Accounting 2101 FINAL EXAM ch 1-12

The beginning and ending balances of retained earnings for the year were $30,000 and $40,000 respectively. If dividend payments during the year were $3,000, determine the net income or net loss for the year.

13,000 net income

Determine Sales revenue for Barta Company with the following data: Cost of Goods Sold $1,260,000 Operating Expenses 315,000 Sales Discounts 22,500 Sales Returns and Allowances 146,250 Net Income 382,500

2,126,250

The direct write-off method is not generally accepted because it violates which of the following accounting principles or concepts?

The matching principle

The direct write-off method is not generally accepted because:

The method fails to match sales revenue with expenses in the appropriate time period.

Dallas Company receives a six-month note from a customer. The note has a face amount of $60,000 and an interest rate of five percent. What is the total amount of interest income to be received?

1,500

Moshier Company has beginning equity of $1,200,000, net income of $200,000, dividends of $120,000 and investments by owners in exchange for stock of $40,000. Its ending equity is:

$1,320,000

The beginning-of-the-period cash balance for the Travis Company was a $9,600 debit. Cash sales for the month were $4,800 and sales on account were $6,400. The company paid $2,000 cash for current-period purchases and also paid $2,400 cash for amounts due from last month.What is the ending debit or credit balance in the Cash account?

$10,000 debit

Smith & Sons began the period with $10,000 in inventory. The company also purchased $20,000 of inventory and returned $2,000 for a full credit. A physical count of the inventory at year-end revealed $15,000 of inventory on hand. What was the company's cost of goods sold for the period?

$13,000 ($10,000 + $20,000 - $2,000 - $15,000)

The beginning and ending balances of retained earnings for the year were $30,000 and $41,000, respectively. If yearly dividends totaled $3,000, what was the net income or net loss for the year?

$14,000 net income

A firm receives a six-month note from a customer. The note has a face amount of $4,000 and an interest rate of nine percent. What is the total amount of interest to be received?

$180

Smith & Sons purchased $10,000 of merchandise from the Claremont Company with terms of 2/10, n/30. How much discount is Smith & Sons entitled to take if it pays for the merchandise within the allowed discount period of 10 days?

$200 (2% x $10,000)

Smith & Sons received a six month note from a customer. The note had a face amount of $5,000 and carried an interest rate of nine percent. What is the total amount of interest to be received?

$225

Smith & Sons has beginning inventory of $50,000, purchases of $260,000 and ending inventory is $35,000. What is the company's cost of goods sold?

$275,000 ($50,000 + $260,000 - $35,000)

In its income statement, Huffman Company reported cost of goods sold of $340,000. Later, Huffman determined that beginning inventory was understated by $92,000, and the ending inventory for was understated by $40,000.What should be the corrected amount for cost of goods sold for the year?

$392,000

Likert Company received a 90 day, six percent note receivable for $80,000 on November 1. How much interest income should be accrued on December 31?

$800

If assets total $140,000 and liabilities total $50,000, how much are net assets?

$90,000

What are the 2 principal reasons for preparing a trial balance?

- to check on whether the sum of the debit balances and the sum of the credit balances from the general ledger are equal. -to show all general ledger accounts in one location

Adjusting entries affect at least one

. income statement account and one balance sheet account

Ken Company purchased $19,000 of merchandise from Marilyn Company with terms of 4/10, n/45. What percent discount will Ken Company get if it pays within the allowed discount period? If Ken Company fails to pay within the discount period, how many days does Ken Company have from the date of purchase before the payment is considered to be late?

4%; 45

Smith & Sons reports the following data at year-end: Net sales: $100,000 Cost of goods sold: 60,000 Net income: 20,000 What is the company's gross profit percentage?

40 percent ($100,000 - $60,000)/$100,000

Smith & Sons reports net sales of $5,000, cost of goods sold of $3,000, and net income of $500. What is the gross profit percentage for the company?

