Formulation of Cement Products

Topics: Generally Accepted Accounting Principles, Balance sheet, Revenue Pages: 15 (2755 words) Published: January 19, 2013
Exam 1A KEY (Ch. 1-4)

True/False (1 point each)

__F___A primary objective of accounting is to disclose the fair market value of assets on the balance sheet so investors and creditors know their current value.

__F___The payment of a liability in cash will decrease stockholders' equity.

__F___When a company borrows money from a bank, it leads to a cash inflow from an investing activity.

T Only events that can be measured will be reflected in the journal entries

F Every transaction affects both the income statement and the balance sheet

Matching (1 pt. each)
Match each account title with its related term by entering the appropriate letter in the space provided:

Account TitleTerm

__D___1. Prepaid RentA. Accrued Revenue

__B___2. Salaries PayableB. Accrued Expense

__C___3. Unearned RevenueC. Deferred Revenue

__A___4. Interest ReceivableD. Deferred Expense

Fill in the blank:
1. The basic balance sheet equation is: ASSETS = LIABILITIES + __EQUITY___. 

2. The amount of cash paid by a business for office utilities would be reported on the statement of cash flows

as what kind of activity? Operating OMIT THIS QUESTION

3. To determine whether a company will be able to pay for goods when payment is due in 30 days, we should

look at which financial statement? Balance sheet

4. Sales - Cost of Goods Sold = Gross profit

Work-out - Point allocations are indicated on each question. Problem 1:

Use the following list of accounts to identify the accounts that would be used in the journal entry for each transaction given below. Write the appropriate account number in each debit and credit blank. (½ pt. for each blank)

1.Accounts payable6.Insurance expense
2.Accounts receivable7.Sales revenue
3.Cash8.Unearned revenue
4.Retained earnings9.Prepaid insurance
5.Notes payable 10.Service revenue
11.Operating expenses

Transaction: Journal Entry
Debit Credit

a. Provided service to a customer on credit 2 10

b. Paid current operating expenses 11 3

c. Paid insurance premium for next year 9 3

d. Received a deposit from a customer for
service to be performed next year 3 8

e. Received payment for transaction (a) above 3 2

Problem 2:

An electronics store had the following transactions in February:

(a)Sold $90,000 of goods to customers, receiving $65,000 in cash with the remainder on account. The inventory had an original cost of $36,000. ($90,000 revenue; $36,000 COGS)

(b)Purchased $16,000 of inventory and paid for $12,000 in cash and the remainder on account

(c)Paid $12,000 in wages to employees who worked in January (wage expense)

(d)Received a customer order and payment of $9,000 for an audio system to be delivered and installed in March (MARCH revenue)

(e)$14,000 earned by employees in February hasn’t been paid by Feb. 28. (FEB. expense)

The store should report how much income for the month of February? (3 pts.)

$40,000(Rev. $90,000 - $36,000 COGS- $14,000 wage exp.)

Problem 3:

A company has been operating for three years. At December 31, 2008, the accounting records reflected the following: (in thousands $) Red=assets; Green=Liabilities

Accounts Payable $ 15Equipment $ 48...
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