#30 We are Econ3a, Inc.. We purchase stuff and sell it for a profit.Here is our trial balance at 1/1/2009:

DR/ (CR)Cash 100,000 Accounts receivable 30,000 Inventory 25,000 Prepaid expenses 5,000 Fixed assets 200,000 Accounts payable (50,000) Accrued payroll - Debt (175,000) Common stock (5,000) Retained earnings (130,000)

-

(1)

(2) Purchased $70,000 of inventory with cash on hand(3) Sold goods for $70,000 on credit which cost $30,000(4) Made a $1,100 payment on the debt ($600 for interest and $500 for principle)(5) Purchased inventory for $10,000 on account.(6) Collected $65,000 from customers.(7) Paid $40,000 to vendors against outstanding payables.(8)

(9) (10)

(11)

BASED ON ALL OF THE ABOVEi.

II.

FOR THE INCOME STATEMENT, CHOOSE FROM THE FOLLOWING ACCOUNT TITLESRevenuesSalaries expenseAdvertising expenseCost of Goods Sold (or COGS)Interest expenseConsultant expensesRent expense

We had the following activity during January:

Paid $12,000 for payroll.

NOTE: ALL OF THE BALANCE SHEET ACCOUNT TITLES YOU MAY NEED ARE LISTED IN THE ABOVE TRIAL BALANCE.

FOR EACH NUMBER (1-11) ABOVE, RECORD THE JOURNAL ENTY OR STATE NO ENTRY IF THERE IS NONE.

TRACK ACTVITY IN WHATEVER MANNER YOU PREFER, AND SHOW THE BALANCE SHEET AS OF THE END OF THE MONTH AND THE INCOME STATEMENT FOR THE MONTH.

Made no new bank borrowings, but the debt already on the trial balance matures at $500/ month

Noticed that there was $1,000 of payroll for the last couple days of the month which has not been paid yet , but for which we have received the benefit from our employees. Paid $2,000 for advertising which was completed by January 15th.

On the last day of the month, paid $10,000 for consulting services for which we have not yet received the benefit..

ACCOUNT DEBIT CREDIT(1) NO ENTRY

(2) Inventory 70,000 Cash 70,000

(3) Accounts receivable 70,000 Sales 70,000

(3a) COGS 30,000 Inventory 30,000

(4) Debt 500 Interest expense 600

Cash 1,100

(5) Inventory 10,000 Accounts payable 10,000

(6) Cash 65,000 Accounts receivable 65,000

(7) Accounts payable 40,000 Cash 40,000

(8) Prepaid expenses 10,000 Cash 10,000

(9) Salaries expense 12,000 Cash 12,000

(10) Salaries expense 1,000 Accrued payroll 1,000

(11) Advertising expense 2,000 Cash 2,000

100,000 30,000 25,000 5,000 200,00070,000 70,000 70,000 10,000

1,100 65,000 30,000 65,000 10,000

40,000 10,000 12,000

2,000

29,900 35,000 75,000 15,000 200,000

- 50,000 - 175,000 5,000 130,00010,000 1,000 500 24,400

40,000 20,000 1,000 174,500 5,000 154,400

70,000 30,000 600 12,0001,000

70,000 30,000 600 13,000 NET INCOME 24,400

2,000 - 2,000 -

Debt

Salaries expense

Cash Accounts Receiv. Inventory

COGS Interest exp.

Fixed AssetsPrepaid Expenses

Rent Expense Advertising Exp.

Common Stock Retained EarningsAccounts payable Accrued Payroll

Sales

Consult. Exp.

Assets Sales 70,000 Current assets COGS 30,000

Cash 29,900 Gross Profit 40,000 Accounts receivable 35,000 Inventory 75,000 Interest expense 600 Prepaid expenses 15,000 Consultant expenses -

Total Current assets 154,900 Salaries expense 13,000 Advertising expense 2,000

Fixed assets 200,000 Operating expenses 15,600

Total Asstes 354,900 Net income 24,400

Liabilities & EquityCurrent liabilities

Current portion of notes payable 6,000 Accounts payable 20,000 Accrued payroll 1,000

