Exam 2: Qualities of Accounting Information

The historical-cost principle refers to ________.

A deferral transaction is one in which ________.

Reliable information can be verified.

During the year,Mega,Inc.had revenues of $400,000 of which $310,000 was collected from customers.It also had expenses of $360,000 of which $280,000 was paid.The shareholders were paid $20,000 in dividends.Net income for the year equals ________.

Evaluate the following information for Team Shirts. Part A: Calculate the current ratio for Team Shirts (round to two decimal places). Part B: Is the ratio acceptable or unacceptable? Why? Part C: Advise Team Shirts how to improve the ratio.

S.generally accepted accounting principles (GAAP)are determined by the ________.

Busy Beaver had revenues of $2,000,cost of goods sold of $780,advertising expense of $100,and interest expense of $25.Net income was ________.

Clean Sweep performed cleaning services and billed the customer for $900.This transaction includes ________.

The owner of a sole proprietorship should not include personal financial records as part of the financial records and statements of the business.

Classify each of the items below according to the section of a firm's financial statements where it would be reported.Some sections may be used more than once.Others may not be used at all.

Indicate with an "X" the one financial statement where you would expect to find each line item:

Team Instructions: Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final correct copy of the problem.Each team should turn in only one copy of the problem for grading.All team members will receive the same grade. Part A: Record the transactions below by filling in the amount and the account title from the list of accounts below (use the abbreviations given): 1.February 1 Tim's Tams paid $800 for February's rent of a booth. 2.February 1 Tim's Tams paid $600 cash for three months of insurance coverage that begins February 1. 3.February 2 Tim's Tams purchased 800 baseball caps that cost $6.00 each on account. 4.February 12 Tim's Tams sold 600 baseball caps @ $10.00 each on account. Record both a)the sale and b)the cost of the sale. 5.February 20 Tim's Tams paid for $500 of the caps purchased on February 2. 6.February 28 Tim's Tams declared and paid a $100 cash dividend to its shareholder. 7.February 28 Adjusted for insurance used during the month. Parts B,C,D and E: Complete the four financial statements: Part D: Part E: Part F: For each description,write in the amount and show on which of the February financial statements this information is found. Part G: Using the financial statements above,answer the following:

Explain the differences between cash-basis and accrual accounting.

Name one type of preventive control that would be useful in a computerized information system.

Clean Sweep had current assets of $650 and long-term assets of $1,350.It had current liabilities of $500 and a note payable of $600 due in three years.Its current ratio (rounded)was ________.

Baby Boutique had $250 worth of supplies on hand at the beginning of July.During July,the store paid $460 for more supplies.At the end of the month,a physical count showed $240 of supplies left.How much supplies expense did Baby Boutique have during July?

The going-concern assumption refers to ________.

Financial statements should be prepared using accrual accounting.

Liquidity ________.