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GB518 Unit3 Midterm Exam / GB518 Unit3 Midterm Exam
1. What would be the appropriate entry for the following transaction?
Bill Co. performed $5,200 in consulting services on account (Points : 2)
Credit to Cash, Debit to Accounts Receivable
Debit to Revenue, Debit to Cash
Debit to Accounts Receivable, Credit to Cash
Debit to Revenue, Credit to Cash
Debit to Accounts Receivable, Credit to Revenue
2. Technological advancement (Points : 2)
Has replaced accounting
Has not changed the work that accountants do
Has freed accounting professionals to concentrate more on the analysis and interpretation of information
In accounting has replaced the need for decision makers
In accounting is only available to large corporations
3.Which of the following elements are found on the Balance Sheet? (Points : 2)
Service Revenue
Net Income
Operating Activities
Utilities Expense
Retained Earnings
4.Increases in retained earnings from a company's earnings activities are: (Points : 2)
Assets
Revenues
Liabilities
Stockholder's Equity
Expenses
5. An asset created by prepayment of an expense is: (Points : 2)
Recorded as a debit to an unearned revenue account
Recorded as a debit to a prepaid expense account
Recorded as a credit to an unearned revenue account
Recorded as a credit to a prepaid expense account
Not recorded in the accounting records until the earnings process is complete
6.Unearned revenues are: (Points : 2)
Revenues that have been earned and received in cash
Revenues that have been earned but not yet collected in cash
Liabilities created when a customer pays in advance for products or services before the revenue is earned
Recorded as an asset in the accounting records
7.The debt ratio is used: (Points : 2)
To measure the amount of equity relative to the expenses
To reflect the risk associated with a company's debts
Only by banks when a business applies for a loan
To determine how much debt a firm should pay off
8.The principle that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash and (3) measures the amount of revenue as the cash plus the cash equivalent value of any non-cash assets received from customers in exchange for goods or services is called the: (Points : 2)
Going-concern principle
Cost principle
Revenue recognition principle
Objectivity principle
Business entity principle
9.An example of an operating activity is: (Points : 2)
Paying wages
Purchasing office equipment
Borrowing money from a bank
Selling stock
Paying off a loan
10.Which of the following statements best describes the relationship of U.S. GAAP and IFRS? (Points : 2)
They are identical
They are entirely different conceptual frameworks
They are similar but not identical
Neither has anything to do with accounting
They both relate only to publicly traded companies
11.The financial statement that shows: beginning and ending retained earnings balances and the effects of net income (loss) and a dividend for the period is the: (Points : 2)
Statement of financial position
Statement of cash flows
Balance sheet
Income statement
Statement of retained earnings
12.A credit is used to record: (Points : 2)
An increase in an expense account
An increase in an asset account
An increase in an unearned revenue account
A decrease in a revenue account
A decrease to retained earnings
13.The primary objective of financial accounting is: (Points : 2)
To serve the decision-making needs of internal users
To provide financial statements to help external users analyze and interpret an organization's activities
To monitor and control company activities
To provide information on both the costs and benefits of managing products and services
To know what, when and how much to produce
14.To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the: (Points : 2)
Objectivity principle
Realization principle
Business entity principle
Going-concern principle
Revenue recognition principle
15.Net Income: (Points : 2)
Decreases equity
Represents the amount of assets owners put into a business
Equals assets minus liabilities
Is the excess of revenues over expenses
Represents the owners' claims against assets
16. A post-closing trial balance includes: (Points : 2)
All ledger accounts with balances, none of which can be temporary accounts
All ledger accounts with balances, none of which can be permanent accounts
All ledger accounts with balances, which include some temporary and some permanent accounts
Only revenue and expense accounts
Only asset accounts
17. On April 30, 2011, a three-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the year ended December 31, 2011? (Points : 2)
$500
$4,000
$6,000
$14,000
$18,000
18.A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is: (Points : 2)
2%
20%
200%
500%
$8,000
19. A classified balance sheet: (Points : 2)
Measures a company's ability to pay its bills on time
Organizes assets and liabilities into important subgroups
Presents revenues, expenses and net income
Reports operating, investing and financing activities
20.A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in: (Points : 2)
$200 less in net income
$200 more in net income
$200 difference between the debit and credit columns of the Unadjusted Trial Balance
$200 of prepaid insurance
An error in the financial statements
21. If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on the following January 5 would include: (Points : 2)
A debit to Cash and a credit to Salaries Payable
A debit to Cash and a credit to Prepaid Salaries
A debit to Salaries Payable and a credit to Cash
A debit to Salaries Payable and a credit to Salaries Expense
No entry would be necessary on January 5
22.The difference between the cost of an asset and the accumulated depreciation for that asset is: (Points : 2)
Depreciation Expense
Unearned Depreciation
Prepaid Depreciation
Depreciation Value
Book Value
23. A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements and which is an optional tool in the accounting process is a(n): (Points : 2)
Adjusted trial balance
Work sheet
Post-closing trial balance
Unadjusted trial balance
General ledger
24. A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of office supplies was purchased during the period? (Points : 2)
