Mini%20Exam%201%20Spring%202011%20VC

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

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Unformatted text preview: 1.  OnOctober31,acompany'sCashaccounthadanormalbalanceof$7,000.DuringOctober,theaccount wasdebitedforatotalof$5,340andcreditedforatotalof$4,250.WhatwasthebalanceintheCash accountatthebeginningofOctober?   A. $2,750debitbalance  B. $1,090creditbalance  C. $4,250creditbalance  D. $8,090debitbalance  E. $5,910debitbalance    ***changesinyellowwereannouncedinclass   2.  3yearsago,VadisCompanypurchaseda7acreabandonedparceloflandinFairviewPeaksNevada andbuiltastate of the artdistributionfacility. UnfortunatelyVadisdidnotdoenoughresearchandonly afterinvestinginthefacilitydidtheylearnthatthesoiliscontaminatedfromapaintmanufacturer  Thecontaminationisseriousandisthreateningtocontaminatethe localgroundwaterreserves. Vadishasworkedwiththeirattorneysandalocalinvestigativefirmand  TheEPAhasclassifiedthe anuptocommenceimmediately. Vadisbelievesthatthe clean upcostswillrangebetween$12and$18million.   A. Thisriskshouldbedisclosedbutnoaccrualshouldbemade.  B. Vadishasnoresponsibilitytodoanythingrelatedtothissituationastheydidnotownthepropertyat thetimethedamagewasincurred.  C. Vadisshouldaccruea$12milliondollarlossrelatedtothissituation.  D. Vadisshouldbeconservativeaccruean$18milliondollarlossrelatedtothissituation.  E. Noneoftheabove        3.  OnOctober1,2010,AdamsCompanypaid$4,000foratwo  yearinsurancepolicywiththeinsurance coveragebeginningonthatdate.AsofDecember31,2010,whichofthefollowingaccountbalancesare correctafteradjustingentrieshavebeenmade?   A. Prepaidinsurance,$4,000andInsuranceexpense,$0.  B. Prepaidinsurance,$3,500andInsuranceexpense,$500.  C. Prepaidinsurance,$2,000andInsuranceexpense,$2,000.  D. Prepaidinsurance,$0andInsuranceexpense,$4,000.  E. Noneoftheabove    4.  PleaseconsiderthefollowingtransactionsthattookplaceinDr.Haines'OrthodonticPractice(lab1) duringthemonthofDecemberanddetermineallthetransactionswhichshouldberecordedinthe underlyingaccountsduringDecember.   (i)ProvidedOrthodonticServicestoourlandlordvaluedat$10,500inexchangeforonemonthofrent valuedat$10,500. Nocashchangedhands.  (ii)Reimburseddentalassistant,Leslie$110foruniformpurchases.  (iii) Ordered$550ofletterheadandbusinesscardsfromanonlineofficesupplychain. Theorderwill beshippedfromthevendorwithin10daysanddeliveredshortlythereafter.  (iv)Metwithvariouslocalinsuranceagents,to getbidsonourtwoinsurancepolicies(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) youareconsideringtheeventbeing describedhere i.e.themeetingwiththeagents.   5.  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. $3,500  C. $10,500  D. $6,000  E. Noneoftheabove     6.  Whichofthefollowingwouldmostlikelyleadtoanoverstatementofnetincomeinthecurrentyear?   A. Recordingrevenuenextperiodwhenthecashiscollectedalthoughitisearnedinthecurrentyear.  B. Recordinganexpenseincurredthisyeareventhoughthecashwasnotpaiduntilthefollowingyear.  C. Failingtoadjustadeferredrentexpenseaccountfortheportionofthepre paymentthatexpiredthis year.  D. Recordingrevenuethisperiodwhenearnedeventhoughthecash iscollectednextyear.  E. Noneoftheabovewouldleadtoanoverstatementofnetincome.    7.  Whichofthefollowinglistofeventsproperlyreflectstheearlystepstakenintheaccountingprocess?   