Devry ACCT 504 Week 4 Midterm Exam
(TCOs A, B, and C) Which type of corporate information is available to investors? (Points : 3)
- Sales budget
- Operating expense budget
- Cash provided by investing activities
- Five-year strategic plan
Question 2.2. (TCO C) Collecting cash from customers would be an example of which type of activity? (Points : 3)
- Non-cash financing activity
Question 3.3. (TCO C) Buying a new plant would be an example of which type of activity? (Points : 3)
- None of the above
Question 4.4. (TCO A) On a classified balance sheet, prepaid expenses are classified as (Points : 3)
- property, plant, and equipment.
- long-term investments.
- intangible assets.
- current assets.
Question 5.5. (TCO B) For 2012, LBJ Corporation reported net income of $25,000; net sales $250,000; and weighted average shares outstanding of 5,000. There were no preferred stock dividends. What was the 2012 earnings per share? (Points : 3)
Question 6.6. (TCO D) Which of the following accounts has a normal balance of a credit? (Points : 3)
- Dividends account
- Expense account
- Accounts Receivable account
- Retained Earnings account
Question 7.7. (TCO E) The accrual accounting term used to indicate an item paid in advance or the receipt of cash in advance is _____ (Points : 3)
Question 8.8. (TCOs A and B) Specific identification would not likely be used by which of the following businesses? (Points : 3)
- A hardware store
- A jewelry store
- An automobile dealership
- An art gallery
Question 9.9. (TCOs A and B) LBJ Company recorded the following events involving a recent purchase of merchandise.
- Received goods for $100,000, terms 2/10, n/30
- Returned $5,000 of the shipment for a credit due to damaged goods
- Paid $1,500 for freight in
- Paid the invoice within the discount period
As a result of these events, the company’s merchandise inventory (Points : 3)
- increased by $96,500.
- increased by $95,000.
- increased by $94,500.
- increased by $94,600.
Question 10.10. (TCO A) In periods of rising prices, which of the following inventory methods results in the lowest income taxes? (Points : 3)
- FIFO method
- Average cost method
- LIFO method
- None of the above
11. (TCO D) A classmate is considering dropping his or her accounting class because he or she cannot understand the rules of debits and credits.
Explain 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). (Points : 30)
12. (TCOs B and E) The Caltor Company gathered the following condensed data for the year ended December 31, 2010.
- Cost of goods sold $710,000
- Net sales 1,279,000
- Administrative expenses 239,000
- Interest expense 68,000
- Dividends paid 38,000
- Selling expenses 45,000
Instructions: Prepare a multiple-step income statement for the year ended December 31, 2010.
Compute the profit margin ratio and gross profit rate. Caltor Company’s 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. (Points : 30)
13. (TCOs 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.
- Investors invest $600,000 in exchange for 30,000 shares of common stock.
- Company paid rent of $3,000.
- Company billed $5,000 for services performed.
- Company purchased supplies of $3,000.
- Company received $20,000 for services not yet performed. (Points : 30)
14. (TCO D) Your friend Dean has hired you to evaluate the following internal control procedures.
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.
- For the weaknesses, you also need to state a recommendation for improvement.
- Bonding of the cashiers is not required because all of the cashiers have significant experience.
- The treasurer is the only one allowed to sign checks.
- All employees may operate cash registers.
- Blank checks are stored in the safe.
- Supervisors count cash receipts daily. (Points : 30)