GB518 - Unit 3 - Midterm Exam - A Graded
Asma1. Question : Prepaid expenses are:
Payments made for products and services that do not ever expire
Classified as liabilities on the balance sheet
Decreases in retained earnings
Assets that represent prepayments of future expenses
Question 2. Question : An example of an operating activity is:
Paying wages
Purchasing office equipment
Borrowing money from a bank
Selling stock
Paying off a loan
Question 3. Question : Fast-Forward had cash inflows from operations of $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:
$40,500 increase
$40,500 decrease
$134,500 decrease
$134,000 increase
Question 4. Question : Which of the following is the primary purpose of accounting?
To establish a business
To identify, record and communicate business transactions
To deceive stockholders
To keep from paying taxes
To establish credit for a company
Question 5. Question : An asset created by prepayment of an expense is:
Recorded as a debit to an unearned revenue account
Recorded as a debit to a prepaid expense account
Recorded as a credit to an unearned revenue account
Recorded as a credit to a prepaid expense account
Not recorded in the accounting records until the earnings process is complete
Question 6. Question : What would be the appropriate entry for the following transaction?
Bill Co. performed $5,200 in consulting services on account
Credit to Cash, Debit to Accounts Receivable
Debit to Revenue, Debit to Cash
Debit to Accounts Receivable, Credit to Cash
Debit to Revenue, Credit to Cash
Debit to Accounts Receivable, Credit to Revenue
Question 7. Question : Ethical behavior requires:
That an auditors' pay not depend on the figures in the client's reports
Auditors to invest in businesses they audit
Analysts to report information favorable to their companies
Managers to use accounting information to benefit themselves
That an auditor provides a favorable opinion
Question 8. Question : Technological advancement
Has replaced accounting
Has not changed the work that accountants do
Has freed accounting professionals to concentrate more on the analysis and interpretation of information
In accounting has replaced the need for decision makers
In accounting is only available to large corporations
Question 9. Question : Distributions of assets by a business to its stockholders are called:
Dividends
Expenses
Assets
Retained earnings
Net Income
Question 10. Question : The principle prescribing that financial statements reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue is the:
Going-concern principle
Business entity principle
Objectivity principle
Cost Principle
Monetary unit principle
Question 11. Question : If equity is $300,000 and liabilities are $192,000, then assets equal:
$108,000
$192,000
$300,000
$492,000
$792,000
Question 12. Question : To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the:
Objectivity principle
Realization principle
Business entity principle
Going-concern principle
Revenue recognition principle
Question 13. Question : Double-entry accounting is an accounting system:
That records each transaction twice
That records the effects of transactions and other events in at least two accounts with equal debits and credits
In which the impact of each transaction is recorded in two or more accounts but that could include two debits and no credits
That may only be used if T-accounts are used
That insures that errors never occur
Question 14. Question : Which of the following statements best describes the relationship of U.S. GAAP and IFRS?
They are identical
They are entirely different conceptual frameworks
They are similar but not identical
Neither has anything to do with accounting
They both relate only to publicly traded companies
Question 15. Question : Net Income:
Decreases equity
Represents the amount of assets owners put into a business
Equals assets minus liabilities
Is the excess of revenues over expenses
Represents the owners' claims against assets
Question 16. Question : Which of the following accounts would not be on the post closing trial balance?
Accounts Payable
Accounts Receivable
Common Stock
Dividends
Question 17. Question : A trial balance prepared after the closing entries have been journalized and posted is the:
Unadjusted trial balance
Post-closing trial balance
General ledger
Adjusted trial balance
Work sheet
Question 18. Question : A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of office supplies was purchased during the period?
$2,700
$2,900
$3,300
$3,500
$3,700
Question 19. Question : A company purchased a new truck at a cost of $42,000 on July 1, 2011. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. How much depreciation expense will be recorded for the truck for the year ended December 31, 2011?
