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ISU ACCT 284 - Exam 2 Review[1]

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Exam 2 Review (SI)1. The Sarbanes-Oxley Act or 2002 introduced stiffer punishment for fraud in accounting. What 3 things are required for fraud to occur?a. Incentive, Purpose, Cashb. Cash, Assets, Opportunityc. Incentive, Opportunity, Characterd. Character, Incentive, Cash2. Income Tax Expense was $80,000 for Amazon Company. The tax rate was 40%. Other Expenses for Amazon.com was $10,000. General & Administrative expenses were 20,000. Net Sales for Amazon was $400,000. Determine Amazon’s cost of goods sold.a. $210,000b. $200,000c. $190,000d. $180,0003. When an annual report is audited and released annual, which of the following forms is filed with the SEC?a. Form 10kb. Form 8Kc. Form 10Qd. No filing required unless a major transaction occurs4. In reconciling the checking account, Morris Company noted the following items for the month of October:Ending book balance $5,775Deposits in transit $1,250Outstanding checks $2,075NSF check $ 450Bank service charges $ 25Bank interest expense $ 250Ending bank balance $ 5,875What is the correct cash balance at the end of October? a. $5,000b. $5,050c. $4,000d. $5,7505. Target Company had 2009 and 2010 ending inventory of $2,000 and $4,000 respectively. In 2010, Target made $7,000 worth of purchases. What was Target’s costof goods sold in 2010?a. $5,000b. $11,000c. $6,000d. $3,0006. Under the perpetual inventory system,a. There is a purchase account involvedb. As inventory is sold, no entry is neededc. To account for ending inventory, purchases account is closed and cost of goods sold is createdd. Inventory is increased as purchased, and reduced as sold7. On March 1st, Kellogg’s Company made gross sales of $400,000 with terms 2/10,n30.The customer later returned goods worth $20,000 because of defect on March 3rd. Calculate the net sales of Kellogg’s company assuming the customer rendered full payment on March 9th in the same year.a. $380,000b. $360,000c. $372,000d. $372,4008. Which of the following parties would have a raw materials inventory, work-in-process inventory and finished goods inventory?a. A retailerb. A manufacturerc. A distributord. None of the above9. Under which of the following inventory methods, cost of goods sold would generally be the highest?a. FIFOb. LIFOc. Weighted-average methodd. Specific identification methodAnswer questions 10, 11 and 12 based on the following information :September 1 – Inventory balance on hand is $5,000 (500 units of inventory) 6 – Purchased 200 units @ $10.50 each 7 – Sold 500 units @ $15.00 each 8 – Purchased 200 units @ $11 each 19 – Sold 300 units @ $15.00 each10. Assuming the above company uses the FIFO inventory method, what would the cost of goods sold be?a. $8,000b. $8,050c. $8,200d. $9,60011. Now assume the company uses a LIFO inventory method, what would the ending balance in inventory be at the end of September?a. $1,000b. $1,200c. $1,400d. $1,60012. Assuming the company uses the LIFO inventory method, what would gross profit be?a. $3,000b. $3,700c. $3,900d. $4,20013. According to the lower-of cost or market rule, what would the inventory balance be based on the following information?Quantity Unit Cost Replacement costMen’s sneakers 20 $50 $40Women’s sneakers 15 $40 $50a. $1,400b. $1,550c. $1,600d. $1,75014. Bad debt expense is :a. The actual write-off a company has to make because debtors defaultedb. A fixed amount a company occurs every year based on the size of the companyc. An amount which is charged to expense arising from situations such as a debtor’s bankruptcy.d. An estimated amount based on credit sales or Accounts receivable15. Maxis Corporation has beginning balance in Allowance for Doubtful Accounts of $2,000. Assuming credit sales totaled $50,000 and Celcom estimates 5% of net credit sales to be bad debt, what amount of bad debt expense would be recorded if Celcom uses the balance sheet method?a. $500b. $2,500c. $2,000d. $1,50016. Assume beginning balance of a company’s allowance for doubtful accounts is $4,000.Net credit sales are $250,000 and 4% is estimated as bad debt. If the income statement method was used, what would bad debt expense be?a. $6,000b. $10,000c. $14,000d. None of the above17. Maxwell Company uses the income statement method for estimated bad debt expense. It estimates 2% of its $500,000 credit sales to be bad debt. Assume the beginning balance in the allowance for doubtful account was $4,000 and ending balance was $8,000. Determine the amount of write-off’s that the company made during the year.a. $2,000b. $4,000c. $6,000d. $8,00018. Method Company issued cash for a $20,000, 5% note on May 1st, 2010. The note is due in one year. On December 31st, 2010, the fiscal year end, determine the amount ofinterest revenue recorded by Method.a. $556b. $667c. $1,000d. $500 19. Which of the following assets is not amortized?a. Goodwillb. Trademarksc. Trucksd. Patents20. Which of the following is not depreciated?a. Buildingb. Equipmentc. Trucksd. Land21. Using which method of depreciation would result in the highest depreciation expense when the asset is fully depreciated?a. Straight-lineb. Units of Productionc. Double Declining balanced. All methods results in the same depreciation expense at the end22. An equipment had a life of 8 years, cost of $20,000 and salvage value of $2,000. What is the depreciation expense for this equipment in the first year?a. $2,250b. $2,500c. $3,000d. $4,00023. Cy purchased a building with an estimated life of 10 years, for $200,000. The building is expected to have $20,000 in salvage value at the end of its life. Using the double declining balance method, what would accumulated depreciation be in the second year?a. $32,000b. $40,000c. $ 72,000d. $20,00024. Which of the following would be part of the cost recorded in for the purchase of an equipment?a. Purchase price of the equipmentb. Installation cost for the equipmentc. Transportation of the equipmentd. All of the above25. The copy machine of Iowa State had an estimated useful life of 8 years. After its 5th year of use, the machine was sold for $5,000. The cost of the machine originally was $15,000. Assuming at the end of the 5th year, the accumulated depreciation was $5,000. What was the gain / loss on the sale of the copy machine?a. Gain of $5,000b. Loss of $5,000c. Gain of $15,000d. Loss of $10,00026. A


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