Midterm2008_summer

Midterm2008_summer - Stanford University Name: __—_I___...

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Unformatted text preview: Stanford University Name: __—_I___ Date: ID: A 150 Points (Questions 1-29 at 4 points each, question 30 at 20 points and question 31 at 14 points) MS&E 140/240 Midterm Summer 08 Multiple Choice Identify the choice that best completes the statement or answers the question. .2 ) t V I. )) 1. Which of the following statements would be true if you own stock in a company? a. You are an owner of the retained earnings and capital stock of the company. b. You have a claim to the assets of the business c. You have the right to receive interest on an annual basis. d. You have the right to a portion of the company’s revenues each accounting period. 2. Which financial statement would you analyze to determine if a company distributed any of its profits to its shareholders? a. Balance Sheet b. Statement of Retained Earnings c. Income Statement d. Statement of Public Accounting How is the balance sheet linked to the other financial statements? a. The amount of retained earnings reported on the Balance Sheet is equal to net income. b. Retained earnings is added to total assets and reported on the Balance Sheet. 0. Net income increases retained earnings on the Statement of Retained Earnings, which ultimately increases retained earnings on the Balance Sheet. (1. There is no link between the Balance Sheet and other statements, as each contains different accounts and provides different information. Rayburn Company The Rayburn Company reported the following items on its financial statements for the year ending December 31, 2010: Sales $ 560,000 Cost of Goods Sold $400,000 Salary Expense 40,000 Interest Expense 30,000 Dividends 20,000 Income Tax Expense 25,000 Refer to Rayburn Company. The Income Statement for Rayburn will report Net Income for the current year ,. m the amount of L A L E’ 5 ,w 5 (:1). JJJ a. $ 45,000 / , W. b. $ 65,000 -- '70 b *" ’ 50”“ c. $ 85,000 a 3" I L’ " {’5’ '“ " ,7 d. $465,000 ‘0 fl = r a i: 5.4. ‘/ v‘é‘v Ties/[.5172 .. : H/(r; V", ..l \ Name: ID: A F or each transaction in the following set of transactions completed by Gymnastics, Inc, identify the eflect on the accounting equation. Refer to Gymnastics, Inc. Services are provided for customers who are sent bills for the amount they owe. a. Assets increase and liabilities increase. fl ': C 4 E, _, r b. Assets increase and owners' equity increases. ,4/,z, “E” "L if: c. Liabilities increase and owners' equity decreases. "‘”‘ _+_ 4” n d. Liabilities decrease and assets decrease. 6. Refer to Gymnastics, lnc. Payment is received from customers who were billed earlier for services provided for them. (if) ( M ,4) up? A ‘7 x C' 4 ‘3 ’33 a Assets increase and liabilities increase. M3- ’ V b. Assets increase and owners' equity increases. 0. Liabilities increase and owners' equity decreases. d. There is no effect on the accounting equation as one asset account increases while another asset account decreases. Refer to Gymnastics, Inc. Payment is made for land purchased earlier on credit. I ,7 I a. Assets increase and liabilities increase. r? :r "r 1'” ‘ b. Assets increase and owners' equity increases. iiéfifi (fie-“V -‘ it” " c. Liabilities increase and owners’ equity decrease. --— in i ' d. Liabilities decrease and assets decrease. When are revenues recognized under the accrual basis of accounting? 