Baruch College - Financial Accounting 2101 Midterm EXAM - Spring 2018

13) For most businesses what is the critical event? A) Sale of Inventory B) Collecting Cash for Receivables C) Acquiring Inventory

A

14) During a Sale in the operating cycle, what happens to cash? A) Stays the Same B) Decreases C) Increases D) It depends

A

17) Usually we measure Accounts Receivable at A) Benefit Value B) $0 C) Sacrifice Value

A

21) Prior to year-end adjusting entries, what would explain the Allowance for Uncollectible Accounts having a debit balance? A) The amount of actual uncollectible accounts in the current year was greater than the estimate of uncollectible accounts made at the end of the prior year. B) The amount of credit sales in the current year was greater than the amount of credit sales made in the prior year. C) The amount of actual uncollectible accounts in the current year was less than the estimate of uncollectible accounts made at the end of the prior year. D) The amount of cash collections from customers in the current year was less the amount of cash collections from customers in the prior year.

A

24) Which of the following are made when the business does something A) Transaction Entries B) Adjusting Entries C) Closing Entries

A

27) The usual balance in a Contra-Dividend account is a: A) CR B) It depends C) DR

A

29) Which statement is true? A) All Income Statement accounts are Temporary B) All Income Statement accounts are Permanent C) Some Income Statement accounts are Temporary and some are Permanent

A

3) Sooner Company had a net income of $8,000, $5,000, $12,000, and $10,000 over the first four years of the company's existence. If the average annual amount of dividends paid over the last four years is $3,000, what is the ending retained earnings balance? A) $23,000. B) $47,000. C) $35,000. D) $7,000.

A

32) The usual balance in a Contra-Owners' Equity account is a: A) DR B) It depends C) CR

A

35) Which of the following are made BEFORE a Trial Balance is prepared? A) Transaction Entries B) Adjusting Entries C) Closing Entries

A

42) For the past five years, Mookie Consulting Services reported the following annual net income and dividend amounts: Year Net Income Dividends 1 $22,000 $2,000 2 17,000 2,000 3 9,000 1,000 4 14,000 3,000 5 25,000 4,000 If Mookie had Retained Earnings of $88,000 at the end of year 5, what was the company's Retained Earnings at the beginning of Year 1? A) $13,000. B) $25,000. C) $1,000. D) $7,000.

A

47) Which of the following items would not appear in an income statement? A) Cash. B) Advertising expense. C) Salaries expense. D) Service revenue.

A

5) The Statement of Cash Flows always balances. A) False B) True

A

50) The adjusting entry required when amounts previously recorded as deferred revenues are earned by providing goods or services to customers includes: A) A debit to a liability. B) A debit to an asset. C) A credit to a liability. D) A credit to an asset.

A

64) What is usually a better predictor of future cash flow to the firm? A) Past Income B) Past Cash Flows

A

77) In Cash Flow reporting Accounts Receivable is measured at A) $0 B) Sacrifice Value C) It depends on the measuring system D) Benefit Value

A

80) Consider the following account balances of the Shattuck Law Firm at the end of the year: Accounts Payable $4,400 Salaries Expense 12,800 Cash 1,700 Common Stock 2,400 Service Revenue 8,300 Supplies 4,300 Retained Earnings 1,100 Utilities Expense 5,000 How many of these accounts would appear in Shattuck's year-end income statement? A) Three. B) Four. C) Five. D) Two.

A

82) After the Third STEP in the Operating Cycle the firm has? A) Cash B) Account Receivable C) Inventory D) None of the other three

A

86) A company received an order from a customer in June for services to be provided. Those services were provided in July, and the customer paid the full amount in August. According to the revenue recognition principle, in which month should the company record revenue? A) July. B) August. C) Evenly over the three months. D) June.

A

88) Consider the following transactions: Issued common stock for cash. Purchased equipment by signing a note payable. Paid rent for the current month. Collected cash from customers on account. How many of these four transactions increased the given company's total assets? A) Two. B) Four. C) Three. D) One.

