1. ACCT 550 Midterm 100% Correct
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(TCO A) Financial information demonstrates
consistency when
(TCO A) The cash method of accounting
(TCO A) Changing the method of inventory
valuation should be reported in the financial
statements under what qualitative characteristic
of accounting information?
(TCO A) The characteristic that is demonstrated
when a high degree of consensus can be secured
2. among independent measurers using the same
measurement methods is
(TCO A) Which of the following is not a basic
element of financial statements?
(TCO A) Issuance of common stock for cash affects
which basic element of financial statements?
(TCO A) Faithful representation has as an
enhancing quality for which of the following?
(TCO D) Which of the following is a limitation of
the balance sheet?
(TCO D) The amount of time that is expected to
elapse until an asset is realized or otherwise
converted into cash is referred to as
(TCO A) The quality of information that gives
assurance that is reasonably free of error and bias
and is complete is
(TCO D) The correct order to present current
assets is
(TCO A) Why are some of the major differences
between iGAAP and U.S. GAAP? Explain in detail.
3. (TCO C) Blue Corp. reports operating expenses in
two categories: (1) selling and (2) general and
administrative. The adjusted trial balance at
December 31, 201X, included the following
expense accounts.
Accounting and legal fees $150,000
Advertising $125,000
Freight-out $65,000
Interest $80,000
Loss on sale of long-term $35,000
investments
Officers' salaries $200,000
Rent for office space $160,000
Sales salaries and commissions $110,000
One half of the rented premises are occupied by
4. the sales department. How much of the expenses
listed above should be included in Perry's selling
expenses for 201X?
(TCO C) For the year ended December 31, 201X,
King Inc. reported the following.
Net income $60,000
Preferred dividends declared $10,000
Common dividend declared $2,000
Unrealized holding loss, net of tax $1,000
Retained earnings, beginning $80,000
balance
Common stock sold during the year $80,000
Retained earnings, beginning
balance
Common stock $40,000
Accumulated Other Comprehensive $5,000
5. Income, Beginning Balance
What would Transformers report as the ending
balance of retained earnings?
(TCO C) Ivy Co. had the following account balances.
Sales 120,000
Cost of goods sold 70,000
Salary expense 15,000
Depreciation expense 20,000
Dividend revenue 5,000
Utilities expense 6,000
Rental revenue 30,000
Interest expense 10,000
Advertising expense 15,000
6. What would Ivy report as total expenses in a
single-step income statement?
(TCO B) Unearned rent at 1/1/1X was $7,300 and
at 12/31/1X was $8,100. The records indicate cash
receipts from rental sources during 201X
amounted to $40,000, all of which was credited to
the Unearned
Rent Account. You are to prepare the missing
adjusting entry. Please indicate DR (debit) or CR
(credit) to the left of the account title, and place a
comma between the account title and the amount
of the
adjustment.
(TCO B) Unearned rent at 1/1/1X was $5,500 and
at 12/31/1X was $10,000. The records indicate
cash receipts from rental sources during 201X
amounted to $40,000, all of which was credited to
the Unearned
Rent Account. You are to prepare the missing
adjusting entry. Please indicate DR (debit) or CR
(credit) to the left of the account title, and place a
comma between the account title and the amount
of the
adjustment.
7. (TCO B) Allowance for doubtful accounts on
1/1/1X was $50,000. The balance in the allowance
account on 12/31/1X after making the annual
adjusting entry was $65,000, and during 201X, bad
debts written off
amounted to $40,000. You are to provide the
missing adjusting entry. Please indicate DR (debit)
or CR (credit) to the left of the account title,and
place a comma between the account title and the
amount of the
adjustment.
(TCO D) Which of the following should be reported
for capital stock?
(TCO D) Which item below is not a current
liability?
(TCO A) Financial information exhibits the
characteristic of consistency when
(TCO D) Hall Corp.'s trial balance reflected the
following account balances at December 31, 201X.
Accounts receivable (net)
(TCO A) Which of the following statements is not
an objective of financial reporting?
