Mini Test 1 Form D - [Iii-J The assumption that in the...

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Unformatted text preview: [Iii-J The assumption that in the absence of contrary information a business entity will continue indefinitely is the: A. Historical cost assumption B. Entity assumption. C. Periodicity assumption. D. lGoing concern assumption. Which ofthe following control procedures [found in the purchasing 3s disbursement cycle} would help mitigate the risk that goods which are ordered are not received on a timely basis, causing production delays and inventory shortages. A. The accounting department should independently match tic. compare] the voucher package cmnponents prior to payment. B. The requisitioning department should match [i.e. compare} their copy ofthe purchase order to the purchase requisition. C. Departmental inventory requisitions should be based on a monitored need and require supervisory approval. D. The receiving department should periodically review open pttrchase orders. E. None ofthe above 1Which oi" the following statements about stockholders' equity is false? A. The purchase of land for cash has no effect on stockholders‘ equity. B. Stockholders' equity accounts are decreased with credits. C. Stockholders equity is the shareholders' residual interest in the company resulting from the difference in assets and liabilities. I}. Stockholdeis' equity results only from contributions by the owners. E. Both E dc. D are false statements Panther Co. had a warranty liability of $350¢000 at the beginning of200t‘i~ and 3300.000 at end of 2006. Each year Panther records warranty expense based on an estimate of the value of future warranty claims that will be incurred as a result ol'currcnt year product sales. For 212112115, Panther estimates $200000 {representing l% of sales}. W hat were the actual warranty expenditures for 20013? A. $200,000. I}. $250,000 C . $0 I]. $1 50,000 E. Hone ofthe above 5. * In class we discussed that a business could categorize its "sources of funds“ in to three broad categories. Which ol'the l'ollowing would be considered an example of one of these three sources? A. Limbo Corporation borrowed $250,000 from a finance company. The company is charging Limbo 2% interest and expects to be paid back in monthly installments over the next 8 years. B. Limbo Corporation collected 3250.000 of Accounts Receivable created in the ordinary course of business. C. Limbo Corporation was unable to obtain traditional bank financing and instead dealt with a venture capitalist firm obtaining 3250.000 cash. Limbo must repay $|50,000 ofthe cash received within 5 years pltts l2% interest. The remaining $001000 provided by the VC‘ firm gave them a 51% ownership stake in Limbo Corporation. D. All of the above are examples of the three broad sources of Funds discussed in class. 1-5. B and C only * In class we used the “three sources of funds" discussion {see question 5} as justification for what accounting concept? The equality of the basic accounting equation "espenditurel‘i'expense” Accrual basis accounting versus cash basis Justification for depreciation of long lived assets to be thought of as "the recovery ufcost” versus a true measure of the decline in value E. None of the above represent the reasons for the discussion some On December IS. 2006. Transport Company accepted delivery of merchandise which it purchased on credit. As of December 3 I, 2000, 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 of this omission on its balance sheet at December 3 I. 2006. {end ol'the accounting period] was that A. assets and stockholders‘ equity were understated but liabilities were not affected. B. assets and liabilities 1were understated but stocl-tltolders' equity 1was not affected. C. D. assets, liabilities and stockholdersr equity were understated. assets and stockholder's equity were overstated but liabilities were not affected. E. Transport was correct in their treatment of this transaction 3.: the balance sheet is therefore correct. For questions til through l l please indicate whether the account would be increased or decreased by a debit entry. 