Mini%20Exam%201%20Spring%202011%20VA

Mini%20Exam%201%20Spring%202011%20VA - 1. 

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Unformatted text preview: 1.  JohnownsasuccessfulfastfoodrestaurantinacentralIllinoiscommunity. Inyourclassreadings, author,Dunndiscussedthatriskscanbeclassifiedbasedonthelevelatwhichtheyare occurring, specifically:  (i)LocalEconomyRisks (ii)GlobalEconomyRisk(iii) IndustryRisk (iv)ExternalEnt erpriseRisk (v)InternalEnterpriseRisks(vi)BusinessProcessRisk(vii)InformationProcessRisk Pleaseconsider thebelowsituationsandselectthesituationthatwouldbeconsideredanindustryrisktoJohn.     A. InearlyFebruarythecountrywashitveryhardbyafluepidemic. Entirefamiliesweretakenill, schoolsclosedandthegovernmentencouragedpeopletostayhomeunlessitwasabsolutelynecessary togoout.  B. TheIllinoislegislaturepassedataxincreasewhichwillretroactivelyraisetheincometaxon businessprofitsby45%.  C. John'srestaurantfailedasurpriseinspectionbythehealthdepartment. Therestaurantwasclosedfor threedaysandthesituationwascoveredbythelocalmedia.  D. Thenation'spotatocropwasdamagedbyanearlyfrostresultinginasmallersupplyofpotatoes beingsoldat  ahigherpriceperpound.  E. BothAandB    2.  Inyourreadings,youwereintroducedtobasicassumptions,qualitativecharacteristics,broad accountingprinciplesandconstraintsthatprovideanunderlyingconceptualframeworkforfinancial accountingandreportingdecisions.Pleasereviewthebelowstatementsandidentifythestatementthat bestdemonstratestheeconomicentityassumption   A. Withtheconsentoftheirexternalauditors,alargemulti billiondollarcorporationrecordsall purchasesofofficesupplies(thatarelessthan$100)assuppliesexpenseasopposedto capitalizing thesuppliesasanasset.  B. DeltaAirlineincludedthefollowingstatementin itsannualreporttoshareholders: Passenger Tickets.WerecordsalesofpassengerticketsinairtrafficliabilityonourConsolidatedBalance Sheets.Passengerrevenueisrecognizedwhenweprovidetransportationorwhentheticketexpires unused,reducingtherelatedairtrafficliability.  C. ThesoleownerofVosburghIndustriesusedcompanyfundstopurchaseaverycostlyautomobileto beusedforpersonalpurposes. ThecontrollerofVosburghIndustriesrecordedthepurchasewitha credittocashandadebittothedividendaccount.  D. Atthebeginningofits2011fiscalyear,RossiImportspaid$48,000foratwoyearleaseon warehousespace. Rossi'scontrollerrecordedtheexpenditureasanassetandexpenseditequallyover thetwoyearperiodoftheleaseagreement.  E. Noneoftheaboveareexamplesoftheeconomicentityassumption.    3.  Ourcompanyhasthreetimesasmanyassetsasitdoesliabilities.Iftotalliabilitiesare$55,000,whatis theamountofowners'equity?   A. $55,000  B. $110,000  C. $165,000  D. $220,000  E. Cannotbedeterminedfromthegiveninformation    4.  Whichofthefollowinglistofeventsproperlyreflectstheearlystepstakenintheaccountingprocess?   A. Recordrelevanttransactions,Postjournalinformationtoledgeraccounts,Analyzeeachtransaction, Prepareanunadjustedtrialbalance  B. Postjournalinformationtoledgeraccounts,Analyzeeachtransaction,Postjournalinformationto ledgeraccounts,Prepareanadjustedtrialbalance  C. Analyzeeachtransaction,Recordrelevanttransactions,Postjournalinformationtoledgeraccounts, Prepareanunadjustedtrialbalance  D. Analyzeeachtransaction,Postjournalinformationtoledgeraccounts,Recordrelevanttransactions, Prepareanunadjustedtrialbalance  E. Prepareanunadjustedtrialbalance,Analyzeaccountsforabnormalbalances,Postclosingentries, Preparefinancialstatements    5.  