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UMUC ACCT220 Final exam 2014




Question;UMUC;Final Examination;Acct220: Principles of Accounting I;For this exam;omit all general journal entry explanations.;Ensure to;include correct dollar signs, underlines & double underlines.;Question 1: 15% points;The account balances appearing;on the trial balance (below) were taken from the general ledger of Flop's Copy;Shop at September 30, 2012.;Additional information for the;month of September which has not yet been recorded in the accounts is as;follows;(a) A physical count of supplies indicates $400;on hand at September 30.;(b) The amount of insurance that expired in the;month of September was $300.;(c) Depreciation on equipment for September was;$500.;(d) Rent owed on the copy shop for the month of September;was $400 but will not be paid until July.;Flop?s Copy Shop;Trial Balance;For the Month Ended September 30, 2012;Account Titles;Debit;Credit;Cash;$1,000;Supplies;1,100;Prepaid Insurance;2,200;Equipment;24,000;Accum. Depreciation?;Equipment;$4,500;Accounts Payable;2,400;Notes Payable;4,000;Flop?s Capital;15,300;Flop?s Drawings;2,400;Service Revenue;4,900;Utilities Expense;400;Totals;$31,100;$31,100;Instructions;Prepare in journal form, without;explanations, the end of month adjusting entries for Flop's Copy Shop for the month of September.Prepare a partial adjusted trial;balance for the accounts provided.Prepare in journal form, without;explanations, the end of month closing entries for Flop's Copy Shop for the month of September.;Acct220 Page;1 of 9;Question 2: 15% points;The following information is available for Flip;Company;Beginning;inventory 600 units at $5;First purchase 900 units at $6;Second purchase 500 units at $7.25;Assume that Flip 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;Question 3: 15% points;The following items;were taken from the post adjusted trial balance of Flap Company. (All balances;are normal.);Mortgage;payable $ 1,443 Accumulated;depreciation 3,655;Prepaid expenses 880 Accounts;payable 1,444;Equipment 11,000 Notes payable after 2016 1,200;Long-term investments 1,100 Flap?s capital 10,480;Short-term investments 1,696 Accounts receivable 2,690;Notes payable in 2015 1,000 Inventories 2,100;Cash 1,756 Service Revenue 9,000;Rent;Expense 1,000 Wages Expense 5,000;Utilities;Expense 1,000;Instructions;Prepare;a classified balance sheet in good form as of December 31, 2014.;Acct220 Page;2 of 9;Question 4: 10% points;Prepare;journal entries to record the following transactions entered into by Flip;Company;2012;June 1 Accepted;a $10,000, 12%, 1-year note from Flop as full payment on her account.;Nov. 1 Sold;merchandise on account to Flap, Inc. for $12,000, terms 2/10, n/30.;Nov. 5 Flap;Inc. returned merchandise worth $500.;Nov. 9 Received;payment in full from Flap, Inc.;Dec. 31 Accrued;interest on Flop's note.;2013;June 1 Flop;honored her promissory note by sending the face amount plus interest. No interest;has been accrued in 2013;Question 5: 10% points;Flip 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 5-year useful;life. It is also estimated that the equipment will produce 100,000 units over;its 5-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 14,000 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 6: 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 of 5.4% 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 Flip?s total salary during the year.;(b) Prepare;a journal entry summarizing the employer payroll tax expense on Flip?s salary;for the year.;(c) Determine;the cost of employing Flip for the year.;Multiple;choice questions allocated 1% point each. Make your;selection by recording the letter in the answer box provided.;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 some transactions are recorded differently.;d. All transactions are recorded the same under;IFRS and GAAP.;Question;9: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;10: 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;11: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 12: 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 13:Flip Company purchased merchandise from Flop;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 14: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 15: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;16:Flip 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 17: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 18:Flip 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 19: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 20: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;21:Flip?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 22: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 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 $39,300;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 24: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;25:Flip 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 26:The financial statements of Flip 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 27:Flip 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 Flip;record as the cost of the new truck?;a. $66,050;b. $65,890;c. $64,000;d. $65,600;Question 28: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 29:Flip's Boutique has total receipts for the month;of $30,660 including sales taxes. If the sales tax rate is 5%, what are Flip'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;30:Flip 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. Flip 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 31:Partners Flip and Flop have capital balances in a partnership of;$80,000 and $120,000, respectively. They agree to share profits and losses as;follows;Flip Flop;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 Flip?;a. $26,000;b. $34,000;c. $20,000;d. $28,000


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