This Tutorial contains 4 Set of Midterm Exam\t\u00a0\t\u00a0\t1. Question : (TCOs A and E) Your friend, Ellen, has hired you to evaluate the following internal control procedures.\tExplain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which internal control procedure relates to each of the internal controls.\t\u00a0\tFor the weaknesses, you also need to state a recommendation for improvement.\t\u00a0\t\u00a0\t(1) The cashier counts the total receipts and reconciles the receipts with the cash register total.\t(2) Electronic documents are password-protected.\t(3) The accountant is completely independent of the sales department.\t(4) Invoices are not numbered.\t(5) Large purchase orders must be approved by a manager.\t\u00a0\t\u00a0\t\u00a0\t\u00a0\tTCOs A and E) Your friend, Ellen, has hired you to evaluate the following internal control procedures.\tExplain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which internal control procedure relates to each of the internal controls.\t\u00a0\tFor the weaknesses, you also need to state a recommendation for improvement.\t\u00a0\t\u00a0\t(1) The cashier counts the total receipts and reconciles the receipts with the cash register total.\t(2) Electronic documents are password-protected.\t(3) The accountant is completely independent of the sales department.\t(4) Invoices are not numbered.\t(5) Large purchase orders must be approved by a manager. (Points : 30)\t\u00a0\tSet 2\t1: Invoices are pre-numbered.\t2: The controller approves of the purchases and makes the payment since he or she is familiar with the purchases.\t3: The office manager is in charge of the petty cash fund.\t4: Blank checks are stored in the safe.\t5: At the end of the day, the total receipts are counted by the cashier on duty and reconciled to the cash register total. (Points : 30)\t\u00a0\tSet 3\tInvoices are pre-numbered.\tThe controller approves of the purchases and makes the payment since he\tor she is familiar with the purchases.\tThe office manager is in charge of the petty cash fund.\tBlank checks are stored in the safe.\tAt the end of the day, the total receipts are counted by the cashier on duty\tand reconciled to the cash register total\t\u00a0\t\u00a0\tSet 4\tQuestion 14. Question : (TCO D) \u00a0Your friend Dean has hired you to evaluate the following internal control procedures.\u00a0\ta: 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.\tb: For the weaknesses, you also need to state a recommendation for improvement.\u00a0\t\u00a0\t\u00a0\t1: Bonding of the cashiers is not required because all of the cashiers have significant experience.\t2: The treasurer is the only one allowed to sign checks.\t3: All employees may operate cash registers.\u00a0\t4: Blank checks are stored in the safe.\u00a0\t5: Supervisors count cash receipts daily.\t\u00a0\t\u00a0\t12. (TCOs E and F) 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.\t\u00a0\t(1) Investors invest $500,000 in exchange for 50,000 shares of common stock.\t(2) Company purchased equipment for $25,000 on account.\t(3) Company paid Rent for $4,000.\t(4) Company received $15,000 for services not yet performed.\t(5) Employees work Monday through Friday and are paid on Friday. Salary expense is $10,000 per day and this year, December 31 falls on a Wednesday. (Points : 30)\t\u00a0\t\u00a0\tSet 2\tQuestion\tPlease 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.\t\u00a0\t(1) Investors invest $300,000 in exchange for 30,000 shares of common stock.\t(2) Company made payment on account for $500.\t(3) Employees work Monday through Friday and are paid on Friday. Salary expense is $20,000 per day, and December 31 falls on a Tuesday.\t(4) Company purchased Supplies for $2,000.\t(5) The company needs to record Supplies used for $500.\t\u00a0\t\u00a0\t\u00a0\tSet 3\t13. Question : (TCOs D and E) Please prepare the following journal entries. Indicate\twhich account should be debited and which account should be credited,\talong with the dollar amount of the debit and credit.\tInvestors invest $50,000 in exchange for 1,000 shares of common stock.\tCompany purchased equipment for $10,000 on credit.\tCompany received $5,000 for services performed.\tCompany made payment on account for $2,000.