accounting-Acct220: Principles of Accounting I

QUESTION

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, 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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