Whichofthefollowingisnotanadvantagetohavingacentralizedpurchasingdepartment:   A. Purchasingagentspecializationandtraining  B. Potentialforstrongervendorrelations  C. Increasedopportunityforquantitydiscounts&batchorders  D. Betterabilitytomakepaymentstovendorswithinthediscountperiod  E. Alloftheaboveareadvantagesofacentralizedpurchasingdepartment    6.  Permanentaccountswouldnotinclude:   A. AccountsPayable.  B. OfficeSupplies.  C. UtilitiesExpense.  D. CommonStock.  E. Alloftheabovewouldbeconsideredpermanentaccounts    7.  OnOctober31,acompany'sCashaccounthadanormalbalanceof$7,000.DuringOctober,theaccount wasdebitedforatotalof$4,250andcreditedforatotalof$5,340.WhatwasthebalanceintheCash accountatthebeginningofOctober?   A. $5,910debitbalance  B. $1,090creditbalance  C. $2,590creditbalance  D. $8,090debitbalance  E. $9,590creditbalance    8.  PleaseconsiderthefollowingtransactionsthattookplaceinDr.Haines'OrthodonticPractice(lab1) duringthemonthofDecemberanddetermineallthetransactionswhichshouldberecordedinthe underlyingaccountsduringDecember.***   (i)ProvidedOrt hodonticServicestoourlandlordvaluedat$10,500inexchangeforonemonthofrent valuedat$10,500. Nocashchangedhands.  (ii)Reimburseddentalassistant,Leslie$110foruniformpurchases.  (iii) Ordered$550ofletterheadandbusinesscardsfromanonlineofficesupplychain. Theorderwill beshippedfromthevendorwithin10daysanddeliveredshortlythereafter.  (iv)Metwithvariouslocalinsuranceagents,togetbidsonourtwoinsurancepolicies(12month malpracticepolicyandan18monthgeneralbusinesspolicy)bothofwhichhavepolicytermsthatexpire asof12/31st.     A. (i),(ii),(iii),(iv)  B. (ii),(iii)&(iv)  C. (ii)and(iii)  D. (i)and(ii)  E.  Noneoftheabovechoicesreflectthetransactionswhichwouldberecordedonthebooksin  December.   ***Announcementwasmadeinclasstellingyoutoconsiderthesespecifictransactionsonly.  i.e. item(iii)youareconsideringtheeventbeingdescribedherei.e.theorder.  item(iv) youare consideringtheeventbeingdescribedhere i.e.themeetingwiththeagents.   9.  Whichofthefollowingerrors,eachconsideredindividually,wouldcausethetrialbalancetotalstobe unequal?   A. atransactionwasnotposted  B. apaymentof$311toacreditorwaspostedasadebitof$311tocashandacreditof$311to AccountsReceivable  C. apaymentof$96forinsurancewaspostedasadebitof$46toPrepaidInsuranceandacreditof$46 toCash  D. Alloftheabovewouldcausethetrialbalancetotalstobeunequal.  E. Noneoftheabovewouldcausethetrialbalancetotalstobeunequal    10.  OnJuly31stHawthorneManufacturingCompany(the"seller")ships$10,000worthofmerchandisetoa customer(i.e.the"buyer"). ThecustomerplacedtheirorderforthemerchandiseonJuly29th. Hawthornepays$500ofshippingrelatedtothissale. AspartofthesalestermsHawthorneoffers thecustomersa1%cashdiscountifthesalespriceispaidwithin10days. Ifitispaidafterthe10day windowHawthorneexpectsthatcustomerswillpaythebalanceinfullwithinanother20days(i.e.30 daysintotal). ThemerchandiseisdeliveredtothecustomeronAugust5thandpaymentisremittedby thecustomeronAugust12th. Whichofthebelowstatementsappropriatelydescribetheshippingterms assumingthatthe"risksandrewards"ofownershiptransfertothebuye ronAugust5th.  ***     A. FOBShippingPoint  FreightPrepaid  B. FOBDestination FreightCollect  C. FOBShippingPoint  FreightCollect  D. FOBDestination FreightPrepaid  E. Noneoftheabove    11.  