ACCOUNTING2113MIDTERM - Title of Test: | ' e (ex. Exam 1 or...

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Unformatted text preview: Title of Test: | ' e (ex. Exam 1 or Fma] Exam) Department: ( x T, MATH, or C S) Course #: 5 (ex. 2303 or 4315) Professor Name: (ex. Lee or Martm) Semester: t l l (ex. Fall 2000 or Spnng 2001) ACCOUNTING 21 1 3 FALL 20.1 DEPARTMENTAL MID—TERM W f3 0?: 71' we .,, 1w 5 recently W salonnlgfiyl not maintain a formal set of accounting records during the first week of her it ., w ' ’s operations 'fnsifid'ghe sinflymamtamed a checkbook for the busmess Followrng are the enmes included 1n 1' . Kay’s checkbook for the penod 13mm 2-8 January 2 Bank loan $25,000 January 3 Rent to landlord (1,000) January 3 Hair styling fees earned 650 January 4 Bought inventory (7,500) January 8 Hair styling fees earned 800 Assuming Kay had maintained a true accountmg system, determine the proper balance of her Cash, as of the close of busrness on January 8 a $1,450 1) $26,450 c $16,500 e some other amount Facts for Questions 2 and 3: Sanders, Inc. recently acquired a ptece of equipment r 32,110, Following ts the entry that was recorded In Sanders’ accounting records for this transaction as Equipment 450 EaUtP U006? Cash 450mm eager i 2 What effect does tlus error have on the tst accounts Involved? j Cash ts oversta equipment is overstated ‘ a Cash is unde _ ' equrpment ts understatdrl i g Cash rs overstated; equipment 15 understated a b @ Cash ts understated; equipment 15 overstated e None of the above 3 The journal entry needed to correct Sanders’ accounting records would include which of the following? a Debt! cash 3,000 Ed 730 00 Debit equipment 3.000 r h 0 J OW c Credit cash 3,900 0“ I’ d Debit equipment 3,900 e None of the above 4 The concept of reasonable assurance suggests that the cost of specific controls should exceed the benefits the controls provtde to an orgamzatton V} dd.) Us 33‘ \fi‘ a True (9 False 5 An “accrued revenue" account 15 included in a company’s balance sheet m g False u.- —l l. n|_rfl \IIU «sh- 33/ /’ f \ 2 55 q 6 Salanes payable Is an example ofa deferred expense account (1130. SUM-9 a True flake 7 Sales Drscounts ts a contra revenue account (flTme b False 8 A statement of cash flows reports a busmess’s cash flows from operatmg activittes. investmg acnvrttes, and producnon acflvrttes a True® False 9 When goods are slupped FOB Wmmt the seller ts responsible for paytng the transportatIon charges a True @False 10 Consrgned Inventory Items should not be Included In the physrcal inventory count at year-end @True b False 11 Arthur Fanuly Farms grows lettuce for sale to vegetable dtstnbutors The lettuce requlres approxtmately 100 days for soil preparatton, planting, and growth, 2 days for harvesung and selllng the crop, and 30 days to collect receivables related to the sale What length of nme should Arthur Fanuly Farms use for Identifying tts current assets and current habtlittes? A 7 V- a 100 days 30% w' ‘V‘ H” b. 102 days #19 Cd‘ 03¢“ r 132 days @1 year c none of the above 12 The three types of dunes that should be assrgned to dtfierent employees when an orgam'zanon practrces segregatton of key functional responsrbrltttes are ,a/ Reconctllatron, record keeprng, and execution of transactions . Venficauon. authonzanon, and organizing \c Authonzatton, record keeping, and custodtanship of assets G Ll 414/1 \ (l { ( T75 \ ( U \ [)1 l to; Record keeping, accounting, and custodtanslup of assets None of the above 13 Followrng are the lrne rtems. presented at random order, that were :11ch tn 3 recent mW ofJ Corp Interestcnpense W K G, 7 I q a} I so 0 Graces-profit seesa— m‘lj 15 2: O O Incomebeiou-mccmemes 4 -— C O C? .3 I J Ms + Y {W J’ 02.3!