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UMUC ACCT220 Final exam 2014




Question;University of Maryland University College;Final Examination;Acct220: Principles of Accounting I;For this exam;omit all general journal entry explanations.;Question 1: 40% points;On December 1, 2014, Marcus Distributing Company had the;following account balances.No additional owner investments or withdrawals were made;during 2014.;Account;Debit;Account;Credit;Cash;$7,200;Accu. Depn., Equipment;$2,200;Accounts Receivable;4,600;Accounts Payable;4,500;Inventory;12,000;Salaries & Wages Payable;1,000;Supplies;1,200;Owner's Capital;39,300;Equipment;22,000;Total;$47,000;Total;$47,000;During December, the company completed the following;transactions. All end-of-the month adjusting entries were made on November 30;2014.;Dec. 6;Paid $1,600 for salaries and wages due;employees, of which $600 is for December and $1,000 is for November salaries;and wages payable.;Dec. 8;Received $1,900 cash from customers in payment;of account (no discount allowed).;Dec. 10;Sold merchandise for cash $6,300. The cost of;the merchandise sold was $4,100.;Dec. 13;Purchased merchandise on account from Alex Co.;$9,000, terms 2/10, n/30.;Dec. 15;Purchased supplies for cash $2,000.;Dec. 18;Sold merchandise on account $12,000, terms;3/10, n/30. The cost of the merchandise sold was $8,000.;Dec. 20;Paid salaries and wages $1,800.;Dec. 23;Paid Alex Co. in full, less discount.;Dec. 27;Received collections in full, less discounts;from customers billed on December 18.;December adjusting entry data;1. Accrued salaries and wages;payable $800.;2. Depreciation $200 per month.;3. Supplies on hand $1,500.;Acct220 Page;1 of 9;Instructions;Prepare in journal form, without explanations, the December;transactions using a perpetual inventory system. Prepare in journal form, without explanations, the December;adjusting entries.Prepare a December adjusted trial balance. Prepare a classified balance sheet for year ending;December 31, 2014.Prepare in journal form, without explanation, 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: 14% points;The following information is available for Scott;Company;Beginning;inventory 600 units at $5;First purchase 900 units at $6;Second purchase 500 units at $7.25;Assume that Scott;uses a periodic inventory system and that there are 700 units left at the end;of the month. (Round all final answers to the nearest dollar.);Instructions;a. Compute the;cost of goods available for sale.;b. Compute the;value of ending inventory and Cost of Good Sold under the;(1);LIFO method.;(2);FIFO method.;(3) Average-cost;method;Acct220 Page;2 of 9;Question 3: 5% points;Scott?s;supplier Tom Co. has the following transactions related to notes receivable;during the last 2 months of 2014.;Nov. 1 Loaned $20,000 cash to Waterfall Inc. on a 1-year, 12% note.;Dec. 11 Sold goods to Robbie;Inc., receiving a $11,700, 90-day, 8% note.;16 Received;an $12,000, 6-month, 9% note in exchange for Don?s outstanding accounts;receivable.;31 Accrued interest revenue on all notes;receivable.;Instructions;(a) Journalize the transactions for Tom Co.;(b) Record the collection of the Waterfall;note at its maturity in 2015.;Question 4: 9% points;Jerome Company;purchased equipment on July 1, 2011 for $90,000. It is estimated that the;equipment will have a $5,000 salvage value at the end of its 4-year useful;life. It is also estimated that the equipment will produce 100,000 units over;its 4-year life.;Instructions;Answer 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 10,000 units of product;are produced in 2011 and 26,000 units are produced in 2012, what is the book;value of the equipment at December 31, 2012? The company uses the;units-of-activity depreciation method.;3. If the company uses the;double-declining-balance method of depreciation, what is the balance of the;Accumulated Depreciation?Equipment account at December 31, 2013?;Acct220 Page;3 of 9;Question 5: 7% points;Assume that;the payroll records of Jeff Company provided the following information for the;weekly payroll ended November 30, 2014.;Employee;Hours;Rate;Fed Tax;Dues;Earnings Year-to-Date;Flop;44;$45;$362;$9;$111,000;Flim;46;15;97;5;23,200;Flam;40;25;148;5,700;Floozy;42;30;230;7;49,500;Additional;information: All employees are paid overtime at time and a half for hours;worked in excess of 40 per week. The FICA (total social security & medicare) tax rate is 7.65% for;the first $110,100 of each employee's annual earnings. The employer pays;unemployment taxes of 6.2% (5.4% for state and.8% for federal) on the first;$7,000 of each employee's annual earnings.;Instructions;a. Prepare the payroll register for the pay period.;b. Prepare a schedule to show calculation for any payroll taxes.;Multiple;choice questions allocated 1% point each. Make your;selection by recording the letter in the answer box provided.;Question;6: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;7: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 some transactions are recorded differently.;d. All transactions are recorded the same under;IFRS and GAAP.;Question;8:Revenue recognition under IFRS is;a. substantially different from;revenue recognition under GAAP.;b. generally the same as revenue;recognition under GAAP, but with more detailed guidance.;c. generally the same as revenue;recognition under GAAP, but with less detailed guidance.;d. exactly the same as revenue;recognition under GAAP.;Acct220 Page;4 of 9;Question;9: Both IFRS and GAAP;require disclosure about;a. accounting policies followed.;b. judgements that management has made in the;process of applying the entity's accounting policies.;c. the key assumptions and estimation;uncertainty.;d. all of the above.;e. only b & c.;Question;10:The use of fair value to report assets;a. 