Mini Test 1 Form A - l/axsrcri 4 Mix-yr i I Which statement below best describes the basic accounting equation'ir A The change in retained eantings

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Unformatted text preview: l/axsrcri 4 Mix-yr- i I. Which statement below best describes the basic accounting equation'ir A. The change in retained eantings equals net income less dividends. B. Equality of rcvettue and expense transactions over tinte. @esources of the company equal creditors' and owners' claims to those resources. 1'}. 1|.lr'hen it comes to financing its operations. a business has only two choices ti] estetnal borrowing and [iii contributions ol'eapital from the ownership base. 1i. C St. I} both accurately describe the accounting equation. 2. The accounts which represent the resources of the company are called: A. Liabilities H. Revenues C. Expenses @Assets E. Contributed Capital 3. Part oi" the accounting process involves identifying which particular business transactions and events sltould be recorded iii the underlyittg books and records and iii which accounting period. Acme Car Wash has the following events take place; please identify which ol" these events ttoiifdbe recorded in Aeme's accouuting records For the month of June. A. Acme washes 500 cars in .Tune l3. o-"flrd: LB. Smith, a customer. buys lunch at the rcstaurattt next door to Acme while waiting for her ear to be washed. C. o-“Ell'th: Acme orders 5t] pounds of soap from their supplier, Clean Company D. Ctnc ot‘r‘tctne's employees works 51] hours during the last week in June and is paid for his time during the first week in July. E. ollflth.‘ Bob Silver. Acme's general manager. tires the receptionist for texting while at work. A. A only CE?) 3: D only . A d: C only I}. A. C 8:: I] E. All of the transactions listed would be recorded in June. 4. Matenality is based upon which l'actorts]? . Timeliness of an itent. B. Amount and nature of an item. C. Consistency of‘ an item. D. Relevance of an item. 1i. lComparability of an itetn 5. According to C030, the terms "preventive, detective and corrective“ are most closely associated with which of the five interrelated components of an internal control system? A. Control cnviromnent. B. Monitoring. 6 Iontrol activities . Risk assessment. 11'. lnfonnatitin dc Communication 6. In a well designed purchasing system which of the following statements is true regarding the receiving department‘s copy ofthc purchase order ti.e. “P.U."l. A. The receiving department's copy of the Pl) should contain a description of the goods ordered as well the quantity expected to he delivered. @he receiving departmentls copy of the PI] should contain the vendor's name and the date that the order was placed. C. The receiving department's cop},r ol'the PD should contain a reference to the vendor’s invoice number. D. In a well designed purchasing system. the receiving department's copy ot~ the PD should include all of the above items. E. In a well designed purchasing system, the receiving department should operate "blind" and would therefore not receive a copy of the purchase order. 7’. A company has a policy requiring sales clerks to count out the change when handing it back to customers. Wllll respect to this control procedure, which ot‘thc following statements is true? A. It has a preventative element with respect to errors but not with respect to irregularities. B. It has a preventative and corrective element with respect to tooth errors and irregularities. {3. It does not have a preventative element. CD? It has a strong detective element. E. C and D 8. Under the method learned in class tie. the Hgross" method] a purchase discount should be recorded @U hen the account payable is settled. B. When the inventory is purchased C. 1|nthcn the inventory is sold I]. In their first year tiftipetatittns the business can choose their accounting treatment by filing an election choosing between items B or (I. As long as tltcy continue to use the elected method the accounting treatment remains proper. E. Purchase discounts are never recorded; instead they are used to determine the final negotiated price between the buyer and the seller. El. lionita Industries purchased $5,1l1l1l ot‘ merchandise on account For resale purposes. Bonita plans to sell the merchandise for $151311 Before making any payments to the vendor. Bonita returned 5 LEGO of merchandise. The journal entry to reeord the retuni would include a: @ebil to Accounts Payable for $1.,l'lflfl I1. Credit to Inventory for 352.5111} C. chit to sales returns 3t allowances for $2.50“) I]. Credit to Cash for FELDDD E. Debit to purchase discounts lest for ‘3 I131). I111 1|Which ot' the following would be considered as primarily a merchandising business? A. _ Consulting firm B. Department Store {2, A Law Uffiees D. A lEar Wash E. All of the above I I. Ace Bonding Company purchased merchandise inventory on account and fai led to record the original purchase on their books. Considering this omission alone. how is the basic accounting equation impacted? A. assets and Liabilities are both overstated. B. Assets and Owners Equity are both understated. C. Assets. Liabilities and Owners Equity are understated. @sscts and Liabilities are both understated. E. There is no impact on the basic accounting equation. l2. Merchandise sold FIDE shipping. point indicates that: fit. The seller holds title until the merchandise is received at the buyer's location. B. The merchandise has not yet been shipped. 13. The merchandise will not be shipped until after the common carrier has been paid. (£9 The seller transfers title to the buyer once the merchandise is shipped. E. The common carrier holds the title while the goods are in transit. I3. Suppose l[Company A places an order with l[Company ii on May 12. {in May 14, Company ii ships the ordered goods to Company A with terms FDE destination. The goods arrch at Company A on May 1?. Ctrmpany A begins selling the goods to customer on May 1‘} and pays Company B on May Ell. 1|lichen should Company A record the purchase of goods from IL‘ompany B's" A. E's-lay IE B. May I4 Way I? . May I? E. May 2i} l4. Pumpkin Inc. sold 35th} in pumpkins to a customer on account on January 1. On January 1 1 Pumpkin collected the cash From that customer. 1lit-'hat is the impact on i-‘unipl-tin‘s accounting equation from the collection of eash':1 No net effect to the accounting equation. El. increase assets and decrease equity. C. Increase assets and increase liabilities. D. increase assets and increase equity. E. Increase assets and decrease liabilities. l5. Espcnses normally carry a balance and are reported on the Debit; Statement of stockholders1 equity. Debit; income statement. Credit; Balance sheet. D. Debit; Balance Sheet. E. lIf.'rer.iit; Income Statement 1 If]. 1|l‘r'hich of the following is not a possible journal entry? A. Decrease assets: Increase expenses. (Epincrease assets: Decrease owners' equity. C. increase revenues: increase assets. D. increase expenses; increase liabilities. E. an ofthe aboye are possible IT. Little Store has the following adjusted account balances as of the end of their first year of operations. Accounts Payable 55.000 Accounts Receivable 55.000 Accumulated Depreciation SL000 t" ash 315.000 Frrnlrihutcd Capital 5 | 0.000 inventory 525.000 Office Equipment 5. | {1.000 Prepaid insurance $5.000 anarned Revenue 35.000 IIJr'arranty Payable S | 0000 Providing that all of the account balances have normal balances, please calculate Little's foraf stockholder‘s equity at the end ol'the year. a. $lfl,flflfl 13. gm fieloafl 2. ssannossdd” sac-.aoa {$1090 E. Iiifl'fltfll'lfl image l8. Receiving payment from customers before services are pertbrmed results in: A. An increase to a prepaid asset. An increase to a revenue C. An increase to a liability A decrease to accounts receivable. E. An increase to a contra revenue l9. Contingent liabilities must be recorded: ® if the future event is probable and the amount owed can be reasonably estimated. if the future event is remote but a range of loss can be estimated. 13. C. if the future event is reasonably possible but a range of loss cart be estimated. D. il'the future event is probable even il'the amount owed cannot be reasonably estimated. l-i. Only gain contingencies should be recorded. EU. The Fear—end adjusted trial balance of the Timmons Tool (Si: Die Corporation included the Following account balances: retained earnings. SESDJItDt}. sales revenue. Sflflflflflfl; cost of goods sold. $5flfl,flflfl; salaries expense Slfiflfiflfl; rent expense, SEQUIN}. 1ill-“hat is the ending balance in retained eamings after the closing entries are posted? a. szsohoo a. stseeeo :_ steeper: é assaooo E. assume 2 I. After performing an inventory count, Faltron Corporation detennined that it had $5flflflfl of inventory pltysieally on hand as of the end of the year. Given the Following items and costs, determine the total value of‘ merchandise inventory that should he reported by Faltron as ot'the halanee sheet date: - $1,t]tltl goods sold by Faltron to another eotnpatty. As of llfl | st, the goods are in transit and stripping terms are FOB destination. — $2.flflfl goods sold by another company to Faltron. As of 1 EH 1 st. the goods are in transit and shipping terms are FOB destination. A. $ 5t] ytltltl $49 ,UUU é $5 | .CICICI. _ .