Iowa State University



Exam 2 Review SheetAccounting 284TopicAdjusting entriesOn September 30, Apple Inc. paid $24,000 for insurance for October, November and December. On October 31what would Apple record and what type of adjusting entry is it?On April 1, 2010, a resident paid ISU Housing $6,750 rent in advance for the rest of the year. What would ISU Housing record at the end of the month of July and what type of adjusting entry is it?On February 1 ABC borrowed $20,000 and signed a note that promises repayment in a year. The interest rate was 6% annually. The adjusting entry on December 31 will include…On April 1, 2012, Wells Fargo loaned $100,000, one-year, 6 percent . At due date, March 31, 2013, the principal and interest will be paid. What should Wells Fargo record on December 31 and what type of adjusting entry is it? At the beginning of the quarter, ABC had supplies of $15,400 recorded. During the quarter, ABC purchased an additional $35,200 in supplies. At the end of the month, ABC had $13,900 of supplies on hand. The correct adjusting entry at the end of the period is: Accounting cycle & closing entriesWhich of the following is not closed at the end of the accounting period?Sales revenueCost of Goods SoldPrepaid RentRent expenseWhich of the following has to be closed at the end of the accounting period?ExpenseRevenueAssets & LiabilitiesBoth A and BFinancial reporting environment (fraud)What was enacted by the government to prevent more corporate accounting scandals?What are three things fraud requires (fraud triangle) ?Internal control and bank recSally notices that her manager forgot to lock the drawer to the cash register when she left work. Sally is the only person left in the store. Which part of the fraud triangle could be at risk here?In reconciling the checking account, ABC notes the following items for the month of October:Ending bank balance $5,250Deposits in transit $1,250Outstanding checks $2,150Ending book balance $4,500NSF check $125Bank service charges $25What is the correct cash balance at the end of October?Revenue is recognized when it is __________Expense is recognized when it is __________ Determine whether the following account increase or decrease:If revenue increases then: B. If expense increases then: Net Income _________Net Income ____Retained Earnings ______Retained Earnings _____Stockholders Equity ___Stockholders Equity____If revenue decreases then: D. If expense decreases then:Net Income _____Net Income _____Retained Earnings ____Retained Earnings _____Stockholders Equity___Stockholders Equity____Cash in the office designated for Friday morning cinnamon rolls would be what type of cash:Petty cashRestricted cashParty cashExtra cash 15. Which of the following businesses doesn’t use the inventory account?MerchandisingServiceManufacturing16. Beginning inventory was worth $15,000, Ending inventory was worth $5,000, and COGS was worth $25,000. What was Purchases?$5,000$25,000$15,000$10,00017. The purchases account is used in the __________, and inventory is used in the __________ .Periodic system, Perpetual systemPeriodic system, Periodic systemPerpetual system, Periodic systemPerpetual system, Perpetual system18. Walmart makes a sale of $4,000 on account with terms 2/10, n/30. The buyer returns $500 of the merchandise. If the customer pays the balance in 8 days, which of the following is the correct transaction to record the payment. Cash +3500AR -3500Sales -70Cash +3430AR -3500Sales Discounts +70Cash +3430AR +3500Sales Discounts +70Cash +3430AR -350019. Income before taxes is $550,000. Net income is $467,500. What is the tax rate?10%5%24%15%20. Sales are $500,000 and COGS is $200,000. What is the correct interpretation of the Gross Profit Percentage?For every dollar in sales, 60 cents is profit after covering costs. For every dollar in sales, 6 cents is profit after covering costs.For every dollar in sales, 40 cents is profit after covering costs.For every dollar in sales, 4 cents is profit after covering costs. 21. Inventory is __________A current assetA current liabilityA non-current assetA non-current liability22. A baker purchases sugar, flour, and chocolate chips to sell cookies. The cookie dough would be classified under which inventory?Raw MaterialsWork In ProcessFinished Goods23. FOB shipping point belong to the _____ in transit.BuyerSeller24. Use the following Information to complete the next few questions:BI: 20 units @ $13/unitPurchase 1: 15 units @ $15/unitPurchase 2: 30 @ $16/unitSold 40 units @ $30/unit25. What is the COGS using the FIFO method?$1,200$655$565$47026. What is EI using FIFO?$565$500$470$40027. What is COGS using LIFO?$630$565$680$43528. What is COGS using WAC?$642$594$498$54729. If LIFO is used for taxes, it must be used on the financial statements. This is known as the ____________.LIFO Tax RuleFIFO Tax RuleDouble Tax RuleLIFO Conformity Rule30. If ending inventory is overstated this year, then COGS is ___________ this year and ____________ next year.Understated, UnderstatedOverstated, UnderstatedUnderstated, OverstatedOverstated, Overstated ................
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