A

9) Which of the following are made AFTER the financial statements are prepared? A) Closing Entries B) Adjusting Entries C) Transaction Entries

A

94) Following are transactions of Gotebo Tanners, Inc., a new company, during the month of January: 1. Issued 10,000 shares of common stock for $15,000 cash. 2. Purchased land for $12,000, signing a note payable for the full amount. 3. Purchased office equipment for $1,200 cash. 4. Received cash of $14,000 for services provided to customers during the month. 5. Purchased $300 of office supplies on account. 6. Paid employees $10,000 for their first month's salaries. How many of these transactions decreased Gotebo's total assets? A) One. B) Four. C) Two. D) Three.

A

98) The Income Statement is a: A) Video B) Snapshot

A

59) Investors and Creditors are interested in which of these entries? A) Transaction Entries B) Adjusting Entries C) Closing Entries

AB

92) Which of the following must Debits equal Credits A) Transaction Entries B) Closing Entries C) Adjusting Entries

ABC

40) Which of the following are classified as Accounts Receivable? A) Monies that customers owe us for providing a service. B) Tax refunds owed to us by the IRS. C) Monies that customers owe us from sale of merchandise. D) Loans we made to a customer.

AC

76) Which of the following are made ONLY at year end A) Adjusting Entries B) Transaction Entries C) Closing Entries

AC

19) Red Company has the following information: Net credit sales = $400,000 Net income = $100,000 Average total assets = $80,000 Average accounts receivable = $20,000 What is Red's average collection period (rounded to the nearest whole day)? A) 73 days. B) 18 days. C) 9 days. D) 5 days.

B

20) When a company pays cash for equipment, what is the effect on the accounting equation for that company? A) Decrease assets and decrease liabilities. B) No change. C) Increase assets and increase liabilities. D) Increase assets and increase stockholders' equity.

B

25) Usually we pick up Income at: A) Collection of a Receivable B) Point of Sale C) Acquisition of Inventory

B

28) Consider the following transactions: Issued common stock for cash. Purchased equipment by signing a note payable. Provided services to customers on account. Collected cash from customers on account. How many of these four transactions increased the given company's total liabilities? A) Three. B) One. C) Two. D) Four.

B

30) If a Trial Balance balances A) all account balances must be correct B) some account balances may be wrong

B

31) An alternative form of the accounting equation is: A) Stockholders' Equity = Assets + Liabilities. B) Assets − Liabilities = Stockholders' Equity. C) Net Income = Revenues − Expenses. D) Assets = Liabilities − Stockholders' Equity.

B

34) The usual balance in a Contra-Liability account is a: A) It depends B) DR C) CR

B

36) Marketing is involved in which step in the Operating cycle? A) Fourth B) Second C) Third D) First

B

37) After the First STEP in the Operating Cycle the firm has? A) Cash B) Inventory C) None of the other three D) Account Receivable

B

38) We always sell pens at $8. We sold a pen for $7 because it was damaged. Record the sale at A) It depends B) $7 C) $8

B

46) A company has 1,384 customers they extend credit to, how many total A/R will they have A) None of the other three B) 1,385 C) 1 D) 1,384

B

48) In a Balanced set of Accounting Records, EVERY Account must balance. A) True B) False

B

55) Sandburg Veterinarian reports the following information for the year: Net credit sales $120,000 Average accounts receivable 20,000 Cash collections on credit sales 100,000 What is Sandburg's receivables turnover ratio? A) 1.2. B) 6.0. C) 0.2. D) 5.0.

B

57) Which of the following is possible for a particular business transaction? A) Increase assets; Decrease liabilities B) Decrease assets; Increase assets C) Decrease liabilities; Increase expenses D) Decrease assets; Increase stockholders' equity

B

60) How many of the following transactions would affect operating cash flows reported in the statement of cash flows (all transaction involve cash)? Borrowed $50,000 from the bank Purchased $12,000 in supplies Provide services to customers for $27,000 Paid the utility bill of $750 Purchased a delivery truck for $12,000 Received $25,000 from issuing common stock A) Four. B) Three. C) Two. D) One.

