Accounting Questionnaire

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True/False – If the statement is FALSE, you must explain why or correct it to get credit
(3 points)
Example:
New York City is the capital of the United States of America.
Washington D.C.
True
False
(circle one)
1. The income statement is a measure of an entity’s economic performance as of a point
in time.
True
False
(circle one)
If false, explain below or correct above:
Period not a point in time
2. Current assets include accounts receivable and prepaid rent expense.
True
False
(circle one)
If false, explain below or correct above:
3. Net income is increased when accounts receivable are collected.
True
False
(circle one)
If false, explain below or correct above:
4. The adjusting entry for a prepaid expense has the effect of reducing total assets and
reducing net income.
True
False
If false, explain below or correct above:
-2-
(circle one)
5. Investing activities including receiving cash from the sale of land and also the
resulting gain or loss on the sale.
True
False
(circle one)
If false, explain below or correct above:
6. Maya Company’s purchase of 100 shares of Labrador, Inc. common stock would be
reported as an investing activity on Maya’s statement of cash flows.
True
False
(circle one)
If false, explain below or correct above:
7. The adjusting entry for an accrued revenue includes a debit to a liability account and
a credit to a revenue account.
True
False
(circle one)
If false, explain below or correct above:
The debit is to an asset account
8. A company needs to record the receipt of a bill for utilities used during this year even
if the company will not pay the bill until next year.
True
False
If false, explain below or correct above:
-3-
(circle one)
9. Every transaction increases at least one account and decreases at least one account.
True
False
(circle one)
If false, explain below or correct above:
10. A company’s retained earnings balance increased $50,000 last year; therefore, net
income last year must have been $50,000.
True
False
(circle one)
If false, explain below or correct above:
II. Multiple Choice – Circle the correct answer. (4 points)
11. Lena Company has provided the following data (ignore income taxes):
• 2015 revenues were $99,000
• 2015 expenses were $47,800
• Dividends declared and paid during 2015 totaled $9,500
• At December 31, 2015, total assets were $177,000, total liabilities were
$89,000, and common stock was $28,000.
Which of the following is not correct?
A. 2015 Net Income was $51,200
B. Total stockholders’ equity at December 31, 2015 was $88,000
C. Total liabilities and stockholders’ equity at December 31, 2015 was $177,000
D. Retained earnings on December 31, 2015 were $41,700
12. Two years ago your company bought $40,000 in bonds from another company. This
month, it sold half those bonds for $20,640 and purchased the common stock of
another company for $1,000. On the statement of cash flows you would report:
A. outflow of $19,640 from investing activities
B. inflow of $19,640 from investing activities
C. inflow of $20,640 from investing activities
D. outflow of $20,640 from investing activities
-4-
13. During May, Many Happy Returns, Inc. earned $1,400, of which $1,000 was
collected, and had expenses of $800, of which $700 was paid. Its net income equals:
A. $600 using accrual accounting versus $300 using cash basis.
B. $600 using accrual accounting versus $700 using cash basis.
C. $700 using accrual accounting versus $300 using cash basis.
D. $700 using accrual accounting versus $600 using cash basis.
14. If a company receives $20,000 cash from its customers on account and uses the cash
to pay $20,000 to its suppliers on accounts, the net result is that:
A. assets would increase by $20,000 and liabilities would decrease by $20,000
B. liabilities would decrease by $20,000 and stockholders’ equity would increase by
$20,000
C. assets would decrease by $20,000 and liabilities would decrease by $20,000
D. liabilities would decrease by $20,000 and stockholders’ equity would decrease by
$20,000
15. The asset account Office Supplies has a balance of $800 at the beginning of the year.
The amount on hand at the end of the year is $500. The company has calculated the
Supplies Expense for the year to be $3,500. Based on this information, what amount
of office supplies was purchased during the year?
A. $3,800
B. $4,000
C. $3,200
D. $3,000
16. A company had the following assets and liabilities at the beginning and end of the
current year:
Assets
Beginning of the Year
End of the Year
Liabilities
$214,000
$245,000
$88,000
$75,000
Common stock in the amount of $15,000 was issued, and dividends of $5,000 were
paid during the year. What is the amount of net income for the year?
A. $44,000
B. $34,000
C. $24,000
D. None of the above
-5-
17. The following account balances were listed on the trial balance of Doogar Company
at the end of the period:
Account
Balance
Unearned Revenue
Cash
Common Stock
Equipment
Land
Notes Payable
$30,600
48,900
30,000
13,500
45,000
60,000
The company’s trial balance is not in balance, and the company’s accountant has
determined that the error is in the cash account. What is the correct balance in the
cash account?
A. $57,900
B. $31,500
C. $2,100
D. $62,100
18. Chino Company reported net income of $20,000 for the current year. During the year,
Inventory decreased by $7,000, Accounts Payable decreased by $8,000, Depreciation
Expense was $10,000, and Accounts Receivable increased by $6,500. If the indirect
method is used, what is the net cash provided by operating activities?
A. $10,500
B. $22,500
C. $38,500
D. $51,500
19. On December 31, 2016, The Bates Company’s revenue is $300,000 and expenses
total $160,000 before consideration of the following:
Accrued wages total $11,000.
Accrued revenues total $36,000.
Depreciation expense is $17,000.
Rental revenue of $9,000 was earned, with the rent initially recorded as unearned rent
revenue.
The income tax rate is 40% of income before taxes.
