Principles of Accounting 1 Fall 2013Midterm Exam 2 (120 minutes)Version DName: (please print)_____________________________Instructor’s Name:______________________________50 Multiple choice questions at 5.7 points each for total points available of 285. However, the maximum grade is 275. Select the BEST answer. You are permitted to use a simple four-function calculator. This is a closed book, closed note, and closed neighborexam. You are NOT permitted to have scratch paper. Turn in the exam and scantron withyour name, instructor’s name, and exam version letter noted on both. You will be required to show a picture ID upon turning in your exam and scantron. Indicate your answer on a SCANTRON using a pencil. Do not mark yourSCANTRON until you have selected your FINAL answer. Eraser marks canconfuse the SCANTRON grading machine. All adverse consequences of erasermarks and mismarks are your responsibility.1. A firm billed clients for services rendered. How would this affect the accounting equation?A) increase assets and decrease owners equity B) increase assets and increase liabilitiesC) increase assets and increase owners equityD) none of the above2. The projected utility expense for the factory would most likely be shown on the: A) cash disbursements budget B) direct labor and manufacturing overhead budget C) production budget D) administrative budget 3. Which of the following best describes the competitive environment in the United States for refrigerators?A) Pure Competition B) Monopolistic Competition C) OligopolyD) Monopoly4. Clyde, Inc. sells two products, X and Y. Clyde sells twice as much X as Y and projects the sale of 57,000 units of X during the coming year. Product Y sells for three times as much as product X, which sells for $2.75 per unit. The estimated sales revenue for Clyde for the coming year is:A) $182,970 B) $340,005C) $391,875D) $548,6255. Which of the following cases would not require an adjusting entry?A) A client has paid for services in advance. B) The company paid for three months rent in advance.C) Capital stock has been issued for cash but not yet paid for.D) Interest on a note receivable will not be received until the note is paid off nextyear. 6. Russell Company's sales revenue was budgeted for the first six months of next year as follows:January $650,000 April $520,000February 600,000 May 460,000March 620,000 June 600,000Sales are 15% cash and 85% credit. Management estimates that 20% of credit sales will be collected in the month of sale, 70% will be collected in the month following the sale, and 10% will not be collected. Cash receipts for March are estimated to be: A) $555,400B) $574,000 C) $618,400 D) None of the above.7. Which of the following could not be net pay?A) Gross pay less FICA, union dues, income tax withheld. B) Gross pay less FICA, health insurance, income tax withheld.C) Gross pay less FICA, income tax withheld.D) Gross pay less FICA, income tax withheld, federal unemployment taxes. 8. Baxwell Industries' vice president of manufacturing receives a bonus equal to 8% of income before taxes (but after bonus). Assuming the company's income before consideration of the bonus and taxes was $48,000,000, determine the amount of the vice president's bonus (round to the nearest dollar). A) $4,760,000 B) $4,444,445C) $3,840,000 D) $3,555,5569. Homestyle Soups, Inc. has developed three new soup recipes. The company plans to set up displays in local supermarkets and hand out 20% off coupons for purchasing one or more cans of the new soups. This is an example of which of the following?A) Penetration pricing B) Life-cycle pricing C) Predatory pricing D) Target pricing 10. Lockwood Company sells bookshelves. The bookshelves cost $310 and are sold for $450. What is the selling margin percentage for the bookshelves? A) 28% B) 31% C) 45% D) 69%11. The Ellis Company is preparing its sales budget for their fiscal year that starts June 1,2010 and ends May 31, 2011. Ellis sells its product for $37 and thinks their sales in June 2010 will be 23,000 units. They expect a 10% increase in July and August and a20% increase for September and October. What will be the budgeted unit sales for the first quarter of their fiscal year? A) 69,000 B) 73,600 C) 76,130 D) None of the above12. Which of the following entries reflects the use of a perpetual inventory system? A) Purchases $XXXAccounts Payable $XXXB) Accounts Payable $XXXPurchase Returns and Allowances $XXXC) Accounts Payable $XXXCash $XXXD) Inventory $XXXAccounts Payable $XXX13.The following journal entry affected the accounting equation by:Supplies Expense $XXXSupplies $XXXA) increasing assets and increasing liabilities B) decreasing assets and increasing owners' equity C) increasing assets and increasing owners' equity D) decreasing assets and decreasing owners' equity 14. LKR Manufacturing reported cost of goods sold of $813,000, beginning and ending inventory of $75,000 and $68,600, respectively, and beginning and ending accounts payable of $39,700 and $27,500, respectively. Cash payments to suppliers forDepreciation Expense 20,000 Accumulated Depreciation 20,000Depreciation Expense 10,000 Accumulated Depreciation 10,000Depreciation Expense 8,333 Equipment 8,333Depreciation Expense 10,000 Equipment 10,000inventory during the year were: A) $785,500 B) $800,800C) $806,600 D) $818,80015. Capital Corporation's economic order quantity is 600 units and the company desires safety stock of 115 units. Demand for the year is 56,000 units. There are four days between the time an order is placed and the day it is received. Capital Corporation operates 360 days per year. The reorder point is: A) 600 units B) 624 units C) 739 units D) None of the above. 16.On July 1st, Katlin Corporation purchased $100,000 of factory equipment. Thecompany estimates the equipment will have a 5 year useful life. Assuming Katlin’s year end is December 31st, the required adjusting entry would be: A) B) C) D) Use the following information for questions 17 and 18.Treble Corporation generated the following income:Sales $8,000,000Cost of Goods Sold 5,200,000Gross Profit $2,800,000Operating Expenses 700,000Income Before Taxes and Bonus $2,100,000 John Lewis, the executive vice president of Treble Corporation, receives a bonus of 5% of income before taxes and bonus. The tax rate is 35%.17.What is John Lewis’s bonus?A) $ 68,250 B) $105,000 C) $140,000 D)