Acct 557 midterm exam

Question 1. double rule applied to accounts in the ledger during the closing process implies that

                       

the account is a temporary account.

the account is a balance sheet account.

the account balance is not zero

A mistake has been made, since double ruling is prescribed.

 

Question 2.

On March 8, Black Candy Company bought supplies on account from the Arcade Fire Company for $550. Black Candy Company incorrectly debited Equipment for $500 and credited Accounts Payable for $500. The entries have been posted to the ledger. the correcting entry should be:

                       

Supplies................................................................................... 550

                Accounts Payable................................................................                 550

                       

Supplies................................................................................... 550

               Accounts Payable................................................................                 500

               Equipment..........................................................................                   50

                       

Supplies................................................................................... 550

                Equipment..........................................................................                 550

                       

Supplies................................................................................... 550

               Equipment..........................................................................                 500

               Accounts Payable................................................................                   50

 

Question 3.

The step in the accounting cycle that is performed on a periodic basis (i.e., monthly, quarterly) is

                       

analyzing transactions.

                       

journalizing and posting adjusting entries.

                       

preparing a post-closing trial balance.

                       

posting to ledger accounts.

 

Question 4.

 

If errors occur in the recording process, they:

                       

should be corrected as adjustments at the end of the period.

                       

should be corrected as soon as they are discovered.

                       

should be corrected when preparing closing entries.

                       

cannot be corrected until the next accounting period.

 

Question 5.

 

The operating cycle of a company is the average time that is required to go from cash to

                       

sales in producing revenues.

                       

cash in producing revenues.

                       

inventory in producing revenues.

                       

accounts receivable in producing revenues.

 

Question 6.

The income statement for the year 2015 of Fugazi Co. contains the following information:

Revenues                                                                                                                             $70,000

Expenses:

        Salaries and Wages Expense                                                              $45,000

        Rent Expense                                                                                     12,000

        Advertising Expense                                                                            10,000

        Supplies Expense                                                                                  6,000

        Utilities Expense                                                                                    2,500

        Insurance Expense                                                                                2,000

                Total expenses                                                                                                       77,500

Net income (loss)                                                                                                                $ (7,500)

 

After all closing entries have been posted, the Income Summary account will have a balance of

 

                       

$0.

 

                       

$7,500 debit.

 

                       

$7,500 credit.

 

                       

$77,500 credit

 

Question 7.

A worksheet can be thought of as a(n):

                       

permanent accounting record.

                       

optional device used by accountants.

                       

part of the general ledger.

                       

part of the journal.

 

Question 8.

The revenue recognition principle dictates that revenue should be recognized in the accounting records

                       

when cash is received.

                       

when the performance obligation is satisfied.

                       

at the end of the month.

                       

in the period that income taxes are paid.

 

Question 9.

Which of the following statements is not

true?

                       

Comparability means using the same accounting principles from year to year within a company.

                       

Faithful representation is the quality of information that gives assurance that it is free from error.

                       

Relevant accounting information must be capable of making a difference in the decision.

                       

The primary objective of financial reporting is to provide financial information that is useful to investors and creditors for making decision.

Question 10.

Expenses incurred but not yet paid or recorded are called

                       

prepaid expenses.

                       

accrued expenses.

                       

interim expenses.

                       

unearned expenses.



Question 11.

Adjusting entries are required

                       

because some costs expire with the passage of time and have not yet been journalized.

                       

when the company's profits are below the budget.

                       

when expenses are recorded in the period in which they are incurred.

                       

when revenues are recorded in the period in which services are performed.

 

Question 12.

 

 

A law firm received $3,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause

                       

expenses to be overstated.

                       

net income to be overstated.

                       

liabilities to be understated.

                       

revenues to be understated.

 

Question 13.

If an adjusting entry is not made for an accrued revenue,

                       

assets will be overstated.

                       

expenses will be understated.

                       

stockholders’ equity will be understated.

                       

revenues will be overstated.

 

Question 14.

An account is a part of the financial information system and is described by all except which one of the following?

                       

An account has a debit and credit side.

                       

An account is a source document.

                       

An account may be part of a manual or a computerized accounting system.

                       

An account has a title.

 

Question 15.

Transactions in a journal are recorded in

                       

account number order.

                       

dollar amount order.

                       

alphabetical order.

                       

chronological order.

 

 

17 . On June 1, 2015 Ted Leo buys a copier machine for his business and finances this purchase with cash and a note. When journalizing this transaction, he will

a.   use two journal entries.

*b.  make a compound entry.

c.   make a simple entry.

d.   list the credit entries first, which is proper form for this type of transaction.

 

Question 16.

An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?

                       

A debit balance in the dividends account

                       

A credit balance in an expense account

                       

A credit balance in a liabilities account

                       

A credit balance in a revenue account

 

Question 17.

Electrelane Company showed the following balances at the end of its first year:

 

 

Cash                                                                       $  4,000

Prepaid insurance                                                         7,000

Accounts receivable                                                      5,000

Accounts payable                                                         4,000

Notes payable                                                              6,000

Common stock                                                             2,000

Dividends                                                                    1,000

Revenues                                                                  32,000

Expenses                                                                  25,000

 

What did Electrelene Company show as total credits on its trial balance?

 

                       

$9,000

 

                       

$44,000

 

                       

$45,000

 

                       

$49,000

 

 

9 . An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?

a.   A debit balance in the dividends account

*b.  A credit balance in an expense account

c.   A credit balance in a liabilities account

d.   A credit balance in a revenue account

 

Question 18.

The entire group of accounts maintained by a company is called the

 

                       

chart of accounts.

 

                       

general journal.

 

                       

general ledger.

 

                       

trial balance.

 

Question 19.

An account consists of

                       

one part.

                       

two parts.

                       

three parts.

                       

four parts

 

Question 20.

The Duce Company has five plants nationwide that cost a total of $100 million. The current fair value of the plants is $500 million. The plants will be recorded and reported as assets at

                       

$100 million.

                       

$400 million.

                       

$500 million.

                       

$600 million

 

Question 21.

If supplies that have been purchased are used in the course of business, then

                       

a liability will increase.

                       

an asset will increase.

                       

stockholders' equity will decrease.

                       

stockholders' equity will increase.

 

Question 22.

The final step in solving an ethical dilemma is to

                       

identify and analyze the principal elements in the situation.

                       

recognize an ethical situation.

                       

identify the alternatives and weigh the impact of each alternative on stakeholders.

                       

recognize the ethical issues involved.

 

Question 23.

The primary purpose of the statement of cash flows is to report

                       

a company's investing transactions.

                       

a company's financing transactions.

                       

information about cash receipts and cash payments of a company.

                       

the net increase or decrease in cash.

 

Question 24.

Revenues would not result from

                       

sale of merchandise.

                       

issuance of common stock.

                       

performance of services.

                       

rental of property.

 

 

24 . If total liabilities increased by $30,000 and stockholders' equity increased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?

a.   $50,000 decrease

b.   $10,000 decrease

c.   $10,000 increase

*d.  $50,000 increase

 

Question 25.

All of the following statements are correct except

                       

Good decision-making depends on good information.

                       

A vital element in communicating economic events is the accountant's ability to analyze and interpret reported information.

                       

The origins of accounting are generally attributed to Socrates, a classical Greek philosopher, who promoted accounting as a social contract.

                       

The information that a user of financial information needs depends upon the kinds of decisions the user makes.

 


Answer

ACC 557 Midterm part 1

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