Accounting Test

Accounting Test - BUAD 232 Spring 2006 First Mid-Term...

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BUAD 232 – Spring 2006 – First Mid-Term Examination [In completing this examination, you may use any resources you deem appropriate. I encourage you to work together in considering these questions, but insist that your final answers be entirely your own. Please present these answers in a professional manner (“hard” copies only, no electronic submissions!!). Papers received prior to the “bonline” of 27 March 2006 at 17h will earn a 2% bonus. All others are due by 1 May 2006 at 17h. Good luck!!!] Section 1 – Theory [30 Points] 1. There are several different methods of accounting for “bad debt expense.” What are the differences between the accrual and cash-basis methods? Of the two, which is considered GAAP in the United States? How does the IRS require taxpayers to treat bad debt expense, and why? 2. Is a liability created when a merchant collects sales tax from a client? If so, how would it be recorded on the merchant’s accounting records? In this situation, what is the relationship between the merchant and the government? 3. Why is a “prepaid expense” not an expense? Give three typical examples of prepaid expenses. How does a “deferred charge” differ from a prepaid expense? 4. Which accounting principle allows accountants to ignore real transactions and record fictional ones? Why is this principle important to accounting? 5. Why are “unearned revenues” not revenues? Give three examples of real-life unearned revenues. Discuss a recent fraud case that revolved around the misclassification of unearned revenues. 6. What is meant by a “contingency,” and how do we account for it? Does the accounting for a gain contingency differ from a loss contingency, and if so, why? Which principle supports this method of accounting? 7.
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This note was uploaded on 03/31/2008 for the course BUAD 232 taught by Professor Staff during the Spring '08 term at Mary Washington.

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Accounting Test - BUAD 232 Spring 2006 First Mid-Term...

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