ACCT 212 MIDTERM EXAM
1. Question :
(TCO 1) The Accounting Equation is used to develop the
organization's financial reports. (1) Describe what assets value
would be if Liabilities are $12,000 and Owners' Equity is $50,000
by showing the Accounting Equation (10 points), and (2) provide
an example of two asset accounts that could contain the value.
(10 points)
Student Answer: Equity= Assets- Liabilities Liabilities = Assets - Equity 50,000-
12,000= 38,000 Two types of asset accounts that can contain
value are notes receivable, and merchandise inventory.
Instructor Textbook pages 11-12. Assets = $12,000 + $50,000 = $62,000. Cash
Explanation: and inventory are examples.
Points Received: 16 of 20
Comments:
Question 2. Question : (TCO 1) The financial statements present a company to the public
in financial terms. (1) Which financial statement should be
prepared first and why (10 points), and (2) explain what
information this financial statement provides. (10 points)
Student Answer: The income statement or statement of operation is the first to be
prepared. This reports the revenues and expenses for the specified
period. The income statement reports two main things. The first is
revenues and gains and the second is expenses and losses. We
also find the net income after subtracting the expenses from
revenue. Net income is the most important item in financial
statements.
Instructor Textbook pages 15-21. Income Statement. Compares revenue to
Explanation: expenses.
Points Received: 20 of 20
Comments:
, 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 Going-concern Assumption is (10 points) and (2)
provide an example of its application. (10 points)
Student Answer: The going concern is one of the fundamental assumptions in
accounting on the basis of which financial statements are
prepared. Possible indications of going concern problems are
high financial risks arising from increased gearing level rendering
the company vulnerable to delays in payment of interest. A
merchandising company has a current ratio below 0.5. A creditor
1,000,000 demanded payment which the company could not
make. The creditor requested the court to liquidate the business
and recover his debts and the court grants the order. The company
is no longer a going concern.
Instructor Textbook pages 6-9. Assume that the entity will continue to operate
Explanation: long enough to use existing assets. Depreciation is an example.
Points Received: 20 of 20
Comments:
Question 4. Question : (TCO 2) Transaction analysis results in the development of a
journal entry. A building is purchased for $535,000. (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)
Student Answer: Building Debit 535,000 Cash Credit 535,000 This transaction
would only affect the asset side of the accounting equation.
Buildings are an asset account would increase. Cash is also an
asset account would decrease by the same amount. The changes
would offset each other because they are both asset accounts. The
net change to the accounting equation would be zero.
Instructor Textbook page 64. Building/Debit/$535,000 and
Explanation: Cash/Credit/$535,000. Assets are increased and decreased by the
same amount so the Accounting Equation is in balance.
1. Question :
(TCO 1) The Accounting Equation is used to develop the
organization's financial reports. (1) Describe what assets value
would be if Liabilities are $12,000 and Owners' Equity is $50,000
by showing the Accounting Equation (10 points), and (2) provide
an example of two asset accounts that could contain the value.
(10 points)
Student Answer: Equity= Assets- Liabilities Liabilities = Assets - Equity 50,000-
12,000= 38,000 Two types of asset accounts that can contain
value are notes receivable, and merchandise inventory.
Instructor Textbook pages 11-12. Assets = $12,000 + $50,000 = $62,000. Cash
Explanation: and inventory are examples.
Points Received: 16 of 20
Comments:
Question 2. Question : (TCO 1) The financial statements present a company to the public
in financial terms. (1) Which financial statement should be
prepared first and why (10 points), and (2) explain what
information this financial statement provides. (10 points)
Student Answer: The income statement or statement of operation is the first to be
prepared. This reports the revenues and expenses for the specified
period. The income statement reports two main things. The first is
revenues and gains and the second is expenses and losses. We
also find the net income after subtracting the expenses from
revenue. Net income is the most important item in financial
statements.
Instructor Textbook pages 15-21. Income Statement. Compares revenue to
Explanation: expenses.
Points Received: 20 of 20
Comments:
, 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 Going-concern Assumption is (10 points) and (2)
provide an example of its application. (10 points)
Student Answer: The going concern is one of the fundamental assumptions in
accounting on the basis of which financial statements are
prepared. Possible indications of going concern problems are
high financial risks arising from increased gearing level rendering
the company vulnerable to delays in payment of interest. A
merchandising company has a current ratio below 0.5. A creditor
1,000,000 demanded payment which the company could not
make. The creditor requested the court to liquidate the business
and recover his debts and the court grants the order. The company
is no longer a going concern.
Instructor Textbook pages 6-9. Assume that the entity will continue to operate
Explanation: long enough to use existing assets. Depreciation is an example.
Points Received: 20 of 20
Comments:
Question 4. Question : (TCO 2) Transaction analysis results in the development of a
journal entry. A building is purchased for $535,000. (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)
Student Answer: Building Debit 535,000 Cash Credit 535,000 This transaction
would only affect the asset side of the accounting equation.
Buildings are an asset account would increase. Cash is also an
asset account would decrease by the same amount. The changes
would offset each other because they are both asset accounts. The
net change to the accounting equation would be zero.
Instructor Textbook page 64. Building/Debit/$535,000 and
Explanation: Cash/Credit/$535,000. Assets are increased and decreased by the
same amount so the Accounting Equation is in balance.
