You are on page 1of 7

G W U Fall 2 0 1 4 M B A D 6 2 1 1 HC M i d t e r m E x a m i n a t i o n

If necessary, assume the fiscal year ends on Dec 31


st
. Unless otherwise stated assume accrual
accounting. There are 20 questions in this exam. Time value of money tables are on the last
two pages.

1. Given statements A to E below, which of the following statements is true?
Statement A: The normal balance of asset accounts is a credit.
Statement B: The normal balance of retained earnings is a credit.
Statement C: The normal balance of liability accounts is a debit
Statement D: The normal balance of asset accounts is a debit.
Statement E: The normal balance of all accounts is a debit.
(a) A and B.
(b) B and D
(c) D and C
(d) C and A
(e) E


2. During the month of September, Georgetown Pharmacy purchased inventory with cash of
$78,000. This transaction
(a) increased its assets by $78,000
(b) increased its expenses by $78,000
(c) decreased its assets by $78,000
(d) decreased its liabilities by $78,000
(e) had no effect on assets, liabilities, or equity


3. On June 30
th
, 20X0, the GWU Hospital System borrowed $100,000 signing a 1-year,
12% $100,000 promissory note. Because of this debt, on its 12/31/20x0 annual
financial statements, the firm should report
(a) interest expense of $6,000 and interest payable of $6,000.
(b) interest expense of $4,000 and cash payments of $4,000.
(c) interest expense of $4,000 and interest payable of $4,000.
(d) interest expense of $3,000 and interest payable of $3,000.
(e) interest expense of $2,000 cash payments of $2,000.




4. Kane, Shaw, and Crawford Medical Supplies use the perpetual inventory method. They sold
goods that cost $1,000 for $8,000. If the sale was made on account to a customer, the sale will:

A. increase total assets by $8,000.
B. increase total liabilities by $7,000.
C. increase total liabilities by $1,000.
D. increase total assets by $7,000.
E. had no effect on assets, liabilities, or equity














MBAD 6211HC Midterm Page 1 of 7 pages
G W U Fall 2 0 1 4 M B A D 6 2 1 1 D E M i d t e r m E x a m i n a t i o n


5. My Back Aches Physical Therapy had the following transactions in September:

(a.) Sold back rollers to customers for $11,000; received $5,000 in cash and the rest on
account. The cost of the instruments sold was $8,000.
(b.) Purchased $5,200 of new rollers inventory; paid $1,050 in cash and owed the rest on
account.
(c.) Paid $1,900 cash in wages for the month
(d.) Received a $450 bill for utilities that will be paid in October.
(e.) Received $1,800 cash from customers as deposits on orders of new rollers to be delivered
in October.

Back Aches cash flow from operations for September is:

6. Here is some information from the 12/31/20x2 financial statements of the Jonathan
Letterman Corporation. Calculate the missing information and then mark which one of
the following sentences is true.

12/31/20x1 12/31/20x2
Assets 100 ?
Liabilities 60 115
Contributed capital 25 25
Retained Earnings 15 35
Revenue

120
Expenses

90
Net income

?
Dividends declared and paid

?

(a) Assets 12/31/20x2 are $140
(b) Net income for the year 20x2 is $20
(c) Net income for the year 20x2 is $30
(d) Dividends for the year 20x2 are $15
(e) None of these

7. Heart Stints Incorporated purchased merchandise inventory on account with a list price of
$5,000 and credit terms of 1/10, n/30. What was the net or cash cost (aka you pay for it in
cash instead of on account) for the merchandise?
A. $5,000
B. $4,950
C. $4,500
D. $4,850
E. None of these

8. Alexander Fleming Labs purchased two identical inventory items. One of the items cost $8.00
and was purchased in January. The other was purchased in February, and the company paid
$7.00 for this item. One of the items was sold in March at a price of $11.00. Select the
correct answer assuming that Alexander Fleming Labs uses a FIFO cost flow assumption.
A. The balance in ending inventory would be $7.00.
B. The cost of goods sold would be $7.00.
C. The amount of ending inventory would be $7.50.
D. The amount of ending inventory would be $8.00.






