Mini%20Exam%201%20Spring%202011%20VB

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

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Unformatted text preview:  1.  Temporaryaccountswouldnotinclude:   A. SalariesPayable.  B. AdvertisingExpense.  C. SuppliesExpense.  D. Dividends.  E. Alloftheabovewouldbeconsideredtemporaryaccounts     2.  Inclassandinyourassignedreadingstheconceptofa"DeferredExpense"was explained. Please consideranaccountthatcouldbeclassifiedasadeferredexpenseand (i)identify howthisaccountwouldchangeifacreditentrywerepostedtoit(ii)onwhichfinancialstatementthis accountwouldbereported   A. (i)increase (ii)IncomeStatement  B. (i)increase (ii)BalanceSheet  C. (i)decrease (ii)IncomeStatement  D. (i)decrease (ii)BalanceSheet    3.  SouthsideGold("SSG")isalocallyownedPawnShoplocatedintheoutskirtsofChicago. Jakeand Barbhaveownedthestorefor28yearsandliveinanapartmentabovethestore. Overthelastsix monthstherehasbeenacrimespreewherelocalpawnshopsarebeingtargeted. Thecriminalsare consistentinwhattheyarestealingandlosseshaveaveragedaround$22,000perincident. Although SSGhasnotyetbeenbrokeninto,Jakedoesfeelthatitishighlyprobablethattheywillbehitinthenear future.    Theyhavetakensomeprecautionsinresponsetothisrisk, specifically: the installationofvideo surveillancecamerasandtheinstallationofironsecuritygrilles(i.e.bars)overalldoorsand windows. Lastbutnotleasttheyhavepurchasedahighlytrainedguarddog. Theguarddogisan80 pound,maleDobermanappropriately named "killer". Eacheveningafterthestoreislockedup,Killer issetlooseinthestore. Hehasbeenspeciallytrainedtobarkloudlyatanyintruderandthentorestrain theintruderbycorneringthem. Duringtheday,Killermovesupstairsandst aysinthe apartment. WhileKillerisveryaggressivetowardstrangersheisasweetdogwhenheiswithhis owners. Despitethis,BarbalwayslocksKillerupinakennelwhenhergrandchildrenvisit. Jakehas hungsignsallaroundthepropertythatsay"smile,youarebeingvideotapedbyoursurveillancesystem" and"bewareofguarddog".    Pleaseconsidertheabovenarrativeandselectthefalsestatementcontainedbelow:   A. SinceitishighlyprobablethatSSGwillberobbedandarea sonableestimateofthelosscanbe made,Jakeshouldaccruea$22,000contingentliabilityonSSG'sfinancialstatements.   B. Thevideosurveillancecameras(incombinationwiththewarningsigns)wouldbeconsidereda preventative,detectiveandco rrectivecontrol.  C. "Killer"(incombinationwiththewarningsigns)wouldbeconsideredapreventative,detectiveand correctivecontrol.  D. Alloftheabovearetrue  E. AandB    4.  Pleaseconsidertheabovenarrativeandthe factthatJakeinstalled ironsecuritygrilles(i.e.bars)overall doorsandwindows. Inclasswelearnedthatcontrolprocedurescouldbeclassifiedas(i)preventative (ii)detectiveand(iii)corrective. Giventhisinformation,howwouldtheuseof theseironsecuritygrilles beclassified?     A. (i)and(ii)  B. (i)and(iii)  C. (ii)and(iii)only  D. (i)only  E. (i),(ii)and(iii)    5.  LangleyCorporationmadejournalentriesforthefollowingtransactions:  (i)Torecordinterestearnedthatwon'tbecollecteduntil nextperiod.  (ii)Torecordthecashpaidforthenext sixmonthsofrent  (iii)Torecordsalariesincurredbutnotyetpaid  (iv)Torecordthecashpaidfora36monthinsurancepolicy.   