3. When cash is received, and expenses when cash is paid b. When cash is received, and expenses when the costs are incurred c. When earned, and expenses when the costs are incurred . d. When earned, and expenses when cash is paid 9. Bill Tall Trucks sells new trucks and pays each salesperson a commission of $1,000 for each truck sold. During the month of August, a salesperson, Phil, sold 3 new trucks. Bill Tall pays Phil on the 10th day of the month following the sale. Phil operates on the cash basis; the car dealer operates on the accrual basis. Which ' of the following statements is true? \ a. Phil will recognize commission revenue earned in the amount of $3,000 in August. b. Bill Tall will recognize commission expense in the amount of $3,000 in August. Phil will recognize commission expense in the amount of $3,000 in September. Phil will recognize revenue in the same month that the car dealer recognizes expense akota Corp. purchased equipment at a cost of $320,000 in January, 2001. As of January 1, 2010, epreciation of $ 1 60,000 had been recorded on this asset. Depreciation expense for 2010 is $40,000. After / ’ the adjustments are recorded and posted at December 31, 2010, what are the balances for the Equipment and Accumulated Depreciation? ft: * Equipment Accumulated Depreciation ' g; a, J 7 “l g. _ a. $ 320,000 $200,000 q , ,‘ A x A q . .: 7.35. g; b. $ 320.000 $ -0- j; 5 1”” “A " J J ’ o. $ 160,000 $ 40,000 1 m V 3- , .4 b 5 .) d. $ 120,000 $ 200,000 ’5‘” " ‘ i ’ l‘x) Name: 14. /v 15. ‘ J 12. ID: A Kibitz Company received advance payments from customers during 2010 of $10,000. At December 31, 2010, $1,000 of the advance payments still had not been earned. Afier the adjustments are recorded and posted at December 31, 2010, the balances in the Uneamed Service Revenue and Service Revenue accounts will be Uneamed Service Revenue Service Revenue a. $ 1,000 $ 9,000 b. $ 1,000 $10,000 c. $11,000 35 1.000 (1. $ 9,000 $10,000 Crisp Company received a 6—month, 6% note for $10,000 from its president on October 1, 2010. The note is due on March 31, 2011. If Crisp's accounting period ends on December 31, how much interest revenue should Crisp recognize during 2010 and 201 1? _ g . i. 711 ; 1;. _ MA 7; ,g'rf’ 2010 2011 Nina/2;: u /"j,"eijn;;. I {alchfi‘x "( 2;. ki>a><¢fl=4 /]Z‘é‘t.\} a. $450 $ 150 \hlzon “Q. 5+]! lull : 310,330 :z'é‘j‘yzgco x 3/;122’35 b. $600 $ -0— c. $300 $300 d. $150 $150 On December 1, 2010 Zane Corporation paid $8,000 rent in advance. The rent per month is $1,000. If Zane’s accounting period ends on December 31, 2010, what will be reported on the financial statements? I fa: V f a. Prepaid Rent of $7,000 on its balance sheet at December 31, 2010 PP REA/‘7‘ :. ,1 > gym - b. Prepaid Rent of $8,000 on its balance sheet at December 31, 2010 x 2h any “"‘g;;—-————-———— c. Rent Expense of $8,000 on its 2010 income statement {my 3 if NW" £39: gm; \ a»: y L d. Rent Revenue of $7,000 on its 2010 income statement (pj ‘21,?! 7&0 9 :2/3} W Blear Industrial plant operates five days per week with a daily payroll of $4,000. Employees are paid every Saturday for the workweek just completed (Monday through Friday). The last day of the month is Wednesday, March 31. What is the effect of the correct adjustment at March 31? an 374/) a. Increases owners' equity and Wages Payable by $8,000 5“ i 'A _, , b. Increases Wages Payable and decreases Cash by $12,000 (“I 000/3749 I 5 ["45] I f ’1’“) 00 c. Decreases owners' equity and increases Wages Payable by $12,000 d. Increases Wages Payable and increases Wages Expense by $8,000 Which of the following does not occur during the closing process? a. Journal entries are made to return the balance in all nominal accounts to zero. b. Journal entries are made to transfer the net income or loss to retained earnings. c. Journal entries are made to return the balance in all real accounts to zero. d. Journal entries are made to transfer the dividends to retained earnings. Ending inventory is equal to the cost of items on hand plus a. Merchandise in transit sold to customers FOB shipping point b. Merchandise in transit sold to customers FOB destination c. The cost of all inventory purchased during the period (1. Merchandise purchased in transit with terms FOB destination Name: Mills Corporation ID: A/[ills Corp. is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales $500,000 Purchases 225,000 Inventory (Beginning) 16,000 Inventory (Ending) 30,000 Operating Expenses 148,000 Income Tax Expense 10,000 Retained Earnings (beginning) 53,000 i Dividends 15,000 ‘ _D_ 17. Refer to Mills Corp. Calculate the cost of goods sold for Mills Corp. PM [Lg H 2 ‘2 8.. 