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Review: Accounting Crash Course Retake
 Exam v4
 Score: 92%, 24 correct out of 26 | Taken On: 06-19-20
 Question 1
 Assume US GAAP to answer this question.
 In 2017, $2 million in wages were earned and no cash wages were paid.
 In 2018, $8 million in wages were earned and $9 million in cash wages were paid.
 Cash wages were used to first pay wages earned in 2017 with the remainder used to pay wages
 earned in 2018.
 Any earned but unpaid wages will be paid during the first quarter of 2019.
 Using only the information provided, which of the following statements is most accurate?
 Liabilities decreased by $1.0 million in 2018.
 Liabilities increased by $6.0 million in 2018.
 Assets decreased by $7.0 million in 2018.
 Retained earnings decreased by $10.0 million in 2018.
 Retained earnings decreased by $9.0 million in 2018.
 See Lesson: Payable, Accrued Expenses, Deferred Revenue & Debt
 Question 2
 A company reported gross profit of $22 million in 2018. In addition, it recorded the following activities:
 Sales and marketing expenses were $6 million.
 Interest expense was $1 million.
 Sold equipment for $13 million that had a net book value of $9 million.
 $3 million in preferred stock issuance.
 Company’s tax rate is 40%.
 Calculate the company’s net income.
 $9.0 million
 $9.6 million
 $11.4 million
 $12.6 million
 $15.0 million
 See Lessons:
Net Income, EPS & Dividends
 Property, Plant & Equipment, Part 2
 Question 3
 The next two questions use the following data from TGX Global, a heavy equipment manufacturer (this
 information will be repeated on the next question):
 TGX Global sells excavators, with an average sale price of $750,000 per excavator.
 TGX received new orders for 100 excavators in 2018.
 TGX produced & delivered 130 excavators in 2018: 70 of these delivered excavators were ordered in
 2017 and the rest (60 excavators) were part of the 100 ordered in 2018.
 TGX received payment for 120 excavators.
 TGX began selling 1-year maintenance services contracts for $60,000 per excavator in 2018, which begin
 after the excavator is delivered. Contracts were sold on 50% of all excavator orders made in 2018 (no
 contracts were sold on orders placed in 2017)
 Assume all excavators delivered in 2018 are delivered at year end.
 Calculate TGX’s 2018 revenue based on the transactions described above.
 $75.0 million
 $78.0 million
 $97.5 million
 $100.5 million
 $101.4 million
 See Lesson: Basic Accounting Principles
 Question 4
 This question uses the same TGX Global data as the previous question, repeated below:
 TGX Global sells excavators, with an average sale price of $750,000 per excavator.
 TGX received new orders for 100 excavators in 2018.
 TGX produced & delivered 130 excavators in 2018: 70 of these delivered excavators were ordered in
 2017 and the rest (60 excavators) were part of the 100 ordered in 2018.
 TGX received payment for 120 excavators.
 TGX began selling 1-year maintenance services contracts for $60,000 per excavator in 2018, which begin
 after the excavator is delivered. Contracts were sold on 50% of all excavator orders made in 2018 (no
 contracts were sold on orders placed in 2017).
 Assume now that instead of the revenue recognized in the previous question, TGX recognized $75 million in
 revenue for 100 excavators (and assume no maintenance contract revenue was recognized). In addition, the
 following occurred in 2018:
 TGX recognized $3 million in shipping and delivery costs for its excavators.
 TGX recognized $7 million in direct labor expenses.
 TGX recognized $3 million in commissions paid to its salespeople for selling the excavators.
 TGX purchased $60 million in raw materials in 2018, of which $50 million was in cash.
 Raw materials required to assemble each excavator cost $500,000 per excavator.
 Calculate TGX’s 2018 gross profit based on the transactions described above.
 $11.0 million
 $14.0 million
 $15.0 million
 $18.0 million
 $35.0 million
 See Lesson: COGS & Gross Profit
 Question 5
 Fairview Corporation recorded the following in 2018:
 After-tax net income was $25 million in 2018.
 The actual share count at the beginning of the year was 15.0 million.
 Fairview repurchased 3 million shares at $12/share in the middle of 2018.
 Fairview issued preferred dividends of $5 million and common dividends of $5 million.
 Fairview issued 5 million stock options in 2018, 1 milllion of which vested in the middle of 2018.
 Calculate 2018 basic earnings per share (EPS).
 1.07
 1.29
 1.43
 1.67
 1.79
 See Lessons:
Net Income, EPS & Dividends
 Financial Statement Analysis
 Question 6
 Dynamic Resources reported the following information for year ending June 30, 2016 (values in millions):
 Plant, Property & Equipment, gross $5,000
 Accumulated Depreciation 1,500
 Plant, Property & Equipment, net 3,500
 Salvage Value 300
 The company also reported the following transactions on the first day of fiscal 2017:
 Sale of asset with gross PP&E of $700 million for $500 million and useful life of 7 years and no salvage
 value. Recorded a gain on sale of $400 million.
 Write off of asset with gross PP&E of $600 million. Asset was purchased 3 years ago with original useful
 life of 4 years and salvage value of $300 million.
 Purchase of new equipment for $1,600 million with useful life of 8 years and no salvage value
 (purchased on the first day of fiscal 2017).
 Assuming the remaining useful life of other equipment is 9 years on a straight-line basis, what is the net PP&E
 as of June 30, 2017 (rounded to nearest thousand)?
 $4,088.9 million
 $4,288.9 million
 $4,355.6 million
 $4,555.6 million
 $4,725.0 million
 See Lesson: Depreciation
 Question 7
 Information about the assets of TAP Holdings is provided below:
 TAP purchased land on January 1, 2013 for $500 million. As of January 1, 2018, the fair value was
 estimated to be $550 million.
 TAP purchased a trademark on January 1, 2016 for $300 million. As of January 1, 2018, the fair value was
 estimated to be $200 million.
 TAP acquired a company on Jun 5, 2016 and recognized $1100 million in goodwill as a result. A $150
 million goodwill impairment was recognized at year end 2017.
 Assume a useful life of 5 years and the straight-line method for any depreciable or amortizable assets above.
 Assume TAP reports under US GAAP.
 What is the total value of these assets reported on TAP’s balance sheet as of January 1, 2018
 $1,610 million
 $1,650 million
 $1,700 million
 $1,800 million
 See Lessons:
Basic Accounting Principles
 Intangible Assets & Goodwill
 Question 8
 For the next 2 questions, use the financials of Acme Corporation.
 After adjusting revenue for accounts receivable and deferred revenue, how much cash did Acme generate
 from revenue for the three months ending September 30, 2017?
 $234.4 million
 $241.1 million
 $274.8 million
 $369.4 million
 
