Accounting 550 Week 8 final exam latest 2017

Subject: Business / Accounting
Question
Week 8 final exam

1. (TCO A) Listed below are some information, characteristics, and accounting principles and assumptions. Match the term with the appropriate phrase that states its application.

(Points : 30)

Potential Matches:

1 : Implies that a company can divide its economic activities into artificial time periods

2 : Affairs of the business distinguished from those of its owners

3 : Presentation of error-free information with representational faithfulness= Presentation of error-free information with representational faithfulness

4 : Notes as part of necessary information to a fair presentation

5 : Economic activity can be identified with a particular unit of accountability

6 : Earnings process completed and realized or realizable

7 : Money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis

8 : Valuing assets at amounts originally paid for them

9 : Application of the same accounting principles as in the preceding year

10 : Business enterprise assumed to have a long life

Answer

: Consistency characteristic

: Historical cost principle

: Going concern principle

: Periodicity assumption

: Reliability characteristic

: Economic entity assumption

: Monetary unit assumption

: Revenue recognition principle

: Full disclosure principle

: Economic entity assumption

Question 2. 2. (TCO B) Adjusting Entries: Unearned rent at 1/1/1X was $10,300 and at 12/31/1X was $10,000. The records indicate cash receipts from rental sources during 201X amounted to $50,000, all of which was credited to the Unearned Rent Account. You are to prepare the missing adjusting entry. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

Question 3. 3.

(TCO B) Adjusting Entries: Data relating to the balances of various accounts affected by adjusting or closing entries appear below. (The entries which caused the changes in the balances are not given.) You are asked to supply the missing journal entries which would logically account for the changes in the account balances. Interest receivable at 1/1/1X was $5,000. During 201X cash received from debtors for interest on outstanding notes receivable amounted to $8,000. The 201X income statement showed interest revenue in the amount of $10,900. You are to provide the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

Question 4. 4. (TCO B) Adjusting Entries: Accumulated depreciation-equipment at 1/1/1X was $230,000. At 12/31/1X the balance of the account was $480,000. During 201X, one piece of equipment was sold. The equipment had an original cost of $40,000 and was 3/4 depreciated when sold. You are to prepare the missing adjusting entry. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

Question 5. 5. (TCO B) Adjusting Entries: Allowance for doubtful accounts on 1/1/1X was $70,000. The balance in the allowance account on 12/31/1X after making the annual adjusting entry was $70,000 and during 201X bad debts written off amounted to $40,000. You are to provide the missing adjusting entry. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

Question 6. 6. (TCO B) Adjusting Entries: Prepaid rent at 1/1/1X was $30,000. During 201X rent payments of $110,000 were made and charged to “rent expense.” The 201X income statement shows as a general expense the item “rent expense” in the amount of $130,000. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

Question 7. 7. (TCO B) Adjusting Entries: Retained earnings at 1/1/1X were $100,000 and at 12/31/1X it was $350,000. During 201X, cash dividends of $40,000 were paid and a stock dividend of $40,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

Question 8. 8.

(TCO C) Presented below is information related to Square Company.

Retained earnings, December 31, 20X2

$2,750,000

Sales

2,000,000

Selling and administrative expenses

240,000

Hurricane loss (pre-tax) on plant (extraordinary item)

250,000

Cash dividends declared on common stock

33,600

Cost of goods sold

960,000

Gain resulting from computation error on depreciation charge in 20X1 (pre-tax)

2,000,000

Other revenue

80,000

Other expenses

50,000

Instructions: Prepare in good form a multiple-step income statement for the year 2011. Assume a 30% tax rate and that 100,000 shares of common stock were outstanding during the year (Points : 40)

Question 9. 9. (TCO D) The following balance sheet was prepared by the bookkeeper for Stripes Company as of December 31, 201X Stripes Company Balance Sheet as of December 31, 201X is as follows.

