Sampletest Mid1(Key)

8/16/2019 Sampletest Mid1(Key)

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Name______________________

Sample Test Key for Midterm 1 (Chapters 1 – 4)

Multiple Choice - Circle the one best answer.

1. The primary accounting standard-setting body in the United States is thea. Securities and Exchange Commission.b. nternal !e"enue Ser"ice.c. Financial ccountin! Standards "oard.d. Corporate #oard o$ %irectors.

&. 'n increase in an expensea. increases re"enues.b. increases assets.c. decreases liabilities.d. decreases capital.

(. ' corporation with total owners) e*uity o$ +,/// paid a +/// business debt. 'sa result o$ this transaction total capital e*uitya. did not chan!e.b. increased by +///.c. decreased by +///.d. increased to +0////.

. The right side o$ an account is alwaysa. the debit side.#. the credit side.c. the balance o$ that account.d. carried $orward to the next accounting period.

. 2osting is the process o$ a. preparing a chart o$ accounts.b. adding a column o$ $igures.c. transferrin! $ournal entries to led!er accounts.d. recording entries in a 3ournal.

4. The purpose o$ recording depreciation on producti"e assets is toa. re$lect the decline in the mar5et "alue o$ the assets each period.

b. reduce income when the company has an exceptionally pro$itable year.c. be in con$ormity with the re"enue recognition principle.d. allocate the ori!inal cost of a producti%e asset to e&pense o%er its usefullife.


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6. 7urray Company debited 2repaid nsurance $or +04/ on 8uly 1 &//1 $or a one-year $ire insurance policy. $ the company prepares monthly $inancial statements$ailure to ma5e an ad3usting entry on 8uly (1 $or the amount o$ insurance that hasexpired would causea. assets to be o"erstated by +04/ and expenses to be understated by +04/.b. expenses to be o"erstated by +,/ and assets to be understated by +,/.

c. assets to #e o%erstated #y ' and e&penses to #e understated #y '.d. expenses to be o"erstated by +04/ and assets to be understated by +04/.

,. 9hich one o$ the $ollowing accounts is not closed at the end o$ an accountingperiod:a. Capital accountb. %i"idends accountc. Ser"ice !e"enue accountd. nsurance Expense account

0. The re"enue recognition principle dictates that re"enue should be recogni;ed in

the accounting period in which it is a. collected.

#. earned.c. earned and collected.d. most li5ely to be collected.

1/.


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1. 9hich o$ the $ollowing is not considered an external user o$ accountingin$ormation:a. Creditor b. !egulatory 'gencyc. =abor Uniond. *fficers

1. 9hich o$ the $ollowing is a separate legal entity:a. 2roprietorshipb. 2artnershipc. Corporationd. Sole proprietorship

14. 9hich o$ the $ollowing is $alse:a. Current assets are listed in the order of ma!nitude (si+e).b. >bligations expected to be paid a$ter one year are classi$ied as long-term

liabilities.

c. ntangible assets are noncurrent assets that do not ha"e physical substance.d. 2roperty plant and e*uipment are assets with relati"ely long use$ul li"es that

are used in operating the business.

16. The primary source o$


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&1. The owners) e*uity had a beginning total o$ +//// and an ending total o$ +////. $ +1//// o$ withdrawals were paid during the period net income mustha"e beena. '.b. +////.c. +1////.

d. +(////.

Matchin! - 7atch the items below by entering the appropriate letter in the space.

_____ 1. =iabilities /

_____ &. !e"enues 0

_____ (. =edger F

_____ . 7atching principle C

_____ . Unearned re"enues

_____ 4. ncome summary

_____ 6. n ?ebruary 1 &//1 a tenant in an apartment building owned by the NanceCompany paid +1// which represents six monthsB rent in ad"ance. The amountrecei"ed was credited to the Unearned !ent account.

Unearned !ent...............................................................................................,/!ent Earned............................................................................................. ,/

'. ' liability created when cash is recei"ed inad"ance o$ per$orming a ser"ice $or a customer.

#. Company will remain in business long enough tocarry out its existing ob3ecti"es.

C. The recognition o$ e$$orts expensesD at the sametime as accomplishments re"enuesD.

%. Creditors) claims on total assets.

