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Homework answers / question archive / University of California, Davis - MGT 11A Financial Accounting: Midterm 1 (Fall 2014) 1)Which of the following assets is not depreciated? a
University of California, Davis - MGT 11A
Financial Accounting: Midterm 1 (Fall 2014)
1)Which of the following assets is not depreciated?
a. Store fixtures
b. Computers
c. Land
d. Buildings
e. Vehicles
2. A company had a sales of $695,000 and cost of goods sold at $278,000. Its gross profit equals:
a. -$417,000
b. $695,000
c.278,000
d. $417,000
e. $973,000
3. Which of the following statements about the Cash account are true?
a. Because most companies earn their fees in cash, the Cash account is categorized as revenue
b. For any given transaction, Accounts Receivable and Cash can be used interchangeable because both accounts are measured in terms of cash
c. The Cash account includes the value of any medium of exchange that a bank accepts for deposit
d. Cash is the same thing as Retained Earnings
e. Cash is a liability account
4. The credit terms 2/10, n/30 are interpreted as:
a. 2% cash discount if the amount is paid within 10 days, with the balance due in 30 days
b. 10% cash discount if the amount is paid within 2 days, with the balance due in 30 days
c. 30% discount if paid within 2 days
d. 30% discount if paid within 10 days
e. 2% discount if paid within 30 days
5. Which of the following accounts would not be impacted by adjusting journal entries?
a. Accounts receivable
b. Consulting fee earned
c. Unearned consulting fees
d. Cash
e. Wage payable
6. A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
a. Reflects an increase in amount due from a customer
b. Recognizes that a customer returned merchandise and/or received an allowance
c. Requires a debit memorandum to recognize the customer’s return
d. Is recorded when a customer takes a discount
e. Reflects an increase in net sales
7. A company records the fees of legal services paid in advance by its clients in an account called Unearned Legal Fees. If the company fails to make the end-of-period adjusting entry to record the portion of these fees that has been earned, one effect will be an:
a. Overstatement of equity
b. Understatement of equity
c. Understand of assets
d. Understatement of liabilities
e. Overstatement of assets
8. Which of the following accounts would be closed at the end of the accounting period?
a. Accounts receivable
b. Unearned consulting fees
c. Fees earned
d. Retained earnings
e. Land
9. The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is:
a. Debit Unpaid Salaries and credit Salaries Payable
b. Debit Salaries Payable and credit Salaries Expense
c. Debit Salaries Expense and credit Cash
d. Debit Salaries Expense and credit Salaries Payable
e. Debit Cash and credit Salaries Expense
10. Which of the following is the primary purpose of accounting?
a. To establish business
b. To identify, record, and communicate business transactions
c. To earn a large profit
d. To reduce taxes owed for the business
e. To establish credit for a company
11. Revenues are:
a. The same as net income
b. The excess of expenses over assets
c. Resources owned or controlled by a company
d. Increases in retained earnings from a company’s earning activities
e. The cost of assets or services used
12. A company had cash sales of $49,527, credit sales of $38,540, sales returns
and allowances of $7,100, and sales discounts of $4,375. The company’s net sales for this period equal:
a. $80,967
b. $83,692
c. $88,067
d. $76,592
e. $99,542
13. Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for a six-month contract in advance. Management Services’ journal entry to record this transaction will include a:
a. Debit to Unearned Management Fees for $60,000
b. Credit to Management Fees Earned for $60,000
c. Credit to Cash for $60,000
d. Credit to Unearned Management Fees for $60,000
e. Debit to Management Fees Earned for $60,000
14. The main purpose of adjusting entries is to:
a. Record external transactions and events
b. Record internal transactions and events
c. Recognize assets purchased during the period
d. Recognize debts paid during the period
e. Correct errors
15. An example of an operating activity:
a. Paying wages
b. Purchasing office equipment
c. Borrowing money from a bank
d. Selling stock
e. Paying off a loan
16. The account used to record the transfers of assets from a business to its stockholders is:
a. A revenue account
b. The dividends account
c. Common stock account
d. An expense account
e. A liability account
17. Which of the following is a true statement regarding debits and credits?
a. If a company earned a profit, debits will equal credits
b. For a business, debits are better than credits
c. A company’s books are not in balance if they have a current period loss
d. Assets and expenses are both increased with a debit
e. Liabilities and equity are both increased with a debit
18. Of the following accounts, the one that normally has a credit balance is:
a. Cash
b. Office equipment
c. Sales salaries payable
d. Dividends
e. Sales salaries expense
19. The private board that currently has the authority to establish U.S. generally accepted accounting principles is the:
a. APB
b. FASB
c. AAA
d. AICPA
e. SEC
20. A credit entry:
a. Increases asset and expense accounts and decrease liability, common stock, and revenue accounts
b. Is always a decreases in an account
c. Decreases asset and expense accounts and increases liability, common stock, and revenue accounts
d. Is recorded on the left side of a T-account
e. Is always an increase in an account
21. A company has expenses other than cost of goods sold of $250,000. Determine sales and gross profit given cost of goods sold was $100,000 and net income was $150,000.
a. Sales: $350,000; gross profit: $150,000
b. Sales: $350,000; gross profit: $50,000
c. Sales: $500,000; gross profit: $400,000
d. Sales: $500,000; gross profit: $50,000
e. Sales: $400,000; gross profit: $500,000
22. Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The request adjusting entry is:
a. Debit Office Supplies $105 and credit Office Supplies Expense $105
b. Debit Office Supplies Expense $105 and credit Office Supplies $105
c. Debit Office Supplies Expense$254 and credit Office Supplies $254
d. Debit Office Supplies $254 and credit Office Supplies Expense $254
e. Debit Office Supplies $105 and credit Office Supplies Expense $254
23. The Maximum Experience Company acquired a building for $500,000. Maximum Experience had an appraisal done and fund that the building was worth $575,000. The seller had paid $300,000 for the building six years ago. Which accounting principle would prescribe that Maximum Experience record the building on its records of $500,000?
a. Monetary nit principle
b. Going-concern principle
c. Cost principle
d. Business entity principle
e. Revenue recognition principle
24. Which of the following statements is incorrect?
a. Prepaid expenses, depreciation, and unearned revenues involve previously recorded assets and liabilities
b. Accrued expenses and accrued revenues involve assets and liabilities that were not previously been recorded
c. Adjusting entries can be used to record both accrued expense and accrued revenues
d. Prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time
e. Adjusting entries affect the cash account
25. The total amount of depreciation recorded against an asset or group of assets during the entire time the asset or assets have been used in the day-to-day operations of the business is:
a. Referred to as a depreciation expense
b. Referred to as accumulated depreciation
c. Shown on the income statement of the final period
d. Only recorded when the asset is disposed of
e. Referred to as an accrued asset
26. A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is a(n):
a. Journal
b. Posting
c. Trial balance
d. Account
e. Chart of accounts
27. Sales less sales discounts less sales returns and allowances equals:
a. Net purchase
b. Cost of goods sold
c. Net sales
d. Gross profit
e. Net income
28. A debit is:
a. Increase in an account
b. The right hand side of a T-account
c. A decrease in an account
d. The left hand side of a T account
e. An increase to a liability account
29. The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of those expenses is the:
a. Recognition principle
b. Cost principle
c. Cash basis of accounting
d. Matching principle
e. Time period principle
30. Due to an oversight, a company did not make an adjusting entry for accrued and unpaid employee wages of $24,000 on December 31. This oversight would:
a. Understate net income by $24,000
b. Overstate net income by $24,000
c. Have no effect on net income
d. Overstate assets by $24,000
e. Understate assets by $24,000
31. The following transactions occurred during July:
1) Received $900 cash for services provided to a customer during July.
2) Received $2,200 cash investment from Barbara Hanson, the owner of the business.
3) Received $750 from a customer in partial payment of his account receivable, which arose form sales in June.
4) Provided services to a customer on credit, $375.
5) Signed a promissory note for a $6,000 bank loan.
6) Received $1,250 cash from a customer for services to be rendered next year.
