ACCT 210 MIDTERM EXAM

Transportation-in is

part of cost of goods purchased.

Measurement of the economic effects on an entity involves each of the following except

recording the economic effects in the financial statements.

Which one of the following items is correct concerning the time element of financial statements?

The statement of retained earnings explains changes during a particular period.

Payment is received from customers who were billed earlier for services provided for them. For this transaction, identify the effect on the accounting equation.

There is no effect on the accounting equation as one asset account increases while another asset account decreases.

Blenham, Inc. sells merchandise on credit. If a customer pays its balance due after the discount period has passed, what is the effect of the payment on Blenham's accounting equation?

There is no net effect.

Floors, Inc. offers terms of 2/10, n/30 to credit customers. Tile Magic Corp. purchased 100 tile cutters with a list price of $20 each on August 5, 2017, on account. Tile Magic Corp. paid the invoice on August 31, 2017. How much sales discount will Floors recognize?

$0

Lucky Company purchased a truck at a cost of $12,000 in 2012. As of January 1, 2017, depreciation of $10,000 had been recorded on this asset. Depreciation expense for 2017 is $2,000. After the adjustments are recorded and posted at December 31, 2017, what is the carrying value of the truck?

$0

Border Company's Cash account had a balance of $962 on August 31. This included a bank deposit of $87 that was in transit. The August 31 bank statement contained the following information: Bank statement balance $1,089 NSF check $16 Bank service charge $7 Collection of notes receivable $68 Border also had checks outstanding of $169. What is Border's adjusted cash balance at August 31? $1,089 (Bank statement balance) + $87 (Deposit in transit) - $169 (Outstanding checks) = $1,007, or $962 (Book balance) + $68 (Note receivable) - $16 (NSF check) - $7 (Service charge) =

$1,007

Longitude Company borrowed on a two-year, 10%, $150,000 note on May 1, with interest and principal to be paid at maturity. How much interest will Longitude report on its income statement for the year ending December 31? $150,000 (Principal) × 10% (Rate) × 8/12 (Time) =

$10,000

Rosu Company has total current assets of $150,000 and total current liabilities of $50,000. What is the amount of working capital for Rosu Company? $150,000 - $50,000 =

$100,000

Murphy Corporation's end-of-year balance sheet consisted of the following amounts: Cash $ 35,000 Accounts receivable $46,000 Property, plant, and equipment $69,000 Long-term debt $41,000 Capital stock $107,000 Accounts payable $22,000 Retained earnings ? Inventory 33,000 What is Murphy's owners' equity balance at the end of the current year? Assets: $35,000 + $69,000 + $46,000 + $33,000 = $183,000Liabilities: $41,000 + $22,000 = $63,000Owners' equity: $183,000 - $63,000 =

$120,000

Takenson Corp. is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales $500,000 Purchases $225,000 Inventory (beginning) $16,000 Inventory (ending) $30,000 Operating expenses $148,000 Income tax expense $10,000 Retained earnings (beginning) $53,000 Dividends $15,000 Calculate net income. $289,000 (Gross profit) - $148,000 (Operating expenses) - $10,000 (Income tax expense) =

$131,000

The accountant for Busch Corp. was preparing a bank reconciliation as of February 28, 2017. The following items were identified: Busch's book balance $15,000 Outstanding checks $2,500 Service charge $15 Customer's NSF check returned by the bank $100 What amount will Busch report as its adjusted cash balance at February 28, 2017? $15,000 (Book balance) - $100 (NSF check) - $15 (Service charge) =

$14,885

Moore Industries began operations on January 2, 2017, with an investment of $50,000 by each of its two stockholders. Net income for its first year of business was $240,000. Moore Industries paid a total of $100,000 in dividends to its stockholders during the year. Read the information about Moore Industries. What is the company's retained earnings balance at December 31, 2017? ($0 Beginning Balance + $240,000 Net Income - $100,000 Dividends = )

$140,000

The following is from Goldman Inc.'s 2017 income statement. Purchases $172,000 Transportation-in $11,000 Inventory, January 1, 2017 $26,500 Inventory, December 31, 2017 $28,800 Purchase returns and allowances $8,400 How much will Goldman report as cost of goods purchased in its 2017 income statement? $172,000 (Purchases) - $8,400 (Purchase returns and allowances) + $11,000 (Transportation-in) =

