SOLVED

1) Fandango Co. Ltd. acquired a $45,000 piece of heavy equipment. If they paid for the machine with a bank loan, the change in the balance sheet would be A) Assets increase by $45,000 and long-term liabilities decrease by $45,000 B) Only long-term liabilities increase by $45,000 C) Assets and long-term liabilities each increase by $45,000 D) Long-term liabilities and shareholders equity each increase by $45,000 E) Only assets increased by $45,000. 2) A company purchases a high-speed packaging machine for $100,000. The correct entry for the purchase of Equipment in the fundamental accounting equation is A) An increase on the left side B) A decrease on the left side C) An increase on the right side D) A decrease on the right side E) Neither side increases or decreases 3) Accumulated amortization is grouped under A) Liabilities with other expense accruals B) Shareholders equity and serves to reduce its value C) Long-term liabilities as a penitentiary D) Expenses on the income statement E) Capital assets as a contra account 4) A patent is an example of a(n) A) Current asset B) Current liability C) Intangible asset D) Long term liability E) Current liability 5) The following accounts represent the financial status of Fandango Company as of October 1.The business has cash of $100,000. It must pay its suppliers $250,000 within 60 days. It has a mortgage outstanding of $3.1 million, of which $100,000 is owed within the next 12 months. Inventory totals $700,000 and the net book value of its land, building and equipment is $3.6 million. Income tax payable equals $50,000. It has $1 million in shareholder’s equity. The value of the Company’s working capital is A) $300,000 B) $350,000 C) $800,000 D) $400,000 E) $1 million 6) Fandango company reported current liabilities of $520,000, total assets of $10,560,000, and shareholders equity of $4,750,000 on its July balance sheet. Which of the following would the business have to have reported to complete the balance sheet equation? A) $14,790,000 in long-term liabilities B) $5,290,000 in long-term liabilities C) $10,040,000 in long-term liabilities D) $10,040,000 in accumulated amortization E) $14,790,000 in accumulated amortization 7) On May 15 RAJ Inc. received prepayment of $132,000 representing the total amount to cover a purchase order requiring delivery of the custom blended product in four equal monthly shipments. The first shipment was scheduled for June 23. RAJ Inc.’s income statement showed A) The full amount on the September statement B) The full amount on the May statement C) The full amount on the June statement D) $33,000 on the May statement E) $33,000 on the June statement 8) Fandango Co. Ltd. uses straight-line amortization. If the book value of a new piece of equipment is $36,000 and is expected to last five years with no salvage value, the monthly amortization expense will be A) $360 B) $600 C) $3,000 D) $7,200 E) $36,000 9) The Matching Principle used in accounting is consistent with A) Cash based accounting practices B) The timing of cash inflows and outflows C) Calendar based accounting practices D) Accrual based accounting practices E) Standard credit and collections practices 10) In the previous year, company XYZ had 500,000 shares outstanding, and an EPS of $1.50 a share. This year, the company performed a buyback of 20% of the outstanding shares and by year end EPS had risen to $1.60 per share. The remaining shareholders should be A) Positive because the company’s earnings increased B) Positive because shareholder earnings increased C) Concerned because the company’s earnings declined D) Concerned because the number of shares decreased E) Unconcerned because share price is not affected by company earnings 1