ACCT
504 Midterm Exam 100% Correct Answers
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(TCO A, B, C) Which of the following statements concerning users of
accounting information is incorrect?
(TCO C) Issuing shares of stock in exchange for cash is an example
of a(n):
(TCO C) Which activities involve putting the resources of the
business into action to generate a profit?
(TCO A) The cost of assets consumed or services used is also known
as:
(TCO C) Edwards Company recorded the following cash transactions
for the year:
Paid $45,000 for salaries.
Paid $20,000 to purchase office equipment.
Paid $5,000 for utilities.
Paid $2,000 in dividends.
Collected $75,000 from customers.
Paid $20,000 to purchase office equipment.
Paid $5,000 for utilities.
Paid $2,000 in dividends.
Collected $75,000 from customers.
What was Edwards’ net cash provided
by operating activities?
(TCO A) On a classified balance sheet, prepaid insurance is
classified as:
(TCO A) An intangible asset:
(TCO A) These are selected account balances on December 31, 2007.
-Land (location of the corporation’s
office building) $200,000
-Land (held for future use) 300,000
-Corporate Office Building 1,200,000
-Inventory 400,000
-Equipment 900,000
-Office Furniture 200,000
-Accumulated Depreciation 600,000
-Land (held for future use) 300,000
-Corporate Office Building 1,200,000
-Inventory 400,000
-Equipment 900,000
-Office Furniture 200,000
-Accumulated Depreciation 600,000
What is the total NET amount of
property, plant, and equipment that will appear on the balance sheet
(TCO B) For 2010, Landford Corporation reported net income of
$30,000; net sales $400,000; and average share outstanding 6,000. There were no
preferred stock dividends. What was the 2010 earnings per share?
(TCO B) Liondale Corporation had beginning retained earnings of
$2,292,000 and ending retained earnings of $2,499,000. During the year, they
issued common stock totaling $141,000. There were no dividends issued. What was
their net income for the year?
(TCO D) On March 1, 2010, Dillon Company hires a new employee who
will start the work on March 6. The employee will be paid on the last day of
each month. Should a journal entry be made on March 6? Why or why not?
(TCO D) Which one of the following is not a part of an account?
(TCO D) Which of the following describes the classification and
normal balance of the retained earnings account?
(TCO D) A debit is the normal balance for which account listed
below?
(TCO D) Which of the following accounts follows the rules of debit
and credit in relation to increases and decreases in the opposite manner?
(TCO E) An accounting time period that is one year in length is
called
(TCO E) In a merchandising business, revenue may be considered
earned when
(TCO E) On April 1, 2010, M Corporation paid $48,000 cash for
equipment that will be used in business operations. The equipment will be used
for four years and will have no residual value. M records depreciation expense
of $9,000 for the calendar year ending December 31, 2010. Which accounting
principle has been violated?
(TCO E) The following is selected information from M Corporation
for the fiscal year ending October 31, 2010:
Cash received from customers
$300,000
Revenue earned 350,000
Cash paid for expenses 170,000
Expenses incurred 200,000
Revenue earned 350,000
Cash paid for expenses 170,000
Expenses incurred 200,000
Based on the accrual basis of
accounting, what is M Corporation’s net income for the year ending October 31,
2010?
(TCO E) Adjusting entries are made to ensure that:
(TCO A, B) Which of the following expressions is incorrect?
(TCO B) Hunter Company purchased merchandise inventory with an
invoice price of $3,000 and credit terms of 2/10, n/30. What is the net cost of
the goods if Hunter Company pays within the discount period?
(TCO A, B) Jake’s Market recorded the following events involving a
recent purchase of merchandise:
Received goods for $20,000, terms
2/10, n/30.
Returned $400 of the shipment for credit.
Paid $100 freight on the shipment.
Paid the invoice within the discount period.
Returned $400 of the shipment for credit.
Paid $100 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the
company’s merchandise inventory:
(TCO A) The factor which determines whether or not goods should be
included in a physical count of inventory is:
(TCO A) Barnes Company is taking a physical inventory on March 31,
the last day of its fiscal year. Which of the following must be included in
this inventory count?
(TCO A) A problem with the specific identification method is that:
(TCO A) Which of the following statements is true regarding
inventory cost flow assumptions?
(TCO A) In periods of rising prices, the inventory method which
results in the inventory value on the balance sheet that is closest to current
cost is the:
(TCO B) Which of the following is a true statement about inventory
systems?
(TCO B) A merchandiser that sells directly to consumers is:
(TCO D) A classmate is considering dropping his accounting class
because he cannot understand the rules of debits and credits.
Explain the rules of debits and credits in a way that will help him understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities and stockholders’ equity) and the income statement (revenues and expenses).
Explain the rules of debits and credits in a way that will help him understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities and stockholders’ equity) and the income statement (revenues and expenses).
