Mini Test 1 Form B Solutions - \let/s to m B I. Magazine...

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Unformatted text preview: \let/s to m B I. Magazine Corporation has a company poliey that any single eheelt written that is greater than ss.oou requires two separate signatures. Stephen lvlill. the controller. is one of the two individuals with authorization to sign eheelcs. The second individual is the Treasurer. Susan Davis. Susan travels frequently for business and it is therefore hard to traek her dowrt to obtain her signature. On one partieular day. Stephen realizes that there is a 39.000 vendor invoiee that needs to he paid immediately or the eompany risks losing their 1% purehase diseottnt. Noticing his fi'ustration, one of his employees suggested that he side—step the rule by requesting two sasaa eheeks be prepared instead ot'a single Fligsflflfl eheek. After thinking it over. Stephen deeides instead. to follow policy. and to wait to pay the invoiee onee Susan was available to sign the eheek. He also makes a mental note to diseuss the "signature" issue with Susan in their next meeting. ‘t’v'hieh orthe Following statements is trtte‘}I A. Stephen's behavior weakened the eompany's eontrol environment as he eost the eompany money. H. Stephen's deeision has no impact on the eompany's overall eontrol environment. His deeision impaeted the exeeutioo of a speeifie eoutrol proeedure {i.e. dual signatures} and nothing else. C. Stephen’s employees may mirror his attitudes and aetions {i.e. while performing their own jobs}. lseeause of this fact, his deeision {whieh eost the eompauy money} weakened the overall eontrol environment. I]. Stephen’s employees may mirror his attitudes and aetions {i.e. while performing their own jobs}. Beeause of this fact, his deeision strengthened the overall eontrol envirotttnent. E. Both fit and C 2. Cal Farrns reported supplies expense of 32,000,000 this year. The supplies aeeount deereased by .‘Efllflfiflfl during the year to an ending balanee of $4tltlfitltl. 1|.i'v’hat was the cost of supplies the Cal Farms purchased during the year? A. $1 .oflflflflfl. $ | .Eflflflflfl. C . $2.tltltl.tltltl D. $2,2llll,llllll. E. $2.4flfl.flflfl. 3. [11 our eomprehensive problem. how was the balanee in Norma's bank aeeount reported for tinaneial statement purposes? A. {‘Ltnent r‘tsset. Balanee Sheet H. Current Liability. Ineome Statement . Current Asset. lneotne Statement (E) 1‘L'TtuTent Liahility. Balanee Sheet E. It was not required to be reported. 4. The employees of Heat Clothes work Monday through Friday. Every other Friday the company issues payroll cheeks totaling $32,flflfl. The current pay period ends on Friday. July lflth. Neat Clothes is now preparing quarterly financial statements for the three months ended June 3t}. What is the adjusting entry to reeord seemed salaries at the end of June“! A. DEBIT {'Reolr Salary Ex pens-e Efihnfl Cash: Biotin B. Dril'tlT It" REDIT Salariea. Expense Eifillll Salaries Payable .25.on C. DEBIT CREDIT Salary Expense sauna Salary Payable {n.4LIIU D. D F.an CREDIT Salaries Payable sane Cash moo E. l": FFtl'T' C'R FDIT Salaries ex pens-e fiAt'l-I'II Deferred Salary expense 23W Salaries Payable lltltltl 5. Stifith llawthorne Manufacturing {the “buyer"i places an order to purchase materials from lligh Quality Vendor ("HEW"). The materials normally list for 520.000 but due to Hawthorne's buying history the vendor gave them a 10% trade discount and the standard pay'n'tent tenor; of 2.-"l 0. 1180 Hawthorne anticipates sell ing the itents for $25,000. 0f20th The materials are shipped FOB Shipping point from HQV's warehouse in California with $l ,000 ot‘t‘reight prepaid. m The materials arrive at Hawthornc's facility. Upon inspection of the goods. hall'oi the order is sent back 3: not accepted. Hawtltornc pays the vendor the amount owed. How much cash will Hawthorne need to pay the seller in order to settle the account payable in full? a. steam a. $13,000 ((3) cases o. same a. $3,320 t5. After performing an inventory count. Faltron Corporation determined that it had $50,000 of inventory physically on hand as of‘the end of‘the year. Given the following items and costs . determine the total valtte ofmerchandise inventory that should be reported by Faltron as of the balance sheet date: - $1.000 goods sold by Faltrttn to another company. As of 12.33 I at , the gottds are in transit and shipping terms are FOB shipping point - $2.000 goods sold by another company to Fallron. As of I233 1st. the goods are in transit and shipping terms are FUH shipping point. A. $50,000 13. $49,000 $5] ,000. 