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ACCT 310 Fall 2011 Midterm Exam

ACCT 310 Fall 2011 Midterm Exam

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ACCT 310 section 6382 Fall 2011 Midterm Examination Chapters 1-5 & 7 Student Name: ____________________________________ Multiple Choice (1 point

each) 1. What is a major objective of financial reporting? a) Provide information that clearly portrays the economic resources of an enterprise. b) Provide information that is useful to the Internal Revenue Service in determining the amount of federal income taxes payable. c) Provide information that is comprehensible only by sophisticated investors. d) Provide information that is useful in assessing the amounts and timing of revenue. 2. What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States? a) The SEC reviews financial statements for compliance. b) The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction. c) The SEC requires all companies listed on an exchange to submit their financial statements to the SEC. d) The SEC coordinates with the AICPA in establishing accounting standards. 3. What would be an advantage of having all countries adopt and follow the same accounting standards? a) Consistency. b) Comparability. c) Lower preparation costs. d) B and C.

b) Always. d) When future benefit exists. d) None of the above. c) Reliability and Relevance. d) Neither Consistency nor Verifiability.4. c) The entire amount receivable has been collected from the customer and there remains no further possible liability. 5. b) The product is available for sale to the ultimate customer. b) Relevance. d) Neither Reliability nor Relevance. b) Verifiability. c) Consistency and Verifiability. neutrality is an ingredient of the primary quality of: a) Reliability. Generally. When should an expenditure be recorded as an asset rather than an expense? a) Never. which of the following relates to both relevance and reliability? a) Consistency. revenue from sales should be recognized at a point when: a) Management decides it is appropriate to do so. According to the FASB’s conceptual framework. 6. . 2. 7. c) If the amount is material. According to Statement of Financial Concepts No.

2010. b) Increase of $40.000 plus interest.000. b) An accrued expense on the books of the company that made the advance payment. b) $180. 2009 and is payable in three equal annual payments of $800. In Allen’s June 2011 included a 10% note payable in the amount of $2.000.8. How do these prepaid expenses expire? Rent a) Through use and consumption b) Through use and consumption c) With the passage of time d) With the passage of time Supplies Through use and consumption With the passage of time With the passage of time Through use and consumption 9. d) Increase of $6. Maso Company recorded journal entries for the issuance of common stock for $40. d) $120. c) Increase of $27. What net effect do these entries have on owners’ equity? a) Increase of $19. the payment of $13. 10. The first interest and principle payment was made on October 1.000.000. d) An accrued revenue on the books of the company that made the advance payment. c) An unearned revenue on the books of the company that made the advance payment. Allen Corp’s liability account balances at June 30. . Unearned revenue on the books of one company is likely to be a) A prepaid expense on the books of the company that made the advance payment. 2011 balance sheet. and the payment of salaries expense of $21.400.000. c) $60. The note is dated October 1. what amount should be reported and accrued as interest payable for this note? a) $40.000 on accounts payable.000.000. 11.000.

000.000 1. reported the following: Net income Preferred dividends declared Common dividend declared Unrealized holding loss. c) $1.700 2. d) $13.000.000 10. 2010 December 31. 13. d) $4. c) $10.000 2.900 Salaries payable 12.100.200 $1. Olsen Company paid or collected during 2010 the following items: Insurance premiums paid $10.000. b) $7.000 What would Transformers report as its ending balance of Accumulated Other Comprehensive Income? a) $5.200 The following balances have been excerpted from Olsen’s balance sheets: December 31. 2009 Prepaid insurance $1.700.000 40.300 10. Transformers Inc.000 80.400 Interest collected 33. Beginning Balance $ b) $6. 2010.900 Salaries paid 120. .700.600 The insurance expense on the income statement for 2010 was: a) $10. For the year ended December 31.500 Interest receivable 3.000 5. net of tax Retained earnings Common stock Accumulated Other Comprehensive Income.

Dole Company.000. . b) Unusual gain. what amount should Chase report as total infrequent net gains that are not considered extraordinary? a) $140. c) Cumulative effect of a change in accounting principle.000.000.000. Chase Corp. b) $290.000 loss on the write-down of inventories In its 2010 income statement. The company’s income before taxes and extraordinary items was: a) $240. b) $330.000 gain on the sale of equipment A $70.000.000. c) $231. d) Prior period adjustment. Which of the following items would be reported at its gross amount on the face of the income statement? a) Extraordinary loss. d) $300. had the following infrequent transactions during 2010: A $150. 15. reported net income of $210.14. Included in income for the period was an extraordinary loss from flood damage of $30.000. c) $80. 16. with an applicable income tax rate of 30%. d) $360.000.000 before deducting the related tax effect.000.000 gain from selling the only investment Chase has ever owned A $210.

