ACCT 220 Final Exam NEW Spring 2016

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ACCT 220 Final Exam  NEW Spring 2016

Question 1 (40 points)
XYZ Company's December 31, 2015 trial balance is as follows:
XYZ Company
Trial Balance
December 31, 2015
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 and 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
XYZ is a small company and records adjusting entries and closing entries only at fiscal (calendar) year end. Correcting and adjusting entries have not been recorded.
Additional Information:
5. Notes Receivable is a 3-month, 6% note accepted on November 1, 2015.
6. Long-Term Notes Payable is a 5-year, 5% note that was signed on July 1, 2015. Interest is payable annually.
7. Building is depreciated at 3% per year. There is no salvage value.
8. Equipment is depreciated at 15% per year. There is no salvage value.
9. XYZ discovered, on December 30, 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.
10. 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.
11. Salaries for the last half of December, payable in January, amount to $5,500.
12. XYZ estimates that of the Accounts Receivable, 5% will not be collectable.
Required:
1. Prepare in journal form, any required correcting entries.
2. Prepare in journal form, all end-of-the-period adjusting entries.
3. Prepare a December adjusted trial balance.
4. Prepare a classified balance sheet for the year ended December 31, 2015.
5. Prepare in journal form the closing entries for the year ended December 31, 2015.

Question 2 (8 points)
XYZ Company uses the periodic inventory 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: The January 1 amounts were the beginning inventory and unit value.
(Round all total dollar values to the nearest dollar. Round all unit values to the nearest penny.)
Required:
1. Calculate the cost of goods available for sale.
2. Calculate the dollar value of sales.
3. Calculate the value of Ending Inventory and Cost of Goods Sold under the following independent assumptions:
(1) LIFO method
(2) FIFO method
(3) Average-cost method
Question 3 (7 points)
Required: Prepare Acme Supply Company's general journal entries for the following transactions:
Jan. 1
Accepted RunTimeCo's 120-day, 10% note as settlement of an outstanding $15,000 account receivable for goods sold last year.
Jan. 15
Purchased $10,000 Equipment from XYZ, signing a 9-month, 12% note.
Jan. 15
Loaned Warner Co. $30,000 cash, accepting a 90-day, 10% note.
Jan. 31
Prepared accrual adjusting entry for any interest revenue.
Apr. 15
Received payment in full from Warner Co. for outstanding note and interest.
May 1
Received payment in full from RunTimeCo for the outstanding note and interest.
Oct. 15
Paid XYZ in full.
Question 4 (9 points)
XYZ Company purchased a refrigerated delivery truck for $65,000 on January 1, 2015. 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. The fiscal year ends December 31.
1. Prepare the depreciation table for XYZ's truck, assuming that the company uses the straight--=]
2. line method for depreciation.
3. Prepare the depreciation table for XYZ's truck, assuming that the company uses the double-declining-balance depreciation method.
4. Compute the depreciation expense for 2015 for XYZ's truck, assuming the truck has an expected life of 200,000 miles and during 2015 the truck was driven 24,540 miles. Round your depreciation expense per mile to three decimal places.
Question 5 (7 points)
Acme Company has a January 15 mid-month gross salaries expense of $25,000. All salaries are subject to FICA Social Security (6.2%), FICA Medicare (1.45%), state income tax (5%) and federal income tax (15%) withholdings. Additionally, all salaries are subject to employer taxes to include FUTA (0.8%) and SUTA (5.4%) taxes. (Round all calculations to the nearest penny.)
Required:
1. Prepare the general journal entry to record the employer's payroll liability.
2. Prepare the general journal entry to record the employer's payroll-tax liability.
3. Prepare the general journal entry to liquidate (pay) the liabilities accrued in parts (a) and (b) on January 22.
Question 6 (4 points)
At the end of the fiscal 2015 year, Acme Company has the following information: Credit Sales, $2,500,000; Sales Returns and Allowances, $25,000; Accounts Receivable, $200,000; and Allowance for Doubtful Accounts with a Debit, $1,500.
Required:
1. Prepare the general journal entry to record the end-of-the-year adjusting entry if Acme uses 0.5% of Net Credit Sales as the basis for determining Bad-Debt Expense.
2. Prepare the general journal entry to record the end-of-the-year adjusting entry if Acme uses 5% of Accounts Receivable as the basis for determining Bad-Debt Expense.
Bottom of Form
Question 7 (1 point)
After the bank reconciliation is prepared, the entry to record bank service charges would have a credit to _______________.
Bank Service Charge Expense
Cash
Petty Cash
Cash Short and Over
None of the above
Question 8 (1 point)
Malloy Company estimates uncollectible accounts using the percentage-of-receivables method and expects that 5 percent of outstanding receivables will be uncollectible for 2015. 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 2015 will be _______________.
$7,000
$10,000
$13,000
$9,850
None of the above
Question 9 (1 point)
Malloy Company issued its own $10,000, 90-day, non-interest-bearing note to a bank. The only payment Malloy will ever make to the bank will be for $10,000 at the maturity date of the loan as the bank discounts the note at 10 percent. The proceeds to Malloy are _______________.
$10,000
$9,000
$9,750
$10,250
None of the above