Pleaseconsidertheabovequestion(HawthorneManufacturing)andselectwhichofthebelowitems wouldbeincludedintheentrytorecordthepaymentinAugust. ***  A. credit: AccountsPayable$10,000  B. credit: Cash$10,400  C. debit: MerchandiseInvent ory$10,500  D. credit: Cash$9,900  E. Noneoftheabove     ***announcedinclasst hatyoushouldconsiderthesetransactionsfromtheperspectiveofthebuyer.  12.  BetaCorporationpurchased$100,000worthoflandbypaying10,000cashandsigninga$90,000 mortgagenoteforthebalance.Immediatelypriortothistransactionthecorporationhadassets,liabilities andowners'equityintheamountsof$150,000 $30,000 and$120,000respectively.Whatisthetotal amountofBetaCorporation'sassetsafterthistransactio nhasbeenrecorded?   A. $240,000  B. $260,000  C. $160,000  D. $140,000  E. Noneoftheabove       Continuedonnextpage  13.  PleaseconsidertheaccountingforDrHaines'Orthodonticpractice(Lab1). Asexplainedinthe narrativeaccompanyingthecase,theemployeesworkTuesdaythroughSaturdayand getpaidholidays. Dr.Hainespayspayrollonthesecondand4thSaturdayofthemonth. ThelastpayrollinDecember coveredworkperformedthroughDecember25thandthefirstpayrollinJanuarywasonJanuary8th.    Sunday 12 Dec 19 Dec 26 Dec 2 Jan 9 Jan  Monday 13 Dec 20 Dec 27 Dec 3 Jan 10 Jan Tuesday 14 Dec 21 Dec 28 Dec 4 Jan 11 Jan Wednesday 15 Dec 22 Dec 29 Dec 5 Jan 12 Jan Thursday 16 Dec 23 Dec 30 Dec 6 Jan 13 Jan Friday 17 Dec 24 Dec 31 Dec 7 Jan 14 Jan Saturday 18 Dec 25 Dec 1 Jan 8 Jan 15 Jan  PleaseconsiderthatfortheJanuary8thpayroll,thewagesearnedbyemployeestotaled$22,320. Using thisinformationandtheabovecalendar, determinetheadjustingentryforpayroll(ifany)thatwouldbe recordedasof12/31/2010. Pleaseignorepayrolltax.    A. SalaryExpense$22,320  DeferredWages9,566  Cash$12,754     B.SalaryExpense$13,392  SalaryPayable$13,392   C. SalaryPayable$9,566  PrepaidSalary12,754  Cash$22,320   D. SalaryExpense$8,928  SalaryPayable$8,928   E. Noneoftheabove    14.  Whichofthefollowingisatruestatementregardingdebitsandcredits?   A. Anormalbalanceforliabilities(thatareduewithinoneyear)isadebit.  B. Assetsandexpensesarebothincreasedwithadebit  C. Acompany'sbooksarenotinbalanceiftheyhaveacurrentperiodloss  D. Foramerchandisingbusiness,debitsarebetterthancredits  E. BothBandDaretrue    15.  WetstoneCompanyhadthefollowingyear to date(normal)accountbalanceson itsDecember 31stbalancesheet:   AccountsPayable AccountsReceivable AccumulatedDepreciation Cash CustomerAdvanceDeposits Equipment RetainedEarnings  2,500 3,500 3,500 1,000 2,500 10,000 2,500  WhatwasWetstone'stotalequityatDecember31st?   A. $2,500  B. $6,000  C. $10,500  D. $3,500  E. Noneoftheabove     16.  Whichofthefollowingwouldmostlikelyleadtoanoverstatementofnetincomeinthecurrentyear?   A. Recordingrevenuenextperiodwhenthecashiscollectedalthoughitisearnedinthecurrentyear.  B. Recordinganexpenseincurredthisyeareventhoughthecashwasnotpaiduntilthefollowingyear.  C. Recordingrevenuethisperiodwhenearnedeventhoughthecash iscollectednextyear.  D. Failingtoadjustadeferredrentexpenseaccountfortheportionofthepre paymentthatexpiredthis year.  E. Noneoftheabovewouldleadtoanoverstatementofnetincome.    17.  Acompanyreportedtotalequityof$145,000onitsDecember31,2008,balancesheet($15,000of whichwasconsideredcontributedcapital).Therewerenoadditionalcapitalcontributionsmadeduring 2009.   Pleaseconsiderthefollowinginformationwhich wasreportedfortheyearendedDecember31,2009 andcalculatethetotalassetsreportedbythecompanyatDecember31,2009.   Total2009Revenue Total2009Expense Totaldividendsdeclaredduring2009: TotalLiabilitiesreportedonthe12/31/2009BalanceSheet  $210,000 $165,000 $25,000 $95,000   A. $190,000  B. $260,000  C. $150,000  D. $285,000  E. Noneoftheabove    18.  