B

65) On September 30, MFP Co. paid employee salaries of $7,000, including $1,000 it owed to its employees last month. What are the effects of this transaction on the accounting equation? A) Assets decreased, expenses decreased, and liabilities increased. B) Assets decreased, liabilities decreased, and expenses increased. C) Assets increased, expenses increased, and liabilities decreased. D) Expenses decreased, liabilities decreased, and assets decreased. E) Expenses increased, liabilities increased, and assets increased.

B

66) The Income Statement always balances. A) True B) False

B

68) Is it possible to make an entry which changes only one account? A) Yes B) No

B

7) If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much? A) $76,000 increase. B) $34,000 increase. C) $55,000 increase. D) $34,000 decrease.

B

71) If total change in cash = $44,000, net operating cash flows = $22,000, and net investing cash flows = ($13,000); then net financing cash flows = A) $45,000. B) $35,000. C) $15,000. D) $25,000.

B

72) The Statement of Cash Flows is a: A) Snapshot B) Video

B

74) Using the information below from the accounting records of Thomas Corporation, stockholders' claims to the company's resources amount to: Assets $1,200,000 Liabilities $800,000 Net income $100,000 Retained earnings $250,000 A) $1,200,000. B) $400,000. C) $800,000. D) $250,000.

B

79) When Managers report they A) Always try to look bad B) Sometimes like to look good, and sometimes like to look bad C) Always try to look good

B

84) Of the following, the most important objective for financial accounting is to provide information useful for: A) Increasing future profits. B) Predicting cash flows. C) Providing accountability. D) Determining taxable income.

B

85) The third step in the Operating Cycle is called? A) Purchase B) Collection C) Sale D) Manufacture

B

89) In the Allowance Method when we collect on a previously written off receivable A) Assets increase, Net Income increases. B) Assets stay the same, Net Income stays the same. C) Assets decrease, Net Income decreases D) It depends

B

97) The usual balance in a Contra-Expense account is a: A) DR B) CR C) It depends

B

26) Which of the following are made BEFORE the financial statements are prepared? A) Closing Entries B) Adjusting Entries C) Transaction Entries

BC

1) The second step in the Operating Cycle is called? A) Purchase B) Manufacture C) Sale D) Collection

C

10) How many of the following events would require an expense to be recorded? Ordering office supplies Hiring a receptionist Paying employees' salaries for the current month Receiving but not paying a current utility bill Paying for insurance in advance A) Four. B) One. C) Two. D) Three.

C

11) The primary focus for financial accounting information is to provide information useful for: A) Investment decisions but not credit decisions. B) Credit decisions but not investment decisions. C) Investment decisions and credit decisions. D) Neither investment decisions nor credit decisions

C

12) Which of the following best explains the meaning of total stockholders' equity? A) The amount of common stock less dividends over the life of the company. B) The difference between total revenues and total expenses, less dividends for the year. C) The amount of capital invested by stockholders plus profits retained over the life of the company. D) All revenues, expenses, and dividends over the life of the company.

C

2) The usual balance in a Contra-Revenue account is a: A) CR B) It depends C) DR

C

39) On January 1, Brad Inc. sold $30,000 in products to a customer on account. Then on January 10, Brad collected the cash on that account. What is the impact on Brad's accounting equation from the collection of cash on January 10? A) Assets increase and stockholders' equity increases. B) Assets increase and liabilities decrease. C) No net effect on the accounting equation. D) Assets decrease and liabilities decrease.

C

4) A company orders office supplies in June. Those supplies are received and paid for in July. The supplies are used in August. In which month should the company record supplies expense? A) June. B) Evenly over the three months. C) August. D) July.

C

41) In Cash Flow reporting inventory is measured at A) It depends on the measuring system B) Sacrifice Value C) $0 D) Benefit Value

C

43) Emmitt had the following final balances after the first year of operations: assets, $55,000; stockholders' equity, $25,000; dividends, $3,000; and net income, $10,000. What is the amount of Emmitt's liabilities? A) $55,000. B) $7,000. C) $30,000. D) $13,000.