E. ' temporary account used in closing re"enue andexpense accounts.

?. Contains all asset liability and stoc5holders)e*uity accounts.


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(. >n 8uly 1 &//1 the balance in the >$$ice Supplies account was +&//. %uring 8ulyo$$ice supplies costing +,/ were purchased. ' physical count o$ o$$ice supplies at8uly (1 re"ealed that there was +&/ still on hand.

>$$ice Supplies Expense............................................................................................/>$$ice Supplies.................................................................................................... /

. >n 7arch (1 &//1 the Nance Company purchased a deli"ery "an $or +((///. t isestimated that the annual depreciation will be +44//.

%epreciation Expense............................................................................................/ 'ccumulated %epreciation %eli"ery Fan...................................................... /

. The Nance Company has two o$$ice employees who earn +,/ and +1// per dayrespecti"ely. They are paid each ?riday $or a $i"e-day wor5 wee5 that begins each7onday. 8uly (1 is a Thursday in &//1.

Salaries Expense............................................................................................6&/Salaries 2ayable....................................................................................... 6&/

2atios

The $ollowing data are ta5en $rom the $inancial statements o$ 7arcum Company. Thedata are in alphabetical orderG

'ccounts payable + &&/// Net income + ////

'ccounts recei"able /// Net sales ///// '"erage assets &//// >ther current liabilities 1&///Cash (/// Salaries payable 4///wners) e*uity 1/////

3nstructions

Compute the $ollowingGaD Current ratio H Current assets ÷ Current liabilities

H +0//// ÷ +//// H . 5 1

bD %ebt to total assets ratio H Total debt ÷ Total assets H +1//// ÷ +&//// H 67

Total debt H Total assets >wners) e*uity H +&//// - +1/////D

cD 2ro$it margin ratio H Net income ÷ Net sales

H +//// ÷ +///// H 17

dD !eturn on assets ratio H Net income ÷ Total assetsH +//// ÷ +&//// H 167

Selected in$ormation $rom the $inancial statements o$ #uyman Company $or the year ended %ecember (1 &//1 appears belowG

&//1


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Current assets + (////Total assets beginningD 1&/////Current liabilities 1////=ong-term liabilities /////Net sales 1/////


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independent problems.

'.


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2lace a chec5 in the appropriate columns to designate whether each o$ the $ollowing accounts isan asset, a liability, or a stoc5holders) e*uity account.

____________________________________________________________________________

'ccount 'sset =iability >wners) E*uity ____________________________________________________________________________

1. Ser"ice !e"enue K ____________________________________________________________________________

&. nsurance Expense K ____________________________________________________________________________

(. Supplies K ____________________________________________________________________________

. Capital K ____________________________________________________________________________

. 'ccounts 2ayable K ____________________________________________________________________________

4. Salaries 2ayable K ____________________________________________________________________________

6. 9ithdrawals K ____________________________________________________________________________

,. 'ccounts !ecei"able K ____________________________________________________________________________

0. 2repaid nsurance K ____________________________________________________________________________

1/. 7ortgage 2ayable K ____________________________________________________________________________

":=C S9T C:SS3F3CT3*=S

3nstructions


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7atch the account titles gi"en below with the appropriate #alance Sheet classi$ication. 'nindi"idual classi$ication may be used more than once or not at all. 'n account may also notappear in the balance sheet.

Classi$ications

'. Current 'ssets E. Current =iabilities

#. =ong-term n"estments ?. =ong-term =iabilities

C. 2roperty 2lant and E*uipment wners) E*uity

%. ntangible 'ssets L. Not separately presented on the #alance Sheet

'ccount Titles

_____ 1. 9ithdrawals 0 _____1/. 2repaid nsurance

_____ &. Unearned !ent !e"enue _____ 11. #onds 2ayable F

_____ (. Supplies _____1&. Taxes 2ayable

_____ . 'ccounts 2ayable _____1(. Copyrights /

_____ . 2atents / _____1. 'ccounts !ecei"able

_____ 4. Salaries 2ayable _____1. 7ortgage 2ayable F

_____ 6. E*uipment C _____14. %i"idends 9

_____ ,. Ser"ice !e"enue 9 _____16. 'ccumulated %epreciationIE*uipment C

_____ 0. !ent Expense 9 _____1,. Capital 0

Sampletest Mid1(Key)

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