ACCT 212 Week 4 Midterm (Version 2)
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 =
Explanation: $62,000. Cash 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
Explanation: to 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
Explanation: operate 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.
Points Received: 20 of 20
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