W06_136A2_MT1

W06_136A2_MT1 - February 6, 2006 Anderson ECON 136A Midterm...

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February 6, 2006 Anderson ECON 136A Midterm #1 v. 2 Name _________________________ Answer multiple choice questions (#1-25) on your green scantron and the remaining problems in your blue-books. 1. The statement below which best states the intent of the "matching principle" is: a. Record expenses when they have been earned. b. Record revenues when they have been earned. c. Let the expense follow the revenue. d. Opposites attract. 2. The statement "risk is commensurate with reward" means that the higher the perceived risk, the: a. Higher the interest rate b. Lower the interest rate c. No impact on the interest rate d. More likely an investor is to abstain from investment. 3. Losses incurred by a corporation operating in Southern California as a result of an earthquake should be reported: a. As a change in accounting estimate in the income statement; b. As a restatement to prior periods on the equity statement; c. As other gains and losses on the income statement; d. As an extraordinary item on the income statement and presented net of the associated tax benefit. 4. Which statement below best represents the criteria to classify as a current item in a classified balance sheet: a. The item will convert within one year; b. The item will convert within one year or the operating cycle, whichever is shorter; c. The item will convert within one year or the operating cycle, whichever is longer; d. None of the above. 5. Present value is a. the value now of a future amount. b. the amount that must be invested now to produce a known future value. c. always smaller than the future value. d. all of these.
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Midterm #1 v. 2--Page 2 6. Which of the following statements is true about unrealized gains and losses on available for sale securities. a. They should be reflected on the income statement. b. They should be ignored as available for sale securities are presented at cost. c. They should be reflected as a component of other comprehensive income in the statement of stockholder's equity. d. They should be reflected as a component of other comprehensive income, which is a component of net income. 7. Which of the following types of entities is most likely able to support use of an un-classified balance sheet: a. A manufacturing company; b. A retail company; c. A real estate company; d. None of the above. 8. If you pay 12 months of an insurance policy on April 1 for $240,000 and record the following journal entry: Insurance expense $200,000 Prepaid insurance $40,000 Cash $240,000 The journal entry required at the end of the year would: a. Debit prepaid insurance for $20,000 and credit insurance expense for the same amount. b. Debit insurance expense for 180,000 and credit prepaid insurance for the same amount. c.
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W06_136A2_MT1 - February 6, 2006 Anderson ECON 136A Midterm...

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