Accounting 2401 Final Exam Study Guide

Accounting 2401 Final Exam Study Guide ACCOUNTING 2401 FINAL EXAM STUDY GUIDE   Accounting 2401 Final Exam Study Guide Multiple Choice (2.5 points each) 1. During 2014, Parker Enterprises generated revenues of $90,000. The company’s expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000 and a loss on the sale of equipment of $3,000. Parker’s gross profit is a. $24,000. b. $27,000. c. $45,000. d. $90,000. 2. During 2014, Parker Enterprises generated revenues of $90,000. The company’s expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000 and a loss on the sale of equipment of $3,000. Yoder’s income from operations is a. $18,000. b. $27,000. c. $45,000. d. $90,000. 3. During 2014, Parker Enterprises generated revenues of $90,000. The company’s expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000 and a loss on the sale of equipment of $3,000. Yoder’s net income is a. $24,000. b. $27,000. c. $45,000. d. $90,000. 4. Dawson’s Fashions sold merchandise for $40,000 cash during the month of July. Returns that month totaled $1,000. If the company’s gross profit rate is 40%, Murray’s will report monthly net sales revenue and cost of goods sold of a. $39,000 and $23,400. b. $39,000 and $24,000. c. $40,000 and $23,400. d. $40,000 and $24,000. 5. During August, 2014, Baxter’s Supply Store generated revenues of $60,000. The company’s expenses were as follows: cost of goods sold of $36,000 and operating expenses of $4,000. The company also had rent revenue of $1,000 and a gain on the sale of a delivery truck of $2,000. Baxter’s gross profit for August, 2014 is a. $20,000. b. $21,000. c. $23,000. d. $24,000. 6. Goldblum Company has the following account balances: Purchases $96,000 Sales Returns and Allowances 12,800 Purchase Discounts 8,000 Freight-In 6,000 Delivery Expense 10,000 The cost of goods purchased for the period is a. $80,800. b. $88,000. c. $94,000. d. $104,000. 7. Delmar Company had beginning inventory of $90,000, ending inventory of $110,000, cost of goods sold of $600,000, and sales of $960,000. Delmar's days in inventory is: a. 38.0 days. b. 54.3 days. c. 60.8 days. d. 67.5 days. 8. During July, the following purchases and sales were made by Big Dan Company. There was no beginning inventory. Big Dan Company uses a perpetual inventory system. Purchases Sales July 3 40 units @ $12 July 13 50 units 11 40 units @ $13 22 20 units 20 20 units @ $15 Under the FIFO method, the cost of goods sold for each sale is: July 13 July 22 a. $600 $240 b. 610 260 c. 650 260 d. 750 300 9. Priscilla has the following inventory information. July 1 Beginning Inventory20 units at $19 $ 380 7 Purchases 70 units at $20 1,400 22Purchases 10 units at $23 230 $2,010 A physical count of merchandise inventory on July 31 reveals that there are 35 units on hand. Using the average-cost method, the value of ending inventory is a. $680. b. $704. c. $723. d. $730. 10. Beginning inventory plus the cost of goods purchased equals a. cost of goods sold. b. cost of goods available for sale. c. net purchases. d. total goods purchased. 11. Cost of goods sold is computed from the following equation: a. beginning inventory – cost of goods purchased + ending inventory. b. sales – cost of goods purchased + beginning inventory – ending inventory. c. sales + gross profit – ending inventory + beginning inventory. d. beginning inventory + cost of goods purchased – ending inventory. 12. A subsidiary ledger is a. used in place of the general ledger if the general ledger is destroyed or stolen. b. a group of accounts used by branches and subsidiaries of a corporate business. c. a group of accounts with a common characteristic that provides detailed information about a control account in the general ledger. d. used to post excess transactions if a general ledger account becomes full during an accounting period. 13. A petty cash fund of $100 is replenished when the fund contains $4 in cash and receipts for $93. The entry to replenish the fund would a. credit Cash Over and Short for $3. b. credit Miscellaneous Revenue for $3. c. debit Cash Over and Short for $3. d. debit Miscellaneous Expense for $3. 