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devry acct504 midterm exam




Question;(TCO A;B, C) Which of the following statements concerning users of accounting;information is incorrect?;Student;Answer;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.;Instructor;Explanation: Chapter 1 page 7;Points;Received: 3 of 3;Comments;ACCT 504 Wk_4 Midterm 30 Multiple Chioce and 2 Explanatory;2. Question;(TCO C) Issuing shares of;stock in exchange for cash is an example of a(n);Student;Answer;delivering activity.;investing activity.;financing activity.;operating activity.;Instructor;Explanation: Chapter 1 page 9;Points;Received: 3 of 3;Comments;3. Question;(TCO C) Which activities;involve putting the resources of the business into action to generate a profit?;Student;Answer;Delivering;Financing;Investing;Operating;Instructor;Explanation: Chapter 1 page 10;Points;Received: 0 of 3;Comments;4. Question;(TCO A) The cost of assets;consumed or services used is also known as;Student;Answer: a revenue.;an expense.;a liability.;an asset.;Instructor;Explanation: Chapter 1 page 10;Points;Received: 0 of 3;Comments;5. Question;(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?;Student;Answer: $25,000;$5,000;$30,000;$23,000;Instructor;Explanation: $75,000 - 45,000 - 5,000 =;$25,000;Chapter 1 page 10;Points;Received: 0 of 3;Comments;6. Question;(TCO A) On a classified;balance sheet, prepaid insurance is classified as;Student;Answer: an;intangible asset.;property, plant, and equipment.;a current asset.;a long-term investment.;7. Question;(TCO A) An intangible asset;Student;Answer: 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.;3 of 3;Comments;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;What is the total NET amount of property, plant, and;equipment that will appear on the balance sheet?;Student;Answer: $1,900,000;$2,600,000;$2,200,000;$3,200,000;Instructor;Explanation: Gross cost of plant assets;utilized - accumulated depreciation Chapter 2 page 51;Points;Received: 3 of 3;Comments;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?;Student;Answer;$4.66;$0.20;$66.67;$5.00;Instructor;Explanation: $30,000/6,000 = $5.00;Chapter 2 page 56;Points;Received: 3 of 3;Comments;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?;Student;Answer: $207,000;$ 66,000;$348,000;$273,000;Instructor;Explanation: $2,499,000 - $2,292,000 =;$207,000;Chapter 2 page 57;Points;Received: 3 of 3;Comments;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?;Student;Answer: Yes;the company is now obligated to pay the employee, thus that event must be;recorded on March 6.;No, hiring an employee is an important event;however, it is not an economic event that should be recorded on March 6.;Yes, failure to record the event on March 6;would cause the financial statements to be misleading.;No, the journal entry should be made on March;1 which is the date of hiring.;Instructor;Explanation: Chapter 3 page 108;Points;Received: 3 of 3;Comments;12. Question: (TCO D) Which one of the following is;not a part of an account?;Student;Answer;Credit side;Trial balance;Debit side;Title;Instructor;Explanation: Chapter 3 page 111;Points;Received: 3 of 3;Comments;13. Question: (TCO D) Which of the following;describes the classification and normal balance of the retained earnings;account?;Student;Answer;Asset, debit;Stockholders' equity, credit;Revenues, credit;Expense, debit;Instructor;Explanation: Chapter 3 page 116;Points;Received: 3 of 3;Comments;14. Question: (TCO D) A debit is the normal balance;for which account listed below?;Student;Answer: Furniture;Accounts payable;Rent revenue;Capital stock issued;Instructor;Explanation: Chapter 3 page 116;Points;Received: 3 of 3;Comments;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?;Student;Answer;Prepaid insurance and dividends;Dividends and medical fees earned;Interest payable and common stock;Advertising expense and land;Instructor;Explanation: Chapter 3 page 116;Points;Received: 0 of 3;Comments;Page 2;(TCO E);An accounting time period that is one year in length is called;Student;Answer: a fiscal year.;an interim period.;the time period assumption.;a reporting period.;Instructor;Explanation: Chapter 4 page 164;Points;Received: 3 of 3;Comments;2. Question;(TCO E) In a merchandising;business, revenue may be considered earned when;Student;Answer: cash is received from the customers;a product is delivered to a customer.;an order is received from a customer;a customer shows interest in a product;Instructor;Explanation: Chapter 4 page 164;Points;Received: 0 of 3;Comments;3. 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?;Student;Answer;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;Instructor;Explanation: Chapter 4 page 171;Points;Received: 3 of 3;Comments;4. 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;Based on the accrual basis of accounting, what is M;Corporation's net income for the year ending October 31, 2010?;Student;Answer;$140,000;$114,000;$82,000;$150,000;Instructor;Explanation: $350,000 - 200,000 =;$150,000;Chapter 4 pages 166-167;Points;Received: 3 of 3;Comments;5. Question;(TCO E) Adjusting entries are;made to ensure that;Student;Answer;expense 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;Instructor;Explanation: Chapter 4 pages 167-168;Points;Received: 3 of 3;Comments;6. Question;(TCO A, B) Which of the;following expressions is incorrect?;Student;Answer: 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;Instructor;Explanation: Chapter 5 page 228;Points;Received: 0 of 3;Comments;7. 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?;Student;Answer: $2,940;$2,760;$2,700;$3,000;Instructor;Explanation: $3,000 x 98% = $2,940;Chapter 5 page 234;Points;Received: 0 of 3;Comments;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;Student;Answer;increased by $19,208.;increased by $19,700.;increased by $19,306.;increased by $19,308.;Points;Received: 0 of 3;Comments;9. Question;(TCO A) The factor which;determines whether or not goods should be included in a physical count of;inventory is;Student;Answer: physical possession.;legal title.;management's judgment.;whether or not the purchase price has been;paid.;Instructor;Explanation: Chapter 6 page 284;Points;Received: 0 of 3;Comments;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?;Student;Answer;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;Instructor;Explanation: Chapter 6 pages 284-285;Points Received: 3 of 3;Comments;11. Question: (TCO A) A problem with the specific;identification method is that;Student;Answer;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;Instructor;Explanation: Chapter 6 page 286;Points;Received: (not graded);Comments;12. Question: (TCO A) Which of the following;statements is true regarding inventory cost flow assumptions?;Student;Answer: A company may use more than one cost-flow;assumption concurrently for different product lines.;A company must comply with the method;specified by industry standards.;A company must use the same method for;domestic and foreign operations.;A company may never change its inventory;costing method once it has chosen a method.;Instructor;Explanation: Chapter 6 page 286;Points;Received: 0 of 3;Comments;13. 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;Student;Answer: FIFO method.;LIFO method.;average cost method.;tax method.;Instructor;Explanation: Chapter 6 page 288;Points;Received: 0 of 3;Comments;14. Question: (TCO B) Which of the following is a;true statement about inventory systems?;Student;Answer;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.;Instructor;Explanation: Chapter 5 page 230;Points;Received: 3 of 3;Comments;15. Question: (TCO B) A merchandiser that sells;directly to consumers is;Student;Answer: a retailer.;a wholesaler.;a broker.;a service enterprise.;Instructor;Explanation: Chapter 5 page 228;Points;Received: 3 of 3;Comments;Page: 3;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;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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