UMUC ACCT 220 Final Exam Summer 2015

UMUC ACCT 220 Final Exam Summer 2015  in $46 (Instant Download)

University of Maryland University College

Final Examination

Acct220: Principles of Accounting I

For this exam, omit all general journal entry explanations.

Ensure to include correct dollar signs, commas, underlines & double underlines where required.

Question 1: 40% points:

Floozy Company’s December 31, 2014 trial balance is as follows:

Floozy Corporation
Trial Balance
December 31, 2014
AccountDebitCredit
Cash (A)$43,500
Accounts Receivable(A)53,500
Allowance for Doubtful Accounts (A)1,500
Notes Receivable (A)30,000
Merchandise Inventory (A)55,000
Land (A)20,000
Building (A)150,000
Accumulated Depreciation, Building (A)$15,000
Equipment (A)50,000
Accumulated Depreciation, Equipment (A)21,000
Goodwill (A)26,000
Accounts Payable (L)25,000
Long Term Notes Payable (L)75,000
Common Stock, $10 par, 2,000 shares authorized & outstanding (SE)20,000
Retained Earnings (SE)147,000
Sales Revenue700,000
Salaries Expense150,000
Utilities Expense3,500
Cost of Goods Sold350,000
Administrative Expenses55,000
Sales Expenses15,000_______
Totals$1,003,000$1,003,000

Floozy is a small company and records adjusting entries & closing entries only at fiscal (calendar) year end. Correcting and adjusting entries have not been recorded.

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Additional Information:

a. Notes Receivable is a 3-months, 6% note accepted on November 1, 2014. (Adjust journal entries)

b. Long Term Notes Payable is a 5-year, 5% note that was signed on July 1, 2014. Interest is payable annually. (Adjust journal entries)

c. Building is depreciated at 3% per year. There is no salvage value. (Adjust journal entries)

d. Equipment is depreciated at 15% year. There is no salvage value. (Adjust journal entries)

e. Floozy discovered, on December 30th, that the inexperienced bookkeeper recorded in the general journal and general ledger that day’s $1,500 cash sales as a debit to Accounts Receivable and a credit to Sales Revenue. (Adjust journal entries)

f. The year-end physical count for Merchandise Inventory reflected a value of $51,500. Any difference in value will not be considered theft or loss. (Adjust journal entries)

g. Salaries for the last half of December, payable in January, amount to $5,500. (Adjust journal entries)

h. Floozy estimates that of the Accounts Receivable 5% will not be collectable. (Adjust journal entries)

Required:

a. Prepare in journal form, any required correcting entries. b. Prepare in journal form, all end-of-the period adjusting entries

c. Prepare a December adjusted trial balance

d. Prepare a classified balance sheet for the year ended December 31, 2014

e. Prepare in journal form, the closing entries for the year ended December 31, 2014

NOTE: Students are encouraged to prepare their own T-accounts, on a separate scratch sheet of paper, and track from the beginning balance thru all journal transactions to ending balances for all accounts used in this problem. Do not turn in your separate scratch sheet of paper – those are student personal working papers and not part of any solution required for this exam.

Question 2: 8% points: Inventory

Floozy uses the period method and had the following inventory events during January:

DateUnits PurchasedUnit CostDateUnits SoldUnit Sales Price
Jan. 1150$7.00Jan. 2100$10.00
Jan. 52257.20Jan. 712510.00
Jan. 101007.50Jan. 127512.00
Jan. 151507.80Jan. 1720012.50
Jan. 202007.95Jan. 2415015.00
Jan. 251508.00
Jan. 30758.20

Note: January 1 amount was the beginning inventory and unit value.

(Round all total dollar values to the nearest dollar. Round all unit values to the nearest penny.)

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Required:

a. Calculate cost of goods available for sale.

b. Calculate the dollar value of sales.

c. Calculate the value of Ending Inventory and Cost of Good Sold under the following independent assumptions:

1) LIFO method

2) FIFO method

3) Average-cost method

Question 3: 7% points:

Required:Prepare Flip’s Supply Co. general journal entries for the following transactions:

Jan. 1Accepted Flop’s 120 days, 10% note, as settlement of an outstanding $15,000 account receivable for goods sold last year
Jan. 15Purchased $10,000 Equipment from Floozy, signing a 9 month, 12% note
Jan. 25Loaned Flam Co. $30,000 cash, accepting a 90 days, 10% note
Jan. 31Prepared accrual adjusting entry for any interest revenue
Apr. 25Received payment in full from Flam Co. for outstanding note & interest
May 1Received payment in full from Flop Co. for outstanding note & interest
Oct. 15Paid Floozy in full

