- The document provides a grading summary for an exam, including multiple choice and essay questions. It provides the number of questions, number correct, points received, and instructor comments.
- The summary shows the student received a grade of 96% on the exam by answering all 10 multiple choice questions correctly and receiving full points on the 4 essay questions.
- The document provides a grading summary for an exam, including multiple choice and essay questions. It provides the number of questions, number correct, points received, and instructor comments.
- The summary shows the student received a grade of 96% on the exam by answering all 10 multiple choice questions correctly and receiving full points on the 4 essay questions.
- The document provides a grading summary for an exam, including multiple choice and essay questions. It provides the number of questions, number correct, points received, and instructor comments.
- The summary shows the student received a grade of 96% on the exam by answering all 10 multiple choice questions correctly and receiving full points on the 4 essay questions.
computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below. Date Taken: 2014 Time Spent: xxxx Points Received: xxxx (96%) Question Type: # Of Questions: # Correct: Multiple Choice 10 10 Essay 4 N/A
Grade Details - All Questions Question 1. Question : (TCOs A, B, and C) Which of the following statements concerning users of accounting information is incorrect? Student Answer:
The marketing vice president is considered an internal user.
Present and prospective creditors are considered external users.
Regulatory authorities, such as the SEC, are considered internal users.
The IRS is considered an external user. Instructor Explanation: Chapter 1
Points Received: 3 of 3 Comments:
Question 2. Question : (TCO C) Collecting cash from customers would be an example of which type of activity? Student Answer:
Question 5. Question : (TCO B) For 2012, LBJ Corporation reported net income of $40,000; net sales $1,400,000; and weighted average shares outstanding of 10,000. There were no preferred stock dividends. What was the 2012 earnings per share? Student Answer:
$4.00
$2.00
$14.00
$140.00 Instructor Explanation: ($40,000 minus 0) divided by 10,000 shares = $4.00, Chapter 11
Points Received: 3 of 3 Comments:
Question 6. Question : (TCO D) Which of the following describes the normal balance and classification of the Unearned Revenue account? Student Answer:
Question 7. Question : (TCO E) Which of the following statements is correct? Student Answer:
Cash-basis accounting records revenue when earned.
Cash-basis accounting records expenses when incurred.
Accrual accounting records expenses when incurred.
Accrual accounting records revenue when the payment is received in cash. Instructor Explanation: Chapter 3
Points Received: 3 of 3 Comments:
Question 8. Question : (TCOs A and B) A periodic inventory system would most likely be used by a(n) Student Answer:
automobile dealership.
jewelry store.
furniture store.
local neighborhood restaurant. Instructor Explanation: Chapter 6
Points Received: 3 of 3 Comments:
Question 9. Question : (TCOs A and B) LBJ Company recorded the following events involving a recent purchase of merchandise.
- Received goods for $75,000, terms 2/10, n/30 - Returned $2,500 of the shipment for credit due to damaged goods - Paid $1,200 for freight in - Paid the invoice within the discount period
As a result of these events, the company's merchandise inventory Student Answer:
increased by $72,250.
increased by $72,176.
increased by $75,876.
increased by $73,700. Instructor Explanation: ($75,000 - $2,500) x 98% = $71,050 + $1,200 for freight = $72,250. Chapter 6
Points Received: 3 of 3 Comments:
Question 10. Question : (TCO A) In a period of declining prices, which of the following inventory methods generally results in the lowest gross profit figure? Student Answer:
FIFO method
LIFO method
Average cost method
Cannot determine based on the information given Instructor Explanation: Chapter 6
Points Received: 3 of 3 Comments:
Question 11. Question : (TCO D) Describe the process of preparing a trial balance. What is the purpose of preparing a trial balance? If a trial balance does not balance, identify what might be the reasons why it does not balance. If the trial balance does balance, does that ensure that the ledger accounts are correct? Explain. Student Answer:
Trial balance lists accounts with their balances in the order of assets, liabilities, then stockholder's equity. It summarizes account balances and shows whether total debits is equal to total credits. It facilitates the preparation of financial statements, but trial balances can be prepared at any time. Accounting is a double-entry system that records dual effect of each entity. Each transaction affects at least 2 accounts for the purpose to keep the accounting equation in balance. These account balances follow the "rules of debit and credit" where their normal balance falls either on the left (debit) or right (credit) side. Examples of normal debit balance accounts: assets, expenses, and dividends. Examples of normal credit balance accounts: common stocks, revenue, retained earnings. The process of preparing trial balance occurs at the end of the month after financial transactions have been journalized and then posted to the ledger. It may need to be adjusted in order to keep the information up to date. After the ledger accounts are closed, the balance of each account is posted on the trial balance as either debit or credit. The order of the accounting listing is important. Assets are always listed first, then liabilities, then equities. In the end, the total amount of debit should equal the total amount of credit. If trial balance is not in balance (debit does not equal credit), then this could be due to accounting errors. It may occur even in computerized systems. Some examples that cause these errors are: wrong input data (duplicated or missing data), side or transposition errors. If trial balance is in balance, it does not ensure that ledger accounts are correct because there may be missing information on the ledger (both credit and debit), or equally mistaken values put on both sides of the equation. Harrison et. al. (2010). Financial Accounting (8th ed.). Boston, MA: Pearson Education. p.83-88 http://accounting-simplified.com/preparing-trial-balance.html Instructor Explanation: To prepare a trial balance, create a column for the account name along with a column for the debits and a column for the credits. Then list all accounts with their balances starting with assets, then liabilities, and finally stockholders equity accounts. The purpose of the trial balance is to verify that the sum of the debits equals the sum of the credits. A trial balance may not balance due to a mathematical error or posting two debits instead of a debit and a credit, as one example of an error. Even if a trial balance balances, this does not ensure that the ledger accounts are correct because there could be omissions from the trial balance, offsetting errors, or the incorrect accounts could be charged. Chapter 2 and the Week 2 Lecture
Points Received: 30 of 30 Comments: awesome
Question 12. Question : (TCOs B and E) The following information is available for Partin Company.
