GB518 Unit3 Midterm Exam1.What would be the appropriate entry for the following transaction?Bill Co.

GB518 Unit3 Midterm Exam1.What would be the appropriate entry for the following transaction?Bill Co. performed $5,200 in consulting services on account (Points : 2)Credit to Cash, Debit to Accounts ReceivableDebit to Revenue, Debit to CashDebit to Accounts Receivable, Credit to CashDebit to Revenue, Credit to CashDebit to Accounts Receivable, Credit to Revenue2.Technological advancement (Points : 2)Has replaced accountingHas not changed the work that accountants doHas freed accounting professionals to concentrate more on the analysis and interpretation of informationIn accounting has replaced the need for decision makersIn accounting is only available to large corporations3.Which of the following elements are found on the Balance Sheet? (Points : 2)Service RevenueNet IncomeOperating ActivitiesUtilities ExpenseRetained Earnings4.Increases in retained earnings from a company’s earnings activities are: (Points : 2)AssetsRevenuesLiabilitiesStockholder’s EquityExpenses5.An asset created by prepayment of an expense is: (Points : 2)Recorded as a debit to an unearned revenue accountRecorded as a debit to a prepaid expense accountRecorded as a credit to an unearned revenue accountRecorded as a credit to a prepaid expense accountNot recorded in the accounting records until the earnings process is complete6.Unearned revenues are: (Points : 2)Revenues that have been earned and received in cashRevenues that have been earned but not yet collected in cashLiabilities created when a customer pays in advance for products or services before the revenue is earnedRecorded as an asset in the accounting records7.The debt ratio is used: (Points : 2)To measure the amount of equity relative to the expensesTo reflect the risk associated with a company’s debtsOnly by banks when a business applies for a loanTo determine how much debt a firm should pay off8.The principle that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash and (3) measures the amount of revenue as the cash plus the cash equivalent value of any non-cash assets received from customers in exchange for goods or services is called the: (Points : 2)Going-concern principleCost principleRevenue recognition principleObjectivity principleBusiness entity principle9.An example of an operating activity is: (Points : 2)Paying wagesPurchasing office equipmentBorrowing money from a bankSelling stockPaying off a loan10.Which of the following statements best describes the relationship of U.S. GAAP and IFRS? (Points : 2)They are identicalThey are entirely different conceptual frameworksThey are similar but not identicalNeither has anything to do with accountingThey both relate only to publicly traded companies11.The financial statement that shows: beginning and ending retained earnings balances and the effects of net income (loss) and a dividend for the period is the: (Points : 2)Statement of financial positionStatement of cash flowsBalance sheetIncome statementStatement of retained earnings12.A credit is used to record: (Points : 2)An increase in an expense accountAn increase in an asset accountAn increase in an unearned revenue accountA decrease in a revenue accountA decrease to retained earnings13.The primary objective of financial accounting is: (Points : 2)To serve the decision-making needs of internal usersTo provide financial statements to help external users analyze and interpret an organization’s activitiesTo monitor and control company activitiesTo provide information on both the costs and benefits of managing products and servicesTo know what, when and how much to produce14.To include the personal assets and transactions of a business’s owner in the records and reports of the business would be in conflict with the: (Points : 2)Objectivity principleRealization principleBusiness entity principleGoing-concern principleRevenue recognition principle15.Net Income: (Points : 2)Decreases equityRepresents the amount of assets owners put into a businessEquals assets minus liabilitiesIs the excess of revenues over expensesRepresents the owners’ claims against assets16.A post-closing trial balance includes: (Points : 2)All ledger accounts with balances, none of which can be temporary accountsAll ledger accounts with balances, none of which can be permanent accountsAll ledger accounts with balances, which include some temporary and some permanent accountsOnly revenue