Whichoftheabovetransactions involvesanaccrual?   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)    6.  sinventorybalanceonDecember31,2006,was$100,000(basedona12/31/06 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.  GoodsshippedfromKwoktoacustomerf.o.b. shippingpointonDecember27,2006,were receivedbythecustomeronJanuary3,2007.Thesalespricewas$35,000andthemerchandise cost$25,000.  GoodsshippedtoKwokf.o.b.shippingpointonDecember28,2006,werereceivedonJanuary5, 2007.Theinvoicecostwas$25,000.  GoodsshippedfromKwoktoacustomerf.o.b.shippingpoint onDecember28,2006,were receivedbythecustomeronJanuary4,2007.Thesalespricewas$35,000andthemerchandise cost$25,000.   Determinethecorrectinvento ryamounttobereportedinKwok's2006balancesheet.   A. $100,000  B. $125,000  C. $150,000.  D. $175,000.  E. $200,000    7.  Whichofthefollowingdirecteffectsonthebasicaccountingequationis notpossibleasaresultof transactionanalysis?   A. Increasealiabilityandincreaseanasset.  B. Decreasestockholders'equityanddecreaseanasset.  C. Increaseanassetanddecreaseanasset.  D. Increasestockholders'equityanddecreaseanasset.  E. Alloftheabovearepossible.    8.  OnOctober1,2010,AdamsCompanypaid$6,000foratwo  yearinsurancepolicywiththeinsurance coveragebeginningonthatdate.AsofDecember31,2010,whichofthefollowingaccountbalancesare correctafteradjustingentrieshavebeenmade?   A. Prepaidinsurance,$6,000andInsuranceexpense,$0.  B. Prepaidinsurance,$5,750andInsuranceexpense,$250.  C. Prepaidinsurance,$3,000andInsuranceexpense,$3,000.  D. Prepaidinsurance,$5,250andInsuranceexpense,$750.  E. Noneoftheabove    9.  LeonardCorporationisanarchitecturefirmwhichpublishestheirfinancialstatements,annuallyon December31st. Assumethatnoadjustingentrieshaveyetbeenrecordedfortheentireyear.  Please considerthebelowsituationandselectthechoicethatshowsthecorrectadjustingjournalentryneededat 12/31/2010.OnNovember20,2010,Leonardreceived$5,000asanadvancepaymentfromacustomer forservicestoberenderedinDecemberandJanuary2011.Theentireamountoftheco llectionwas  AsofDecember31st,45%oftheproject hadbeencompleted.   A. Cash5,000  UnearnedRevenue5,000   B. UnearnedRevenue2,250  ArchitecturalFeesEarned2,250   C. UnearnedRevenue2,750  ArchitecturalFeesEarned2,750   D. ArchitecturalFeesEarned2,750  UnearnedRevenue2,750   E. Noneoftheabove     ***announcedinclass rees s/b fees  10.  3yearsago,VadisCompanypurchaseda7acreabandonedparceloflandinFairviewPeaksNevada andbuiltastate of the artdistributionfacility. UnfortunatelyVadisdidnotdoenoughresearchandonly afterinvestinginthefacilitydidtheylearnthe irfacilityissituatedonamajorearthquake fault. Althoughtheithasbeen70yearssincethelastearthquake(7.1magnitude),thecontroller,John Fallonhasspokentoauthoritiesandfeelsitishighlyprobablethatanotherearthquakewillbe experiencedatsomepointinthenext10years.BecauseofthisriskVadisisunabletopurchase earthquakeinsurance. Johnbelievesifanotherlargeearthquakeoccursthattheirexposuretolosswill rangebetween$12and$18million.   A. Vadisshouldaccruea$12milliondollarlossrelatedtothissituation.  B. Vadisshoulddonothingrelatedtothissituation.  C. Vadisshouldconservativelyaccruean$18milliondollarlossrelatedtothissituation.  