ACCT 504 Acct Fin Managerial Use Anlys Week4 Mid Term Perfect Answer Set 3

ACCT 504 Acct Fin Managerial Use_Anlys_Week4_Mid Term Perfect Answer Set 3

(TCO A) The factor which determines whether or not goods should be included in a physical count of inventory is (Points: 3)
Physical possession.
Legal title.
Management’s judgment.
Whether or not the purchase price has been paid.

2. (TCO D) Which pair of accounts follows the rules of debit and credit in relation to increases and decreases in the same manner? (Points: 3)
Dividends payable and rent expense
Repair expense and notes payable
Prepaid insurance and advertising expense
Service revenues and equipment

3. (TCO A) When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory? (Points: 3)
To check the accuracy of the perpetual inventory records
To determine cost of goods sold for the accounting period
To compute inventory ratios
All are a purpose of taking a physical inventory when a perpetual inventory system is used.

4. (TCO A) A problem with the specific identification method is that (Points: 3)
Inventories can be reported at actual costs.
Management can manipulate income.
Matching is not achieved.
the lower of cost or market basis cannot be applied

5. (TCO A) Which of the following statements is correct with respect to inventories? (Points: 3)
The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold.
It is generally good business management to sell the most recently acquired goods first.
Under FIFO, the ending inventory is based on the latest units purchased.
FIFO seldom coincides with the actual physical flow of inventory.

6. (TCO A) — In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure? (Points: 3)
Average Cost Method
LIFO method
FIFO method
Need more information to answer

7. (TCO B) The figure for which of the following items is determined at a different time under the perpetual inventory method than under the periodic method? (Points: 3)
Sales
Cost of Goods Sold
Purchases
Accounts Receivable

8. (TCO E) The time period assumption states that (Points: 3)
A transaction can only affect one period of time.
Estimates should not be made if a transaction affects more than one time period.
Adjustments to the enterprise’s accounts can only be made in the time period when the business terminates its operations.
The economic life of a business can be divided into artificial time periods.

9. (TCO E) In a service-type business, revenue is considered earned (Points: 3)
At the end of the month.
At the end of the year.
When the service is performed.
When cash is received.

10. (TCO E) On April 1, 2007, M Corporation paid $48,000 cash for equipment that will be used in business operations. The equipment will be used for four years
And will have no residual value. M records depreciation expense of $9,000 for the calendar year ending December 31, 2007. Which accounting principle has been violated? (Points: 3)
Revenue recognition principle
No principle has been violated because M has correctly matched the expense for using the equipment to the period during which it generated revenue.
Matching principle because the cash was paid in 2007 and should be expensed in 2007.
Cost principle

11. The following is selected information from J Corporation for the fiscal year ending October 31, 2007.

Cash received from customers $75,000
Revenue earned 87,500
Cash paid for expenses 42,500

Expenses incurred 50,000

(TCO E) Based on the accrual basis of accounting, what is J Corporation’s net income for the year ending October 31, 2007?
(Points: 3)
$28,500
$33,500
$20,500
$37,500

12. (TCO E) The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is (Points: 3)
Contra asset.
Prepayment.
Asset.
Accrual.

13. (TCO B) Two categories of expenses in merchandising companies are (Points: 3)
Cost of goods sold and financing expenses.
Operating expenses and financing expenses.
Cost of goods sold and operating expenses.
Sales and cost of goods sold.

14. (TCO A,B) Detailed records of movements in merchandise (each purchase and sale) are not maintained in the inventory account in a (Points: 3)
Perpetual inventory system.
Periodic inventory system.
Double entry accounting system.
Business that sells expensive merchandise.

ACCT 504 Week 8 Final Exam All Correct Set 2 Answers

ACCT 504 Week 8 Final Exam All Correct Set 2 Answers

1. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?
Reduced legal liability for investors
Harder to transfer ownership
Lower taxes
most common form of organization

2. Dividends _____.
Represent an expense and are an operating activity
represent an obligation and are an operating activity
represent a distribution of earnings and are a financing activity
represent an asset and are an investing activity

3. Below is a partial list of account balances for LBJ Company:
Cash $15,000
Prepaid insurance 5,000
Accounts receivable 2,500
Accounts payable 3,000
Notes payable 6,000
Common stock 10,000
Dividends 500
Revenues 15,000
Expenses 13,000

What did LBJ Company show as total debits?
$34,000
$36,000
$70,000
$31,000

4. Under the accrual basis of accounting, revenues are recorded and reported _____.
When companies receive payments for jobs performed or products provided
when companies have provided products or performed services
when companies receive payments prior to providing products or performing services
when companies receive payments after providing products or performing services

5. In a period of increasing prices, which inventory cost flow assumption will result in the highest amount of net income?
LIFO
The average cost method
FIFO
Income tax expense for the period will be the same under all assumptions.

