Mini Test 1 Form C - 2. Recognizing expected losses...

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Unformatted text preview: 2. Recognizing expected losses immediately. but deferring expected gains. is an example of: fin "1 - L A. Lonservatism A ['5 B. Timeliness. Q“ C. 1‘fTost effectiveness. {S D. Matcriality. Explain how the collection of amounts due on outstanding customer accounts affects the accounting equation. A. Assets increase and liabilities decrease. B. Liabilities increase and equity decreases. C. Both liabilities and assets increase. D. Both assets and equity increase. E. The equation will not change 1|Which oi" the following statements are true? A. A company policy requiring that invoices be stamped "paid" is a concerns: control procedure designed primarily to alert management if an AEP clerk pays the same invoice twice. B. The receiving report once accepted by accounting is a legally binding contract. C. One of the benefits of having a centralized purchasing department is that it improves accuracy and efficiency by allowing the employee working closest with the ordered item [and thus most knowledgeable about what is needed} to handle the purchase. D. A company philosophy encouraging management to hire competent workers and to train employees enhances the control environment. E. Both B Se D U1 Cyclone Co. uses the periodic inventory system and had the following inventory purchases during the yeah 11' of Cost Per Extended in: 'l'ransactien LIL-[IE Uiit Value l-Jan Beg. Inventory 200 59.00 S l.l'lf.|l'.|.|i.||-’.| IE- Apr Purchase ICICI 510.00 S | .t'll'll'lflt'l R-Iul T’uruhun'u IUU 5| LEIEI S l.lflfl.flt'.| 22-5ep l‘ut'chase IUU SllUU S M 5 5.lflfl.flfl During the year. 3flfl units were sold at a price ol'$3fl each. What was ending inventory and cost of goods sold on llfll under the LIFO cost flow assumption? A. static and ssaaa B. 53.3Dfland3|.iiflfl C. seam and saline D. SilUU and sasaa E. slant: unri sasnn On September 20. 2006+. Precision Electric Companyf purchased $ltl,tltltl of stereo equipment tior resale on credit. subject to the terms Elli. mitt]. The company,r records all purchases using the gross method. It" the company paid for these goods on Sept. 23, the entry made to record the payment should include alan A. $ltl,tltltl credit to Accounts payable. E. $ lilililil debit to Merchandise Inventory C. $2M! debit to Purchases discounts. D. 369.3% credit to Cash E. None of the above is correct. t5. 1|i‘v'hich oi'thc following control procedures [found in the purchasing 3; disbursement cyclcl would help mitigate the risk that the wrong goods are ordered {please cltoose the best answer]. .i‘t. Departmental inventory requisitions should be based on a monitored need and require supervisory approval. B. The receiving department should periodically review open purchase orders. C. The accounting departntent should independently match [i.e. compare} the voucher package components prior to payment. D. The requisitioning department should match (Le. compare) their copy of the purchase order to the purchase requisition, E. None ot‘the above At the end (1152000, the following data were taken from the accounts of Albert Company: an'trihutctlrapilal 300.000 Retained Earnings. Ill-€009 300,000 Total Revenue Earned during 2000 150.000 'I'otal Espcnscs Incurred during 2005" 200.000 Total Cash Collected during 3009 125.000 Total Expenses l’aid during 200*} 100.000 The 2000 closing entries would include: A. $250,000 net credit to Retained earnings. B. 550.000 net credit to Retained earnings. C. $25,000 net credit to Retained earnings. D. $50,000 net debit to Retained earnings. E. 3350.000 net credit to Retained Earnings * In class we discussed that a business could categorize its “sources of funds" in to three broad categories. 