accounting 200 exam 2

21 January 2023
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Accrual-basis accounting recognizes expenses when they are incurred.
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Q 4.1: Which of the following statements about accrual-basis accounting is true?
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over the useful life of the warehouse
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Q 4.2: If a company spends $12 million dollars for a warehouse, when should the cost be written off?
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An adjusting entry should be made recognizing the expense.
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Q 4.3: If an expense has been used or consumed but a bill has not been received at the end of the accounting period, which of the following is needed?
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They are received and recorded as liabilities before they are earned.
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Q 4.4: Which of the following is true about unearned revenues?
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The economic life of a business can be divided into artificial time periods.
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Q 4.5: What does the periodicity assumption state?
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prepaid expense adjusting entries
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Q 4.6: Which of the following exemplifies an asset-expense relationship?
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allocating the cost of an asset to expense over its useful life in a rational and systematic manner
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Q 4.7: Which of the following explains the process of depreciation?
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prepayment for the use of an asset
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Q 4.8: From an accounting standpoint, the acquisition of a long-lived asset such as a building can be thought of as a long-term
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expensing a part of the cost of a building
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Q 4.9: Which of the following is an example of a deferral?
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Assets will be overstated and net income will be overstated.
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Q 4.10: A company forgot to prepare the adjusting entry to record the current month's portion of Prepaid Rent. What is the resulting impact on the financial statements?
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understate assets, net income, and stockholders' equity.
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Q 4.11: Suppose that a company did not make an adjusting entry to record revenue earned but not yet billed to customers. The result of this error would be to
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Record Revenues that will be received in cash in a subsequent period.
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Q 4.12: which of the following is an example of an accrual?
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liabilities are understated
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Q 4.13: Salaries and Wages Expense should have been accrued on December 31st, but the entry was not made. The result of this oversight is that
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The entry reflects $5,000 payment of wages and salaries for the current period and $3,000 for wages and salaries accrued previously.
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Q 4.14: A journal entry includes a debit to Salaries and Wages Expense of $5,000; a debit to Salaries and Wages Payable of $3,000; and a credit to Cash for $8,000. Which explains this entry?
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The company should debit Accounts Receivable for $500 and credit Service Revenue for $500.
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Q 4.15: In late August, a company provided one of its customers with services worth $500; however, the company did not send the customer a bill for those services until early September. What journal entries should the company make in August to denote this delivery of services?
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at the end of the accounting period
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Q 4.16: Closing entries and a post-closing trial balance are steps in the accounting cycle that occur
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preparing all adjusting entries
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Q 4.17: An adjusted trial balance is created after
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service revenue
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Q 4.18: Which of the following accounts from a firm's adjusted trial balance would need to be considered when compiling the firm's income statement?
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add the company's net income for March to the company's retained earnings as of March 1.
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Q 4.19: Lorna just finished compiling her company's income statement for the month ended March 31. Her next step in preparing the company's financial statements should be to
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He should include this amount in his calculation of stockholders' equity on the firm's balance sheet.
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Q 4.20: David just finished compiling his firm's retained earnings statement for the month ended May 31. What should he do with the figure he calculates at the bottom of this statement?
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will probably indicate less than $2 million in merchandise on hand.
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Q 5.1: A department store uses a perpetual inventory system. At year-end, the balance in the merchandise inventory account is $2 million. Assuming that the inventory records have been maintained properly, a year-end physical inventory
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A merchandising firm has an expense titled Cost of Goods Sold, while a service firm does not.
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Q 5.2: Which of the following is a difference between the financial statements of a merchandising company and a service company?
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sales revenue is greater than cost of goods sold.
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Q 5.3: Gross profit will result if
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credited to inventory
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Q 5.4: A company receives a discount for paying for merchandise purchased within the discount period. How will the amount of the discount be recorded in a perpetual inventory system?
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Seller pays freight costs
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Q 5.5: What does the freight term "FOB destination" mean?
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debited to the inventory account
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Q 5.6: A retailer acquires merchandise for resale. How would this be recorded in a perpetual inventory system?
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The buyer should pay within the discount period and recognize a savings.
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Q 5.7: If the credit terms on a sales invoice read "2/10, n/30," what does this mean?
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A customer utilizes a prompt payment incentive.
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Q 5.8: In which of the following scenarios would a Sales and Returns and Allowances account NOT be debited?
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Sales Revenue
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Q 5.9: ________ has a normal credit balance.
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Sales Revenue
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Q 5.10: Which of the following is NOT a contra revenue account?
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Gross Profit
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Q 5.12: ________ is shown on a multiple-step but not on a single-step income statement.
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$90,000
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Q 5.13: If sales revenues are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, the gross profit is
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$6,000
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Q 5.14: Last month a company had net sales revenues of $10,000; Cost of goods sold of $4,000; other operating expenses of $3,000; non-operating expenses of $1,000; no non-operating revenues, gains or losses; and income taxes of $500. The gross profit was
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$21,800
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Q 5.15: At the beginning of January 2017, a company reported inventory of $4,000. During the month, the company made purchases of $17,800. On January 31, 2017, a physical count of inventory reported $4,200 on hand. Find the cost of goods sold for the month.
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periodic
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Q 5.16: A ________ inventory system requires a physical count of goods on hand to compute the cost of goods sold.
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$380,000
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Q 5.17: During the year, a company's inventory decreased by $20,000. If the company's cost of goods sold for the year was $400,000, find the amount for purchases.
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by dividing the amount of gross profit by net sales
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Q 5.18: How is the gross profit rate computed?
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by dividing net income by net sales
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Q 5.19: How is the profit margin computed?
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by dividing net cash provided by operating activities by net income
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Q 5.20: How is the quality of earnings ratio computed?