See Lessons:
Cash, Receivables & Prepaid Expenses
 Payable, Accrued Expenses, Deferred Revenue & Debt
 Question 9
 For this question, use the financials of Acme Corporation.
 Note the industry average ratios below:
 A/R days (based on average balances) = 57 days
 A/P days (based on average balances) = 23 days
 Current ratio (based on ending balance) = 1.8x
 Based on Acme’s A/R days, A/P days and Current ratios for the three months ending September 30, 2017,
 which of the following conclusions is most accurate? Assume 92 days in the three months ending September
 
Question 10
 For the next 3 questions, use the Grove Analytics Financials.
 Calculate Grove's 2018 cash from operations.
 167
 170
 173
 179
 12/31/2018
Net income 132
 Depreciation 35
 Stock based compensation 9
 Accounts receivable 5
 Inventory 1
 Accounts payable (3)
 Cash from operations 179
 See Lesson: Cash From Operations
 Question 11
 This question uses the Grove Analytics Financials.
 Calculate Grove's 2018 cash from investing activities.
 (65)
 (30)
 30
 65
 Capex (65)
 CFI (65)
See Lesson: Cash From Investing
 Question 12
 This question uses the Grove Analytics Financials.
 Calculate Grove's 2018 cash from financing activities. Calculate 2018 cash from financing activities for Grove
 Analytics. Hint: Remember to capture dividends. Also, remember that stock based compensation expense is a
 credit to common stock & APIC.
 (71)
 (78)
 (79)
 (88)
 