A. Recordrelevanttransactions,Postjournalinformationtoledgeraccounts,Analyzeeachtransaction, Prepareanunadjustedtrialbalance  B. Analyzeeachtransaction,Recordrelevanttransactions,Postjournalinformationtoledgeraccounts, Prepareanunadjustedtrialbalance  C. Prepareanunadjustedtrialbalance,Analyzeaccountsforabnormalbalances,Postclosingentries, Preparefinancialstatements  D. Postjournalinformationtoledgeraccounts,Analyzeeachtransaction,Postjournalinformationto ledgeraccounts,Prepareanadjustedtrialbalance  E. Analyzeeachtransaction,Postjournalinformationtoledgeraccounts,Re cordrelevanttransactions, Prepareanunadjustedtrialbalance    8.  Whichofthefollowingisnotanadvantagetohavingacentralizedpurchasingdepartment:   A. Increasedopportunityforquantitydiscounts&batchorders  B. Betterabilitytomakepaymentstovendorswithinthediscountperiod  C. Purchasingagentspecializationandtraining  D. Potentialforstrongervendorrelations  E. Alloftheaboveareadvantagesofacentralizedpurchasingdepartment    9.  Inyourreadings,youwereintroducedtobasicassumptions,qualitativecharacteristics,broad accountingprinciplesandconstraintsthatprovideanunderlyingconceptualframeworkforfinancial accountingandreportingdecisions.Pleasereviewthebelowstatementsandidentifythestatementthat bestdemonstratesthematerialityconstraint.   A. Withtheconsentoftheirexternalauditors,alargemulti billiondollarcorporationrecordsall purchasesofofficesupplies(thatarelessthan$100)as suppliesexpenseasopposedto capitalizing thesuppliesasanasset.  B. DeltaAirlineincludedthefollowingstatementin itsannualreporttoshareholders: Passenger Tickets.WerecordsalesofpassengerticketsinairtrafficliabilityonourConsolidatedBalance Sheets.Passengerrevenueisrecognizedwhenweprovidetransportationorwhentheticketexpires unused,reducingtherelatedairtrafficliabilit y.  C. ThesoleownerofVosburghIndustriesusedcompanyfundstopurchaseaverycostlyautomobileto beusedforpersonalpurposes. ThecontrollerofVosburghIndustriesrecordedthepurchasewitha credittocashandadebittothedividendaccount.  D. Atthebeginningofits2011fiscalyear,RossiImportspaid$48,000foratwoyearleaseon warehousespace. Rossi'scontrollerrecordedtheexpenditureasanassetandexpenseditequallyover thetwoyearperiodoftheleaseagreement.  E. Noneoftheaboveareexamplesofthematerialityconstraint.    10.  Ourcompanyhasthreetimesasmanyassetsasitdoesliabilities.Iftotalliabilitiesare$55,000,whatis theamountofowners'equity?   A. $220,000  B. $55,000  C. $165,000  D. $110,000  E. Cannotbedeterminedfromthegiveninformation    11.  Inclassandinyourassignedreadingstheconceptofa"DeferredRevenue"was explained. Please consideranaccountthatcouldbeclassifiedasadeferredrevenueand (i)identify howthisaccountwouldchangeifacreditentrywerepostedtoit(ii)onwhichfinancialstatementthis accountwouldbereported   A. (i)increase (ii)BalanceSheet  B. (i)increase (ii)IncomeStatement  C. (i)decrease (ii)BalanceSheet  D. (i)decrease (ii)IncomeStatement    12.  Acompanyreportedtotalequityof$145,000onitsDecember31,2008,balancesheet($15,0 00of whichwasconsideredcontributedcapital).Therewerenoadditionalcapitalcontributionsmadeduring 2009.   PleaseconsiderthefollowinginformationwhichwasreportedfortheyearendedDecember31,2009 andcalculatethetotalassetsreportedbythecompanyatDecember31,2009.   Total2009Revenue Total2009Expense Totaldividendsdeclaredduring2009: TotalLiabilitiesreportedonthe12/31/2009BalanceSheet  $210,000 $165,000 $25,000 $95,000   A. $190,000  B. $150,000  C. $260,000  D. $285,000  E. Noneoftheabove    13.  Whichofthefollowingerrors,eachconsideredindividually,wouldcausethetrialbalancetotalstobe unequal?   A. apaymentof$311toacreditorwaspostedasadebitof$311tocashandacreditof$311to AccountsReceivable  B. apaymentof$96forinsurancewaspostedasadebitof$46toPrepaidInsuranceandadebitof$46 toCash  C. atransactionwasnotposted  D. Alloftheabovewouldcausethetrialbalancetotalstobeunequal.  E. Noneoftheabovewouldcausethetrialbalancetotalstobeunequal    14.  