What is Bates’ net income after consideration of the above information?
A. $94,200
B. $157,000
C. $140,000
D. $88,800
-6-
20. A company took out $665,000 of new debt this year and repaid $1,000,000 of older
debt in the same year. The company also issued stock for $442,000 cash and paid
dividends of $99,000 for the year. The company’s financing cash flows will show:
A. Net cash used in financing activities of $434,000
B. Net cash used in financing activities of $58,000
C. Net cash provided by financing activities of $8,000
D. Net cash provided by financing activities of $107,000
-7-
III – Free Response Questions – Please answer each question as completely as possible.
Show your work for partial credit.
21. Determine and fill in the missing amounts for each independent case below (i.e., each
row corresponds with a different company). Assume the amounts given are at the end
of each company’s first year of operation. (1 point for each correct blank space filled
in, 6 points in total for the problem).
Company
Name
Total
Revenue
Total
Assets
Total
Expenses
Total
Liabilities
Net
Income
(Loss)
Stockholders’
Equity
$80,000
$10,000
$75,000
($30,000)
$100,000
$19,000
$79,000
Hales
$105,000
Rupar
$190,000
$70,000
Ophir
$55,000
-8-
$75,000
22. The table below describes four initial transactions recorded by Formosa Company
during 2015. For each, complete the table by indicating whether the related adjusting
entry at the end of 2015 will include a Debit or Credit to the accounts listed. Then,
indicate whether the related adjusting entry will increase or decrease retained
earnings. (12 points)
Initial Transaction
On June 1, the company paid
$26,000 in advance for a oneyear insurance policy starting
on that date.
The company sold gift cards
totaling $18,300 during May.
Customers used those gift
cards during the remaining
months of the year.
The company earned interest
on investments in the amount
of $1,000 during December.
The interest will be received
in 2016.
During December,
employees performed work
for the company worth
$12,500 in salaries and
wages. Payment will be made
in 2016.
Account
Effect of Adjusting
Entry (Debit or
Credit?)
Effect on
Retained
Earnings
(Increase or
Decrease?)
Insurance Expense
Prepaid Insurance
Service Revenue
Unearned Revenue
Interest Receivable
Interest Revenue
Salaries and Wages
Expense
Salaries and Wages
Payable
23. Wickersham Brothers, Inc. reported the following information:
2015
2014
$50,000
$72,000
Balance Sheet
Assets
Cash
-9-
Accounts Receivable
80,000
70,000
Merchandise Inventory
60,000
65,000
Property And Equipment
110,000
60,000
Less: Accumulated Depreciation
(30,000)
(15,000)
$270,000
$252,000
$10,000
$12,000
Salaries and Wages Payable
2,000
1,000
Bonds Payable, Long-Term
50,000
60,000
Common Stock
100,000
80,000
Retained Earnings
108,000
99,000
$270,000
$252,000
Total Assets
Liabilities:
Accounts Payable
Stockholders’ Equity:
Total Liabilities and Stockholders’ Equity
Income Statement
Sales
$200,000
Cost of Goods Sold
110,000
Depreciation Expense
15,000
Other Expenses
50,000
Net Income
$25,000
Other information from the company’s 2015 records includes the following:
• No equipment was sold during the year.
• $10,000 worth of Bonds payable were repurchased from investors during the
year (i.e., retired).
On the next page, prepare Wickersham’s Statement of Cash Flows in good form for
2015 (12 points).
Show your answer for question #23 on this page:
– 10 –
IV – Company Analysis– Instructions: Use Netflix’s 2015 annual report excerpts (at the
end of this document) to answer the following questions. Its fiscal year ends December
31, 2015, and FY2015 refers to the fiscal year ended December 31, 2015. Treat each
item below independently. Watch the dates on the statements. All numbers on the
financial statements and in the problems are in thousands (except per share data).
24. Did Netflix pay dividends in 2015? If yes, how much? If no, how do you know? (5
points)
– 11 –
25. Assume that Netflix failed to record the expiration (i.e., use of) prepaid rent of $700
for office buildings during the last month of the fiscal year.
A. Compute the amount that should have been reported as “Income before Income
taxes” for 2015 (4 points): $ ___________
B. Compute the amount that should have been reported as “Total Current Assets” for
2015 (4 points): $__________
26. Assume that no marketing expenses for Netflix are prepaid, and that all accrued
expenses on the balance sheet relate to marketing. Which was higher during 2015
(circle one below) (5 points)
a) Marketing expenses
b) Cash paid for marketing
27. For 2013, what was the net cash inflow or outflow that Netflix realized associated
with the issuance and/or repayment of debt to investors? Ignore issuance costs. Be
sure to clearly label whether your answer represents an inflow or outflow. (5
points)
– 12 –
28. Which was larger during 2015 for Netflix (circle one below) (5 points)
a) Purchases on account
b) Sales made on account to customers
29. Assume that Netflix made the following mistake in preparation of its 2015 statements,
and no adjustments were made:
No entry for accrued interest earned of $4 on debt securities in “short-term
investments” was made.
What would be the effect of the error on the following amounts at year-end of 2015?
Circle U/S for understate, O/S for overstate, or NE for no effect. Ignore income tax
effects. (12 points)
A) Total Liabilities
US
OS
NE
B) Income Before Income Taxes
US
OS
NE
C) Total Assets
US
OS
NE
D) Stockholders’ Equity at Year-End
US
OS
NE
– 13 –
Financial Statements and Notes for Section IV
Practice
These are the excerpt from Netflix’s 2015 annual report.
There are 4 pages including this cover.
– 15 –
– 16 –
Selected Notes to the Financial Statements:
Note 1.
– 17 –

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Explanation & Answer:
29 Questions

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accounting

Income Statement

net income

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