8. Accounts Rec civablc A. Increased El. Decreased 9. Retained Earnings A. Increased El. Dec reascd It}. Unearned Subscription Revenue A. increased B. Decreased I I. Wage Expense A. increased H. Decreased l2. In its 2on4 annual report, Apple Computer reported the following in one of its disclosure notes: “ll’ananty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized.” This note exemplifies Apple's use of: A. Full disclosure principle El. Realization principle C. Consen-‘atisnt D. The matching principle IS. At the end of 2009, the feIIewing data were taken from the aeeeunts ef‘AIbert iSernpany: (.‘entrlhuled Capital 500.000 Retained Earnings. I-‘I-"ZUIW 200.000 Tetal Revenue Earned during 3009 150.000 Tetal Expenses Incurred during 200‘;I I30.000 'T'ntal Cash Culleeletl during 2009 125.000 Tuial Expenses T’aid during 1000 H.000 The 3009 elesing entries would Include: $200,000 net credit to Retained earnings. seams net credit tn Retained eamings. $50,000 debit te Retained earnings. . ssnnnn net debit tu Retained earnings. E. El |0.000 net credit to Retained Earnings ens? I4. Adamfi Apples npened business un January.r I, 2006. and paid for [we insurance pulieies effective that date. The Iialiiilit}.r picnic},r was $30,000 fer three years of coverage. and the crap damage pnIiey,r was 324.000 fer a one-year term. Which et‘the tellewing adjusting entries would be made by Adam at 12.-'3 19’2000’.’ A. mean caenrr insurance Expense EfiJ'I-I'H'II Cmp Damage Payahie 24.001} Prepaid lnsuranee £0000 B. UEBi'J' CREDI'J' Insurance Expense 30.011} Prepaid insurance Stri'l'l'l'l'l' C. DEB[T CREDIT Prepaid lnsul'anee 00.000 Cash same Insurance Expense 24.043} T’repnirl Insu ranei: lit-HT” D. DEBIT CREEHT Insurance Expense 24.000 Prepaid Insurance 24.11"} E. Name at the abeve IS. The employees of Heat I[Tlothes work Monday through Friday. Every other Friday the eompany issues payroll cheeks totaling $30,000. The current pay period ends on Friday. July 3th. Neat Clothes is now preparing quarterly financial statements for the three months ended .que 30. What is the adjusting entiy to reeord seemed salaries at the end of June“! A. mean easolt Salary Expense Isnoo Salaries Payable H.000 B. DEBlT CREDlT Salary Expense 30.000 Cash 30,000 0. new easolr Salaries expense H.000 Salarien Payable H.000 D. DEBlT ear-.oit Salaries expense lltltltl Prepaid Salaries l-‘zl.000 Salaries Payable 30.000 E. There would be no entry required on June 30"1 I6. CNH staited 2000 with $50,000 of rnerehandise on hand. During 2000, $271000 in merchandise was purehased on account with credit terms ot‘2l10 nr'45. The shipping terms were fob. shipping point with CNH paying total freight charges ol'$5,000. Before the invoiee was paid, merchandise with an invoiee amount of $25,000 was retunied to the vendor. All pui'ehase diseounts were taken. CNH reported eost of goods old totaling $225,000. 1What is the dollar amount of beginning inventory reported at lr'l.-’200T.’ ft. $250,000 H. $71000 C. $50,000 D. $25,000 E. None ot‘the ahoye IT. Ending inventory is equal to the cost of items physically on hand plus: A. Items sold, still in transit {hob destination}. B. items sold, still in transit (fob. shipping point]. C. [terns purchased still in transit (Fob. destination}. D. A and {I E. None of the above would be added to the physical inventory l8. Each Tl“ 1“l Whiner |Corporation is required to make a single payment to it‘s landlord pre—paying the rent JFor the next 12 months, 1It’lt'hiner'a rental payment; covers the period beginning cm WI"-l and ending on 6330'“ ot'eaeh year. Alter making year -end adjustments Whincr had the following actiy'it y in it’s prc- paid rent account for the year ended 2009. Prepaid Rent BB 13'11’2 009 6,000 is,an I 15,000 EB 12f31f2009 a,ooo Given the aboye information, wltat was the amount of expense that Wltiner would have recorded on it‘s accmal basis income statement for the year ended 12:3”2009'? $24,000 $0,000 $15,000 $13,000 E. Hone oi'the above .5035“? I0. which of the following statements best describes Whiner‘s rental agreement at W |.