btv1D3 - ECON 3A-FALL 2007 MIDTERM #2 Name: _ _ PERM #:...

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ECON 3A---FALL 2007 MIDTERM #2 Name: _________________________________ PERM #: _______________________ ANSWER QUESTIONS #1-25 ON GREEN SCANTRON AND THE REST IN THE SPACE PROVIDED-PLEASE. 1. Gross profit equals the difference between A) net sales revenues and operating expenses. B) net income and operating expenses. C) net sales revenues and cost of goods sold plus operating expenses. D) net sales revenues and cost of goods sold. 2. Goods purchased for future use in the business, such as supplies, are called A) revenues. B) liabilities. C) prepaid expenses. D) stockholders' equity. 3. The balance in the prepaid rent account before adjustment at the end of the year is $9,000 and represents three months rent paid on December 1. The adjusting entry required on December 31 is A) Debit Prepaid Rent, $6,000; Credit Rent Expense, $6,000. B) Debit Rent Expense, $3,000; Credit Prepaid Rent, $3,000. C) Debit Prepaid Rent, $3,000; Credit Rent Expense $3,000. D) Debit Rent Expense, $9,000; Credit Prepaid Rent, $9,000. 4. The revenue recognition principle dictates that revenue should be recognized in the accounting records A) at the end of the month. B) when cash is received. C) in the period that income taxes are paid. D) when it is earned. 5. Accounts often need to be adjusted because A) many transactions affect more than one time period. B) management can't decide what they want to report. C) there are never enough accounts to record all the transactions. D) there are always errors made in recording transactions. 6. Two categories of expenses in merchandising companies are A) sales and cost of goods sold. B) cost of goods sold and financing expenses. C) operating expenses and financing expenses. D) cost of goods sold and operating expenses. 7. One of the accounting concepts upon which adjustments for prepayments and accruals Version 1 Page 1
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are based is A) monetary unit. B) economic entity. C) cost. D) matching. 8. Accumulated Depreciation is a(n) A) liability account. C) stockholders' equity account. B) contra asset account. D) expense account. 9. A company spends $20 million dollars for an office building. Over what period should the cost be written off? A) All in the first year B) After $20 million in revenue is earned C) When the $20 million is expended in cash D) Over the useful life of the building 10. The future value of 1 factor will always be A) equal to the interest rate. B) less than 1. C) equal to 1. D) greater than 1. 11. Which one of the following is not a justification for adjusting entries? A) Adjusting entries are necessary to enable financial statements to be in conformity with GAAP. B) Adjusting entries are necessary to ensure that revenue recognition principles are followed. C) Adjusting entries are necessary to bring the general ledger accounts in line with the
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This note was uploaded on 06/09/2009 for the course ECON 3A taught by Professor Loster during the Winter '07 term at UCSB.

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btv1D3 - ECON 3A-FALL 2007 MIDTERM #2 Name: _ _ PERM #:...

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