ACCT 504 ACCT/504 ACCT504 Week 4 Midterm NEW

1. (TCOs A, B, and C) Shareholders want answers to all of the following questions except:

2. (TCO C) Paying back long-term debt is an example of a(n)

3. (TCO C) Buying a new plant would be an example of which type of activity?

4. (TCO A) In a classified balance sheet, assets are usually classified as

5. (TCO B) For 2012, LBJ Corporation reported net income of $75,000; net sales $750,000; and weighted average shares outstanding of 7,500. There were no preferred stock dividends. What was the 2012 earnings per share?

6. (TCO D) Which of the following describes the normal balance and classification of the Unearned Revenue account?

7. (TCO E) The accrual accounting term used to indicate an item paid in advance or the receipt of cash in advance is

8. (TCOs A and B) Specific identification would not likely be used by which of the following businesses?

9. (TCOs A and B) LBJ Company recorded the following events involving a recent purchase of merchandise.
– Received goods for $100,000, terms 2/10, n/30
– Returned $5,000 of the shipment for a credit due to damaged goods
– Paid $1,500 for freight in
– Paid the invoice within the discount period

As a result of these events, the company’s merchandise inventory

10. (TCO A) In a period of increasing prices, which of the following inventory methods generally results in the highest gross profit?

11. (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

12. (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 Company’s 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

13. (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.

14. (TCO D) Your friend Dean 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: Bonding of the cashiers is not required because all of the cashiers have significant experience.
2: The treasurer is the only one allowed to sign checks.
3: All employees may operate cash registers.
4: Blank checks are stored in the safe.

5: Supervisors count cash receipts daily