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

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    mastersolution
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    ********

    **

    * ******* *** ***** ** ******* and *** cost of ***** **** of $278000 *** ***** margin equals: ******* * *** **********

    $695000

    $278000

    $417000

    *****

    ****** terms 2/10 **** *** *********** *** (Points * *** 2%

    **** discount ** *** ****** is **** ****** ** **** **** *** balance *** ** ** ***** ***

    **** discount ** *** ****** ** **** ****** * days with ******* due in 30 ***** ***

    ******** ** **** ****** * days 30%

    ******** if **** ****** 10 ***** 2%

    ******** if **** ****** ** ***** **

    ** ***** had net sales ** $28496 ******* *** **** ** ***** **** *** ****** ******* *** *** net income *** $997 million *** ***** margin ***** ******* ******* * *** 35%

    ****

    ****

    ****

    ******

    **

    ** ******** **** ******** any *********** ******* *** ******** ******* ******* ********* ** *** *************** ******* *** *** ******* ******** on the **** statement ** * **** ******* * 2) Internal

    ****** ****

    reconciliation ****

    ****** *****

    *************** ********

    ** ****** and ******** 48

    ********* ***** ** inventory: ******* * *** **

    **** called ********* stock on ***** *******

    ** average ********* rather **** ****** ********** **

    **** ** measure ********* **

    ********** ** ******** **** ** ***** **** ** ****** inventory **

    * substitute *** *** ********** **

    Goods on ************ ******* * ** ****** ***

    ***** ******* by *** owner ** *** consignee who ***** the ***** *** *** ****** Are

    reported ** *** consignee's ***** ** inventory ***

    goods shipped ** *** ********* *** ***** *** goods *** *** owner ***

    *** ******** ** the *************** inventory ***** they do *** **** ********** of *** ********** **

    *** main ********** ** internal control ******* ***** ** *** ********** ******* * 2) *********

    responsibilities ********

    minimal ******** ***

    only ************ ******** ****

    *** *********

    Click here to download attached files:

    GB518 Unit3 Midterm Exam.docx

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