and expense accountsOnly asset accounts17.On April 30, 2011, a three-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company’s income statement for the year ended December 31, 2011? (Points : 2)$500$4,000$6,000$14,000$18,00018.A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is: (Points : 2)2%20%200%500%$8,00019.A classified balance sheet: (Points : 2)Measures a company’s ability to pay its bills on timeOrganizes assets and liabilities into important subgroupsPresents revenues, expenses and net incomeReports operating, investing and financing activities20.A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in: (Points : 2)$200 less in net income$200 more in net income$200 difference between the debit and credit columns of the Unadjusted Trial Balance$200 of prepaid insuranceAn error in the financial statements21.If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on the following January 5 would include: (Points : 2)A debit to Cash and a credit to Salaries PayableA debit to Cash and a credit to Prepaid SalariesA debit to Salaries Payable and a credit to CashA debit to Salaries Payable and a credit to Salaries Expense No entry would be necessary on January 522.The difference between the cost of an asset and the accumulated depreciation for that asset is: (Points : 2)Depreciation ExpenseUnearned DepreciationPrepaid DepreciationDepreciation ValueBook Value23.A 10-column spreadsheet used to draft a company’s unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements and which is an optional tool in the accounting process is a(n): (Points : 2)Adjusted trial balance Work sheetPost-closing trial balanceUnadjusted trial balanceGeneral ledger24.A company’s Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of office supplies was purchased during the period? (Points : 2)$2,700$2,900$3,300$3,500$3,70025. Based on the following information, determine the current assets, assuming all accounts have a normal balance?Cash$ 6,754Dividends$ 2,000Accounts receivable$ 13,733Consulting fees earned$ 13,718Office supplies$ 2,625Rent expense$ 3,673Land$ 37,153Salaries expense$ 6,642Office equipment$ 14,535Telephone expense$ 560Accounts payable$ 6,463Miscellaneous expense$ 280Common stock$ 54,490Retained Earnings?(Points : 2)$74,800$37,647$60,265$23,11226.The length of time covered by a set of periodic financial statements is referred to as the: (Points : 2)Fiscal cycleNatural business yearAccounting periodBusiness cycleOperating cycle27.On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account and the company records adjustments only at year-end, the adjusting entry at the end of the first year is: (Points : 2)Debit Prepaid Insurance, $1,800; credit Cash, $1,800Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440Debit Prepaid Insurance, $360; credit Insurance Expense, $360Debit Insurance Expense, $360; credit Prepaid Insurance, $360Debit Insurance Expense, $360; credit Prepaid Insurance, $1,44028.A company purchased a new truck at a cost of $42,000 on July 1, 2011. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. How much depreciation expense will be recorded for the truck for the year ended December 31, 2011? (Points : 2)$3,250$3,500$4,000$6,500$7,00029.On June 30, 2011, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31, 2011 for Apricot would include: (Points : 2)A debit to an expense for $1,250A debit to a prepaid expense for $1,250A credit to an expense for $3,750A debit to a prepaid expense for $3,75030.A company pays each of its two office employees each Friday at the rate of $100 per day each for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is: (Points : 2)Debit Unpaid Salaries $600 and credit Salaries Payable $600Debit Salaries Expense $400 and credit Salaries Payable $400Debit Salaries Expense $600 and credit Salaries Payable $600Debit Salaries Payable $400 and credit Salaries Expense $40031.In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 4239 for November’s rent was correctly written and drawn for $7,390, but was erroneously entered in the accounting records as $3,790. When preparing the November bank statement, the company should: (Points : 2)Deduct $3,600 from the book balance of cashAdd $3,600 to the bank statement balanceAdd $7,390 to the book balance of cashDeduct $3,600 from the bank statement balanceAdd $3,600 to the book balance of cash32.A company had $43 missing from petty cash which was not accounted for by petty cash receipts. The correct