OnJuly31st HawthorneManufacturingCompany(the"seller")ships$10,000worthofmerchandiseto acustomer(i.e.the"buyer"). ThecustomerplacedtheirorderforthemerchandiseonJuly29thandwill paythe$500ofshippingrelatedtothisordertotheoutsidecar rieratthetimeofdelivery. Aspartofthe salestermsHawthorneoffersthecustomersa1%cashdiscountifthesalespriceispaidwithin10 days. Ifitispaidafterthe10daywindowHawthorneexpectsthatcustomerswillpaythebalanceinfull withinanother20days(i.e.30daysintotal). ThemerchandiseisdeliveredtothecustomeronAugust 5thandpaymentisremittedbythecustomeronAugust6th. Whichofthebelowstatements appropriatelydescribetheshippingtermsassumingthatthe"risk sandrewards"ofownershiptransferto thebuyeronJuly31st.***     A. FOBShippingPoint  FreightPrepaid  B. FOBDestination FreightCollect  C. FOBShippingPoint  FreightCollect  D. FOBDestination FreightPrepaid  E. Noneoftheabove    15.  Pleaseconsidertheabovequestion(HawthorneManufacturing)andselectwhichofthebelowitems wouldbeincludedintheentrytorecordthepaymentinAugust. ***  A. debit: shippingexpense$500  B. credit: MerchandiseInventory$100  C. debit: MerchandiseInventory$10,500  D. credit: Cash$10,400  E. Noneoftheabove     ***  announcedinclasstolookatthesetwoproblems fromtheperspectiveofthebuyer 16.  JohnownsasuccessfulfastfoodrestaurantinacentralIllinoiscommunity. Inyourclassreadings, author,Dunndiscussedthatriskscanbeclassifiedbasedonthelevelatwhichtheyareoccurring, specifically:  (i)LocalEconomyRisks (ii)GlobalEconomyRisk(iii) IndustryRisk (iv)ExternalEnterpriseRisk (v)InternalEnterpriseRisks(vi)BusinessProcessRisk(vii)InformationProcessRisk Pleaseconsider thebelowsituationsandselectthesituationthatwouldbeconsideredaneconomy(eitherlocalorglobal) risktoJohn.     A. InearlyFebruarythecountrywashitveryhard byafluepidemic. Entirefamiliesweretakenill, schoolsclosedandthegovernmentencouragedpeopletostayhomeunlessitwasabsolutelynecessary togoout.  B. TheIllinoislegislaturepassedataxincreasewhichwillretroactivelyraisetheinco metaxon businessprofitsby45%.  C. John'srestaurantfailedasurpriseinspectionbythehealthdepartment. Therestaurantwasclosedfor threedaysandthesituationwascoveredbythelocalmedia.  D. Thenation'spotatocropwasdamagedbyanearlyfrostresultinginasmallersupplyofpotatoes beingsoldat  ahigherpriceperpound.  E. BothAandB    17.  Permanentaccountswouldnotinclude:   A. AccountsPayable.  B. OfficeSupplies.  C. CommonStock.  D. UtilitiesExpense.  E. Alloftheabovewouldbeconsideredpermanentaccounts    18.  PleaseconsidertheaccountingforDrHaines'Orthodonticpractice(Lab1). Asexplainedinthe narrativeacco mpanyingthecase,theemployeesworkTuesdaythroughSaturdayand getpaidholidays. Dr.Hainespayspayrollonthesecondand4thSaturdayofthemonth. ThelastpayrollinDecember coveredworkperformedthroughDecember25thandthefirstpayrollin JanuarywasonJanuary8th.    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$8,928  SalaryPayable$8,928   B. SalaryExpense$22,320  DeferredWages9,566  Cash$12,754   C. SalaryPayable$9,566  PrepaidSalary12,754  Cash$22,320   D. SalaryExpense$13,392  SalaryPayable$13,392   E. Noneoftheabove    19.  Whichofthefollowingisatruestatementregardingdebitsandcredits?   A. Anormalbalanceforliabilities(thatareduewithinoneyear)isadebit.  B. Acompany'sbooksarenotinbalanceiftheyhaveacurrentperiodloss  C. Assetsandexpensesarebothincreasedwithadebit  D. Foramerchandisingbusiness,debitsarebetterthancredits  E. BothBandCaretrue    20.  BetaCorporationpurchased$100,000worthoflandbypaying10,000cashandsigninga$90,000 mortgagenoteforthebalance.Immediatelypriortothistransactionthecorporationhadassets,liabilities andowners'equityintheamountsof$150,000 $30,000 and$120,000respectively.Whatisthetotal amountofBetaCorporation'sassetsafterthistransactionhasbeenrecorded?   