$174,600

Selected data from the accounting records of Cobb Company are listed below. General and administrative expenses $2,200 Operating revenues $6,000 Selling expenses $1,800 Income taxes $600 Other revenues (expenses) $800 Dividends paid $1,200 Read the information about Cobb Company. What is Cobb's income from operations? ($6,000 Operating Revenues - $1,800 Selling Expenses - $2,200 General and Administrative Expenses =)

$2,000

Realistic Sound's unadjusted bank balance amounted to $3,000. Outstanding checks amounted to $500 and deposits in transit totaled $300. Based on this information alone, Realistic's adjusted cash balance is... $3,000 (Unadjusted bank balance) - $500 (Outstanding checks) + $300 (Deposits in transit) =

$2,800

Marvel Shoes reported the following items on its statement of cash flows for the current year: Net cash inflows from operating activities $ 70,000 Net cash outflows from investing activities (20,000) Net cash outflows from financing activities (40,000) Cash balance at the beginning of the year $30,000 Read the information about Marvel Shoes. What was the cash balance for Marvel Shoes at the end of the current year? ($30,000 Beginning Balance + $10,000 Increase in Cash = )

$40,000

Taylor Corp. identified the following data in preparing a bank reconciliation on October 31, 2017: Bank statement balance $29,600 Taylor's book balance (before adjustments) ? Outstanding checks $3,100 NSF check $300 Service charge $200 Deposits in transit $2,200 Interest earned on checking account $100 What is the net amount of the adjustments to Taylor's cash balance as a result of the bank reconciliation? $100 (Interest earned) - $300 (NSF check) - $200 (Service charge) =

$400 decrease

Wolfe Inc. reports these account balances at January 1, 2017: Retained Earnings $49,000 Accounts Receivable $20,000 Accounts Payable $24,000 Capital Stock $85,000 Land $153,000 Cash $13,000 Equipment $20,000 Notes Payable $28,000 Buildings $80,000 See the account balances for Wolfe Inc.On January 31, Wolfe collected $12,000 of its accounts receivable and paid $11,000 on its note payable. On January 31, 2017, the total liabilities are... $28,000 Notes Payable on January 1 - $11,000 collected on January 31 + $24,000 Accounts Payable =

$41,000

Anthony's Shoe Company uses a perpetual inventory system. The beginning balance in its Inventory account is $1,500, and the ending balance is $1,000. Cost of goods sold is $6,500. What was the amount of inventory purchased during the year? $6,500 (Cost of goods sold) + $1,000 (Ending inventory) - $1,500 (Beginning inventory) =

$6,000

The following data was identified by Raines Corp. in preparation of a bank reconciliation on October 31, 2017: Bank statement balance $30,700 Raines' book balance (before adjustments) ? Outstanding checks $4,200 NSF checks $400 Service charge $300 Deposits in transit $3,100 Interest earned on checking account $100 What is the net amount of the increase or decrease in Raines' cash balance which must be recorded as a result of the adjustments identified by the bank reconciliation? $100 (Interest earned) - $400 (NSF checks) - $300 (Service charges) =

$600 decrease

If a company has $152,000 of revenues, declares and pays $55,000 in dividends, and has net income of $89,000, how much were expenses for the year? $152,000 (Revenues) - $89,000 (Net income) = (Expenses)

$63,000

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Sawaddee's total assets doubled to $900,000 and its owners' equity remained the same during the year, what was the amount of its total liabilities at the end of the year? $900,000 = L + $220,000**Owners' equity = $450,000 - $230,000L =

$680,000

The balance sheet of Jobston, Inc. includes the following items: Cash$22,400 Accounts receivable $11,700 Inventory $23,300 Prepaid insurance $1,040 Land $80,000 Accounts payable $47,500 Salaries payable$1,200 Capital stock $84,040 Retained earnings $5,700 Read the information about Jobston, Inc. What is Jobston's working capital? Working Capital = Current Assets - Current Liabilities = ($22,400 + $11,700 + $23,300 + $1,040) - ($47,500 + $1,200) = $58,440 - $48,700 =

$9,740

All of the following are examples of manufacturers except

Amazon.com

Which of the following is an organization that lends funds to a business entity and expects repayment of the funds?

A creditor

A customer returned damaged goods and was given an allowance. Which of the seller's accounts decreases?

