ACCT 212 Midterm Exam Solution 100% Correct Answers

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ACCT 212 Midterm Exam Solution 100% Correct Answers

1. Which of the following is not an advantage of the corporate form of business organization? (Points : 3) No personal liability Easy to transfer ownership Favorable tax treatment Easy to raise funds

Question 2. 2. External users want answers to all of the following questions except (Points : 3) Is the company earning satisfactory income? Will the company be able to pay its debts as they come due? Will the company be able to afford employee pay raises this year? How does the company compare in profitability with competitors?

Question 3. 3. Issuing shares of stock in exchange for cash is an example of a(n) (Points : 3) delivering activity. investing activity. financing activity. operating activity.

Question 4. 4. Buying and selling products are examples of (Points : 3) operating activities. investing activities. financing activities. delivering activities.

Question 5. 5. Debt and obligations of a business are referred to as (Points : 3) assets. equities. liabilities. expenses.

Question 6. 6. Dividends paid (Points : 3) increase assets. increase expenses. decrease revenues. decrease retained earnings.

Question 7. 7. Net income results when (Points : 3) Assets > Liabilities. Revenues = Expenses. Revenues > Expenses. Revenues < Expenses.

Question 8. 8. Finney Company began the year by issuing $20,000 of common stock for cash. The company recorded revenues of $185,000, expenses of $160,000, and paid dividends of $10,000. What was Finney’s net income for the year? (Points : 3) $15,000 $35,000 $25,000 $45,000

Question 9. 9. Payments to stockholders are called (Points : 3) expenses. liabilities. dividends. distributions.

Question 10. 10. Stockholders’ equity is increased by (Points : 3) dividends. revenues. expenses. liabilities.

Question 11. 11. Which of the following describes the classification and normal balance of the Unearned Revenue account? (Points : 3) Asset, debit Liability, credit Revenues, credit Expense, debit

Question 12. 12. Which of the following accounts has a normal debit balance? (Points : 3) Accounts Payable Prepaid Rent Retained Earnings Common Stock

Question 13. 13. If employees are bonded (Points : 3) it means that they are not allowed to handle cash. they have worked for the company for at least 10 years. they have been insured against misappropriation of assets. it is impossible for them to steal from the company.

Question 14. 14. Which of the following would be deducted from the balance per books on a bank reconciliation? (Points : 3) Outstanding checks. Deposits in transit. Notes collected by the bank. Service charges.

Question 15. 15. To show how successfully your business performed during a period of time, you would report its revenues and expense in the (Points : 3) balance sheet. income statement. statement of cash flows. retained earnings statement.

Question 16. 16. Net income results when (Points : 3) Assets > Liabilities. Revenues = Expenses. Revenues > Expenses. Revenues < Expenses.

Question 17. 17. Sam’s Grocery Store has the following policy. ‘Only one cashier can have access to a cash drawer.’ Which internal control principle supports this policy? (Points : 3) Documentation procedures. Segregation of duties. Physical controls. Establishment of responsibilities.

Question 18. 18. Lankston Company began the year by issuing $30,000 of common stock for cash. The company recorded revenues of $275,000, expenses of $240,000, and paid dividends of $15,000. What was Lankston’s net income for the year? (Points : 3) $20,000 $50,000 $35,000 $65,000

Question 19. 19. Kilmer Corporation began the year with retained earnings of $217,000. During the year, the company issued $294,000 of common stock, recorded expenses of $840,000, and paid dividends of $56,000. If Kilmer’s ending retained earnings was $231,000, what was the company’s revenue for the year? (Points : 3) $854,000 $910,000 $1,148,000 $1,204,000

Question 20. 20. Which of the following is not considered an asset? (Points : 3) Equipment Dividends Accounts receivable Inventory

1.     (TCO 1) The financial statements present a company to the public in financial terms. (1) Which financial statement identifies where cash was generated and where it was spent during the year (10 points), and (2) identify the three major parts of this statement. (10 points) (Points : 20)

Question 2. 2. (TCO 2) Transaction analysis results in the development of a journal entry. Supplies are purchased on account agreeing to pay $500 within 30 days. (1) Name the accounts impacted and how to use the format account name/debit or credit/dollar amount (10 points), and (2) explain how the Accounting Equation is impacted. (10 points) (Points : 15)

Question 3. 3. (TCO 5) Internal Controls are required to safeguard assets and to ensure ethical business practices. (1) Identify and explain the reason for any two of the five components of internal control (10 points) and (2) provide examples of how your two selected components of internal control will meet the goal of safeguarding assets and promoting ethical business practices. (12 points) (Points : 15)

Question 4. 4. (TCO 1) The Accounting Equation is used to develop the organization’s financial reports. (1) Describe what liabilities value would be if Assets are $70,000 and Owners’ Equity is $30,000 by showing the Accounting Equation (8 points) and (2) provide an example of two liability accounts. (7 points) (Points : 20)