A. $140,000  B. $260,000  C. $160,000  D. $240,000  E. Noneoftheabove    21.  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. Pre paidAdvertising36,000  AdvertisingExpense36,000   B. AdvertisingExpense84,000  Pre paidAdvertising84,000   C. AdvertisingExpense120,000  Cash120,000   D. AdvertisingExpense80,000  Pre paidAdvertising80,000   E. Noneoftheabove         22.  Whichofthefollowingdirecteffectsonthebasicaccountingequation is notpossibleasaresultof transactionanalysis?   A. Increaseanassetanddecreaseanasset.  B. Increasealiabilityanddecreaseanasset.  C. Increasestockholders'equityandincreaseanasset.  D. Decreasestockholders'equityanddecreaseanasset.  E. Alloftheabovearepossible.    23.  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.destinationonDecember27,2006,werereceived bythecustomeronJanuary3,2007.Thesalespricewas$35,000andthemerchandisecost $25,000.  GoodsshippedtoKwokf.o.b.shippingpointonDecember28,20 06,werereceivedonJanuary5, 2007.Theinvoicecostwas$25,000.  GoodsshippedfromKwoktoacustomerf.o.b.shippingpointonDecember28,2006,were receivedbythecustomeronJanuary4,2007.Thesalespricewas$35,000andthemerchandise cost$25,000.   DeterminethecorrectinventoryamounttobereportedinKwok's2006balancesheet.   A. $100,000  B. $175,000  C. $200,000.  D. $125,000.  E. $150,000    24.  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)     Continuedonnextpage.  25.  SouthsideGold("SSG")isalocallyownedPawnShoplocatedintheoutskirtsofChicago. Jakeand Barbhaveownedthestorefor28yearsandliveinanapartmentabovethestore. Overthelastsix monthstherehasbeenacrimespreewherelocalpawnshopsarebeingtargeted. Thecriminalsare consistentinwhattheyarestealingandlosseshaveaveragedaround$22,000perincident. Although SSGhasnotyetbeenbrokeninto,Jakedoesfeelthatitishighlyprobablethatt heywillbehitinthenear future.    Theyhavetakensomeprecautionsinresponsetothisrisk, specifically: theinstallationofvideo surveillancecamerasandtheinstallationofironsecuritygrilles(i.e.bars)overalldoorsand windows. Lastbutnotleasttheyhavepurchasedahighlytrainedguarddog. Theguarddogisan80 pound,maleDobermanappropriatelynamed "killer". Eacheveningafterthestoreislockedup,Killer issetlooseinthestore. Hehasbeenspeciallytrainedtobarklo udlyatanyintruderandthentorestrain theintruderbycorneringthem. Duringtheday,Killermovesupstairsandstaysinthe apartment. WhileKillerisveryaggressivetowardstrangersheisasweetdogwhenheiswithhis owners. Despitethis,BarbalwayslocksKillerupinakennelwhenhergrandchildrenvisit. Jakehas hungsignsallaroundthepropertythatsay"smile,youarebeingvideotapedbyoursurveillancesystem" and"bewareofguarddog".    Pleaseconsidertheabovenarrativeandselectthetruestatementcontainedbelow:   A. "Killer"(incombinationwiththewarningsigns)wouldbeconsideredapreventative,detectiveand correctivecontrol.  B. Thevideosurveillancecameras(incombinationwiththewarningsigns)wouldbeconsidereda preventative,detectiveandcorrectivecontrol.  C. SinceitishighlyprobablethatSSGwillberobbedandareasonableestimateoftheloss canbe made,Jakeshouldaccruea$22,000contingentliabilityonSSG'sfinancialstatements.   D. Alloftheabovearetrue  E. AandC     26.  PleaseconsiderthefactthatBarblocksKillerupinakennelonthedayshergrandchildrenvisit. In classwelearnedthatcontrolprocedurescouldbeclassifiedas(i)preventative(ii)detectiveand(iii) corrective. Giventhisinformation,howwouldtheuseofthekennel beclassified?     A. (iii)only  B. (i)only  C. (i)and(iii)  D. (i)and(ii)  E. (i),(ii)and(iii)    ...
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