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ACC 556 Week 5 Quiz | Assignment Help | Strayer University
Midterm Exam (Part-2)
Question 1
Partnerships generally receive more favorable tax
treatment than sole proprietorships and corporations.
o
True
o
False
Question 2
The sole
proprietorship form of business organization
o
Must have at least two owners in most
states.
o
Is classified as a separate legal
entity.
o
Generally receives favorable tax
treatment relative to a corporation.
o
Combines the records of the business
with the personal records of the owner.
Question 3
To which of
the following questions will internal users want answers?
o
What selling price for our product will
maximize the company’s net income?
o
Which product line is most profitable?
o
Is cash sufficient to pay dividends to
stockholders?
o
All of the answer choices are correct.
Question 4
Which of the
following is not an external user of accounting data?
o
Labor unions
o
Customers
o
Economic planners
o
Chief Financial Officer
Question 5
Which
statement about users of accounting information is incorrect?
o
Present creditors are considered
external users.
o
Regulatory authorities are considered
internal users.
o
Management is considered an internal
user.
o
Taxing authorities are considered
external users.
Question 6
Which of the
following did not result from the Sarbanes-Oxley Act?
o
Auditors cannot provide non-audit
services to the same client.
o
Tax rates on corporations increased.
o
Top management must now certify the
accuracy of financial information.
o
Penalties for fraudulent activity
increased.
Question 7
Current
assets are economic resources that are expected to be converted to cash or used
up by the business within one year or the normal operating cycle, whichever is
shorter.
o
True
o
False
Question 8
In a
classified balance sheet, how are assets usually classified?
o
Current assets; long-term investments;
property, plant, and equipment; and intangible assets
o
Current assets; long-term assets;
property, plant, and equipment; and intangible assets
o
Current assets; long-term investments;
property, plant, and equipment; and common stock
o
Current assets; long-term investments;
tangible assets; and intangible assets
Question 9
For 2017,
Stoneland Corporation reported net income, $24,000; net sales, $400,000; and
average shares outstanding, 6,000. There were no preferred stock dividends. How
much was the 2017 earnings per share?
o
$0.06
o
$66.67
o
$16.67
o
$4.00
Question 10
Net income is
$200,000, preferred dividends are $20,000, and average common shares
outstanding are 50,000. How much is earnings per share?
o
$4.00
o
$0.28
o
$3.60
o
$0.25
Question 11
Which of the following does not properly reflect a
financial ratio?
o
7:1
o
18.4%
o
$0.60 per dollar
o
$7,200
Question 12
The following
balances and amounts were taken from the financial statements of Ortiz, Inc.
The data are presented in alphabetical order.
Accounts payable $35,000 Cash
provided by operations $90,000
Accounts receivable 37,500 Net
income 36,000
Average common shares 20,000 Salaries and wages payable 8,000
Average current liabilities 110,000 Stockholders’ equity 240,000
Average and total assets 600,000 Total current assets 300,000
Average total liabilities 320,000 Total current liabilities 120,000
Cash 100,000
How much is earnings per share?
o
$1.80
o
$1.20
o
$0.15
o
$0.56
Question 13
Which of the
following are constraints that allow a company to modify generally accepted
accounting principles without jeopardizing the usefulness of the financial
statements?
o
Cost constraint
o
Timeliness and neutrality
o
Relevance and faithful representation
o
Consistency and comparability
Question 14
The effect on the basic accounting equation of
performing services for cash are to
o
Increase assets and increase
liabilities.
o
Increase assets and increase
stockholders’ equity.
o
Increase liabilities and increase
stockholders’ equity.
o
Increase assets and decrease
stockholders’ equity.
Question 15
If total
liabilities increase by $5,000 then
o
Assets decrease by $5,000.
o
Assets increase by $5,000, or
stockholders’ equity decrease by $5,000.
o
Stockholders’ equity increase by $5,000.
o
Assets and stockholders’ equity each
increase by $2,500.
Question 16
Every account
has a left or credit side and a right or debit side.
o
True
o
False
Question 17
Every
transaction affects at least two accounts.
o
True
o
False
Question 18
An account is
a part of the financial information system and is described by all except which
one of the following?
o
An account has a debit and credit side.
o
An account has a title.
o
An account is a source document.
o
An account consists of three parts.
Question 19
What effects
occur when an account payable is paid with cash?
o
Decreases assets and decreases
liabilities
o
Decreases stockholders’ equity and
decreases liabilities
o
Decreases assets and increases
stockholders’ equity
o
Increases assets and decreases
liabilities
Question 20
What is the
periodicity assumption?
o
Companies should match expenses with
revenues.
o
The economic life of a business can be
divided into artificial time periods.
o
Companies should recognize revenue in
the accounting period in which the
performance obligation is satisfied.
o
The fiscal year should correspond with
the calendar year.