“ Inqumetaampense mono - ’g PA 119100 W“ 9 / WM . W 2 Q u \J Operatm l. 4-4? '— .nijég 2') Samumexpenses 341400 til/1C “4Lth a. -Ir_1cTMttb: 12.1000 1“ “71‘ 1k *"‘ What was J’s Net income? QC‘N ’ LX [’3 a 531.100 ©319‘100 e someother amount b $37,100 d $34,100 14 Knapp and Roth is a large investment banking firm. In December 1320, this firm earned fees of $2.2 nulltgn for investment banking semces prowded to three large chents As of December 31, 1998, the firm had not been pad for these services IfKnapp and Roth does not record an appropriate year-end iadyusnng entry for these fees. the company’s O “5" w (l or a ' 98 stockholders‘ eqmty Will be understated on its balance sheet {AC (Le C L-Z 3 993 revenues Will be overstated on its income statement 0 , i t m: n ’2 t“), 98 cash balance Will be understated on Its balance sheet V [1998 expenses will be understated on its Income statement. if, \ I L Li , J . "i 15 Revenues. expenses. and dmdends are all examples of temporary accounts ’ “ True b False 16 Generally accepted accounting pnnctples require a company to select the inventory cost flow assumption that moat closely matches the physrcal flow of its goods a True @ False 17 CTank owns a 011 field supply business Listed next are key mcome statement ttemsforthtsbusmess mwyuad C if): 2061K) Sales $86,000 Coat of goods sold 36,000 Operating expanses 18.000 income taxes expense (40%) 6000 ’L L0 tOOo Assumng the mmpany “WWW, the company should have reported a Net Income of . a V IL d SC.) k " \ a J k\ ‘v’k ‘ r, r b BL t~ f t $20,000 a $13,200 1? some other amount Facts for Questions 18 & 19: Don Olson & Day (DAD) perforate an aging analysis to determine the amount of uncollectible accounts expense to record at the end of each year At the end of 2000. the company’s aging schedule appeared as follows. Fraction expected to Meatle— Current receivables $50,000 15% “160 Past~due receivables 1-30 days 5,400 5% 730 31-50 days 2.000 10% 7,90 60+ 6,000 50% 39%0 The balance tn the company’s Allowance or Doeb Accounts was a debit of $215 pnor to the preparation of year-end k) adjusting entries for 2000 2“: 1 d V) 18 Based on the aging information, what was the of accounts receivable that DAD estimated it would not collect? a $4,435 1) $4,120 (1 34.005 $4,220 e Some other amount 19 The dollar amount of the 2000 year-end adjusting journal entry for uncollecnble accounts expense was c $4.005 d $4,220 G) $4,435 e Some other amount it $4,120 - - 1-1 - mune-till».- nut 20 The Secunues and Exchange Cornnusston does not allow puth comparues to issue forecasted financral data because of the nsk that the oompames’ pl'OJGCtJOI‘lS may not be achieved A Tme (Q False 21 “Busmesses are expected to conunue operatmg Indefinltely unless there rs evrdence to the contrary ” / reliability rule ,b/ full dlSCIOS‘lll'C pnnciple / entity concept ,d/ accounting penod concept @ none of the above 22 “The mlagvgtrpgorjangc of Specrfic rtems of acoounung mfonnatlon ” ,a/ feedback value foomparablhty relevance eoonomtes of scale matenahty 23 “T1meltness, predlcnve value, and/or feedback value “ relevance data tntegnty rehablhty comparability A” matenalityoom: t l: (Hf . Wilding: 24 Jones Corporanon reported the followmg Infonnatron in Its 5113110181 statements for 2000‘ Sales 38,575,000 Cost of goods sold 4,397,500 Inventoxy, January 1, 2000 572,700 Inventory, December 31, 2000 755.000 Jones’s rnventory tumover for 2000 was 39 o 61 D b6 ’ M- a 129 c 768 e someotheramount LEV. tin-IS 2 @662 d. 582 Facts for Questions 25 8:. 