1. ACCT 550 Final Exam
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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
2. 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
3. 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
4. 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
5. 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
6. 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:
7. 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
8. 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:
9. 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
10. (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)