C

44) Consider the following list of accounts: Cash Retained Earnings Service Revenue Utilities Expense Salaries Expense Accounts Receivable Accounts Payable Common Stock Equipment Dividends How many of these accounts have a normal debit balance? A) Seven. B) Five. C) Six. D) Four.

C

45) Given the information below about Thomas Corporation, what was the amount of dividends the company paid in the current period? Beginning retained earnings $54,000 Ending retained earnings $110,000 Decrease in cash $10,000 Net income $84,000 Change in stockholders' equity $15,000 A) $110,000. B) $13,000. C) $28,000. D) $18,000.

C

53) In Purchase or Manufacture in the operating cycle, what happens to cash? A) Increases B) Stays the Same C) Decreases D) It depends

C

54) Which of the following is not a possible journal entry? A) Credit assets; Debit expenses. B) Debit expenses; Credit liabilities. C) Debit assets; Debit stockholders' equity. D) Credit revenues; Debit assets.

C

58) In a sale on account, who is undertaking a financial risk of non-payment? A) Neither the buyer nor the seller B) Both the buyer and the seller C) The seller D) The buyer

C

6) A company receives a $50,000 cash deposit from a customer on October 15 but will not provide services until November 20. Which of the following statements is true? A) The company records nothing on October 15. B) The company records service revenue on October 15. C) The company records deferred revenue on October 15. D) The company records cash collection on November 20.

C

62) Receiving cash from customers before services are performed results in: A) Service Revenue. B) Accounts Receivable. C) Deferred Revenues. D) Prepaid Assets.

C

63) If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true? A) The company has issued $60,000 of common stock. B) Total revenues during the year equal $60,000. C) The company's assets exceed liabilities by $60,000. D) Net income for the year equals $60,000.

C

67) Stimpleton Company engages in the following cash payments: Purchase equipment $2,000 Pay rent 500 Repay loan to the bank 5,000 Pay worker's salaries 1,000 What is the total amount of cash paid for operating activities? A) $6,000. B) $2,000. C) $1,500. D) $7,000.

C

73) The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year. The company declared a dividend of $1.3 million during the year. What was the net income earned during the year? A) $1.3 million. B) $1.9 million. C) $4.5 million. D) $3.2 million.

C

78) The usual balance in a Contra-Asset account is a: A) DR B) It depends C) CR

C

83) Allocation is primarily as issue in A) Both Measuring Assets and Income B) None of the other three C) Measuring Income D) Measuring Assets

C

91) Usually we measure Inventory at A) Benefit Value B) $0 C) Sacrifice Value

C

96) Income in the operating cycle equals A) It depends on the Measuring system. B) Sacrifice Value Minus Benefit Value C) Benefit Value Minus Sacrifice Value D) Benefit Value Plus Sacrifice Value

C

99) The assumption that a business will continue to operate into the future is the: A) Periodicity assumption. B) Monetary unit assumption. C) Going concern assumption. D) Economic entity assumption.

C

100) A company provides services on account. Indicate how this transaction would affect (1) assets, (2) stockholders' equity, and (3) revenues. A) (1) No effect, (2) Increase (3) Increase B) (1) Increase, (2) No effect (3) Increase C) (1) No effect, (2) No effect (3) No effect D) (1) Increase, (2) Increase (3) Increase

D

15) Pumpkin Inc. sold $500 in pumpkins to a customer on account on January 1. On January 11 Pumpkin collected the cash from that customer. What is the impact on Pumpkin's accounting equation from the collection of cash? A) Increase assets and increase liabilities. B) Decrease assets and decrease liabilities. C) Decrease assets and increase liabilities. D) No net effect to the accounting equation.