40 percent ($5,000 - $3,000)/$5,000

Kurt Company purchased $5,000 of merchandise from Marilyn Company with terms of 2/10 n/40. What amount will Kurt Company pay to Marilyn Company, if Kurt Company takes advantage of the purchase discount?

4900

An exclusive right to operate or sell a specific brand of products in a given geographic area is called:

A franchise.

Posting refers to the process of transferring information from:

A journal to the general ledger accounts

The Sarbanes-Oxley Act was enacted to help restore confidence in financial reporting. Which of the following was not part of the legislation?

A new statement of social responsibility

What is a bank reconciliation?

A schedule that accounts for differences between a firm's cash balance as shown on its bank statement and the balance shown in its general ledger Cash account

A merchandising company's multi-step income statement differs from that of a service company in what way?

A service company does not include a line for cost of goods sold.

A merchandising company's classified income statement differs from that of a service company in what way?

A service company's income statement does not include a line item for cost ofgoods sold.

Generally accepted accounting principles are:

A set of guidelines to aid in the financial reporting process

IFRS refers to:

A set of standards and procedures that form guidelines for international financial accounting.

Which of the following is not part of the T-account?

Analysis

The following is the correct order of the five steps in the accounting cycle:

Analyze; record; adjust; report; close

Which of the following is desirable in a good system of internal accounting control?

Appropriate forms, such as checks and sales invoices, should have preprinted control numbers

Establish the correct sequence of steps in the accounting measurement process. a. Record in a systematic fashion b. Identify relevant economic activity c. Quantify economic activity

BCA

On which financial statement and at what amount are accounts receivable reported?

Balance sheet at the net realizable value

Which of the following is considered a good internal control practice?

Both job rotation and required vacations

Which of the following processes best defines accounting?

Both measuring economic activities and communicating results to interested parties.

Which of the following is not an example of a closing entry?

Close Unearned Revenue to Retained Earnings

Which of the following is not an example of a closing entry?

Close the Unearned Revenue account to the Retained Earnings account

Which of the following is not a common internal control concept?

Collusion among employees

In chapter 2, we see the accounting equation expand with the addition of the 2 primary components of Stockholder's Equity. What are the 2 components introduced

Common Stock Retained Earnings

Effective cash management involves all the following except:

Conduct internal audits.

Which of the following statements regarding cost flows is true?

Cost of goods available for sale is equal to beginning inventory plus cost of goods purchased.

Chassoul & Company pays a four percent credit card fee on all credit sales, and receives a cash deposit immediately following each credit card transaction. If credit sales for the company total $35,000 on January 15, what journal entry should be recorded to recognize the receipt of cash and the credit card fee expense?

Debit Cash $33,600; debit Credit Card Fee Expense $1,400

In a bank reconciliation, outstanding checks are:

Deducted from the bank balance

Mesa Motors received cash in advance from several customers to repair their cars next month. The adjusting entry associated with this is referred to as:

Deferred Revenue

Which of the following is a term identifying the periodic expensing of a plant asset?

Depreciation

Which of the following is not one of the three elements of the fraud triangle?

Embezzlement

Under which of the following freight terms does the seller retain ownership of the shipped goods?

F.O.B. destination

Select the correct information...

F.O.B. is an abbreviation for "free on board." The accountant can look at the freight bill or the invoice to determine which party bears the shipping costs.

Which inventory costing method results in the highest net income during a period of rising unit prices?

FIFO

Which inventory costing method results in the highest-valued ending inventory during a period of rising unit costs?

FIFO

The direct write-off method of accounting for uncollectible accounts follows the accrual concept of accounting more closely than does the allowance method of accounting for uncollectible accounts.

False

The chart of accounts is a listing of:

General ledger account names and numbers

Net sales less cost of goods sold equals:

Gross profit

A primary qualitative characteristic of accounting information is relevance. Relevance means that information should:

Have the capacity to make a difference in a decision

The Financial Statements are prepared in a specific order. What is the first Financial Statement that is prepared?

Income Statement

If assets increase by $50 and liabilities decrease by $30, stockholders' equity must:

Increase by $80

Having one person responsible for the related activities of ordering merchandise, receiving the merchandise, and paying for the merchandise:

Increases the potential of fraud.

