ACC 556 – Midterm part 1 · Question 1 Source documents can provide evidence that a transaction has occurred · Question 2 Expense recognition is tied to revenue recognition. · Question 3 To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the employee authorized to sign checks. · Question 4 An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected. · Question 5 A concentration of credit risk is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of the company. · Question 6 Which of the following is not a common way that managers use the balance sheet? · Question 7 Financing activities include the purchase or sale of long-lived assets or the purchase or sale of investment securities. · Question 8 Bathlinks Corporation has a debt to assets ratio of 73%. This tells the user of Bathlinks’s financial statements that · Question 9 Owners of business firms are the only people who need accounting information. · Question 10 Marvin Services Corporation had the following accounts and balances: If the balance of the Buildings account was $45,000 and the equipment was sold for $21,000, what would be the total of stockholders’ equity? · Question 11 Consistent use of the same accounting principles and methods is necessary for meaningful analysis of trends within a company. · Question 12 Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency. · Question 13 Solvency ratios measure the short-term ability of the company to pay its maturing obligations. · Question 14 The best definition of assets is the · Question 15 The partnership form of business organization · Question 16 Goods that have been purchased FOB destination but are in transit, should be excluded from a physical count of goods by the buyer. · Question 17 Management may choose any inventory costing method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods in the company. · Question 18 Which of the following would not be classified as a long-term liability? · Question 19 The economic resources that are owned by a business are called stockholders’ equity. · Question 20 An advantage of using the periodic inventory system is that it requires less record keeping than the perpetual inventory system. · Question 21 The revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied. · Question 22 Lankston Company began the year by issuing $90,000 of common stock for cash. The company recorded revenues of $825,000, expenses of $720,000, and paid dividends of $45,000. What was Lankston’s net income for the year? · Question 23 The multiple-step income statement is considered more useful than the single-step income statement because it highlights the components of net income. · Question 24 Use the following data to calculate the current ratio. Carne Auto Supplies Balance Sheet December 31, 2014 Cash � � � � � � � � $ 35,000 � �Accounts payable � � � � � $ 65,000 Accounts receivable � � � � �50,000 � �Salaries and wages payable � � � 10,000 Inventory � � � � � � � �70,000 � �Mortgage payable � � � � � �90,000 Prepaid insurance � � � � � 40,000 � �Total liabilities � � � � � � �$165,000 Stock investments � � � � � 80,000 � � Land � � � � � � � � � 95,000 � � � � � � � � � � � � � � � � Buildings � � � $100,000 � � � � � � Common stock � � � � � �$120,000 Less: Accumulated � � � � � � � � � Retained earnings � � � � � 250,000 � depreciation � (30,000) � 85,000 � � �Total stockholders’ equity � �$370,000 Trademarks � � � � � � � 70,000 � � � Total liabilities and Total assets � � � � � � $535,000 � � � �stockholders’ equity � � � $535 · Question 25 Which of the following is the least likely consideration that management uses when deciding whether to pay a dividend? ACC 556 – Midterm part 2 · Question 1 Which of these would cause the inventory turnover ratio to increase the most? · Question 2 Bad Debt Expense is considered · Question 3 A trial balance proves · Question 4 Fehr Company sells merchandise on account for $5,000 to Kelly Company with credit terms of 2/10, n/30. Kelly Company returns $1,000 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? · Question 5 A revenue generally · Question 6 A merchandiser will earn an operating income of exactly $0 when · Question 7 Smithson Corporation’s unadjusted trial balance includes the following balances (assume normal balances): � Accounts Receivable � � � � � � � $3,357,000 � Allowances for Doubtful Accounts � � � $ �63,900 Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record? · Question 8 All of the following are characteristics of every accounting information system except it is a system · Question 9 Receivables are · Question 10 Regions Inc. pays its rent of $48,000 annually on January 1 and makes monthly adjusting entries. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following are true? · Question 11 What is an advantage of using the multiple-step income statement? · Question 1 Which of these would cause the inventory turnover ratio to increase the most? · Question 2 Bad Debt Expense is considered · Question 3 A trial balance proves · Question 4 Fehr Company sells merchandise on account for $5,000 to Kelly Company with credit terms of 2/10, n/30. Kelly Company returns $1,000 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? · Question 5 A revenue generally · Question 6 A merchandiser will earn an operating income of exactly $0 when · Question 7 Smithson Corporation’s unadjusted trial balance includes the following balances (assume normal balances): � Accounts Receivable � � � � � � � $3,357,000 � Allowances for Doubtful Accounts � � � $ �63,900 Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record? · Question 8 All of the following are characteristics of every accounting information system except it is a system · Question 9 Receivables are · Question 10 Regions Inc. pays its rent of $48,000 annually on January 1 and makes monthly adjusting entries. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following are true? · Question 11 What is an advantage of using the multiple-step income statement? · Question 12 The primary difference between accrued revenues and unearned revenues is that accrued revenues have: · Question 13 Dobler Company gathered the following reconciling information in preparing its June bank reconciliation: Cash balance per books, 6/30 � � � � � � $8,400 Deposits in transit � � � � � � � � � � �600 Notes receivable and interest collected by bank � 1,480 Bank charge for check printing � � � � � � � 50 Outstanding checks � � � � � � � � � 3,000 NSF check � � � � � � � � � � � � � 280 The adjusted cash balance per books on June 30 is · Question 14 Which of the following is least likely to help a company minimize losses as credit standards are relaxed? · Question 15 A company usually determines the amount of supplies used during a period by: · Question 16 If a company is given credit terms of 2/10, n/30, it should · Question 17 Independent internal verification of the physical inventory process occurs when · Question 18 Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using · Question 19 At Emerson Company, one bookkeeper prepares the cash deposits while the other bookkeeper enters the collections in the journal and ledger. Which of the following is the best explanation of this type of internal control principle over cash receipts? · Question 20 Which statement is incorrect? · Question 21 Management usually wants ________ financial statements and the IRS requires all businesses to file _________ tax returns. · Question 22 All of the following are true regarding the management and monitoring of cash except · Question 23 If Morris Corporation has a negative $131 million free cash flow, which of the following statements is most likely true? · Question 24 Which one of the following is not an objective of a system of internal controls? · Question 25 Olympus Climbers Company has the following inventory data: � � � July 1 � � Beginning inventory � �20 units at $19 � $ 380 � � � � 7 � � Purchases � � � � �70 units at $20 � 1,400 � � � �22 � � Purchases � � � � �10 units at $22 � � 220 � � � � � � � � � � � � � � � � � � � � � $2,000 A physical count of merchandise inventory on July 30 reveals that there are 32 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is
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