DeVry NY BUSINESS 115 - Midterm problems

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

expenses                     

dividends

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?

Corporation

Partnership

Proprietorship

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?

$500,000

$300,000

$5,000,000

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?

Cash

Prepaid

Accrual

Deferred

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            

Essay

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:

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.