14. In preparing its bank reconciliation for the month of April 2014, Delano, Inc. has available the following information. Balance per bank statement, 4/30/14 $78,600 NSF check returned with 4/30/14 bank statement 940 Deposits in transit, 4/30/14 10,000 Outstanding checks, 4/30/14 10,400 Bank service charges for April 60 What should be the adjusted cash balance at April 30, 2014? a. $77,260. b. $77,600. c. $78,020. d. $78,200. 15. The cash account shows a balance of $90,000 before reconciliation. The bank statement does not include a deposit of $5,000 made on the last day of the month. The bank statement shows a collection by the bank of $2,400 and a customer’s check for $640 was returned because it was NSF. A customer’s check for $900 was recorded on the books as $1,080, and a check written for $138 was recorded as $192. The correct balance in the cash account was a. $91,580. b. $91,634. c. $92,400. d. $96,634. 16. Drago Company purchased equipment on January 1, 2014, at a total invoice cost of $1,200,000. The equipment has an estimated salvage value of $30,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2015, if the straight-line method of depreciation is used? a. $240,000 b. $480,000 c. $234,000 d. $468,000 17. On January 1, a machine with a useful life of five years and a residual value of $30,000 was purchased for $90,000. What is the depreciation expense for year 2 under the double-declining- balance method of depreciation? a. $21,600 b. $36,000 c. $28,800 d. $17,280 18. A machine with a cost of $480,000 has an estimated salvage value of $30,000 and an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours? a. $150,000 b. $90,000 c. $130,000 d. $160,000 19. Dailey Company does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $48,150. If the sales tax rate is 7%, what amount must be remitted to the state for February's sales taxes? a. $3,371 b. $3,150 c. $4,815 d. It cannot be determined. 20. Kenny Corsig, an employee of Fenwick Company, has gross earnings for the month of October of $3,000. FICA taxes are 7.65% of gross earnings, federal income taxes amount to $476 for the month, state income taxes are 2% of gross earnings, and authorizes voluntary deductions of $8 per month to the United Way. What is the net pay for Kenny? a. $2,295 b. $2,227 c. $2,235 d. $2,287 21. L sells 6,000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 120 units for a total cost of $6,000. What amount should L accrue on December 31 for estimated warranty costs? a. $9,000 b. $6,000 c. $3,000 d. $45,000 22. The partnership agreement of Alix, Gise, and Bosco provides for the following income ratio: (a) Alix, the managing partner, receives a salary allowance of $108,000, (b) each partner receives 15% interest on average capital investment, and (c) remaining net income or loss is divided equally. The average capital investments for the year were: Alix $600,000, Gise $1,200,000, and Bosco $1,800,000. If partnership net income is $720,000, the amount distributed to Gise should be: a. $180,000. b. $186,000. c. $204,000. d. $240,000. 23. The Partners' Capital Statement for TSB Company reported the following information in total: Capital, January 1 ..................................... $240,000 Additional investment................................ 80,000 Drawings................................................... 160,000 Net income ............................................... 200,000 The partnership has three partners: Toub, Sauls, and Birch with ending capital balances in a ratio 40:20:40. What are the respective ending balances of the three partners? a. Toub, $160,000; Sauls, $80,000; Birch, $160,000. b. Toub, $144,000: Sauls, $72,000; Birch, $144,000. c. Toub, $272,000; Sauls, $136,000; Birch, $272,000. d. Toub, $180,000; Sauls, $96,00000; Birch, $180,000. 24. Liabilities of a company would not include a. notes payable. b. accounts payable. c. salaries and wages payable. d. cash. 25. The common characteristic possessed by all assets is a. long life. b. great monetary value. c. tangible nature. d. future economic benefit. 