1|Which of the Following would be considered an example of one of these three sources? A. Limbo Corporation was unable to obtain traditional bank financing and instead dealt with a venture capitalist firm obtaining 5250.000 cash. Limbo must repay $150000 of the cash received within 5 years plus lzi’xii interest. The remaining $100,000 provided by the VC firm gave them a 5W1. ownership stake in Limbo Corporation. B. Limbo Corporation borrowed $250,000 from a finance cotnpany. The company is charging Limbo 9% interest and expects to be paid back in monthly installments over the next 3 years. [7. Limbo Colporation collected $250,000 of Accounts Receivable created it] the ordinary course of business. I}. All of the above are examples of the three broad scarces of Funds discussed in class. E. A and C only 9. * In class we used the "three sources ol'f‘unds“ discussion {see question #3} asjustitlcation for what accounting concept? .i‘t. Accrual basis accounting versus cash basis H. Justification for depreciation of long lived assets to be thought of as "the recovery of cost" versus a true measure of the decline in value if "expenditure”?=“espense" D. The equality ot‘the basic accounting equation E. Home of the above represent the reasons for the discussion It}. Ending inventtny is equal to the cost of items physically on hand plus: Items purchased, still in transit (fob. destination]. Items purchased. still in transit (fob. shipping point}. Items sold. still in transit (fob. shipping point]. A St E None of the above would be added to the physical inventory sense I I. Do December 15, zoos, Transport Company accepted delivery of merchandise which it purchased on credit. fits oI'Dceembcr 3 I. EDDIE. the company had neither recorded the transaction nor included the merchandise in its inventory because the seller's invoice had not been received. The effect ofthis omission on its balance sheet at December 3 I, zoos, {end of the accounting period) was that A. assets and stoekliolder's equity were overstated but liabilities were not affected. El. stockholder‘s equity was the only item affected by the omission. C. assets and stockholders' equity were understated but liabilities were not affected. D. assets and liabilities were understated but stockholders' equity was not alleeted. E. Transport was correct in their treattnent of this transaction 3!. the balance sheet is therefore correct. IE. Adam’s Apples opened business on January 1, zoos, and paid for two insurance policies effective that date. The liability,r policyr was S3fififlfl for three years of coverage and the crop damage policyr was $24,{l{l{l for a one-year term. Which of the following adjusting entries would be made by Adam at 123'} IEEUUF’? A. Ell—LEFT fREDlT Prepaid Insurance scam Cash mono lnsurance Expense 241%) Prepaid insurance 24.000 B. DEBIT L‘ RE DlT lnsut‘anee Expense 3mm Crop Damage Payable 24am) Prepaid insurance Willi} C. DEBl'l' L'i-lEIJl'l' Prepaid Insurance 2mm Insurance Expense EIJIH} D. DEBIT rasntr lnsurance Expense llflflfl Prepaid Insurance limit E. None ofthe also-re Continued on next pagel Fur questicns 13 thrcilgh 16 please indicate 1whether the acccilnt wcLIId be increased cr decreased by a credit entry. I 3. Ce st of Geede Sold A. Increased B. Decreased l4. Prepaid Insurance Expense A. Inereased B. Dccrea scd IS. Retained Eamings A. Increased B. Decreased l6. Accounts- Payable A. [nc rcascd B. Decreased {antinued on next page! IT. The following represents selected information taken from Acorn Corporation‘s annual report dated I233 1.2‘2008: Net Sales 50.500.000- '|'ota| Assets Sltflfiitflfil End of year balance in cash and cash Iatluivalence tC'C'F] 3300,1010 Total Liabilities 54.500000 Total Cash Collected on customer accounts $4.20).” 'T'Utal Cash paid Io renders en amounls owed $3.31'H'U'H'I0 (liner-string Expense $3,500.000 'I'otal Defened Expenses 31.225100} 1|ilr'hat was the total amount of stockholders equity reported by Acorn at l2.-"31.i‘200t'§‘:1 A. $ | £00,000 B. $0 C. ${ 1,500,000} deficit D. $ 2,500,000 E. Home of the above l8. Panther Co. had a warranty liability of $400,000 at the beginning of 2000, and $450,000 at end of 2000. Each year Panther records warranty expense based on an estimate oi" the value of I'uture warranty claims that will be incurred as a result of current year product sales. For 2000, Panther estimated Future warranty work to be approximately 1% of current year sales. During 2006 Panther incurred $250,000 of actual cost to service customer warranty claims. What was the amount of warranty expense recorded in 2000‘? $200,000. $300,000 $0 . $250,000 E. None ol'the above some lg. Judy has recently hired a nanny for her 3 month old son. During the interview. candidates were informed that they tnust agree to random