midterm%20fall%2009%20Version%20A%20%20solution3

midterm%20fall%2009%20Version%20A%20%20solution3 -...

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Unformatted text preview: MtDi'en’m Fin“ Gui Uflffitfifl A I. Scott Simpson is the sole owner ol'Sal‘ety Solutions. Inc [SSI]. Safety Solutions is a consulting linn tltat is hired by businesses across the country to provide on-site safety certification courses. job-site inspections. regulatory compliance assessments and customized etnployee training progratns. On New Year’s Eve Scott suffered a motnentary lapse ofprofessional etiquette while talking to his secretary; lte said something he believed to be “funny” that she viewed as inappropriate. In early January she filed a legal claim against 331 asking for 525.000 in damages. Scott quickly met with his attontey who looked in to the case. He discovered that the secretary had a long history of filing these sorts of claims against her male employers. He felt that this fact alone made it extretnely unlikely that a verdict would be reached in the secretary's favor. lie pointed out that even on the slight chance that she did win the case {which he feels is not going to happen] her settlement would never be ttear the 5525.000 that she is requesting and would probably fall somewhere between 52.000 and 32.500. Which of the Following statements best explains how SSI shottld reflect this situation on their ll-"fl | st financial statements: 551 should accrue the full 325.000 as a liability on their l2f3l balance sheet. SSI should not record any liability on their I331 balance sheet. .. SSI should accrue a $2.000 liability on their l2i’3l balance sheet. D. 531 should accrue a $2.500 liability on their l2.-"3| balance sheet. li. None of the above statements accurately explains how SSI should reflect this situation on their | 2.-'31st financial statements: 2. its a faculty member at the University of Illinois | ltave the objective ofmaintaining an environment free of acadetnic dishonesty. Assume that in order to help to achieve this objective I plant “under cover" proctors throughout the exam rooln who pose as regular students taking the exam. Assume that students taking the exam are unaware that this control procedure has been pttt in to place. 1|t'r'hat type of control procedure would this be considered? . Preventative El. Detective i... Corrective D. Preventative and detective E. Primarin con‘ective but somewhat preventative 3. Proper segregation ofduties It. Could prohibit an employee from being able to authorize a transaction while at the same time holding legal title to the asset. B. {Jan eliminate the risk. oftheft C. Is effective at preventing irregularities but is not effective at preventing errors. 1'}. Could prohibit an employee from being able to authorize a transaction while at the same time having physical custody of the asset. li. None ofthe ahove 4. 6. Lynn Corporation failed to make the following adjusting entry: I 1131313 1 .[ltltl Insurance Expense Prepaid Insurance Assuming that no adjustment is made to correct for this mistake. which of the following statements adequately explains the all'cct ol'this omission on the accounting equation? A. Assets are overstated and Equity would be understated B. Assets are understated and Equity would be overstated {3. Assets and equity are undeistated @ fitsscts and equity are overstated 1:. The emission would cause the balance slteet equation to be out—nf—halance. After performing an inventory count, Billow Corporation determined that it had ii I ,tltltl of inventory physically on hand as of the end of the year. |Eiivcn the following items and costs . determine the total value of merchandise inventory that should be reported by Billow as of the balance sheet date: — $l.flflfl of goods purchased by Billow from another company. As of 12.53 I st . the goods are in transit and shipping terms are FDR destination. - $1.,IIJIIJII] of goods sold by Billow to another company. shipping terms are FOB shipping point. -5 | .000 of goods sold by Billow to another company. These goods were on site on 12.:‘31st but were segregated and not counted. They were shipped FOB Shipping at the start of business on January 211d. As of ll-"31st. the goods are in transit and A. $1 ,flflfl . $2 ,U'U'U . $ 3 .fltlt] I]. $4 ,UUU E. None of the above Accruals occur when cash flows: . Occur before revenue or expense recognition. é) llflccur after revenue or expense recognition. C. Are uncertain. D. May be substituted for goods or services. 