Accounting 221 Mid Term Exam

Accounting 221 Exam 1 — Fall 2003 Multiple Choice (10 points). Select the right reply for each of the following multiple alternative questions. 1. Assets could greatest be defined as: a. Economic resources invested by the owners of a business. b. Tangible economic resources of worth. c. Economic resources invested by the collectors of a enterprise. d. Probable future economic benefits obtained or controlled by a selected entity on account of past transactions or events.

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e. Probable future financial benefits obtained or controlled by a specific entity as the outcomes of future transactions or occasions. . Which of the next equations is NOT true? a. Assets – Liabilities – Owners’ Equity = Zero b. Assets = Liabilities + Owners’ Equity c. Assets – Liabilities = Owners’ Equity d. Assets – Owners’ Equity = Liabilities e. Assets + Liabilities = Owners’ Equity 3. Which of the following accounts is a liability? a. Unearned rent revenue. b. Accounts receivable. c. Sales. d. Treasury inventory. e. Retained earnings. 4. The two elements of stockholders’ fairness on a balance sheet for a corporation are: a.

Liabilities and Capital Stock. b. Assets and Retained Earnings. c. Assets and Liabilities. . Capital Stock and Retained Earnings. e. Liabilities and Retained Earnings. 5. Which of the next statements is FALSE? a. Asset accounts are elevated with debits. b. Liability accounts are increased with credit. c. Asset accounts are decreased with credits. d. Owners’ fairness accounts are increased with credit. e. Liability accounts are elevated with debits. Matching terms (8 points). Presented under are a number of events and practices which have developed over time. Select the letter that identifies the term best describing the item.

(A explicit term will solely be used once. Terms: a. Conservatism | g. Materiality| b. Cost-benefit| h. Matching| c. Economic entity assumption| i. Monetary unit assumption| d. Full disclosure| j. Relevance| e. Going concern assumption| k. Reliability| f. Historical cost| l. Revenue recognition | Events and Practices: _____ 6. A building bought for $40,000 is recorded at that amount despite the very fact that its tax appraisal is $35,000. _____ 7. At Pizza King, knowing which employee assembles each pizza may present useful info to management. However, preserving monitor of this information is taken into account time consuming so it is not done. ____ eight. The value of manufacturing a product is reported because the expense “Cost of Goods Sold” within the period that the product is offered, not in the period when the cash was paid. _____ 9. Even though the corporate has not collected the cash from prospects, it shows income on its financial statements because it has delivered the products to those clients. _____ 10. Prediction of subsequent month’s money needs requires info such as final period’s sales and the rate of sales development. _____ eleven. Accountants have a tenet to use each time multiple allowable procedures exist.

This guideline says, “When in doubt choose the process that will be least more doubtless to overstate belongings and earnings. ” _____ 12. Financial accountants prepare the statements assuming that the corporate will continue to function sooner or later. _____ 13. Following this principle has lead to voluminous footnotes in annual reports. 14. (15 points). For every of the transactions beneath, point out whether the occasion would change complete property, whole liabilities, or complete owners’ equity and in what direction. Use these abbreviations: I – Increase D – Decrease U – Unchanged TOTAL ASSETS – TOTAL LIABILITIES – TOTAL OWNERS’ EQUITY

Example: Issued stock for money ——- I- U -I a. Borrowed money from the bank. b. Purchased supplies on account. c. Purchased tools with cash. d. Paid money for items purchased last month. e. Received money for objects offered final month. 15. (5 points). For every of the accounts listed under, indicate whether or not the account is an asset (A), legal responsibility (L), owners’ fairness (OE), revenue (R), or expense (E). ________ a. Prepaid advertising ________ b. Retained earnings ________ c. Accounts payable ________ d. Cost of excellent sold ________ e. Equipment 16. Setting: (10 points). You are reviewing the annual report for General Electric, Inc. nd need solutions to the questions listed beneath. Use the next key to indicate the most probably place to search out solutions to your questions. Key: A – Independent Auditor’s Report B – Balance Sheet C – Statement of Cash Flows I – Income Statement N – Notes to the financial statements R – Statement of Retained Earnings O – Some other place within the Annual Report X – Not discovered in the Annual Report Some of the above classes may be used more than as soon as and some will not be used at all. Occasionally, the answer to your question could additionally be present in a couple of place. In that case both reply can be acceptable. Questions: 1.

What is the whole owners’ equity of General Electric Inc.? 2. What quantity of dividends have been declared through the year? 3. What was General Electric’s income from operations for the year? four. How have the retained earnings modified through the year? 5. The report that expresses whether the company’s monetary statements are in conformity with GAAP. 17. Stock (8 points). Investors who purchase common inventory in a company expect to obtain a return from that investment. a. List and briefly describe the 2 components of that anticipated return. b. What is “secondary market” trading? Does the corporate obtain money from these trades? 18. eight points) a. A specific set of monetary statements does not provide enough disclosure a couple of lawsuit pending in opposition to the company. The more than likely audit opinion can be: b. The most favorable audit opinion is: c. The audit agency believes the financial statements usually are not fairly offered. The sort of opinion that it ought to concern is a(n): d. The auditor is unable to assemble enough evidence to form an opinion. The auditor would problem a(n): 19. (4 points). Who was the one who wrote about double-entry accounting (and is considered the “father of accounting”)? 20. (6 points). Name the three types of enterprise organizations. 1. (6 points). Name 3 advantages that the pc lends to the accounting system. 22. (10 points). The Rose Company has the following account balances as of September 30, 2003: ACCOUNT | BALANCE | Accounts payable| $ 8,000| Accounts receivable| $ 6,000| Bonds payable| $ 30,000| Buildings | $ 50,000| Capital stock| $ 50,000| Cash| $ 12,000| Cost of products bought | $ 20,000| Inventory | $ 7,500| Land| $ 25,000| Retained earnings | ? | Sales | $ forty five,000| Wage expense | $ 10,000| REQUIRED: Prepare the categorized balance sheet for the Rose Company (in good form). Accounting 221 Exam 1 — Answers Multiple Choice. 1. D 2. E 3. A 4. D . E Matching terms. 6. F 7. B 8. H 9. L 10. J 11. A 12. E thirteen. D 14. a. I-I-U b. I-I-U c. U-U-U d. D-D-U e. U-U-U 15. a. A b. OE c. L d. E e. A 16. 1. B 2. C, R three. I 4. R 5. A 17. a. (1) Dividends – distribution of earnings and (2) Capital appreciation which is the increase within the value of the stock held by the investor b. Secondary market trading happens when an proprietor of inventory sells the stock to a different investor 18. a. Qualified b. Unqualified c. Adverse d. Disclaimer 19. Luca Pacioli 20. Sole proprietorship, partnership, corporation 21. (1) accuracy of processing, (2) velocity of processing, (3) flexibility of processing 22.

The Rose Company Balance Sheet September 30, 2003 Curent Assets:| | | Cash| $12,000| | Accts Receivable| 6,000| | Inventory | 7,500| | Total Current Assets| | $25,500| Long-term assets| | | Buildings| 50,000| | Land| 25,000| 75,000| Total Assets| | $100,500| Current Liabilities| | | Acct Payable| eight,000| | Long-term Liab| | | Bonds Payble| 30,000| | Total Liab| | 38,000| Owner’s Equity| | | Capital stock| 50,000| | Retained earnings| 12,500| 62,500| Total Liab ; O/E | | $100,500| Back to Accounting 221 Home Page 01-04-06/[email protected] bgsu. edu/ Disclaimer