drug 8r. alcohol testing as a condition of their employment. What type of control procedure is the random drug 3; alcohol testing ’3' fit. Preventative B. Detective C. Corrective D. Primarily Detective and lCorrective and potentially preventative E. Primarily Detective and potentiain preventative 241}. The recognition of a revenue could be accompanied by which of tlte following? A. an increase in liabilities B. The contribution ot‘eapital by an owner if a decrease in assets D. an increase in assets E. None ofthe above 2 I. CHH started seas with S ] UUJUUU of merchandise on hand. During sees, $25U,{J{J{J in merchandise was purchased on account with credit tenns of |.-"1fl ne’45. The shipping terms were I".u.h. shipping point with Chill paying total freight charges of frilflflfl. Before the invoice was paid. merchandise with an invoice amount ot'SSD.DDD was returned to the vendor. an purchase discounts were taken. CNH reported cost of goods old totaling $175flflfl. What is the dollar amount of beginning inventory reported at l r' 1.32mi"? A. ii 3G 5 ,UUU E. $ | 343 .1311) f .‘E l T 5 ,flflfl D. Mill} Hill] E. $ 1 flfl.flflfl 22. Each TilH1 1Iiv'hiner Corporation is required to make a single payntent to it‘s landlord ere-paying the rent for the next 12 months. Whiner's rental payment covers the period beginning on W1“ and ending on {3i30lh of each year. After making year —end adjustments Whiner had the Following activity in it‘s pre-paid rent account for the year ended 2009. Prepaid Rent 00 131f2000 10,000 24,000 22,000 EB izrslrzoos 12.noo |Given the above information, what was the antount ot‘eash paid by Whiner on TIL-"2009‘? A. $ | 2 .000 H. $34 .000 C . $22 .000 D. $24 000 E. None of the above 33. 1|Which of the following statements best describes 1|Nhiner"s rental agreement at it 19003 versus Ti“ 1.520091" A. Whiner’s annual rent payment decreased by $2,000- between Til I03 and W] I00. B. Whiner's annual rent payment increased by $14,000 between 13008 and 13009. C. Whiners annual rent payment increased by $2,000 between 151.308 and T3] .309. D. 1|iiihiners annual rent payment increased by $4.000 between "H HUB and "H 000. E. The problem does not provide the necessary inionnalion to answer this question. 24. 1|Which of the tollowing businesses would n_ot have cost of goods sold. A. A manufacturer of batteries B. A grocery store C. A jewelry store D. A law firm E. All of the above would disclose cost Dr goods sold 10 25. 1|r‘r’hich of the following statements about stockholders‘ equity is correct? A. Stockholders' equity accounts can be increased by debits or credits depending on whether or not the company has reported a profit for the current year. H. Stockholdersr equity results only From contributions of the owners. C. Stockholders' equity is the shareholders' residual interest iii the company resulting from the difTerence in assets and accrued liabilities. D. The transaction recording the payment of an amount due to a supplier has no effect on stockholders equity. E. None of the above is correct. 20. IJe’r‘erred Revenue is reported on the income statemertt. on the balance sheet. on the statement ot‘ retained earnings only as a disclosure in the notes to the financial statements E. None ot‘thc above is correct. some 2?. The employees of Heat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling 1530.000. The current pay period ends on Friday. July lflth. Neat Clothes is now preparing quarterly financial statements for the three months ended .lune 30. What is the adjusting entry to record seemed salaries at the end ot‘lune‘.’ A. DEElT CREDIT Salary Espense 30,000 Cash 30.000 B. DEHI'J' ['lllz'Dl'l' Salary Expense 0000 Salary Payable {1.000 C. DEBIT car-.an Salaries expense 24.000 Salaries Payable 24,000 I}. osarr casorT Salaries expense 0.000 Prepaid Salaries 24.000 Salaries Payable 30.000 E. There would be no required adjusting entry at June 30th 11 ...
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This note was uploaded on 02/14/2011 for the course ACCY 202 taught by Professor Staff during the Spring '08 term at University of Illinois, Urbana Champaign.

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Mini Test 1 Form C - 2. Recognizing expected losses...

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