-"2003 versus 1-“ 139009? A. Whiner‘s annual rent payment decreased by $9,000 between W l 3'08 and W 1 000. E. Whiner‘s annual rent payment decreased by $3,000 bctwccn 131.033 and 131.509. C. Whiners annual rent payment increased by $3,000 between T! l .503 and T! 1 I00. 13'. Whiner‘s annual rent payment increased by 50.000 between TH H03 and TH |.-"0'Ei. E. The problem does not provide the necessary information to answer this question. Cyclone Co. uses the periodic inventory system and had the Following inventory purchases during the year. I! of Cost For Estcndvfl m Transaction Lln'us flit ‘v'aluo l-Jan Hcglnvcntory Etltl 59.00 S I.Ht.H.t.t.H.|- IE-Apr Purchase 100 Sltmfl S l.[|I|LK.|.ILH.t R-Jul Purchase 100 511.00 S |..lCK.|.'EH} 23—5111 Purchase ifln 512cc 5 |.21'H'.|'.1'H'l' 3 5.1110110 During the year! EDD units vvcrc sold at a price of $30 cach. 2t}. What 1vvas ending inventory and cost of goods sold on 128] under the FIFUI cost flow assumption? A. sum annalsm Eu. Shit-200 and 33.300 C. ss. I on and sazuo D. Slltltl and saaao E. 52.51an and same: 2|. Judy is in the process ol‘hiring a nanny for her 8 month old son. She hires a private detective to run background checks on all viable candidates. What type at control procedure is the background check? A. Preventative B. Detective C. Corrective D. Preventative and Corrective only E. None of the above 22. On September it}, sees, Precision Electric Company purchased 5 l Ulltltl of stereo equipment for resale on credit. subject to the terms 2.:‘15, n80. The company records all purchases using the gross method. If tlte company paid for these gnt'JcIs on October IE. tlte entry made to- i'eeord the paflent should include a.-"ar1 A. $9.3m credit to Cash. E. $1lIIIJIIIIIIIIIII debit to Accounts payable. C. $2M] debit tn Purchases discounts. D. $1fl,tititi debit to Merchandise Inventory E. None of tlte above is correct. 23. 1|Which of the following statements are tme'? A. A. company philosophy encouraging management to hire competent workers and to train employees enhances the control environment, B. The purchase requisition once accepted is a legally binding contract. C. fine of the benefits oi" having a centralized purchasing department is that it helps to insure that purchases eonipanywide are being properly authorized D. A. company policy requiring that invoices be stamped "paid" is a defective control procedure designec primarily to alert management if an A.-"P clerk pays the same invoice twice. E. Both A fit. C 24. The fol lowing represents selected infonnation taken from Acorn lii'orporation‘s annual report dated |2.331f2003: New Salter 55,5 00,000 Total Assets 53,000,000 End ofgi-‘ear balance in cash and cash equivalents tCCEl $000,000 Total Stockholdcr‘s F.qui1y1ric:ficit‘ll S[500,000i Total [Tush Collected on customer accounts S4,?00,000 'I'otal Iif‘aslt paid to vendors on amounts owed 53,2 00.000 Operating FJ: pcnxc 53,5 00,000 Total Del'errcel Expenses 51,215,000 What was the total amount of liabilities reported by Acorn at ll-"B 02008? $3,000,000 $2.5 00.000 $0,000,000 $35 00,000 13. None ot‘the above 130.53?“ 25. Explain how the collection of an advance payment from a customer affects the accountng equation. A. Assets increase and liabilities decrease. H. Hoth assets and equity increase. C. Both liabilities and assets increase. D. Assets increase and equity decreases. E. The equation will not change 10 as. All {recognized} contingent liabilities are reported on the income statement. on the statement of retained earnings on the balance sheet. . on i}! as a disclosure in the notes to the financial statements None ot'thc above is correct. moon? 2?. The recognition ofan expense could be accompanied by which of the Fellini-ring?I a decrease in revenue an increase in liabilities an increase in assets a decrease in liabilities Hone ot‘the above none? 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 D - [Iii-J The assumption that in the...

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