procedure is to: (Points : 2)Debit Cash Over and Short for $43 Credit Cash Over and Short for $43Debit Petty Cash for $43Credit Petty Cash for $43Credit Cash for $4333. Multiple-step income statements: (Points : 2)Are required by the FASBContain more detail than a simple listing of revenues and expensesAre required for the perpetual inventory systemList cost of goods sold as an operating expenseCan only be used in perpetual inventory systems34.Physical inventory counts: (Points : 2)Are not necessary under the perpetual systemAre necessary to measure and adjust for inventory shrinkageMust be taken at least once a monthRequire the use of hand-held portable computers35.The quick assets are defined as: (Points : 2)Cash, short-term investments and inventoryCash, short-term investments and current receivablesCash, inventory and current receivablesCash, noncurrent receivables and prepaid expensesAccounts receivable, inventory and prepaid expenses36.A company had sales of $375,000 and its gross profit was $157,500. Its cost of goods sold equal: (Points : 2)$(217,000)$375,000$157,500$217,50037.Herald Company had sales of $135,000, sales discounts of $2,000 and sales returns of $3,200. Herald Company’s net sales equals: (Points : 2)$5,200$129,800$133,000$135,000$140,20038.The inventory valuation method that tends to smooth out erratic changes in costs is: (Points : 2) FIFOWeighted averageLIFOSpecific identificationWIFO39.The inventory turnover ratio: (Points : 2)Is used to analyze profitabilityIs used to measure solvencyMeasures how quickly a company turns over its merchandise inventoryValidates the acid-test ratioCalculation depends on the company’s inventory valuation method40.Given the following information:Petty cash balance$ 450.00Courier receipt$ 82.50Postage receipt$ 48.00Office Supplies receipt$ 56.22Business Meal receipt$ 102.34Cash on hand at the end of the month$ 76.21What is the amount of cash over and short? (Points : 2)debit $84.73credit $84.73debit $160.94credit $160.94no cash over or short would be recorded41.Cash equivalents: (Points : 2)Are short-term, highly liquid investmentsInclude 6-month CDsInclude checking accountsAre recorded in petty cashInclude money orders42.The full disclosure principle: (Points : 2)Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made and its effect on net incomeRequires that companies use the same accounting method for inventory valuation period after periodIs not subject to the materiality principleIs only applied to retailersIs also called the consistency principle43.Alpha Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700 and sales discounts of $3,475. Alpha’s net sales for this period equal: (Points : 2)$94,275$172,550$174,250$176,025$177,72544.A company had sales of $695,000 and its cost of goods sold of $278,000. Its gross margin equals: (Points : 2)$(417,000)$695,000$278,000$417,00045.The credit terms 2/10, n/30 are interpreted as: (Points : 2)2% cash discount if the amount is paid within 10 days, with the balance due in 30 days10% cash discount if the amount is paid within 2 days, with balance due in 30 days30% discount if paid within 2 days30% discount if paid within 10 days2% discount if paid within 30 days46.J.C. Penny had net sales of $28,496 million, its cost of goods sold was $19,092 million and its net income was $997 million. Its gross margin ratio equals: (Points : 2)3.5%5.2%33%67%149.3%47.An analysis that explains any differences between the checking account balance according to the depositor’s records and the balance reported on the bank statement is a (n): (Points : 2)Internal auditBank reconciliationBank auditTrial reconciliationAnalysis of debits and credits48.Days’ sales in inventory: (Points : 2)Is also called days’ stock on handFocuses on average inventory rather than ending inventoryIs used to measure solvencyIs calculated by dividing cost of goods sold by ending inventoryIs a substitute for the acid-test49.Goods on consignment: (Points : 2) ratioAre goods shipped by the owner to the consignee who sells the goods for the owner Are reported in the consignee’s books as inventoryAre goods shipped to the consignor who sells the goods for the ownerAre not reported in the consignor’s inventory since they do not have possession of the inventory50.The main principles of internal control include which of the following: (Points : 2)Establish responsibilitiesMaintain minimal recordsUse only computerized systemsBond all employees