 
 CFF (88)
See Lesson: Cash From Financing & Cash From Investing
 Question 13
 Barney Corporation reported the following figures for their year ending December 31, 2019:
 Gross profit: 672,000
 Cost of goods sold: 463,000
 Net income: 350,000
 Using the data above, calculate Barney Corp's 2019 Gross Profit Margin.
 0.8%
 40.8%
 59.2%
 68.9%
 
See Lesson: COGS & Gross Profit
 Question 14
 Which of the following activities are credits?
 1. The impact on accounts receivable from a $20 million sale to a customer.
 2. The impact on treasury stock from a company repurchasing $40 million in shares.
 3. The impact on inventory from a company recognizing $25 million in cost of goods sold expense.
 4. The impact on debt from a $10 million principal paydown.
 1 only
 2 and 3
 3 and 4
 3 only
 
Question 15
 On January 1, 2019, Fitbit goes public and issues 100 million shares at $20 per share.
 Fitbit had 200 million shares prior to going public and the book value of the common stock & additional
 paid in capital was $1,000 million.
 On January 1, 2020, Fitbit shares are trading at $45 per share and, for the first time ever, Fitbit buys back
 20 million shares.
 What is the January 1, 2020 balance of common stock & APIC?
 $13.5 billion
 $11 billion
 $3.0 billion
 $2.1 billion
 
Question 16
 Barney Corporation recognized a $50 million preferred stock balance on 12/31/2019.
 On January 1, 2020, Barney issued $20 million in preferred dividends.
 On the same date, Barney raised an additional $30 million via a new issuance of preferred stock.
 On December 31, 2020, the market value of the original amount of preferred shares rose $10 million.
 Under US GAAP, the 12/31/2020 year ending preferred stock balance is:
 $40m
 $60m
 $80m
 $100m
 
 See Lesson: Equity
 Question 17
 Squat XFit Inc. reported the following activities during 2020.
 Activities during the year ($ in millions) 2020
Capital expenditures 72.5
 Cost of goods sold 41.1
 Cash purchases of inventory 32.9
 Dividends 7.0
 Income tax rate 25%
 Interest expense 41.6
 Net revenues 168.2
 Other operating expenses 17.3
 Purchases of intangible assets 39.0
 Loss from sale of land (7.0)
 Selling, general, & administrative 12.6
 Write-down of PP&E 3.0
 Interest income 2.0
 Depreciation expense 15.0
 Amortization expense 7.5
 Write down of inventory 2.5
 Stock based compensation expense 15.0
 Paydown of short term debt 5.0
 Calculate net income for the year ending 12/31/2020.
 $5.70 million
 $9.83 million
 $10.95 million
 $11.85 million
 
Review your answer with the SquatFix Activities Solution File.
 See all lessons in chapter The Income Statement.
 Question 18
 Squat XFit Inc. reported the following ($ in millions).
 Financial results 2020
Revenue 122.1
 EBITDA 60.9
 Interest income 7.0
 Tax rate 25.0%
 Interest rate on debt 5.0%
 Balances as of 12/31/2019 12/31/2020
Net PP&E 198.8 240.0
 Intangible assets 40.0 45.0
 Debt 155.0 155.0
 Purchases
Assume purchases made at year end and thus did not generate
 D&A in 2020
 2020
Capital expenditures 75
 Purchases of intangible assets 20
 Calculate net income for the year ending 12/31/2020
 $8.5million
 $9.1 million
 $11.4 million
 $14.3 million
 
