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Acct220_Final Exam_Solution




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, underlines & double underlines.;Question 1: 40%points;On December 1, 2014, Flip 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 Flim 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 Flim 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;a. Prepare in journal form, without explanations, the December transactions;using a perpetual inventory system.;b. Prepare in journal form, without explanations, the December adjusting;entries.;c. Prepare a December adjusted trial balance.;d. Prepare a classified balance sheet for year ending December 31, 2014.;e. 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 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;Acct220 Page 2 of 9;Question 3: 5%points;Flip's Supply Co. has the following transactions related to notes receivable during the last;2 months of 2014.;Nov. 1 Loaned $20,000 cash to Flop on a 1-year, 12% note.;Dec. 11 Sold goods to Flim, Inc., receiving a $11,700, 90-day, 8% note.;16 Received an $12,000, 6-month, 9% note in exchange for Flam's outstanding;accounts receivable.;31 Accrued interest revenue on all notes receivable.;Instructions;(a) Journalize the transactions for Flip's Supply Co.;(b) Record the collection of the Flop note at its maturity in 2015.;Question 4: 9%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 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 Flip 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: 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 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: 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 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: 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 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: 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 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, 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 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: 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 25: 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 26: 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 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: 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 29: 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 30: 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;Acct220 Page 9 of 9


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