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Unformatted text preview: February 5, 2007 VERSION #1 (WRITE ON SCANTRON) Anderson ECON 136A_ Winter 2007 Midterm 1 Name _________________________ Complete questions 1-25 (multiple choice) on your scantron. Complete problems 26-28 in your blue book. Be sure to leave a detailed trail of your computations for partial credit. 1. Under the cash basis of accounting, revenues are recorded a. when they are earned and realized. b. when they are earned and realizable. c. when they are earned. d. when they are realized. 2. When converting from cash basis to accrual basis accounting, which of the following adjustments should be made to cash paid for operating expenses to determine accrual basis operating expenses? a. Add beginning accrued liabilities. b. Add beginning prepaid expense. c. Subtract ending prepaid expense. d. Subtract interest expense. 3. Adjusting entries are necessary to 1. obtain a proper matching of revenue and expense. 2. achieve an accurate statement of assets and equities. 3. adjust assets and liabilities to their fair market value. a. 1 b. 2 c. 3 d. 1 and 2 4. Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting cycles? a. To reduce the federal income tax liability b. To aid management in cash-flow analysis c. To match the costs of production with revenues as earned d. To adhere to the accounting constraint of conservatism 5. Another term for the balance sheet is: a. Statement of sources and uses of cash b. Statement of activity for the period c. Statement of financial position d. I have no idea Midterm 1--Page 2 6. Under accounting principles generally accepted in the United States of America, which of the following statements are true: a. Revenue is recorded when the payment has been received and expenses are recorded when paid. b. Revenue is recorded when it has been earned and expenses when the associated benefit has been received. c. Revenue is recorded when the expense for the revenue has been paid. d. Revenue is recorded when estimable by the Company's management and expenses are recorded when it is reasonably determined. 7. Forbes Company paid $7,200 on June 1, 2004 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2004 adjusting entry is a. debit Insurance Expense and credit Prepaid Insurance, $2,100. b. debit Insurance Expense and credit Prepaid Insurance, $5,100. c. debit Prepaid Insurance and credit Insurance Expense, $2,100 d. debit Prepaid Insurance and credit Insurance Expense, $5,100. 8. The major elements of the income statement are a. revenue, cost of goods sold, selling expenses, and general expense. b. operating section, nonoperating section, discontinued operations, extraordinary items, and cumulative effect....
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This note was uploaded on 05/18/2011 for the course ECON 136A taught by Professor Anderson during the Spring '08 term at UCSB.
- Spring '08