Question ACC556 Financial Accounting for Managers Midterm Exam Part 1

ACC556 Financial Accounting for Managers

Midterm Exam Part 1

Question 1 Lankston Company began the year by issuing $90,000 of common stock for cash. The company recorded revenues of $825,000, expenses of $720,000, and paid dividends of $45,000. What was Lankston’s net income for the year?

Selected Answer:

$105,000

Answer:

$105,000

Question 2 Marvin Services Corporation had the following accounts and balances:

Accounts payable            $18,000 Equipment          $21,000

Accounts receivable       3,000     Land      21,000

Buildings              ?              Unearned service revenue          6,000

Cash      9,000     Total stockholders’ equity            ?

If the balance of the Buildings account was $45,000 and the equipment was sold for $21,000, what would be the total of stockholders’ equity?

Question 3 An advantage of using the periodic inventory system is that it requires less record keeping than the perpetual inventory system.

Question 4 Financing activities include the purchase or sale of long-lived assets or the purchase or sale of investment securities.

Question 5 The economic resources that are owned by a business are called stockholders’ equity.

Question 6 Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.

Question 7 An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.

Question 8 A concentration of credit risk is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of the company.

Question 9To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the employee authorized to sign checks.

Question 10Owners of business firms are the only people who need accounting information.

Question 11Source documents can provide evidence that a transaction has occurred.

Question 12Consistent use of the same accounting principles and methods is necessary for meaningful analysis of trends within a company.

Question 13Which of the following is not a common way that managers use the balance sheet?

Question 14Management may choose any inventory costing method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods in the company.

Question 15Goods that have been purchased FOB destination but are in transit, should be excluded from a physical count of goods by the buyer.

Question 16 Solvency ratios measure the short-term ability of the company to pay its maturing obligations.

Question 17Use the following data to calculate the current ratio.

Carne Auto Supplies

Balance Sheet

December 31, 2014

Cash                                         $    35,000          Accounts payable                          $   65,000

Accounts receivable                         50,000          Salaries and wages payable                10,000

Inventory                                        70,000          Mortgage payable                              90,000

Prepaid insurance                             40,000          Total liabilities                                   $165,000

Long Term Stock investments           80,000

Land                                               95,000

Buildings                 $100,000                               Common stock                              $120,000

Less: Accumulated                                                Retained earnings                           250,000

depreciation         (30,000)       85,000               Total stockholders’ equity          $370,000

Trademarks                                    70,000                  Total liabilities and

Total assets                                 $535,000                    stockholders’ equity                   $535

Question 18 The multiple-step income statement is considered more useful than the single-step income statement because it highlights the components of net income.

Question 19 The best definition of assets is the

Question 20 The revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied.

Question 21Bathlinks Corporation has a debt to assets ratio of 73%. This tells the user of Bathlinks’s financial statements that

Question 22The partnership form of business organization

Question 23 Which of the following would not be classified as a long-term liability?

Question 24 Which of the following is the least likely consideration that management uses when deciding whether to pay a dividend?

Question 25 Expense recognition is tied to revenue recognition.

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.