Accounts Receivable

Use the following five transactions for Monaco & Associates to answer the following question. Oct. 1 Bills are sent to clients for services provided in September in the amount of $800. 9 Dravo Co. delivers office furniture ($1,060) and office supplies ($160) to Monaco leaving an invoice for $1,220. 15 Payment is made to Dravo Co. for the furniture and office supplies delivered on October 9. 23 A bill for $430 for electricity for the month of September is received and will be paid on its due date in November. 31 Salaries of $850 are paid to employees. See the transactions for Monaco & Associates.The journal entry to record the October 1 transaction will include a debit of $800 to

Accounts Receivable.

Which of the following includes only current assets?

Accounts receivable, cash, inventory, office supplies

Which one of the following is an example of a deferred revenue?

Cash is received prior to providing the services to customers.

Which of the following is an example of a credit memorandum?

Collection of a note receivable by the bank

Which pair of accounts has the same set of rules for debit and credit entries?

Common Stock (Capital Stock) and Accounts Payable

Which of the following could never be considered to be cash equivalents?

Common stock issued by a corporation

Which one of the following is not an external user of financial information?

Company management

Which of the following statements regarding cost of goods available for sale is true?

Cost of goods available for sale is a "pool" of costs to be distributed between what was sold and what was not sold during a period.

A debit memorandum appeared on Cinco Inc.'s May bank statement. How will Cinco treat this amount on its May bank reconciliation?

Deduct it from the book balance

You are comparing three companies that use different depreciation methods. Which of the following would help you the most in making a comparison of the companies?

Disclosure of accounting policies

Which the following organizations is primarily responsible for establishing GAAP today?

FASB (financial accounting standards board)

Which one of the following groups is considered an internal user of financial statements?

Factory managers who supervise production line workers

Texas Inc. sold merchandise to Fagin Corp. on December 28, 2017, with shipping terms of FOB destination point. Fagin Corp. received the merchandise on January 3, 2018. Which of the following statements is true?

Fagin Corp. should record a liability for the purchase on January 3, 2018.

A bank loaned $62 million to Apex Corporation to finance the construction of a new distribution warehouse. In which section of Apex's statement of cash flows would you be able to determine whether the company repaid any portion of the debt during the year?

Financing Activities

Which of the following accounts is increased by a credit entry?

Interest Revenue

What is the effect on the accounting equation when a company recognizes rent as earned that had previously been received in advance from customers?

Net income increases

Which of the following accounts are normally reported as long-term liabilities on a classified balance sheet?

Notes payable due in five years and bonds payable

Which of the following items will be found in a corporate annual report?

Notes to the financial statements

When is revenue from the sale of merchandise normally recognized?

On the date the sale is made

Which of the following transactions affects the liabilities for Gravette, Inc.?

Payment is made on a bank loan which Gravette had obtained six months ago.

Which of the following events (transactions) is an internal event for a business entity?

Periodically, the historical cost of the computer equipment used by an accountant is recorded as depreciation expenses.

Which of the following procedures is not part of preparing a bank reconciliation of a checking account?

Preparing adjustments to reverse the transactions recorded for checks that are still outstanding

Which of the following transactions involves an accrued asset?

Rent owed by a tenant but not yet collected

Which of the following items would be subtracted from the balance per books on a bank reconciliation?

Service charge assessed by the bank

Which statement summarizes the income earned and the dividends paid?

Statement of retained earnings

Fox Auto sold merchandise to a customer for $3,000 on credit on March 10. The customer paid Fox Auto the amount due on March 31. Under the accrual basis of accounting, which of the following statements is true?

The March 31 transaction has no effect on total assets under the accrual basis.

Which of the following statements regarding inventory is true?

Wholesalers and retailers incur a single type of cost, the purchase price, of the inventory they sell.

Sunnyside Vacations has a $1,200 account receivable from John Smith. On September 18, John makes a partial payment of $1,100 to Sunnyside. The journal entry made on September 18 by Sunnyside to record this transaction includes

a credit to the Accounts Receivable account of $1,100.

Your bookkeeper is off for the day and you are trying to figure out what her last entry in the journal could be for. Unfortunately, she only recorded the debit side of the transaction as $4,400 to Accounts Payable. It is possible that this debit could correspond to

a payment of $4,400 to a supplier to settle a balance due.

Mitchell Company prepares monthly financial statements and will record a prepaid expense account for each of the following except

a tenant that pays Mitchell for six months of rent in advance.

If a work sheet is used, it is prepared

before preparing financial statements.

The correct term for an entry made to the left side of an account is

debit