ACCT 504 Week 4 Midterm Exam Set 1

Grading Summary

These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the “Details” section below.
Date Taken:

Time Spent:
1 h , 41 min , 28 secs
Points Received:
149 / 150
Question Type:
# Of Questions:
# Correct:
Multiple Choice

30

30

Essay

2

N/A

Grade Details – All Questions
Page: 
1 2 3
1.
Question :
(TCO A, B, C) External users want answers to all of the following questions except:

Student Answer:

 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?

Instructor Explanation:
Chapter 1 page 6

Points Received:
3 of 3

Comments:

2.
Question :
(TCO C) Borrowing money is an example of a(n):

Student Answer:

 delivering activity.

 financing activity.

 investing activity.

 operating activity.

Instructor Explanation:
Chapter 1 page 9

Points Received:
3 of 3

Comments:

3.
Question :
(TCO C) Buying and selling products are examples of:

Student Answer:

 operating activities.

 investing activities.

 financing activities.

 delivering activities.

Instructor Explanation:
Chapter 1 page 10

Points Received:
3 of 3

Comments:

4.
Question :
(TCO A) Resources owned by a business are referred to as:

Student Answer:

 stockholders’ equity.

 liabilities.

 assets.

 revenues.

Instructor Explanation:
Chapter 1 page 9

Points Received:
3 of 3

Comments:

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?

Student Answer:

 $47,000

 $54,000

 $27,000

 $33,000

Instructor Explanation:
$130,000 – 70,000 – 6,000 = $54,000
Chapter 1 page 10

Points Received:
3 of 3

Comments:

6.
Question :
(TCO A) In a classified balance sheet, assets are usually classified as:

Student Answer:

 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.

Instructor Explanation:
Chapter 2 page 49

Points Received:
3 of 3

Comments:

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.

Instructor Explanation:
Chapter 2 page 51

Points Received:
3 of 3

Comments:

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?

Student Answer:

 $650,000

 $550,000

 $475,000

 $800,000

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, 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?

Student Answer:

 $2.33

 $0.10

 $2.50

 $33.34

Instructor Explanation:
$15,000/6,000 = $2.50
Chapter 2 page 56

Points Received:
3 of 3

Comments:

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?

Student Answer:

 $69,000

 $22,000

 $116,000

 $91,000

Instructor Explanation:
$833,000 – $764,000 = $69,000
Chapter 2 page 57

Points Received:
3 of 3

Comments:

11.
Question :
(TCO D) Is the purchase of equipment treated as an expense at the time of purchase? Why or why not?

Student Answer:

 No, GAAP requires that 10% of the cost be expensed each year. This minimizes attempts to mislead financial statement users.

 Yes, the matching principle requires that the cost be expensed in the period of purchase.

 No, the cost needs to be allocated to the years of expected use.

 Yes, the actual life of the asset is not known, thus there is no acceptable way to allocate the cost.

Instructor Explanation:
Chapter 3 page 105

Points Received:
3 of 3

Comments:

12.
Question :
(TCO D) The left side of an account is:

Student Answer:

 blank.

 a description of the account.

 the debit side.

 the balance of the account.

Instructor Explanation:
Chapter 3 page 111

Points Received:
3 of 3

Comments:

13.
Question :
(TCO D) A credit is not the normal balance for which account listed below?

Student Answer:

 Common Stock account

 Revenue account

 Liability account

 Dividends account

Instructor Explanation:
Chapter 3 page 116

Points Received:
3 of 3

Comments:

14.
Question :
(TCO D) A debit is not the normal balance for which account listed below?

Student Answer:

 Dividends

 Cash

 Accounts Receivable

 Service Revenue

Instructor Explanation:
Chapter 3 page 116

Points Received:
3 of 3

Comments:

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?

Student Answer:

 Dividends payable and rent expense

 Repair expense and notes payable

 Prepaid insurance and advertising expense

 Service revenues and equipment

Instructor Explanation:
Chapter 3 page 116

Points Received:
3 of 3

Comments:

Page: 
1 2 3
* Times are displayed in (GMT-07:00) Mountain Time (US & Canada)

Grading Summary

These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the “Details” section below.
Date Taken:

Time Spent:
1 h , 41 min , 28 secs
Points Received:
149 / 150
Question Type:
# Of Questions:
# Correct:
Multiple Choice

30

30

Essay

2

N/A

Grade Details – All Questions
Page: 
1 2 3
1.
Question :
(TCO E) The time period assumption states that:

Student Answer:

 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.