3yearsago,VadisCompanypurchaseda7acreabandonedparceloflandinFairviewPeaksNevada andbuiltastate of the artdistributionfacility. UnfortunatelyVadisdidnotdoenoughresearchandonly afterinvestinginthefacilitydidtheylearnthatthesoiliscontaminatedfromapaintmanufacturer  Thecontaminationisseriousandisthreateningtocontaminatethe localgroundwaterreserves. Vadishasworkedwiththeirattorneysandalocalinvestigativefirmand havebeenunabletof  TheEPAhasclassifiedthe  Vadisbelievesthatthe clean upcostswillrangebetween$12and$18million.   A. Vadisshouldaccruea$12milliondollarlossrelatedtothissituation.  B. Vadishasnoresponsibilitytodoanythingrelatedtothissituationastheydidnotownthepropertyat thetimethedamagewasincurred.  C. Thisriskshouldbedisclosedbutnoaccrualshouldbemade.  D. Vadisshouldbeconservativeaccruean$18milliondollarlossrelatedtothissituation.  E. Noneoftheabove    19.  LeonardCorporationisanarchitecturefirmwhichpublishestheirfinancialstatements,annuallyon December31st. Assumethatnoadjustingentrieshaveyetbeenrecordedfortheentireyear.  Please considerthebelowsituationandselectthechoicethatshowsthecorrectadjustingjournalentryneededat 12/31/2010.OnNovember1st,2010Leonardpurchased60radioadsfor$120,000.OnNovember 1st,thisentireexpenditurewasrecordedtotheaccount"advertisingexpense".  Theadswerescheduled toair20permonthinNovemberthroughJanuary.  InearlyJanuary,theradiostationsentasummary statementfor2010whichdetailedthat19ads(outof60)wereruninNovemberand23ads(outof60) wereruninDecember.   A. AdvertisingExpense80,000  Pre paidAdvertising80,000   B. Pre paidAdvertising36,000  AdvertisingExpense36,000   C. AdvertisingExpense120,000  Cash120,000   D. AdvertisingExpense84,000  Pre paidAdvertising84,000   E. Noneoftheabove    20.  Whichofthefollowingdirecteffectsonthebasicaccountingequation is notpossibleasaresultof transactionanalysis?   A. Increasealiabilityanddecreaseanasset.  B. Increasestockholders'equityandincreaseanasset.  C. Increaseanassetanddecreaseanasset.  D. Decreasestockholders'equityanddecreaseanasset.  E. Alloftheabovearepossible.    21.  physicalcount)beforeconsideringthefollowingtransactions:  GoodsshippedtoKwokf.o.b.destinationonDecember20,2006,werereceivedonJanuary4, 2007.Theinvoicecostwas$25,000.  GoodsshippedfromKwoktoacustomerf.o.b.destinationonDecember26,2006,werereceived bythecustomeronDecember30,2006.Thesalespricewas$35,000andthemerchandisecost $25,000.  GoodsshippedfromKwokto acustomerf.o.b.destinationonDecember27,2006,werereceived bythecustomeronJanuary3,2007.Thesalespricewas$35,000andthemerchandisecost $25,000.  GoodsshippedtoKwokf.o.b.shippingpointonDecember28,2006,werereceivedonJanua ry5, 2007.Theinvoicecostwas$25,000.  GoodsshippedfromKwoktoacustomerf.o.b.shippingpointonDecember28,2006,were receivedbythecustomeronJanuary4,2007.Thesalespricewas$35,000andthemerchandise cost$25,000.   DeterminethecorrectinventoryamounttobereportedinKwok's2006balancesheet.   A. $100,000  B. $125,000  C. $150,000.  D. $175,000.  E. $200,000      22.  LangleyCorporationmadejournalentriesforthefollowingtransactions:  (i)Torecordthecashpaidforthenext sixmonthsofrent  (ii)Torecordinterestearnedthatwon'tbecollecteduntil nextperiod.  (iii)Torecordsalariesincurredbutnotyetpaid  (iv)Torecordthecashpaidfora36monthinsurancepolicy.   Whichoftheabovetransactions involvesadeferral?   