Devry Cincinnati ACCT 212 Midterm

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Devry Cincinnati ACCT 212  Midterm


Multiple choice

When preparing a bank reconciliation, which of the following items should be added to the book balance?
EFT receipts
deposits in transit
collection items
both EFT receipts and collection items

Which of the following must be added to beginning Retained Earnings to compute ending Retained Earnings?
net income
all of these answers are correct

The use of the FIFO method increases taxable income:
when prices are constant
when prices are declining
when prices are increasing
under all circumstances

A company mistakenly destroys a unit of inventory that originally cost $12. The company included the cost of the destroyed unit in cost of goods sold on the income statement, rather than recognizing it as a loss. This action is justifiable based on:
the revenue concept
accounting conservatism
the materiality concept
none of the above answers. All of them are incorrect; according to GAAP, a separate loss must be recognized

When applying the lower-of-cost-or-market rule, market value generally refers to:
fifo cost using the periodic method
lifo cost using the periodic method
current sales price of the inventory
current replacement cost

A company performed services for a customer on account. This transaction increased assets and _______.
decreased equity
increased liabilities
increased expenses
increased revenues

The two methods of estimating uncollectible receivables are the:
aging-of-receivables method and direct write-off method
percent of sales method and the aging-of-receivables method
allowance method and the direct write-off method
percent of sales method and the direct write-off method

The use of the allowance method of accounting for bad debts is preferred over the direct write-off method because of the:
matching principle
historical cost principle
revenue recognition principle
full disclosure principle

For which form of business ownership are the owners of a business legally distinct from the business?
all of the above

A written promise to pay a specified amount of money at a particular future date is called a(n) :
maturity note
promissory note
account receivable
unearned revenue

If the interest is $5,000 on a 6%, 60 day note, what is the principal?
not enough information to calculate

Which characteristic will NOT be found in an effective system of internal control?
competent, reliable, and ethical personnel
a combination of duties
a separation of duties
documents and records

An accountant recognizes the impact of a business event as it occurs and accounts for it appropriately under which basis of accounting?

The stable-monetary-unit concept of accounting:
ensures that accounting records and statements are based on the most reliable data available
holds that the entity will remain in operation for the foreseeable future
maintains that each organization or section of an organization stands apart from other organizations and individuals
enables accountants to ignore the effect of inflation in the accounting records

In a bank reconciliation, a NSF check is
added to the bank balance
added to the book balance
deducted from the book balance
deducted from the bank balance 









1.) Given the following data, calculate the gross profit using the average-cost method, if the selling price was $20 per unit.
Date,                      Item,                                      Unit
1/1,              Beginning inventory,                40 units at $12 per unit
3/5,              Purchase of inventory,             18 units at $14 per unit
5/30,            Purchase of inventory,             24 units at $18 per unit
12/31,          Ending inventory,                    20 unites


2.) Eckle Ltd. has the following unadjusted Trial Balance as of March 31, 2009:

Account Debit Credit
Cash $600 
Account Receivable $1,800 
Inventory $3,000 
Store Supplies $1,900 
Prepaid Rent $1,500 
Land $23,300 
Building $50,000 
Accumulated Depreciation—Building  $7,500
Store Equipment $27,000 
Accumulated Depreciation--Store Equipment  $15,625
Accounts Payable  $6,000
Notes Payable  $2,500
Salaries Payable  
Unearned Revenue  $8,000
Common Stock  $31,655
Retained Earnings  $2,520
Retained Earnings  $35,000
Rent Expense  
Store Supplies Expense  
Salaries Expense  
Depreciation Expense--Building  
Depreciation Expense--Store Equipment  
Totals $108,000 $108,000

The following data is available from Shantrice Meadows, Controller for Eckle Ltd.:
a. Store Supplies used for the period were $1,225.
b. The Building has been depreciated for three years; this Fiscal year is year 4.
c. The Store Equipment has been depreciated for 5 years; this Fiscal year is year 6.
d. Prepaid Rent is for six months purchased on January 1, 2009.
e. Forty percent of the Unearned Revenue has been earned.
f. There are 8 employees, each receiving a salary of $2,000 per week for a five-day (Monday through Friday) week. FYE ends on a Tuesday.

Prepare the appropriate Adjusting Journal entries.
Make sure your answer is in Journal Entry Form.  List the Account Name and Debit or Credit.  Remember all Journal Entries should balance.


3.) John Smith started a consulting business and completed the following transactions during January 2007.  Journalize the transactions.  Explanations are not required.

1.  John incorporated the business, Consulting Inc., and invested $10,000 for common stock.
2.  Paid $2,000 monthly rent for office space.
3.  Purchased $3,000 of office equipment, paying cash.
4.  Purchased $500 of office supplies on account.
5.  Recorded $1,000 of revenue, receiving cash.
6.  Recorded $1,500 of revenue on account and mailed invoices to the customers.
7.  Paid utilities expense of $300.
8.  Collected cash from a customer on account, $500.

Make sure your answer is in Journal Entry Form.  List the Account Name and Debit or Credit.  Remember all Journal Entries should balance.

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