DeVry ACCT504 final exam - 2017

Asked by bizgrad
Dated: 20th Apr'17 10:23 PM
Bounty offered: $37.00

1. (TCO D) Please describe the purpose of the Income Statement and the interrelationship between the income statement and the other major financial statements that we covered in this class. In your answer, please also address which financial statements should be created before the Income Statement, if any, and which financial statements need to be completed after the Income Statement, if any. (Points : 25)

Question 2. 2. (TCO E) Your friend, Lisa, plans to open a nail salon. Lisa states that she does not have time to develop and implement a system of internal controls.

(a) Explain to Lisa the components of internal control. (10 points)

(b) Explain to Lisa at least 5 internal control procedures she must establish to protect herself against fraud. You should state specific internal control procedures from the textbook, and relate your answer to her nail salon business. (15 points) (Points : 25)

Question 3. 3.(TCO H) ABC Corporation purchased 5, $1,000, 6% bonds of Langley Corporation when the market rate of interest was 8%. Interest is paid semiannually on the bonds, and the bonds mature in 5 years.

Compute the total price paid by ABC Corporation for the bonds showing your calculation for the present value of the principal and the present value of the interest payments.

Present value tables (Exhibit 8-14 and Exhibit 8-15) are available on pages 452 and 453 of your Harrison, Horngren, and Thomas textbook. NOTE: Be sure you review the PV Tables completely to ensure you find the correct period and interest rate for the calculation. (Points : 20)

Question 4. 4.(TCO A) The following items are taken from the financial statements of PQR Company for 2013:





Accounts Payable


Accounts Receivable




Salaries Payable


Unearned Revenue


Intangible assets


Property, plant, and equipment, net


Long term debt


Common Stock


Additional Paid in Capital


Retained Earnings, 12/31/2012


Service revenue


Cost of Goods Sold


Rent expense


Supplies expense


Insurance expense



(1) Create a classified balance sheet in good form for the year ended 2013. (30 points)

(2) Calculate the current ratio and debt ratio and explain your findings. (6 points) (Points : 36)

Question 5. 5.(TCO B) The Alpha Company gathered the following condensed data for the year ended December 31, 2014:

Preferred stock dividends paid


Net Sales


Interest revenue


Selling expenses


Administrative expenses


Cost of Goods Sold


Income tax percentage


(1) Prepare a multiple-step income statement for the year ended December 31, 2014. (30 points)

(2) Compute the gross margin percentage and net profit margin ratio. Alpha Company’s assets at the beginning of the year were $1,500,000, and the assets were $1,400,000 at the end of the year. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings. (6 points) (Points : 36)

Question 6. 6.(TCO C) This is a 2-part question.

Part 1) Please indicate which section of the statement of cash flows should contain each of the following items, and whether each item would result in an inflow or outflow of cash. The sections are Operating, Investing, and Financing. (30 points)

(a) Sold a building at book value
(b) Decrease in inventory
(c) Purchased land with cash
(d) Depreciation of property, plant, and equipment
(e) Issuance of common stock

Part 2) Please explain how to calculate free cash flow, and also explain why some investors have more faith in investing based on free cash flow rather than reported net income. (6 points) (Points : 36)

Question 7. 7.(TCO F) This is a 2-part question.

Part 1) Journalize the adjusting entries below at year-end December 31, XXXX. Please share your supporting calculations for the adjusting entries requiring computations.

(a) The unadjusted balance of the Supplies account is $2,200. The total cost of supplies remaining is $1,000.
(b) Accrued Service Revenue of $9,000.
(c) Equipment was purchased at the beginning of the year for $45,000. The equipment’s useful life is 5 years, and the residual value is $5,000. Record the depreciation for this year.
(d) The weekly payroll is $25,000. Employees are owed for 3 days of a 5-day work week.
(e) Beginning unearned service revenue is $7,500, and ending unearned service revenue is $3,500.
(f) The business has interest expense of $750 that is due in January.
(30 points)

Part 2) Calculate the overall overstatement or understatement of net income if the above adjusting entries were not made. Please share your work. (6 points) (Points : 36)

Question 8. 8.(TCO G) Please review the following 6 ratios for Johnson Company and Lee Enterprises for the year ended 2014, and address the 2 questions below.

Ratio Name

Johnson Company

Lee Enterprises

(a) Accounts receivable turnover



(b) Days’ inventory outstanding



(c) Debt ratio



(d) Return on common stockholders’ equity



(e) Current ratio



(f) Price/Earnings ratio



Instructions: This is a 2-part question.

(1) Explain the meaning of each of the Johnson Company ratios above. (18 points)
(2) State which company performed better for each ratio. (18 points) (Points : 36)

DeVry ACCT504 final exam - 2017
Answered by bizgrad
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Dated: 20th Apr'17 10:23 PM
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8-14     8-15)   available on     and       Harrison,   and Thomas     NOTE:        review   PV Tables     ensure       correct   and interest     the       20)   value of     inteterest       yearsCompoundsemi   rate3%Market interest     periods10Coupon       all   interest:=periodical coupon     cumulative       8   present value     value=par       factor=1000   676=676Step-3:Present value     cash       of   bond =     of       919   5 =$     price       Corporation   the bonds     4,595Cumulative       04)^-10)/   111Question 4     A)       are   from the     of       2013:Cash $100,000Inventory150,000Accounts   Receivable   40,000Supplies10,000Salaries Payable 30,000Unearned     plant,       term   Stock  25,000Additional Paid     Earnings,       Goods   expense   48,000Supplies expense     25,000Insurance     Create       sheet   good form     year       points)   Calculate the     and       explain   findings (6     :       sheetfor   year ended     stockholder's       liability:Amount   Payable75,000Supplies10,000Salary Payable30,000Account     Current       and   term debt90,000Intangible     Fixed       paid   capital400,000Retained earning71,800Total     assets811,800Total       Equity811,800(b)Current   assets/Current liabilty=233800/150000=1     14Working:Income       746,000Cost   goods sold             30,000Supplies       21,000Net   50,800Transferred to     50,800Retained       retained   Addition during     year50,800Rtained       (TCO   The Alpha     the       for   year ended     2014:Preferred       Sales 825,000Interest   expenses  225,000Administrative expenses  125,000Cost     Sold 400,000Income       a   statement for     ended       (30   Compute the     percentage       margin   Alpha Company’s     the