ACCT 220 Final Exam (UMUC)

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University of Maryland University College
Final Examination
Acct220: Principles of Accounting I
For this exam, omit all general journal entry explanations.
Question 1: 40% points:
On December 1, 2014, Marcus Distributing Company had the following
account balances. No additional owner investments or withdrawals were
made during 2014.
Account

Debit

Account

Credi
t

Cash

$7,20
0

Accu. Depn.,
Equipment

$2,20
0

Accounts
Receivable

4,600

Accounts Payable

4,500

Inventory

12,00
0

Salaries & Wages

Payable

1,000

Supplies

1,200

Owner's Capital

39,30
0

Equipment

22,00
0

Total

Total

$47,0
00

$47,0
00

During December, the company completed the following transactions. All endof-the month adjusting entries were made on November 30, 2014.
Dec.
6

Paid $1,600 for salaries and wages due

employees, of which $600 is for December
and $1,000 is for November salaries and
wages payable.

Dec.
8

Received $1,900 cash from customers in

payment of account (no discount allowed).

Dec.
10

Sold merchandise for cash $6,300. The cost

of the merchandise sold was $4,100.

Dec.
13

Purchased merchandise on account from

Alex Co. $9,000, terms 2/10, 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 of the
merchandise sold was $8,000.

Dec.
20

Paid salaries and wages $1,800.

Dec.
23

Paid Alex Co. in full, less discount.

Dec.
27

Received collections in full, less discounts,

from customers billed on December 18.

December adjusting entry data:

1. Accrued salaries and wages payable $800.
2. Depreciation $200 per month.
3. Supplies on hand $1,500.
Instructions:
1. Prepare in journal form, without explanations, the December
transactions using a perpetual inventory system.
2. Prepare in journal form, without explanations, the December adjusting
entries.
3. Prepare a December adjusted trial balance.
4. Prepare a classified balance sheet for year ending December 31, 2014.
5. Prepare in journal form, without explanation, 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: 14% points:
The following information is available for Scott Company:
Beginning inventory

600 units at $5

First purchase

900 units at $6

Second purchase

500 units at $7.25

Assume that Scott uses a periodic inventory system and that there are 700 units left at the end of the
month. (Round all final answers to the nearest dollar.)
Instructions:
1. Compute the cost of goods available for sale.
2. Compute the value of ending inventory and Cost of Good Sold under the
(1) LIFO method.
(2) FIFO method.
(3) Average-cost method
Question 3: 5% points:
Scotts supplier Tom Co. has the following transactions related to notes receivable during the last 2
months of 2014.

Nov. 1
Dec. 11

Loaned $20,000 cash to Waterfall Inc. on a 1-year, 12% note.

Sold goods to Robbie, Inc., receiving a $11,700, 90-day, 8% note.

16
Received an $12,000, 6-month, 9% note in exchange for Dons outstanding accounts
receivable.
31

Accrued interest revenue on all notes receivable.

Instructions
(a)
Journalize the transactions for Tom Co.
(b)

Record the collection of the Waterfall note at its maturity in 2015.

Question 4: 9% points:
Jerome Company purchased equipment on July 1, 2011 for $90,000. It is estimated that the
equipment will have a $5,000 salvage value at the end of its 4-year useful life. It is also estimated
that the equipment will produce 100,000 units over its 4-year life.
Instructions
Answer 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 in
2012, what is the book value of the equipment at December 31, 2012? The
company uses the units-of-activity depreciation method.
3. If the company uses the double-declining-balance method of depreciation, what
is the balance of the Accumulated DepreciationEquipment account at
December 31, 2013?
Question 5: 7% points:
Assume that the payroll records of Jeff Company provided the following information for the weekly
payroll ended November 30, 2014.

