ACCT 550 Week 4 Midterm

1. (TCO A) Which of the following statements is not an objective of financial reporting?

2. (TCO A) Under Sarbanes Oxley, the new law does not:

3. (TCO A) The cash method of accounting:

4. (TCO A) The characteristic that is demonstrated when a high degree of consensus can be secured among independent measurers using the same measurement methods is

5. (TCO A) The two primary qualities for accounting information are:

6. (TCO A) Which basic element of financial statements arise from peripheral or incidental transactions?

7. (TCO A) Which of the following is not a basic assumption underlying the financial accounting structure?

8. (TCO A) What is the quality of information that enables users to better forecast future operations?

9. (TCO A) Accounting information is considered to be relevant when it

10. (TCO A) Which of the following is not a basic assumption underlying the financial accounting structure?

11. (TCO A) Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy?

12. (TCO A) Which of the following are benefits of providing financial information?


13. (TCO D) The balance sheet is useful for analyzing all of the following except

14. (TCO D) The balance sheet contributes to financial reporting by providing a basis for all of the following except

15. (TCO D) The net assets of a business are equal to

16. (TCO D) Stine Corp.'s trial balance reflected the following account balances at December 31, 2010:

Accounts receivable (net) $24,000
Trading securities 6,000
Accumulated depreciation on equipment and furniture 15,000
Cash 11,000
Inventory 30,000
Equipment 25,000
Patent 4,000
Prepaid expenses 2,000
Land held for future business site 18,000

In Stine's December 31, 2010 balance sheet, the current assets total is:

17. (TCO D) Which of the following is not a long-term investment?

18. (TCO D) The presentation of long-term liabilities in the balance sheet should disclose:

19. (TCO D) Typical contractual situations that are disclosed in the notes to the balance sheet include all of the following except

20. (TCO D) A generally accepted account title is:

21. (TCO D) Equity or debt securities held to finance future construction of additional manufacturing plants should be classified on the balance sheet as: (Points: 5)

22. (TCO D) Working capital is

1. Unearned rent at 1/1/10 was $7,300 and at 12/31/10 was $8,000. The records indicate cash receipts from rental sources during 2010 amounted to $40,000, all of which was credited to the Unearned Rent Account. You are to prepare the missing adjusting entry.

2. Allowance for doubtful accounts on 1/1/10 was $75,000. The balance in the allowance account on 12/31/10 after making the annual adjusting entry was $60,000, and during 2010 bad debts written off amounted to $30,000. You are to provide the missing adjusting entry.

3. Prepaid rent at 1/1/10 was $20,000. During 2010 rent payments of $123,000 were made and charged to "rent expense." The 2010 income statement shows as a general expense the item "rent expense" in the amount of $122,000. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made.

4. Retained earnings at 1/1/10 was $100,000 and at 12/31/10 it was $210,000. During 2010, cash dividends of $50,000 were paid and a stock dividend of $40,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry.

5. For the year ended December 31, 2010, Transformers Inc. reported the following:

Net income $ 60,000

Preferred dividends declared, $10,000

Common dividend declared, $2,000

Unrealized holding loss, net of tax; $1,000

Retained earnings $80,000

Common stock, $40,000

Accumulated Other Comprehensive Income, Beginning Balance 5,000

What would Transformers report as its ending balance of Accumulated Other Comprehensive Income? (Points: 15)

6. (TCO C) Presented below is certain information pertaining to Edson Company.

Assets, January 1 $240,000

Assets, December 31 $230,000

Liabilities, January 1 $150,000

Common stock, December 31 $80,000

Retained earnings, December 31 $31,000

Common stock sold during the year $10,000

Dividends declared during the year $13,000

Compute the net income for the year. (Points: 20)

7. (TCO C) At Ruth Company, events and transactions during 2010 included the following. The tax rate for all items is 30%.

(1) Depreciation for 2008 was found to be understated by $30,000.

(2) A strike by the employees of a supplier resulted in a loss of $25,000.

(3) The inventory at December 31, 2008 was overstated by $40,000.

(4) A flood destroyed a building that had a book value of $500,000. Floods are very uncommon in that area.

The effect of these events and transactions on 2010 income from continuing operations net of tax would be:

8. What is FASB Codification? Explain in detail.