D

16) In the Allowance Method when we do the year end adjusting entry for Bad Debts A) Assets stay the same, Net Income stays the same. B) It depends on the balance in the Allowance account before we make the entry. C) Assets increase, Net Income increases. D) Assets decrease, Net Income decreases

D

18) In Cash Flow reporting when the firm acquires inventory A) There is no Loss and no Gain B) It depends on the measuring system C) There is a Gain D) There is a Loss

D

22) After the Second STEP in the Operating Cycle the firm has? A) None of the other three B) Cash C) Inventory D) Account Receivable

D

23) Which of the following is not a major section in the statement of cash flows? A) Cash flows from financing activities. B) Cash flows from investing activities. C) Cash flows from operating activities. D) Cash flows from customers.

D

33) In the Allowance Method when we write off a receivable A) It depends B) Assets increase, Net Income increases. C) Assets decrease, Net Income decreases D) Assets stay the same, Net Income stays the same.

D

49) When a company makes an end-of-period adjusting entry that includes a credit to Prepaid Rent, the debit is usually made to: A) Rent Payable. B) Rent Receivable. C) Cash. D) Rent Expense.

D

51) In Cash Flow reporting at the point of Sale A) There is a Gain B) It depends on the measuring system C) There is a Loss D) There is no Loss and no Gain

D

52) In Cash Flow reporting at the collection of an Account Receivable A) It depends on the measuring system B) There is no Loss and no Gain C) There is a Loss D) There is a Gain

D

56) DW has an ending Retained Earnings balance of $51,100. If during the year DW paid dividends of $4,300 and had net income of $22,500, then what was the beginning Retained Earnings balance? A) $69,300. B) $300. C) $24,300. D) $32,900.

D

61) Which of the following transactions would cause an increase in both the assets and liabilities of a company? A) Pay for inventory purchased 90 days ago. B) Paying for the current month's rent. C) Services received on account. D) Purchase of a building by issuing a note payable.

D

69) For which step in the Operating cycle is there a difference between manufacturers and retailers? A) Fourth B) Third C) Second D) First

D

70) Consider the following account balances of the Shattuck Law Firm at the end of the year: Accounts Payable $4,400 Salaries Expense 12,800 Cash 1,700 Common Stock 2,400 Service Revenue 8,300 Supplies 4,300 Retained Earnings 1,100 Utilities Expense 5,000 How many of these accounts would appear in Shattuck's year-end balance sheet? A) Two. B) Four. C) Three. D) Five.

D

75) Shupe Inc. estimates uncollectible accounts based on the percentage of accounts receivable. What effect will recording the estimate of uncollectible accounts have on the accounting equation? A) Decrease assets and decrease liabilities. B) Increase liabilities and decrease stockholders' equity. C) Increase assets and decrease stockholders' equity. D) Decrease assets and decrease stockholders' equity.

D

8) How many of the following transactions are operating activities? Borrowed $50,000 from the bank Purchased $12,000 in supplies Provide services to customers for $27,000 Paid the utility bill of $750 Purchased a delivery truck for $12,000 Received $25,000 from issuing common stock A) One. B) Two. C) Four. D) Three.

D

81) Which statement below best describes the accounting equation? A) The change in retained earnings equals net income less dividends. B) Financing activities equal investing and operating activities. C) Equality of revenue and expense transactions over time. D) Resources of the company equal creditors' and owners' claims to those resources.

D

87) Which of the following is not possible when recording a transaction? A) Stockholders' equity decreases and assets decrease. B) One asset increases and another asset decreases. C) Stockholders' equity increases and assets increase. D) Liabilities increase and assets decrease.

D

90) Which of the following is recorded upon receipt of a payment on April 7, 2018, by a customer who pays a $900 invoice dated March 3, 2018, with terms 2/10, n/60? A) Credit Purchase Discounts $18. B) Credit Accounts Receivable $882. C) Debit Sales Discounts $18. D) Debit Cash $900.

D

93) Which of the following is NOT possible for a business transaction? A) Increase liabilities and increase expense. B) Decrease assets and increase expense. C) Decrease liabilities and increase revenue. D) Increase assets and decrease revenue.

D

95) The Trueblood Criterion is used by A) Internal Management reports (Managerial Accounting) B) Managers when reporting to the IRS C) Managers when reporting to the public D) Accountants

D