\t\u00a0\tSet 4\tQuestion 13. Question : (TCO D and TCO 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. \u00a0\ta: Investors invest $100,000 in exchange for 10,000 shares of common stock.\u00a0\tb: Company paid a utility bill for $600.\u00a0\tc: Company received cash of $15,000 for services performed.\u00a0\td: Company made payment on account for $1,000.\u00a0\te: Company received $12,000 for services not yet performed.\t\u00a0\t\u00a0\t\u00a0\tSet 5\tQuestion 12. Question : (TCOs B and D) 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.\t\u00a0\t(1) Investors invest $300,000 in exchange for 30,000 shares of common stock.\t(2) Company made payment on account for $500.\t(3) Employees work Monday through Friday and are paid on Friday. Salary expense is $20,000 per day, and December 31 falls on a Tuesday.\t(4) Company purchased Supplies for $2,000.\t(5) The company needs to record Supplies used for $500.\t\u00a0\t\u00a0\tQuestion 3\t.The following items are taken from the financial statements of BGS Company for 2012:\tCash $500,000\tAccounts Receivable 200,000\tSupplies 70,000\tAccounts Payable 147,300\tUnearned Service Revenue 18,000\tEquipment, net of accumulated depreciation 212,000\tCommon Stock 500,000\tRetained Earnings 12\/31\/2011 78,300\tLong-term debt 142,400\tService revenue 240,000\tCost of Goods Sold 72,000\tRent expense 36,000\tSupplies expense 12,000\t\u00a0\tSet 2\t14. (TCO D) The following items are taken from the financial statements of SRW Company for 2012:\t\u00a0\t\u00a0\tCash $375,000\tAccounts Receivable 125,000\tPrepaid Insurance 100,000\tAccounts Payable 88,000\tUnearned Service Revenue 15,000\tEquipment, net of accumulated depreciation 177,000\t\u00a0\t\u00a0\t\u00a0\tQuestion 4\t13. (TCOs B and D) The following items are taken from the financial statements of Lacey Company for 2012:\t\u00a0\t\u00a0\tAdvertising Expense $14,000\tAccounts Receivable 12,000\tCost of Goods Sold 65,000\tAccumulated Depreciation”\ufffdEquipment 20,000\tAccounts Payable 21,000\tCash 44,000\tDepreciation Expense 17,000\tCommon Stock 100,000\t\u00a0\t\u00a0\t\u00a0\tInstructions\t\u00a0\t(a) Calculate the net income. (18 points)\t(b) Calculate the balance of Retained Earnings that would appear on a balance sheet at December 31, 2012. (7 points)\t(c) Calculate the gross profit percentage. (5 points) (Points : 30\tLacey Company \tIncome Statement \t\u00a0\t\u00a0\tQuestion 13. Question : (TCOs B and D) The following items are taken from the financial statements of Ashe Company for 2012:\t\u00a0\tEquipment $100,000\tAccounts Receivable 12,000\tAccounts Payable 9,000\tCost of Goods Sold 72,000\tUtilities Expense 11,000\tDepreciation Expense 17,000\tInsurance Expense 9,000\t\u00a0\t\u00a0\tQuestion 14. Question : (TCO D) The following items are taken from the financial statements of BGS Company for 2012:\u00a0\t\u00a0\tCash $500,000\u00a0\tAccounts Receivable 200,000\u00a0\tSupplies 70,000\u00a0\tAccounts Payable 147,300\u00a0\tUnearned Service Revenue 18,000\u00a0\tEquipment, net of accumulated depreciation 212,000\u00a0\t\u00a0\t\u00a0\tInstructions\u00a0\t\u00a0\t(a) Please create a classified balance sheet in good form for the year ended 2012. (25 points)\t\u00a0\t(b) Please calculate the current ratio. (5 points)\t\u00a0\t\u00a0\tQuestion 12. Question : (TCOs B and E) The adjusted trial balance of Gertz Company included the following selected accounts.\t\u00a0\t\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\t\u00a0 Debit Credit\tSales $575,000\tSales returns and allowances $ 50,000 \tSales discounts 9,500 \tCost of goods sold 347,000 \t\u00a0\t\u00a0\tInstructions:\u00a0\t1: Use the above information to prepare a multiple-step income statement for the year ended December 31, 2010.\u00a0\t2: Calculate the profit margin ratio and gross profit rate. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings.\t\u00a0\t\u00a0\t\u00a0\tQuestion 11. Question : (TCO D) A classmate is considering dropping his or her accounting class because he or she cannot understand the rules of debits and credits.\tExplain the rules of debits and credits in a way that will help him or her understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities and stockholders’ equity) and the income statement (revenues and expenses).