Mini%20Exam%201%20Spring%202011%20VD

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

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Unformatted text preview: 1.  Acorporationpurchaseda$40,000deliverytruckbypaying4, 000cashandsigninga$36,000note payableforthebalanceowed.Immediatelypriortothistransactionthecorporationhadassets,liabilities andowners'equityintheamountsof$75,000 $52,000 and$23,000respectively.Whatisthetotal amountofthecorporation'sassetsafterthistransactionhasbeenrecorded?   A. $111,000  B. $71,000  C. $79,000  D. $115,000  E. Noneoftheabove    2.  Inclassandinyourassignedreadingstheconceptofa"DeferredExpense"was explained. Please consideranaccountthatcouldbeclassifiedasadeferredexpenseand (i)identify howthisaccountwouldchangeifadebitentrywerepostedtoit(ii)onwhichfinancialstatementthis accountwouldbereported   A. (i)increase (ii)IncomeStatement  B. (i)increase (ii)BalanceSheet  C. (i)decrease (ii)IncomeStatement  D. (i)decrease (ii)BalanceSheet    3.  OnSeptember30,theCashaccountofValueCompanyhadanormalbalanceof$5,000.During September,theaccountwasdebitedforatotalof$12,200andcreditedforatotalof$11,500.Whatwas thebalanceintheCashaccountatthebeginningofSeptember ?   A. A$11,500debitbalance  B. A$4,300debitbalance  C. A$4,300creditbalance  D. A$5,700debitbalance  E. A$5,700creditbalance    4.  Temporaryaccountswouldnotinclude:   A. Dividends.  B. SalariesPayable.  C. SuppliesExpense.  D. AdvertisingExpense.  E. Alloftheabovewouldbeconsideredtemporaryaccounts    5.  Acompanyhastwiceasmuchowner'sequityasitdoesliabilities.Iftotalliabilitiesare$50,000,what amountsofassetsareownedbythecompany?   A. $150,000  B. $100,000  C. $50,000  D. $200,000  E. Cannotbedeterminedfromthegiveninformation    6.  Whichofthefollowinglistofeventsproperlyreflectstheearlystepstakenintheaccountingprocess?   A. Prepareanunadjustedtrialbalance,Analyzeaccountsforabnormalbalances,Postclosingentries, Preparefinancialstatements  B. Postjournalinformationtoledgeraccounts,Analyzeeachtransaction,Postjournalinformationto ledgeraccounts,Prepareanadjustedtrialbalance  C. Recordrelevanttransactions,Postjournalinformationtoledgeraccounts,Analyzeeachtransaction, Prepareanunadjustedtrialbalance  D. Analyzeeachtransaction,Postjournalinformationtoledgeraccounts,Recordrelevanttransaction s, Prepareanunadjustedtrialbalance  E. Analyzeeachtransaction,Recordrelevanttransactions,Postjournalinformationtoledgeraccounts, Prepareanunadjustedtrialbalance    7.  OnOctober1,2010,AdamsCompanypaid$6,000foratwo  yearinsurancepolicywiththeinsurance coveragebeginningonthatdate.AsofDecember31,2010,whichofthefollowingaccountbalancesare correctafteradjustingentrieshavebeenmade?   A. Prepaidinsurance,$5,250andInsuranceexpense,$750.  B. Prepaidinsurance,$5,750andInsuranceexpense,$250.  C. Prepaidinsurance,$3,000andInsuranceexpense,$3,000.  D. Prepaidinsurance,$6,000andInsuranceexpense,$0.  E. Noneoftheabove    8.  Acompanyreportedtotalequityof$210,000onitsDecember31,2008,balancesheet($15,000of whichwasconsideredcontributedcapital).Therewerenoadditionalcapitalcontributionsmadeduring 2009.   Pleaseconsider,the followinginformationwhichwasreportedfortheyearendedDecember31,2009 andcalculatethetotalassetsreportedbythecompanyatDecember31,2009.   Total2009Revenue Total2009Expense Totaldividendsdeclaredduring2009: TotalLiabilitiesreportedonthe12/31/2009BalanceSheet  $325,000 $215,000 $50,000 $145,000   A. $415,000  B. $465,000  C. $255,000  D. $320,000  E. Noneoftheabove    9.  