8. (TCO A) The cash method of accounting
(TCO A) Changing the method of inventory
valuation should be reported in the financial
statements under what qualitative characteristic
of accounting information?
(TCO A) The two fundamental qualities for
accounting information are
(TCO A) The elements of financial statements
include investments by owners. These are
increases in an entity's net assets resulting from
owners’
(TCO A) Issuance of common stock for cash affects
which basic element of financial statements?
(TCO A) Which basic assumption may not be
followed when a firm in bankruptcy reports
financial results?
(TCO D) Balance sheet information is useful for all
of the following except to
(TCO D) The balance sheet contributes to financial
reporting by providing a basis for all of the
following except
9. (TCO A) The quality of information that gives
assurance that is reasonably free of error and bias
and is complete is
(TCO D) The basis for classifying assets as current
or noncurrent is conversion to cash within
(TCO A) What is FASB Codification? Explain in
detail.
(TCO C) At Red Company, events and transactions
during 20X2 included the following. The tax rate
for all items is 30%.
(1) Depreciation for 20X1 was found to be
understated by $40,000.
(2) A strike by the employees of a supplier
resulted in a loss of $35,000.
(3) The inventory at December 31, 20X1 was
overstated by $50,000.
(4) A flood destroyed a building that had a book
value of $500,000. Floods are very uncommon in
that area.
What would the effect of these events and
transactions on 20X2 income from continuing
operations net of tax be?
(TCO C) An income statement shows "income
before income taxes and extraordinary items" in
10. the amount of $3,000,000. The income taxes
payable for the year are $1,500,000, including
$260,000 that is applicable to an extraordinary
gain. Thus, what is the "income before
extraordinary items"?
(TCO C) Dolly Company reported the following
information for 201X.
(TCO B) Prepaid rent at 1/1/1X was $70,000.
During 201X, rent payments of $120,000 were
made and charged to "rent expense."
The 201X income statement shows as a general
expense the item "rent expense" in the amount of
$126,000. You are to prepare the missing adjusting
entry that must have been made, assuming
reversing entries are not made. Please indicate DR
(debit) or CR (credit) to the left of the account title,
and place a comma between the account title and
the amount of the adjustment.
(TCO B) Unearned rent at 1/1/1X was $6,000 and
at 12/31/1X was $15,000. The records indicate
cash receipts from rental sources during 201X
amounted to $40,000, all of which was credited to
the Unearned Rent Account. You are to prepare the
missing adjusting entry. Please indicate DR (debit)
or CR (credit) to the left of the account title, and
11. place a comma between the account title and the
amount of the adjustment.
(TCO B) Prepaid rent at 1/1/1X was $25,000.
During 201X, rent payments of $123,000 were
made and charged to "rent expense." The 201X
income statement shows as a general expense the
item "rent expense" in the amount of $122,000.
You are to prepare the missing adjusting entry
that must have been made, assuming reversing
entries are not made. Please indicate DR (debit) or
CR (credit) to the left of the account title, and place
a comma between the account title and the amount
of the adjustment.
(TCO B) Prepaid rent at 1/1/1X was $40,000.
During 201X, rent payments of $115,000 were
made and charged to "rent expense." The 201X
income statement shows as a general expense the
item "rent expense" in the amount of $125,000.
You are to prepare the missing adjusting entry
that must have been made, assuming reversing
entries are not made. Please indicate DR (debit) or
CR (credit) to the left of the account title, and place
a comma between the account title and the amount
of the adjustment
12. (TCO D) Which of the following is not an
acceptable major asset classification?
(TCO D) An example of an item that is not an
element of working capital is
(TCO A) Which of the following is not a basic
assumption underlying the financial accounting
structure?
(TCO D) The current assets section of the balance
sheet should include
TCO D) Ahnen Company owns the following
investments.
Trading securities (fair value) $70,000
Available-for-sale securities (fair value) 40,000
Held-to-maturity securities (amortized cost)
47,000
What will Ahnen report investments in its current
assets section?