In 2017,
Costello Company performs work for a customer and bills the customer $10,000;
it also pays expenses of $3,000. The customer pays Costello in 2018. If
Costello uses the accrual-basis of accounting, then Costello will report
o
Expenses of $3,000 in 2018.
o
Net income of $7,000 in 2018.
o
Revenue of $10,000 in 2017.
o
Revenue of $10,000 in 2018.
Question 22
Which
statement is correct?
o
The cash-basis of accounting is
objective because no one can be certain of the amount of revenue until the cash
is received.
o
As long as management is ethical, there
are no problems with using the cash-basis of accounting.
o
As long as a company consistently uses
the cash-basis of accounting, generally accepted accounting principles allow
its use.
o
The use of the cash-basis of accounting
violates both the revenue recognition and expense recognition principles.
Question 23
On August 1
the Darius Co. purchased a photocopy machine for $8,000. The estimated annual
depreciation on the machine is $1,680. If the company prepares annual financial
statements on December 31, the appropriate adjusting journal entry to make on
December 31 of the first year would be
o
Depreciation Expense $700
Equipment $700
o
Depreciation Expense $1,680
Accumulated Depreciation $1,680
o
Depreciation Expense $700
Accumulated Depreciation $700
o
Depreciation Expense $140
Accumulated Depreciation $140
Question 24
Bonita Realty
Management Co. received a check for $30,000 on October 1, which represents a
one year advance payment of rent on an office it rents to a client. Unearned
Rent Revenue was credited for the full $30,000. Financial statements are
prepared on December 31. The appropriate adjusting journal entry to make on
December 31 of the first year would be:
o
Unearned Rent Revenue $22,500
Rent Revenue $22,500
o
Rent Revenue $2,500
Unearned Rent Revenue $2,500
o
Rent Revenue $22,500
Unearned Rent Revenue $22,500
o
Unearned Rent Revenue $7,500
Rent Revenue $7,500
Question 25
If the
adjusting entry is not made for unearned revenues, then the result will be to
o
Understate net income and overstate
retained earnings.
o
Understate retained earnings and
overstate revenues.
o
Overstate assets and understate
liabilities.
o
Overstate liabilities and understate
revenues.
Which is true
about a wholesaler?
o
It is a company that sells to consumers
at a discount.
o
It sells only to manufacturing
companies.
o
It conducts large sales for consumers on
a recurring basis.
o
It sells to another business, which will
sell to a consuming customer.
Question 27
Which of the
following statements about a periodic inventory system is true?
o
Companies determine cost of goods sold
only at the end of the accounting period.
o
Companies continuously maintain detailed
records of the cost of each inventory purchase and sale.
o
The periodic system provides better
control over inventories than a perpetual system.
o
The increased use of computerized systems
has increased the use of the periodic system.
Question 28
The operating
cycle of a merchandising company is ordinarily ___________________ that of a
service firm.
o
The same as
o
Shorter than
o
Longer than
o
Has fewer steps than
Question 29
Which of the
following statements is correct?
o
A perpetual inventory system computes
cost of goods sold only at the end of the accounting period.
o
A periodic inventory system computes
cost of goods sold each time a sale occurs.
o
A periodic inventory system provides
better control over inventories than does a perpetual inventory system.
o
A perpetual inventory system provides
better control over inventories than does a periodic inventory system.
Question 30
Which
inventory system will likely be used by a company with merchandise that has a
high unit value?
o
Single entry inventory system
o
Perpetual inventory system
o
Double entry inventory system
o
Periodic inventory system
Question 31
Discount term
of 2/10, n/30 mean that a 10% cash discount is available if payment is made
within 30 days.
o
True
o
False
Question 32
Merchandising firms usually classify their inventory
into raw materials, work in process and finished goods.
o
True
o
False
Question 33
Which of the
following should not be included in the physical inventory of a company?
o
Goods held on consignment from another
company
o
Goods in transit from another company
shipped FOB shipping point
o
Goods shipped on consignment to another
company
o
All of the answer choices are correct
Question 34
As a result
of a thorough physical inventory, Railway Company determined that it had
inventory worth $180,000 at December 31, 2017. This count did not take into
consideration the following transactions:
• Rogers Consignment store currently has goods worth
$35,000 on its sales floor that belong to Railway but are being sold on
consignment by Rogers. The selling price of these goods is $50,000.
• Railway purchased $13,000 of goods that were
shipped on December 27, FOB destination, that will be received by Railway on
January 3.