26. Owner's equity is best depicted by the following: a. Assets = Liabilities. b. Liabilities + Assets. c. Residual equity + Assets. d. Assets – Liabilities. 27. In the first month of operations for Gallowsbird Industries, the total of the debit entries to the cash account amounted to $36,000 ($16,000 investment by the owner and revenues of $20,000). The total of the credit entries to the cash account amounted to $22,000 (purchase of equipment $8,000 and payment of expenses $14,000). At the end of the month, the cash account has a(n) a. $6,000 credit balance. b. $6,000 debit balance. c. $14,000 debit balance. d. $14,000 credit balance. 28. Chik Chik Company showed the following balances at the end of its first year: Cash $ 6,000 Prepaid insurance 9,400 Accounts receivable 7000 Accounts payable 5,600 Notes payable 8,400 Owner’s Capital 2,800 Owner’s Drawings 1,400 Revenues 44,000 Expenses 35,000 What did Chik Chik Company show as total credits on its trial balance? a. $51,400 b. $60,800 c. $62,200 d. $70,200 29. At January 31, 2014, the balance in Aislers Inc.’s supplies account was $750. During February, Aislers purchased supplies of $900 and used supplies of $1,125. At the end of February, the balance in the supplies account should be a. $525 debit. b. $975 debit. c. $525 credit. d. $975 debit. 30. At December 1, 2014, Cursive Company’s accounts receivable balance was $1,800. During December, Cursive had credit sales of $7,200 and collected accounts receivable of $6,000. At December 31, 2012, the accounts receivable balance is a. $600 debit. b. $3,000 debit. c. $600 credit. d. $3,000 credit. 31. If an adjustment is needed for unearned revenues, the a. liability and related revenue are overstated before adjustment. b. liability and related revenue are understated before adjustment. c. liability is overstated and the related revenue is understated before adjustment. d. liability is understated and the related revenue is overstated before adjustment. 32. The balance in the supplies account on June 1 was $5,200, supplies purchased during June were $3,500, and the supplies on hand at June 30 were $3,000. The amount to be used for the appropriate adjusting entry is a. $3,500. b. $5,700. c. $6,500. d. $11,700. 33. Depreciation expense for a period is the a. original cost of an asset – accumulated depreciation. b. book value of the asset ÷ useful life. c. portion of an asset’s cost that expired during the period. d. market value of the asset ÷ useful life. 34. REM Real Estate received a check for $27,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $27,000. Financial statements will be prepared on July 31. REM Real Estate should make the following adjusting entry on July 31: a. Debit Unearned Rent Revenue, $4,500; Credit Rent Revenue, $4,500. b. Debit Rent Revenue, $4,500; Credit Unearned Rent Revenue, $4,500. c. Debit Unearned Rent Revenue, $27,000; Credit Rent Revenue, $24,000. d. Debit Cash, $27,000; Credit Rent Revenue, $27,000. 35. The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2014: Accounts payable $ 18,000 Accounts receivable 11,000 Accumulated depreciation – equipment 28,000 Advertising expense 21,000 Cash 15,000 Owner’s capital (1/1/14) 102,000 Owner’s drawings 14,000 Depreciation expense 12,000 Insurance expense 3,000 Note payable, due 6/30/15 70,000 Prepaid insurance (12-month policy) 6,000 Rent expense 17,000 Salaries and wages expense 32,000 Service revenue 133,000 Supplies 4,000 Supplies expense 6,000 Equipment 210,000 What is the company’s net income for the year ending December 31, 2014? a. $12,000 b. $28,000 c. $42,000 d. $133,000 36. The following items are taken from the financial statements of the Postal Service for the year ending December 31, 2014: Accounts payable $ 18,000 Accounts receivable 11,000 Accumulated depreciation – equipment 28,000 Advertising expense 21,000 Cash 15,000 Owner’s capital (1/1/14) 102,000 Owner’s drawings 14,000 Depreciation expense 12,000 Insurance expense 3,000 Note payable, due 6/30/15 70,000 Prepaid insurance (12-month policy) 6,000 Rent expense 17,000 