Principles of Accounting 1 Summer 2019Study Guide for Midterm 2Test Format:- Multiple choice questions (50 @ 5.20 points each). Total possible points are 260. - Maximum grade is 250! The extra points are to compensate for any weakness in the main test instrument and misunderstanding in the question wording. - Students need to bring their own scantrons (form 882-E) and #2 pencils. Do not mark your scantron until you have selected your FINAL answer. Eraser marks confuse the scantron grading machine. All adverse consequences of eraser marks and mismarks are the student’s responsibility. Bring extra scantrons. Do not write notes before or duing the exam on your scantron. All work should be written on the exam.- You are permitted to use a simple four-function calculator (cell phones, scientific, financial, programmable, and graphing calculators are NOT simple four-function calculators). Instructors/exam proctors will check each student’s calculator whiledistributing the exams.- This is a closed book, closed note, and closed neighbor exam. You are NOT permitted to have scratch paper. You are NOT to look around during the exam. You are to keep your scantron sheet covered to the extent possible. Questions regarding the exam cannot be asked during the exam period.- During the exam period, cell phones and all devices that can connect to the internet should be turned off or on silent and any ear piece should be removed. If an instructor or exam proctor sees a cell phone during the exam period, the student will receive a zero on the exam. Put your cell phones away!- You must turn in your exam and scantron with your name and the version letter ofthe exam on both. You will be asked to show a picture id when you turn in your exam and scantron. - You will have 120 minutes to complete the exam. This includes time to fill in your scantron. Do not start writing on the exam before you are instructed to begin.- The exam covers Chapters 5 - 9. Skills needed: Chapter 5:- Analyze the flow of costs for a merchandising company.- Analyze freight costs, returns & allowances, and discounts associated with the purchasing and selling of inventory.- Identify characteristics of perpetual and periodic inventory systems.- Identify and calculate items found on a multiple-step income statement.- Calculate cost of goods sold under a periodic inventory system.- Calculate gross profit and the gross profit rate.Chapter 6:- Calculate ending inventory based upon the physical count and ownership of goods.- Calculate and analyze cost of goods sold and/or ending inventory under FIFO, LIFO, or average cost.- Given sales, inventory transactions, expenses, and tax rate, calculate net income.- Apply the lower of cost or market basis to inventory and identify the accounting convention it represents.- Calculate inventory turnover and days in inventory.- Interpret the effect on the financial statements of an error in the physical inventorycount.Chapter 7:- Identify the three factors that contribute to fraudulent activity.- Identify the objectives of a system of internal controls.- Given a scenario, identify the internal control principle being violated.- Identify internal controls for cash.- Prepare a bank reconciliation. - Identify the basic principles of cash management.- Determine the amount to borrow, if any, by analyzing a cash budget.- Prepare journal entries related to petty cash.Chapter 8:- Define receivables and accounting issues associated with accounts receivables.- Using the allowance method, prepare journal entries to record bad debt expense and the write off of an uncollectible account.- Prepare journal entries associated with a note receivable and interest revenue.- Calculate the due date of a note.- Calculate the accounts receivable turnover.- Prepare the journal entry to record the sale of receivables to a factor.- Identify how to record national credit card sales.Chapter 9:- Using the historical cost principle, calculate the cost of land and equipment.- Identify the factors in computing depreciation.- Calculate depreciation expense using the straight-line method.- Given a scenario, calculate the book value of a long-lived asset.- Calculate depreciation expense after a change in useful life.- Calculate the gain or loss on the disposal of a plant asset.- Calculate return on assets.- Identify intangible assets and where they are found on the balance