ACCT 504 Week 4 Midterm Set 3
ACCT 504 Week 4 Midterm Set 3
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Date Created: 11/05/15
Grading Summary These are the automatically computed Date Taken: results of your exam. Grades for essay questions, and comments from your Time Spent: Points Received: 150 / 150 (100%) instructor, are in the "Details" section below. 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) Debt securities sold to investors that must be repaid at a particular date some years in the future are called: Student Answer: accounts payable. notes receivable. taxes payable. bonds payable. 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 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) 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: 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 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 166167 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 167168 Points Received: 3 of 3 Comments: 6. Question : (TCO A, B) A perpetual inventory system would most likely be used by a(n): Student Answer: automobile dealership. hardware store. drugstore. convenience store. Instructor Explanation: Chapter 5 page 230 Points Received: 3 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: 3 of 3 Comments: 8. Question : (TCO A, B) Lindy's Market recorded the following events involving a recent purchase of merchandise: Received goods for $80,000, terms 2/10, n/30. Returned $2,000 of the shipment for credit. Paid $500 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 $76,440. increased by $78,000. increased by $76,940. increased by $76,840. Instructor ($80,000 $2,000) x 98% = $76,440 + $500 for freight = $76,940 Explanation: Chapter 5 page 235 Points Received: 3 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: 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 284285 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: 3 of 3 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 costflow 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: 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) The figure for which of the following items is determined at a different time under the perpetual inventory method than under the periodic method? Student Answer: Sales Cost of Goods Sold Purchases Accounts Receivable Instructor Explanation: Chapter 5 page 230 Points Received: 3 of 3 Comments: 15. Question : (TCO B) The primary source of revenue for a retailer is: Student Answer: investment income. service revenue. the sale of merchandise. the sale of plant assets the company owns. Instructor Explanation: Chapter 5 page 228 Points Received: 3 of 3 Comments: Page: 1 2 3 Page: 1 2 3 1. Question : (TCO D) Describe the process of preparing a trial balance. What is the purpose of preparing a trial balance? If a trial balance does not balance, identify what might be the reasons why it does not balance. If the trial balance does balance, does that insure that the ledger accounts are correct? Explain. Student Answer: Making a trial balance can really be broken down into 3 steps. List the account titles and their balances. You want to make sure that you not only capture some, but all this way you have a accurate representation of were you are. Then you need to list the total the debit column and total the credit column. This allows you to see all the credits and debits so in the end you can see what its going in and have going out. Then you need to verify the equality of the two columns. If one has a credit, but no debit then there is a problem. Both line need to equal at all times. Once you ensure that all things balance then you can say its in balance if its not then you need to establish the differences and find out were the discrepancy is and why its there. The purpose of the trail balance as it talks about in the text is to lists accounts and their balances at a given time. A company usually prepares a trial balance at the end of an accounting period. The accounts are listed in the order in which they appear in the ledger. Debit balances are listed in the left column and credit balances in the right column. The totals of the two columns must be equal. No, a trial balance does not prove that all transactions have been recorded or that the ledger is correct. If there is a problem with the information going in there cannot be good information coming out. If the ledger is wrong then so will your results. Instructor Explanation: Chapter 3 page 129 Points Received: 25 of 25 Comments: 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 multiplestep 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: Page: 1 2 3
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