Mini Test 1 Form D Solutions - Vet/6W0 I. After performing...

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Unformatted text preview: Vet/6W0 I. After performing an inventory count, Faltron (oprpolation detennined that it had $50,000 of inventory physically on hand as ot'thc end of the year. Giyen the following items and costs . determine the total value of merchandise inyentory that should be reported by Faltron as of‘the balance sheet date: — $1.000 goods sold by Fallron to another company. As of no | st. the goods are in transit and shipping terms are FOB shipping point - $2,000 goods sold by another company to Faltron. As of l2.-"31st. the goods are in transit and shipping terms are FOB shipping point. a) some B. 55 0.000 C . 35 1.000. 1'}. 353.000 E. 549.000 2. 1|i'r'hich of the following is not a. possible journal entry"?I A. Dcercasc assets; Increase cspcnscs. El. Increase revenues; lncrease assets. C Increase expenses; Increase liabilities. @All of the above are possible a K. .lnerease assets: Increase liabilities 3. Merchandise sold FOB destination indicates that: £3.) The seller holds title until the merchandise is received at the buyer's location. . The common carrier holds the title while the goods are in transit. C. The merchandise will not be delivered until alter the common carrier has been paid. I}. The buyer transfers title to the seller once the merchandise is delivered at the buyer‘s location. E. The merchandise has not yet arriycd at its destittatiott. 4. The year-end adjusted trial balance of the Timmons Tool 8; Die Corporation included the following account halances; sales revenue, 5800.000; cost of goods sold. $500000; salaries expense $150000; rent expense. 550.000 and retained earnings. 5 | 50000. What is the ending balance in retained earnings afler the closing entries are posted? A 51 5 0,000 33 5 0,000 a. ‘. sssenoo (S. sssonoo E. 3] 00.000 5. A grocery store has recently installed a video surveillance system which tapes the cashiers at the checkout lane. In addition to providing taped audio and video footage ol‘eaeh cashier. the system 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 not know about the surveillance system. which of the following statements is true? (A) gland 9Q) B. [t has a strong detective element. C. It does not have a preventative element. 1'}. It has a preventative and corrective element with respect to both errors and irregularities. E. [t has a preventative element with respect to errors but not with respect to irregularities. 6. It" a company has total stockholders’ equity of $60.00!] at the end of the year. which of the following statements is always true? 6) The company's assets exceed liabilities by 5500.000. l3. Net income for the year equals 500.000. C. Both A and D 1}. Total revenues canted during the year equal $00,000. E. The company has issued 560.000 of common stock. 7". Under the method learned in class (Le. the "gross" method] a trade discount shottld he recorded (£9 Trade discounts are never recorded; instead they are used to determine the final negotiated price between the buyer and the seller. B. When the accotmt payable is settled. C. [11 their first year oloperations the business can choose their accounting treatment by filing an election choosing between items It or As long as they continue to use the elected method the accounting treatment remains proper. I]. By making a credit to a contra asset account. E. When the inventory is sold 8. Which of the following would be considered as primarily a merchandising business“? A. A Law Offices E. A Consulting firm 6') None of the above D. A Car Wash E. An Accountng linn El. Cal Farms reported supplies expense ot‘SleUtLUUU this year. The supplies account decreased by SEEICIJJGG during the year to an ending balance ol" $4flflflflfl. What was the cost of supplies the Cal Farms purchased during the year? A. 32 .DDDJIDD B. 32 .4UU.U'U'U'. C . 