Total current liabilities 27,000

Notes payable, exc. Curr. Portion 168,500

EquityCommon stock 5,000 Retained earnings 154,400

Total Liabilities & Equity 354,900

Econ 3a, Inc.Income Statement

For the month ended January 31, 2008

Econ 3a, Inc.Balance Sheet

As of January 31, 2008

T-ACCOUNTS FOR YOUR USE, NO POINTS ALLOCATED TO T-ACCOUNTS

31 Please post the journal entries for #31 in the space provided below.

DR. CR.(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

Account name

31. COMPLETE YOUR BALANCE SHEET & INCOME STATEMENT IN THE SPACE PROVIDED.

Econ 3a, Inc. Econ 3a, Inc.Balance Sheet Income Statement

ECON 3A SPRING 2009 MIDTERM #1

Name: __________________________ Perm #: _____________

WRITE YOUR VERSION # ON YOUR SCANTRON PLEASE!!!

Answer multiple choice questions (#1-25) on green scantron. Answer the remaining questions IN THE SPACE PROVIDED. No need for blue books. Please be sure to write your name on this exam and your scantron.

1. The basic financial statements under GAAP do not include:A) Balance sheet C) Statement of retained earningsB) Management's discussion & analysis D) income statement

2. Which statement below is most accurateA) Accountants should consider whether a GAAP requirement could be easily be

misinterpreted and result in over-reaction of financial statement users.B) Accountants should decide ultimately what is in the best interest of the investors,

lenders and other users of financial statements.C) Accountants should report exactly as GAAP requires, even if doing so may result in

adverse consequencesD) Accountants should use their judgment in deciding how to apply GAAP

3. Which of the following would not be considered an internal user of accounting data for the XYZ Company?A) Production manager C) President of the companyB) President of the employees' labor

unionD) Merchandise inventory clerk

4. The right to receive money in the future is called a(n)A) account receivable. B) revenue. C) account payable. D) liability.

5. Preparation of financial statements in accordance with GAAP is required....A) For all companiesB) For all companies whose users have required itC) For all public companiesD) B and C

Version 1 Page 1

6. The statement of cash flows solves which of the following criticisms of the accrual basis of accounting?A) Paper income B) Income C) Operating income D) Net income

7. The statement of cash flows presents the cash flows of an organization from three principal cash activities, which do NOT includeA) Accumulating B) Operating C) Investing D) Financing

8. When Bob Anderson in class keeps saying that GAAP "levels the playing field", which attribute of GAAP most closely is associated with this statement?A) Consistency/ Comparability C) ConservatismB) Compatibility D) Completeness

9. Accounting is a process of doing three principal things, which item below is NOT one of themA) Communicating B) Identifying C) Validating D) Measuring

10. The historical cost principal is one which results in:A) Textbooks for studentsB) More informationC) Less information but more consistent reportingD) Inflated balance sheets

11. Which statement is true with respect to compliance with GAAP.A) A company must comply with GAAP only if they are required to by a user of their

financial statements, such as public companiesB) No company must comply with GAAPC) All companies incorporated in the United States of America must comply with

GAAPD) A company need only comply with GAAP if they are a public company governed

by the SEC

12. Current assets and current liabilities will be satisfied within:A) The operating cycleB) One year or the operating cycle, whichever is shorterC) One yearD) One year or the operating cycle, whichever is longer

Version 1 Page 2

13. The left side of an account isA) the balance of the account. C) blank.B) the debit side. D) a description of the account.

14. When a company receives a utility bill but will not pay it right away, it shouldA) make no entry until the bill is paid.B) debit utilities expense and credit accounts receivable.C) debit utilities expense and credit accounts payable.D) debit accounts payable and credit utilities expense.

15. At January 31, 2001, the balance in Prieto Inc,'s supplies account was $250. During February. Prieto purchased supplies of $300 and used supplies of $400. At the end of February, the balance in the supplies account should beA) $950 debit. B) $250 debit. C) $150 debit D) $350 credit.

Use the following to answer questions 16-19:

Benton Office SuppliesBalance Sheet

December 31, 2007

Cash $ 65,000 Accounts Payable $ 70,000Prepaid Insurance 30,000 Salaries Payable 10,000Accounts Receivable 50,000 Mortgage Payable 90,000Inventory 70,000 Total Liabilities $160,000Land held for investment 75,000Land 90,000 Building $100,000 Common Stock $120,000 Less Accumulated Retained Earnings 250,000 Depreciation (20,000) 80,000 Total stockholders' equity $370,000Trademark 70,000 Total Liabilities and Total Assets $530,000 Stockholders' Equity $530,000

16. The total amount of working capital isA) $60,000. B) $135,000. C) $295,000. D) $75,000.

17. The total dollar amount of assets to be classified as current assets isA) $215,000. B) $180,000. C) $145,000. D) $290,000.

