ACC 281 Final Exam Review Questions
and Answers Graded A+
A company purchased land for $84,000 cash. Real estate brokers' commission was
$5,000 and $7,000 was spent for demolishing an old building on the land before
construction of a new building could start. Proceeds from salvage of the
demolished building was $1,200. Under the historical cost principle, the cost of the
land was recorded at:
A. $94,800
B. $84,000
C. $89,000
D. $96,000 - Correct answer-A. $94,800
Solution: $84,000+$5,000+$7,000=$96,000
$96,000-$1,200=$94,800
The balance in the Accumulated Depreciation account represents the:
A. cash fund to be used to replace plant assets
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,B. amount to be deducted from the cost of the plant asset to arrive at its fair market
value
C. amount charged to expense in the current period
D. amount charged to expense since the acquisition of the plant asset - Correct
answer-D. amount charged to expense since the acquisition of the plant asset
At December 31, 2014 Howell Company's inventory records indicated a balance of
$858,000. Upon further investigation it was determined that this amount included
the following:
• $168,000 in inventory purchases made by Howell shipped from the seller
12/27/14 terms FOB destination, but not due to be received until January 2nd
• $111,000 in goods sold by Howell with terms FOB destination on December
27th. The goods are not expected to reach their destination until January 6th.
• $9,000 of goods received on consignment from Westwood Company
What is Howell's correct ending inventory balance at December 31, 2014?
A. $681,000
B. $570,000
C. $690,000
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,D. $849,000 - Correct answer-A. $681,000
Solution: $858,000-$168,000=$690,000
$690,000- $9,000= $681,000
The $111,000 is not accounted for in this situation because it is for SOLD goods.
Quark Inc. just began business and made the following four inventory purchases in
June:
June 1 150 units $825
June 10 200 units $1,120
June 15 200 units $1,140
June 28 150 units $885
$3,970
A physical count of merchandise on June 30 reveals that there are 200 units on
hand. Using the FIFO inventory method, the amount allocated to ending inventory
for June is
A. $1,180
B. $1,170
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, C. $1,100
D. $1,105 - Correct answer-B. $1,170
Solution: The total units purchased in June was 700. 700-200=500, meaning that
500 units were sold. FIFO (first in, first out) requires that the first 500 units that
were purchased are the first 500 to go. Therefore, all 150 units from June 1st are
gone, totaling $825 and 150 units gone.
Next, all 200 units from June 15th are gone. Totaling $1,945 ($825+$1,120) and
350 units gone (150+200)
150 more units must be sold. So, we divide June 15th's purchase totaling $1,140
and divide it by the 200 units. This gives us a price of $5.70 per unit.
Multiply $5.70 by 150, because we only need 150 more units. This equals $855.
This totals $2,800 ($1,945+$855) and 500 units.
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and Answers Graded A+
A company purchased land for $84,000 cash. Real estate brokers' commission was
$5,000 and $7,000 was spent for demolishing an old building on the land before
construction of a new building could start. Proceeds from salvage of the
demolished building was $1,200. Under the historical cost principle, the cost of the
land was recorded at:
A. $94,800
B. $84,000
C. $89,000
D. $96,000 - Correct answer-A. $94,800
Solution: $84,000+$5,000+$7,000=$96,000
$96,000-$1,200=$94,800
The balance in the Accumulated Depreciation account represents the:
A. cash fund to be used to replace plant assets
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,B. amount to be deducted from the cost of the plant asset to arrive at its fair market
value
C. amount charged to expense in the current period
D. amount charged to expense since the acquisition of the plant asset - Correct
answer-D. amount charged to expense since the acquisition of the plant asset
At December 31, 2014 Howell Company's inventory records indicated a balance of
$858,000. Upon further investigation it was determined that this amount included
the following:
• $168,000 in inventory purchases made by Howell shipped from the seller
12/27/14 terms FOB destination, but not due to be received until January 2nd
• $111,000 in goods sold by Howell with terms FOB destination on December
27th. The goods are not expected to reach their destination until January 6th.
• $9,000 of goods received on consignment from Westwood Company
What is Howell's correct ending inventory balance at December 31, 2014?
A. $681,000
B. $570,000
C. $690,000
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,D. $849,000 - Correct answer-A. $681,000
Solution: $858,000-$168,000=$690,000
$690,000- $9,000= $681,000
The $111,000 is not accounted for in this situation because it is for SOLD goods.
Quark Inc. just began business and made the following four inventory purchases in
June:
June 1 150 units $825
June 10 200 units $1,120
June 15 200 units $1,140
June 28 150 units $885
$3,970
A physical count of merchandise on June 30 reveals that there are 200 units on
hand. Using the FIFO inventory method, the amount allocated to ending inventory
for June is
A. $1,180
B. $1,170
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, C. $1,100
D. $1,105 - Correct answer-B. $1,170
Solution: The total units purchased in June was 700. 700-200=500, meaning that
500 units were sold. FIFO (first in, first out) requires that the first 500 units that
were purchased are the first 500 to go. Therefore, all 150 units from June 1st are
gone, totaling $825 and 150 units gone.
Next, all 200 units from June 15th are gone. Totaling $1,945 ($825+$1,120) and
350 units gone (150+200)
150 more units must be sold. So, we divide June 15th's purchase totaling $1,140
and divide it by the 200 units. This gives us a price of $5.70 per unit.
Multiply $5.70 by 150, because we only need 150 more units. This equals $855.
This totals $2,800 ($1,945+$855) and 500 units.
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