Accounting Quiz 2 MCQs 2015

| June 12, 2016

Question
Quiz 2

Multiple choice (5 pts each) (highlight or clearly mark your answer)

1) In a good internal control system, which of the following documents are required for proper approval of a payment to a supplier?

a) a journal entry, a supplier invoice, and a description of the goods being purchased

b) a receiving report, an invoice, and a purchase order

c) a purchase order, a journal entry, and a price catalog

d) a supplier invoice, a bill of lading, and the supplier’s financial statements

2) In the following situation, which internal control procedure needs strengthening?

The controller’s duties at New Era Inc. include approving bank reconciliations, approving general journal entries, hiring administrative staff, and approving various types of administrative expenses. She needs new computer equipment for the accounting office, but there are no guidelines specifying whether she can approve purchases of office equipment.

a) assignment of responsibilities

b) competent, reliable, and ethical personnel

c) separation of duties

d) documents

3) The objectives of the internal control structure of a company include all of the following except:

a) Compliance with company policies and federal law.

b) Protection of its assets.

c) Increase in accuracy and reliability of accounting data.

d) Guarantee of a certain level of profit.

e) Evaluation of personnel performance to promote efficiency of operations.

4) Which of the following accounting methods is usually used to compute amortization expense?

a) declining-balance

b) units-of-production

c) straight-line

d) first-in, first-out

5) Which of the following statements is true of a corporation?

a) The liabilities of the corporation can be paid by the personal assets of the shareholders.

b) Shares of stock cannot be readily bought and sold by investors on the open market.

c) Shareholders are authorized to sign contracts or make business commitments on behalf of the corporation.

d) Corporations pay income tax on corporate earnings, and shareholders pay personal income tax on corporate dividends and gains from sale of stock.

6) Rick Co. purchases 7,000 shares of its own $2 par value common stock for $160 per share. Which of the following is the correct journal entry to record this transaction?

a) Debit Common Stock—$2 Par Value $2,240,000 and credit Cash $2,240,000.

b) Debit Cash $2,240,000, and credit Paid-In Capital in Excess of Par—Common $2,240,000.

c) Debit Cash $2,240,000 and credit Treasury Stock—Common $2,240,000.

d) Debit Treasury Stock—Common $1,120,000 and credit Cash $1,120,000.

Problems (10 pts each) (please show your work for partial credit)

1. Ronald Company had the following balances and transactions during 2014.

Beginning merchandise inventory

10 units at $95

March 10

Sold 8 units

June 10

Purchased 20 units at $92

October 30

Sold 15 units

What is the amount of the company’s Merchandise Inventory, as disclosed in the December 31, 2014 balance sheet as per the periodic weighted-average costing method?

2. Rubal Inc. earned revenue of $400,000 and incurred cost of goods sold of $320,000. Calculate the gross profit percent.

3. Thomas Company provided the following particulars for year 2015:

Cost of Goods Sold (Cost of sales)

$1,800,000

Beginning Merchandise Inventory

325,000

Ending Merchandise Inventory

650,000

Calculate Thomas’s inventory turnover ratio for the year. (Round your answer to two decimal places.)

4. Caterpillers Inc., a manufacturing company, acquired equipment on January 1, 2012 for $500,000. Estimated useful life of the equipment was 7 years and the estimated residual value was $10,000. On January 1, 2015, after using the equipment for 3 years, the total estimated useful life has been revised to 9 years. Residual value remains unchanged. The company uses the straight-line method of depreciation. Calculate depreciation expense for the year 2015.

5. Overton Company had the following transactions in 2012, its first year of operations.

• Issued 5,000 shares of common stock. Stock has par value of $0.01 per share and was issued at $30.00 per share.

• Earned net income of $200,000.

• Paid dividends of $5.00 per share.

At the end of 2012, how much is the total stockholders’ equity?

6. Partridge Inc. provides the following information for the year 2014:

Net income

180,000

Market price per share of common stock

$20.00/share

Dividends paid

$1.00/share

Common stock outstanding at Jan. 1, 2014

110,000 shares

Common stock outstanding at Dec. 31, 2014

150,000 shares

The company has no preferred stock outstanding. Calculate the Earnings per share.

7. The following information is needed to reconcile the cash balance for Fire Steel Inc.

• A deposit of $5,800 is in transit.

• Outstanding checks total $1,500.

• The book balance is $6,800 at February 28, 2013.

• The bookkeeper recorded a $1,740 check as $17,400 in payment of the current month’s rent.

• The bank balance at February 28, 2013 was $18,000.

• A deposit of $400 was credited by the bank for $4,000.

• A customer’s check for $3,700 was returned for nonsufficient funds.

• The bank service charge is $60.

What was the adjusted book balance?

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