Salaries and wages expense 32,000 Service revenue 133,000 Supplies 4,000 Supplies expense 6,000 Equipment 210,000 What is the balance that would be reported for owner’s equity at December 31, 2014? a. $158,000 b. $144,000 c. $130,000 d. $102,000 37. Income Summary has a credit balance of $17,000 in S. Sufjan Co. after closing revenues and expenses. The entry to close Income Summary is a. credit Income Summary $17,000, debit Owner’s Capital $17,000. b. credit Income Summary $17,000, debit Owner’s Drawings $17,000. c. debit Income Summary $17,000, credit Owner’s Drawings $17,000. d. debit Income Summary $17,000, credit Owner’s Capital $17,000. 38. Gross profit for a merchandiser is net sales minus a. operating expenses. b. cost of goods sold. c. sales discounts. d. cost of goods available for sale. 39. Deposits in transit a. have been recorded on the company's books but not yet by the bank. b. have been recorded by the bank but not yet by the company. c. have not been recorded by the bank or the company. d. are checks from customers which have not yet been received by the company. 40. In preparing a bank reconciliation, outstanding checks are a. added to the balance per bank. b. deducted from the balance per books. c. added to the balance per books. d. deducted from the balance per bank. 41. If a check correctly written and paid by the bank for $427 is incorrectly recorded on the company's books for $472, the appropriate treatment on the bank reconciliation would be to a. add $45 to the bank's balance. b. add $45 to the book's balance. c. deduct $45 from the bank's balance. d. deduct $427 from the book's balance. 42. On November 1, Gentle Company received a $3,000, 6%, three-month note receivable. The cash to be received by Gentle Company when the note becomes due is: a. $3,000. b. $3,030. c. $3,045. d. $3,180. 43. On January 15, 2014, Craig Company received a two-month, 9%, $9,000 note from William Pentel for the settlement of his open account. The entry by Craig Company on January 15, 2014 would include a: a. debit of $9,135 to Notes Receivable. b. debit of $9,000 to Notes Receivable. c. credit of $9,135 to Accounts Receivable. d. credit of $9,000 to Notes Receivable. 44. On January 15, 2014, Craig Company received a two-month, 9%, $9,000 note from William Pentel for the settlement of his open account. The entry by Craig Company on March 15, 2014 if Pentel dishonors the note and collection is expected is: a. Accounts Receivable—W. Pentel ......................... Notes Receivable............................................ 9,000 9,000 b. Accounts Receivable—W. Pentel ......................... Notes Receivable............................................ 9,135 9,000 Interest Revenue ............................................ 135 c. Accounts Receivable—W. Pentel ......................... 8,865 Interest Lost........................................................ Notes Receivable............................................ 135 9,000 d. Bad Debts Expense .............................................. Notes Receivable............................................ 9,135 9,135 45. Notes receivable are recognized in the accounts at a. cash (net) realizable value. b. face value. c. gross realizable value. d. maturity value. 46. Farr Company purchased a new van for floral deliveries on January 1, 2014. The van cost $56,000 with an estimated life of 5 years and $14,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the depreciation expense for 2014? a. $11,200 b. $8,400 c. $16,800 d. $22,400 47. A plant asset was purchased on January 1 for $60,000 with an estimated salvage value of $12,000 at the end of its useful life. The current year's Depreciation Expense is $6,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $30,000. The remaining useful life of the plant asset is a. 10 years. b. 8 years. c. 5 years. d. 3 years. 48. Sargent Corporation bought equipment on January 1, 2014. The equipment cost $360,000 and had an expected salvage value of $60,000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is a. $360,000. b. $300,000. c. $200,000. d. $50,000.