University of Maryland University College Final Examination Acct220: Principles of Accounting I

QUESTION

University of Maryland University CollegeFinal ExaminationAcct220: Principles of Accounting IUniversity 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:
Floppy Company’s
December 31, 2014 trial balance is as follows:

Floppy Corporation

Trial Balance

December
31, 2014

Account

Debit

Credit

Cash

$43,500

Accounts
Receivable

53,500

Allowance
for Doubtful Accounts

1,500

Notes
Receivable

30,000

Merchandise
Inventory

55,000

Land

20,000

Building

150,000

Accumulated
Depreciation, Building

$15,000

Equipment

50,000

Accumulated
Depreciation, Equipment

21,000

Goodwill

26,000

Accounts
Payable

25,000

Long
Term Notes Payable

75,000

Common
Stock, $10 par, 2,000 shares authorized & outstanding

20,000

Retained
Earnings

147,000

Sales
Revenue

700,000

Salaries
Expense

150,000

Utilities
Expense

3,500

Cost
of Goods Sold

350,000

Administrative
Expenses

55,000

Sales
Expenses

15,000

_______

Totals

$1,003,000

$1,003,000

Floppy 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.
b.
Long Term Notes Payable is a 5-year, 5% note, that was signed on July 1, 2014.
Interest is payable annually.
c.
Building is depreciated at 3% per year. There is no salvage value.
d.
Equipment is depreciated at 15% year. There is no salvage value.
e.
Floppy 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.
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.
g.
Salaries for the last half of December, payable in January, amount to $5,500.
h.
Floppy estimates that of the Accounts Receivable 5% will not be collectable.
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
Floppy uses the period method and had the following
inventory events during January:

Date

Units
Purchased

Unit
Cost

Date

Units
Sold

Unit
Sales Price

Jan. 1

150

$7.00

Jan. 2

100

$10.00

Jan. 5

225

7.20

Jan. 7

125

10.00

Jan. 10

100

7.50

Jan. 12

75

12.00

Jan. 15

150

7.80

Jan. 17

200

12.50

Jan. 20

200

7.95

Jan. 24

150

15.00

Jan. 25

150

8.00

Jan. 30

75

8.20

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 Flipper’s Supply Co. general
journal entries for the following transactions:

Jan. 1

Accepted Flop’s 120
days, 10% note, as settlement of an outstanding $15,000 account receivable
for goods sold last year

Jan. 15

Purchased $10,000
Equipment from Floppy, signing a 9 month, 12% note

Jan. 25

Loaned Flam Co. $30,000
cash, accepting a 90 days, 10% note

Jan. 31

Prepared accrual
adjusting entry for any interest revenue

Apr. 25

Received payment in
full from Flam Co. for outstanding note & interest

May 1

Received payment in
full from Flop Co. for outstanding note & interest

Oct. 15

Paid Floppy in full

Question 4: 9% points:
Floppy 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 Floppy’s truck assuming that the company uses the
straight-line method for depreciation.

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

c. Compute the
depreciation expense for 2016 for Floppy’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:
Flipper
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:
Flipper
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 Flipper 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 Flipper 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: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
8: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
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Question
9: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

Question
10: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
e. $40,000

Question
11: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

Question
12: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
13: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

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Question
14: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
15: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
16: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
17: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
d. DR Cash 500 and CR Capital stock 500

Question
18: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
19: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.

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Question
20: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
21: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
22: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
23:The
underlying assumptions of accounting includes all the following except:
a. Business entity
b. Going concern
c. Matching
d. Money measurement and periodicity

Question
24: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
c. $252,000
d. $168,000
e. None of the above

Question
25: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

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Question
26: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
27: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

Question
28: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
29: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

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Question
30:The following information: related to the bank
reconciliation of the Flipper Company:

Balance per bank
statement

$1,951.20

Balance per ledger

1,869.60

Deposits in transit

271.20

Outstanding checks

427.80

NSF check

61.20

Service charges

13.80

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
31: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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