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ACCT 550 DeVry Final Exam

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ACCT 550 DeVry Final Exam

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

(Points : 30)

Potential Matches:

1 : Earnings process completed and realized or realizable

2 : Cost of providing financial information versus the benefits derived from its use

3 : Accruals and deferrals in adjusting and closing process

4 : Business enterprise assumed to have a long life

5 : Stable dollar assumption

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

7 : Valuing assets at amount originally paid for them

8 : The impact of an item on the overall financial operations of a company

9 : Presentation of error-free information with representational faithfulness

2. (TCO B) Adjusting Entries: Unearned rent at 1/1/10 was $10,300 and at 12/31/10 was $6,000. The records indicate cash receipts from rental sources during 2010 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)

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 1/1/10 was $1,000. During 2010 cash received from debtors for interest on outstanding notes receivable amounted to $1,000. The 2010 income statement showed interest revenue in the amount of $2,900. 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)

4. (TCO B) Adjusting entries: Accumulated depreciation-equipment at 1/1/10 was $200,000. At 12/31/10, the balance of the account was $320,000. During 2010, one piece of equipment was sold. The equipment had an original cost of $50,000 and was 1/2 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)

5. (TCO B) Adjusting Entries: Allowance for doubtful accounts on 1/1/10 was $70,000. The balance in the allowance account on 12/31/10 after making the annual adjusting entry was $70,000 and during 2010 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)

6. (TCO B) Adjusting Entries: Prepaid rent at 1/1/10 was $50,000. During 2010 rent payments of $110,000 were made and charged to “rent expense.” The 2010 income statement shows as a general expense the item “rent expense” in the amount of $135,000. 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)

7. (TCO B) Adjusting Entries: Retained earnings at 1/1/10 were $100,000 and at 12/31/10 it was $300,000. During 2010, 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)

8. (TCO C) Presented below is information related to Big Blast Company.

Retained earnings, December                        31, 2010     $ 2,350,000

Sales                                                               2,600,000

Selling and administrative expenses              240,000

Earthquake loss (pre-tax) on plant (extraordinary item)     250,000

Cash dividends declared on common stock  53,600

Cost of good sold                                            1,000,000

Gain resulting from computation error on depreciation charge in 2009 (pre-tax)    520,000

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)

9. (TCO D) The following balance sheet was prepared by the bookkeeper for Purple Company as of December 31, 2011 Purple Company Balance Sheet as of December 31, 2011:

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;

(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 $2000.

Instructions:

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

10. (TCO E) Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $4,500 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         .50025             .46319             .42888

Future Value of           12.48756         14.48656         16.64549

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

Instructions

(a) Assuming the computer has an eleven-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)

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

(2). Outstanding checks

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

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

Units                Unit Cost

January 1, 2011 (beginning inventory)            1,500              $19.00

Purchases:

January 5, 2011                                               2,600              $20.00

January 25, 2011                                             2,400              $21.00

February 16, 2011                                           1,000              $22.00

March 15, 2011                                                2,300              $24.00

A physical inventory on March 31, 2011, shows 2,800 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)

13. (TCO H) A machine cost $500,000 on April 1, 2010. Its estimated salvage value is $50,000 and its expected life is eight years.

Instructions

Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used.

(a) Straight-line for 2010

(b) Double-declining balance for 2011

(c) Sum-of-the-years’-digits for 2011 (Points : 40)