Question 10 (1 point)
On 2015 July 1, Malloy 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 Malloy uses the double-declining-depreciation method, the depreciation expense for 2015 is _______________.
$88,000
$72,000
$36,000
$44,000
$40,000
Question 11 (1 point)
The result of recording a capital expenditure as a revenue expenditure is an _______________.
overstatement of current year's expense
understatement of current year's expense
understatement of subsequent year's net income
overstatement of current year's net income
None of the above
Question 12 (1 point)
Cole Inc., a new company, purchases a two-year insurance policy for $12,000. Six months later, the correct balance in the prepaid insurance account would be _______________.
$12,000
$6,000
$9,000
None of the above



Question 13 (1 point)
Which of the following is not an advantage of the corporate form of organization?
continuous existence of the entity
limited liability of stockholders
government regulation
easy transfer of ownership
Question 14 (1 point)
Treasury stock should be shown on the balance sheet as a(n) _______________.
reduction of the corporation's stockholders' equity
current asset
current liability
investment asset
Question 15 (1 point)
When the stockholders invest cash in the business, what is the effect on the accounting equation?
Liabilities increase and stockholders' equity increases.
Both assets and liabilities increase.
Both assets and stockholders' equity increase.
None of the above
Question 16 (1 point)
The ending balance in retained earnings is shown in the _______________.
income statement
statement of retained earnings
balance sheet
both (b) and (c)
both (a) and (c)
(a), (b), and (c)
Question 17 (1 point)
A cash dividend of $500 was declared and paid to stockholders simultaneously. The correct journal entry to record the declaration and payment simultaneously is _______________.
debit Capital Stock 500 and credit Cash 500
debit Cash 500 and credit Dividends 500
debit Dividends 500 and credit Cash 500
debit Cash 500 and credit Capital Stock 500
Question 18 (1 point)
If $3,000 has been earned but not yet paid to a company's workers since the last payday within an accounting period, the necessary adjusting entry at the end of that accounting period would be _______________.
debit an expense and credit a liability
debit an expense and credit an asset
debit a liability and credit an asset
debit a liability and credit an expense
Question 19 (1 point)
The accrual basis of accounting _______________.
recognizes revenues only when cash is received
is used by almost all companies
recognizes expenses only when cash is paid out
recognizes revenues when sales are made or services are performed, and recognizes expenses only when cash is paid out



Question 20 (1 point)
The need for adjusting entries is based on _______________.
the matching principle
source documents
the cash basis of accounting
activity that has already been recorded in the proper accounts
Question 21 (1 point)
Which of the following statements is false regarding the closing process?
The Dividends account is closed to Income Summary.
The closing of expense accounts results in a debit to Income Summary.
The closing of revenues results in a credit to Income Summary.
The Income Summary account is closed to the Retained Earnings account.
Question 22 (1 point)
Which of the following statements is true regarding the classified balance sheet?
Current assets include cash, accounts receivable, and equipment.
Plant, property, and equipment is one category of long-term assets.
Current liabilities include accounts payable, salaries payable, and notes receivable.
Stockholders' equity is subdivided into current and long-term categories.
Question 23 (1 point)
The underlying assumptions of accounting include all the following except _______________.
business entity
going concern
matching
money measurement and periodicity

Question 24 (1 point)
Malloy Company began the accounting period with $60,000 of merchandise, and the 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 Malloy Company for the period is _______________.
$300,000
$228,000
$252,000
$168,000
None of the above
Question 25 (1 point)
A classified income statement consists of all of the following major sections except _______________.
Operating revenues
Cost of goods sold
Operating expenses
Non-operating revenues and expenses
Current assets
Question 26 (1 point)
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 _______________.
$240
$200
$1,200
$1,000
$3,600


Question 27 (1 point)
Malloy 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 _______________.
$114,750
$157,600
$122,400
$109,650
None of the above
Question 28 (1 point)
Malloy 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 _______________.
$147,200
$160,350
$155,250
$114,000
None of the above
Question 29 (1 point)
During a period of rising prices, which inventory method might be expected to give the highest net income?
Weighted-average
FIFO
LIFO
Specific identification
Cannot determine

Question 30 (1 point)
The following information is related to the bank reconciliation of the Acme 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 _______________.
Question 30 options:
$1,794.60
$1,719.60
$1,638.00
$1,713.00
$1,876.20
Question 31 (1 point)
In a bank reconciliation, deposits in transit should be _______________.
Question 31 options:
deducted from the balance per books