$2,700
$2,900
$3,300
$3,500
$3,700
25. Based on the following information, determine the current assets, assuming all accounts have a normal balance?
Cash $ 6,754 Dividends $ 2,000
Accounts receivable $ 13,733 Consulting fees earned $ 13,718
Office supplies $ 2,625 Rent expense $ 3,673
Land $ 37,153 Salaries expense $ 6,642
Office equipment $ 14,535 Telephone expense $ 560
Accounts payable $ 6,463 Miscellaneous expense $ 280
Common stock $ 54,490 Retained Earnings ?
(Points : 2)
$74,800
$37,647
$60,265
$23,112
26. The length of time covered by a set of periodic financial statements is referred to as the: (Points : 2)
Fiscal cycle
Natural business year
Accounting period
Business cycle
Operating cycle
27. On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account and the company records adjustments only at year-end, the adjusting entry at the end of the first year is: (Points : 2)
Debit Prepaid Insurance, $1,800; credit Cash, $1,800
Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440
Debit Prepaid Insurance, $360; credit Insurance Expense, $360
Debit Insurance Expense, $360; credit Prepaid Insurance, $360
Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440
28. A company purchased a new truck at a cost of $42,000 on July 1, 2011. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. How much depreciation expense will be recorded for the truck for the year ended December 31, 2011? (Points : 2)
$3,250
$3,500
$4,000
$6,500
$7,000
29.On June 30, 2011, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31, 2011 for Apricot would include: (Points : 2)
A debit to an expense for $1,250
A debit to a prepaid expense for $1,250
A credit to an expense for $3,750
A debit to a prepaid expense for $3,750
30. A company pays each of its two office employees each Friday at the rate of $100 per day each for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is: (Points : 2)
Debit Unpaid Salaries $600 and credit Salaries Payable $600
Debit Salaries Expense $400 and credit Salaries Payable $400
Debit Salaries Expense $600 and credit Salaries Payable $600
Debit Salaries Payable $400 and credit Salaries Expense $400
31. In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 4239 for November's rent was correctly written and drawn for $7,390, but was erroneously entered in the accounting records as $3,790. When preparing the November bank statement, the company should: (Points : 2)
Deduct $3,600 from the book balance of cash
Add $3,600 to the bank statement balance
Add $7,390 to the book balance of cash
Deduct $3,600 from the bank statement balance
Add $3,600 to the book balance of cash
32.A company had $43 missing from petty cash which was not accounted for by petty cash receipts. The correct procedure is to: (Points : 2)
Debit Cash Over and Short for $43
Credit Cash Over and Short for $43
Debit Petty Cash for $43
Credit Petty Cash for $43
Credit Cash for $43
33. Multiple-step income statements: (Points : 2)
Are required by the FASB
Contain more detail than a simple listing of revenues and expenses
Are required for the perpetual inventory system
List cost of goods sold as an operating expense
Can only be used in perpetual inventory systems
34. Physical inventory counts: (Points : 2)
Are not necessary under the perpetual system
Are necessary to measure and adjust for inventory shrinkage
Must be taken at least once a month
Require the use of hand-held portable computers
35. The quick assets are defined as: (Points : 2)
Cash, short-term investments and inventory
Cash, short-term investments and current receivables
Cash, inventory and current receivables
Cash, noncurrent receivables and prepaid expenses
Accounts receivable, inventory and prepaid expenses
36. A company had sales of $375,000 and its gross profit was $157,500. Its cost of goods sold equal: (Points : 2)
$(217,000)
$375,000
$157,500
$217,500
37.Herald Company had sales of $135,000, sales discounts of $2,000 and sales returns of $3,200. Herald Company's net sales equals: (Points : 2)
$5,200
$129,800
$133,000
$135,000
$140,200
38. The inventory valuation method that tends to smooth out erratic changes in costs is: (Points : 2) FIFO
Weighted average
LIFO
Specific identification
WIFO
39. The inventory turnover ratio: (Points : 2)
Is used to analyze profitability
Is used to measure solvency
Measures how quickly a company turns over its merchandise inventory
Validates the acid-test ratio
Calculation depends on the company's inventory valuation method
40.Given the following information:
Petty cash balance $ 450.00 Courier receipt $ 82.50
Postage receipt $ 48.00 Office Supplies receipt $ 56.22
