Keller ACCT 504 Midterms- Questions

Grading Summary
These are the automatically computed
results of your exam. Grades for essay
questions, and comments from your
instructor, are in the "Details" section
below.
Date Taken: 2015
Time Spent:
Points Received:
Question Type: # Of Questions: # Correct:
Multiple Choice 10 10
Essay 4 N/A
Grade Details - All Questions
1. Question : (TCOs A, B, and C) Which type of corporate information is available to
investors?
Student Answer: Sales budget
Operating expense budget
Cash provided by investing activities
Five-year strategic plan
Instructor Explanation: Chapter 1
Points Received: 3 of 3
Comments:
2. Question : (TCO C) Collecting cash from customers would be an example of which
type of activity?
Student Answer: Operating
Investing
Financing
Non-cash financing activity
Instructor Explanation: Chapter 1
Points Received: 3 of 3
Comments:
3. Question : (TCO A) Resources owned by a business are referred to as
Student Answer: revenues.
dividends.
liabilities.
assets.
Instructor Explanation: Chapter 1
Points Received: 3 of 3
Comments:
4. Question : (TCO A) In a classified balance sheet, assets are usually classified as
Student Answer: current assets, long-term assets, property, plant, and equipment, and
tangible assets.
current assets, long-term investments, property, plant, and equipment,
and intangible assets.
current assets, long-term investments, and tangible assets.
current assets, long-term investments, property, plant, and equipment,
and common stocks.
Instructor Explanation: Chapter 3
Points Received: 3 of 3
Comments:
5. Question : (TCO B) For 2012, LBJ Corporation reported net income of $25,000; net
sales $250,000; and weighted average shares outstanding of 5,000. There
were no preferred stock dividends. What was the 2012 earnings per share?
Student Answer: $50.00
$5.00
$2.50
$25.00
Instructor Explanation: ($25,000 minus 0) divided by 5,000 shares = $5.00, Chapter 11
Points Received: 3 of 3
Comments:
6. Question : (TCO D) Which of the following accounts has a normal balance of a credit?
Student Answer: Dividends account
Expense account
Accounts Receivable account
Retained Earnings account
Instructor Explanation: Chapter 2
Points Received: 3 of 3
Comments:
7. Question : (TCO E) The accrual accounting term used to indicate recording an
expense before paying cash for the item is _____
Student Answer: depreciation.
prepayment.
deferral.
accrual.
Instructor Explanation: Chapter 3
Points Received: 3 of 3
Comments:
8. Question : (TCOs A and B) A periodic inventory system would most likely be used by
a(n) _____
Student Answer: automobile dealership.
jewelry store.
furniture store.
local neighborhood restaurant.
Instructor Explanation: Chapter 6
Points Received: 3 of 3
Comments:
9. Question : (TCOs A and B) LBJ Company recorded the following events involving a
recent purchase of merchandise.
- Received goods for $75,000, terms 2/10, n/30
- Returned $2,500 of the shipment for credit due to damaged goods
- Paid $1,200 for freight in
- Paid the invoice within the discount period
As a result of these events, the company's merchandise inventory
Student Answer: increased by $72,250.
increased by $72,176.
increased by $75,876.
increased by $73,700.
Instructor Explanation: ($75,000 - $2,500) x 98% = $71,050 + $1,200 for freight = $72,250. Chapter 6
Points Received: 3 of 3
Comments:
10. Question : (TCO A) In a period of declining prices, which of the following inventory
methods generally results in the lowest gross profit figure?
Student Answer: FIFO method
LIFO method
Average cost method
None of the above
Instructor Explanation: Chapter 6
Points Received: 3 of 3
Comments:
11. Question : (TCO D) Describe the process of preparing a trial balance. What is the
purpose of preparing a trial balance? If a trial balance does not balance,
identify what might be the reasons why it does not balance. If the trial
balance does balance, does that ensure that the ledger accounts are
correct? Explain.
