ACCT 504 Wk 4 Midterm Exam Answers
ACCT 504 Wk 4 Midterm Exam Answers
30 Multiple Choice
1. Question: (TCO A, B, C) Which of
the following statements concerning users of accounting information is
incorrect?
2. Question: (TCO C) Issuing shares
of stock in exchange for cash is an example of a(n):
3. Question: (TCO C) Which activities
involve putting the resources of the business into action to generate a profit?
4. Question: (TCO A) The cost of
assets consumed or services used is also known as:
5. Question: (TCO C) Edwards Company
recorded the following cash transactions for the year:
6. Question: (TCO A) On a classified
balance sheet, prepaid insurance is classified as:
7. Question: (TCO A) An intangible
asset:
8. Question: (TCO A) These are
selected account balances on December 31, 2007.
-Land (location of the corporation’s
office building) $200,000
-Land (held for future use) 300,000
-Corporate Office Building 1,200,000
-Inventory 400,000
-Equipment 900,000
-Office Furniture 200,000
-Accumulated Depreciation 600,000
-Land (held for future use) 300,000
-Corporate Office Building 1,200,000
-Inventory 400,000
-Equipment 900,000
-Office Furniture 200,000
-Accumulated Depreciation 600,000
What is the total NET amount of
property, plant, and equipment that will appear on the balance sheet?
9. Question: (TCO B) For 2010,
Landford Corporation reported net income of $30,000; net sales $400,000; and
average share outstanding 6,000. There were no preferred stock dividends. What
was the 2010 earnings per share?
10. Question: (TCO B) Liondale
Corporation had beginning retained earnings of $2,292,000 and ending retained
earnings of $2,499,000. During the year, they issued common stock totaling
$141,000. There were no dividends issued. What was their net income for the
year?
11. Question: (TCO D) On March 1,
2010, Dillon Company hires a new employee who will start the work on March 6.
The employee will be paid on the last day of each month. Should a journal entry
be made on March 6? Why or why not?
12. Question : (TCO D) Which one of
the following is not a part of an account?
13. Question: (TCO D) Which of the
following describes the classification and normal balance of the retained
earnings account?
14. Question: (TCO D) A debit is the
normal balance for which account listed below?
15. Question: (TCO D) Which of the
following accounts follows the rules of debit and credit in relation to
increases and decreases in the opposite manner?
16. Question: (TCO E) An accounting
time period that is one year in length is called:
17. Question: (TCO E) In a
merchandising business, revenue may be considered earned when:
18. Question : (TCO E) On April 1,
2010, 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, 2010. Which accounting principle has been violated?
19. Question: (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
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?
20. Question: (TCO E) Adjusting
entries are made to ensure that:
21. Question: (TCO A, B) Which of
the following expressions is incorrect?
22. Question: (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?
23. 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.
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:
24. Question: (TCO A) The factor
which determines whether or not goods should be included in a physical count of
inventory is:
25. 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?
26. Question: (TCO A) A problem with
the specific identification method is that:
27. Question: (TCO A) Which of the
following statements is true regarding inventory cost flow assumptions?
28. Question : (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:
29. Question: (TCO B) Which of the
following is a true statement about inventory systems?
30. Question: (TCO B) A merchandiser
that sells directly to consumers is:
2 Explanatory Questions
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).
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
Net sales 1,279,000
Administrative expenses 239,000
Interest expense 68,000
Dividends paid 38,000
Selling expenses 45,000
Instructions:
1. Prepare an 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.
1. Prepare an 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.
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