26: The jgycmng schedule surnmanzes the Inventory purchases and sales of Kna p Fans! pp dunng a recent three—month mod ~ LU com o» « . Per um 20 r) 1 O 'g‘Jjo '3? .g :1 J Per Umt Sellmg 1’ . ref) 7 r; (t, . L 10" we. ’2 » guts see. Page. b 3,000 zBCglnmng Inventory, January 1%" . 600 ' $20 ,. 00 A’urchase, January I 3 400 25 (“no ,Sales, January 2-31 U? LU 0‘ x500 s40 , 40 {c500 mum, February 1 wt” 2 :9 x300 30 F O 'i ‘ ,sales, February 2-28 7/ 00 ’7 ’ ‘ 200 45 ‘ xPurchasc, March 1 500 25 W Sales, March 2-31 490 45 _M,_ _ 3, Cut (Ohiyw f. 25 What rs Knapp and Knapp's cost ofgoods sold on March 31, assuming the company uses a perpetual inventory system and the LIFO inventory costing method? a $38,500 ® $30,000 e Some other amount b 38,500 d $10,000 26 What rs Knapp and Knapp’s inventory dollar value for January through March, assunung the company uses a perpetual inventory system and the FIFO inventory costing method? a $8,500 c $18,500 e .Some other amount (£310,000 d $30,000 27 The rmtral step of the closing process is posting joornal entry data to the appropriate general ledger accounts @ False 28 For whtch of the followrng groups of accoonts does each listed account have a normal “credit” balance? ‘ j (E v ‘i I r : F 6 c: V“ \W glimmer! Liabilities, Additional Paid-In Capital, snestenue D u ’ A” = es mane, Common Stock, Prepaid Rent , - Sales Dionne, Income Taxes Payable, Dividends é, AccountsPayable. Notes Pa ble. Cost ofGoods Sold / Short-Tenn Investments, Revenue, Cash and Cash Equivalents 29 For which of the followrng groups of accounts does each ltsted account have a normal “debit” balance? d ( '? r Receivables, Shor®mDeb Pnpdeenr [)7 Claimid )» ‘* W‘ ( ,b/ Land, Sales Revenue. Cost Sold ,r’ Land. Short-term Investments. Accfl‘pts Payable 1/ Research and Development Expenses. General and Administrative Expenses, Shfiterm Debt @ None of the above. 30 At the end of the Just completed fiscal year, Will Co. has an AW The company’s Allowance for Doubtful Accounts has a credit balance of $1.200. prior to any year-end adjusting entries Based upon an aging analysis ofthe company‘s recer es, an accountant estimates that Will has $15,100 of uncollectible receivables at year-end The year-end adjusting entry to record uncollectible accounts expense (bad debt expense) will include a a debit to Accounts Receivable 011115.900 H @ crcdrttothe Allowance for Doubtful Accounts «$13,900 W000 c credit to the Allowance for Doubtful Accounts of $16,300 d debit to Uncollectrble Accounts Expense of$15. 100 e None of the above Infomatlo for Questions 31-32: C - w (No ' \ The following information pertains to the operations of P & P, on accounting firm, for the month of December P a P’s accoun lens to use this rnformanon to prepare rli'e appropriate adjusting entries as of December 31 0003f)“ ( 1 [£000 U‘fl r i \‘t P received and recorded a $50,000 payment from a customer on December 4 This was firll payment for }services to be provrded by P a P during December, January. and February By December 31, one-halfof these W‘ \J finals” semcesbadboenprovrdcd ‘ n J fry 5 B On December 30, P & P received a $9.400 advance payment from a new client. No ' services have been provrded to tlus chent as of December 31 gm item was properly recorded by P & P accounting stall" on December 30 00")” {\le e .. Ufleo ( WM) u: 