Version 1 Page 3

18. The current ratio isA) 1.57 : 1. B) 2.69 : 1. C) 1.94 : 1. D) 3.14 : 1.

19. The total dollar amount of assets to be classified as property, plant, and equipment isA) $170,000. B) $245,000. C) $190,000. D) $320,000.

20. If a company buys a $700 machine on credit, this transaction will affect the:A) balance sheet only.B) income statement and retained earnings statement only.C) income statement only.D) income statement, retained earnings statement, and balance sheet.

21. The usual sequence of steps in the transaction recording process is:A) post to the ledger journalize analyze.B) journalize analyze post to the ledger.C) analyze journalize post to the ledger.D) journalize post to the ledger analyze.

22. Which of the following is not classified properly as a current asset?A) A receivable from the sale of an asset to be collected in two yearsB) SuppliesC) Marketable securitiesD) A fund to be used to purchase a building within the next year

23. A debit to an asset account indicates a(n)A) increase in the asset. C) credit was made to a liability account.B) error. D) decrease in the asset.

24. Which of the following is a limitation of the corporate form of ownership?A) Ease of raising capital C) Dual taxationB) Personal liability D) Ease of ownership transfer

25. The payment of a liabilityA) increases assets and decreases liabilities.B) decreases assets and increases liabilities.C) decreases assets and liabilities.D) decreases assets and stockholders' equity.

Version 1 Page 4

26. For each of the following items, and in the space provided, state what impact the item should have upon equity (increase/ decrease/ no impact): Revenue: Payment of rent on the 1st of the month The end of the month when you have paid your rent already on the 1st ________________ Receipt of a non-refundable deposit _____________________ Collect an account receivable Dividends . Net income Net loss Pay tuition at the beginning of the quarter _________________. Insurance expense _____________________.

27. Under GAAP (fill in the blanks below in the space provided):

Revenue is recorded when it is _____________, Expenses are recorded when they have been __________,Assets are ____________ future economic ___________ as a result of a past transaction or event.Liabilities are ___________ future economic _______________ as a result of a past transaction or event.

Collecting an open account receivable should have what impact on income? ________________Paying an open account payable should have what impact on income? ________________.

Recording an expense in the period when the benefit is derived is a fundamental GAAP process of _______________.

28. State the accounting equation: _____________________________________________.

The GAAP statement which displays the accounting equation is the __________________________________.

If an asset goes up, liabilities are unchanged and no owner transactions took place other than income, what happened to income? __________________

For every debit, there is a _________________.

Version 1 Page 5

Answer Key

1. B2. C3. B4. A5. D6. A7. A8. A9. C

10. C11. A12. D13. B14. C15. C16. B17. A18. B19. A20. A21. C22. A23. A24. C25. C26. For each of the following items, and in the space provided, state what impact the item

should have upon equity (increase/ decrease/ no impact): Revenue: INCREASE Payment of rent on the 1st of the month NO IMPACT The end of the month when you have paid your rent already on the 1st __DECREASE______ Receipt of a non-refundable deposit ___NO IMPACT__________________ Collect an account receivable NO IMPACT Dividends DECREASE . Net income INCREASE Net loss DECREASE Pay tuition at the beginning of the quarter ___NO IMPACT______________. Insurance expense ____DECREASE.

Version 1 Page 6

27. Revenue is recorded when it is ___earned__________, Expenses are recorded when they have been _incurred_________,Assets are __probable________ future economic __benefits_________ as a result of a past transaction or event.Liabilities are ___probable________ future economic ____sacrafices___________ as a result of a past transaction or event.

Collecting an open account receivable should have what impact on income? ___None_____________Paying an open account payable should have what impact on income? ____None____________.

Recording an expense in the period when the benefit is derived is a fundamental GAAP process of _______________.

