Mid Term

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Below are the questions for the exam with the choices of answers:

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Question #1

What is the primary purpose of financial accounting?

A Measure the profitability of the company in order to assist employees with making decisions.

B Determine the amount of tax liability owed to the government.

C Communicate business activities to internal management.

D Measure business activities and communicate those measures to external users to make decisions.

Question #2

Generally Accepted Accounting Principles (GAAP) are best defined as:

A The group of individuals that create and enforce all accounting rules.

B Rules that best estimate profitability for a company.

C Government-mandated rules that companies must follow.

D Standards for presenting financial accounting information.

Question #3

Credit sales are recorded as:

A Debit Cash, credit Service Revenue.

B Debit Service Revenue, credit Accounts Receivable.

C Debit Accounts Receivable, credit Service Revenue.

D Debit Cash, credit Deferred Revenue.

Question #4

The revenue recognition principle states that:

A Revenue should be recognized in the period the cash is received.

B Revenue is a component of common stock.

C Revenue should be recognized in the period goods and services are provided.

D Revenue should be recognized in the balance sheet.

Question #5

Stimpleton Company engages in the following cash payments:

Purchase equipment $3,900
Pay rent 500
Repay loan to the bank 4,000
Pay workers’ salaries 1,200
________________________________________

What is the total amount of cash paid for operating activities?

A $7,900

B $1,700

C $3,900

D $5,200

Question #6

Emmitt had the following final balances after the first year of operations: assets, $36,400; stockholders’ equity, $14,300; dividends, $2,700; and net income, $9,100. What is the amount of Emmitt’s liabilities?

A $24,100.00

B $22,100

C $36,400

D $10,300

Question #7

During periods when inventory costs are rising, cost of goods sold will most likely be:

A Higher under FIFO than LIFO.

B Lower under LIFO than FIFO.

C Lower under average cost than LIFO.

D Higher under FIFO than average cost.

Question #8

The basic principle involved with expense recognition is:

A The business is separate from its owners.

B The business will continue to operate indefinitely unless there is evidence to the contrary.

C All transactions are recorded at the exchange price.

D All costs that are used to generate revenue are recorded in the period the revenue is recognized.

Question #9

On November 1, $4,800 of rent on equipment for the next six months was paid and charged to Prepaid Rent. At the end of the year, the financial statements would report:

A Rent Expense, $3,200; Prepaid Rent $1,600.

B Rent Expense, $1,600; Prepaid Rent $3,200.

C Rent Expense, $1,600; Prepaid Rent $4,800.

D Rent Expense, $4,800; Prepaid Rent $0.

Question #10

LeGrand Corporation reported the following amounts in its income statement:

Sales revenue $440,000
Advertising expense 60,000
Interest expense 10,000
Salaries expense 55,000
Utilities expense 25,000
Income tax expense 45,000
Cost of goods sold 180,000
________________________________________

What was LeGrand’s net income?

A $60,000.00

B $110,000.00

C $65,000

D $120,000.00

Question #11

Which of the following transactions would cause an increase in both the assets and liabilities of a company?

A Provide services on account.

B Pay for inventory purchased 90 days ago.

C Purchase a building by issuing a note payable.

D Pay for the current month’s rent.

Question #12

Inventory records for Dunbar Incorporated revealed the following:

Apr.1, Beginning inventory, Numberof Units – 460, UnitCost – $2.12
Apr.20, Purchase, Numberof Units – 380, UnitCost – $2.64
________________________________________

Dunbar sold 640 units of inventory during the month. Ending inventory assuming LIFO would be

A $424.00

B $528

C $975

D $1,003.00

Question #13

On March 3, Cobra Inc. purchased a desk for $370 on account. On March 22, Cobra purchased another desk for $440 also on account, and then on March 24, Cobra paid $440 on account. At the end of March, what amount should Cobra report for desks (assuming these two desks were the only desks they had)?

A $70

B $370

C $810

D $440.00

Question #14

The accounting equation is defined as:

A Assets = Liabilities + Stockholders’ Equity.

B Net Income = Revenues − Expenses.

C Liabilities + Revenues = Assets.

D Assets = Liabilities − Stockholders’ Equity.

Question #15

Paying salaries to employees for the current period would have what effect on the accounting equation?

A Assets decrease and stockholders’ equity decreases.

B Liabilities increase and stockholders’ equity decreases.

C Liabilities decrease and stockholders’ equity increases.

D Assets decrease and liabilities decrease.

Question #16

The following information pertains to a company’s cash balance and bank reconciliation as of August 31:

Company balance before reconciliation $5,000
Checks outstanding $2,500
Notes collected by the bank $2,200
Service fee $50
Deposits outstanding $2,000
________________________________________

What is the correct cash balance for the company?

A $7,650.00

B $7,150.00

C $5,150.00

D $7,250.00

Question #17

On September 1, 2021, Middleton Corp. lends cash and accepts a $4,700 note receivable that offers 7% interest and is due in six months. How much interest revenue will Middleton Corp. report during 2021?

A $110.00

B $752.00

C $329.00

D $658.00

Question #18

External events include all of the following except:

A Purchasing equipment.

B Using office supplies.

C Collecting an account receivable.

D Paying rent.

Question #19

Using a perpetual inventory system, the purchase of inventory on account is recorded with a:

A Debit to Cost of Goods Sold.

B Debit to Inventory.

C Debit to Accounts Payable.

D Credit to Sales Revenue.

Question #20

On December 31, 2021, Andy Inc. has a debit balance of $1,500 for the Allowance for Uncollectible Accounts before any year-end adjustment. Andy Inc. also has the following information for its accounts receivable and the estimated percentages of bad debts for different past-due amounts:

Age Group (days past due) – 0-30, Accounts Receivable-$50,000, Estimated Percent Uncollectible-5%
Age Group (days past due) – 31-60, Accounts Receivable-$20,000, Estimated Percent Uncollectible-10%
Age Group (days past due) – 61-90, Accounts Receivable-$10,000, Estimated Percent Uncollectible-20%

What is the amount of bad debt expense to be reported on Andy Inc.’s financial statements for 2021 using the aging method?

A $1,500.00

B $5,000.00

C $6,500.00

D $8,000.00

Question #21

Consider the following inventory transactions for September:

Beginning inventory 17 units @ $ 3.10
Purchase on September 12 29 units @ $ 3.50
Purchased on September 23 11 units @ $ 4.30
________________________________________

For the month of September, the company sold 29 units. What is cost of goods sold under the weighted-average cost method?

A $125.00

B $90.00

C $126.00

D $103.00

Question #22

Inventory does not include:

A Assets intended to be sold in the normal course of business.

B Materials used in the production of goods to be sold.

C Equipment used in the manufacturing of assets for sale.

D Assets currently in production for normal sales.

Question #23