BMGT 220 FALL 2013 Midterm Exam 1 Thursday February 21 For the following Multiple Choice Questions identify the letter of the choice A B C or D that best completes the statement or answers the question 1 Financial statements are prepared A Only for publicly owned business organizations B For corporations but not for sole proprietorships or partnerships C Primarily for the benefit of persons outside of the business organization D In either monetary or nonmonetary terms depending upon the need of the decision maker 2 Which of the following organizations is not recognized as a source of generally accepted accounting principles 3 Which of the following transactions would cause an increase in both assets and owners equity A The Financial Accounting Standards Board FASB B Securities and Exchange Commission SEC C D Federal Bureau of Investigation FBI International Accounting Standards Board IASB A Providing service to a customer to generate revenue B Paying dividends to shareholders C Borrowing money from a bank D Sale of land for cash at a price equal to its cost 4 In the above data for a company if the total assets are 556 000 Retained Earnings must be A 811 000 B 180 000 C 221 000 D 335 000 5 The owner of Maryland Crabcakes purchased a new car for his daughter at a cost of 39 000 and reported this amount on the restaurant s balance sheet The reporting of this item in this manner violated the A Cost principle B Fair Value Principle C Monetary Unit Assumption D Economic Entity Assumption 6 During the current year assets of Wagner Company increased by 382 000 and liabilities decreased by 240 000 The owners equity in the business must have A Decreased by 142 000 B Decreased by 622 000 C Increased by 142 000 D Increased by 622 000 7 On December 31 2011 O Keefe Company s Assets and Liabilities were 66 000 and 15 000 respectively On December 31 2012 the assets and liabilities were 94 000 and 28 000 respectively During 2012 the company issued 7 000 of additional stock and paid 3 000 of dividends Determine the company s net income for 2012 A 8 000 B 11 000 C 19 000 D 15 000 8 The following items were listed by Shiny Dentures Company for the month of September Common Stock September 1 42 000 Accounts payable 7 000 Equipment 40 000 Service revenue 22 000 Dividends 6 000 Dental supplies expense 3 500 Cash 5 000 Utilities expense 700 Dental supplies 2 800 Salaries expense 7 000 Accounts receivable 4 000 Rent expense 2 000 Determine the company s Net income for the month of September A 2 800 B 8 800 C 6 000 D 12 800 In a ledger debit entries cause A Increases in owners equity decreases in liabilities and increases in assets B Decreases in liabilities increases in assets and decreases in owners equity C Decreases in assets decreases in liabilities and decreases in owners equity D Increases in assets decreases in liabilities and increases in owners equity 9 10 Which of the following represents the correct flow of information through financial statements A Balance Sheet to Income Statement to Statement of Retained Earnings B Income Statement to Balance Sheet to Statement of Retained Earnings C Income Statement to Statement of Retained Earnings to Balance Sheet D Statement of Retained Earnings to Balance Sheet to Income Statement 11 Double entry accounting is characterized by which of the following A Every transaction affects both sides of the accounting equation B The number of ledger accounts with debit balances is equal to the number of ledgers with credit C The total dollar amount of debit entries posted to the ledger is equal to the dollar amount of the balances credit entries D The number of debit entries posted to the ledger equals the number of credit entries 12 The manager of a retail store purchased several cash registers for the business on January 10 but at the end of the year does not remember whether he paid cash for the full price of the registers or recorded a liability to the vendor Where is the best place for the manager to get information about this transaction A A trial balance prepared at the end of June B The general journal C A balance sheet prepared at the end of June D The ledger account for equipment 13 Kevin Company s Accounts Receivable accounts had a balance of 27 400 on January 1 and a balance of 43 500 on February 1 During the month of January the company made sales on credit for 55 800 Determine the cash collections made by Kevin Company from its credit customers in January A 39 700 B 15 100 C 71 900 D It cannot be determined from the information given 14 Kristian Company s Accounts Payable account had a balance of 32 400 on January 1 and a balance of 24 100 on February 1 During the month of January the company made cash payments for outstanding bills for 35 800 Determine Kristian Company s purchases on credit in January A 44 100 B 20 700 C 27 500 D It cannot be determined from the information given 15 An accountant for Jessica Company made the following journal entry on January 30 2013 Before the journal entry above Jessica Company had assets liabilities and owners equity of 450 000 100 000 and 350 000 respectively What are total assets immediately after the above transaction A 221 000 B 671 000 C 736 000 D 450 000 16 Which of the following errors would be discovered by preparation of a trial balance A The collection of an account receivable was recorded by a debit to the Land account rather than to B The collection of an account receivable for 319 was recorded by a 391 debit to Cash and a 391 C The collection of a 375 account receivable was not recorded at all D The collection of a 225 account receivable was recorded by a 225 debit to Cash and a 225 debit the Cash account credit to Accounts Receivable to Accounts Receivable 17 Which of the following is NOT a purpose of adjusting entries A To prepare the revenue and expense accounts for recording transactions for the following period B To record the proper amounts of revenue and expense in the income statement C To establish the proper amounts of assets and liabilities in the balance sheet D To accomplish the objective of offsetting the revenue of the period with all the expenses incurred in generating that revenue 18 On March 1 Rezzetano Company paid 3 120 as premium for a six month auto insurance policy going into immediate effect The necessary adjusting entry on June 30 will include which of the following A A credit to Prepaid Insurance for 2 080 B A credit to Prepaid Insurance for 1 560 C A debit to Prepaid
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