17. January 1 1. d) None of these. b) c) d) Is not essential to a fair presentation of financial position. 2010 is: a) $1.100 Dividends 560 420 476 Common Stock 504 448 500 Stockholders’ Equity. Is needed in financial reporting when company policy differs from income . c) Current assets less current liabilities. Is not a current practice in financial reporting. b) Unappropriated retained earnings. Should be included in corporate financial statements or notes thereto. c) $560.596 Net income 560 448 ? Assets. January 1 ? ? 2. 18. Working capital is: a) Capital which has been reinvested in the business.80 $3.680 ? 2. A general description of the depreciation methods applicable to major classes of depreciable assets: a) tax policy. d) $1. b) $504. December 31 ? ? 1. January 1 Stockholders’ Equity at January 1.36 0 0 ? Liabilities.624. Presented below are data for Antwerp Corp.120. 19.016 Stockholders’ Equity. 2010 2011 2012 $2.

Under which section of the balance sheet is “cash restricted for plant expansion” reported? a) Stockholders’ equity.’s trial balance reflected the following account balances at December 31. Stine Corp.000 d) $82.000 b) $90. d) Current liabilities. Which of the following methods of determining annual bad debt expense best achieves the matching concept? a) Percentage of average accounts receivable.000 21. c) Direct write-off.20.000 Land held for future business site 18. 2010 balance sheet. 2010: Accounts receivable.000 Accumulated depreciation on equipment and furniture 15.000 Patent 4. c) Non-current assets. 22. the current assets total is: a) $77.000 Trading securities 6. b) Current assets.000 Inventory 30. net $24. b) Percentage of ending accounts receivable. .000 c) $73.000 Equipment 25.000 In Stine’s December 31. d) Percentage of sales.000 Prepaid expenses 2.000 Cash 11.

d) $0. (i) Residual interest in the assets of the enterprise after deducting its liabilities. (k Decreases assets during the period by purchasing ) the company’s own stock.000. (h Arises from income statement activities that ) constitute the entity’s ongoing major or central operations. Equestrian Roads accepted a customer’s $50. after adding distributions to owners and subtracting investments by owners. (j) Increases assets during a period through sale of product. Assets Distributions to owners Expenses Liabilities Comprehensive income Gains Equity Revenues Losses Investments by owners Identify the element or elements associated with the 12 items below (a through l). b) $ Exercises & Problems 24. except those resulting from investments by . The product sold normally sells for $46. c) $5. how much interest revenue from this transaction would be recorded for the year ending December 31? a) $2. If the sale was made on June 30.000 zero-interest-bearing six-month note payable in a sales transaction. (12 points) (a) Arises from peripheral or incidental transactions (b Obligation to transfer resources arising from a ) past transaction (c) Increases ownership interest (d Declares and pays cash dividend to owners ) (e) Increases net assets in a period from nonowner sources (f) Items characterized by service potential or future economic benefit (g Equals increase in assets less liabilities during the ) year. (l) Includes all changes in equity during the period. Ten interrelated elements that are most directly related to measuring the performance and financial status of an enterprise are provided below.000.

985 127. maintains the accounting records of Dunbar Clinic on a cash basis. 2010.980 December 31.000 127.626 Salaries Expense 12.479 Common Stock 10. During 2010. Flynn Design Agency Adjusted Trial Balance December 31.255 2. . Dunbar collected $144.985 Prepare a balance sheet at December 31 and an income statement and a statement of retained earnings for the year ended December 31.626 Art Supplies 5.626 Printing Equipment 60. Dr.426 Insurance Expense 1. unearned service revenue. she had accounts receivable. M. Corinne Dunbar. Presented below is the adjusted trial balance as of December 31. and prepaid expenses as follows: Accounts Receivable Unearned Service Revenue Accrued Expenses Prepaid Expenses January 1.131 2.305 from her patients and paid $55. (18 points) 26.000 Unearned Advertising Revenue 5.020 4.961 3.626 Advertising Revenue 58. At January 1.126 Interest Payable 150 Notes Payable 5. Flynn Design Agency was founded by Kevin Flynn in January 2006. 25.726 Salaries Payable 1. 2010.029 Interest Expense 500 Depreciation Expense 7. 2010 16.126 Prepaid Insurance 2.445 1.D.608 in expenses.126 Retained Earnings 3.126 Accounts Receivable 21.000 Art Supplies Expense 3. and December 31.126 Accounts Payable 8. accrued expenses.460 3. 2010 9.owners and distributions to owners.400 Rent Expense 4.126 Accumulated Depreciation 35.242 . 2010 Debit Credit Cash $10. 2010.

800 During 2010. 4.600 873.203 shares Common stock. 8% cumulative preferred stock. The major classifications of activities reported in the statement of cash flows are operating. Operating activity – add to net income.315. (6 points) 28.960 shares $10.924.300 35% Compute earnings per share data as it should appear in the 2010 income statement of Schroeder Corporation.058. $100 par. Reported as significant noncash activity. 5.603. Schroeder did not issue any additional stock.500 3.380. Operating activity – deduct from net income. At December 31. 2009. 2.300 $20. Financing activity. 109. Investing activity. investing and financing. Income from continuing operations before taxes Discontinued operations (loss before taxes) Preferred dividends declared Common dividends declared Effective tax rate $30.How much revenue under the accrual basis did Corinne Dunbar earn during 2010? (3 points) 27. Schroeder Corporation had the following stock outstanding. The following also occurred during 2010.624 2. (13 points) The transactions are as follows: (a) Issuance of capital stock (b) Purchase of land and building (c) Redemption of bonds (d) Sale of equipment (e) Depreciation of machinery (f) Amortization of patent (g) Issuance of bonds for plant assets (h) Payment of cash dividends (i) Exchange of furniture for office equipment (j) Purchase of treasury stock (k) Loss on sale of equipment (l) Increase in accounts receivable during the year (m)Decrease in accounts payable during the year .920. $5 par. Classify each of the transactions listed below as: 1. 4. 3.

400 Ending merchandise inventory $105. postage stamps on hand $719. cash advance received from customer $963 (not included in checking account balance).300 Goods are marked to sell at 40% above cost Compute an estimate of the ending accounts receivable balance from customers that should appear in the ledger and any apparent shortages. utility deposit paid to gas company $193.940 as shown in the ledger.870.380. determine the amount that should be reported as cash.600 Merchandise purchased $374. (5) Checking account balance $719. short-term treasury bills $185. Mary Herman.670. money market balance at mutual fund (has checking privileges) $51. certificate of deposit $1. has just purchased a new Buick.690.830. (2) Checking account balance $512. NSF check received from customer $813. certified check from customer of $9. (3) Checking account balance $592. coins and currency on hand $1. per month.340.900.430.950.980 paid to federal government to guarantee performance on construction contract. (5 points) . (4) Checking account balance at bank $46. refundable deposit of $28. petty cash fund $316. The following information is available for your first year in business: (1) (2) (3) (4) Collections from customers $231.450. payable on demand.060 to company executive. cash advance of $8.730. You decided to test the accuracy of the accounts receivable balance of $95.880. cash held in bond sinking fund $209. postdated check from customer $12. to whom you pay a salary of $1. cash restricted for future plant expansion $516. cash restricted due to maintaining compensating balance requirement of $107. (10 points) (1) Checking account balance $940.850. cash advance to subsidiary of $992. Presented below are a number of independent situations (numbered 1 through 5).570.419.040. Your accounts receivable clerk. Assume that all sales are made on account. For each situation. an overdraft in special checking account at same bank as normal checking account of $21.

On January 16. $2.300 $50. Accounts Receivable Allowance for Doubtful Accounts Sales (all on credit) Sales Returns & Allowances Dr. Sandel Company reports that following financial information before adjustments.) Prepare the journal entry for Sorter to write off the Ordonez receivable. Prepare the journal entry to record Bad Debts Expense assuming Sandel Company estimates bad debts at 5% of accounts receivable. (4 points) 32.550 will not be collected.) What is the net realizable value of Sorter Company’s accounts receivable before the write-off of the Ordonez receivable? c) What is the net realizable value of Sorter Company’s accounts receivable after the write-off of the Ordonez receivable? .870 and an allowance for doubtful accounts of $43.300 $900. b.31. (6 points) a. $127.000 Prepare the journal entry to record Bad Debts Expense assuming Sandel Company estimates bad debts at 1% of net sales. Sorter Company determined that its receivable from Ordonez Company of $6. and management authorized its write-off. 2011.800 Cr.280. At the end of 2010 Sorter Company has accounts receivable of $838.

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