MBAD 6211HC Midterm Page 2 of 7 pages
G W U Fall 2 0 1 4 M B A D 6 2 1 1 HC M i d t e r m E x a m i n a t i o n


9. Andy Boettcher Teachers Inc finances the purchase of its office building with a 15 year 3.8%
mortgage. The principal owed on the mortgage is $235,000 on Jan 1, 20X0. The monthly
payment is $1,769. What will be the ending principal after Januarys monthly payment?

Answer:

10. You are considering investment options. Given the current interest rate of
10%, $5,000 3 years from now is preferable to $9,000 nine years from now. Is this
statement True or False?

Answer: True / False

11. Grays Anatomy Company accepted a credit card account receivable in exchange for
$50,000 of services provided to a customer. The credit card company charges a 2%
service charge. Recording the service revenue and the service charge would
A. decrease expenses by $1,000
B. increase assets by $49,000
C. increase assets by $50,000
D. A and C

12. At the end of 2014, General Hospital had outstanding accounts receivable of $109,760.
If General Hospital estimates that it will not collect 4 percent of its accounts receivable, what
amount of uncollectible accounts expense should General Hospital record? Round to the
nearest dollar.
A. $5,121
B. $5,471
C. $5,488
D. $4,390

13. Which of the following statements concerning internal controls is true?
A. Internal administrative controls are designed to limit the amount of funds spent on
investments.
B. The control procedure, separation of duties, prohibits the employment of a husband and
wife or other closely related parties within the same company.
C. Internal accounting controls are limited to the policies and procedures used to protect the
company from only embezzlement.
D. A strong internal control system provides reasonable assurance that the objectives of a
company will be accomplished.

14. In December of 20X1, The Heather Trafton Corporation projects 20X2 net income of $120.
At the December meeting of the board of directors, Ms. Trafton argued for a 20X2 cash
dividend that was 15% of projected income. The firm wants to expand and so the board
authorizes the issue of more shares for $75 (in total not per share) and the borrowing of $35 in
long-term debt during 20X2. What change in owners equity over 20X2 should the firm
project if the board agrees to the dividend?

Trafton Corps equity should be projected to change by $











MBAD 6211HC Midterm Page 3 of 7 pages
G W U Fall 2 0 1 4 M B A D 6 2 1 1 HC M i d t e r m E x a m i n a t i o n


15. At March 31, Band-Aid Co. had a book balance in its cash account of $5,600. At the end of
March the company determined that it had outstanding checks of $900, deposits in transit of
$900, a bank service charge of $20, and an NSF check from a customer for $280. The true
cash balance at March 31 is:
A. $5,300
B. $5,320
C. $5,600
D. $4,700


16. On July 1, 2014, Toews Company's Accounts Receivable balance was $10,000 and the
balance in the Allowance for Doubtful Accounts was $300. On July 5, 2014, a $200
uncollectible account was written-off as uncollectible. Assuming that no other transactions
related to accounts receivable had occurred, the net realizable value of accounts receivable
immediately after the write-off was
A. $9,500
B. $9,700
C. $9,300
D. $9,200


17. The Scrubs Company sold merchandise costing $1,000 for $2,500 cash. All of the
merchandise was later returned by the customer. If the perpetual inventory method is used,
what effect will the sales return have on the accounting equation?
A. Total assets and total equity increase by $1500.
B. Total assets increase by $2,500 and total equity is decreased by $1,000.
C. Total assets increase by $1,000 and total equity decrease by $2,500.
D. Total assets and total equity decrease by $1500.


