136AS05MT2

136AS05MT2 - May 16, 2005 Anderson ECON 136A Midterm #2...

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May 16, 2005 Anderson ECON 136A Midterm #2 9:30 Class Name _________________________ RETURN THIS EXAM WITH YOUR BLUE-BOOK AND SCANTRON PLEASE! ON YOUR EXAM, YOUR SCANTRON AND YOUR BLUE-BOOK, WRITE YOUR NAME, PERM # AND CLASS TIME. ------------------------- PLEASE ANSWER ALL MULTIPLE CHOICE QUESTIONS (#1-25) ON YOUR GREEN SCANTRON. 1. The category "trade receivables" includes a. advances to officers and employees. b. income tax refunds receivable. c. claims against insurance companies for casualties sustained. d. none of these. 2. Icantdoastatementofstockholdersequitybutitwillbeonthefinal!, Inc. has properly applied their percentage of sales consistently all year in recording bad debt expenses. At the end of the year, they note that the allowance for doubtful accounts balance is $150,000. Management reviews the accounts receivable aging and notes that there are very old balances and other items which lead them to estimate that the allowance needs to be $225,000. Given these facts, which of the following statements is accurate: a. Management should adjust the percentage of sales to increase the allowance on future transactions, but do nothing to adjust the bad debt expense now; b. Management should report a restatement of $75,000; c. Management should do nothing as the additional expense could result in negative comments from financial analysts; d. Management should record an additional bad debt expense of $75,000, reflecting a change in their estimate. 3. Which of the following is correct? a. Selling costs are product costs. b. Manufacturing overhead costs are product costs. c. Interest costs for routine inventories are product costs. d. All of these. 4. If a company's general ledger indicates that the cash balance at the end of the year is negative, this should be presented in the financial statements: a. As a current liability b. Labeled "bank overdraft" c. As cash, negative d. As a current liability labeled "bank overdraft" e. None of the above
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Midterm #2 9:30 Class -Page 2 5. Designated market value a. is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin. b. should always be equal to net realizable value. c. may sometimes exceed net realizable value. d. should always be equal to net realizable value less a normal profit margin. 6. Which of the following methods of determining bad debt expense does not properly match expense and revenue? a. Charging bad debts with a percentage of sales under the allowance method. b. Charging bad debts with an amount derived from a percentage of accounts receivable under the allowance method. c. Charging bad debts with an amount derived from aging accounts receivable under the allowance method. d. Charging bad debts as accounts are written off as uncollectible.
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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.

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136AS05MT2 - May 16, 2005 Anderson ECON 136A Midterm #2...

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