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Accounting Mock final




Question;Accounting Mock finalCheck to see if you;have pages 1 through 10. You may write this exam for two hours. If you need;more scratch paper;than is available on the test sheets, use the back side of the previous;page.;There are 125;points on this exam. Show all work necessary to support your answers!;I Indicate the best;answer to the following multiple choice questions.;(100 points);1 Which of the;following is the private sector organization involved in developing;accounting;principles?;A Feasible;Accounting Standards Board.;B Financial;Accounting Students Board.;C Financial;Accounting Standards Board.;D Financial;Auditors' Standards Board.;2 The cost;principle requires that when assets are acquired, the assets shouldbe;recorded at;what amount?;A Cash amount still;owed for the asset.;B Amount paid for;the asset.;C Salvage value at;the time the assetwillbe disposed.;D Acquisition cost;- salvage value.;3 Which of the;following would be considered a liability?;A An unearned;revenue.;B Something that;decreases owner's equity.;C Something that;used to have value to the company.;D Something that;may have value to the company in the future.;4 The income;statement can be expressed as which of the following?;A Revenues= Assets;- Liabilities+ Owner's Equity- Revenues.;B Expenses=;Revenues+ Net Income (loss).;C Net Income;(loss)= Revenues - Expenses.;D Net Income;(loss)= Revenues+ Expenses.;5 Expenses are;increased with which of the following?;A Temporary entries;B Closing entries.;C Debits.;D Credits.;6 Which of the;following best describes unearned revenues?;A Cash received and;recorded as a liability before being earned.;B Cash earned and;recorded as a liability on the income statement.;C Cash earned but;not yet received or recorded.;D Cash earned and;already received and recorded.;7 When are;adjusting entries required?;A When the;company's profits are below budgeted levels.;B Before financial;statements are prepared.;C When expenses are;unearned.;D When revenues are;consumed.;Page 1 of 10Check to see if you have;pages 1 through 10. You may write this exam for two hours. If you need;more scratch paper than is available;on the test sheets, use the back side of the previous page.;There are 125 points on this exam.;Show all work necessary to support your answers!;I Indicate the best answer to the;following multiple choice questions.;(100 points);1 Which of the following is the;private sector organization involved in developing accounting;principles?;A Feasible Accounting Standards Board.;B Financial Accounting Students Board.;C Financial Accounting Standards;Board.;D Financial Auditors' Standards Board.;2 The cost principle requires that;when assets are acquired, the assets should be recorded at;what amount?;A Cash amount still owed for the asset.;B Amount paid for the asset.;C Salvage value at the time the asset;will be disposed.;D Acquisition cost - salvage value.;3 Which of the following would be;considered a liability?;A An unearned revenue.;B Something that decreases owner's;equity.;C Something that used to have value to;the company.;D Something that may have value to the;company in the future.;4 The income statement can be;expressed as which of the following?;A Revenues= Assets - Liabilities+;Owner's Equity- Revenues.;B Expenses= Revenues+ Net Income;(loss).;C Net Income (loss)= Revenues -;Expenses.;D Net Income (loss)= Revenues+;Expenses.;5 Expenses are increased with which of;the following?;A Temporary entries;B Closing entries.;C Debits.;D Credits.;6 Which of the following best;describes unearned revenues?;A Cash received and recorded as a;liability before being earned.;B Cash earned and recorded as a;liability on the income statement.;C Cash earned but not yet received or;recorded.;D Cash earned and already received and;recorded.;7 When are adjusting entries required?;A When the company's profits are below;budgeted levels.;B Before financial statements are;prepared.;C When expenses are unearned.;D When revenues are consumed.;Page 1 of 108 If a company fails to adjust Unearned;Revenues for revenue that has been earned during the month, what effecACC 312;Fundamentals of Managerial Accounting Midterm Exam 2t will this have on the;financial statements?;A No effect on the financial statements.;B Revenues will be understated and net;income and owner's equity will be understated. C Assets will be overstated and;net income and owner's equity will be understated.;D Assets will be overstated and net;income and owner's equity will be overstated.;9 Which of the following is true;concerning closing entries?;A They are prepared before the financial;statements are prepared. B