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DeVry NY BUSINESS 115 -Midterm problems Solution

Multiple choiceWhen preparing a bank reconciliation, which of the following items should be added to the book balance?EFT receiptsdeposits in transitcollection itemsboth EFT receipts and collection itemsWhich of the following must be added to beginning Retained Earnings to compute ending Retained Earnings?net incomeexpensesdividendsall of these answers are correctThe use of the FIFO method increases taxable income:when prices are constantwhen prices are decliningwhen prices are increasingunder all circumstancesA company mistakenly destroys a unit of inventory that originally cost $12. The company included the cost of the destroyed unit in cost of goods sold on the income statement, rather than recognizing it as a loss. This action is justifiable based on:the revenue conceptaccounting conservatismthe materiality conceptnone of the above answers. All of them are incorrect; according to GAAP, a separate loss must be recognizedWhen applying the lower-of-cost-or-market rule, market value generally refers to:fifo cost using the periodic methodlifo cost using the periodic methodcurrent sales price of the inventorycurrent replacement costA company performed services for a customer on account. This transaction increased assets and _______.decreased equityincreased liabilitiesincreased expensesincreased revenuesThe two methods of estimating uncollectible receivables are the:aging-of-receivables method and direct write-off methodpercent of sales method and the aging-of-receivables methodallowance method and the direct write-off methodpercent of sales method and the direct write-off methodThe use of the allowance method of accounting for bad debts is preferred over the direct write-off method because of the:matching principlehistorical cost principlerevenue recognition principlefull disclosure principleFor which form of business ownership are the owners of a business legally distinct from the business?CorporationPartnershipProprietorshipall of the aboveA written promise to pay a specified amount of money at a particular future date is called a(n) :maturity notepromissory noteaccount receivableunearned revenueIf the interest is $5,000 on a 6%, 60 day note, what is the principal?$500,000$300,000$5,000,000not enough information to calculateWhich characteristic will NOT be found in an effective system of internal control?competent, reliable, and ethical personnela combination of dutiesa separation of dutiesdocuments and recordsAn accountant recognizes the impact of a business event as it occurs and accounts for it appropriately under which basis of accounting?CashPrepaidAccrualDeferredThe stable-monetary-unit concept of accounting:ensures that accounting records and statements are based on the most reliable data availableholds that the entity will remain in operation for the foreseeable futuremaintains that each organization or section of an organization stands apart from other organizations and individualsenables accountants to ignore the effect of inflation in the accounting recordsIn a bank reconciliation, a NSF check isadded to the bank balanceadded to the book balancededucted from the book balancededucted from the bank balanceEssay1.) Given the following data, calculate the gross profit using the average-cost method, if the selling price was $20 per unit.Date, Item, Unit1/1, Beginning inventory, 40 units at $12 per unit3/5, Purchase of inventory, 18 units at $14 per unit5/30, Purchase of inventory, 24 units at $18 per unit12/31, Ending inventory, 20 unites2.) Eckle Ltd. has the following unadjusted Trial Balance as of March 31, 2009:The following data is available from Shantrice Meadows, Controller for Eckle Ltd.:a. Store Supplies used for the period were $1,225.b. The Building has been depreciated for three years; this Fiscal year is year 4.c. The Store Equipment has been depreciated for 5 years; this Fiscal year is year 6.d. Prepaid Rent is for six months purchased on January 1, 2009.e. Forty percent of the Unearned Revenue has been earned.f. There are 8 employees, each receiving a salary of $2,000 per week for a five-day (Monday through Friday) week. FYE ends on a Tuesday. Prepare the appropriate Adjusting Journal entries.Make sure your answer is in Journal Entry Form. List the Account Name and Debit or Credit. Remember all Journal Entries should balance.3.) John Smith started a consulting business and completed the following transactions during January 2007. Journalize the transactions. Explanations are not required.1. John incorporated the business, Consulting Inc., and invested $10,000 for common stock.2. Paid $2,000 monthly rent for office space.3. Purchased $3,000 of office equipment, paying cash.4. Purchased $500 of office supplies on account.5. Recorded $1,000 of revenue, receiving cash.6. Recorded $1,500 of revenue on account and mailed invoices to the customers.7. Paid utilities expense of $300.8. Collected cash from a customer on account, $500.Make sure your answer is in Journal Entry Form. List the Account Name and Debit or Credit. Remember all Journal Entries should balance.

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