ACCT504 Week 4 Midterm Exam v1 Complete Solution

Question: #9307

ACCT504 Week 4 Midterm Exam v.1 A++ Graded Page: 1 1. Question : (TCO A, B, C) External users want answers to all of the following questions except: Is the company earning satisfactory income? Will the company be able to pay its debts as they come due? Did the company use a budget to plan its expenses? How does the company compare in profitability with competitors? 2. Question : (TCO C) Borrowing money is an example of a(n): delivering activity. financing activity. investing activity. operating activity. 3. Question : (TCO C) Buying and selling products are examples of: operating activities. investing activities. financing activities. delivering activities. 4. Question : (TCO A) Resources owned by a business are referred to as: stockholders' equity. liabilities. assets. revenues. 5. Question : (TCO C) Jamie Company recorded the following cash transactions for the year: Paid $70,000 for salaries. Paid $20,000 to purchase office equipment. Paid $6,000 for utilities. Paid $7,000 in dividends. Collected $130,000 from customers. What was Jamie's net cash provided by operating activities? $47,000 $54,000 $27,000 $33,000 6. Question : (TCO A) In a classified balance sheet, assets are usually classified as: 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. 7. Question : (TCO A) An intangible asset: may have the capacity to earn revenue for its owner. is worthless because it has no physical substance. is converted into a tangible asset during the operating cycle. cannot be reported on the balance sheet because it lacks physical substance. 8. Question : (TCO A) These 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? $650,000 $550,000 $475,000 $800,000 9. Question : (TCO B) For 2010, Ford Corporation reported net income of $15,000; net sales $200,000; and average share outstanding 6,000. There were no preferred stock dividends. What was the 2010 earnings per share? $2.33 $0.10 $2.50 $33.34 10. Question : (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 totaling $47,000. There were no dividends issued. What was their net income for the year? $69,000 $22,000 $116,000 $91,000 11. Question : (TCO D) Is the purchase of equipment treated as an expense at the time of purchase? Why or why not? 12. Question : (TCO D) The left side of an account is: blank. a description of the account. the debit side. the balance of the account. 13. Question : (TCO D) A credit is not the normal balance for which account listed below? Common Stock account Revenue account Liability account Dividends account 14. Question : (TCO D) A debit is not the normal balance for which account listed below? Dividends Cash Accounts Receivable Service Revenue 15. Question : (TCO D) Which pair of accounts follows the rules of debit and credit in relation to increases and decreases in the same manner? Dividends payable and rent expense Repair expense and notes payable Prepaid insurance and advertising expense Service revenues and equipment Page: 2 1. Question : (TCO E) The time period assumption states that: 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. 2. Question : (TCO E) The matching principle matches: customers with businesses. expenses with revenues. assets with liabilities. creditors with businesses. 3. Question : (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? Due from Employees Due to Employer Wages Payable Wages Expense 4. Question : (TCO E) The following is selected information from J Corporation for the fiscal year ending October 31, 2010. Cash received from customers $75,000 Revenue earned 87,500 Cash paid for expenses 42,500 Expenses incurred 50,000 Based on the accrual basis of accounting, what is J Corporation's net income for the year ending October 31, 2007? $28,500 $33,500 $20,500 $37,500 5. Question : (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: contra asset. prepayment. asset. accrual. 6. Question : (TCO A, B) Which of the following expressions is incorrect? 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 7. Question : (TCO B) Hunter Company purchased merchandise inventory with an invoice price of $6,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Hunter Company pays within the discount period? $6,000 $5,880 $5,400 $5,520 8. Question : (TCO A, 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: increased by $19,208. increased by $19,700. increased by $19,306. increased by $19,308. 9. Question : (TCO A) The Freight-in account: increases the cost of merchandise purchased. is contra to the Purchases account. is a permanent account. has a normal credit balance. 10. Question : (TCO A) Barnes Company is taking a physical inventory on March 31, the last day of its fiscal year. Which of the following must be included in this inventory count? Goods in transit to Barnes, FOB destination Goods that Barnes is holding on consignment for Parker Company Goods in transit that Barnes has sold to Smith Company, FOB shipping point Goods that Barnes is holding in inventory on March 31 for which the related Accounts Payable is 15 days past due 11. Question : (TCO A) Of the following companies, which one would not likely employ the specific identification method for inventory costing? Music store specializing in piano sales Custom Jewelry store Antique shop Hardware store 12. Question : (TCO A) Which of the following statements is correct with respect to inventories? 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. 13. Question : (TCO A) In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory? Average cost method LIFO method FIFO method Need more information to answer 14. Question : (TCO B) Which of the following is a true statement about inventory systems? 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. 15. Question : (TCO B) Two categories of expenses in merchandising companies are: 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. Page: 3 1. Question : (TCO D) A classmate is considering dropping his accounting class because he cannot understand the rules of debits and credits. Explain the rules of debits and credits in a way that will help him understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities and stockholders' equity) and the income statement (revenues and expenses). 2. Question : (TCOs B & E) The Caltor Company gathered the following condensed data for the year ended December 31, 2010: Cost of goods sold $ 710,000 Net sales 1,279,000 Administrative expenses 239,000 Interest expense 68,000 Dividends paid 38,000 Selling expenses 45,000 Instructions: 1. Prepare a multiple-step income statement for the year ended December 31, 2010. 2. Compute the profit margin ratio and gross profit rate. Caltor Company s assets at the beginning of the year were $770,000 and were $830,000 at the end of the year. To qualify for full credit, you must state the formula you are using, show your computations and explain your findings.

Solution: #9344

ACCT504 Week 4 Midterm ExamGraded

A+ Please look at the attach...