Essay on Exam Chapters 1-5

3283 Words Nov 13th, 2012 14 Pages
(Chapters 1-6)

Problem A-I — Multiple Choice.
Choose the best answer for each of the following questions and enter the identifying letter in the space provided.

1. How does failure to record accrued revenue distort the financial reports? a. It understates revenue, net income, and current assets. b. It understates net income, stockholders’ equity, and current liabilities. c. It overstates revenue, stockholders’ equity, and current liabilities. d. It understates current assets and overstates stockholders’ equity.

2. A contingent liability which is normally accrued is a. notes receivable discounted. b. accommodation endorsements on customer notes. c. additional compensation
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The balance in the Insurance Expense account contains the premium costs of three policies: Policy 1, remaining cost of $2,550, 1-yr. term, taken out on May 1, 2011; Policy 2, original cost of $7,200, 3-yr. term, taken out on Oct. 1, 2012; Policy 3, original cost of $1,300, 1-yr. term, taken out on Jan. 1, 2012.

2. On September 30, 2012, Alt received $21,600 rent from its lessee for an eighteen month lease beginning on that date.

3. The regular rate of depreciation is 10% per year. Acquisitions and retirements during a year are depreciated at half this rate. There were no purchases during the year. On December 31, 2011, the balance of the Plant and Equipment account was $240,000.

4. On December 28, 2012, the bookkeeper incorrectly credited Sales for a receipt on account in the amount of $10,000.

5. At December 31, 2012, salaries and wages

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