(TCOs B & E) The Caltor Company gathered the following condensed data
for the year ended December 31, 2010:
(TCO A, B, C) External users want answers to all of the following
questions except:
(TCO C) Borrowing money is an example of a(n):
(TCO C) Buying and selling products are examples of:
(TCO A) Resources owned by a business are referred to as:
(TCO C) Jamie Company recorded the following cash transactions for
the year:
Paid $70,000 for salaries.
Paid $20,000 to purchase office equipment.
Paid $6,000 for utilities.
Paid $7,000 in dividends.
Collected $130,000 from customers.
Paid $20,000 to purchase office equipment.
Paid $6,000 for utilities.
Paid $7,000 in dividends.
Collected $130,000 from customers.
What was Jamie’s net cash provided
by operating activities?
(TCO A) In a classified balance sheet, assets are usually
classified as:
(TCO A) These are selected account balances on December 31, 2010.
(TCO A) These are selected account balances on December 31, 2010.
-Land (location of the corporation’s
office building) $50,000
-Land (held for future use) 75,000
-Corporate Office Building 300,000
-Inventory 100,000
-Equipment 225,000
-Office Furniture 50,000
-Accumulated Depreciation 150,000
-Land (held for future use) 75,000
-Corporate Office Building 300,000
-Inventory 100,000
-Equipment 225,000
-Office Furniture 50,000
-Accumulated Depreciation 150,000
What is the total NET amount of
property, plant, and equipment that will appear on the balance sheet?
(TCO B) For 2010, Ford Corporation reported net income of $15,000;
net sales $200,000; and average share outstanding 6,000. There were no
preferred stock dividends. What was the 2010 earnings per share?
(TCO B) Morten Corporation had beginning retained earnings of
$764,000 and ending retained earnings of $833,000. During the year they issued
common stock totaling $47,000. There were no dividends issued. What was their
net income for the year?
(TCO D) Is the purchase of equipment treated as an expense at the
time of purchase? Why or why not?
(TCO D) The left side of an account is:
(TCO D) A credit is not the normal balance for which account listed
below?
(TCO D) A debit is not the normal balance for which account listed
below?
(TCO D) Which pair of accounts follows the rules of debit and
credit in relation to increases and decreases in the same manner?
(TCO E) The time period assumption states that:
(TCO E) The matching principle matches:
(TCO E) Expenses sometimes make their contribution to revenue in a
different period than when the expense is paid. When wages are incurred in one
period and paid in the next period, this often leads to which account appearing
on the balance sheet at the end of the first period?
(TCO E) The following is selected information from J Corporation for
the fiscal year ending October 31, 2010.
Cash received from customers $75,000
Revenue earned 87,500
Cash paid for expenses 42,500
Expenses incurred 50,000
Revenue earned 87,500
Cash paid for expenses 42,500
Expenses incurred 50,000
Based on the accrual basis of
accounting, what is J Corporation’s net income for the year ending October 31,
2007?
(TCO E) The general term employed to indicate an expense that has
not been paid or revenue that has not been received and has not yet been
recognized in the accounts is:
(TCO A, B) Which of the following expressions is incorrect?
(TCO B) Hunter Company purchased merchandise inventory with an
invoice price of $6,000 and credit terms of 2/10, n/30. What is the net cost of
the goods if Hunter Company pays within the discount period?
(TCO A, B) Jake’s Market recorded the following events involving a
recent purchase of merchandise:
Received goods for $20,000, terms
2/10, n/30.
Returned $400 of the shipment for credit.
Paid $100 freight on the shipment.
Paid the invoice within the discount period.
Returned $400 of the shipment for credit.
Paid $100 freight on the shipment.
Paid the invoice within the discount period.
(TCO A) The Freight-in account:
As a result of these events, the
company’s merchandise inventory:
(TCO A) Barnes Company is taking a physical inventory on March 31,
the last day of its fiscal year. Which of the following must be included in
this inventory count?
(TCO A) Of the following companies, which one would not likely
employ the specific identification method for inventory costing?
(TCO A) Which of the following statements is correct with respect
to inventories?
(TCO A) In a period of declining prices, which of the following
inventory methods generally results in the lowest balance sheet figure for
inventory?
(TCO B) Which of the following is a true statement about inventory
systems?
(TCO B) Two categories of expenses in merchandising companies are:
(TCOs B & E) The Caltor Company gathered the following condensed data
for the year ended December 31, 2010:
Cost of goods
sold
$ 710,000
Net sales 1,279,000
Administrative expenses 239,000
Interest expense 68,000
Dividends paid 38,000
Selling expenses 45,000
Net sales 1,279,000
Administrative expenses 239,000
Interest expense 68,000
Dividends paid 38,000
Selling expenses 45,000
Instructions:
- Prepare a multiple-step income statement for the year ended December 31, 2010.
Compute the profit margin ratio and
gross profit rate. Caltor Company s assets at the beginning of the year were
$770,000 and were $830,000 at the end of the year. To qualify for full credit,
you must state the formula you are using, show your computations and explain
your findings.
(TCO C) Debt securities sold to investors that must be repaid at a
particular date some years in the future are called:
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