\t\u00a0\t\u00a0\t11. Question : (TCO D) Describe the process of preparing a trial balance. What is the\tpurpose of preparing a trial balance? If a trial balance does not balance,\tidentify what might be the reasons why it does not balance. If the trial\tbalance does balance, does that ensure that the ledger accounts are\tcorrect? Explain.\t\u00a0\t\u00a0\t\u00a01. Question : (TCO D) An account is an important accounting record where financial information is stored until needed. Briefly explain (1) the nature of an account, (2) the different types of accounts, and (3) the manner in which an account is increased and decreased, and the normal balance of each type of accounts.\t\u00a0\t\u00a0\t\u00a0\tQuestion 1.1. (TCO A) Assets include (Points : 3)\t\u00a0 \u00a0 \u00a0 \u00a0prepaid insurance and prepaid rent.\t\u00a0 \u00a0 \u00a0 \u00a0dividends paid to shareholders.\t\u00a0 \u00a0 \u00a0 \u00a0loans obtained by the company.\t\u00a0 \u00a0 \u00a0 \u00a0stockholders”\ufffd investment in the business.\t\u00a0\t\u00a0\tQuestion 2.2. (TCO B) For 2014, CAP Corporation reported net income of $96,000; net sales $1,440,000; and weighted average shares outstanding of 9,600. There were no preferred dividends. What was the 2014 earnings per share? (Points : 3)\t\u00a0 \u00a0 \u00a0 \u00a0$100.00\t\u00a0 \u00a0 \u00a0 \u00a0$150.00\t\u00a0 \u00a0 \u00a0 \u00a0$10.00\t\u00a0 \u00a0 \u00a0 \u00a0$15.00\t\u00a0\t\u00a0\tQuestion 3.3. (TCO C) Issuing debt is an example of a(n) (Points : 3)\t\u00a0 \u00a0 \u00a0 \u00a0operating activity.\t\u00a0 \u00a0 \u00a0 \u00a0investing activity.\t\u00a0 \u00a0 \u00a0 \u00a0financing activity.\t\u00a0 \u00a0 \u00a0 \u00a0noncash investing and financing activity.\t\u00a0\t\u00a0\tQuestion 4.4. (TCO D) Dividends declared are reported on which of the following statements? (Points : 3)\t\u00a0 \u00a0 \u00a0 \u00a0Income Statement\t\u00a0 \u00a0 \u00a0 \u00a0Statement of Retained Earnings\t\u00a0 \u00a0 \u00a0 \u00a0Balance Sheet\t\u00a0 \u00a0 \u00a0 \u00a0Statement of Financial Position\t\u00a0\t\u00a0\tQuestion 5.5. (TCO E) Which of the following describes the normal balance and classification of the Unearned Revenue account? (Points : 3)\t\u00a0 \u00a0 \u00a0 \u00a0Credit, liability\t\u00a0 \u00a0 \u00a0 \u00a0Debit, liability\t\u00a0 \u00a0 \u00a0 \u00a0Debit, stockholders”\ufffd equity\t\u00a0 \u00a0 \u00a0 \u00a0Credit, stockholders”\ufffd equity\t\u00a0\t\u00a0\tQuestion 6.6. (TCO F) The accrual accounting term used to indicate recording an expense before paying cash for the item is (Points : 3)\t\u00a0 \u00a0 \u00a0 \u00a0deferral.\t\u00a0 \u00a0 \u00a0 \u00a0accrual.\t\u00a0 \u00a0 \u00a0 \u00a0depreciation.\t\u00a0 \u00a0 \u00a0 \u00a0prepayment.\t\u00a0\t\u00a0\tQuestion 7.7. (TCO A) LBJ Company recorded the following events involving a recent purchase of merchandise.\t\u00a0\t\u00a0\t– Received goods for $95,000, terms 2\/10, n\/30.\u00a0\t– Returned $4,500 of the shipment for credit due to damaged goods.\u00a0\t– Paid $1,000 for freight in.\u00a0\t– Paid the invoice within the discount period.\t\u00a0\t\u00a0\tAs a result of these events, the company’s merchandise inventory (Points : 3)\t\u00a0 \u00a0 \u00a0 \u00a0increased by 89,580.\t\u00a0 \u00a0 \u00a0 \u00a0increased by $89,690.\t\u00a0 \u00a0 \u00a0 \u00a0increased by $89,600.\t\u00a0 \u00a0 \u00a0 \u00a0increased by $91,500.\t= (95000-4500)*0.98+ 1000\t\u00a0\t\u00a0\tQuestion 8.8. (TCO B) In periods of rising prices, which of the following inventory methods results in the highest gross profit figure? (Points : 3)\t\u00a0 \u00a0 \u00a0 \u00a0FIFO\t\u00a0 \u00a0 \u00a0 \u00a0LIFO\t\u00a0 \u00a0 \u00a0 \u00a0Average cost method\t\u00a0 \u00a0 \u00a0 \u00a0Cannot be determined based on the information given\t\u00a0\t\u00a0\tQuestion 9.9. (TCO A) On a classified balance sheet, prepaid expenses are classified as (Points : 3)\t\u00a0 \u00a0 \u00a0 \u00a0current liabilities.\t\u00a0 \u00a0 \u00a0 \u00a0long-term liabilities.\t\u00a0 \u00a0 \u00a0 \u00a0current assets.\t\u00a0 \u00a0 \u00a0 \u00a0Prepaid expenses do not belong on the Balance Sheet.