D. Vadisshouldlimittheiraccrualtotheamounttheywouldhavespentoninsurance(haditbeen availabletopurchase).  E. Noneoftheabove    11.  Whichofthefollowingwouldmostlikelyleadtoanunderstatementofnetincomeinthecurrentyear?   A. Recordingrevenuethisperiodwhenearnedeventhoughthecash iscollectednextyear.  B. Failingtoadjustadeferredrentexpenseaccount fortheportionofthepre paymentthatexpiredthis year.  C. Recordinganexpenseincurredthisyeareventhoughthecashwasnotpaiduntilthefollowingyear.  D. Recordingrevenuenextperiodwhenthecashiscollectedalthoughitisearnedint hecurrentyear.  E. Noneoftheabovewouldleadtoanunderstatementofnetincome.    12.  WetstoneCompanyhadthefollowingyear to date(normal)accountbalanceson itsDecember 31stbalancesheet:   AccountsPayable AccountsReceivable AccumulatedDepreciation Cash CustomerAdvanceDeposits Equipment RetainedEarnings  1,000 2,500 3,500 2,500 3,500 10,000 2,500  WhatwasWetstone'stotalequityatDecember31st?   A. $2,500  B. $14,000  C. $7,000  D. $4,500  E. Noneoftheabove     13.  PleaseconsidertheaccountingforDrHaines'Orthodonticpractice(Lab1). Asexplainedinthe narrativeaccompanyingthecase,theemployeesworkTuesdaythroughSaturdayand getpaidholidays. Dr.Hainespayspayrollonthesecondand4thSaturdayofthemonth. Forpurposesofthisproblem, assumethatthelastpayrollinDecembercoveredworkperformedthroughDecember24thandthefirst payrollinJanuarywasonJanuary14th.    Sunday 11 Dec 18 Dec 25 Dec 1 Jan 8 Jan Monday 12 Dec 19 Dec 26 Dec 2 Jan 9 Jan Tuesday 13 Dec 20 Dec 27 Dec 3 Jan 10 Jan Wednesday 14 Dec 21 Dec 28 Dec 4 Jan 11 Jan Thursday 15 Dec 22 Dec 29 Dec 5 Jan 12 Jan Friday 16 Dec 23 Dec 30 Dec 6 Jan 13 Jan Saturday 17 Dec 24 Dec 31 Dec 7 Jan 14 Jan  PleaseconsiderthatfortheJanuary14thpayroll,thewagesearnedbyemployeestotaled $22,320. Usingthisinformationandtheabovecalendar, determinetheadjustingentryforpayroll(if any)thatwouldberecordedasof12/31/2010. Pleaseignorepayrolltax.     A. SalaryExpense$22,320  DeferredWages14,880  Cash$7,440   B. SalaryExpense$7,440  SalaryPayable$7,440   C. SalaryPayable$11,160  PrepaidSalary11,160  Cash$22,320   D. SalaryExpense$14,880  SalaryPayable$14,880   E. Noneoftheabove    14.  OnJuly31st HawthorneManufacturingCompany(the"seller")ships$10,000worthofmerchandiseto acustomer(i.e.the"buyer"). ThecustomerplacedtheirorderforthemerchandiseonJuly29th. Hawthornepays$500ofshippingrelatedtothissalea ndexpectsthebuyertoreimbursethemforthis expenditure. AspartofthesalestermsHawthorneoffersthecustomersa1%cashdiscountifthesales priceispaidwithin10days. Ifitispaidafterthe10daywindowHawthorneexpectsthatcustomerswill paythebalanceinfullwithinanother20days(i.e.30daysintotal). Themerchandiseisdeliveredtothe customeronAugust5thandpaymentisremittedbythecustomeronAugust6th. Whichofthebelow statementsappropriatelydescribetheshippingtermsassumingthatthe"risksandrewards"ofownership transfertothebuyeronJuly31st.  ***     A. FOBShippingPoint  FreightPrepaid  B. FOBDestination FreightCollect  C. FOBShippingPoint  FreightCollect  D. FOBDestination FreightPrepaid  E. Noneoftheabove    15.  