$3,250
$3,500
$4,000
$6,500
$7,000
Question 20. Question : On June 30, 2011, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31, 2011 for Apricot would include:
A debit to an expense for $1,250
A debit to a prepaid expense for $1,250
A credit to an expense for $3,750
A debit to a prepaid expense for $3,750
Question 21. Question : An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n):
Accrued expense
Contra account
Accrued revenue
Intangible asset
Adjunct account
Question 22. Question : The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the:
Income Summary account
Closing account
Balance column account
Contra account
Question 23. Question : A company pays each of its two office employees each Friday at the rate of $100 per day each for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:
Debit Unpaid Salaries $600 and credit Salaries Payable $600
Debit Salaries Expense $400 and credit Salaries Payable $400
Debit Salaries Expense $600 and credit Salaries Payable $600
Debit Salaries Payable $400 and credit Salaries Expense $400
Question 24. Question : Based on the following information, what would be the beginning balance in the Retained Earnings Account, assuming all accounts have a normal balance?
Cash $ 6,754 Dividends $ 2,000
Accounts receivable $ 13,733 Consulting fees earned $ 13,718
Office supplies $ 2,625 Rent expense $ 3,673
Land $ 37,153 Salaries expense $ 6,642
Office equipment $ 14,535 Telephone expense $ 560
Accounts payable $ 6,463 Miscellaneous expense $ 280
Common stock $ 54,490 Retained Earnings ?
$0
$13,718
$13,155
$13,284
Question 25. Question : The Income Summary account is used:
To adjust and update asset and liability accounts
To close the revenue and expense accounts
To determine the appropriate dividend amount
In some situations to replace the income statement
To replace the retained earnings account in some businesses
Question 26. Question : The Retained Earnings account has a credit balance of $17,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800 and dividends are $9,000, what is the ending balance in the Retained Earnings account after all closing entries are made?
$8,000
$15,400
$23,400
$17,000
$32,400
Question 27. Question : On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:
Debit Prepaid Insurance, $1,800; credit Cash, $1,800
Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440
Debit Prepaid Insurance, $360; credit Insurance Expense, $360
Debit Insurance Expense, $360; credit Prepaid Insurance, $360
Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440
Question 28. Question : A balance sheet that places the assets above the liabilities and equity is called a(n):
Report form balance sheet
Account form balance sheet
Classified balance sheet
Unadjusted balance sheet
Question 29. Question : If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on the following January 5 would include:
A debit to Cash and a credit to Salaries Payable
A debit to Cash and a credit to Prepaid Salaries
A debit to Salaries Payable and a credit to Cash
A debit to Salaries Payable and a credit to Salaries Expense
No entry would be necessary on January 5
Question 30. Question : Unearned revenue is reported on the financial statements as:
A revenue on the balance sheet
A liability on the balance sheet
An unearned revenue on the income statement
An asset on the balance sheet
An operating activity on the statement of cash flows
Question 31. Question : Our company has three times as many assets as it does liabilities. If total liabilities are $55,000, what is the amount of owners' equity?
$55,000
$110,000
$165,000
$220,000
Cannot be determined from the given information
Question 32. Question : Multiple-step income statements:
Are required by the FASB
Contain more detail than a simple listing of revenues and expenses
Are required for the perpetual inventory system
List cost of goods sold as an operating expense
Can only be used in perpetual inventory systems
Question 33. Question : The full disclosure principle:
Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made and its effect on net income
Requires that companies use the same accounting method for inventory valuation period after period
Is not subject to the materiality principle
Is only applied to retailers
Is also called the consistency principle
Question 34. Question : The inventory valuation method that tends to smooth out erratic changes in costs is:
FIFO
Weighted average
LIFO
Specific identification
WIFO
Question 35. Question : Which of the following procedures would weaken the control over cash receipts that arrive through the mail?
After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the sender's name, the amount and an explanation of why the money is sent
The bank reconciliation is prepared by a person who does not handle cash or record cash receipts
For safety, only one person should open the mail and that person should immediately deposit the cash received in the bank
The cashier should not also be the record keeper who records the amounts received in the accounting records
All of the above are good internal control procedures over cash receipts that arrive through the mail
Question 36. Question : When two clerks share the same cash register, which internal control principle is violated?
