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)
Question 3. (TCO C) Buying and selling products are examples of (Points : 3)
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)
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)
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
-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)
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)
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)
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)
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)
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
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)
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)
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)
average cost 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)
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.
Sales returns and allowances $ 50,000
Sales discounts 9,500
Cost of goods sold 347,000
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
- 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.
(Points : 35)