Pleaseconsidertheabovequestion(HawthorneManufacturing)andselectwhichofthebelowitems wouldbeincludedintheentrytorecordthepaymentinAugust. ***  A. debit: AccountsPayable$10,500  B. credit: Cash$10,500  C. debit: MerchandiseInventory$10,500  D. credit: MerchandiseInventory$1,000  E. Noneoftheabove   ***announcedinclasstolookatthesetwofromtheperspectiveofthebuyer    16.  Whichofthefollowingerrors,eachconsideredindividually,wouldcausethetrialbalancetotalstobe unequal?   A. amathematicalerrorwasmadewhentallyinguptheaccountbalancethatwasreportedonthetrial balance.  B. apaymentof$311toacreditorwaspo stedasadebitof$311tocashandacreditof$311to AccountsReceivable  C. apaymentof$96forinsurancewaspostedasadebitof$46toPrepaidInsuranceandacreditof$46 toCash  D. Alloftheabovewouldcausethetrialbalancetotalsto beunequal.  E. Noneoftheabovewouldcausethetrialbalancetotalstobeunequal     Continuedonnextpage.  17.  PleaseconsiderthefollowingtransactionsthattookplaceinDr.Haines'OrthodonticPractice(lab1) duringthemonthofDecemberanddetermineallthetransactionswhichshouldberecordedinthe underlyingaccountsduringDecember.   (i)Metwithpatient,ValerieCreggtodiscussheroutstandingaccountbalance.Sheconcludedthatshe shoulddelaytreatmentforher youngestchilduntiltreatmentisfinishedfortheolderchild.Shesigneda  (ii)SoldtwoSuperSmileWhiteningSystemsfor$110each.  (iii) Orderedalargeamountoforthodonticsupplies(brackets,bands,wires).Vendor:Ortho Technology,listprice$16,500.Negotiatedatradediscountof5%andpaymenttermsof2/10,n/30. Shipment(FOBDest). TheordershouldshipfromOrthoTechnologieswithinthenexttendaysand bedeliveredshortlythereafter.  (iv)Paidtheaccountingfirm$160fortheirDecemberservices(check#680).     A. (i),(ii),(iii),(iv)  B. (ii)and(iv)  C. (i),(ii)&(iv)  D. (ii),(iii)and(iv)  E. Noneoftheabovechoicesreflectthetransactionswhichwouldberecordedonthebooksin December.    ***Announcement wasmadeinclasstellingyoutoconsiderthesespecifictransactionsonly.  i.e.item(iii) youareconsideringtheeventbeingdescribedherei.e.theorder.    18.  OnSeptember30,theCashaccountofValueCompanyhadanormalbalanceof$5,000.During September,theaccountwasdebitedforatotalof$11,500andcreditedforatotalof$12,200.Whatwas thebalanceintheCashaccountatthebeginningofSeptember ?   A. A$7,200debitbalance  B. A$11,500debitbalance  C. A$4,300debitbalance  D. A$5,700debitbalance  E. A$5,700creditbalance    19.  Whichofthefollowingisatruestatementregardingdebitsandcredits?   A. Ifacompanyearnedaprofit,debitswillnotequalcredits.  B. Assetsandexpensesarebothincreasedwithacredit.  C. Foramerchandisingbusiness,debitsarebetterthancredits  D. Anormalbalanceforliabilities(thatareduewithinoneyear)isacredit.  E. BothAandDaretrue    20.  Whichofthefollowinglistofeventsproperlyreflectstheearlystepstakenintheaccountingprocess?   A. Analyzeeachtransaction,Recordrelevanttransactions,Postjournalinformationtoledgeraccounts, Prepareanunadjustedtrialbalance  B. Analyzeeachtransaction,Postjournalinformationtoledgeraccounts,Recordrelevanttransactions, Prepareanunadjustedtrialbalance  C. Prepareanunadjustedtrialbalance,Analyzeaccountsforabnormalbalances,Postclosingentries, Preparefinancialstatements  D. Postjournalinformationtoledgeraccounts,Analyzeeachtransact ion,Postjournalinformationto ledgeraccounts,Prepareanadjustedtrialbalance  E. Recordrelevanttransactions,Postjournalinformationtoledgeraccounts,Analyzeeachtransaction, Prepareanunadjustedtrialbalance    21.  