28. State the accounting equation: ___ASSETS=LIABILITIES + EQUITY.

The GAAP statement which displays the accounting equation is the ____BALANCE SHEET_________________.

If an asset goes up, liabilities are unchanged and no owner transactions took place other than income, what happened to income? ____INCREASE_

For every debit, there is a ___CREDIT________.

Version 1 Page 7

ECON 3A SPRING 2009 MIDTERM #1

Name: __________________________ Perm #: _____________

WRITE YOUR VERSION # ON YOUR SCANTRON PLEASE!!!

Answer multiple choice questions (#1-25) on green scantron. Answer the remaining questions IN THE SPACE PROVIDED. No need for blue books. Please be sure to write your name on this exam and your scantron.

1. Preparation of financial statements in accordance with GAAP is required....A) For all companiesB) For all companies whose users have required itC) For all public companiesD) B and C

2. Which of the following would not be considered an internal user of accounting data for the XYZ Company?A) President of the employees' labor

unionC) President of the company

B) Merchandise inventory clerk D) Production manager

3. Accounting is a process of doing three principal things, which item below is NOT one of themA) Communicating B) Measuring C) Identifying D) Validating

4. Which statement below is most accurateA) Accountants should report exactly as GAAP requires, even if doing so may result in

adverse consequencesB) Accountants should decide ultimately what is in the best interest of the investors,

lenders and other users of financial statements.C) Accountants should use their judgment in deciding how to apply GAAPD) Accountants should consider whether a GAAP requirement could be easily be

misinterpreted and result in over-reaction of financial statement users.

5. The historical cost principal is one which results in:A) Inflated balance sheetsB) More informationC) Textbooks for studentsD) Less information but more consistent reporting

Version 2 Page 1

6. The statement of cash flows presents the cash flows of an organization from three principal cash activities, which do NOT includeA) Investing B) Financing C) Accumulating D) Operating

7. The basic financial statements under GAAP do not include:A) income statement C) Statement of retained earningsB) Balance sheet D) Management's discussion & analysis

8. The statement of cash flows solves which of the following criticisms of the accrual basis of accounting?A) Net income B) Paper income C) Operating income D) Income

9. When Bob Anderson in class keeps saying that GAAP "levels the playing field", which attribute of GAAP most closely is associated with this statement?A) Completeness C) Consistency/ ComparabilityB) Compatibility D) Conservatism

10. The right to receive money in the future is called a(n)A) revenue. B) account payable. C) account receivable. D) liability.

11. Current assets and current liabilities will be satisfied within:A) The operating cycleB) One year or the operating cycle, whichever is longerC) One year or the operating cycle, whichever is shorterD) One year

12. Which statement is true with respect to compliance with GAAP.A) A company must comply with GAAP only if they are required to by a user of their

financial statements, such as public companiesB) No company must comply with GAAPC) All companies incorporated in the United States of America must comply with

GAAPD) A company need only comply with GAAP if they are a public company governed

by the SEC

13. Which of the following is not classified properly as a current asset?A) A fund to be used to purchase a building within the next yearB) SuppliesC) A receivable from the sale of an asset to be collected in two yearsD) Marketable securities

Version 2 Page 2

14. The left side of an account isA) the balance of the account. C) blank.B) the debit side. D) a description of the account.

15. A debit to an asset account indicates a(n)A) credit was made to a liability account. C) error.B) increase in the asset. D) decrease in the asset.

16. If a company buys a $700 machine on credit, this transaction will affect the:A) income statement only.B) balance sheet only.C) income statement and retained earnings statement only.D) income statement, retained earnings statement, and balance sheet.

Use the following to answer questions 17-20:

Benton Office SuppliesBalance Sheet

December 31, 2007

Cash $ 65,000 Accounts Payable $ 70,000Prepaid Insurance 30,000 Salaries Payable 10,000Accounts Receivable 50,000 Mortgage Payable 90,000Inventory 70,000 Total Liabilities $160,000Land held for investment 75,000Land 90,000 Building $100,000 Common Stock $120,000 Less Accumulated Retained Earnings 250,000 Depreciation (20,000) 80,000 Total stockholders' equity $370,000Trademark 70,000 Total Liabilities and Total Assets $530,000 Stockholders' Equity $530,000

17. The current ratio isA) 2.69 : 1. B) 3.14 : 1. C) 1.94 : 1. D) 1.57 : 1.

18. The total dollar amount of assets to be classified as property, plant, and equipment isA) $170,000. B) $245,000. C) $190,000. D) $320,000.