18. On March 1, Zane Company purchased a new stamping machine with a list price of
$27,000. The company paid cash for the machine; therefore, it was allowed a 3% discount.
Other costs associated with the machine were: transportation costs, $1,270; sales tax paid,
$1,680; installation costs, $450; routine maintenance during the first month of operation,
$500. The cost recorded for the machine was:
A. $29,488
B. $29,590
C. $30,090
D. $27,000





















MBAD 6211HC Midterm Page 4 of 7 pages
G W U Fall 2 0 1 4 M B A D 6 2 1 1 HC M i d t e r m E x a m i n a t i o n




19.Which of the following statements is true with regard to depreciation expense?
A. A company using straight line will show a smaller book value for assets than if the same
company uses double declining balance.
B. Choosing double declining balance over straight line will produce a greater total
depreciation expense over the asset's life.
C. A company should use the depreciation method that best matches expense recognition with
the use of the asset.
D. Different companies in the same industry will always depreciate similar assets by the same
methods.

20.An asset with a book value of $19,000 is sold for $16,000. Which of the following answers
would accurately represent the effects of the sale on the financial statements? (Note: The
answers show the net effect on the total amount under each category. For example, if cash
increased by $100 and Accounts Receivable decreased by $70, a net $30 increase would be
shown in the assets column.)



A. Choice A
B. Choice B
C. Choice C
D. Choice D






























MBAD 6211HC Midterm Page 5 of 7 pages
G W U Fall 2 0 1 4 M B A D 6 2 1 1 HC M i d t e r m E x a m i n a t i o n


Present Value Tables



Present Value of a Lump Sum of $1
Years 8% 10% 12% 14%

1

0.9259

0.9091

0.8929

0.8772

2

0.8573

0.8264

0.7972

0.7695

3

0.7938

0.7513

0.7118

0.6750

4

0.7350

0.6830

0.6355

0.5921

5

0.6806

0.6209

0.5674

0.5194

6

0.6302

0.5645

0.5066

0.4556

7

0.5835

0.5132

0.4523

0.3996

8

0.5403

0.4665

0.4039

0.3506

9

0.5002

0.4241

0.3606

0.3075

10

0.4632

0.3855

0.3220

0.2697



Present Value of an Annuity of $1
Years 8% 10% 12% 14%

1

0.9259

0.9091

0.8929

0.8772

2

1.7833

1.7355

1.6901

1.6467

3

2.5771

2.4869

2.4018

2.3216

4

3.3121

3.1699

3.0373

2.9137

5

3.9927

3.7908

3.6048

3.4331

6

4.6229

4.3553

4.1114

3.8887

7

5.2064

4.8684

4.5638

4.2883

8

5.7466

5.3349

4.9676

4.6389

9

6.2469

5.7590

5.3282

4.9464

10

6.7101

6.1446

5.6502

5.2161






Fall 2014 MBAD 6211HC Midterm Page 6 of 7 pages
G W U Fall 2 0 1 4 M B A D 6 2 1 1 HC M i d t e r m E x a m i n a t i o n


Future Value Tables



Future Value of a Lump Sum of $1
Years 8% 10% 12% 14%

1

1.0800

1.1000

1.1200

1.1400

2

1.1664

1.2100

1.2544

1.2996

3

1.2597

1.3310

1.4049

1.4815

4

1.3605

1.4641

1.5735

1.6890

5

1.4693

1.6105

1.7623

1.9254

6

1.5869

1.7716

1.9738

2.1950

7

1.7138

1.9487

2.2107

2.5023

8

1.8509

2.1436

2.4760

2.8526

9

1.9990

2.3579

2.7731

3.2519

10

2.1589

2.5937

3.1058

3.7072



Future Value of an Annuity of $1
Years 8% 10% 12% 14%

1

1.0000

1.0000

1.0000

1.0000

2

2.0800

2.1000

2.1200

2.1400

3

3.2464

3.3100

3.3744

3.4396

4

4.5061

4.6410

4.7793

4.9211

5

5.8666

6.1051

6.3528

6.6101

6

7.3359

7.7156

8.1152

8.5355

7

8.9228

9.4872

10.0890

10.7305

8

10.6366

11.4359

12.2997

13.2328

9

12.4876

13.5795

14.7757

16.0853

10

14.4866

15.9374

17.5487

19.3373






MBAD 6211HC Midterm Page 7 of 7 pages