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University of Maryland Acct 220 Final Examination

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Question;For this exam, omit all general journal entry explanations.Question 1: Suggested time 20 minutes: 15% points:The account balances appearing on the trial balance (below) were taken from thegeneral ledger of Flip's Copy Shop at June 30, 2012.Additional information for the month of June which has not yet been recorded in theaccounts is as follows:(a) A physical count of supplies indicates $300 on hand at June 30.(b) The amount of insurance that expired in the month of June was $200.(c) Depreciation on equipment for June was $400.(d) Rent owed on the copy shop for the month of June was $600 but will not be paiduntil July.Flips Copy ShopTrial BalanceFor the Month Ended June 30, 2012Account TitlesDebitCreditCash$1,000Supplies1,100Prepaid Insurance2,200Equipment24,000$4,500Accum. Depreciation EquipmentAccounts Payable2,400Notes Payable4,000Flips Capital15,300Flips Drawings2,400Service Revenue4,900Utilities Expense400Totals$31,100$31,100Instructions: Prepare in journal form, without explanations, the end of month adjustingentries & closing entries for Flip's Copy Shop for the month of June.Question 2: Suggested time 15 minutes: 15% points:The following items were taken from the post adjusted trial balance of Flip Company.(All balances are normal.)Mortgage payablePrepaid expensesEquipmentLong-term investmentsShort-term investmentsNotes payable in 2014Cash$ 1,44388011,0001,1003,6901,0002,100Accumulated depreciationAccounts payableNotes payable after 2015Flips capitalAccounts receivableInventories3,6551,4441,20013,4801,6961,756Instructions: Prepare a classified balance sheet in good form as of December 31, 2013.Question 3: Suggested time 15 minutes: 15% points:The following information is available for Flip Company:Beginning inventory600 units at $4First purchase900 units at $6Second purchase500 units at $7.20Assume that Flip uses a periodic inventory system and that there are 700 units left at theend of the month.Instructions: Compute the cost of ending inventory and Cost of Good Sold under the(a) LIFO method.(b) FIFO method.(c) Average-cost methodQuestion 4: Suggested time 15 minutes: 10% points:Prepare journal entries to record the following transactions entered into by FlipCompany:2012June 1Accepted a $10,000, 12%, 1-year note from Flop as full payment on heraccount.Nov. 1Sold merchandise on account to Flap, Inc. for $12,000, terms 2/10, n/30.Nov. 5Flap, Inc. returned merchandise worth $500.Nov. 9Received payment in full from Flap, Inc.Dec. 31Accrued interest on Flop's note.2013June 1Flop honored her promissory note by sending the face amount plus interest.No interest has been accrued in 2013Question 5: Suggested time 20 minutes: 10% points:Flip Company purchased equipment on January 1, 2011 for $90,000. It is estimated thatthe equipment will have a $5,000 salvage value at the end of its 5-year useful life. It isalso estimated that the equipment will produce 100,000 units over its 5-year life.InstructionsAnswer the following independent questions.1. Compute the amount of depreciation expense for the year ended December 31, 2011,using the straight-line method of depreciation.2. If 16,000 units of product are produced in 2011 and 24,000 units are produced in2012, what is the book value of the equipment at December 31, 2012? The companyuses the units-of-activity depreciation method.3. If the company uses the double-declining-balance method of depreciation, what is thebalance of the Accumulated DepreciationEquipment account at December 31,2013?Question 6: Suggested time 10 minutes: 10% points:Flip earns a salary of $7,500 per month during the year. FICA taxes are 8% on the first$100,000 of gross earnings. Federal unemployment insurance taxes are 6.2% of the first$7,000, however, a credit is allowed equal to the state unemployment insurance taxes of5.4% on the $7,000. During the year, $25,600 was withheld for federal income taxes and$5,700 was withheld for state income taxes.Instructions(a) Prepare a journal entry summarizing the payment of Flips total salary during theyear.(b) Prepare a journal entry summarizing the employer payroll tax expense on Flipssalary for the year.(c) Determine the cost of employing Flip for the year.Multiple choice questions allocated 1% point each. Make your selection byrecording the letter in the answer box provided. Suggested time is 60 minutes.Question 7: Which of the following are the same under both GAAP and IFRS?a. The journal.b. The ledger.c. The chart of accounts.d. All of the above.e. Only a & c.Question 8: Which of the following is true?a. Transaction analysis is completely different under IFRS and GAAP.b. Most transactions are recorded differently under IFRS and GAAP.c. Transaction analysis is the same under IFRS and GAAP, but sometransactions are recorded differently.d. All transactions are recorded the same under IFRS and GAAP.Question 9: Revenue recognition under IFRS isa. substantially different from revenue recognition under GAAP.b. generally the same as revenue recognition under GAAP, but with moredetailed guidance.c. generally the same as revenue recognition under GAAP, but with less detailedguidance.d. exactly the same as revenue recognition under GAAP.Question 10: Both IFRS and GAAP require disclosure abouta. accounting policies followed.b. judgements that management has made in the process of applying the entity'saccounting policies.c. the key assumptions and estimation uncertainty.d. all of the above.e. only b & c.Question 11: The use of fair value to report assetsa. is not allowed under GAAP or IFRS.b. is required by GAAP and IFRS.c. is increasing under GAAP and IFRS, but GAAP has adopted it more broadly.d. is increasing under GAAP and IFRS, but IFRS has adopted it more broadly.Question 12: Closing entries are madea. in order to terminate the business as an operating entity.b. so that all assets, liabilities, and owner's capital accounts will have zerobalances when the next accounting period starts.c. in order to transfer net income (or loss) and owner's drawings to the owner'scapital account.d. so that financial statements can be prepared.Question 13: Flip Company purchased merchandise from Flop Company with freightterms of FOB shipping