552.000. E. 553.000 T. The Fear-end adjusted trial balance of the 'l'iinmons Tool 3.: Die Corporation included the Following account balances: sales revenue, $800,000; cost of goods sold, $500,000: salaries expense $150,000: rent expense. $50,000 and retained eantings. S I 50,000. What is tlte ending halance in retained earnings after the closing entries are postetl‘:1 (ii) $250,000 E. $ | 50.000 C. $2 I 00,000 D. $550,000 E. 5550.000 S. A contingent liability: A. Can always be nan'owecl down to a specific dollar amount. C9 ls an obligation whose existence as of the balance sheet date depends on the occurrence or ttott occurrence of future events. C. Is an existing obligation not requiring future payment. D. ls an existing obligation arising from the purchase of goods or services on credit. 1-5. 1s a future legal obligation which will be created as future events takes place. 0. Receiving payment from customers after services are performed results in: A. An increase to a prepaid asset. B. An increase to a revenue . An increase to a liability I] A decrease to accounts receivable. E. An increase to a contra revenue It}. Little Store has the following adjusted account balances as ofthe end oftheir first year ofoperations. Accounts Payable $5.000 Accounts Receivable 55.000 Accumulated Depreciation SIJIIIUE] L'aslt $35.00!] lContributed ICapital 5:10.000 Inventory 5 | 5.000 Office Equipment Sitiflt’lt'l Prepaid insurance $5.000 [Iliearrtetl Revenue 55.000 Warranty Payable S l ll1llllll Providing that all of the account balances have normal balances, please calculate Little's tors! stockholder's equity at the end ofthe year. | I. 1|i‘l’hich of the following is not a possible journal entry? A. Decrease assets; Increase expenses. El. lncrcase assets: lncrcase liabilities C. Increase revenues: Increase assets. . lncrcase expenses: lncrcase liabilities. é All of the above are possible l2. Revenues normally carry a balance and are reported on the A. Credit; Statement of stockholders' equity. B. Debit; Income statement. C. Credit; Balance sheet. D. Debit; llalance Sheet. 6) Credit: Income Statement l3. Pumpkin Ine. collected 55E") from a customer on January tst for pumpkins to be delivered in February. On February 5th the pumpkins 1avere delivered. How does the January lst collection of cash impact Pumpkins accounting equation?r A. No net effect to the accounting equation. . Increase assets and decrease equity. é Increase assets and increase liabilities. D. Increase assets and increase equity. E. Increase assets and decrease liabilities. l4. Suppose Company A places an order with Company B on May 12. On May 14* lCompany B ships the ordered goods to Company A with terms FCI'II shipping point. The goods arrive at Company A on May IT. Company A hcgins selling the goods to customers on May 19 and pays Company B on May 2t}. 1|ill'hen should Company A record the purchase of grants from Company B'? A. lvlay IE ® Tviay l4 C. May I? I]. lvlay I? E. May 20 IS. Mercltandise sold FUD destination indicates that: @ The seller holds title Until the merchandise is received at the buyer's locatign, . Thc tnerchandise has not yet arrived at its destination. C. The merchandise 1will not be delivered until after the common can'ier has been paid. D. The buyer transfers title to the seller once the merchandise is delivered at the buyers location. E. The common carrier holds the title 1.vhile the goods are in transit. lo. Ace llonding Company purchased merchandise inventon on account and failed to record the payment made for the purchase on their books. Considering this emission alone. hovr is the basic accounting equation impacted? Q) Assets and Liabilities are both overstated. El. Assets and Owners Equity are both understated. C. Assets. Liabilities and tU'vvners Equity are understated. D. Assets and Liabilities are both understated. E. There is no impact on the basic accounting equation. IT. Which ofthe following would be considered as primarily a merchandising business“? A. A Car Wash B. An Accounting firm C. A Law I[Diffices D. A Consulting firm (3 None of the above I8. Frontgate ‘v‘v’alleoverings purchased $lfl.flflfl of wallpaper on account for resale purposes. Frontgate plans to sell the merchandise for 312.000. liefore making any payments to the vendor. Frontgate retumed S | .Stltl ot‘the merchandise. Thejournal entry to record the return would include a: A. Debit to inventory for $1,5flfl Debit to Accounts Payable for $1.5 W! C. Debit to sales returns 3: allowances for $2.0m D. Credit to Cash for $ | .Sflt} E. Debit tn pttrchase discounts lost for $1511 l9. Under the