Version 2 Page 3

19. The total amount of working capital isA) $295,000. B) $75,000. C) $60,000. D) $135,000.

20. The total dollar amount of assets to be classified as current assets isA) $145,000. B) $180,000. C) $290,000. D) $215,000.

21. At January 31, 2001, the balance in Prieto Inc,'s supplies account was $250. During February. Prieto purchased supplies of $300 and used supplies of $400. At the end of February, the balance in the supplies account should beA) $150 debit B) $250 debit. C) $350 credit. D) $950 debit.

22. Which of the following is a limitation of the corporate form of ownership?A) Personal liability C) Dual taxationB) Ease of ownership transfer D) Ease of raising capital

23. The payment of a liabilityA) decreases assets and increases liabilities.B) decreases assets and liabilities.C) increases assets and decreases liabilities.D) decreases assets and stockholders' equity.

24. The usual sequence of steps in the transaction recording process is:A) post to the ledger journalize analyze.B) journalize post to the ledger analyze.C) journalize analyze post to the ledger.D) analyze journalize post to the ledger.

25. When a company receives a utility bill but will not pay it right away, it shouldA) debit utilities expense and credit accounts payable.B) debit accounts payable and credit utilities expense.C) make no entry until the bill is paid.D) debit utilities expense and credit accounts receivable.

Version 2 Page 4

26. Under GAAP (fill in the blanks below in the space provided):

Revenue is recorded when it is _____________, Expenses are recorded when they have been __________,Assets are ____________ future economic ___________ as a result of a past transaction or event.Liabilities are ___________ future economic _______________ as a result of a past transaction or event.

Collecting an open account receivable should have what impact on income? ________________Paying an open account payable should have what impact on income? ________________.

Recording an expense in the period when the benefit is derived is a fundamental GAAP process of _______________.

27. State the accounting equation: _____________________________________________.

The GAAP statement which displays the accounting equation is the __________________________________.

If an asset goes up, liabilities are unchanged and no owner transactions took place other than income, what happened to income? __________________

For every debit, there is a _________________.

28. For each of the following items, and in the space provided, state what impact the item should have upon equity (increase/ decrease/ no impact): Revenue: Payment of rent on the 1st of the month The end of the month when you have paid your rent already on the 1st ________________ Receipt of a non-refundable deposit _____________________ Collect an account receivable Dividends . Net income Net loss Pay tuition at the beginning of the quarter _________________. Insurance expense _____________________.

Version 2 Page 5

Answer Key

1. D2. A3. D4. A5. D6. C7. D8. B9. C

10. C11. B12. A13. C14. B15. B16. B17. A18. A19. D20. D21. A22. C23. B24. D25. A26. Revenue is recorded when it is ___earned__________,

Expenses are recorded when they have been _incurred_________,Assets are __probable________ future economic __benefits_________ as a result of a past transaction or event.Liabilities are ___probable________ future economic ____sacrafices___________ as a result of a past transaction or event.

Collecting an open account receivable should have what impact on income? ___None_____________Paying an open account payable should have what impact on income? ____None____________.

Recording an expense in the period when the benefit is derived is a fundamental GAAP process of _______________.

Version 2 Page 6

27. State the accounting equation: ___ASSETS=LIABILITIES + EQUITY.

The GAAP statement which displays the accounting equation is the ____BALANCE SHEET_________________.

If an asset goes up, liabilities are unchanged and no owner transactions took place other than income, what happened to income? ____INCREASE_

For every debit, there is a ___CREDIT________.28. For each of the following items, and in the space provided, state what impact the item

should have upon equity (increase/ decrease/ no impact): Revenue: INCREASE Payment of rent on the 1st of the month NO IMPACT The end of the month when you have paid your rent already on the 1st __DECREASE______ Receipt of a non-refundable deposit ___NO IMPACT__________________ Collect an account receivable NO IMPACT Dividends DECREASE . Net income INCREASE Net loss DECREASE Pay tuition at the beginning of the quarter ___NO IMPACT______________. Insurance expense ____DECREASE.

Version 2 Page 7