Acct220_Final Exam_Solution

| July 29, 2018

University of Maryland University CollegeFinal ExaminationAcct220: Principles of Accounting IFor 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 accountbalances. No additional owner investments or withdrawals were made during 2014.Account Debit Account CreditCash $7,200 Accu. Depn., Equipment $2,200Accounts Receivable 4,600 Accounts Payable 4,500Inventory 12,000 Salaries & Wages Payable 1,000Supplies 1,200 Owner’s Capital 39,300Equipment 22,000 Total $47,000Total $47,000During December, the company completed the following transactions. All end-of-themonth adjusting entries were made on November 30, 2014.Dec. 6 Paid $1,600 for salaries and wages due employees, of which $600 isfor December and $1,000 is for November salaries and wagespayable.Dec. 8 Received $1,900 cash from customers in payment of account (nodiscount allowed).Dec. 10 Sold merchandise for cash $6,300. The cost of the merchandise soldwas $4,100.Dec. 13 Purchased merchandise on account from Flim Co. $9,000, terms2/10, 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 ofthe 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 onDecember 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 9Instructions:a. Prepare in journal form, without explanations, the December transactionsusing a perpetual inventory system.b. Prepare in journal form, without explanations, the December adjustingentries.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 yearended December 31, 2014.NOTE: Students are encouraged to prepare their own T-accounts, on a separatescratch sheet of paper, and track from the beginning balance thru all journaltransactions to ending balances for all accounts used in this problem. Do not turn inyour separate scratch sheet of paper – those are student personal working papersand 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 $5First purchase 900 units at $6Second purchase 500 units at $7.25Assume that Flip uses a periodic inventory system and that there are 700 units left at theend 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 methodAcct220 Page 2 of 9Question 3: 5%points:Flip’s Supply Co. has the following transactions related to notes receivable during the last2 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 outstandingaccounts 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 theequipment will have a $5,000 salvage value at the end of its 4-year useful life. It is alsoestimated that the equipment will produce 100,000 units over its 4-year life.InstructionsAnswer 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 in2012, what is the book value of the equipment at December 31, 2012? The companyuses the units-of-activity depreciation method.3. If the company uses the double-declining-balance method of depreciation, what is thebalance of the Accumulated Depreciation—Equipment account at December 31,2013?Acct220 Page 3 of 9Question 5: 7%points:Assume that the payroll records of Flip Company provided the following information forthe weekly payroll ended November 30, 2014.Employee Hours RateFedTaxDuesEarningsYear-to-DateFlop 44 $45 $362 $9 $111,000Flim 46 15 97 5 23,200Flam 40 25 148 5,700Floozy 42 30 230 7 49,500Additional information: All employees are paid overtime at time and a half for hoursworked in excess of 40 per week. The FICA (total social security & medicare) tax rate is7.65% for the first $110,100 of each employee’s annual earnings. The employer paysunemployment taxes of 6.2% (5.4% for state and .8% for federal) on the first $7,000 ofeach 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 byrecording 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 sometransactions are recorded differently.d. All transactions are recorded the same under IFRS and GAAP.Question 8: Revenue recognition under IFRS isa. substantially different from revenue recognition under GAAP.b. generally the same as revenue recognition under GAAP, but with moredetailed guidance.c. generally the same as revenue recognition under GAAP, but with less detailedguidance.d. exactly the same as revenue recognition under GAAP.Acct220 Page 4 of 9Question 9: Both IFRS and GAAP require disclosure abouta. accounting policies followed.b. judgements that management has made in the process of applying the entity’saccounting 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 assetsa. 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 madea. in order to terminate the business as an operating entity.b. so that all assets, liabilities, and owner’s capital accounts will have zerobalances when the next accounting period starts.c. in order to transfer net income (or loss) and owner’s drawings to the owner’scapital account.d. so that financial statements can be prepared.Question 12: Flip Company purchased merchandise from Flop Company with freightterms of FOB shipping point. The freight costs will be paid by thea. seller.b. buyer.c. transportation company.d. buyer and the seller.Question 13: A Sales Returns and Allowances account is not debited if a customera. 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 costeffectiveness.b. When an accounting system is designed, no consideration needs to be given tothe needs and knowledge of the various users.c. The accounting system should be able to accommodate a variety of users andchanging information needs.d. To be useful, information must be understandable, relevant, reliable, timely,and accurate.Acct220 Page 5 of 9Question 15: Flip is warehouse custodian and also maintains the accounting record of theinventory held at the warehouse. An assessment of this situation indicatesa. 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 excepta. 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 toconstruct. The construction will be financed in part by funds borrowed during theconstruction period. There are significant architect fees, excavation fees, andbuilding 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 thebuilding.d. The capitalized cost is equal to the contract price to build the plant less anyinterest on borrowed funds.Question 18: Depreciation is the process of allocating the cost of a plant asset over itsservice life ina. 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 expensesa. of the retailer.b. of the customers.c. of the government.d. that are not recognized by the retailer until they are submitted to thegovernment.Acct220 Page 6 of 9Question 20: Flip’s Market recorded the following events involving a recent purchase ofmerchandise: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 bya. $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 journalentry to replenish the account would include aa. 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 $39,300NSF check returned with 4/30/13 bank statement 470Deposits in transit, 4/30/13 5,000Outstanding checks, 4/30/13 5,200Bank service charges for April 30What 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 incorrectlyrecorded on the company’s books for $519, the appropriate treatment on the bankreconciliation would be toa. 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 9Question 24: Flip Company had net credit sales during the year of $1,200,000 and costof goods sold of $720,000. The balance in accounts receivable at the beginning of theyear was $180,000, and the end of the year it was $120,000. What was the accountsreceivable turnover ratio?a. 5.0b. 6.7c. 8.0d. 10.0Question 25: The financial statements of Flip Manufacturing Company report net salesof $400,000 and accounts receivable of $80,000 and $40,000 at the beginning andend of the year, respectively. What is the average collection period for accountsreceivable in days?a. 40 daysb. 50 daysc. 54.7 daysd. 80 daysQuestion 26: Flip Company purchases a new delivery truck for $60,000. The sales taxesare $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 doesFlip record as the cost of the new truck?a. $66,050b. $65,890c. $64,000d. $65,600Question 27: A company purchased factory equipment on April 1, 2012 for $80,000. It isestimated that the equipment will have an $10,000 salvage value at the end of its10-year useful life. Using the straight-line method of depreciation, the amount tobe recorded as depreciation expense at December 31, 2012 isa. $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 salestaxes. If the sales tax rate is 5%, what are Flip’s sales for the month?a. $29,127b. $29,200c. $32,193d. It cannot be determined.Acct220 Page 8 of 9Question 29: Flip Electric began operations in 2012 and provides a one year warranty onthe products it sells. They estimate that 10,000 of the 200,000 units sold in 2012 will bereturned for repairs and that these repairs will cost $8 per unit. The cost of repairing8,000 units presented for service in 2012 was $64,000. Flip should reporta. 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 contingentliability.Question 30: Partners Flip and Flop have capital balances in a partnership of $80,000and $120,000, respectively. They agree to share profits and losses as follows:Flip FlopAs salaries $20,000 $24,000As 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 toFlip?a. $26,000b. $34,000c. $20,000d. $28,000Acct220 Page 9 of 9

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