\t\u00a0\t\u00a0\tQuestion 10.10. (TCO E) Which of the following is an internal control procedure? (Points : 3)\t\u00a0 \u00a0 \u00a0 \u00a0Control environment\t\u00a0 \u00a0 \u00a0 \u00a0Comparisons and compliance monitoring\t\u00a0 \u00a0 \u00a0 \u00a0Promote operational efficiency\t\u00a0 \u00a0 \u00a0 \u00a0Encourage employees to follow company policies\t\u00a0\tQuestion 1. Question : (TCO A) Which of the following accounts is recorded as part of stockholders”\ufffd equity on the Balance Sheet?\t\u00a0\tQuestion 2. Question : (TCO B) For 2014, CAP Corporation reported net income of $96,000; net sales $1,440,000; and weighted average shares outstanding of 9,600. There were no preferred dividends. What was the 2014 earnings per share?\t\u00a0\tQuestion 3. Question : (TCO C) Purchasing inventory is an example of a(n)\t\u00a0\tQuestion 4. Question : (TCO D) Dividends declared are reported on which of the following statements?\t\u00a0\tQuestion 5. Question : (TCO E) Which of the following describes the normal balance and classification of the Unearned Revenue account?\t\u00a0\tQuestion 6. Question : (TCO F) The accrual accounting term used to indicate recording an expense before paying cash for the item is\t\u00a0\tQuestion 7. Question : (TCO A) XYZ Company recorded the following events involving a recent merchandise purchase.\u00a0\t\u00a0\t\u00a0\tQuestion 8. Question : (TCO B) In periods of rising prices, which of the following inventory methods results in the highest gross profit figure?\t\u00a0\tQuestion 9. Question : (TCO A) Which of the following is not a current liability?\t\u00a0\t\u00a0\tQuestion 10. Question : (TCO E) Which of the following is an internal control procedure?\t\u00a0\t1. Question : (TCOs A, B, and C) Which type of corporate information is available to\tinvestors?\t\u00a0\t2. Question : (TCO C) Collecting cash from customers would be an example of which\ttype of activity?\t\u00a0\t3. Question : (TCO A) Resources owned by a business are referred to as\t\u00a0\t4. Question : (TCO A) In a classified balance sheet, assets are usually classified as\t\u00a0\t5. Question : (TCO B) For 2012, LBJ Corporation reported net income of $25,000; net\tsales $250,000; and weighted average shares outstanding of 5,000. There\twere no preferred stock dividends. What was the 2012 earnings per share?\t\u00a0\t6. Question : (TCO D) Which of the following accounts has a normal balance of a credit?\t\u00a0\t7. Question : (TCO E) The accrual accounting term used to indicate recording an\texpense before paying cash for the item is _____\t:\t8. Question : (TCOs A and B) A periodic inventory system would most likely be used by\ta(n) _____\t\u00a0\t9. Question : (TCOs A and B) LBJ Company recorded the following events involving a\trecent purchase of merchandise.\t\u00a0\t\u00a0\tComments:\t10. Question : (TCO A) In a period of declining prices, which of the following inventory\tmethods generally results in the lowest gross profit figure?\t\u00a0\tQuestion : (TCOs A, B, and C) Shareholders want answers to all of the following questions except:\t\u00a0\tQuestion 2. Question : (TCO C) Paying cash dividends is an example of a(n)\t\u00a0\tQuestion 3. Question : (TCO C) Buying a new plant would be an example of which type of activity?\t\u00a0\tQuestion 4. Question : (TCO A) Which of the following should not be classified as a current liability?\t\u00a0\tQuestion 5. Question : (TCO B) For 2012, LBJ Corporation reported net income of $75,000; net sales $750,000; and weighted average shares outstanding of 7,500. There were no preferred stock dividends. What was the 2012 earnings per share?\u00a0\t\u00a0\tQuestion 6. Question : (TCO D) Which of the following describes the normal balance and classification of the Unearned Revenue account?\t\u00a0\tQuestion 7. Question : (TCO E) Which of the following statements is correct?\t\u00a0\tQuestion 8. Question : (TCOs A and B) A periodic inventory system would most likely be used by a(n)\t\u00a0\tQuestion 9. Question : (TCOs A and B) LBJ Company recorded the following events involving a recent merchandise purchase.\u00a0\t\u00a0\t– Received goods for $40,000, terms 2\/10, n\/30\u00a0\t– Returned $1,200 of the shipment for credit due to damaged goods\t– Paid $1,000 for freight in\t– Paid the invoice within the discount period\t\u00a0\tQuestion 10. Question : (TCO A) In a period of declining prices, which of the following inventory methods generally results in the lowest gross profit figure?