They reduce the number of permanent accounts.;C They summarize the activity in every;account. D They record net income/loss in owner's capital.;10 How are unearned revenues typically;classified on the balance sheet? A As a cun-ent asset.;B As property, plant, and equipment. C;As an intangible asset.;D As a cun-ent liability.;11 How should notes payable due in;6months be classified? A As a current asset.;B As a long-term asset. C As a current;liability;D As a long-term liability.;12 Assume a company makes a credit sale;of inventory and uses a perpetual inventory system. Thejournal entry would;include which of the following?;A An increase to sales and a decrease to;cost of goods sold. B An increase to both accounts receivable and inventory.;C An increase to cost of goods sold and;a decrease to inventory. D An increase to sales and a decrease to accounts;receivable.;13 The sales returns and allowances;account provides information to management about which of the following?;A The dollar amount related to;dissatisfied customers. B The relationship between credit sales and cash sales.;C The number of customers who have;promptly paid what is owed to the business. D The dollar amount related to;dissatisfied vendors.;14 If a buyer of inventory is given;credit terms of 2/10,N/30 the buyer should probably do which of the following;when using the perpetual inventory method?;A Not pay the bill until the end of the;credit period in order to take full advantage of the discount.;B Pay within the discount period and;record a decrease in the cost of the inventory. C Not pay for the inventory;until the inventory is sold.;D Wait until after 30days before sending;payment to the vendor.;Page 2 of 10;15 Sales discounts should be recorded in;which journal? A General Journal.;B Cash Receipts Journal.;C Cash Payments Journal. D Sales;Journal.;16 Where should a cash payment for rent;be recorded? A General Journal.;B Cash Receipts Journal. C Cash Payments;Journal. D Sales Journal.;17 Which of the following is not an;objective of an internal control system?;A Safeguarding assets.;B Punishing employees for arriving late;for work.;C Enhancing the accuracy and reliability;of accounting records.;D Reducing the risk of errors.;18 For accounting purposes, postdated;checks received (checks to be cashed at a later date) are considered to be;which of the following?;A Cash.;B Accounts Payable.;C Accounts Receivable. D Owner's Drawing;19 The Cash Over & Short account is;used for which of the following? A Increase revenues to meet projected profit;levels.;B Balance thejournal entry to replenish;the petty cash account. C Pay for any unexpected large expenses.;D Reconcile the bank portion of the bank;statement.;20 How is interest revenue reported on a;multiple-step income statement? A As an addition to sales to arrive at net;sales.;B As an operating expense.;C As part of cost of goods sold. D As an;other revenue or gain.;21 How is the Allowance for Doubtful;Accounts account reported? A As an expense on the income statement.;B As a liability on the balance sheet.;C As a contra account in the current;assets section of the balance sheet. D As a revenue on the income statement.;Page 3 of 10;22 The percentage of net credit sales;method of estimating bad debts expense accomplishes which of the following?;A Itadjusts bad debt expense without;consideration for thebalance in the allowance account.;B It adjusts bad debt expense after;talcing into consideration the balance in the allowance account.;C It includes cash sales in the;estimation process in case a customer decides to return inventory.;D It requires a solid understanding of;the relationships among the asset and liability accounts on the income;statement.;23 When inventory is "in;transit" at the end of the year and the terms of the transaction are FOB;shipping point, then which of the following is a true statement?;A The company in physical possession of;the inventory at the end of the year includes the inventory on their balance;sheet.;B The seller of the inventory includes;the inventory on their balance sheet. C The buyer of the inventory includes the;inventory on their balance sheet.;D The buyer of the inventory includes;the inventory on their income statement.;24 Which of the following is true about;the LIFO method of calculating cost of goods sold? A It requires the buyer of;the inventory to pay shipping charges.;B It implies the first inventory;purchased by the seller is the first inventory included on the income;statement.;C It implies the last inventory;purchased by the seller is the first inventory included on the income;statement.;D It does not affect the cost of;inventory included on the balance sheet.;25 How do you record