Student Answer:
Instructor Explanation: To prepare a trial balance, create a column for the account name along with a
column for the debits and a column for the credits. Then list all accounts with
their balances starting with assets, then liabilities, and finally stockholders’
equity accounts. The purpose of the trial balance is to verify that the sum of
the debits equals the sum of the credits. A trial balance may not balance due
to a mathematical error or posting two debits instead of a debit and a credit, as
one example of an error. Even if a trial balance balances, this does not ensure
that the ledger accounts are correct because there could be omissions from
the trial balance, offsetting errors, or the incorrect accounts could be charged.
Chapter 2 and the Week 2 Lecture
Points Received:
Comments:
12. Question : (TCOs B and E) The adjusted trial balance of Gertz Company included the
following selected accounts.
Debit Credit
Sales $575,000
Sales returns and allowances $ 50,000
Sales discounts 9,500
Cost of goods sold 347,000
Freight-out 2,000
Advertising expense 15,000
Interest expense 19,000
Store salaries expense 74,000
Utilities expense 18,000
Depreciation expense 3,500
Interest revenue 25,000
Instructions:
· Use the above information to prepare a multiple-step income
statement for the year ended December 31, 2010.
· Calculate the profit margin ratio and gross profit rate. To qualify for full
credit, you must state the formula you are using, show your computations,
and explain your findings.
Student Answer:
Instructor
Explanation:
1: GERTZ COMPANY
Income Statement
For the Year Ended December 31, 2010
Sales $575,0000
Less: Sales returns and allowances $ 50,000
Sales discounts 9,500 59,500
Net sales 515,500
Cost of goods sold 347,000
Gross profit 168,500
Operating expenses
Store salaries expense 74,000
Utilities expense 18,000
Advertising expense 15,000
Depreciation expense 3,500
Freight-out 2,000
Total operating expenses 112,500
Income from operations 56,000
Other revenues and gains
Interest revenue 25,000
Other expenses and losses
Interest expense 19,000 6,000
Net income $ 62,000
Profit margin ratio = $62,000 ÷ $515,500 = 12.0%
Gross profit rate = $168,500 ÷ $515,500 = 32.7%
Chapter 3 and Week 3 Lecture
Points Received:
Comments:
13. Question : (TCOs D and E) Please prepare the following journal entries. Indicate
which account should be debited and which account should be credited,
along with the dollar amount of the debit and credit.
Investors invest $50,000 in exchange for 1,000 shares of common stock.
Company purchased equipment for $10,000 on credit.
Company received $5,000 for services performed.
Company made payment on account for $2,000.
Company received $7,000 for services not yet performed.
Student Answer:
Instructor Explanation: Debit Cash for $50,000 and credit Common Stock for $50,000.
Debit Equipment for $10,000 and credit Accounts Payable for $10,000.
Debit Cash for $5,000 and credit Service Revenue for $5,000.
Debit Accounts Payable for $2,000 and credit Cash for $2,000.
Debit Cash for $7,000 and credit Unearned Service Revenue for $7,000.
See Chapters 2 and 3.
Points Received:
Comments:
14. Question : (TCO D) Your friend Sally has hired you to evaluate the following internal
control procedures.
Explain to your friend whether each of the numbered items below is an
internal control strength or weakness. You must also state which principle
relates to each of the internal controls.
For the weaknesses, you also need to state a recommendation for
improvement.
Invoices are pre-numbered.
The controller approves of the purchases and makes the payment since he
or she is familiar with the purchases.
The office manager is in charge of the petty cash fund.
Blank checks are stored in the safe.
At the end of the day, the total receipts are counted by the cashier on duty
and reconciled to the cash register total.
Student Answer:
Instructor Explanation: Strength; adequate records
Weakness; separation of duties; Recommendation: controller can make
payment but should not also make the purchase
Strength; limited access
Strength; limited access
Weakness; comparisons and compliance monitoring; Recommend: supervisor
counts the cash receipts daily
See Chapter 4.
Points Received:
Comments: