Grading Summary

These are the automatically

computed results of your exam. Date Taken: 2014
Grades for essay questions, and Time Spent: xxxx
comments from your instructor, Points Received: xxxx (96%)
are in the "Details" section below.

Question Type: # Of Questions: # Correct:

Multiple Choice 10 10
Essay 4 N/A

Grade Details - All Questions

Question 1. Question : (TCOs A, B, and C) Which of the following statements concerning

users of accounting information is incorrect?

Student Answer:
The marketing vice president is considered an internal user.

Present and prospective creditors are considered external users.

Regulatory authorities, such as the SEC, are considered internal

users.

The IRS is considered an external user.

Instructor Chapter 1
Explanation:

Points Received: 3 of 3
Comments:

Question 2. Question : (TCO C) Collecting cash from customers would be an example of

which type of activity?

Student Answer:
Operating

Investing

Financing

Non-cash financing activity

Instructor Chapter 1
Explanation:
 Points Received: 3 of 3
Comments:

Question 3. Question : (TCO A) Assets include

Student Answer:
loans obtained by the company.

stockholders’ investment in the business.

dividends paid to shareholders.

supplies and prepaid expenses.

Instructor Chapter 1
Explanation:

Points Received: 3 of 3
Comments:

Question 4. Question : (TCO A) Which of the following should not be classified as a current
liability?

Student Answer:
Accounts Payable

A note payable due in 15 months

Income Tax Payable

Unearned Revenue
Instructor Chapter 3
Explanation:

Points Received: 3 of 3
Comments:

Question 5. Question : (TCO B) For 2012, LBJ Corporation reported net income of $40,000;
net sales $1,400,000; and weighted average shares outstanding of
10,000. There were no preferred stock dividends. What was the 2012
 earnings per share?

Student
Answer: $4.00

$2.00

$14.00

$140.00
Instructor ($40,000 minus 0) divided by 10,000 shares = $4.00, Chapter 11
Explanation:

Points Received: 3 of 3
Comments:

Question 6. Question : (TCO D) Which of the following describes the normal balance and
classification of the Unearned Revenue account?

Student Answer:
debit, Expense

credit, Liability

credit, Stockholders’ equity

debit, Liability
Instructor Chapter 3
Explanation:

Points Received: 3 of 3
Comments:

Question 7. Question : (TCO E) Which of the following statements is correct?

Student Answer:
Cash-basis accounting records revenue when earned.

Cash-basis accounting records expenses when incurred.

Accrual accounting records expenses when incurred.

 Accrual accounting records revenue when the payment is
received in cash.
Instructor Chapter 3
Explanation:

Points Received: 3 of 3
Comments:

Question 8. Question : (TCOs A and B) A periodic inventory system would most likely be used
by a(n)

Student Answer:
automobile dealership.

jewelry store.

furniture store.

local neighborhood restaurant.

Instructor Chapter 6
Explanation:

Points Received: 3 of 3
Comments:

Question 9. Question : (TCOs A and B) LBJ Company recorded the following events involving
a recent purchase of merchandise.

- Received goods for $75,000, terms 2/10, n/30

- Returned $2,500 of the shipment for credit due to damaged goods
- Paid $1,200 for freight in
- Paid the invoice within the discount period

As a result of these events, the company's merchandise inventory

Student
Answer: increased by $72,250.

increased by $72,176.

increased by $75,876.
 increased by $73,700.
Instructor ($75,000 - $2,500) x 98% = $71,050 + $1,200 for freight = $72,250. Chapter 6
Explanation:

Points Received: 3 of 3
Comments:

Question 10. Question : (TCO A) In a period of declining prices, which of the following inventory
methods generally results in the lowest gross profit figure?

Student Answer:
FIFO method

LIFO method

Average cost method

Cannot determine based on the information given

Instructor Chapter 6
Explanation:

Points Received: 3 of 3
Comments:

Question 11. Question : (TCO D) Describe the process of preparing a trial balance. What is the
purpose of preparing a trial balance? If a trial balance does not
balance, identify what might be the reasons why it does not balance. If
the trial balance does balance, does that ensure that the ledger
accounts are correct? Explain.

Student Answer: Trial balance lists accounts with their balances in the order of
assets, liabilities, then stockholder's equity. It summarizes
account balances and shows whether total debits is equal to
total credits. It facilitates the preparation of financial
statements, but trial balances can be prepared at any time.
Accounting is a double-entry system that records dual effect
of each entity. Each transaction affects at least 2 accounts for
the purpose to keep the accounting equation in balance.
These account balances follow the "rules of debit and credit"
where their normal balance falls either on the left (debit) or
right (credit) side. Examples of normal debit balance
accounts: assets, expenses, and dividends. Examples of
normal credit balance accounts: common stocks, revenue,
 retained earnings. The process of preparing trial balance
occurs at the end of the month after financial transactions
have been journalized and then posted to the ledger. It may
need to be adjusted in order to keep the information up to
date. After the ledger accounts are closed, the balance of
each account is posted on the trial balance as either debit or
credit. The order of the accounting listing is important. Assets
are always listed first, then liabilities, then equities. In the
end, the total amount of debit should equal the total amount
of credit. If trial balance is not in balance (debit does not
equal credit), then this could be due to accounting errors. It
may occur even in computerized systems. Some examples
that cause these errors are: wrong input data (duplicated or
missing data), side or transposition errors. If trial balance is in
balance, it does not ensure that ledger accounts are correct
because there may be missing information on the ledger (both
credit and debit), or equally mistaken values put on both
sides of the equation. Harrison et. al. (2010). Financial
Accounting (8th ed.). Boston, MA: Pearson Education. p.83-88
http://accounting-simplified.com/preparing-trial-balance.html
Instructor To prepare a trial balance, create a column for the account name along
Explanation: with a column for the debits and a column for the credits. Then list all
accounts with their balances starting with assets, then liabilities, and
finally stockholders’ equity accounts. The purpose of the trial balance is to
verify that the sum of the debits equals the sum of the credits. A trial
balance may not balance due to a mathematical error or posting two
debits instead of a debit and a credit, as one example of an error. Even if
a trial balance balances, this does not ensure that the ledger accounts are
correct because there could be omissions from the trial balance, offsetting
errors, or the incorrect accounts could be charged.
Chapter 2 and the Week 2 Lecture

Points Received: 30 of 30
Comments: awesome

Question 12. Question : (TCOs B and E) The following information is available for Partin
Company.

Sales $598,000
Sales returns and 20,000
allowances
Cost of goods sold 398,000
Selling expense 69,000
Administrative expense 25,000
Interest expense 19,000
 Interest revenue 20,000

Instructions:

1: Use the above information to prepare a multiple-step income

statement for the year ended December 31, 2007.
2: Compute the profit margin ratio and gross profit rate. Partin
Company’s assets at the beginning of the year were $770,000, and
they were $830,000 at the end of the year. To qualify for full credit, you
must state the formula you are using, show your computations, and
explain your findings.

Student Answer: 1. Partin company Statement of Earnings Year ended

December 31, 2007 Sales revenues 598,000 Less: Sales
returns and allowances 20,000 Net sales 578,000 Less: Cost
of goods sold 389,000 Gross profit 180,000 Selling expense
69,000 Administrative expense 25,000 Interest expense
19,000 Less: Total expenses 113,000 Income from operations
67,000 Add: other income (interest revenue) 20,000 Net
income 87,000 2. Profit margin ratio = net income/ net sales
= 87,000/578,000 = 15.05% Gross profit rate = gross
profit/net sales = 180,000/578,000 = 31.14% (The profit
margin ration is 15.05% which is half the gross profit rate of
31.14% due to the high operating expenses).
Instructor 1: PARTIN COMPANY
Explanation: Income Statement
For the Year Ended December 31, 2007

Sales revenues
Sales $598,000
Less: Sales returns and
20,000
allowances
Net sales 578,000
Cost of goods sold 398,000
Gross profit 180,000

Operating expenses
Selling expenses $69,000
Administrative expenses 25,000
Total operating expenses 94,000
Income from operations 86,000
Other revenues and
gains
Interest revenue 20,000
Other expenses and
losses
Interest expense 19,000 1,000
Net income $87,000
 Profit margin ratio: $87,000 ÷ $578,000 = 15.1%
Gross profit rate: $180,000 / $578,000 = 31.14%
Chapter 3 and Week 3 Lecture

Points Received: 29 of 30
Comments: -1 interest expense should be reported under interest
revenue

Question 13. Question : (TCO D and E) Please prepare the following journal entries. Indicate
which account should be debited and which account should be
credited, along with the dollar amount of the debit and credit.
a: Investors invest $600,000 in exchange for 30,000 shares of common
stock.
b: Company paid rent of $3,000.
c: Company billed $5,000 for services performed.
d: Company purchased supplies of $3,000.
e: Company received $20,000 for services not yet performed.

Student Answer: a. Cash debit $600,000; common stock credit $600,000 b.

Rent expense debit $3,000 ; Cash credit $3000 c. Accounts
receivable debit $5,000 ; Service revenue credit $5,000 d.
Supplies debit $3,000 ; Cash credit $3,000 e. Cash debit
$20,000 ; Unearned service revenue credit $20,000
Instructor a: Debit Cash for $600,000 and credit Common Stock for $600,000.
Explanation: b: Debit Rent Expense for $3,000 and credit Cash for $3,000.
c: Debit Accounts Receivable for $5,000 and credit Service Revenue for
$5,000.
d: Debit Supplies for $3,000 and credit Cash for $3,000.
e: Debit Cash for $20,000 and credit Unearned Service Revenue for
$20,000.
See Chapters 2 and 3.

Points Received: 30 of 30
Comments: awesome

Question 14. Question : (TCO D) Your friend Sally has hired you to evaluate the following
internal control procedures.

a: Explain to your friend whether each of the numbered items below is

an internal control strength or weakness. You must also state which
principle relates to each of the internal controls.
 b: For the weaknesses, you also need to state a recommendation for
improvement.

1: Invoices are pre-numbered.

2: The controller approves of the purchases and makes the payment
since he or she is familiar with the purchases.
3: The office manager is in charge of the petty cash fund.
4: Blank checks are stored in the safe.
5: At the end of the day, the total receipts are counted by the cashier
on duty and reconciled to the cash register total.

Student Answer: 1. Strength (Adequate Records and Documentation

procedures). Documents should be pre-numbered to assure
completeness of processing and proper transaction cutoff. It
also prevents theft and inefficiency. A gap in the numbered
document sequence indicates a possibility that transactions
might have been omitted from processing. 2.Weakness
(Comparisons and Compliance Monitoring/ Separation of
Duties). There should not be any person or department who
completely process a transaction from beginning to end
without being cross-checked by another source. For example,
some division of the treasurer’s department should be
responsible for depositing daily cash receipts in the bank. The
controller's department should be responsible for recording
customer collections to individual customer accounts
receivable. A third employee (in a different department,
controller’s department) should compare the treasurer
department’s daily records of cash deposited with totals of
collections posted to individual customer accounts by the
accounting department. Duties need to be separated and
responsibilities divided to ensure safeguard controls. 3.
Weakness. The office manager should check the work of the
petty fund cashier - Independent internal verification. A
company employee who needs to make a small purchase may
obtain permission from a supervisor to use a company debit
card. Supervisors require receipts for all such purchases and
compare them with EFT amounts on the bank statement.
Debit cards are taking the place of petty cash systems in
many companies. 4. Strength (Physical Control/Limited
Access). All records, cash and checks should be protected in a
lock-box system protected by lock and key. 5. Weakness. It is
important to separate record keeping from custody of assets.
In processing transactions, three key duties: asset handling,
record keeping and transaction approval. Duties of cash
handling and record keeping should be separated to decrease
the possibility of an employee to engage in fraud if he/she
was keeping the books. Harrison et. al. (2010). Financial
Accounting (8th ed.). Boston, MA: Pearson Education. Chapter
4.
Instructor 1: Strength; adequate records
Explanation: 2: Weakness; separation of duties; Recommendation: controller can make
 payment but should not also make the purchase
3: Strength; limited access
4: Strength; limited access
5: Weakness; comparisons and compliance monitoring; Recommend:
supervisor counts the cash receipts daily

See Chapter 4.

Points Received: 25 of 30
Comments: -3 part 3 strength - limited access -2 part 5 comparisons and
compliance monitoring