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 11: Closing;entries are made;a. in order to terminate the business as an;operating entity.;b. so that all assets, liabilities, and owner's;capital accounts will have zero balances when the next accounting period;starts.;c. in order to transfer net income (or loss) and;owner's drawings to the owner's capital account.;d. so that financial statements can be prepared.;Question 12:Alauna Company purchased merchandise from Beth;Company with freight terms of FOB shipping point. The freight costs will be;paid by the;a. seller.;b. buyer.;c. transportation;company.;d. buyer and the;seller.;Question 13:A Sales Returns and Allowances account is not debited if a customer;a. 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 14:Which of the following;statements is incorrect?;a. A major consideration in developing an;accounting system is cost effectiveness.;b. When an accounting system is designed, no;consideration needs to be given to the needs and knowledge of the various;users.;c. The accounting system should be able to;accommodate a variety of users and changing information needs.;d. To be useful, information must be;understandable, relevant, reliable, timely, and accurate.;Acct220 Page;5 of 9;Question;15:Jude Co. is;warehouse custodian and also maintains the accounting record of the inventory;held at the warehouse. An assessment of this situation indicates;a. documentation procedures are violated.;b. independent internal verification is;violated.;c. segregation of duties is violated.;d. establishment of responsibility is violated.;Question 16:Cash;equivalents include each of the following except;a. bank certificates of deposit.;b. money market funds.;c. petty cash.;d. U.S. Treasury bills.;Question 17:Glenda;Company is building a new plant that will take three years to construct. The;construction will be financed in part by funds borrowed during the construction;period. There are significant architect fees, excavation fees, and building;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 the building.;d. The capitalized cost is equal to the contract;price to build the plant less any interest on borrowed funds.;Question 18:Depreciation;is the process of allocating the cost of a plant asset over its service life in;a. an equal and equitable manner.;b. an accelerated and accurate manner.;c. a systematic and rational manner.;d. a conservative market-based manner.;Question 19:Sales taxes collected by a retailer are expenses;a. of the;retailer.;b. of the;customers.;c. of the;government.;d. that are not;recognized by the retailer until they are submitted to the government.;Acct220 Page;6 of 9;Question;20:Foodtown?s Market recorded the following events involving a recent;purchase of merchandise;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 company?s inventory increased by;a. $48,020.;b. $48,265.;c. $48,270.;d. $49,250.;Question 21:A $100 petty cash fund has;cash of $16 and receipts of $81. The journal entry to replenish the account;would include a;a. 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 22:In preparing its bank reconciliation for the;month of April 2013;Cohen, Inc. has available the following information.;Balance per bank statement, 4/30/13 $39,300;NSF check returned with 4/30/13 bank;statement 470;Deposits in transit, 4/30/13 5,000;Outstanding checks, 4/30/13 5,200;Bank service charges for April 30;What;should be the adjusted cash balance at April 30, 2013?;a. $38,630.;b. $38,800.;c. $39,010.;d. $39,100.;Question 23:If a check correctly;written and paid by the bank for $591 is incorrectly recorded on the company?s;books for $519, the appropriate treatment on the bank reconciliation would be;to;a. deduct $72 from the book?s balance.;b. add $72 to the book?s balance.;c. deduct $72 from the bank?s balance.;d. deduct $591 from the book?s balance.;Acct220 Page;7 of 9;Question;24:Alicia Company had net credit sales during the;year of $1,200,000 and cost of goods sold of $720,000. The balance in accounts;receivable at the beginning of the year was $180,000, and the end of the year;it was $120,000. What was the accounts receivable turnover ratio?;a. 5.0;b. 6.7;c. 8.0;d. 10.0;Question 25:The financial statements of MBE Manufacturing;Company report net sales of $400,000 and accounts receivable of $80,000 and;$40,000 at the beginning and end of the year, respectively. What is the average;collection period for accounts receivable in days?;a. 40 days;b. 50 days;c. 54.7 days;d. 80 days;Question 26:Penske;Company purchases a new delivery truck for $60,000. The sales taxes are $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 does;Penske record as the cost of the new truck?;a. $66,050;b. $65,890;c. $64,000;d. $65,600;Question 27:A company;purchased factory equipment on April 1, 2012 for $80,000. It is estimated that;the equipment will have an $10,000 salvage value at the end of its 10-year;useful life. Using the straight-line method of depreciation, the amount to be;recorded as depreciation expense at December 31, 2012 is;a. $8,000.;b. $7,000.;c. $5,250.;d. $6,000.;Question 28:Audrey?s Boutique has total receipts for the;month of $30,660 including sales taxes. If the sales tax rate is 5%, what are;the Boutique?s sales for the month?;a. $29,127;b. $29,200;c. $32,193;d. It cannot be;determined.;Acct220 Page;8 of 9;Question;29:Central Hudson;Electric began operations in 2012 and provides a one year warranty on the;products it sells. They estimate that 10,000 of the 200,000 units sold in 2012;will be returned for repairs and that these repairs will cost $8 per unit. The;cost of repairing 8,000 units presented for service in 2012 was $64,000. Central;Hudson should report;a. 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 contingent liability.;Question 30:Partners Rich and Richer have capital balances in a partnership of;$80,000 and $120,000, respectively. They agree to share profits and losses as;follows;Rich Richer;As salaries $20,000 $24,000;As interest on capital at the beginning of the year 10% 10%;Remaining profits or losses 50% 50%;If income for the year was $60,000, what will be the distribution of;income to Rich?;a. $26,000;b. $34,000;c. $20,000;d. $28,000;Acct220 Page;9 of 9


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