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for Script displaying headers.
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Multiple Choice
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Time Remaining:
1. (TCO1)Financialstatementsare:______________
(Points: 4)
standarddocumentsissuedbyoutsideconsultantswhoarehiredtoanalyzekeyoperationsofthe
businessinfinancialterms.
standarddocumentsthattellushowwellabusinessisperformingandwhereitstandsinfinancial
terms.
reportscreatedbymanagementthatstatesitisresponsiblefortheactsofthecorporation.
reportsissuedbyoutsideconsultantswhoarehiredtoanalyzekeyoperationsofthebusiness.
2. (TCO2)Acompanypurchasedinventoryonaccount.Thistransactionincreasedassetsand: (Points:
4)
increasedequity
increasedliabilities
increasedrevenues
decreasedassets
3. (TCO1)Whichprinciplestatesthatassetsacquiredbythebusinessshouldberecordedattheiractual
price? (Points: 4)
costprinciple.
objectivityprinciple.
reliabilityprinciple.
stabledollarprinciple.
4. (TCO2)Acompanyperformedservicesforacustomeronaccount.This
transaction___________________. (Points: 4)
decreasedassetsanddecreasedequity.
increasedassetsandincreasedliabilities.
increasedrevenueanddecreasedexpenses.
increasedassetsandincreasedrevenues.
5. (TCO2)Whichtypeofaccountisincreasedwhenacompanyrecordsadebt? (Points: 4)
expense
retainedearnings
liability
noneoftheabovearecorrect.
6. (TCO2)Theresultsofoperationsarereportedonthe________. (Points: 4)
statementofoperation.
statementoffinancialposition.
trialbalance.
statementofstockholdersequity.
7. (TCO3)Acompanystartedtheyearwith$400ofsupplies.Duringtheyearthecompanypurchased
additionalsuppliescosting$1,600.Therewere$800ofsuppliesonhandattheendoftheyear.An
adjustedtrialbalancepreparedattheendoftheaccountingperiodwillshowthewhichofthefollowing
balanceinSupplies: (Points: 4)
$1,400.
$800.
$600.
$0.
8. (TCO3)Thebookvalueofanassetatthebeginningoftheyearwas$17,000.Theequipmentoriginally
cost$27,000.Depreciationexpensefortheyearwas$8,000.Thebookvalueoftheassetattheendofthe
yearis: (Points: 4)
$19,000.
$17,000.
$10,000.
$9,000.
9. (TCO5)Whichofthefollowingitemswillcauseadifferencebetweenthebookbalanceandthebank
balance? (Points: 4)
depositsintiming
bankcollections
canceledchecks
outstandingvoidedchecks
10. (TCO5)Undertheallowancemethod,theentrytoreinstateanaccountpreviouslywrittenoff: (Points:
4)
increasestotalassets.
increasesnetincomeandincreasestotalassets.
decreasesnetincomeandincreasestotalassets.
hasnoeffectonnetincomeortotalassets.
11. (TCO4)Inamerchandisingcompanysincomestatement,whichofthefollowingwouldNOTbe
includedintheCostofGoodsSoldcalculation?(Points: 4)
shippingcostsfromthemanufacturertothemerchandiser
salescommissions
returnsofinventorypurchases
salestaxesoninventorypurchases,asshownontheinvoices
12. (TCO4)Acompanywhoseinventoryconsistsofveryuniqueitemswouldprobablyusewhichinventory
method? (Points: 4)
firstin,firstout
lastin,firstout
specificunitcost
weightedaverageofonlytheuniqueitems
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Thereare4pagesinthisexam.Besuretocompleteallpagesbeforesubmittingtheexam.
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Multiple Choice (cont)
4
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Time Remaining:
1. (TCO4)Whenusingtheaveragecostmethodtodeterminethecostofinventory,theaveragecostper
unitiscalculatedasthecostofgoods: (Points: 4)
inendinginventorydividedbythenumberofunitsinendinginventory.
solddividedbythenumberofunitssold.
availableforsaledividedbythenumberofunitsavailableforsale.
solddividedbytheaveragenumberofunitsininventory.
2. 4)
land.
landimprovements.
landmaintenanceexpense.
landimprovementexpense.
3. (TCO6)Thecostofinstallingshrubberyshouldberecordedas:
(Points: (TCO6)Whichofthefollowingstatementsisfalse?
(Points: 4)
depreciationisaprocessofsubjectivevaluation.
depreciationisanoncashexpense.
accumulateddepreciationrepresentsagrowingamountofcashtobeusedtoreplacetheexisting
asset.
accumulateddepreciationisthatportionofaplantassetscostthathasbeenrecordedpreviouslyas
anexpense.
4. (TCO6)OnJanuary2,2006,KJCorporationacquiredequipmentfor$260,000.Theestimatedlifeofthe
equipmentis5yearsor40,000hours.Theestimatedresidualvalueis$20,000.Whatisthebookvalueof
theassetonDecember31,2007,ifKJCorporationusesthestraightlinemethodofdepreciation?
(Points: 4)
$80,000
$96,000
$104,000
$164,000
5. (TCO6)Currentliabilitiesfallintotwocategorieswhicharereferredtoas: (Points: 4)
liabilitiesofaknownamountandestimatedliabilities.
contingentliabilitiesandnoncontingentliabilities.
contingentliabilitiesandcontraliabilities.
unearnedliabilitiesandaccruedliabilities.
6. (TCO7)Inacorporation,thetwobasicsourcesofstockholders'equityare: (Points: 4)
donatedcapitalandcontributedcapital.
parvalueandnoparvaluestock.
preferredstockandcommonstock.
paidincapitalandretainedearnings.
7. (TCO7)Thepurchaseoftreasurystock: (Points: 4)
increasesassetsanddecreasesstockholders'equity.
decreasesassetsanddecreasesstockholders'equity.
decreasesassetsandincreasesstockholders'equity.
decreasesassetsandincreasesliabilities.
8. (TCO2)Considerthefollowingtransactions:
I.Borrowedcashonanotepayable,$80,000
II.Providedservicesonaccount,$10,000
III.Receivedcashfromacustomeraspaymentonaccount,$8,000
IV.Receivedautilitybill,$1,200
Totalliabilitieswouldbe:
(Points: 4)
$1,200
$81,200
$98,000
$80,000
Thereare4pagesinthisexam.Besuretocompleteallpagesbeforesubmittingtheexam.
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Essay 1
TCO1ExplainthegenerationoftheBalanceSheet.Wheredoestheinformationcomefromandhow
isitstructured?Whousesthisreportandwhatinformationaretheyinterestedin?Doprovidethe
textbookpage(s)usedtodevelopyouranswer.
Thebalancesheetcomesafterthestatementofretainedearnings.Theinformationfoundinthe
BalanceSheetcomesfromtheIncomeStatementandtheRetainedEarningsStatement.Thestructure
oftheBalanceSheetismadeupofAssets,LiabilitiesandOwnersEquity.TheBalanceSheetismainly
usedbyoutsiders.TheseoutsiderscanbeinvestorslookingtobuystockofownershiporBankers
lookingtolendthecorporationsomecapital.Pagesinthebookusedwere14through19.
2. (TCO6)CreditCompanyincurredthefollowingcostsinacquiringplantassets:
purchasedlandfora$50,000downpaymentandsigneda$100,000notepayableforthe
balance
delinquentpropertytaxof$2,500andlegalfeesof$1,500
$5,000toremoveanunwantedbuilding
architectfeeof$2,000forthedesignofabuilding
constructedanofficebuildingatacostof$500,000
interestcostonconstructionloanforthebuilding,$20,000
$7,500forfencing,$4,000forlandscaping,and$5,000forlighting
Determinethecostoftheland,landimprovements,andbuilding.(Points:
20)
Purchase price: 150,000
Delinquent Tax: 2,500
Legal Fees:
1,500
Demolition:
5,000
Architecture fee 2,000
Construction
500,000
Interest Payable 20,000
Land Improvements 16,500
Total
$697,500
3. (TCO2) Accounting has its own vocabulary and basic relationships. Match the following accounting terms
with the corresponding definition or meaning.
_C_ 1. Net income
equity
A. The cost of operating a business; a decrease
_G_ 2. Receivable
B. Always a liability
in stockholders

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2009385,446.00392,017.002008325,588.00210,692.000.981.55165,202.00104,413.0060,174.00329,789.00392,017.00217,199.0055,214.002,308.00274,721.00210,692.00AcidTestRatio0.841.30TotalLiabilitiesEquity504,169.00926,942.00251,930.00766,

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