point. The freight costs will be paid by thea. seller.b. buyer.c. transportation company.d. buyer and the seller.Question 14: A Sales Returns and Allowances account is not debited if a customera. returns defective merchandise.b. receives a credit for merchandise of inferior quality.c. utilizes a prompt payment incentive.d. returns goods that are not in accordance with specifications.Question 15: Which of the following statements is incorrect?a. A major consideration in developing an accounting system is costeffectiveness.b. When an accounting system is designed, no consideration needs to be given tothe needs and knowledge of the various users.c. The accounting system should be able to accommodate a variety of users andchanging information needs.d. To be useful, information must be understandable, relevant, reliable, timely,and accurate.Question 16: Flip is warehouse custodian and also maintains the accounting record of theinventory held at the warehouse. An assessment of this situation indicatesa. documentation procedures are violated.b. independent internal verification is violated.c. segregation of duties is violated.d. establishment of responsibility is violated.Question 17: Cash equivalents include each of the following excepta. bank certificates of deposit.b. money market funds.c. petty cash.d. U.S. Treasury bills.Question 18: Flip Company is building a new plant that will take three years toconstruct. The construction will be financed in part by funds borrowed during theconstruction period. There are significant architect fees, excavation fees, andbuilding permit fees. Which of the following statements is true?a. Excavation fees are capitalized but building permit fees are not.b. Architect fees are capitalized but building permit fees are not.c. Interest is capitalized during the construction as part of the cost of thebuilding.d. The capitalized cost is equal to the contract price to build the plant less anyinterest on borrowed funds.Question 19: Depreciation is the process of allocating the cost of a plant asset over itsservice life ina. an equal and equitable manner.b. an accelerated and accurate manner.c. a systematic and rational manner.d. a conservative market-based manner.Question 20: Sales taxes collected by a retailer are expensesa. of the retailer.b. of the customers.c. of the government.d. that are not recognized by the retailer until they are submitted to thegovernment.Question 21: Flips Market recorded the following events involving a recent purchase ofmerchandise:Received goods for $50,000, terms 2/10, n/30.Returned $1,000 of the shipment for credit.Paid $250 freight on the shipment.Paid the invoice within the discount period.As a result of these events, the companys inventory increased bya.b.c.d.$48,020.$48,265.$48,270.$49,250.Question 22: A $100 petty cash fund has cash of $16 and receipts of $81. The journalentry to replenish the account would include aa. debit to Cash for $81.b. credit to Petty Cash for $84.c. debit to Cash Over and Short for $3.d. credit to Cash for $81.Question 23: In preparing its bank reconciliation for the month of April 2013, Flip, Inc.has available the following information.Balance per bank statement, 4/30/13$39,300NSF check returned with 4/30/13 bank statement470Deposits in transit, 4/30/135,000Outstanding checks, 4/30/135,200Bank service charges for April30What should be the adjusted cash balance at April 30, 2013?a. $38,630.b. $38,800.c. $39,010.d. $39,100.Question 24: If a check correctly written and paid by the bank for $591 is incorrectlyrecorded on the companys books for $519, the appropriate treatment on the bankreconciliation would be toa. deduct $72 from the books balance.b. add $72 to the books balance.c. deduct $72 from the banks balance.d. deduct $591 from the books balance.Question 25: Flip Company had net credit sales during the year of $1,200,000 and costof goods sold of $720,000. The balance in accounts receivable at the beginning of theyear was $180,000, and the end of the year it was $120,000. What was the accountsreceivable turnover ratio?a. 5.0b. 6.7c. 8.0d. 10.0Question 26: The financial statements of Flip Manufacturing Company report net salesof $400,000 and accounts receivable of $80,000 and $40,000 at the beginning andend of the year, respectively. What is the average collection period for accountsreceivable in days?a. 40 daysb. 50 daysc. 54.7 daysd. 80 daysQuestion 27: Flip Company purchases a new delivery truck for $60,000. The sales taxesare $4,000. The logo of the company is painted on the side of the truck for $1,600.The truck license is $160. The truck undergoes safety testing for $290. What doesFlip record as the cost of the new truck?a. $66,050b. $65,890c. $64,000d. $65,600Question 28: A company purchased factory equipment on April 1, 2012 for $80,000. It isestimated that the equipment will have an $10,000 salvage value at the end of its10-year useful life. Using the straight-line method of depreciation, the amount tobe recorded as depreciation expense at December 31, 2012 isa. $8,000.b. $7,000.c. $5,250.d. $6,000.Question 29: Flip's Boutique has total receipts for the month of $30,660 including salestaxes. If the sales tax rate is 5%, what are Flip's sales for the month?a. $29,127b. $29,200c. $32,193d. It cannot be determined.Acct220aPage 8 of 9Question 30: Flip Electric began operations in 2012 and provides a one year warranty onthe products it sells. They estimate that 10,000 of the 200,000 units sold in 2012 will bereturned for repairs and that these repairs will cost $8 per unit. The cost of repairing8,000 units presented for service in 2012 was $64,000. Flip should reporta. warranty expense of $16,000 for 2012.b. warranty expense of $80,000 for 2012.c. warranty liability of $80,000 on December 31, 2012.d. no warranty obligation on December 31, 2012, since this is only a contingentliability.Question 31: Partners Flip and Flop have capital balances in a partnership of $80,000and $120,000, respectively. They agree to share profits and losses as follows:FlipFlopAs salaries$20,000$24,000As interest on capital at the beginning of the year10%10%Remaining profits or losses50%50%If income for the year was $60,000, what will be the distribution of income toFlip?a. $26,000b. $34,000c. $20,000d. $28,000

 

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