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DEVRY ACCT 504 WEEK 4, MIDTERM EXAM 5

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Question;1. Transactions that affect inventories on hand have an effect on both the;balance sheet and the income statement.;A) True;B) False;2. The matching principle requires that the cost of goods sold be matched;against the ending merchandise inventory in order to determine income.;A) True;B) False;3. A company may use more than one inventory costing method concurrently.;A) True;B) False;4. An error that overstates the ending inventory will also cause net income;for the period to be overstated.;A) True;B) False;5. Under the FIFO method, the costs of the earliest units purchased are the;first charged to cost of goods sold.;A) True;B) False;6. The gross profit method is based on the assumption that the rate of gross;profit remains constant from one year to the next.;A) True;B) False;7. In a manufacturing business, inventory that is ready for sale is called;A) raw materials inventory.;B) work in process inventory.;C) finished goods;inventory.;D) store supplies inventory.;8. An employee assigned to counting computer monitors in boxes should;A) estimate the number if there is a large quantity to be counted.;B) read each box and rely on the box description for the contents.;C) determine that the box;contains a monitor.;D) rely on the warehouse records of the number of computer monitors.;9. A recommended internal control procedure for taking physical inventories;is that the counting should be done by employees who do not have custodial;responsibility for the inventory. This is an example of what type of internal;control procedure?;A) Establishment of responsibility;B) Documentation procedure;C) Independent internal verification;D) Segregation of duties;10. The term "FOB" denotes;A) free on board.;B) freight on board.;C) free only (to) buyer.;D) freight charge on buyer.;11. Cost of goods sold is computed from the following equation;A) beginning inventory ? cost of goods purchased ending inventory.;B) sales ? cost of goods purchased beginning inventory ? ending inventory.;C) sales gross profit ? ending inventory beginning inventory.;D) beginning inventory;cost of goods purchased ? ending inventory;12. Which of the following is not a common cost flow assumption used in;costing inventory?;A) First-in, first-out;B) Middle-in, first-out;C) Last-in, first-out;D) Average cost;13. Which of the following statements is true regarding inventory cost flow;assumptions?;A) A company may use more than one costing method concurrently.;B) A company must comply with the method specified by industry standards.;C) A company must use the;same method for domestic and foreign operations.;D) A company may never change its inventory costing method once it has chosen a;method.;14. Two companies report the same cost of goods available for sale but each;employs a different inventory costing method. If the price of goods has;increased during the period, then the company using;A) LIFO will have the highest ending inventory.;B) FIFO will have the highest cost of good sold.;C) FIFO will have the;highest ending inventory.;D) LIFO will have the lowest cost of goods sold.;15. If companies have identical inventoriable costs but use different;inventory flow assumptions when the price of goods have not been constant, then;the;A) cost of goods sold of the companies will be identical.;B) cost of goods available;for sale of the companies will be identical.;C) ending inventory of the companies will be identical.;D) net income of the companies will be identical.;2. Goods held on consignment should be included in the consignor?s ending;inventory.;A) True;B) False;3. In periods of inflation, phantom or paper profits may be reported as a;result of using the;A) perpetual inventory method.;B) FIFO costing;assumption.;C) LIFO costing assumption.;D) periodic inventory method.;4. Many companies use just-in-time inventory methods. Which of the following;is not an advantage of this method?;A) It limits the risk of having obsolete items in inventory.;B) Companies may not have;quantities to meet customer demand.;C) It lowers inventory levels and costs.;D) Companies can respond to individual customer requests.;5. Days in inventory is calculated by dividing 365 days by;A) average inventory.;B) beginning inventory.;C) ending inventory.;D) the inventory turnover ratio.;8. Selection of an inventory costing method by management does not usually;depend on;A) the fiscal year end.;B) income statement effects.;C) balance sheet effects.;D) tax effects.;10. The specific identification method of inventory costing;A) always maximizes a company's net income.;B) always minimizes a company's net income.;C) has no effect on a company's net income.;D) may enable management;to manipulate net income.;11. Which of the following terms best describes the assumption made in applying;the four inventory methods?;A) Goods flow;B) Cost flow;C) Asset flow;D) Physical flow;12. A problem with the specific identification method is that;A) inventories can be reported at actual costs.;B) management can;manipulate income.;C) matching is not achieved.;D) the lower of cost or market basis cannot be applied.;13. Manufactured inventory that has begun the production process but is not;yet completed is;A) work in process.;B) raw materials.;C) merchandise inventory.;D) finished goods.;The correct answers are in bold text.;1) Which of the following is an external user of accounting information?;a.Managers;b.Labor unions;c.Finance directors;d.Company officers;2) The accounting process is correctly sequenced as;A.communication, recording, identification.;b