Determine the correct amount of inventory that
Railway should report.
o
$228,000
o
$230,000
o
$215,000
o
$193,000
Question 35
Which of the
following is not an inventory account?
o
Work in process
o
Finished goods
o
Equipment
o
Raw materials
Question 36
Which of the following is not a legitimate business
reason for taking a physical inventory?
o
To verify the profitability of
individual inventory items
o
To check the accuracy of the perpetual
inventory records
o
To determine cost of goods sold
o
To determine if any inventory has been
lost from waste, shoplifting, or employee theft
Question 37
Which
situation requires a departure from the cost basis of accounting to the
lower-of-cost-or-market basis in valuing inventory?
o
A desire for more profit
o
A decline in the value of the inventory
o
An increase in selling price
o
An increase in the value of the
inventory
Question 38
Which of the following is a reason why an
organization establishes a system for internal control?
o
To safeguard its assets.
o
To increase efficiency of operations.
o
To ensure compliance with laws and
regulations.
o
All of these answer choices are correct.
Question 39
Which of the
following statements is correct?
o
Control is most effective when two or
three people are given responsibility for the same task.
o
The person who has custody of assets
should not perform the record keeping for the assets.
o
It is often a waste of company resources
to have an employee perform independent internal verification.
o
The person who has custody of assets
should also perform the record keeping for the assets.
Question 40
Internal
auditors
o
Evaluate the system of internal controls
for the companies that employ them.
o
Are employees of the IRS who evaluate
the internal controls of companies filing tax returns.
o
Cannot evaluate the system of internal
controls of the company that employs them because they are not independent.
o
Are hired by CPA firms to audit business
firms.
Question 41
Which one of the following control activities is
relevant when a company uses a computerized (rather than manual) accounting
system?
o
Establishment of responsibility.
o
Segregation of duties.
o
Independent internal verification.
o
All of these answer choices are correct.
Question 42
Which
internal control principle is most important in a control system for handling
cash receipts?
o
Segregation of duties
o
Documentation procedures
o
Independent internal verification
o
Physical controls
Question 43
Deposits in
transit are added to the cash balance per books on the bank reconciliation.
o
True
o
False
Question 44
On June 15,
Kersee Company sold merchandise on account to Eng Co. for $1,000, terms 2/10,
n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On
June 24, payment is received from Eng Co. for the balance due. What is the
amount of cash received on June 24?
o
$700.
o
$680.
o
$686.
o
None of the answer choices are correct.
Question 45
Under the
allowance method, the write off of an account receivable leaves the net
realizable value of the receivables unchanged.
o
True
o
False
Question 46
Which one of
the following statements is true?
o
Bad Debts Expense is a nominal account
and is closed at the end of the fiscal period, while Allowance for Doubtful
Accounts is a real account and remains open at the end of the fiscal period.
o
Bad Debts Expense and Allowance for
Doubtful Accounts are both real accounts and neither are closed at the end of
the fiscal period.
o
Bad Debts Expense is a real account and
remains open at the end of the fiscal period, while Allowance for Doubtful
Accounts is a nominal account and is closed at the end of the fiscal period.
o
Bad Debts Expense and Allowance for
Doubtful Accounts are both nominal accounts and are closed at the end of the
fiscal period.
Question 47
If a company
uses the allowance method for uncollectible accounts, then the entry to record
$800 of estimated uncollectibles is
o
Allowance for Doubtful Accounts 800
Accounts Receivable 800
o
Accounts Receivable 800
Allowance for Doubtful
Accounts 800
o
Bad Debts Expense 800
Allowance for Doubtful Accounts 800
o
Bad Debts Expense 800
Accounts Receivable 800
Question
48
Ryan Leaf Company uses the percentage–of-receivables
method for recording bad debts expense. The accounts receivable balance is
$60,000 at year-end and the total credit sales were $2,300,000 for the year.
Management estimates that 3% of receivables will be uncollectible. What
adjusting entry should be made if the Allowance for Doubtful Accounts has a
credit balance of $200 before adjustment?
o
Bad Debts Expense 1,800
Allowance for Doubtful Accounts 1,800
o
Bad Debts Expense 1,600
Accounts Receivable 1,600
o
Allowance for Doubtful Accounts 1,800
Bad Debt Expense 1,800
o
Bad Debts Expense 1,600
Allowance for Doubtful Accounts 1,600
Question 49
Which one of
the following is part of the transaction that is recorded when an account is
written off under the allowance method?
o
Bad Debts Expense account is debited.
o
Allowance for Doubtful Accounts is
debited.
o
Loss on Accounts Receivable account is
debited.
o
Accounts Receivable account is debited.
Question 50
Which issue
will the IASB and FASB continue to resolve as they work toward convergence?
o
How to report receivables on the balance
sheet.
o
How to recognize fair values of
financial instruments.
o
How to recognize receivables in the
accounting records.
o
How to estimate uncollectible amounts.
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