Question 1.1. (TCOs A, B, and C) Which of the following statements concerning users of accounting information is incorrect? (Points : 3)
The marketing vice president is considered an internal user.
Present and prospective creditors are considered external users.
Regulatory authorities, such as the SEC, are considered internal users.----
The IRS is considered an external user.


Question 2.2. (TCO C) Paying back long-term debt is an example of a(n) (Points : 3)
non-cash investing activity.
investing activity.
financing activity.
operating activity.


Question 3.3. (TCO A) Assets include (Points : 3)
loans obtained by the company.
stockholders’ investment in the business.
dividends paid to shareholders.
supplies and prepaid expenses.




Question 4.4. (TCO A) On a classified balance sheet, prepaid expenses are classified as (Points : 3)
property, plant, and equipment.
long-term investments.
intangible assets.
current assets.


Question 5.5. (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? (Points : 3)
$100.00
$50.00
$10.00
$110.00


Question 6.6. (TCO D) Which of the following describes the normal balance and classification of the dividends account? (Points : 3)
Debit, Expense
Credit, Liability
Debit, Stockholders' equity
Debit, Asset




Question 7.7. (TCO E) The accrual accounting term used to indicate recording an expense before paying cash for the item is _____ (Points : 3)
depreciation.
prepayment.
deferral.
accrual.


Question 8.8. (TCOs A and B) A perpetual inventory system would most likely be used by a(n) _____ (Points : 3)
restaurant.
hardware store.
automobile dealership.
mom and pop convenience store.


Question 9.9. (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 (Points : 3)
increased by $96,500.
increased by $95,000.
increased by $94,500.
increased by $94,600.




Question 10.10. (TCO A) In periods of rising prices, which of the following inventory methods results in the lowest income taxes? (Points : 3)
FIFO method
Average cost method
LIFO method (Confused)
None of the above

Question 11. 11. (TCO D) A classmate is considering dropping his or her accounting class because he or she cannot understand the rules of debits and credits.
Explain the rules of debits and credits in a way that will help him or her understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities, and stockholders' equity) and the income statement (revenues and expenses). (Points : 30)



Question 12. 12. (TCOs B and E) The adjusted trial balance of Gertz Company included the following selected accounts.



Debit

Credit

Sales



$575,000

Sales returns and allowances

$ 50,000



Sales discounts

9,500



Cost of goods sold

347,000



Freight-out

2,000



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


Instructions:
· 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)


a: Debit Cash for $600,000 and credit Common Stock for $600,000. b: Debit Rent Expense for $3,000 and credit Cash for $3,000. c: Debit Accounts Receivable for $5,000 and credit Service Revenue for $5,000. d: Debit Supplies for $3,000 and credit Cash for $3,000. e: Debit Cash for $20,000 and credit Unearned Service Revenue for $20,000.


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.
Strength; limited access

Supervisors count cash receipts daily. (Points : 30)

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