Cash

$ 80,000

Accounts payable

$ 75,000

Accounts receivable (net)

52,200

Long-term liabilities

100,000

Inventories

57,000

Stockholders’ equity

218,500

Investments

76,300

Equipment (net)

96,000

Patents

$393,500

$393,500

The following additional information is provided:

(1) Cash includes the cash surrender value of a life insurance policy $12,000 and a bank overdraft of $2,500 has been deducted.

(2) The net accounts receivable balance includes:

(a) accounts receivable debit balances $60,000;

(b) accounts receivable 0; and

(c) allowance for doubtful accounts $3,800.

(3) Inventories do not include goods costing $3,000 shipped out on consignment. Receivables of $3,000 were recorded on these goods.

(4) Investments include investments in common stock, trading $13,000, available-for-sale $48,300, and franchises $15,000.

(5) Equipment costing $5,000 with accumulated depreciation $4,000 is no longer used and is held for sale. Accumulated depreciation on the other equipment is $40,000.

(6) An unrecorded liability was not recorded on the balance sheet of $2,000. Instructions .

Instructions:

Prepare a balance sheet in good form (stockholders’ equity details can be omitted). (Points : 40)

Question 10. 10. (TCO E) Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $2,500 at the end of each year and provides the leaser (John) with an 8% return on its investment. You may use the following 8% interest factors.

9 Periods

10 Periods

11 Periods

Future Value of 1

1.99900

2.15892

2.33164

Present Value of 1

.50025

.46319

.42888

Future Value of

12.48756

14.48656

Ordinary Annuity of 1

Present Value of

6.24689

6.71008

7.13896

Ordinary Annuity of 1

Present Value of

6.74664

7.24689

7.71008

Annuity Due of 1

(a) Assuming the computer has an 11-year life and will have no salvage value at the expiration of the lease, what was the original cost of the copier to John?

(b) What amount would each payment be if the 11 annual payments are to be made at the beginning of each period? (Points : 25)

Question 11. 11. (TCO F) David deposits all receipts and makes all payments by check. The following information is available from the cash records.

MARCH 31

BANK RECONCILIATION

Balance per bank

$26,746

Add: Deposits in transit

2,100

Deduct: Outstanding checks

(3,800)

Balance per books

$25,046

Month of April Results

Per Bank

Per Book

Balance April 30

$27,995

$24,355

April deposits

8,864

14,889

April checks

12,200

16,080

April note collected

3,000

-0-

(not included in April deposits)

April bank service charge

35

-0-

April NSF check of a customer

900

-0-

returned by the bank

(recorded by bank as a charge)

Instructions

Calculate the amount of the April 30

(1) deposits in transit; and

(2) outstanding checks.

Show all your work for potential partial credit. (Points : 25)

Question 12. 12. (TCO G) Tan Company was formed on December 1, 2010. The following information is available from Tan’s inventory record for Product Lotion.

Units

Unit Cost

Total Cost

January 1, 2011 (beginning inventory)

1,600

$18.00

Purchases:

January 1, 2011

2,600

$20.00

$52,000

January 5, 2011

2,400

$21.00

January 25, 2011

1,000

$22.00

February 16, 2011

1,800

$23.00

March 15, 2011

1,600

$18.00

A physical inventory on March 31, 2011, shows 2,400 units on hand.

Instructions:

Prepare schedules to compute the ending inventory at March 31, 2011, under each of the following inventory methods.

(a) FIFO

(b) LIFO

(c) Weighted-average

Show supporting computations in good form. (Points : 40)

Question 13. 13. (TCO H) On January 2, Year 1, Logan Co. purchased a manufacturing machine for $864,000. The machine has an 8­year estimated life and a $144,000 estimated salvage value. Logan expects to manufacture 1,800,000 units over the life of the machine. During Year 2, Logan manufactured 300,000 units.

Instructions:

Calculate the Year 2 depreciation expense using (1) straight line depreciation and (2) double-declining balance depreciation. (Points : 40)

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