Instructor Explanation:
Chapter 4 page 164

Points Received:
3 of 3

Comments:

2.
Question :
(TCO E) The matching principle matches:

Student Answer:

 customers with businesses.

 expenses with revenues.

 assets with liabilities.

 creditors with businesses.

Instructor Explanation:
Chapter 4 page 165

Points Received:
3 of 3

Comments:

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?

Student Answer:

 Due from Employees

 Due to Employer

 Wages Payable

 Wages Expense

Instructor Explanation:
Chapter 4 page 164

Points Received:
3 of 3

Comments:

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?

Student Answer:

 $28,500

 $33,500

 $20,500

 $37,500

Instructor Explanation:
$87,500 – 50,000 = $37,500
Chapter 4 pages 166-167

Points Received:
3 of 3

Comments:

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:

Student Answer:

 contra asset.

 prepayment.

 asset.

 accrual.

Instructor Explanation:
Chapter 4 pages 166-167

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:
3 of 3

Comments:

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?

Student Answer:

 $6,000

 $5,880

 $5,400

 $5,520

Instructor Explanation:
$6,000 x 98% = $5,880
Chapter 5 page 234

Points Received:
3 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.

Instructor Explanation:
($20,000 – $400) x 98% = $19,208 + $100 for freight = $19,308 Chapter 5 page 235

Points Received:
3 of 3

Comments:

9.
Question :
(TCO A) The Freight-in account:

Student Answer:

 increases the cost of merchandise purchased.

 is contra to the Purchases account.

 is a permanent account.

 has a normal credit balance.

Instructor Explanation:
Chapter 5 page 235

Points Received:
3 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) Of the following companies, which one would not likely employ the specific identification method for inventory costing?

Student Answer:

 Music store specializing in piano sales

 Custom Jewelry store

 Antique shop

 Hardware store

Instructor Explanation:
Chapter 6 page 286

Points Received:
3 of 3

Comments:

12.
Question :
(TCO A) Which of the following statements is correct with respect to inventories?

Student Answer:

 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.

Instructor Explanation:
chapter 6 page 288

Points Received:
3 of 3

Comments:

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?

Student Answer:

 Average cost method

 LIFO method

 FIFO method

 Need more information to answer

Instructor Explanation:
Chapter 6 page 288

Points Received:
3 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) Two categories of expenses in merchandising companies are:

Student Answer:

 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.

Instructor Explanation:
Chapter 5 page 228

Points Received:
3 of 3

Comments:

Page: 
1 2 3

Grading Summary

These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the “Details” section below.
Date Taken:

Time Spent:
1 h , 41 min , 28 secs
Points Received:
149 / 150
Question Type:
# Of Questions:
# Correct:
Multiple Choice

30

30

Essay

2

N/A

Grade Details – All Questions

Page: 
1 2 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).

Student Answer:

Accounting is based on two entry system. Its a system of records for the two entry system. All transactions are recorded in the two envy system to create balance. the account have a normal debits, assets, and liabilities.

Instructor Explanation:
Accounting is based on the double-entry system. This system records the dual effect of each transaction in the appropriate accounts, thus keeping the accounting equation in balance. Each transaction is analyzed and recorded using this dual effect system. If you do not have this basic understanding, the remaining chapters will become increasingly more difficult. You will not have the ability to make journal entries for the many new topics in these upcoming chapters.
Pages 111 through 116

Points Received:
24 of 25

Comments:
Ok
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.

Student Answer:

1) CALTOR COMPANY Income Statement For the Year Ended December 31, 2007 Revenues Net sales…………………………………………….$1,279,000 Cost of Goods Sold………………………………………………….710,000 Gross Profit…………………………………………………………..$569,000 Expenses: Selling expenses…………………..45,000 Administrative expenses…………………….239,000 Interest expense…………………………………68,000 ———– Total Expenses……………………………………………………..$352,000 ———— Net Income………………………………………………………….$217,000 ========== 2) Profit margin ratio: $217,000 / $1,279,000 = 16.9% Gross profit rate: $569,000 / $1,279,000 = 44.49%

Instructor Explanation:
1. CALTOR COMPANY
Income Statement
For the Year Ended December 31, 2010
Revenues

Net sales

$1,279,000
Cost of Goods Sold

710,000
Gross Profit

$569,000

Expenses:

Selling expenses
45,000

Administrative expenses
239,000

Interest expense
68,000

Total expenses

$352,000
Net income
$217,000

2. Profit margin ratio: $217,000 ÷ $1,279,000 = 16.9%
Gross profit rate: $569,000 / $1,279,000 = 44.49%
Page 235 and pages 241 through 244

Points Received:
35 of 35

Comments:
Ok
Page: 
1 2 3