Employee

Hour
s

Rat
e

Fe
d
Tax

Due
s

Earning
s Yearto-Date

Flop

44

$45

$3
62

$9

$111,0
00

Flim

46

15

97

23,200

Flam

40

25

14
8

Floozy

42

30

23
0

5,700
7

49,500

Additional information: All employees are paid overtime at time and a half for hours worked in excess
of 40 per week. The FICA (total social security & medicare) tax rate is 7.65% for the first $110,100 of
each employee's annual earnings. The employer pays unemployment taxes of 6.2% (5.4% for state
and .8% for federal) on the first $7,000 of each employee's annual earnings.

Instructions:
1. Prepare the payroll register for the pay period.
2. Prepare a schedule to show calculation for any payroll taxes.
Multiple choice questions allocated 1% point each. Make your selection by
recording the letter in the answer box provided.
Question 6: Which of the following are the same under both GAAP and IFRS?
1. The journal.
2. The ledger.
3. The chart of accounts.
4. All of the above.
5. Only a & c.
Question 7: Which of the following is true?
1. Transaction analysis is completely different under IFRS and GAAP.
2. Most transactions are recorded differently under IFRS and GAAP.
3. Transaction analysis is the same under IFRS and GAAP, but some transactions are
recorded differently.
4. All transactions are recorded the same under IFRS and GAAP.
Question 8: Revenue recognition under IFRS is
1. substantially different from revenue recognition under GAAP.
2. generally the same as revenue recognition under GAAP, but with more detailed
guidance.
3. generally the same as revenue recognition under GAAP, but with less detailed
guidance.
4. exactly the same as revenue recognition under GAAP.
Question 9: Both IFRS and GAAP require disclosure about
1. accounting policies followed.
2. judgements that management has made in the process of applying the entity's
accounting policies.
3. the key assumptions and estimation uncertainty.
4. all of the above.
5. only b & c.
Question 10: The use of fair value to report assets
1. is not allowed under GAAP or IFRS.
2. is required by GAAP and IFRS.
3. is increasing under GAAP and IFRS, but GAAP has adopted it more broadly.

4. is increasing under GAAP and IFRS, but IFRS has adopted it more broadly.
Question 11:
Closing entries are made
1. in order to terminate the business as an operating entity.
2. so that all assets, liabilities, and owner's capital accounts will have zero balances
when the next accounting period starts.
3. in order to transfer net income (or loss) and owner's drawings to the owner's
capital account.
4. so that financial statements can be prepared.
Question 12: Alauna Company purchased merchandise from Beth Company with freight terms of
FOB shipping point. The freight costs will be paid by the
1. seller.
2. buyer.
3. transportation company.
4. buyer and the seller.
Question 13: A Sales Returns and Allowances account is notdebited if a customer
1. returns defective merchandise.
2. receives a credit for merchandise of inferior quality.
3. utilizes a prompt payment incentive.
4. returns goods that are not in accordance with specifications.
Question 14: Which of the following statements is incorrect?
1. A major consideration in developing an accounting system is cost effectiveness.
2. When an accounting system is designed, no consideration needs to be given to
the needs and knowledge of the various users.
3. The accounting system should be able to accommodate a variety of users and
changing information needs.
4. To be useful, information must be understandable, relevant, reliable, timely, and
accurate.
Question 15: Jude Co. is warehouse custodian and also maintains the accounting record of the
inventory held at the warehouse. An assessment of this situation indicates
1. documentation procedures are violated.
2. independent internal verification is violated.
3. segregation of duties is violated.
4. establishment of responsibility is violated.
Question 16: Cash equivalents include each of the following except
1. bank certificates of deposit.
2. money market funds.