Acompanyreportedtotalequityof$210,000onitsDecember31,2008,balancesheet($15,000of whichwasconsideredcontributedcapital).Therewerenoadditionalcapitalcontributionsmadeduring 2009.   Pleaseconsiderthefollowinginformationwhich wasreportedfortheyearendedDecember31,2009 andcalculatethetotalassetsreportedbythecompanyatDecember31,2009.   Total2009Revenue Total2009Expense Totaldividendsdeclaredduring2009: TotalLiabilitiesreportedonthe12/31/2009BalanceSheet  $325,000 $215,000 $50,000 $145,000   A. $320,000  B. $465,000  C. $255,000  D. $415,000  E. Noneoftheabove    22.  Acorporationpurchaseda$40,000deliverytruckbypaying 4,000cashandsigninga$36,000note payableforthebalanceowed.Immediatelypriortothistransactionthecorporationhadassets,liabilities andowners'equityintheamountsof$75,000 $52,000 and$23,000respectively.Whatisthetotal amountofthecorporation'sassetsafterthistransactionhasbeenrecorded?   A. $115,000  B. $111,000  C. $79,000  D. $71,000  E. Noneoftheabove    23. Acompanyhastwiceasmuchowner'sequityasitdoesliabilities.Iftotalliabilitiesare$50,000,what amountsofassetsareownedbythecompany?  A.$50,000 B.$100,000 C.$150,000 D.$200,000 E.Cannotbedeterminedfromthegiveninformation   24.  Inyourreadings,youwereintroducedtobasicassumptions,qualitativecharacteristics,broad accountingprinciplesandconstraintsthatprovideanunderlyingconceptualframeworkforfinancial accountingandreportingdecisions.Pleasereviewthebelowstatementsandidentifythestatementthat bestdemonstratestherealizationprinciple.   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. Noneoftheaboveareexamplesoftherealizationprinciple.    25.  Whichofthefollowingisnotanadvantagetohavingacentralizedpurchasingdepartment:   A. Betterabilitytomonitorandenforceaconflictofinterestpolicy.  B. Potentialforstrongervendorrelations  C. Purchasingagentspecializationandtraining  D. Increasedopportunityforquantitydiscounts&batchorders  E. Alloftheaboveareadvantagesofacentralizedpurchasingdepartment     Continuedonnextpage  26.  JohnownsasuccessfulfastfoodrestaurantinacentralIllinoiscommunity. Inyourclassreadings, author,Dunndiscussedthatriskscanbeclassifiedbasedonthelevelatwhichtheyare occurring, specifically:  (i)LocalEconomyRisks (ii)GlobalEconomyRisk(iii) IndustryRisk (iv)ExternalEnterpriseRisk (v)InternalEnterpriseRisks(vi)BusinessProcessRisk(vii)InformationProcessRisk Pleaseconsider thebelowsituationsandselectthesituationthatwouldbeconsidere danenterpriserisktoJohn.     A. InearlyFebruarythecountrywashitveryhardbyafluepidemic. Entirefamiliesweretakenill, schoolsclosedandthegovernmentencouragedpeopletostayhomeunlessitwasabsolutelynecessary togoout.  B. TheIllinoislegislaturepassedataxincreasewhichwillretroactivelyraisetheincometaxon businessprofitsby45%.  C. John'srestaurantfailedasurpriseinspectionbythehealthdepartment. Therestaurantwasclosedfor threedaysandthesituationwascoveredbythelocalmedia.  D. Thenation'spotatocropwasdamagedbyanearlyfrostresultinginasmallersupplyofpotatoes beingsoldat  ahigherpriceperpound.  E. BothAandB     ...
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