Question 4: 9% points:

Floozy Company purchased a refrigerated delivery truck for $65,000 on April 1, 2016. The plan is to use the truck for 5 years and then replace it. At the end of its useful life the truck is expected to have a salvage value of $10,000.

a. Prepare the depreciation table for Floozy’s truck assuming that the company uses the straight-line method for depreciation.

b. Prepare the depreciation table for Floozy’s truck assuming that the company uses the double-declining-balance depreciation method.

c. Compute the depreciation expense for 2016 for Floozy’s truck assuming the truck has an expected life of 200,000 miles and during 2016 the truck was driven 24,540 miles. Round your depreciation expense per mile to three decimal places.

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Question 5: 7% points:

Flip Company has a January 15 mid-month gross salaries expense of $25,000. All is subject to FICA Social Security (6.2%), FICA Medicare (1.45%), state income tax (5%) and federal income tax (15%) withholdings. Additionally, all is subject to employer taxes to include FUTA (0.8%) and SUTA (5.4%) taxes. (Round all calculations to the nearest penny.)

Required:

a. Prepare the general journal entry to record the employer’s payroll liability.

b. Prepare the general journal entry to record the employer’s payroll tax liability.

c. Prepare the general journal entry to liquidate the liabilities accrued in parts (a) and (b) on January 22.

Question 6: 4% points:

Flip Company at the end of the fiscal 2014 year has the following information: Credit Sales, $2,500,000 Sales Returns & Allowances $25,000 Accounts Receivable $200,000 and Allowance for Doubtful Accounts with a debit o $1,500.

Required:

a. Prepare the general journal entry to record the end of the year adjusting entry if Flip uses 0.5% of Net Credit Sales as the basis for determining Bad Debt Expense.

b. Prepare the general journal entry to record the end of the year adjusting entry if Flip uses 5% of Accounts Receivable as the basis for determining Bad Debt Expense.

Multiple choice questions allocated 1% point each. Make your selection by recording the letter in the answer box provided.

Question 7:On 2010 July 1, Frick Company purchased equipment for $400,000, and installation and testing costs totaled $40,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $40,000. If Frick uses the double-declining-depreciation method, the depreciation expense for 2010 is:

a. $88,000

b. $72,000

c. $36,000

d. $44,000 (Sample Answer)

e. $40,000

Question 8:The result of recording a capital expenditure as a revenue expenditure is an:

a. Overstatement of current year’s expense

b. Understatement of current year’s expense

c. Understatement of subsequent year’s net income

d. Overstatement of current year’s net income

e. None of the above

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Question 9:A truck costing $45,000 and having an estimated salvage value of $4,500 and an original life of five years is exchanged for a new truck. The cash price of the new truck is $57,000, and a trade-in allowance of $22,500 is received. The old truck has been depreciated for three years using the straight-line method. The new truck would be recorded at:

a. $55,200

b. $57,000

c. $34,500

d. $43,200

e. None of the above

Question 10:Which of the following is not an advantage of the corporate form of organization?

a. Continuous existence of the entity

b. Limited liability of stockholders

c. Government regulation

d. Easy transfer of ownership

Question 11:Treasury stock should be shown on the balance sheet as a(n):

a. Reduction of the corporation’s stockholders’ equity

b. Current asset

c. Current liability

d. Investment asset

Question 12:When the stockholders invest cash in the business, what is the effect?

a Liabilities increase and stockholders’ equity increases

b Both assets and liabilities increase

c Both assets and stockholders’ equity increase

d None of the above

Question 13:The ending balance in retained earnings is shown in the:

a. Income statement

b. Statement of retained earnings

c. Balance sheet

d. Both (b) and (c)

e. Both (a) and (c)

f. (a), (b) and (c)

Question 14:A cash dividend of $500 was declared and paid to stockholders. The correct journal entry to record the declaration is:

a. DR Capital stock 500 and CR Cash 500

b. DR Cash 500 and CR Dividends 500

c. DR Dividends 500 and CR Cash 500 (Sample Answer)

d. DR Cash 500 and CR Capital stock 500

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Question 15:If $3,000 has been earned by a company’s workers since the last payday in an accounting period, the necessary adjusting entry would be:

a. Debit an expense and credit a liability.

b. Debit an expense and credit an asset.

c. Debit a liability and credit an asset.

d. Debit a liability and credit an expense.