Sales $598,000 Sales returns and allowances 20,000 Cost of goods sold 398,000 Selling expense 69,000 Administrative expense 25,000 Interest expense 19,000 Interest revenue 20,000
Instructions:
1: Use the above information to prepare a multiple-step income statement for the year ended December 31, 2007. 2: Compute the profit margin ratio and gross profit rate. Partin Companys assets at the beginning of the year were $770,000, and they 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. Student Answer:
1. Partin company Statement of Earnings Year ended December 31, 2007 Sales revenues 598,000 Less: Sales returns and allowances 20,000 Net sales 578,000 Less: Cost of goods sold 389,000 Gross profit 180,000 Selling expense 69,000 Administrative expense 25,000 Interest expense 19,000 Less: Total expenses 113,000 Income from operations 67,000 Add: other income (interest revenue) 20,000 Net income 87,000 2. Profit margin ratio = net income/ net sales = 87,000/578,000 = 15.05% Gross profit rate = gross profit/net sales = 180,000/578,000 = 31.14% (The profit margin ration is 15.05% which is half the gross profit rate of 31.14% due to the high operating expenses). Instructor Explanation: 1: PARTIN COMPANY Income Statement For the Year Ended December 31, 2007 Sales revenues Sales $598,000 Less: Sales returns and allowances 20,000 Net sales 578,000 Cost of goods sold 398,000 Gross profit 180,000
Operating expenses Selling expenses $69,000 Administrative expenses 25,000 Total operating expenses 94,000 Income from operations 86,000 Other revenues and gains
Comments: -1 interest expense should be reported under interest revenue
Question 13. Question : (TCO D and E) Please prepare the following journal entries. Indicate which account should be debited and which account should be credited, along with the dollar amount of the debit and credit. a: Investors invest $600,000 in exchange for 30,000 shares of common stock. b: Company paid rent of $3,000. c: Company billed $5,000 for services performed. d: Company purchased supplies of $3,000. e: Company received $20,000 for services not yet performed. Student Answer:
a. Cash debit $600,000; common stock credit $600,000 b. Rent expense debit $3,000 ; Cash credit $3000 c. Accounts receivable debit $5,000 ; Service revenue credit $5,000 d. Supplies debit $3,000 ; Cash credit $3,000 e. Cash debit $20,000 ; Unearned service revenue credit $20,000 Instructor Explanation: a: Debit Cash for $600,000 and credit Common Stock for $600,000. b: Debit Rent Expense for $3,000 and credit Cash for $3,000. c: Debit Accounts Receivable for $5,000 and credit Service Revenue for $5,000. d: Debit Supplies for $3,000 and credit Cash for $3,000. e: Debit Cash for $20,000 and credit Unearned Service Revenue for $20,000. See Chapters 2 and 3.
Points Received: 30 of 30 Comments: awesome
Question 14. Question : (TCO D) Your friend Sally has hired you to evaluate the following internal control procedures.
a: Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which principle relates to each of the internal controls. b: For the weaknesses, you also need to state a recommendation for improvement.
1: Invoices are pre-numbered. 2: The controller approves of the purchases and makes the payment since he or she is familiar with the purchases. 3: The office manager is in charge of the petty cash fund. 4: Blank checks are stored in the safe. 5: At the end of the day, the total receipts are counted by the cashier on duty and reconciled to the cash register total. Student Answer:
1. Strength (Adequate Records and Documentation procedures). Documents should be pre-numbered to assure completeness of processing and proper transaction cutoff. It also prevents theft and inefficiency. A gap in the numbered document sequence indicates a possibility that transactions might have been omitted from processing. 2.Weakness (Comparisons and Compliance Monitoring/ Separation of Duties). There should not be any person or department who completely process a transaction from beginning to end without being cross-checked by another source. For example, some division of the treasurers department should be responsible for depositing daily cash receipts in the bank. The controller's department should be responsible for recording customer collections to individual customer accounts receivable. A third employee (in a different department, controllers department) should compare the treasurer departments daily records of cash deposited with totals of collections posted to individual customer accounts by the accounting department. Duties need to be separated and responsibilities divided to ensure safeguard controls. 3. Weakness. The office manager should check the work of the petty fund cashier - Independent internal verification. A company employee who needs to make a small purchase may obtain permission from a supervisor to use a company debit card. Supervisors require receipts for all such purchases and compare them with EFT amounts on the bank statement. Debit cards are taking the place of petty cash systems in many companies. 4. Strength (Physical Control/Limited Access). All records, cash and checks should be protected in a lock-box system protected by lock and key. 5. Weakness. It is important to separate record keeping from custody of assets. In processing transactions, three key duties: asset handling, record keeping and transaction approval. Duties of cash handling and record keeping should be separated to decrease the possibility of an employee to engage in fraud if he/she was keeping the books. Harrison et. al. (2010). Financial Accounting (8th ed.). Boston, MA: Pearson Education. Chapter 4. Instructor Explanation: 1: Strength; adequate records 2: Weakness; separation of duties; Recommendation: controller can make payment but should not also make the purchase 3: Strength; limited access 4: Strength; limited access 5: Weakness; comparisons and compliance monitoring; Recommend: supervisor counts the cash receipts daily
See Chapter 4.
Points Received: 25 of 30
Comments: -3 part 3 strength - limited access -2 part 5 comparisons and compliance monitoring