6. Equipment was purchased for $55,000 on January 1, 2011. Freight charges of $2,200 were incurred and there was a cost of $1,800 for installation. It is estimated the equipment will have a $5,500 salvage value at the end of its 5-year useful life. Depreciation expense for 2011 using the straight-line method will be _____.
$10,340
$10,700
$10,260
$9,900

7. Payne Corporation issues 100 twenty-year, 6%, $1,000 bonds dated July 1, 2010, at 94. The journal entry to record the issuance will show a _____.
Debit to Cash of $100,000
credit to Bonds Payable of $94,000
credit to Premium on Bonds Payable of $4,000
debit to Discount on Bonds Payable of $6,000

8. Accounts receivable arising from sales to customers amounted to $80,000 and $120,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $2,000,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____.
$2,040,000
$2,000,000
$1,200,000
$1,960,000

9. If you are making comparisons within a company to detect changes in financial relationships and significant trends, you are performing what type of analysis?
Industry averages analysis
Intercompany analysis
Common-size analysis
Intracompany analysis

10. The formula for performing horizontal analysis is _____.
(Current Year Amount minus Base Year Amount) divided by Current Year Amount
Base Year Amount divided by Current Year Amount
Current Year Amount minus Base Year Amount
(Current Year Amount minus Base Year Amount) divided by Base Year Amount
11. Horizontal analysis of comparative financial statements includes the _____.
development of common-size statements
calculation of liquidity ratios
calculation of dollar amount changes and percentage changes from the previous year to the current year
evaluation of financial statement data that expresses each item in a financial statement as a percentage of a base amount

12. A common measure of solvency is the _____.
Asset turnover
current cash debt coverage ratio
cash debt coverage ratio
current ratio
13. Stockholders would be most interested in which of the following ratios?
Days in inventory
Free cash flow
Current ratio
Average collection period

14. To calculate the market value of a bond, we need to _____.
multiply the bond price times the interest rate
calculate the present value of the principal only
calculate the present value of the interest only
calculate the present value of both the principal and interest payments

15. (TCO A) Use the following partial financial statement information below to calculate the liquidity and profitability ratios. This information can be used to correctly solve each of the ratios below.
Average common shares $10,000 Current liabilities $100,000 Capital expenditures 20,000 Net income 21,000
Cash provided by operations 28,000 Net sales 150,000
Common stock dividends paid 5,000 Total liabilities 105,000 Current assets 150,000 Total assets 175,000 Instructions: Compute the following.
a) Current ratio
b) Working capital
c) Earnings per share
d) Debt-to-total-assets ratio
e) Free cash flow
Must show the formula you are using, show your computations, and explain the meaning of each of your ratio results.

16. Please indicate which section of the statement of cash flows should contain each of the following items and whether each item would result in an inflow or outflow of cash. The sections are Operating, Investing, and Financing.
a) Payment of dividends
b) Bought assets needed to operate the business
c) Depreciation of equipment
d) Increase in inventory
e) Sale of building

17. (TCOs D, E) Please prepare the following journal entries. Indicate which account should be debited with the abbreviation DR in front of the account name and which account should be credited with the abbreviation CR in front of the account name along with the dollar amount of the debit and credit.
a) Investors invested $600,000 in exchange for 30,000 shares of common stock.
b) Company paid rent of $3,000
c) Company billed $5,000 for services performed
d) Company purchased supplies of $3,000
e) Company received $20,000 for services not yet performed
18) (TCO D) Your friend Dean has hired you to evaluate the following internal control procedures.

a) 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.
b) For the weaknesses, you also need to state a recommendation for improvement.
1. Bonding of the cashiers is not required because all of the cashiers have significant experience.
2. The treasurer is the only one allowed to sign checks.
3. All employees may operate cash registers.
4. Blank checks are stored in the safe.
5. Supervisors count cash receipts daily.