1-“! “It‘ll mill 31 The proper adjusting entry for Item A wrll Include a ' 0 tan r’ 7 W 00 )/ debtt to Accounts Recewable U.» b crecht to Retamed Earnings 0 fig 0 . credlt to Uneamed Revenue credrt to Accounts Reoetvable None of the above 32 The proper adjusting entry for Item B wrll Include a a debrt to Accounts Payable y. _ a b credlt to Retamed Earmngs l \ ‘ V "J, c debrt to Uneamed Revenue ~\ [ (J ‘ J 1 t l l t d credrt to Accounts Recervable L (9 none of the above U x ‘ecw ‘ L 33 thk Francrs owns and operates the Francis Manufacttmng Corporatron Followrng 1s the business's m e sta ment 0 for 2000 r‘- a ‘93 W (400 Sales $92,000 3’, 6 01 tin“. [p o 00 Cost ofGoods Sold 51,000! 53m LCD—15 Gross Profit 41.0004: 3‘0“) (5‘ V) Operatmg Expenses 10,000 "' Operaung Income 40' 31.990435 l O 3% 730;" Income Taxes Expense {40%) 12,400» to no 0 3/ “L Net Income 3m ‘7 IS: 00 11% t ‘l \ lit Shortly after the company's financral statements were dtstnbuted to ranets's accountant discovered that the company's year-end Inventory for 2000 had been madvertently ove error stemmed from an oversrght on the part of the accountant The accountant forgot to record the warm e try to bring the firm‘s perpetual inventory records rnto agreement wrth the results of the phystcal Inventory The perpetual Inventory records reflected an mventory balance of $56,000, wlule the physrcal Inventory yrelded an enchng Inventory value of $50,000 What was Francrs’s Net Income for 2000? a $13,600 c $25,000 @me other amount 0 $35,000 15,000 0 Pt: Lj’ C 34 R & T has total stockholders’ eqmty of $500,000 Ifthrs company has retained earnings of $220,000, $70,000 of common stock, and total assets of $940,000, determtne the firm’s total ltabthttes. H:Lr_Q A $210,000 D $280,000 -"' U 3 65 0Q OQO @3440000 E $40,000 0' W310 1 19.00 1 C $500900 TH) . oo o v @ Lrsted next are selected account balances 1ncluded m the December 31. 2000, adjusted Ina] balance of Kay’s Coffee op 9&1 I Qt) (J Cash 3 2,000 Accounts Payable 1,500 Sales—MMO Prepatd Rent 4,500 Adrmnrstrauve Expenses 1.500 UuhtJes Expense 2,000 t Income Taxes Expense 5.000 Uneamed Rental Revenue 6,100 Selling Expenses 8,000 Assuming that the above accounts include all of the company's revenue and expense accounts. this business had a net income for December 2000 of A $11,000 .000 E some other amount B $20,100 $12,500 36 Which of the followmg items is a key “component” of a busmess’s internal control? accounting system 21/ financmg actmties c control resources / reasonable assurance concept / materiality concept 37 Listed next are two recent transactions of a new company, Doubletiee Realtors (1) Received $48,000 advance payment for one year's rent on an oflice building (the building is being leased to an accounting firm by Doubletree) (2) Paid $12,000 in advance for six months of insurance Followmg these two transactions, the balance of Doubletree's muted Revenue account was A adebit balance ofs4s,ooo D adebit balance meow r . B a credit balance of $12,000 ®a credit balance of $48,000 v ‘~ , C a debit balance of $36,000 * v 38 Measures a firm’s liquidity 3 Age of Accounts Receivable b Market strength ratios L? Quick ratio Gross profit percentage c All of the above 39 Valentine operates a constiucuon firm The company requires that customers pay 50 percent of their estimated bill before any work is performed On November 27, Valentine received and recorded a $90,000 partial payment from a customer on a new Job that was scheduled to begin on December 1. The estimated bill