Whichofthefollowingisnotanadvantagetohavingacentralizedpurchasingdepartment:   A. Increasedopportunityforquantitydiscounts&batchorders  B. Potentialforstrongervendorrelations  C. Purchasingagentspecializationandtraining  D. Betterabilitytomonitorandenforceaconflictofinterestpolicy.  E. Alloftheaboveareadvantagesofacentralizedpurchasingdepartment    10.  Whichofthefollowingwouldmostlikelyleadtoanunderstatementofnetincomeinthecurrentyear?   A. Recordingrevenuenextperiodwhenthecashiscollectedalthoughitisearnedinthecurrentyear.  B. Failingtoadjustadeferredrentexpenseaccountfortheportionofthepre  paymentthatexpiredthis year.  C. Recordinganexpenseincurredthisyeareventhoughthecashwasnotpaiduntilthefollowingyear.  D. Recordingrevenuethisperiodwhenearnedeventhoughthecash iscollectednextyear.  E. Noneoftheabovewouldleadtoanunderstatementofnetincome.    11.  Whichofthefollowingdirecteffectsonthebasicaccountingequationis notpossibleasaresultof transactionanalysis?   A. Increasealiabilityandincreaseanasset.  B. Decreasestockholders'equityanddecreaseanasset.  C. Increasestockholders'equityanddecreaseanasset.  D. Increaseanassetanddecreaseanasset.  E. Alloftheabovearepossible.        Continuedonnextpage.  12.  PleaseconsidertheaccountingforDrHaines'Orthodonticpractice(Lab1). Asexplainedinthe narrativeaccompanyingthecase,theemployeesworkTuesdaythroughSaturdayand getpaidholidays. Dr.Hainespayspayrollonthesecondand4thSaturdayofthemonth. Forpurposesofthisproblem, assumethatthelastpayrollinDece mbercoveredworkperformedthroughDecember24thandthefirst 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$14,880  SalaryPayable$14,880   C. SalaryExpense$7,440  SalaryPayable$7,440   D. SalaryPayable$11,160  PrepaidSalary11,160  Cash$22,320   E. Noneoftheabove    13.  Whichofthefollowingisatruestatementregardingdebitsandcredits?   A. Anormalbalanceforliabilities(thatareduewithinoneyear)isacredit.  B. Foramerchandisingbusiness,debitsarebetterthancredits  C. Ifacompanyearnedaprofit,debitswillnotequalcredits.  D. Assetsandexpensesarebothincreasedwithacredit.  E. BothAandCaretrue    14.  LangleyCorporationmadejournalentriesfor thefollowingtransactions:  (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)    15.  OnJuly31stHawthorneManufacturingCompany(the"seller")ships$10,000worthofmerchandisetoa customer(i.e.the"buyer"). ThecustomerplacedtheirorderforthemerchandiseonJuly29th. Hawthornepays$500ofshippingrelatedtothissaleandexpectsthe buyertoreimbursethemforthis expenditure. AspartofthesalestermsHawthorneoffers thecustomersa1%cashdiscountifthesales priceispaidwithin10days. Ifitispaidafterthe10daywindowHawthorneexpectsthatcustomerswill paythebalanceinfullwithinanother20days(i.e.30daysintotal). Themerchandiseisdeliveredtothe customeronAugust5thandpaymentisremittedbythecustomeronAugust12th. Whichofthebelow statementsappropriatelydescribetheshippingtermsassumingthatthe"risksandrewards"ofownership transfertothebuyeronJuly31st.***     A. FOBDestination FreightCollect  B. FOBShippingPoint  FreightPrepaid  C. FOBDestination FreightPrepaid  D. FOBShippingPoint  FreightCollect  E. Noneoftheabove    16.  Pleaseconsidertheabovequestion(HawthorneManufacturing)andselectwhichofthebelowitems wouldbeincludedintheentrytorecordthepaymentinAugust. ***  A. debit: MerchandiseInventory$10,500  B. credit: Cash$10,500  C. debit: AccountsPayable$10,500  D. credit: MerchandiseInventory$1,000  E. Noneoftheabove     ***  announcedinclasstolookatbothquestionsfromtheperspectiveofthebuyer. 17.  