5.
Question : (TCO C) Jamie Company recorded the following cash transactions
for the year:Paid $70,000 for salaries.
Paid $20,000 to purchase office equipment.
Paid $6,000 for utilities.
Paid $7,000 in dividends.
1.
Question : (TCO E) The time period assumption states that:
Student Answer:
a transaction can only affect one period of time.
estimates should not be made if a transaction affects more than one time period.
adjustments to the enterprises accounts can only be made in the time period when
the business terminates its operations.
the economic life of a business can be divided into artificial time periods.
2.
Question : (TCO E) The matching principle matches:
Student Answer:
customers with businesses.
expenses with revenues.
assets with liabilities.
creditors with businesses.
3.
Question : (TCO E) Expenses sometimes make their contribution to revenue
in a different period than when the expense is paid. When wages are incurred in one
period and paid in the next period, this often leads to which account appearing on
the balance sheet at the end of the first period?
Student Answer:
Due from Employees
Due to Employer
Wages Payable
Wages Expense
4.
Question : (TCO E) The following is selected information from J Corporation
for the fiscal year ending October 31, 2010.Cash received from customers $75,000
Revenue earned 87,500
Cash paid for expenses 42,500
Expenses incurred 50,000Based on the accrual basis of accounting, what is J
Corporations net income for the year ending October 31, 2007?
Student Answer:
$28,500
$33,500
$20,500
$37,500
5.
Question : (TCO E) The general term employed to indicate an expense that
has not been paid or revenue that has not been received and has not yet been
recognized in the accounts is:
Student Answer:
contra asset.
prepayment.
asset.
accrual.
6.
Question : (TCO A, B) Which of the following expressions is incorrect?
Student Answer:
Gross profit operating expenses = net income
Sales cost of goods sold operating expenses = net income
Net income + operating expenses = gross profit
12. Question : (TCO A) Which of the following statements is correct with respect
to inventories?
Student Answer:
The FIFO method assumes that the costs of the earliest
goods acquired are the last to be sold.
It is generally good business management to sell the most recently acquired goods
first.
Under FIFO, the ending inventory is based on the latest units purchased.
FIFO seldom coincides with the actual physical flow of inventory.
13. Question : (TCO A) In a period of declining prices, which of the following
inventory methods generally results in the lowest balance sheet figure for
inventory?
Student Answer:
Average cost method
LIFO method
FIFO method
Need more information to answer
14. Question : (TCO B) Which of the following is a true statement about
inventory systems?
Student Answer:
Periodic inventory systems require more detailed
inventory records.
Perpetual inventory systems require more detailed inventory records.
A periodic system requires cost of goods sold be determined after each sale.
A perpetual system determines cost of goods sold only at the end of the accounting
period.
15. Question : (TCO B) Two categories of expenses in merchandising companies
are:
Student Answer:
cost of goods sold and financing expenses.
operating expenses and financing expenses.
cost of goods sold and operating expenses.
sales and cost of goods sold.
1.
Question : (TCO D) A classmate is considering dropping his accounting class
because he cannot understand the rules of debits and credits.
Explain the rules of debits and credits in a way that will help him understand them.
Cite examples for each of the major sections of the balance sheet (assets, liabilities
and stockholders equity) and the income statement (revenues and expenses).
2.
Question : (TCOs B & E) The Caltor Company gathered the following
condensed data for the year ended December 31, 2010:Cost of goods sold
$ 710,000
Net sales
1,279,000
Administrative expenses
239,000
Interest expense
68,000
Dividends paid
38,000
Selling expenses
45,000Instructions:
Prepare a multiple-step income statement for the year ended December 31, 2010.
Compute the profit margin ratio and gross profit rate. Caltor Company s assets at
the beginning of the year were $770,000 and were $830,000 at the end of the year.
To qualify for full credit, you must state the formula you are using, show your
computations and explain your findings.