51 .6DD.DDD. C? 31 .Rflflfiflt}. -. s2.2oo.ooo. If}. According to the C050 definition, internal controls should he designed to provide assurance regarding the achievement ot‘organizational objectives in which ot‘the following areas: {i} effectiveness and ei‘l‘iciencpr of operations. {ii} reliability offinancial reporting. {iii} compliance 1with applicable laws and regulations. A. Absolute; i and ii ; Reasonable; iii E. None of the above Absolute; i. ii and iii. D. Reasonable: i, ii and iii Absolute; iii :_ Reasonable: i and ii Continued on next page. | |. The employees of Heat Clothes work Monday through Friday. Every other Friday the company issues payroll cheeks totalingr $32,000. The current pay period ends on Friday. July 10th. Neat Clothes is now preparing quarterly financial statements for the three months ended June 30. What is the adjusting entry to reeord seemed salaries at the end of June“! A. DEBI'I' L'REDI'I' Salarles expense [1.400 Delierred Salary es pense 2.5.000 Salaries Payal'lle 32.000 13. DEEFIT CREDIT Salaries Payable 0.400 rash frflfll'll DEHI'I' r(ThiliLiI'I'l' Salary Expense o.400 Salary Payable 6.400 D. DEEFIT lCREDIT Salary Expense 25.600 ("ash 25.0w] E. l'} FBI'T' CR EDI T Salaries Expense 23am Salaries Payable Biotin IE. Part of the accounting process involves identifying which particular business transactions and events should be recorded in the underlying books and records and in which accounting period. Acme Car WHSh has the following events take place; please identify which of these events would not he recorded in Acnrc's accounting records for the tnonth ot‘Junc. A. Acme washes SUD cars in June B. or'3rd: LB. Smith. a customer, buys lunch at the restaurant next door to Aerne while waiting for her car to be washed. C. orlflth: Acme orders SCI pounds of soap from their supplier, Clean Cotnpany D. One of Acme's employees works it] hours during the last week in June and is paid For his time during the first week in July. E. oilfith: Bob Silver. neme's general manager, fires the receptionist I'or texting while at work. B, C 3: D only 13 E. C 3: E only C. C d: D only D. B. D 3t E only 1i. None of the transactions listed would he recorded in June. I3. In ottr comprehensive problem, how was the balance in Norma's hank account reported for financial statement pumoses':1 A It was not required to be reported. @3 Current Liability. Balance Slicer C. Current Asset. Income Statement I}. Cun'ent Asset. Balance Sheet E. Current Liability1 Income Statement l4. A corrtitrgerrt liability: A. Can always be narrowed down to a specific dollar amount. E. [s an existing obligation not requiring t'uture payment. C. Is an existing obligation arising from the purchase of goods or services on credit. D. ls art obligatiotr whose existence as of the balance sheet date depends on the occurrence or non occurrence of future events. Ii. Is a Future legal obligation which will be created as future events takes place. IS. 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 represents a legally binding contract between the receiving departtncnt and the external carrier. 1 In a We” designed purchasing system, the receiving department would operate "blind" and would therefore not receive a copy ol'thc purchase order. The receiving department‘s copy of the PD. will strengthen internal control if it is properly prepared. D. Prior to making payment, the receiving department shottld cotnparc their copy of the purchase order {which contains the quantity counted] to the vendor invoice. E. The purchase order sent to receiving should be identical to the purchase order sent to the vendor. 1. IE. The accounts which represent the existing obligations of the company are called: A. Revenues l3. Assets C. Expenses Q9 Liabilities E. Contributed Capital IT. Stitith Hawthorne Manufacturing {the "buyer"l places an order to purchase materials from High Quality ‘v'cndor {"HQV"l. The materials normally list for SERGE} bttt due to Hawthorne's buying history the vendor gave them a lfl% trade discottnt and the standard payment terms offal:r ll'L 113312] Hawthorne anticipates selling the items for fliflflfl. BEE-3th: The materials are shipped FDB Shipping point from HQV's warehouse in California 1vvith SLDDD of freight prepaid. 9.34m: The materials arrive at Ilawthorne's facility. Upon inspection of the goods. half of the order is sent back Er. not accepted. 