it is due in 2hrs 30 mins ACC504 MDTERM

Question 1.1. (TCO A) Resources owned by a business are referred to as (Points : 3)

profits.

dividends.

assets.

equity.

Question 2.2. (TCO B) For 2014, EAB Corporation reported net income of $78,750; net sales of $1,378,125; and weighted average shares outstanding of 10,500. There were no preferred dividends. What was the 2014 earnings per share? (Points : 3)

$17.50

$7.50

$75.00

$131.25

Question 3.3. (TCO C) Selling a long-term asset is an example of a(n) (Points : 3)

operating activity.

investing activity.

financing activity.

noncash investing and financing activity.

Question 4.4. (TCO D) Dividends declared are reported on which of the following statements? (Points : 3)

Income Statement

Statement of Retained Earnings

Balance Sheet

Statement of Financial Position

Question 5.5. (TCO E) Which of the following describes the normal balance and classification of the Accumulated Depreciation account? (Points : 3)

Debit, asset

Credit, liability

Credit, asset

Debit, expense

Question 6.6. (TCO F) The accrual accounting term used to indicate recording an expense before paying cash for the item is (Points : 3)

deferral.

accrual.

depreciation.

prepayment.

Question 7.7. (TCO A) LBJ Company recorded the following events involving a recent purchase of merchandise.

- Received goods for $200,000, terms 2/10, n/30.

- Returned $5,000 of the shipment for a credit due to damaged goods.

- Paid $2,500 for freight in.

- Paid the invoice within the discount period.

As a result of these events, the company's merchandise inventory (Points : 3)

increased by $193,600.

increased by $195,950.

increased by $197,500.

increased by $193,500.

Question 8.8. (TCO B) In periods of rising prices, which of the following inventory methods results in the highest gross profit figure? (Points : 3)

FIFO

LIFO

Average cost method

Cannot be determined based on the information given

Question 9.9. (TCO A) On a classified balance sheet, prepaid expenses are classified as (Points : 3)

current liabilities.

long-term liabilities.

current assets.

Prepaid expenses do not belong on the Balance Sheet.

Question 10.10. (TCO E) Which of the following is an internal control procedure? (Points : 3)

Control environment

Comparisons and compliance monitoring

Promote operational efficiency

Encourage employees to follow company policies

Question 11. 11. (TCOs A and E) Your friend, Ellen, 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 internal control procedure relates to each of the internal controls.

For the weaknesses, you also need to state a recommendation for improvement.

(1) The cashier counts the total receipts and reconciles the receipts with the cash register total.

(2) Electronic documents are password-protected.

(3) The accountant is completely independent of the sales department.

(4) Invoices are not numbered.

(5) Large purchase orders must be approved by a manager. (Points : 30)

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Question 12. 12. (TCOs E and F) 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.

(1) Investors invest $70,000 in exchange for 1,000 shares of common stock.

(2) Company paid a utility bill for $2,000.

(3) The unadjusted balance of the Supplies account is $5,200 and the total cost of supplies on hand is $4,000.

(4) Company received $5,000 for services performed.

(5) The company needs to record $15,000 for depreciation. (Points : 30)

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Question 13. 13. (TCOs B and D) The following items are taken from the financial statements of Ashe Company for 2012:

Equipment

$100,000

Accounts Receivable

12,000

Accounts Payable

9,000

Cost of Goods Sold

72,000

Utilities Expense

11,000

Depreciation Expense

17,000

Insurance Expense

9,000

Common Stock

200,000

Dividends

12,000

Rent Expense

3,000

Note Payable (due 2014)

40,000

Advertising Expense

14,000

Prepaid Insurance

17,000

Retained Earnings (beginning)

44,000

Accumulated Depreciation

50,000

Salaries Expense

60,000

Salaries Payable

3,500

Net sales

205,000

Supplies

4,000

Supplies Expense

5,000

Instructions

(a) Calculate the net income. (18 points)

(b) Calculate the balance of Retained Earnings that would appear on a balance sheet at December 31, 2012. (7 points)

(c) Calculate the gross profit percentage. (5 points) (Points : 30)

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Question 14. 14. (TCO D) The following items are taken from the financial statements of BGS Company for 2012:

Cash

$500,000

Accounts Receivable

200,000

Supplies

70,000

Accounts Payable

147,300

Unearned Service Revenue

18,000

Equipment, net of accumulated depreciation

212,000

Common Stock

500,000

Retained Earnings 12/31/2011

78,300

Long-term debt

142,400

Service revenue

240,000

Cost of Goods Sold

72,000

Rent expense

36,000

Supplies expense

12,000

Insurance expense

24,000

Instructions

(a) Please create a classified balance sheet in good form for the year ended 2012. (25 points)

(b) Please calculate the current ratio. (5 points)

(Points : 30)

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