a. $900
b. $1,275
c. $2,525
d. $3,275
e. $11,100
32. Beginning inventory plus net cost of purchase is:
a. Cost of goods sold
b. Merchandise available for sale
c. Ending inventory
d. Sales
e. Shown on the balance sheet
33. Revenue is properly recognized:
a. When the customer’s order is received
b. Only if the transaction creates an account receivable
c. At the end of the accounting period
d. Upon competition of the sale or when services have been performed and the business obtains the right to collect the sale price
e. When cash from a sale is received
34. Merchandise inventory:
a. Is a long-term asset
b. Is a current asset
c. Includes supplies
d. Is classified with investment of the balance sheet
e. Must be sold within one month
35. A trade discount is:
a. A term used by a purchaser to describe a cash discount given to customers for prompt payment
b. A reduction in price below the list price
c. A term used by a seller to describe a cash discount granted to customers for prompt payment
d. A reduction in price for prompt payment
e. Also called a rebate
36. On April 1, 2014, a company paid $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2014?
a. $1,350.00
b. $450.00
c. $1,012.50
d. $337.50
e. $37.50
37. Which of the following statements is correct?
a. When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense
b. Promises of future payment are called accounts payable
c. Increases and decreases in cash are always recorded in the retained earning account
d. An account called Land is commonly used to record increases and decreases in both the land and building owned by a business
e. Liabilities include accounts receivable
38. Which of the following accounts would be closed with a debit?
a. Sales discounts
b. Sales returns and allowances
c. Cost of goods sold
d. Operating expenses
e. Sales
39. A parcel of land is: offered for sale at $150,000, assessed for tax purposes at $95,000, recognized by its purchases as being worth $140,000, and purchased for $137,000. The land should be recorded in the purchaser’s books at:
a. $95,000
b. $137,000
c. $138,500
d. $140,000
e. $150,000
40. During the month of February, Hoffer Company had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the January 31 beginning cash balance?
a. $700
b. $1,100
c. $2,900
d. $0
e. $4,300
41. On December 15, 2013, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in 2014. Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2014 and not 2013?
a. Monetary unit principle
b. Going-concern principle
c. Cost principle
d. Business entity principle
e. Revenue recognition principle
42. A company purchased $6,000 of merchandise on credit with terms 4/15, n/30. How much will be debited to Accounts Payable if the company pays $800 cash on this account within 10 days?
a. $833.33
b. $800.00
c. Nothing will be debited to Accounts payable; the account should be credited in this situation
d. $5,760.00
e. $5,333.33
43. The objectivity principle:
a. Mean that information is supported by independent, unbiased evidence
b. Mean that information can be based on what the preparer thinks is true
c. Means that financial statement should contain information that is optimistic
d. Means that a business may not recognize revenue until cash is received
e. Means the assets acquired must be recorded at what the company paid for them
44. Which of the following elements are found on the balance sheet?
a. Service revenue
b. Net income
c. Operating activities
d. Utilities expense
e. Retained earnings
45. A company purchased $1,800 of merchandise on December 5. On December 7, it returned $200 worth of merchandise. On December 8, it paid the balance in full, taking a 2% discount. The amount of the cash paid on December 8 is:
a. $200
b. $1,564
c. $1,568
d. $1,600
e. $1,800
46. On June 30, 2014, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot Co. follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31, 2014, for Apricot Co. would include:
a. A debit to Management Services Expense for $1,250
b. A debit to Prepaid Management Services Expense for $1,250
c. A credit to Management Services Expense for $3,750
d. A debit to Prepaid Management Services Expense for $3,750
e. A credit to Management Services Payable for $1,250
47. Our company has three times as many assets as it does liabilities. If total liabilities are $55,000, what is the amount of owners’ equity?
a. $55,000
b. $110,000
c. $165,000
d. $220,000
e. Owners’ equity cannot be determined from the given information
48. Which of the following elements are found on the income statement?
a. Cash
b. Accounts receivable
c. Common stock
d. Retained earnings
e. Salaries expense
49. Rocky Industries receive its telephone bill in the amount of $300 and immediately paid it. Rocky’s journal entry to record this transaction will include a:
a. Debit to Telephone Expense for $300
b. Credit to Accounts Payable for $300
c. Debit to Cash for $300
d. Credit to Telephone Expense for $300
e. Debit to Accounts Payable for $300
50. On October 1, Robertson Company sold merchandise in the amount of $5,800 to Albert, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the perpetual inventory system. The journal entry or entries that Robertson will make on October 1 is:
a. Sales $5,800
Accounts Receivable $5,800
b. Sales $5,800
Accounts Receivable $5,800
Cost of Goods Sold $4,000
Merchandise Inventory $4,000
c. Accounts Receivable $5,800
Sales $5,800
d. Accounts Receivable $5,800
Sales $5,800
Cost of Goods Sold $4,000
Merchandise $4,000
e. Accounts Receivable $4,000
Sales $4,000