‘E 52 ,flfltl. E. $53 ,tltltl 22. Ss‘Efith: Hawthorne Manufacturing { the "httyer") places an order to purchase materials from High Quality Vendor ("HQV"}. The materials nonnally list for SERUM} but due to Hawthorners buying history the vendor gaye tltetn a ltl‘l’u trade discount and the standard paytnent tertns of 2.-"1tl. nt3l] Hawthorne anticipates selling the items For 325.flflfl. 3:”23tl1: The materials are shipped FDH Shipping point JFrom llQ‘U's warehouse in California with 5 | .tltltl of freight prepaid. ‘El'r'fith: The materials an'iye at Hawthorne's facility. Upon inspection of the goods1 half of the order is sent back a not accepted. WIEth: Hawthorne pays the vendor the amount owed. How much cash will Hawthonle need to pay the seller in order to settle the account payable in full? C? $1t:,ttttt: . stapes c. sasao D. litlflltl E. $8.821] 23. The employees of Heat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totalingr $32,flflfl. The current pay period ends on Friday. July 2nd. Neal Clothes is now preparing quarterly financial statements for the three months ended .lune 3t}. What is the adjusting entry to record accrued salaries at the end of .lune'.’ A. DFHIT eaaolr Salary Fat punt-a.- 3513M! Car-ch: 351300 B. Dlzifll'l' L'REDI'I' Salaries Payable 35-1300 Salaries Expense SEMI} {I _ DEBIT CHE DIT Salary Expense ofil'll'l Salary Payable h,4|'l[l| DEBIT L'REJJI'I' Salaries expense 21am: Salaries I’ayablc Eit‘sDL} E. DEBIT CREDIT Salaries es pense 25.12143} Deferred Salary expense SHIT-I'll Salaries Payable 31mm 24. In our eolnprehensiye problem. how was the balance in Norma's bank account reported for financial statement purposes? Current Asset, Balance Sheet Current Asset, Income Statement Current Liability, Balance Sheet Current Liability. Income Statement It was not required to be reported. 25. Cal Farms reported supplies expense ot‘SletlUllUU this Year. The supplies. account increased by $2flfl,flflfl during the year to an ending halanee ol" $4flflflflfl. What was the dollar amount ol'supplies used by lll'al Fanns during the year?I A. $l ,soonoo. n ill ,BUU,UUU. $2 .Uflfl,flflfl I]. $2,2flflfiflfl. E. $2,4flfl,flflfl. 2a. Magazine Corporation has a company policy that any single check written that is greater than Sitltltl requires two separate signatures. Stephen lvlill, the controller, is one of the two individuals with authorization to sign checks. The second individual is the Treasurer, Susan Davis. Susan travels frequently for business and it is therefore hard to track her down to obtain her signature. On one particular day, Stephen realizes that there is a S‘Lflflfl vendor invoice that needs to be paid immediately or the company risks losing their 1% purchase discount. To side step the dual signature requirement, Stephen requests that two Edith] cheeks he prepared instead of a single $9,12IIIIIII] eheek. Whieh of the Following statements is true'? A. Stephen’s behavior strengthened the company’s control environment as he was able to make a decision on the fly and save the company money. El. Stephen's deeision has no impaet on the eompany's overall control environment. It impacted the execution oFa single control procedure tie. dual signatures} and nothing else. 69 Stephen's employees may mirror his attitudes and actions {i.c. while performing their own jobs}. Because of this fact, his decision weakened the overall control environment. I}. Stephen's employees may mirror his attitudes and actions (Le. while performing their own johs}. Because of this taet, his decision strengthened the overall control environment. E. Since Stephen did not create the policy, he 1was really lefl with no choice in the matter, but to do what he did. *"**” Double check your scantron and make sure it is coded as exam version A- if it is not- fix it. **"‘*”*“** ...
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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 A - l/axsrcri 4 Mix-yr i I Which statement below best describes the basic accounting equation'ir A The change in retained eantings

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