Establish responsibilities
Maintain adequate records
Insure assets
Bond key employees
Question 37. Question : The impact of technology on internal controls includes which of the following:
Reduced processing errors
Elimination of the need for regular audits
Elimination of the need to bond employees
More efficient separation of duties
Elimination of fraud
Question 38. Question : Given the following information, determine the cost of goods sold at December 31 using the LIFO periodic inventory method.
December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit
December 15: 20 units were purchased at $10.15 per unit
December 22: 18 units were sold at $35 per unit
$284.70
$332.10
$281.25
$290.70
$297.00
Question 39. Question : Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million and average inventory of $1,965 million. Its days' sales in inventory equals:
0.21
4.51
4.79
76.1 days
80.9 days
Question 40. Question : A remittance advice is:
An explanation for a payment by check
A bank statement
A voucher
An EFT
A cancelled check
Question 41. Question : J.C. Penny had net sales of $28,496 million, its cost of goods sold was $19,092 million and its net income was $997 million. Its gross margin ratio equals:
3.5%
5.2%
33%
67%
149.3%
Question 42. Question : Given the following information:
Petty cash balance $ 450.00 Courier receipt $ 82.50
Postage receipt $ 48.00 Office Supplies receipt $ 56.22
Business Meal receipt $ 102.34 Cash on hand at the end of the month $ 76.21
What is the amount of cash over and short?
debit $84.73
credit $84.73
debit $160.94
credit $160.94
no cash over or short would be recorded
Question 43. Question : Merchandise inventory:
Is a long-term asset
Is a current asset
Includes supplies
Is classified with investments on the balance sheet
Must be sold within one month
Question 44. Question : Cost of goods sold:
Is another term for merchandise sales
Is the term used for the cost of buying and preparing merchandise for sale
Is another term for revenue
Is also called gross margin
Is a term only used by service firms
Question 45. Question : A company has sales of $1,500,000, sales discounts of $102,000, sales returns and allowances of $123,000, shipping charges of $15,000, sales commissions of $34,000,net income totaled $263,500, and cost of goods sold of $420,000. What is the net sales amount for the period?
$1,500,000
$1,275,000
$1,725,000
$1,521,000
$1,479,000
Question 46. Question : A company purchased $1,800 of merchandise on December 5. On December 7, it returned $200 worth of merchandise. On December 8, it paid the balance in full, taking a 2% discount. The amount of the cash paid on December 8 equals:
$200
$1,564
$1,568
$1,600
$1,800
Question 47. Question : The conservatism principle:
Requires that when there are more than one equally likely estimate of amounts expected to be received or paid in the future, then the less optimistic amount should be used
Requires that a company use the same accounting methods period after period
Requires that revenues and expenses be reported in the period in which they are earned or incurred
Requires that all items of a material nature be included in financial statements
Requires that all inventory items be reported at full cost
Question 48. Question : Which of the following is the most serious limitation of internal controls?
Computer error
Human fraud or human error
Cost-benefit principle
Cybercrime
Management fraud
Question 49. Question : Acme-Jones Corporation uses a weighted-average perpetual inventory system.
August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $14 per unit.
August 29, 12 units were sold.
What was the amount of the cost of goods sold for this sale?
$148.00
$150.50
$158.40
$210.00
$330.00
Question 50. Question : In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 4239 for November's rent was correctly written and drawn for $7,390, but was erroneously entered in the accounting records as $3,790. When preparing the November bank statement, the company should:
Deduct $3,600 from the book balance of cash
Add $3,600 to the bank statement balance
Add $7,390 to the book balance of cash
Deduct $3,600 from the bank statement balance
Add $3,600 to the book balance of cash
12 years ago
Purchase the answer to view it
gb518_-_unit_3_-_midterm_exam.docx
