Midterm for Fi504 Keller Management

Question: (TCO E) One of the accounting concepts upon which adjustments for prepayments and accruals are based is

Your Answer:

matching. CORRECT ANSWER

cost.

monetary unit. INCORRECT

economic entity.

Instructor Explanation: chapter 4 page 162

Points Received: 0 of 3

Comments:

2. Question: (TCO E) In a merchandising business, revenue may be considered earned when

Your Answer:

cash is received from the customers

a product is delivered to a customer. CORRECT

an order is received from a customer

a customer shows interest in a product

Instructor Explanation: chapter 4 page 162

Points Received: 3 of 3

Comments:

3. Question: (TCO E) Expenses sometimes make their contribution to revenue in a different period than when the expense is paid. When wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the first period?

Your Answer:

Due from Employees

Due to Employer

Wages Payable CORRECT

Wages Expense

Instructor Explanation: chapter 4 page 163

Points Received: 3 of 3

Comments:

4. Question: The following is selected information from J Corporation for the fiscal year ending October 31, 2007.

Cash received from customers $75,000

Revenue earned 87,500

Cash paid for expenses 42,500

Cash paid for computers on 11/1/2006

that will be used for 3 years 12,000

Expenses incurred,

not including any depreciation

on the above computers 50,000

(TCO E) Based on the accrual basis of accounting, what is J Corporation's net income for the year ending October 31, 2007?

Your Answer:

$28,500

$33,500 CORRECT ANSWER

$20,500 INCORRECT

$37,500

Instructor Explanation: $87,500 - 50,000 - 4,000 = $33,500

Points Received: 0 of 3

Comments:

5. Question: (TCO E) Accounts often need to be adjusted because

Your Answer:

there are never enough accounts to record all the transactions.

many transactions affect more than one time period. CORRECT

there are always errors made in recording transactions.

management can't decide what they want to report.

Instructor Explanation: chapter 4 page 165

Points Received: 3 of 3

Comments:

6. Question: (TCO B) The primary source of revenue for a wholesaler is

Your Answer:

investment income.

service revenue.

the sale of merchandise. CORRECT

the sale of plant assets the company owns.

Instructor Explanation: chapter 5 page 224

Points Received: 3 of 3

Comments:

7. Question: (TCO A,B) Detailed records of movements in merchandise (each purchase and sale) are not maintained in the inventory account in a

Your Answer:

perpetual inventory system.

periodic inventory system. CORRECT

double entry accounting system.

business that sells expensive merchandise.

Instructor Explanation: chapter 5 page 226

Points Received: 3 of 3

Comments:

8. Question: (TCO B) Hunter Company purchased merchandise inventory with an invoice price of $6,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Hunter Company pays within the discount period?