GAAP:

Is a set of guidelines for preparing financial reports in the United States.

Assuming rising prices, which method will give the highest dollar value for cost of goods sold on the income statement?

LIFO

Which inventory costing method assumes that the most recently purchased merchandise is sold first?

LIFO

Which of the following plant assets is not depreciated?

Land for site use

Current assets are usually listed in the order of their:

Liquidity: most liquid to least liquid

Which is the following items will not be reported on a classified balance sheet?

Net income

A major shortcoming of the direct write-off method is that credit losses are:

Not matched with sales

Which of the following is not an example of a natural resource? Select one:

Oil rig

What are the 3 types of business activities that companies engage in?

Operating Investing financing

Good internal control over cash received on account involves the mailroom doing each of the following activities except:

Prepare the deposit receipt.

Bow Corp. accidentally overstated its previous year ending inventory by $650. Assume that ending current year inventory is accurately counted. The error in the previous year will have what effect on Bow Corp.?

Previous year net income is overstated by $650. Current year net income is understated by $650.

Which of the following would not be considered a current asset?

Propert, plant, equipment

3 Primary forms that a business can take

Proprietorship Corporation Partnership

1. What is not a primary function of financial accounting in society?

Provide comedy material for late-night talk shows.

Internal auditing is a company function that:

Provides independent appraisals of the company's financial statements, its internal control, and its operations

The expense recognition (matching) principle is best described as:

Record an expense in the same time period that the corresponding revenue isrecorded

The cost principle is best described as:

Recording an asset on the balance sheet at an amount equal to what waspaid for it.

Which of the following is an example of an adjusting entry?

Recording depreciation expense on a truck

The balance sheet format that reports assets first and then, beneath the assets, reports the liabilities and stockholders' equity is called the:

Report form

Have balances that are transferred to a permanent stockholders' equityaccount at the end of the accounting period

Temporary accounts

Which 2 principles are related to achieving proper matching on the Income Statement in the correct ( same) period?

The Revenue Recognition Principle The Expense Recognition Principle

Which of the following expenditures would not be capitalized as part of the cost of purchasing a piece of equipment?

The cost to train employees to maintain the new equipment

The accounting equation requires that:

Total assets equal total liabilities plus stockholders' equity

For the balance sheet to be in balance, the following must exist: Select one:

Total assets must equal total liabilities plus stockholders' equity

Which of the following is not shown on the statement of stockholders' equity?

Total liabilities.

Intangible assets are amortized to expense on the income statement.

True

Requiring employees to take vacations is an example of a good internal accounting control feature.

True

The Allowance for Doubtful Accounts normally has a credit balance.

True

The net accounts receivable reported in the current asset section of a company's balance sheet represents all receivables expected to be collected within the next year.

True

Cash includes each of the following except:

a postdated check.

Select the 3 steps of the Operating Cycle for a Merchandising Firm. Each correct step is worth 33.3333 points. Note that selecting the incorrect step will subtract points.

a. Receive cash from customer b. Sell Merchandise and deliver to Customer c. Purchase Merchandise for Resale

According to L02 - An accounting transaction is:

an economic event that must be recorded in the company's accounting records.

Which of the following is not considered a qualitative characteristic of accounting information?

assets must equal liabilities and stockholders' equity

Electronic funds transfer (EFT) involves transferring cash from one location to another using:

computers

Companies should recognize inventory as an expense when purchased.

false

Under the matching principle, the cost of inventory should be reported as an expense in the income statement when it is purchased, even if it is purchased on credit and will not be paid until the next reporting period.

flase

Internal controls do each of the following except:

guarantee the accuracy of the accounting records

The COSO framework identifies five internal control components. Which of the following is not one of the five components:

segregation of duties

Which of the following is not one of the five components:

segregation of duties

Accounting for the periodic amortization of intangible assets is similar to which depreciation method?

straight-line

Internal audits provide appraisals of a company's internal control.

true