A. Items(i)and(iii)  B. Items(ii),(iii)and(iv)  C. Items(i), (ii),(iii)and(iv)  D. Items(ii)and(iv)  E. Items(i)and(iv)      23.  OnOctober1,2010,AdamsCompanypaid$4,000foraone yearinsurancepolicywiththeinsurance coveragebeginningonthatdate.AsofDecember31,2010,whichofthefollowingaccountbalancesare correctafteradjustingentrieshavebeenmade?   A. Prepaidinsurance,$4,000andInsuranceexpense,$0.  B. Prepaidinsurance,$0andInsuranceexpense,$4,000.  C. Prepaidinsurance,$3,000andInsuranceexpense,$1,000.  D. Prepaidinsurance,$2,000andInsuranceexpense,$2,000.  E. Noneoftheabove    24.  SouthsideGold("SSG")isalocallyownedPawnShoplocatedintheoutskirtsofChicago. Jakeand Barbhaveownedthestorefor28yearsandliveinanapartmentabovethestore. Overthelastsix monthstherehasbeenacrimespreewherelocalpawnshopsarebeingtargeted. Thecriminalsare consistentinwhattheyarestealingandlosseshaveaveragedaround$22,000perincident. Although SSGhasnotyetbeenbrokeninto,Jakedoesfeelthatitishighlyprobablethattheywillbehitinthenear future.    Theyhavetakensomeprecautionsinresponsetothisrisk, specifically: theinstallationofvideo surveillancecamerasandtheinstallationofironsecuritygrilles(i.e.ba rs)overalldoorsand windows. Lastbutnotleasttheyhavepurchasedahighlytrainedguarddog. Theguarddogisan80 pound,maleDobermanappropriatelynamed"killer". Eacheveningafterthestoreislockedup,Killeris setlooseinthestore. Hehasbeenspeciallytrainedtobarkloudlyatanyintruderandthentorestrainthe intruderbycorneringthem. Duringtheday,Killermovesupstairsandstaysintheapartment. While Killerisveryaggressivetowardstrangersheisasweetdogwhenhe  iswithhisowners. Despitethis, BarbalwayslocksKillerupinakennelwhenhergrandchildrenvisit. Jakehashungsignsallaroundthe propertythatsay"smile,youarebeingvideotapedbyoursurveillancesystem"and"bewareofguard dog".    Pleaseconsidertheabovenarrativeandselectthetruestatementcontainedbelow:   A. SinceitishighlyprobablethatSSGwillberobbedandareasonableestimateoftheloss canbe made,Jakeshouldaccruea$22,000contingentliabilityonSSG'sfina ncialstatements.   B. Thevideosurveillancecameras(incombinationwiththewarningsigns)wouldbeconsidereda preventative,detectiveand  correctivecontrol.  C. "Killer"(incombinationwiththewarningsigns)wouldbeconsider edapreventative,detectiveand correctivecontrol.  D. Alloftheabovearetrue  E. AandC    25.  PleaseconsiderthefactthatBarblocksKillerupinakennelonthedayshergrandchildrenvisit. In classwelearnedthatcontrolprocedurescouldbeclassifiedas(i)preventative(ii)detectiveand(iii) corrective. Giventhisinformation,howwouldtheuseofthekennel beclassified?     A. (i)only  B. (ii)and(iii)only  C. (i)and(iii)  D. (i)and(ii)  E. (i),(ii)and(iii)    26.  Inclassandinyourassignedreadingstheconceptofa"DeferredRevenue"was explained. Please consideranaccountthatcouldbeclassifiedasadeferredrevenueand (i)identify howthisaccountwouldchangeifadebitentrywerepostedtoit(ii)onwhichfinancialstatementthis accountwouldbereported   A. (i)increase (ii)BalanceSheet  B. (i)increase (ii)IncomeStatement  C. (i)decrease (ii)BalanceSheet  D. (i)decrease (ii)IncomeStatement    **** double check the exam version on your scnantron (i.e bubble sheet) . If it is not, erase it & re- ...
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This note was uploaded on 04/28/2011 for the course ACCY 202 taught by Professor Staff during the Spring '08 term at University of Illinois, Urbana Champaign.

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