ACC 291 Final Exam Answers

ACC 291 Final Exam Answers


Question 1

The term “receivables” refers to


cash to be paid to creditors.


merchandise to be collected from individuals or companies.


cash to be paid to debtors.


amounts due from individuals or companies.
Question 2

Three accounting issues associated with accounts receivable are


depreciating, returns, and valuing.


depreciating, valuing, and collecting.


recognizing, valuing, and accelerating collections.


accrual, bad debts, and accelerating collections.

Question 3

When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when


an account becomes bad and is written off.


a customer’s account becomes past due.


management estimates the amount of uncollectibles.


a sale is made.

Question 4

Which one of the following is not a principle of sound accounts receivable management?


Determine to whom to extend credit.


Determine a payment period.


Delay cash receipts from receivables if necessary.


Monitor collections.

Question 5

The accounts receivable turnover is computed by dividing


net credit sales by ending receivables.


total sales by ending receivables.


net credit sales by average receivables.


total sales by average receivables.

Question 6

The accounts receivable turnover is used to analyze








long-term solvency.

Question 7

The following information is provided for Oriole Company and Cheyenne Corp.:

(in $ millions) Oriole Company Cheyenne Corp.
Net income 2017   $150   $405
Net sales 2017 1345 4770
Total assets 12/31/15 1090 2150
Total assets 12/31/16 1260 3030
Total assets 12/31/17 1190 4000

What is Cheyenne’s return on assets (rounded) for 2017?









Question 8

Which of the following is not properly classified as property, plant, and equipment?


Land improvement, such as parking lots and fences.


A truck held for resale by an automobile dealership.


Building used as a factory.


Land used in ordinary business operations.

Question 9

A characteristic of a plant asset is that it is


not currently used in the business but held for future use.


used in the operations of a business.


held for sale in the ordinary course of the business.



Question 10

A current liability is a debt that can reasonably be expected to be paid


within one year, or the operating cycle, whichever is longer.


out of cash currently on hand.


between 6 months and 18 months.


out of currently recognized revenues.

Question 11

Which of the following most likely would be classified as a current liability?


Dividends payable


Mortgage payable as a single payment in 10 years


Bonds payable in 5 years


Three-year notes payable

Question 12

The 2017 financial statements of Crane Company contain the following selected data (in millions).

Current assets $85
Total assets 165
Current liabilities 44
Total liabilities 76
Cash 4
Interest expense 4
Income taxes 9
Net income 14

The debt to assets ratio (rounded) is






7.2 times.



Question 13

In a recent year Grouper Corp. had net income of $145000, interest expense of $30300, and income tax expense of $37700. What was Grouper Corp.’s times interest earned (rounded) for the year?









Question 14

If bonds are issued at a discount, it means that the


financial strength of the issuer is suspect.


market interest rate is lower than the contractual interest rate.


market interest rate is higher than the contractual interest rate.


bondholder will receive effectively less interest than the contractual rate of interest.

Question 15

If bonds are issued at a premium, the stated interest rate is


too low to attract investors.


higher than the market rate of interest.


lower than the market rate of interest.


adjusted to a higher rate of interest.

Question 16

The chief accounting officer in a company is known as the









Question 17

Which one of the following would not be considered an advantage of the corporate form of organization?


Separate legal existence.


Government regulation.


Limited liability of stockholders.


Continuous life.

Question 18

Which of the following would not be true of a privately held corporation?


It is usually smaller than a publicly held company.


It does not offer its shares for sale to the general public.


It is sometimes called a closely held corporation.


Its shares are regularly traded on the New York Stock Exchange.

Question 19

The following information pertains to Concord Company. Assume that all balance sheet amounts represent average balance figures.

Total assets $315000
Stockholders’ equity-common 195000
Total stockholders’ equity 299000
Sales revenue 117000
Net income 20300
Number of shares of common stock 6500
Common dividends 4400
Preferred dividends 6800

What is Concord’s payout ratio?









Question 20

Whispering Winds Corp. had net income of $79130 and paid dividends of $31000 to common stockholders and $20000 to preferred stockholders in 2017. Whispering Winds Corp. common stockholders’ equity at the beginning and end of 2017s was $495000 and $600000, respectively. Whispering Winds Corp. return on common stockholders’ equity is









Question 21

The primary purpose of the statement of cash flows is to


prove that revenues exceed expenses if there is a net income.


facilitate banking relationships.


provide information about the cash receipts and cash payments during a period.


provide information about the investing and financing activities during a period.

Question 22

Which one of the following items is not generally used in preparing a statement of cash flows?


Current income statement.


Additional information.


Adjusted trial balance.


Comparative balance sheets.

Question 23

The category that is generally considered to be the best measure of a company’s ability to continue as a going concern is


usually different from year to year.


cash flows from investing activities.


cash flows from financing activities.


cash flows from operating activities.

Question 24

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows. Indicate where, if at all, a stock dividend declared and issued would be classified on the statement of cash flows.


Does not represent a cash flow.


Financing activities section.


Operating activities section.


Investing activities section.

Question 25

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows. Indicate where, if at all, an inventory increase with cash would be classified on the statement of cash flows.


Operating activities section.


Investing activities section.


Financing activities section.


Does not represent a cash flow.

Question 26

Free cash flow provides an indication of a company’s ability to


generate cash to invest in capital expenditures and to pay dividends.


generate net income.


generate cash to pay dividends.


generate cash to invest in capital expenditures.

Question 27

When using the indirect method to compute cash provided by operating activities


amortization expense is added to net income.


income taxes paid may be ignored.


increases in accounts receivable are added to net income.


decreases in inventory are subtracted from net income.

Question 28

To determine the net cash provided (used) by operating activities, it is necessary to analyze


the current year’s income statement.


a comparative balance sheet.


additional information.


all of these answer choices are correct.

Question 29

Which of these is not a liquidity ratio?

Inventory turnover


Accounts receivable turnover


Current ratio


Asset turnover  
Question 30

The current ratio would be of most interest to

long-term creditors.




short-term creditors.