9:”th1 Hawthonie pays the vendor the amount owed. llov.r much cash will Hawthorne need to pay the seller in order to settle the account payable in full“! at sasso é). saszio c. station n. same a. station I15. Frontgate Wallcoyerings purchased $10,000 ot‘ wall paper on account for resale purposes. Frontgate plans to sell the merchandise for 512.000. Eetbre making any payments to the vendor. Frontgate returned $1.500 of‘the merchandise. The jountal entry to record the return would include a: Debit to Accounts Payable for $1,500 C. Debit to purchase discounts lost for $150. D. Debit to sales retunts 8: allowances for $2.000 E. Debit to Inventory for SI .500 Credit to Cash for $1.500 19. Ace Bonding Company purchased merchandise inventon on account and failed to record the payment made for the purchase on their books. Considering this omission alone. how is the basic accounting equation irnpacted'1I @Assets and Liabilities are both overstated. El. Assets and Liabilities are both understated. C. There is no impact on the basic accounting equation. D. Assets and Owners Equity are both understated. E. Assets. Liabilities and Owners Equity are understated. 20. Suppose Company A places an order with Company B on May 12. Cm May 14. Company B ships the ordered goods to Company A with terms FDB shipping point. The goods arrive at Company A on May 1?. Company A begins selling the goods to customers on May 19 and pays Company H on May 20. 1|u-li’hen should Company A record the purchase of goods from Company E? A. May 19 B May 20 @ May 14 . May 12 1i. May 1? 2 1. Pumpkin Inc. collected 5500 from a customer on January 1st For pumpkins to be delivered in February. On l-‘ebmary 5th the pumpkins were delivered. How does the .lanualy 1st collection of cash impact Pumpkins accounting equation?r A. Increase as sets and decrease equity. Increase assets and decrease liabilities. Increase assets and increase liabilities. . No net effect to the accounting equation. E. Increase assets and increase equity. 22. The matching principle c. E A. Both I and D B. [s a key factor in detennining the timing of accrual basis revenue recognition. C. Could he used for both the cash basis and the accrual basis methods of accounting. B. Is a cash basis reporting principle relating to the timing ofexpense recognition. 6) [s an accrual accounting principle relating to the timing ot'eapensc recognition. 23. Receiving payment from customers alter services are performed results in: An increase to a prepaid asset. An increase to a revenue A. El. '. An increase to a contra revenue 6;) A decrease to accounts receivable. E. An increase to a liability 24. Little Store has the following adjusted account balances as ot‘the end oftheir first year of operations. Accumtta Payable Sillllll Accounts Receivable Sitltltl Accumulated Depreciation SLEJICIEI Cash 535.000 Contributed 'Capital 5 | CLCICIEI lnvtmlory S | SJJEICI It'll-lice Equipment. 5 l fifll’lfl Prqraicl [IIHLLL'EIICIL' Sillllll L'uearned Revenue Sitltltl Warranty Payable E. | tJJlJtJtJ Providing that all of the account balances have normal balances, please calculate Little's ram: stockholder's equity at the end orthe year. 25. Revenues normally carry a balance and are reported on the Credit; Statement of stockholdem' equity. Debit: Balance Sheet. Debit; Income statement. A. B. C. D. Credit; Balance sheet. (E) Credit; Income Statement as. ****t* Magazine Corporation has a company policy that any single cheek written that is greater than Sitltll} 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 he paid immediately or the company risks losing their 1% purchase discount. Noticing his frustration, one of his employees suggested that he sidc—stcp the rule by requesting two $451313 checks be prepared instead oi'a single WING check. After thinking it over. Stephen decides instead. to follow policy. and to wait to pay the invoice once Susan was available to sign the cheek. He also makes a mental note to discuss the "signature" issue with Susan in their next meeting. 'Which oFthe following statements is true‘}I A. Stcphcn‘s employees tnay mirror his attitudes and actions ti.c. while performing their own jobs}. Because of this fact. his decision {which cost the company money} weakened the overall control environment. B. Stephen‘s behavior weakened the company's control environment as he cost the company money. C. Beth A and fl. {5 D. Stcphcn‘s decision has no impact on the company's overall control environment. His decision 'inpacted the execution of a specific control procedure [i.e. dual signatures] and nothing else. a Stephen‘s employees may mirror his attitudes and actions [i.e. while performing their own jobs]. Because of this fact. his decision strengthened the overall control environment. Double check your scantron and make sure it is coded as exam version [l- if it is not— fit: 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 D Solutions - Vet/6W0 I. After performing...

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