Review your answer with the SquatFix Financials Solution File.
 See all lessons in chapter The Income Statement.
 Question 19
 Squat XFit Inc. reported the following activities and select balance sheet items ($ in millions).
 Select results during year ending December 31, 2020
Revenue 387.6
 Interest expense 13.0
 Depreciation expense 37.5
 Stock based compensation 8.0
 Tax rate 40%
 Net income 108.5
 Balances as of: 12/31/2019 12/31/2020
Accounts payable 130.5 108.0
 Accounts receivable 75.2 77.6
 Common Stock & APIC 145.0 165.0
 Deferred revenue 319.0 335.0
 Inventory 145.0 151.8
 Current portion of debt 195.0 205.0
 Long term investments 98.7 110.1
 Net PP&E 198.8 227.1
 Pre-paid expenses 45.0 50.0
 Treasury stock (88.4) (147.0)
 Accrued wages 69.0 74.5
 Other comprehensive income 4.5 9.2
 Calculate cash flow from operations for the year ending 12/31/2020:
 $138.8 million
 $143.5 million
 $167.2 million
 $169.2 million
 
Review your answer with the SquatFix Activities and Balance Sheet Solution file.
 See lesson: Cash From Operations
 Question 20
 Kephlee is an amusement park operator and provided the following select financial data:
 ($ in millions) December 31, 2020
Revenue $98.7
 December 31,
 2019
 December 31, 2020
Accounts receivable 115.1 110.9
 Deferred revenue 49.2 46.6
 Based on the information provided, what were cash sales during 2020?
 $97.1
 $100.3
 $118.8
 $120.4
 $122.0
 
See Lessons:
Revenue Recognition
 Payable, Accrued Expenses, Deferred Revenue & Debt
 Cash, Receivables & Prepaid Expenses
 Question 21
 Bazman is an electronics retailer and provided the following select financial data (assume income statement
 items are for the full year):
 ($ in millions) December 31, 2020
Gross profit $122
 Operating expenses 58
 Accrued expenses 14
 Prepaid wages 21
 Depreciation & amortization
 expense
 17
 Prepaid rent 6
 Stock based compensation
 expense
 5
 Other comprehensive income 2
 Tax rate 25%
 Net income 31
 Based on the information provided, what was operating income during 2020?
 $28
 $40
 $42
 $64
 
See all lessons in chapter The Income Statement.
 Question 22
 Which of the following would you not see explicitly identified on a cash flow statement prepared using the
 indirect method?
 Cash interest expense
 Depreciation expense
 Payment of loan principal
 Repurchase of shares
 
See Lesson: The Cash Flow Statement
 Question 23
 In Q1 2018, CNA Companies reports the following transactions:
 Capital expenditures of $32 million
 Gain on sale of equipment of $10 million
 Debt borrowing of $10 million
 Preferred dividend of $4 million
 Common dividend of $5 million
 Share buyback of $2 million
 Ignoring the effect of taxes, what is the impact of these transactions on retained earnings?
 ($9 million)
 $1 million
 $5 million
 $10 million
 
See Lesson: Equity
 Question 24
 Blueberry is a consumer technology company that reported the following financials (values in millions):
 2017 2018
Revenue $222 $275
 Deferred Revenue (ending balance) $115 $100
 Which of the following statements about the reason for the decrease in deferred revenue from 2017 to 2018 is
 most plausible?
 More revenue was recognized than cash was collected during 2018.
 More gift cards have been redeemed than sold during 2018.
 Higher number of prepaid streaming service subscriptions were sold during 2018.
 A higher number of smartphone extended warranty contracts were sold during 2018..
 See Lesson: Payable, Accrued Expenses, Deferred Revenue & Debt
 Question 25
 Consider the following statements regarding Company A and Company B:
 The two companies are identical except for their inventory accounting methods.
 Inventory prices rose throughout the year.
 Company B reported lower total assets than Company A at the end of this year. Which of the two companies
 most likely reports under US GAAP?
 

See Lesson: Basic Accounting Principles. (US GAAP vs IFRS 
 Question 26
 For the next question, use SEC EDGAR to locate the 10-K for Colgate-Palmolive (Ticker CL) filed on 2/21/19.
 Calculate Net Cash per Share for Colgate as of December 31, 2018. (Net Cash is defined as cash, cash
 equivalents less debt obligations. Use the latest basic share count as of 1/31/19.)
 ($6.46)
 ($6.49)
 ($6.53)
 ($6.55)