freight charges;paid by the seller of inventory? A As an increase in cost of goods sold.;B As a part of net sales.;C As a selling expense on the income;statement. D As a decrease in cost of goods sold.;26 When using the double-declining;balance method to estimate depreciation expense in the second year after an;asset is purchased, which of the following is not important?;A The original cost of the asset. B;Salvage value of the asset.;C The book value of the asset.;D The amount of depreciation expense;previously recorded for that asset.;27 Which of the following is true;concerning an intangible asset?A It should always be amortized over a period of;40 years. B It should not be amortized if it has an indefinite life.;C It should be amortized over its useful;life or 40 years, whichever is longer. D It should be amortized over its useful;life or 40 years,whichever is shorter.;28 Land is depreciated using which;method? A Straight-line.;B Units--of-activity. C Declining;balance.;D Depreciation expense is not recorded;for land.;Page 4 of 10;29 Bookkeeping differs from accounting;in that bookkeeping primarily involves which part of the accounting process?;A Identification.;B Conununication. C Recording.;D Analysis.;30 Which of the following is true;concerning the calculation current assets divided by current liabilities?;A It is useful in determining net;income.;B Itis useful in evaluating a company's;liquidity. C It is akey component of thematching principle.;D It is useful in determining a;company's long-term capital structure.;31 Which of the following is true;concerning the amount of sales tax collected by a retail store? A It is;amiscellaneous revenue for the store.;B It is a current liability.;C It is not recorded because the tax is;owed by the customer. D It is considered an operating expense for the store.;32 Inits first year of business, the;Kane Company sells 2,000 units of its product for $500 each. The selling price;includes a one-year warranty on parts. It is expected that 3% of the units will;be defective and that repair costs will average $50 per unit. In this first;year of sale, warranty contracts are honored on 40 units for a total cost of;$2,000.;What amount should Kane report for its;end of year one balance sheet amount for Estimated Warranty Liability?;A;$1,000;B;$2,000;c;$3,000;D;Cannot be determined.;33 Pederson Company borrows $10,000 for;6months at 10%annual interest. How much interest should Pederson expect to pay;if the loan is paid back after 6months?;A $200;B $300;c $400;D $500;34 Sue Stein's regular pay rate of pay;is $15 with one and a half times her regular rate for any hours worked above 40;hours per week. Sheworked 48 hours last week. What amount should be reported as;her gross wages?;A;$ 600;B;$ 720;c;$ 780;D;$1,080;Page 5 of 10;35 Assuming aFICAtax rate of 8%on the;first $65,000 in wages, and a federal income tax rate of 20% on allwages;whatwould be an employee's net pay for the entire year if the employee earned;$80,000for theyear?;A;$57,600;B;$58,800;c;$64,000;D;$74,800;36 Which of the following is the tax;that is paid equally by both the employee and the employer? A Federal income;tax.;B Federal unemployment tax. C State;unemploymen t tax.;D FICA tax.;Use the following information to answers;questions 37,38,39.;On June 30, 2006 Magazine Company;received cash for monthly subscriptions from 1,000 customers for 48 month;subscription s. The individual cost of a 48 month subscription is $40 for the;entire 48 months.;37 The journal entry to record the;receipt of cash fromcustomers on June 30, 2006 should include which of the;following?;A Debit to Cash for $20,000 and a credit;to Unearned Subscriptions for $20,000. B Debit to Cash for $40,000 and a credit;to Unearned Subscriptions for $40,000. C Debit to Cash for $40,000 and a credit;to Subscription Revenue for $40,000.;D Debit to Unearned Subscriptions for;$40,000 and a credit to Subscription Revenue for;$40,000.;38 After 18months what amount;shouldMagazine Company report on its balance sheet as unearned revenues related;to the magazine subscriptions?;A;$ -O-;B;$15,000;c;$25,000;D;$40,000;39 For the fiscal year ended December;31, 2007 what amount should Magazine Company report on the income statement for;Subscription Revenue?;A $ -O-;B $10,000;c $20,000;D $40,000;40 Liabilities are classified on the;balance sheet as either Current Liabilities or which of the following?;A Defened. B Unearned. C Long-term. D;Permanent.;Page 6 of 10;41 How should the current portion of;long-term debt be reported? A It should be classified as long-term debt.;B It shouldbe reclassified as acurrent;liability. C Itshould be immediately paid.;D It should not be paid until all the;long-termdebt