0'00 a. $275,000 A VA“; 3r“ } 3 (3 L> b' $3333 " if 30”” 1 Z: $211Z000 563/“ 1mm“? _\— 18. Refer to MlllS Corp. Calculate the gross profit. ‘1” y in, (TM a. $241,000 J30? 5 b. $275,000 V3,,ng “16> are 0. $289,000 6%,; ,J/MIIT 2 Mine A (1. $425,000 « [Grip/Ff: 3w / 6/5 C; .5 a» _k/_ 19. Refer to Mills Corp. Calculate net income. A / t/ A 0 5 a. $289,000 to»: ram x52; 0 a e b. $141,000 . .3, “‘1”: . 0. $131,000 i -* 7 fete”: ’ 3 W 63‘ 0 d. $1 16,000 Fillmore, Inc. Fillmore uses the periodic inventory system. (MM 1T5 June 1 On hand, 50 units @ $15.00 each I ’31: $ 750.00 5 Purchased 115 units @ $15.10 each 7: 1,736.50 / 14 Purchased 75 units @ $15.20 each We . 1 140.00 _ Total cost of goods available for sale “2 (/0 ‘ T W '7 A5: I/ 4 V6 6257“ 30 On hand, 90 units C 9 03 W4 ' 7’ S o L D l To 20. Refer to Fillmore, Inc. If Fillmore uses the FIFO inventory method, the amount assigned to the June 30 inventory would be C45 7‘ 121/ STHC 512 E ’ a. 4... [l/é/p b. $1,366.50 , - i... V / 3 wv / v , , c. $1,590.42 _ ,W av, t 5, , o ,: ,_:.; 24:13) d. $1,594.00 _: _, Q n. J- r 1 s Q (o , ‘56 24. 25. ID:A Refer to Fillmore, Inc. If Fillmore uses the weighted average cost inventory method, the amount assigned to the June 30th inventory would be / a. $1,359.90 b. $1,486.50 1:: 1‘10 “NW-5‘ 9‘ “Vb/w; J'csjtécmxr:it???“ 7&9 c. $1,549.00 d. $1,591.50 Refer to Fillmore, Inc. If Fillmore uses the LIFO inventory method, the cost of goods sold for June would be at. $1,354.00 (HQ—5.22.22” .x/if f} M *’ b. $2,200.00 (9 l ,4 75’ >1" /.5'. :0 :1 // 9’5 c. $2,272.50 43 I f 75’ X 57;, .2 // d. $2,296.08 50, D ,5 1r; If a company understates its ending inventory balance for 2010 by $15,500, what are the effects on its net income for 2010 and 2009? {,5}— ; 33/“ 2V; ‘5’ Effect on 2010 Net Income Effect on 2009 Net Income a. Overstated by $15,500 Understated by $15,500 b. Understated by $15,500 Overstated by $15,500 c. Understated by $15,500 No effect (1. Overstated by $15,500 No effect On January 2, 2009, Larue Company sold a machine for $1,000 that it had used for several years. The machine cost $12,000, and had accumulated depreciation of $9,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine? a. Gain of $2,000 {05 5 2000 b. Loss of$ll,000 »*"’ fl 7 [.92 0. Loss of $2,000 ‘4 ' m,” " " / ‘7 O [lg/$7,“)??? d. Gain of $3,000 549“ ’1 Hyltone Resort incurred the following costs to acquire and prepare land during 2009 for a new parking lot: purchase price for land, $800,000; cost to clear the land, $30,000; cost of paving, $40,000; and lighting for the parking lot, $20,000. How much should Hyltone record in the Land Improvements account? a. $30,000 figJ/w’ 5/0, 023‘? b. $40,000 , «I,» 001’). C. $60,000 1‘" <3 x, 5:) d. $90,000 (’5‘ “‘1‘ Wilshire purchased equipment at the beginning of 2009 for $1 1,000. Wilshire decided to depreciate the equipment over a 5-year period using the straight-line method. Wilshire estimated the equipment's residual value at $1,000. The estimated fair market value at the end of 2009 was $10,000. Which of the following statements is correct concerning Wilshire's financial statements at December 31, 2009? a. The book value of the equipment is $7,200. b. The book value of the equipment is $9,000. c. The total accumulated depreciation is $2,200. (1. The equipment will be reported on the balance sheet at it fair market value of $10,000. 5 i _ =21; ? I“ a“ ‘ M i, ’2' J; " L" ' I t,’ , , //,aoa — Mi: : — I — "I In ,‘ -- . (LEI, : - at f / , I ' i 7‘. 