method learned in class tie. the "gross" method} a trade discount should be recorded A. 1|tl'ifhen the account payable is settled. B. By making a credit to a contra asset account. C. 1|when the inventory is sold I}. In their first year ofopetations the business can choose their accounting treatment by filing an election choosing between items 13 or C. As long as they contintte to use the elected method the accnttnting treatment remains proper. (9 Trade discounts are never recorded. instead they are used to deterntine tlte final negotiated price between the buyer and the seller. Ell. A grocery store has recently installed a video surveillance system which tapes the cashiers at the checkout latte. In addition to providing taped audio and video footage of each cashier, the systent allows the manager to select a particular cashier's station and silently observe him or her "live" on his computer monitor. This function has provided him with valuable feedback about the performance of his employees. Assuming the cashiers do ttot know about the sttrvcillanee system, which of the 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 both errors and irregularities. C. it does not have a preventative element. It has a strong detective eletnent. @ C and D 2 I. Arrow Corporation's purchasing department sent the receiving department a copy of the purchase order. 1|which oi" the following statements is most true? A. The purchase order sent to receiving should be identical to the pttrchasc order scttt to the vendor. B. Prior to making payment. the receiving departtnent shottld compare their copy of the purchase order {which contains the quantity counted} to the vendor invoice. C. The purchase order represents a legally binding contract between the receiving department and the extental can'ier. The receiving department's copy of the RD. will strengthen itttcmal control if it is properly prepared. . In a well designed purchasing system, the receiving department would operate "blindH and would therefore not receive a copy of the purchase order. 22. According to the (7050 definition, internal controls should be designed to provide assurance regarding the achievement oforganizational objectives in which of the Following areas: [it effectiveness and efficiency of operations, {ii} reliability offtnancial reporting, {iii} compliance with applicable laws and regulations. A. Absolttte; i, ii and iii. Reasonable: i, ii and iii C. Absolute; i and ii ; Reasonable; iii D. Absolute: iii : Reasonable; i and ii E. l‘s'one of the above 23. The matching principle A. Could he used for both the cash basis and the accrual basis methods of accounting. ls an accrual aeeouttting principle relating to the tinting of expense recognition. ls a cash basis reporting principle relating to the timing ol" expense recognition. I}. Is a key factor in determining the timing of accrual basis revenue recognition. E. Both E and D 24. Part of the accounting process involves identifying which particular business transactions and events should he recorded in the underlying hooks and records and in which accounting period. Acme Car Wash has the following events take place. please identify which of these events would not be recorded in Acme's accounting records for the month of June. A. Acme washes 500 cars in Jane B. {iflrdz LB. Smith. a customer. buys lunch at the restaurant next door to Acme while waiting for her car to be washed. C. fi.-"29th: Acme orders 5f] pounds of soap from their supplier. lClean Company D. Une ofAcme's employees works it] hours during the last week in June and is paid for his titnc durittg the first week in July. H. t3.-"lllth: Hob Silver. Acme's general manager. fires the receptionist for testing while at work. A. C :3: D only B. B. D a E only B. C 3:. D only B. C 81’. F. only E. l‘s‘one ot‘the transactions listed would be recorded in June. 25. The accounts which represent the existing obligations of the company are called: {9 Liabilities B. Revenues C . Expenses 11 Assets E. Contributed Capital 26. [Te company has total stockholders;r equityr of $00,000 111 the end of the year. which oi" the following statements is always true? @ The company's assets exceed liabilities by $00,000. B. The company has issued ssonon ot‘colnnion stock. C. Net income for the year equals $fi0i000. I]. Total revenues earned during the year equal Elififlflflfl. E. Beth A and D ****** Double check your scantron and make sure it is coded as exam 1uersion B- 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 B Solutions - \let/s to m B I. Magazine...

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