19) The following items are taken from the financial statements of Grove Company for 2010.
Accounts payable $ 18,500 Accounts receivable 4,000
Accumulated depreciation 4,800 Bonds payable 18,000
Cash 24,000 Common stock 25,000
Cost of goods sold 13,000 Depreciation expense 4,800
Dividends 5,300 Equipment 48,000
Interest expense 2,500 Patents 7,500
Retained earnings, January 1 16,000 Salaries expense 5,200 Sales revenue 36,500 Supplies 4,500
Instructions: Prepare an income statement and a retained earnings statement for Grove Company.

ACCT 504 Acct Fin Managerial Use Analysis Week4 Mid Term Set 2 Perfect Answers

ACCT 504 Acct Fin Managerial Use Analysis Week4 Mid Term Set 2 Perfect Answers

 

Question 1. (TCOs A, B, and C) Which of the following statements concerning users of accounting information is incorrect? (Points: 3)

Management is considered an internal user.

Present and prospective creditors are considered external users.

Regulatory authorities, such as the SEC, are considered internal users.

Taxing authorities are considered external users.

 

Question 2. (TCOC) Issuing shares of stock in exchange for cash is an example of a(n) (Points : 3)

Delivering activity.

Investing activity.

Financing activity.

Operating activity.

 

Question 3. (TCO C) Buying and selling products are examples of (Points : 3)

Operating activities.

Investing activities.

Financing activities.

Delivering activities.

 

Question 4. (TCO A) The best definition of assets is the (Points : 3)

Cash owned by the company.

Collections of resources belonging to the company and the claims on these resources.

Owners’ investment in the business.

Resources belonging to a company that offer future benefits to the company.

 

Question 5. (TCO C) Edwards Company recorded the following cash transactions for the year.

 

Paid $45,000 for salaries

Paid $20,000 to purchase office equipment

Paid $5,000 for utilities

Paid $2,000 in dividends

Collected $75,000 from customers

 

What was Edwards’ net cash provided by operating activities? (Points : 3)

$25,000

$5,000

$30,000

$23,000

 

Question 6. (TCO A) In a classified balance sheet, assets are usually classified as (Points : 3)

Current assets; long-term assets; property, plant, and equipment; and tangible assets.

Current assets; long-term investments; property, plant, and equipment; and common stocks.

Current assets; long-term investments; and tangible assets.

Current assets; long-term investments; property, plant, and equipment; and intangible assets.

 

Question 7. (TCO A) Which of the following should not be classified as a current asset? (Points : 3)

Supplies

Short-term marketable securities

Prepaid insurance that will expire next year.

A note receivable that will mature after 21 months

 

Question 8. (TCO A) The following are selected account balances on December 31, 2010.

 

-Land (location of the corporation’s office building): $50,000

-Land (held for future use): 75,000

-Corporate Office Building: 300,000

-Inventory: 100,000

-Equipment: 225,000

-Office Furniture: 50,000

-Accumulated Depreciation: 150,000

 

What is the total NET amount of property, plant, and equipment that will appear on the balance sheet? (Points : 3)

$650,000

$550,000

$475,000

$800,000

 

Question 9. (TCO B) For 2010, Moss land Corporation reported net income of $28,000; net sales $400,000; and average share outstanding 6,000. There were no preferred stock dividends. What were the 2010 earnings per share? (Points : 3)

$4.67

$0.25

$66.67

$14.86

 

Question 10. (TCO B) Morten Corporation had beginning retained earnings of $764,000 and ending retained earnings of $833,000. During the year they issued common stock totalling $47,000. There were no dividends issued. What was their net income for the year? (Points : 3)

$69,000

$22,000

$116,000

$91,000

 

Question 11. (TCO D) Is the purchase of equipment treated as an expense at the time of purchase? Why, or why not? (Points : 3)

No, GAAP requires that 10% of the cost be expensed each year. This minimizes attempts to mislead financial statement users.

Yes, the matching principle requires that the cost be expensed in the period of purchase.

No, the cost needs to be allocated to the years of expected use.

Yes, the actual life of the asset is not known, thus there is no acceptable way to allocate the cost.