Business Meal receipt $ 102.34 Cash on hand at the end of the month $ 76.21
What is the amount of cash over and short? (Points : 2)
debit $84.73
credit $84.73
debit $160.94
credit $160.94
no cash over or short would be recorded
41. Cash equivalents: (Points : 2)
Are short-term, highly liquid investments
Include 6-month CDs
Include checking accounts
Are recorded in petty cash
Include money orders
42. The full disclosure principle: (Points : 2)
Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made and its effect on net income
Requires that companies use the same accounting method for inventory valuation period after period
Is not subject to the materiality principle
Is only applied to retailers
Is also called the consistency principle
43. Alpha Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700 and sales discounts of $3,475. Alpha's net sales for this period equal: (Points : 2)
$94,275
$172,550
$174,250
$176,025
$177,725
44. A company had sales of $695,000 and its cost of goods sold of $278,000. Its gross margin equals: (Points : 2)
$(417,000)
$695,000
$278,000
$417,000
45.The credit terms 2/10, n/30 are interpreted as: (Points : 2)
2% cash discount if the amount is paid within 10 days, with the balance due in 30 days
10% cash discount if the amount is paid within 2 days, with balance due in 30 days
30% discount if paid within 2 days
30% discount if paid within 10 days
2% discount if paid within 30 days
46. J.C. Penny had net sales of $28,496 million, its cost of goods sold was $19,092 million and its net income was $997 million. Its gross margin ratio equals: (Points : 2)
3.5%
5.2%
33%
67%
149.3%
47. An analysis that explains any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a (n): (Points : 2)
Internal audit
Bank reconciliation
Bank audit
Trial reconciliation
Analysis of debits and credits
48. Days' sales in inventory: (Points : 2)
Is also called days' stock on hand
Focuses on average inventory rather than ending inventory
Is used to measure solvency
Is calculated by dividing cost of goods sold by ending inventory
Is a substitute for the acid-test
49. Goods on consignment: (Points : 2) ratio
Are goods shipped by the owner to the consignee who sells the goods for the owner
Are reported in the consignee's books as inventory
Are goods shipped to the consignor who sells the goods for the owner
Are not reported in the consignor's inventory since they do not have possession of the inventory
50. The main principles of internal control include which of the following: (Points : 2)
Establish responsibilities
Maintain minimal records
Use only computerized systems
Bond all employees
- @
- 177 orders completed
- ANSWER
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******** * company's ******* ** *** *** ***** ** *****
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**** **** ** net income
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**** * **** ********* $ 2000
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credit ** an expense for $3750 *
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be ***** ** ***** **** * month *******
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short-term *********** and ********** Cash
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noncurrent *********** *** ******* ********* Accounts
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********
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*** ********* ratio Calculation
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*** ********* information: *****
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**** ************ (Points : *** ***
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money ******* **
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$172550
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**
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$695000
$278000
$417000
*****
****** terms 2/10 **** *** *********** *** (Points * *** 2%
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******** ** **** ****** * days 30%
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******** if **** ****** ** ***** **
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****
****
****
******
**
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****** ****
reconciliation ****
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** ****** and ******** 48
********* ***** ** inventory: ******* * *** **
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* substitute *** *** ********** **
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responsibilities ********
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