Devry ACCT504 week 4 midterm set 1

Question 1. Question
: (TCOs A, B, and C) Which of
the following statements concerning users of accounting information is
incorrect?

The marketing vice president is considered an
internal user.

Present and prospective creditors are
considered external users.

Regulatory authorities, such as the SEC, are
considered internal users.
The IRS is considered an external user.

Question 2. Question
: (TCO C) Paying back long-term
debt is an example of a(n)

non-cash investing activity.

investing activity.

financing activity.

operating activity.

Question 3. Question
: (TCO A) Resources owned by a
business are referred to as

revenues.

dividends.

liabilities.

assets.

Question 4. Question
: (TCO A) On a classified
balance sheet, prepaid expenses are classified as

property, plant, and equipment.

long-term investments.

intangible assets.

current assets.

Question 5. Question
: (TCO B) For 2012, LBJ
Corporation reported net income of $40,000; net sales $1,400,000; and weighted
average shares outstanding of 10,000. There were no preferred stock dividends.
What was the 2012 earnings per share?

$4.00

$2.00

$14.00

$140.00

Question 6. Question
: (TCO D) Which of the following
describes the normal balance and classification of the dividends account?

debit, Expense

credit, Liability

debit, Stockholders’ equity

debit, Asset

Question 7. Question
: (TCO E) The accrual accounting
term used to indicate an item paid in advance or the receipt of cash in advance
is

prepayment.

depreciation.

deferral.

accrual.

Question 8. Question
: (TCOs A and B) A perpetual
inventory system would most likely be used by a(n)

restaurant.

hardware store.

automobile dealership.

mom and pop convenience store.

Question 9. Question
: (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

increased by $96,500.

increased by $95,000.

increased by $94,500.

increased by $94,600.

Question 10. Question
: (TCO A) In periods of rising
prices, which of the following inventory methods results in the lowest income
taxes?

FIFO method

Average cost method

LIFO method

Cannot determine based on the information
given

Question 11. Question
: (TCO D) Describe the process
of preparing a trial balance. What is the purpose of preparing a trial balance?
If a trial balance does not balance, identify what might be the reasons why it
does not balance. If the trial balance does balance, does that ensure that the
ledger accounts are correct? Explain.
Question 12. Question
: (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:
1: Prepare a multiple-step income statement for the year
ended December 31, 2010.
2: 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.

Question 13. Question
: (TCO 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.
a: Investors invest $600,000 in exchange for 30,000 shares
of common stock.
b: Company paid rent of $3,000.
c: Company billed $5,000 for services performed.
d: Company purchased supplies of $3,000.
e: Company received $20,000 for services not yet performed.

Question 14. Question
: (TCO D) Your friend Dean has hired you to evaluate
the following internal control procedures.
a: 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.
b: For the weaknesses, you also need to state a
recommendation for improvement.

1: Bonding of the cashiers is not required because all of
the cashiers have significant experience.
2: The treasurer is the only one allowed to sign checks.
3: All employees may operate cash registers.
4: Blank checks are stored in the safe.
5: Supervisors count cash receipts daily.