0 O O Name: fT 27. Problem 30. x: :L «W a. . ID: A EDH, Inc. purchased equipment at the beginning of 2009 for $180,000. EDH decided to depreciate the equipment over a 5-year period using the double-declining—balance method. EDH estimated the equipment's residual value at $30,000. Which of the following statements is corrept concerning EDH's fip cial statements at December 31, 2009? ‘ a. The book value of the equipment is $108,000. E Q“ 7‘ 1 To") a O 1 ?{)1 0 0 0 b. The book value of the equipment is $72,000. ‘r’ '1'“ yrmflzzo 00’0 c. The total accumulated depreciation is $90,000.‘“0°K {’A’“ m“ 13°) 0’00 / 53'; 0‘0”? 1, gm: ,,.-',':~,t--rf:v F” 5....” d. Depreciation expense for 2009 is $60,000. “6}”: 555 p qua GOV/V. Ralph’s Delivery, Inc. purchased a truck on January 1, 2009, for $30,000. The truck had an estimated life of 5 years and an estimated residual value of $5,000. Ralph’s Delivery used the straight-line method to depreciate the asset. On July 1, 201 1, the truck was sold for $17,000 cash. The journal entry to record the sale of the truck in 2011 ,4 , : L 4 S K: a. decreases stockholder’s equity CA5 H drama J ‘I. I) b. increases total assets , "’4' m— v ,_ ~A “’7 1 0. decreases total expenses ‘1’ ‘7 r 0 0 D 3 0‘ W ‘1' 11' 3757) - S J o d. increases net income «- H . l I .. l . m 3M 2010 to” My orizonta ana ySlS lS ana ysns \x/XE/I v a. of dollar changes and percentage changes over two or more years. t o no fig. Q 1 f, ' . ‘ C) b. in which all items are presented as a percentage of one selected item on a financial statement. c. in which a statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements d. of all ratios that increased or decreased over past accounting periods. Laura's Flower Shop presented the stockholders' equity section of its balance sheet on January 1, 2010, as follows: Common stock, $2 par, 10,000 shares issued and outstanding "” “T $20,000 Additional paid-in capital--common 40,000 Retained earnings 10,000 Total stockholders' equity m A11 common shares were originally sold for $6 each. The following transactions occurred duringl2010: Teri/aw 1177 57);»? 13:1!qu . w, r . . a! 5 5 6, —- Reacqurred 3,000 shares of common stock at $15 per share on February 16. J“ " ’- 5 ‘ 5* « g a.) i 1429* '34“ —- Sold 2,000 shares of treasury stock at $20 per share on June 1. ., ,3“: ' '* " ‘ A M [‘1' - ' 4; J I it?" y‘ ’ 4 u . . . . ‘.7’ ’4‘" Part 1. Prepare the entrles to record the transactions in Journal form. ' J" Pan 2. How many shares of stock are outstanding at June 1, immediately after the sale of the 2,000 shares of treasury stock? Name: ID: A 31. Kiefer Corporation reported the following on its balance sheet at December 31, 2010: Preferred stock, $2 par, 10%, 700 shares issued and outstanding $ 1,400 Common stock, $1 par, 1,000 shares issued and outstanding 1,000 Additional paid—in capital--common 3,800 Total contributed capital $ 6,200 Retained earnings 4,500 Total stockholders' equity M No dividends were declared during 2008 or 2009. Kiefer is preparing to issue a cash dividend of $800 for 2010. Determine the total dividend for each class of stock under each of the following assumptions: A) The preferred stock is noncumulative and nonparticipating. B) The preferred stock is cumulative and nonparticipating. \lTYA—L , «so A , w ,. __ A r m ...__._._ F’s. ‘1 1,- l ‘t } “if” » A-‘ h I, g», , t ) /I . «i 16p)? zg/(Qt’ 1,04,; x1779? -- 1/ ’1 - = 7' " /l 3/ 0 «x K.’ 2,: 1 3w C v 7 if if": i, v .. ,r I. 1 1 I! "it: ,‘GQX{53’. *’ {a :24 J ; /‘;"-J‘¢ } 3, V1, / ‘ / Z/ O f r/Emp’ .. J (a ‘ "' *“ i. x c mam/V 31”“ ’1 I 121:9 ban-hf v’ ’ ‘ ’L 04,5. WW“... ...
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Midterm2008_summer - Stanford University Name: __—_I___...

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