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,Killeris setlooseinthestore. Hehasbeenspeciallytrainedtobarkloudlyatanyintruderandthentorestrainthe intruderbycorneringthem. Duringtheday,Killermovesupstairsandsta ysintheapartment. While Killerisveryaggressivetowardstrangersheisasweetdogwhenheiswithhisowners. Despitethis, BarbalwayslocksKillerupinakennelwhenhergrandchildrenvisit. Jakehashungsignsallaroundthe propertythatsay"smile,youarebeingvideotapedbyoursurveillancesystem"and"bewareofguard dog".    Pleaseconsidertheabovenarrativeandselectthefalsestatementcontainedbelow:   A. SinceitishighlyprobablethatSSGwillberobbedandareasonable estimateofthelosscanbe made,Jakeshouldaccruea$22,000contingentliabilityonSSG'sfinancialstatements.   B. Thevideosurveillancecameras(incombinationwiththewarningsigns)wouldbeconsidereda preventative,detectiveandcorrectivecontrol.  C. "Killer"(incombinationwiththewarningsigns)wouldbeconsideredapreventative,detectiveand correctivecontrol.  D. Alloftheabovearetrue  E. AandB    18.  PleaseconsidertheabovenarrativeandthefactthatJakeinstalled  ironsecuritygrilles(i.e.bars)overall doorsandwindows. Inclasswelearnedthatcontrolprocedurescouldbeclassifiedas(i)preventative (ii)detectiveand(iii)corrective. Giventhisinformation,howwouldtheuseoftheseironsecuritygrilles beclassified?     A. (i)and(ii)  B. (i)and(iii)  C. (ii)and(iii)only  D. (i),(ii)and(iii)  E. (i)only    19.  JohnownsasuccessfulfastfoodrestaurantinacentralIllinoiscommunity. Inyourclassreadings, author,Dunndiscussedthatriskscanbeclassifiedbasedonthelevelatwhichtheyare occurring, specifically:  (i)LocalEconomyRisks(ii)GlobalEconomyRisk(iii) IndustryRisk (iv)ExternalEnterpriseRisk (v)InternalEnterpriseRisks(vi)BusinessProcessRisk(vii)InformationProcessRisk Pleaseconsider thebelowsituationsandselectthesituationthatwouldbeconsideredanenterprise risktoJohn.     A. Thenation'spotatocropwasdamagedbyanearlyfrostresultinginasmallersupplyofpotatoes beingsoldat  ahigherpriceperpound.  B. TheIllinoislegislaturepassedataxincreasewhichwillretroactivelyraisetheincometaxon businessprofitsby45%.  C. InearlyFebruarythecountrywashitveryhardbyafluepidemic. Entirefamiliesweretakenill, schoolsclosedandthegovernmentencouragedpeopletostayhomeunlessitwasabsolutelynecessary togoout.  D. John'srestaurantfailedasurpriseinspectionbythehealthdepartment. Therestaurantwasclosedfor threedaysandthesituationwascoveredbythelocalmedia.  E. BothBandC        20.  3yearsago,VadisCompanypurchaseda7acreabandonedparceloflandinFairviewPeaksNevada andbuiltastate of the artdistributionfacility. UnfortunatelyVadisdidnotdoenoughresearchandonly afterinvestinginthefacilitydidtheylearntheirfacilityissituatedonamajorearthquake fault. Althoughtheithasbeen70yearssincethelastearthquake(7.1magnitude),thecontroller,John Fallonhasspokentoauthoritiesandfeelsitishighlyprobablethatanotherearthquakewillbe experiencedatsomepointinthenext10years.BecauseofthisriskVadisisunabletopurchase earthquakeinsurance. Johnbelievesifanotherlargeearthquakeoccursthattheirexposuretolosswill rangebetween$12and$18million.   A. Vadisshouldaccruea$12milliondollarlossrelatedtothissituation.  B. Vadisshouldlimittheiraccrualtotheamounttheywouldhavespentoninsurance(haditbeen availabletopurchase).  C. Vadisshouldconservativelyaccruean$18milliondollarlossrelatedtothissituation.  D. Vadisshoulddonothingrelatedtothissituation.  E. Noneoftheabove    21.  PleaseconsiderthefollowingtransactionsthattookplaceinDr.Haines'OrthodonticPractice(lab1) duringthemonthofDecemberanddetermineallthetransactionswhichshouldberecordedinthe underlyingaccountsduringDecember.   (i)Orderedalargeamountoforthodonticsupplies(brackets,bands,wires).Vendor:OrthoTechnology, listprice$16,500.Negotiatedatradediscountof5%andpaymentte rmsof2/10,n/30.Shipment(FOB Dest). TheordershouldshipfromOrthoTechnologieswithinthenexttendaysandbe deliveredshortly thereafter.  (ii)SoldtwoSuperSmileWhiteningSystemsfor$110each.  (iii) Metwithpatient,ValerieCreggtodiscussheroutstandingaccountbalance.Sheconcludedthatshe shoulddelaytreatmentforheryoungestchilduntiltreatmentisfinishedfortheolderchild.Shesigneda $915toward  (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.   ***Announcementwasmadeinclasstellingyoutoconsiderthesespecifict ransactionsonly.  i.e.item (i)youareconsideringtheeventbeingdescribedherei.e.theorder.      22.  Inyourreadings,youwereintroducedtobasicassumptions,qualitativecharacteristics,broad accountingprinciplesandconstraintsthatprovideanunderlyingconceptualframeworkforfinancial accountingandreportingdecisions.Pleasereviewthebelowstatementsandidentifythestatementthat bestdemonstratesthe matchingprinciple.   A. Withtheconsentoftheirexternalauditors,alargemulti billiondollarcorporationrecordsall purchasesofofficesupplies(thatarelessthan$100)assuppliesexpenseasopposedto capitalizing thesuppliesasanasset.  B. DeltaAirlineincludedthefollowingstatementinit sannualreporttoshareholders: Passenger Tickets.WerecordsalesofpassengerticketsinairtrafficliabilityonourConsolidatedBalance Sheets.Passengerrevenueisrecognizedwhenweprovidetransportationorwhentheticketexpires unused,reducingtherelatedairtrafficliability.  C. ThesoleownerofVosburghIndustriesusedcompanyfundstopurchaseaverycostlyautomobileto beusedforpersonalpurposes. ThecontrollerofVosburghIndustriesrecordedthepurchasewitha credittocashandadebittothedividendaccount.  D. Atthebeginningofits2011fiscalyear,RossiImportspaid$48,000for atwoyearleaseon warehousespace. Rossi'scontrollerrecordedtheexpenditureasanassetandexpenseditequallyover thetwoyearperiodoftheleaseagreement.  E. Noneoftheaboveareexamplesofthematchingprinciple.    23.  Whichofthefollowingerrors,eachconsideredindividually,wouldcausethetrialbalancetotalstobe unequal?   A. apaymentof$96forinsurancewaspostedasadebitof$96toPrepaidInsuranceandacreditof$46 toCash  B. apaymentof$311toacreditorwaspostedasadebitof$311tocashandadebitof$311to AccountsReceivable  C. amathematicalerrorwasmadewhentallyinguptheaccountbalancethatwasreportedonthetrial balance.  D. Alloftheabovewouldcausethetrial balancetotalstobeunequal.  E. Noneoftheabovewouldcausethetrialbalancetotalstobeunequal            24.  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. $125,000  B. $150,000  C. $100,000.  D. $175,000.  E. $200,000    25.  WetstoneCompanyhadthefollowingyear to date(normal)accountbalancesonitsDecember 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. $7,000  B. $14,000  C. $2,500  D. $4,500  E. Noneoftheabove     26.  LeonardCorporationisanarchitecturefirmwhichpublishestheirfinancialstatements,annuallyon December31st. Assumethatnoadjustingentries haveyetbeenrecordedfortheentireyear.  Please considerthebelowsituationandselectthechoicethatshowsthecorrectadjustingjournalentryneededat 12/31/2010.OnNovember20,2010,Leonardreceived$5,000asanadvancepaymentfromacustomer  forservicestoberenderedinDecemberandJanuary2011.Theentireamountofthecollectionwas  AsofDecember31st,45%oftheproject hadbeencompleted.   A. Cash5,000  UnearnedRevenue5,000   B. UnearnedRevenue2,250  ArchitecturalFeesEarned2,250   C. ArchitecturalFeesEarned2,750  UnearnedRevenue2,750   D. UnearnedRevenue2,750  ArchitecturalFeesEarned2,750   E. Noneoftheabove    *** change was announced in class.  Rees s/b Fees  ...
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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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