7". Cal Farms reported supplies expense ot‘SZJJULLUUU this year. The supplies account decreased by $2flfl.flflfl during the year to an ending balance ol" $4flflflflfl. What was the cost ot'supplics the Cal Farms purchased during the year? A. $l season. is ill ,3UU,UUU. $2 .EUDflflfl. D. $2.4flflfiflfl. 8. Adjusting entries: A. Affect income statentent accounts but not balance sheet accounts. B Aftect balance sheet aceouttts but net income statctnent accounts. Q.) Affect both income stalernenl and balance sheet accottnts. I]. Affect permanent but not temporary accounts. E. At‘l'eet temporary but not permanent accounts. 9. The broad principle that requires expenses to be reported in the same period as the revenues that were eamed as a result of the expenses is the: A. Recognition principle. B. Historical Cost principle. C. Cash basis of accounting. @ Matching principle. E. Time period principle. ID. lt‘throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees. the end—of—period adjusting entry to record the portion of those t‘ees that has been earned is: A. Debit Cash and credit Legal Fees Earned. B. Debit II'Sash and credit Unearned Legal Fees. C. Debit Unearned Legal Fees and credit Legal Fees Earned. . Debit legal Fees Eamed and credit Unearned Legal Fees. E. Debit Uncarned Legal Fees and credit Accounts Receivable. | I. The New Deal is a used-car dealership wltich owns the following four assets. Which ofthe following assets would be considered inventory?I A. A van which is used to provide courtesy rides to eustotners who are having their cars serviced at the dealership. B. A show roont used to display some ofthe ntorc high-end vehicles for sale @ars and vans which they plan to sell to customers D. A building and land which was purchased as an investment which are not used in the company‘s operations. 11'. None ofthe above IR. A Few years ago, Baker Corporation introdueed a new product earrying a two-year warranty against det‘eets. The total l‘uture warranty cost are estimated to be 5% ot'sales. Based on past history and industry aveiages, filed elaims are espeeted to be twiee as eon-anon in the last twelve months of the eontraet than in the first twelve months. At the beginning of |99| Flow had a 525,333 balanee in its warranty obligation aeeount representing the estimated east of un filed warranty claims from sales made in 1989 d: tflfltt. Sales forthe year ended December 3|, IEJEJI were S4tttt.t}t}t} and during 1991 the company ineurred $ | iflflfl ot'eost servieing aetual claims filed during 199]. 'What is the dollar amount of' the liability that should he reported on the IE}? l.-"‘}I balanee sheet?I A. $ 5 .UUU H. .‘E 2 5 film (.3. $ | 5 £131? D. 52?} Hill] Q3) saunas l3. Which of the Following aeeounts is NOT closed at the end of the year'? A. Depreeiatinn expense B. Cost of goods sold @nterest receivable I}. Interest revenue E. All of the above are closed l4. When Lowry Company reports $2flflflflfl of revenue and iiilflllltltl of expenses For Eflfl'fl', the following is the et‘t‘eetr A. Lowry's retained earnings is increased by the net income. 13. Lawry's eontnbuted eapital is inereas-ed by the net ineo me. {3. Lawry's retained earnings deereases by the net loss. Lawry's total stoekholders' equity deereases by the net loss. ® Both C and D oeeur. IS. Willow. an automobile manufacturer had the following costs: Glass used in automobiles $1.000 Overtime for accounting dept S | .000 Advertising for automobiles $ | .000 Salary of the VP Sales 31,000 Rent on the factory $1.000 What was the dollar amount of the above costs that are considered product costs? a. $1,000 ED $2.000 c. some I). s4,ooo E. $5.0m] lo. Horwood Appliance produces washers and dryers in an assembly-line process. Labor costs incurred during a recent period were: corporate executives. 5100.000; assembly—line workeis. $30000; factory security guards. S | 8.000; and plant supervisor. 