3. petty cash.
4. U.S. Treasury bills.
Question 17: Glenda Company is building a new plant that will take three years to
construct. The construction will be financed in part by funds borrowed during the
construction period. There are significant architect fees, excavation fees, and building
permit fees. Which of the following statements is true?
1. Excavation fees are capitalized but building permit fees are not.
2. Architect fees are capitalized but building permit fees are not.
3. Interest is capitalized during the construction as part of the cost of the building.
4. The capitalized cost is equal to the contract price to build the plant less any
interest on borrowed funds.
Question 18: Depreciation is the process of allocating the cost of a plant asset over its
service life in
1. an equal and equitable manner.
2. an accelerated and accurate manner.
3. a systematic and rational manner.
4. a conservative market-based manner.
Question 19: Sales taxes collected by a retailer are expenses
1. of the retailer.
2. of the customers.
3. of the government.
4. that are not recognized by the retailer until they are submitted to the
government.
Question 20: Foodtowns Market recorded the following events involving a recent purchase of
merchandise:
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 companys inventory increased by
1. $48,020.
2. $48,265.
3. $48,270.
4. $49,250.

Question 21: A $100 petty cash fund has cash of $16 and receipts of $81. The journal
entry to replenish the account would include a
1. debit to Cash for $81.
2. credit to Petty Cash for $84.
3. debit to Cash Over and Short for $3.
4. credit to Cash for $81.
Question 22: In preparing its bank reconciliation for the month of April 2013,
Cohen, Inc. has available the following information.
Balance per bank statement, 4/30/13
NSF check returned with 4/30/13 bank statement
Deposits in transit, 4/30/13
Outstanding checks, 4/30/13

$39,300
470
5,000
5,200

Bank service charges for April

30

What should be the adjusted cash balance at April 30, 2013?

1. $38,630.
2. $38,800.
3. $39,010.
4. $39,100.
Question 23: If a check correctly written and paid by the bank for $591 is incorrectly
recorded on the companys books for $519, the appropriate treatment on the bank
reconciliation would be to
1. deduct $72 from the books balance.
2. add $72 to the books balance.
3. deduct $72 from the banks balance.
4. deduct $591 from the books balance.
Question 24: Alicia Company had net credit sales during the year of $1,200,000 and
cost of goods sold of $720,000. The balance in accounts receivable at the beginning of
the year was $180,000, and the end of the year it was $120,000. What was the
accounts receivable turnover ratio?
5. 5.0
6. 6.7
7. 8.0
8. 10.0

Question 25: The financial statements of MBE Manufacturing Company report net sales of
$400,000 and accounts receivable of $80,000 and $40,000 at the beginning and end of the year,
respectively. What is the average collection period for accounts receivable in days?
1. 40 days
2. 50 days
3. 54.7 days
4. 80 days
Question 26: Penske Company purchases a new delivery truck for $60,000. The sales
taxes are $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
does Penske record as the cost of the new truck?
1. $66,050
2. $65,890
3. $64,000
4. $65,600
Question 27: A company purchased factory equipment on April 1, 2012 for $80,000. It
is estimated that the equipment will have an $10,000 salvage value at the end of its 10year useful life. Using the straight-line method of depreciation, the amount to be
recorded as depreciation expense at December 31, 2012 is
1. $8,000.
2. $7,000.
3. $5,250.
4. $6,000.
Question 28: Audreys Boutique has total receipts for the month of $30,660 including sales taxes.
If the sales tax rate is 5%, what are the Boutiques sales for the month?
1. $29,127
2. $29,200
3. $32,193
4. It cannot be determined.
Question 29: Central Hudson Electric began operations in 2012 and provides a one year
warranty on the products it sells. They estimate that 10,000 of the 200,000 units sold in 2012 will be
returned for repairs and that these repairs will cost $8 per unit. The cost of repairing 8,000 units
presented for service in 2012 was $64,000. Central Hudson should report
2. warranty expense of $16,000 for 2012.
3. warranty expense of $80,000 for 2012.
4. warranty liability of $80,000 on December 31, 2012.
5. no warranty obligation on December 31, 2012, since this is only a contingent
liability.

Question 30: Partners Rich and Richer have capital balances in a partnership of
$80,000 and $120,000, respectively. They agree to share profits and losses as follows:
Rich
Richer
As salaries
$20,000
$24,000
As 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 to Rich?
1. $26,000
2. $34,000
3. $20,000
4. $28,000