After the bank reconciliation is prepared, the entry to record bank service charges would have a credit to _______________. Question 8 options: Bank Service Charge Expense
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.
uestion 8 (1 point) After the bank reconciliation is prepared, the entry to record bank service charges would have a credit to _______________. Question 8 options: Bank Service Charge Expense Cash Petty Cash Cash Short and Over None of the above Save Question 9 (1 point) Malloy Company estimates uncollectible accounts using the percentage-ofreceivables 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 _______________. Question 9 options: $7,000 $10,000 $13,000 $9,850 None of the above Save Question 10 (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 _______________. Question 10 options: $10,000 $9,000 $9,750 $10,250 None of the above Question 11 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 doubledeclining-depreciation method, the depreciation expense for 2015 is _______________. Question 11 options: $88,000 $72,000 $36,000 $44,000 $40,000 Question 12 (1 point) The result of recording a capital expenditure as a revenue expenditure is an _______________. Question 12 options: 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 Save Question 13 (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 _______________. Question 13 options: $12,000 $6,000 $9,000 None of the above Question 14 (1 point) Which of the following is not an advantage of the corporate form of organization? Question 14 options: continuous existence of the entity limited liability of stockholders government regulation easy transfer of ownership Save Question 15 (1 point) Treasury stock should be shown on the balance sheet as a(n) _______________. Question 15 options: reduction of the corporation’s stockholders’ equity current asset current liability investment asset Save Question 16 (1 point) When the stockholders invest cash in the business, what is the effect on the accounting equation? Question 16 options: Liabilities increase and stockholders’ equity increases. Both assets and liabilities increase. Both assets and stockholders’ equity increase. None of the above Save Question 17 (1 point) The ending balance in retained earnings is shown in the _______________. Question 17 options: income statement statement of retained earnings balance sheet both (b) and (c) both (a) and (c) (a), (b), and (c) Save Question 18 (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 _______________. Question 18 options: 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 Save Question 19 (1 point) If $3,000 has been earned but not yet paid by 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 _______________. Question 19 options: 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 Save Question 20 (1 point) The accrual basis of accounting _______________. Question 20 options: 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 Save Question 21 (1 point) The need for adjusting entries is based on _______________. Question 21 options: the matching principle source documents the cash basis of accounting activity that has already been recorded in the proper accounts Save Question 22 (1 point) Which of the following statements is false regarding the closing process? Question 22 options: 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. Save Question 23 (1 point) Which of the following statements is true regarding the classified balance sheet? Question 23 options: 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. Save Question 24 (1 point) The underlying assumptions of accounting include all the following except _______________. Question 24 options: business entity going concern matching money measurement and periodicity Save Question 25 (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 _______________. Question 25 options: $300,000 $228,000 $252,000 $168,000 None of the above Save Question 26 (1 point) A classified income statement consists of all of the following major sections except _______________. Question 26 options: Operating revenues Cost of goods sold Operating expenses Non-operating revenues and expenses Current assets Save Question 27 (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 _______________. Question 27 options: $240 $200 $1,200 $1,000 $3,600 Save 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 ending inventory using weighted-average is _______________. Question 28 options: $114,750 $157,600 $122,400 $109,650 None of the above Save Question 29 (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 _______________. Question 29 options: $147,200 $160,350 $155,250 $114,000 None of the above Save Question 30 (1 point) During a period of rising prices, which inventory method might be expected to give the highest net income? Question 30 options: Weighted-average FIFO LIFO Specific identification Cannot determine Save Question 31 (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 31 options: $1,794.60 $1,719.60 $1,638.00 $1,713.00 $1,876.20 Save Question 32 (1 point) In a bank reconciliation, deposits in transit should be _______________. Question 32 options: deducted from the balance per books deducted from the balance per bank statement added to the balance per ledger added to the balance per bank statement disregarded in the bank reconciliation Save All Responses
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