 

Question 12. (TCO D) An account is a part of the financial information system and is described by all except which one of the following? (Points : 3)

An account has a debit and credit side.

An account has to be in paper form.

An account has a zero or nonzero balance.

An account has a title.

 

Question 13. (TCO D) The classification and normal balance of the dividend account is (Points : 3)

Revenue, with a credit balance.

An expense, with a debit balance.

A liability, with a credit balance.

Under stockholders’ equity, with a debit balance.

 

Question 14. (TCO D) A debit is the normal balance for which account listed below? (Points : 3)

Furniture

Accounts payable

Rent revenue

Capital stock issued

 

Question 15. (TCO D) Which of the following accounts follows the rules of debit and credit in relation to increases and decreases in the opposite manner? (Points : 3)

Prepaid insurance and dividends

Dividends and medical fees earned

Interest payable and common stock

Advertising expense and land

 

Question 16. (TCO E) One of the accounting concepts upon which adjustments for prepayments and accruals are based is (Points : 3)

Matching.

Cost.

Monetary unit.

Economic entity.

 

Question 17. (TCO E) In a service-type business, revenue is considered earned (Points : 3)

At the end of the month.

At the end of the year.

When the service is performed.

When cash is received.

 

Question 18. (TCO E) Expenses sometimes make their contribution to revenue in a different period than when the expense is paid. When wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the first period? (Points : 3)

Due from employees

Due to employer

Wages payable

Wages expense

 

Question 19. (TCO E) The following is selected information from M Corporation for the fiscal year ending October 31, 2010.

 

-Cash received from customers: $300,000

-Revenue earned: 350,000

-Cash paid for expenses: 170,000

-Expenses incurred: 200,000

 

Based on the accrual basis of accounting, what is M Corporation’s net income for the year ending October 31, 2010? (Points : 3)

$140,000

$114,000

$82,000

$150,000

 

Question 20. (TCO E) Adjusting entries are made to ensure that (Points : 3)

Expenses are recognized in the period in which they are incurred.

Revenues are recorded in the period in which they are earned.

Balance sheet and income statement accounts have correct balances at the end of an accounting period.

All of the above

 

Question  21. (TCOs A and B) Which of the following expressions is incorrect? (Points : 3)

Gross profit – operating expenses = net income

Sales – cost of goods sold – operating expenses = net income

Net income + operating expenses = gross profit

Operating expenses – cost of goods sold = gross profit

 

Question 22. (TCO B) Hunter Company purchased merchandise inventory with an invoice price of $3,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Hunter Company pays within the discount period? (Points : 3)

$2,940

$2,760

$2,700

$3,000

 

Question  23. (TCOs A and B) Jake’s Market recorded the following events involving a recent purchase of merchandise.

 

-Received goods for $20,000, terms 2/10, n/30.

-Returned $400 of the shipment for credit.

-Paid $100 freight on the shipment.

-Paid the invoice within the discount period.

 

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

Increased by $19,208.

Increased by $19,700.

Increased by $19,306.

Increased by $19,308.

 

Question 24. (TCO A) If goods in transit are shipped FOB destination (Points : 3)

The seller has legal title to the goods until they are delivered.

The buyer has legal title to the goods until they are delivered.

The transportation company has legal title to the goods while the goods are in transit.

No one has legal title to the goods until they are delivered.

 

Question 25. (TCO A) When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory? (Points : 3)

To check the accuracy of the perpetual inventory records

To determine cost of goods sold for the accounting period

To compute inventory ratios

All are a purpose of taking a physical inventory when a perpetual inventory system is used.

 

Question 26. (TCO A) A problem with the specific identification method is that (Points : 3)

Inventories can be reported at actual costs.

Management can manipulate income.

Matching is not achieved.

The lower of cost or market basis cannot be applied.

 

Question 27. (TCO A) The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is (Points : 3)

Called the matching principle.

Called the consistency principle.

Nonexistent; that is, there is no such accounting requirement.

Called the physical flow assumption.

 

Question 28. (TCO A) In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the (Points : 3)

FIFO method.

LIFO method.

average cost method.

tax method.

 

Question 29. (TCO B) Which of the following is a true statement about inventory systems? (Points : 3)

Periodic inventory systems require more detailed inventory records.

Perpetual inventory systems require more detailed inventory records.

