Chamberlain College of Nursing - ACCT 212 Week 4 Midterm Questions and Answers Rated A

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ACCT 212 Week 4 Midterm Question 1.: (TCO 1) The Accounting Equation is used to develop the organization's financial reports. (1) Describe what owners' equity values would be if Assets are $100,00... 0 and Liabilities are $27,000 by showing the Accounting Equation (10 points) and (2) provide an explanation of what accounts could be found in owners' equity. (10 points) Answer: Assets, liabilities, owners equity Owners equity = assets – liabilities Owners equity = 100,000 – 27,000 Owners equity = 73,000 Paid in capital: is capital outstanding for the period which are measured by book value also called preferred shares. -Retained earnings: is the earnings available to the share holders. It's the accumulated profits from past years that becomes available after all dividend and obligations are taken care of. -Treasury stock: the shares that are bought back by the company form share holders or the open market Instructor Explanation: Textbook pages 11-12. Owners' Equity = $100,000 - $27,000 = $73,000. Stock, Additional Paid in Capital, and Retained Earnings are examples. Question 2. Question : (TCO 1) The financial statements present a company to the public in financial terms. (1) Which financial statement identifies where cash was generated and where it was spent during the year (10 points), and (2) identify the three major parts of this statement. (10 points) Answer: Statement of cash flows: is a financial statement that provides an overview of the cash inflows and outflows of the business during a certain period of time. Operation, Investing and financing Instructor Explanation: Textbook pages 15-21. Statement of Cash Flows. Operating, Investing, and Financing. Question 3. Question : (TCO 1) The accounting profession follows a set of guidelines for measurement and disclosure of financial information called the Generally Accepted Accounting Principles (GAAP). (1) Explain what the International Financial Reporting Standards (IFRS) are (10 points) and (2) provide an example of its application. (10 points) Answer: Accounting guidelines, formulated by the International Accounting Standards Board (IASB). By 2015, U.S. GAAP is expected to be harmonized with IFRS. At that time, U.S. companies are expected to adopt these principles for their financial statements, so that they can be compared with those of companies from other countries. It's a way to set a certain report that will make the global economy report using the same standard. It was intended to be used by third world businesses to make it easier raising capital. Provision of loan losses -Impairment of investments -Consolidation of entities -Transfer pricing Instructor Explanation: Textbook pages 6-9. Standards that will make the global economy report using the same standards. The intention is to make raising capital easier for third-world businesses. Question 4. Question : (TCO 2) Transaction analysis results in the development of a journal entry. Supplies are purchased on account agreeing to pay $500 within 30 days. (1) Name the accounts impacted and how to use the format account name/debit or credit/dollar amount (10 points), and (2) explain how the Accounting Equation is impacted. (10 points) Answer: Supplies-Debits-$500.00 -Accounts Payable-Credit-$500.00 The assets and liabilities will increase and the accounting equation is in the balance. Instructor Explanation: Textbook page 65. Supplies/Debit/$500 and Account Payable/Credit/$500. Assets and Liabilities increase and the Accounting Equation is in balance. Question 5. Question : (TCO 3) Adjusting Entries are required at the end of the period to ensure that accrual accounting principles are applied. At the beginning of the month, $1,350 of office supplies were purchased. There was not a beginning balance and the one purchase was the only one for the month. At the end of the month, $500 of supplies remained. Develop the adjusting entry. (1) Name the accounts impacted and how using the format account name/debit or credit/dollar amount (10 points), and (2) explain how the Accounting Equation is impacted. (10 points) Answer: Supplies expenses-Debits-$850 $1,350.00 - $500.00 = $850 -Office Supplies -Credit-$850 The assets and the owner's equity decrease and the accounting equation is in the balance. Instructor Explanation: Textbook page 143. Supplies Expense/Debit/$850 and Office Supplies/Credit/$850. Assets and Owners' Equity decrease and the Accounting Equation is in balance. Question 6 : Question : (TCO 5) E-commerce creates its own risks, and therefore special internal controls. (1) Identify and explain one pitfall and one security measure for an online business (10 points) and (2) provide examples of how your selected security measure will strengthen internal control. (15 points) Answer: Stolen credit card numbers Pitfall How Fire walls work: Usually several firewalls are built into the system. Think of a fortress with multiple walls protecting the company’s computerized records in the center. At the point of entry, passwords, personal identification numbers (PINs), and signatures are used. More sophisticated firewalls are used deeper in the network. Start with Firewall 1, and work toward the center. (https://devry.vitalsource.com/#/books/9781269196536/cfi/10!/4/2/24/28/8/2/2@0:63.7) . It prevents unauthorized Internet users from accessing private networks connected to the Internet. Instructor Explanation: Textbook pages 239-242. Examples of pitfall are stolen credit card numbers and computer viruses, while examples of security measures are encryption and firewalls. Question 7. Question : (TCO 5) The bank account as a control device helps to protect cash. One of the requirements is to conduct periodic bank statement reconciliations. Using the following data, complete the bank statement reconciliation for J & J Flooring, Inc. (Use the format shown on page 251 of your textbook.) (25 points) Use the information below to prepare the bank reconciliation for Collier Cleaners for the month of September. The bank statement indicated bank service charges of $63. • Outstanding checks as of September 30 amounted to $1,405. • Deposits in transit as of September 30 amounted to $2,769. • The ending balance per the September bank statement is $40,753. • Collier Cleaners bookkeeper mistakenly recorded a $1,610 cash disbursement as $1,160 for Office Supplies on check #2402. • The bank mistakenly recorded a deposit of $2,800 as $280 on February 17. • The bank made an EFT payment on behalf of the company for Insurance for $3,200. • Bank collected rent of $3,000 and a note, for $16,450, including interest of $450. • The ending cash balance per the books for September before any adjustments was 28,900. Answer: J&J Flooring, Inc Bank Reconciliation May 31, 2015 Bank: Balance, May 31, 2015 $13,019 Add: Deposit of May 31 in transit 1,451 14,470 Less: Outstanding checks issued: 1406 ($1,342), 1610 ($1,609), 1825 ($857) -3,808 Adjusted bank balance 10,662 Books: Balance, May, 31 2015 $13,019 Add: Bank collection of note receivable 1,300 Interest revenue earned on bank balance 16 $14,335 Less: Service Charge $56 NSF Check 314 -370 Adjusted book balance, May 31, 2015 $10,662 Instructor Explanation: Bank Reconciliation for Janus Jutes, Inc. for May 31, 201X Balance per book $9,716 Balance per bank $13,019 ADD: ADD: Note receivable collection 1,300 Deposits in transit 1,451 Interest revenue 16 1,316 LESS: LESS: NSF check--Barney Smythe 314 Outstanding checks: Bank service charge 56 370 1406 1,342 1610 1,609 Adjusted book balance $10,662 1825 857 3,808 Adj. bank balance $10,662 [Show More]

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