530,000. The total ofHorwood's dircot labor cost was: Q.) $30,000. B. $93,000. C. $113,000. D. $128,000. E. $43,000. IT. Gull IrJutboards is a manufacturer of outboard motors for recreational boaters. Gull buys all of its raw materials on account from Roth Materials Company. Gull has provided you with the lbllowing summarized account activity for the year ended 113302003: Raw Materials Accounts Payable 250.000 3 50.000 ? i‘ F00.00-0 l000.000 350J 000 2 50,000 Given the above account activity 1uvhat 1uvas the amount of direct materials placed in to production during 2008‘? A. ii 2 50 .000 E. $ 3 5'0 .000 ssaa .oao D. $1500 .000 E. 3700.000 I 8. Product costs A. are expensed when incurred. g) are inventoried. . are treated in the same manner as period costs. D. are treated in the same manner as advertising costs. E. are subtracted from cost of goods sold. IE3. Which of the following statements is {are} correct?1 G) I[inrerrime premiums should be treated as a component of manufacturing overhead. B. Uvertimc premiums should be treated as a component ot‘direet labor. C. idle time should be treated as a component of direct labor. D. ldle time should be accounted for as a special type of loss. E. Both "E" and "C" are correct. 20. Product costing in a manufacturing firm is the proeess of: A. acctttnulating the company's period costs. B. allocating costs among the film's departments. 2 placing a value on the company‘s fixed assets. é) assigning costs to the lion‘s inventory. E. assigning costs to the company's managers. 2 l. Longview Corporation recently used $2.000 of direct materials and $3,000 ofindirect materials in production activitics. Thcjournal entries reflecting thesc transactions would include: A. a debit to Raw-Material Inventory for $2.000. (3;) a debit to Manufacturing Overhead for 33,000. . a credit to Manufacturing lIZ'J'verhead for $3,000. D. a debit to ‘i‘v'ork—in—Process Inventory for $5,000. E. a debit to Manufacturing Overhead for $5,000. 22. Regency Company incurred 1090.000 ofdepreciation for the year. Eighty percent relates to the firm‘s production facilities. and 20% relates to sales and administrative offices. If all items are handled in the proper manner, a review ol'the company's accounting records should reveal a: A. debit to Depreciation Expense for $90,000. debit to Manufacturing Overhead for $90,000. debit to Manufacturing Overhead for $2,0LHJ. D. dcbit to 1|v‘v'orlt—in—Process Inventory for $2,000. E. debit to Accumulated Depreciation for 9590.000. 23. Dale Company. which applies overhead at the rate of 200% ofdirect labor cost. began work on job no. 101 dunng June. The job was completed in July and sold dunng August, having accumulated direct material and labor charges of $55,000 and $15,000, respectively. On the basis of this information. the entry to record the sale in August would include A. a credit to Wll’ for $0.000 H. a credit to sales revenue for S I 00.000 C. A debit to cost of goods sold for $0,000 D. A debit to finished goods for $0,000 ® A credit to finished goods for $100,000 24. Willow Corporation, a manufacturer ot‘ custom cabinetry. had the Following inventory balances at the beginning and end ot'EflXl: I I I r Duccmhfln-EnXI Raw Material 530.000 50.000 During 20X] the company purchased $200,000 of ra'u.r inateriala tun account] and incurred $ I 501000 at" direct labor. Throughout the year, MD” is applied to production jobs using a pre-determined overhead rate ot'52.00 ol' MDH per direct labor dollar. m the end ol'the year any LlI'IdCr-Cllf-CWCI‘ applied MDH is written off to coat of gooda Hold. The PDHR waa calculated uaing the following budgeted totala for 20X1: budgeted direct labor dollars — $125000 and budgeted MUH — $250,000. Willow’s accounting records»: For the year ended 30Xl indicate that actual manufacturing overhead costs. totaled $350000 for the year. Which of the Following entriea would he recorded by 1|iltr'illow to record the over or under applied MUH for the year ended 2on1? A. man caanlt that til-finial» Suid 100000 3.1 UH 100.000 B. DEBIT L'HEDlT 1thictrlc-irl- Prue-ear: I'I'III'FJ'H'H'II MUN |00e000 C. DEBIT L‘RliL'IlT "u'lCtH 50.000 [tint cil'i'hmda Sold 50,000 El) DEBIT C'REEHT Coat of Goods Sold 50.000 MUH 50.000 E. None of the above 25. Plasma shack your scantron (LE. bubble Shtfit] and make sure that your tESt firm is pencilcd in as "A". ll'il is not. please mrrcct it. Once you have dune this, bubble in "A" m anchr [his questinn. ...
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