is paid.;42 Daggett Company has the following;assets and liabilities on its balance sheet as of December 31, 2007.;Cash;$12,000;Accounts Receivable;$22,000;Accounts Payable;$16,000;Unearned Revenues;$ 4,000;Current maturity of long-term debt;$ 8,000;Total long-term debt;$80,000;Compute the current ratio for Daggett;Company as of December 31,2007.;A about 0.82 times B about 1.21 times C;about 1.42 times D about 1.70 times;Use the following information to answer;questions 43 & 44.;Lawnmower Company produced and sold 50,000;lawnmowers during 2007. Of these 50,000 lawnmowers approximately 500 are;expected to break down while still under warranty. The average cost of fixing a;lawnmower under warranty is $100. Of the 500 lawnmowers to be fixed, 460 will;probably be fixed during 2007 and the other 40 will probably be fixed during;2008.;43 What amount should Lawnmower Company;report asWarranty Expense for the fiscal year ended 2007?;A $ 4,000;B $46,000;c $50,000;D Cannot be determined until Lawnmower;Company knows exactly how many lawnmowers will be fixed during 2007.;44 IfLawnmower Company actually fixes;430 lawnmowers during 2007 at a total cost of;$43,000, what amount should Lawnmower;Company report on the December 31, 2007 balance sheet asWarranty Liability?;A;$ -OB;$3,000;c;$4,000;D;$7,000;45 Which of the following is NOT a;characteristic of a partnership?;A The act of any partner on behalf of;the partnership is typically binding on all partners. B Each partner's share of;net income is taxable at personal tax rates.;C The partnership is not taxed as a;separate entity. D Partnerships have an unlimited life.;Page 7 of 10;46 The written contract outlining the;duties and responsibilities of each partner is typically called which of the;following?;A Partner's capital statement.;B Limited partnership agreement. C;Mutual income agreement.;D Partnership agreement.;47 Which of the following is true;concerning a partnership? A It has only one partner.;B It pays taxes on partnership income. C;Itmust file an information tax return.;D It does not need to produce financial;statements.;48 Iverson Company's cash register;recorded $32,000 in cash receipts for the last week. This amount includes sales;taxes. If the sales tax rate is 4%, what is the dollar of sales revenue that;should be recorded by Iverson?;A;$30,720.00;B;$30,769.23;c;$32,000.00;D;$33,230.77;49 Which of the following best describes;a contingent liability?;A A liability that is contingent on a;company's cash flow situation. B A liability that is dependent on a customer's;ability to pay.;C A potential liability that, dependent;on a future event, may become an actual liability. D A liability that is;created when a company receives cash in advance.;50 Assume there is a primary beneficiary;of a vaiiable interest entity that is under common control with the primary;beneficiary and the primary beneficiary has control of the variable interest;entity. The primary beneficiary transfers assets and liabilities to the;variable interest entity. How should the primary beneficiary initially measure;the assets and liabilities transferred to the variable interest entity?;A This represents an anomalous situation;that is incapable of resolution. B This represents an anomalous situation that;is legally unqualified.;C This represents the type of test;questions I can expect in ACCT 201. D This type of question is exactly why I;amhappy the semester is over.;Page 8 of IO;II. (11 points) Brewer and Roberts have;a partnership agreement which includes the following provisions regarding the;sharing of net income or net loss;l. Asalary allowance of $40,000 toBrewer;and $10,000 toRoberts.;2. An interest allowance of 15% on;capital balances at the beginning of the year.;3. The remainder (profit or loss) to be;divided 30% to Brewer and 70% to Roberts.;The capital balance on January l, 2006;for Brewer and Roberts was $90,000 and $120,000, respectively. During 2006, the;Brewer and Roberts Partnership had a net income of $230,000;REQUIRED;Prepare a Division of Net Income;schedule to show the distribution of income to each of the partners.;Page 9 of IO;The following table;representsthePAYROLLREGISTERforMedalen Company for the pay period ending July;31, 2009.;Name;Gross Pay;Fed. Inc. Tax;State Inc. Tax;Insurance;401 K;Charity;FICA;Total Deductions;Net Pay;Total;$100,000;$30,000;$12,000;$700;$8,000;$1,000;$6,000;$57,700;$42,300;The following information related to;Medalen's payroll tax expense is also available.;FUTApayable;$1,500;SUTApayable;$2,500;FICA payable;$6,000;Prepare the following, journalize the;payroll and recordMedalcn's payroll taxes (14 points).;Page 10 of 10


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