Question 16:The accrual basis of accounting:

a. Recognizes revenues only when cash is received

b. Is used by almost all companies

c. Recognizes expenses only when cash is paid out

d. Recognizes revenues when sales are made or services are performed and recognizes expenses only when cash is paid out.

Question 17:The need for adjusting entries is based on:

a. The matching principle

b. Source documents

c. The cash basis of accounting

d. Activity that has already been recorded in the proper accounts.

Question 18:Which of the following statements is false regarding the closing process?

a. The Dividends account is closed to Income Summary.

b. The closing of expense accounts results in a debit to Income Summary.

c. The closing of revenues results in a credit to Income Summary.

d. The Income Summary account is closed to the Retained Earnings account.

Question 19:Which of the following statements is true regarding the classified balance sheet?

a. Current assets include cash, accounts receivable, and equipment.

b. Plant, property, and equipment is one category of long-term assets.

c. Current liabilities include accounts payable, salaries payable, and notes receivable.

d. Stockholders’ equity is subdivided into current and long-term categories.

Question 20:The underlying assumptions of accounting includes all the following except:

a. Business entity

b. Going concern

c. Matching

d. Money measurement and periodicity

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Question 21:Frick Company began the accounting period with $60,000 of merchandise, and net cost of purchases was $240,000. A physical inventory showed $72,000 of merchandise unsold at the end of the period. The cost of goods sold of Frick Company for the period is:

a. $300,000

b. $228,000 (Sample Answer)

c. $252,000

d. $168,000

e. None of the above

Question 22:A classified income statement consists of all of the following major sections except for:

a. Operating revenues

b. Cost of goods sold

c. Operating expenses

d. Non-operating revenues and expenses

e. Current assets

Question 23:A business purchased merchandise for $12,000 on account; terms are 2/10, n/30. If $2,000 of the merchandise was returned and the remaining amount due was paid within the discount period, the purchase discount would be:

a. $240

b. $200

c. $1,200

d. $1,000

e. $3,600

Question 24:Frick Company began the accounting period with inventory of 3,000 units at $30 each. During the period, the company purchased an additional 5,000 units at $36 each and sold 4,600 units. Assume the use of periodic inventory procedure. The cost of ending inventory using weighted-average is:

a. $114,750

b. $157,600

c. $122,400

d. $109,650

e. None of the above

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Question 25:Frick Company began the accounting period with inventory of 3,000 units at $30 each. During the period, the company purchased an additional 5,000 units at $36 each and sold 4,600 units. Assume the use of periodic inventory procedure. The cost of goods sold using weighted-average is:

a. $147,200

b. $160,350

c. $155,250

d. $114,000

e. None of the above

Question 26:During a period of rising prices, which inventory method might be expected to give the highest net income?

a. Weighted-average

b. FIFO

c. LIFO

d. Specific identification

e. Cannot determine

Question 27:The following information: related to the bank reconciliation of the Flip Company:

Balance per bank statement$1,951.20
Balance per ledger1,869.60
Deposits in transit271.20
Outstanding checks427.80
NSF check61.20
Service charges13.80

The adjusted/correct cash balance is:

a. $1,794.60

b. $1,719.60

c. $1,638.00

d. $1,713.00

e. $1,876.20

Question 28:In a bank reconciliation, deposits in transit should be:

a. Deducted from the balance per books

b. Deducted from the balance per bank statement

c. Added to the balance per ledger

d. Added to the balance per bank statement

e. Disregarded in the bank reconciliation

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Question 29:After the bank reconciliation is prepared, the entry to record bank service charges would have a credit to:

a. Bank Service Charge Expense

b. Cash

c. Petty Cash

d. Cash Short and Over

e. None of the above

Question 30:Frick Company estimates uncollectible accounts using the percentage-of-receivables method and expects that 5 percent of outstanding receivables will be uncollectible for 2010. The balance in Accounts Receivable is $200,000, and the allowance account has a $3,000 credit balance before adjustment at year-end. The uncollectible accounts expense for 2010 will be:

a $7,000

b. $10,000

c. $13,000

d. $9,850

e. None of the above

Question 31:Frick Company issued its own $10,000, 90-day, non interest-bearing note to a bank. If the note is discounted at 10 percent, the proceeds to Frick are:

a. $10,000

b. $9,000

c. $9,750

d. $10,250

e. None of the above

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