\t\u00a0\tQuestion 1. Question : (TCOs A, B, and C) Which of the following statements concerning users of accounting information is incorrect?\t\u00a0\tQuestion 2. Question : (TCO C) Paying cash dividends is an example of a(n)\t\u00a0\tQuestion 3. Question : (TCO C) Buying a new plant would be an example of which type of activity?\t\u00a0\tQuestion 4. Question : (TCO A) On a classified balance sheet, prepaid expenses are classified as\t\u00a0\tQuestion 5. Question : (TCO B) For 2012, LBJ Corporation reported net income of $75,000; net sales $750,000; and weighted average shares outstanding of 7,500. There were no preferred stock dividends. What was the 2012 earnings per share?\u00a0\t\u00a0\tQuestion 6. Question : (TCO D) Which of the following accounts has a normal balance of a credit?\t\u00a0\tQuestion 7. Question : (TCO E) The accrual accounting term used to indicate recording an expense before paying cash for the item is\t\u00a0\t\u00a0\tQuestion 8. Question : (TCOs A and B) A periodic inventory system would most likely be used by a(n)\t\u00a0\tQuestion 9. Question : (TCOs A and B) LBJ Company recorded the following events involving a recent merchandise purchase.\u00a0\t\u00a0\t\u00a0\tQuestion 10. Question : (TCO A) In a period of increasing prices, which of the following inventory methods generally results in the highest gross profit?\t\u00a0\tQuestion 11. Question : (TCO D) A classmate is considering dropping his or her accounting class because he or she cannot understand the rules of debits and credits.\tExplain the rules of debits and credits in a way that will help him or her understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities and stockholders’ equity) and the income statement (revenues and expenses).\t\u00a0\t\u00a0\t\u00a0\tQuestion 12. Question : (TCOs B and E) The Caltor Company gathered the following condensed data for the Year Ended December 31, 2010.\t\u00a0\tCost of goods sold $ 710,000\tNet sales 1,279,000\tAdministrative expenses 239,000\tInterest expense 68,000\tDividends paid 38,000\tSelling expenses 45,000\t\u00a0\t\u00a0\tInstructions:\t1: Prepare a multiple-step income statement for the year ended December 31, 2010.\u00a0\t2: Compute the profit margin ratio and gross profit rate. Caltor Company”\ufffds assets at the beginning of the year were $770,000 and 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.\t\u00a0\t\u00a0\tQuestion 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. \u00a0\t\u00a0\ta: Investors invest $50,000 in exchange for 1,000 shares of common stock.\u00a0\tb: Company purchased equipment for $10,000 on credit.\u00a0\tc: Company received $5,000 for services performed.\u00a0\td: Company made payment on account for $2,000.\u00a0\te: Company received $7,000 for services not yet performed.\t\u00a0\t\u00a0\t\u00a0\tQuestion 14. Question : (TCO D) Your friend Wendy plans to open a hair salon. Wendy states that she does not have time to develop and implement a system of internal controls.\t\u00a0a: Explain to Wendy the objectives of a system of internal control.\t\u00a0b: Explain to Wendy at least four key controls she must establish to protect herself against fraud. You should state specific internal control principles and relate your answer to her hair salon business.<\/p>\n","protected":false},"excerpt":{"rendered":"
This Tutorial contains 4 Set of Midterm Exam \u00a0 \u00a0 1. Question : (TCOs A and E) Your friend, Ellen, has hired you to evaluate the following internal control procedures. Explain to your friend whether each of the numbered items Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-201272","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/201272","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=201272"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/201272\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=201272"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=201272"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=201272"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}