identification, communication, recording.;c.recording, communication, identification.;d.identification;recording, communication.;3) Communication of economic events is the part of the accounting process;that involves a.recording and classifying information.;b.identifying economic events.;C.quantifying transactions into dollars and cents.;D.preparing accounting;reports.;4) The body of theory underlying accounting is not based on;a.definitions.;b.physical laws of nature.;C.concepts.;D.principles.;6) The private sector organization involved in developing accounting;principles is the;a. Financial Auditors' Standards Body.;b.Feasible Accounting Standards Body.;c.Financial Accounting Studies Board.;d.Financial Accounting;Standards Board.;7) All of the financial statements are for a period of time except the;A.statement of cash flows.;B.income statement.;C.retained earnings.;D.balance sheet.;8) After a business transaction has been analyzed and entered in the book of;original entry, the next step in the recording process is to transfer the;information to;A.financial statements.;B.the company's bank.;C.stockholders? equity.;D.ledger accounts.;9) Auditing is;a. conducted by the Securities and Exchange Commission to ensure that;registered financial statements are presented fairly.;b.the examination of;financial statements by a CPA in order to express an opinion on their fairness.;c.a part of accounting that involves only recording of economic events.;d.an area of accounting that involves such activities as cost accounting;budgeting, and accounting information systems.;10) In recording an accounting transaction in a double-entry system;A.there must only be two accounts affected by any transaction.;b.the number of debit accounts must equal the number of credit accounts.;c.there must always be entries made on both sides of the accounting equation.;D.the amount of the debits;must equal the amount of the credits.;11) If a company has overdrawn its bank balance, then;a. it cannot be detected by observing the balance of the cash account.;B. the cash account debits will exceed the cash account credits.;c. its cash account will show a debit balance.;d. its cash accounts will;show a credit balance;12) An account will have a credit balance if the;A. last transaction entered was a credit.;B. first transaction entered was a credit.;c. credits exceed the;debits.;d. debits exceed the credits.;13) On August 13, 2008, Dudbury Enterprises purchased office equipment for;$1,000 and office supplies of $200 on account. Which of the following journal;entries is recorded correctly and in the standard format?;a. Office Equipment............................................... 1,000;Account Payable.................................................... 1,200;Office Supplies........................................................... 200;b. Office Equipment............................................... 1,000;Office Supplies........................................................ 200;Accounts Payable................................................... 1,200;c. Accounts Payable............................................... 1,200;Office Equipment.................................................... 1,000;Office Supplies....................................................... 200d. Office Equipment...............................................1,000;Office Supplies........................................................... 200;Accounts Payable........................................ 1,200;14) Adjusting entries are required;a.when revenues are recorded in the period in which they are earned.;b.when the company's profits are below the budget.;c.when expenses are recorded in the period in which they are incurred.;d.because some costs;expire with the passage of time and have not yet been journalized.;15) The worksheet does not show;a. the trial balance before adjustments.;B. the ending balance in;the retained earnings account.;c. revenue and expense account balances.;d. net income or loss for the period.;16) In order to close the dividends account, the;a.retained earnings;account should be debited.;b.retained earnings account should be credited.;c.income summary account should be credited.;d.income summary account should be debited.;17) The entity responsible for setting International Accounting Standards;is;A.The Financial Accounting Foundation;B.The Financial Accounting Standards Board;C.The International Accounting;Standards Board;d.The International Monetary Fund;16) Joe is warehouse custodian and also maintains the accounting record of;the inventory held at the warehouse. An assessment of this situation indicates;A.establishment of responsibility is violated.;b.documentation procedures are violated.;c.independent internal verification is violated.;d.segregation of duties is;violated.;18) An employee authorized to sign checks should not record;a.cash disbursement;transactions.;b sales transactions.;c.owner cash contributions.;d.mail receipts.;19) Allowing only the treasurer to sign checks is an example of;a. establishment of;responsibility.;b. documentation procedures.;c. other controls.;d.segregation of duties.;20) The importance of a good system of internal controls was recognized with;the passage of;a. the Securities and Exchange Act of 1933.;b. the Securities and Exchange Act of 1994.;c. the Sarbanes-Oxley Act;of 2002.;d.the Blue Sky Laws.;21) Which one of the following is not an objective of a system of internal;controls?;A. overstate liabilities;in order to be conservative;B. Enhance the accuracy and reliability of accounting records;C. Reduce the risks of errors;D. Safeguard company assets

 

Paper#51671 | Written in 18-Jul-2015

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