for this job is $180,000. As of December 31, the job was 75 percent complete No further payments were received by December 31 from the , nor weie any additional entries relating to this Job recorded in the company’s accounting records f (3,000 ' O The December 31 adjustmg entry related to this Job W111 include a L kn Ca ‘00 $45,000 debit to Accounts Receivable 90,000 credit to Revenue 3 0,000 credit to Revenue one of the above 90,000 debit to Accounts Receivable 40 Which of the followmg accounts is a permanent account? a. Div1dends c 0 13 Rental Revenue ’ j ,, {r 4;; ,. Depreciation Expense _ f" , ’l Prepaid Advertismg " h“ 4 U0 None of the above ‘ \K , "\K 1" _ J L \3) 3 Qt g i not 1 fl r fl i L l t‘, t t f ' 4 II I I. -1. I II -II-. Juli 41 thson, Inc , makes all of Its sales on a credtt basts Following are selected financral data, expressed tn thousands. for tlus firm for a recent three-year penod * “a 66 {1'5 .seLY 1 leg; Y_9§L3 mover ‘ F 1 Net Sales $54,900 @400 $66,800 11“ ' W Year-End Accounts Recetvable 7,000 \ 8,300 7.500 U ‘1 U 3 O ‘2” f '2 ’9“ I 1’: thson’s age of receivables for Year 2 ts 1w ( y\ ~ a 48 5 @136 4 days e 7 76 days b 42 6 s 46 days 42 Follomng are the hue Items. presented to random order. that were mcluded m a recent income statement of Gordon. Inc 30 \cS 603.000 Selltng, General and Adnuntstratwe Expenses 3 1:5.000 ’ 2 U B- O 00 Operating Income ? ....a ,_.——-|—— Cost ofGoods Sold 265,000 5 rpgo, 00 0 Net Income ? ’ Income Tax Expense 55,000 1 Net Sales 545,000 0 Income Before Income Taxes ? Gross Profit '? Interest Revenue 15,000 What IS Gordon’s operattng income? $125,000 c $140,000 e Some other amount . 3280.000 d $85,000 43 A husmess’s operating cycle 15 the twelve-month penod covered by Its Income statement 44 At the begmmng of May 2001. the balance of the Supphes account of Robm‘s Ice Cream was $620. LDunng May, the company used $660 of supphes An tnventory of supplies at the end of the month showed supplies on hand of $320 The Journal entry rd the one urchase of su Ites made dunng the month was / Supplies Expense 660 Supplies 660 b Suppltes 660 Accounts Payable 660 c Supplies Expense 350 Accounts Payable __ Suppltes @0 “R a Accounts Payable s 360 \ 350 45 Followmg is information regarding the year-end mventory of Rosenberg. Inc Original Per Replacement '9] M m Wm 9251233121; 0( t g) (1; L, 0 Bakers 125 $17 $13 anti) 4) a) d Carpenters 200 13 15 11500 00 Hammers so 20 18 ' 0 0 g a] Q L) Wheelers 100 14 13 tq ‘ fills“ ’1 430 Applying “Warm of the LCM rule, Rosenbe ' ' Venton value will be $7,125 I $6,975 c $6.925 d $7,450 infiEW my“ mt, e Some other amount UP0 I In a W economic environment, the FIFO Inventory costing method typically yields a lower net income than the LIFO method when these methods are applied to the same financml data. 0 True @ False 47 Merchandtsmg companies want to maintain as low an age of inventory measure as possrble True b. False 48 The reported profits of multinational companies are not affected by their home country’s accounting rules a True @False 49 To enhance control over cash, an organization often asmgns one employee both custodial and reoordkeepmg responsrbthues for this asset True G False 50 “Venfiabihty, neutrality, and representational faithfulness ” comparability materiality a b Q reliability . relevance data integrity an 4—: .- mflu <1“ ...
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ACCOUNTING2113MIDTERM - Title of Test: | ' e (ex. Exam 1 or...

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