A periodic system requires cost of goods sold be determined after each sale.

A perpetual system determines cost of goods sold only at the end of the accounting period.

 

Question 30. (TCO B) The primary source of revenue for a retailer is (Points : 3)

Investment income.

Service revenue.

The sale of merchandise.

The sale of plant assets the company owns.

 

Question 31. (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. (Points : 25)

 

 

Question 32. (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:

  1. Use the above information to prepare a multiple-step income statement for the year ended December 31, 2010.
  2. 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.

(Points : 35)

ACCT 504 Acct Fin Managerial Use Analysis Week 4 Mid Term Perfect Answer Set 3

 

ACCT 504 Acct Fin Managerial Use Analysis Week 4 Mid Term Perfect Answer Set 3

ACCT 504 Acct Fin Managerial Use Analysis Week 4 Mid Term Perfect Answer Set 3

 

 

(TCO A) The factor which determines whether or not goods should be included in a physical count of inventory is (Points: 3)
Physical possession.
Legal title.
Management’s judgment.
Whether or not the purchase price has been paid.
2. (TCO D) Which pair of accounts follows the rules of debit and credit in relation to increases and decreases in the same manner? (Points: 3)
Dividends payable and rent expense
Repair expense and notes payable
Prepaid insurance and advertising expense
Service revenues and equipment
3. (TCO A) When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory? (Points: 3)
To check the accuracy of the perpetual inventory records
To determine cost of goods sold for the accounting period
To compute inventory ratios
All are a purpose of taking a physical inventory when a perpetual inventory system is used.
4. (TCO A) A problem with the specific identification method is that (Points: 3)
Inventories can be reported at actual costs.
Management can manipulate income.
Matching is not achieved.
the lower of cost or market basis cannot be applied
5. (TCO A) Which of the following statements is correct with respect to inventories? (Points: 3)
The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold.
It is generally good business management to sell the most recently acquired goods first.
Under FIFO, the ending inventory is based on the latest units purchased.
FIFO seldom coincides with the actual physical flow of inventory.
6. (TCO A) — In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure? (Points: 3)
Average Cost Method
LIFO method
FIFO method
Need more information to answer
7. (TCO B) The figure for which of the following items is determined at a different time under the perpetual inventory method than under the periodic method? (Points: 3)
Sales
Cost of Goods Sold
Purchases
Accounts Receivable
8. (TCO E) The time period assumption states that (Points: 3)
A transaction can only affect one period of time.
Estimates should not be made if a transaction affects more than one time period.
Adjustments to the enterprise’s accounts can only be made in the time period when the business terminates its operations.
The economic life of a business can be divided into artificial time periods.
9. (TCO E) In a service-type business, revenue is considered earned (Points: 3)
At the end of the month.
At the end of the year.
When the service is performed.
When cash is received.
10. (TCO E) On April 1, 2007, M Corporation paid $48,000 cash for equipment that will be used in business operations. The equipment will be used for four years
And will have no residual value. M records depreciation expense of $9,000 for the calendar year ending December 31, 2007. Which accounting principle has been violated? (Points: 3)
Revenue recognition principle
No principle has been violated because M has correctly matched the expense for using the equipment to the period during which it generated revenue.
Matching principle because the cash was paid in 2007 and should be expensed in 2007.
Cost principle
11. The following is selected information from J Corporation for the fiscal year ending October 31, 2007.
Cash received from customers $75,000
Revenue earned 87,500
Cash paid for expenses 42,500
Expenses incurred 50,000
(TCO E) Based on the accrual basis of accounting, what is J Corporation’s net income for the year ending October 31, 2007?
(Points: 3)
$28,500
$33,500
$20,500
$37,500
12.(TCO E) The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is (Points: 3)
Contra asset.
Prepayment.
Asset.
Accrual.
13. (TCO B) Two categories of expenses in merchandising companies are (Points: 3)
Cost of goods sold and financing expenses.
Operating expenses and financing expenses.
Cost of goods sold and operating expenses.
Sales and cost of goods sold.
14. (TCO A,B) Detailed records of movements in merchandise (each purchase and sale) are not maintained in the inventory account in a (Points: 3)
Perpetual inventory system.
Periodic inventory system.
Double entry accounting system.
Business that sells expensive merchandise.

 

 

 

 

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