Question 1.1. (TCOs A, B, and C) Shareholders want answers to
all of the following questions except for? (Points : 3)
How does the company compare in profitability with competitors?
Did the company meet its operating expense budget?
Will the company be able to pay its liabilities as they come due?
Is the company earning a satisfactory return?
Question 2.2. (TCO C) Paying back long-term debt is an example of a(n) (Points : 3)
non-cash investing activity.
Question 3.3. (TCO A) Resources owned by a business are referred to as (Points : 3)
Question 4.4. (TCO A) In a classified balance sheet, assets are usually classified as (Points : 3)
current assets, long-term assets, property, plant, and equipment, and tangible assets.
current assets, long-term investments, property, plant, and equipment, and intangible assets.
current assets, long-term investments, and tangible assets.
current assets, long-term investments, property, plant, and equipment, and common stocks.
Question 5.5. (TCO B) For 2012, LBJ Corporation reported net income of $25,000; net sales $250,000; and weighted average shares outstanding of 5,000. There were no preferred stock dividends. What was the 2012 earnings per share? (Points : 3)
Question 6.6. (TCO D) Which of the following accounts has a normal balance of a credit? (Points : 3)
Accounts Receivable account
Retained Earnings account
Question 7.7. (TCO E) Which of the following statements is correct? (Points : 3)
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.
Question 8.8. (TCOs A and B) A periodic inventory system would
most likely be used by a(n) _____ (Points : 3)
local neighborhood restaurant.
Question 9.9. (TCOs A and B) LBJ Company recorded the following events involving a recent merchandise purchase.
- Received goods for $40,000, terms 2/10, n/30
- Returned $1,200 of the shipment for credit due to damaged goods
- Paid $1,000 for freight in
- Paid the invoice within the discount period
As a result of these events, the company's merchandise inventory (Points : 3)
increased by $39,800.
increased by $39,024.
increased by $38,988.
increased by $39,000.
Question 10.10. (TCO A) In a period of increasing prices, which of the following inventory methods generally results in the highest gross profit? (Points : 3)
Average cost method
None of the above
Question 11.11. (TCO D) An account is an important accounting record where financial information is stored until needed. Briefly explain (1) the nature of an account, (2) the different types of accounts, and (3) the manner in which an account is increased and decreased, and the normal balance of each type of accounts. (Points : 30)
Question 12.12. (TCOs B and E) The adjusted trial balance of
Gertz Company included the following selected accounts.
Sales returns and allowances $ 50,000
Sales discounts 9,500
Cost of goods sold 347,000
Advertising expense 15,000
Interest expense 19,000
Store salaries expense 74,000
Utilities expense 18,000
Depreciation expense 3,500
Interest revenue 25,000
•Use the above information to prepare a multiple-step income statement for the year ended December 31, 2010.
•Calculate the profit margin ratio and gross profit rate. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings. (Points : 30)
Question 13.13. (TCOs 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.
Investors invest $600,000 in exchange for 30,000 shares of common stock.
Company paid rent of $3,000.
Company billed $5,000 for services performed.
Company purchased supplies of $3,000.
Company received $20,000 for services not yet performed. (Points : 30)
Question 14.14. (TCO D) Your friend Dean has hired you to evaluate the following internal control procedures.
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.
For the weaknesses, you also need to state a recommendation for improvement.
Bonding of the cashiers is not required because all of the cashiers have significant experience.
The treasurer is the only one allowed to sign checks.
All employees may operate cash registers.
Blank checks are stored in the safe.
Supervisors count cash receipts daily. (Points : 30)
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