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Financial Accounting I Final Practice Exam 1 - Solution

This document provides solutions to practice exam questions for an accounting exam. It includes solutions to 41 multiple choice questions covering various accounting topics like financial statements, inventory, depreciation, bonds, goodwill impairment, and asset exchanges. The solutions show the calculations and journal entries required to solve each question.

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misterwaterr
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2K views5 pages

Financial Accounting I Final Practice Exam 1 - Solution

This document provides solutions to practice exam questions for an accounting exam. It includes solutions to 41 multiple choice questions covering various accounting topics like financial statements, inventory, depreciation, bonds, goodwill impairment, and asset exchanges. The solutions show the calculations and journal entries required to solve each question.

Uploaded by

misterwaterr
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Practice Exam 3 - Solution

Accounting 3000
Practice Final Exam Solutions
1. B
$180 million

4% = $7.2 million

2. D
This inventory should be excluded because it had not yet reached its destination, where
title passes.
3. C
4. C
These treasury bonds would be classified in current assets as short-term investments. If
purchased within three months of their maturity, they could be classified as cash
equivalents. The land should be reported in PPE (non-current assets) at $40,000.
5. D

6. C
The insurance premiums of $30,000 were charged in error to insurance expense on the
2008 income statements. The premiums should have been allocated equally at $10,000
per year for 2008, 2009, and 2010. Therefore, the beginning retained earnings at 2009 are
understated by $20,000. The corrected retained earnings would be the beginning balance
plus correction of the error ($200,000 + 12,000 = $220,000).
7. B
2003 depreciation expense: $100,000 x 20% = 20,000 x 9/12 = 15,000
2004 depreciation expense: $85,000 x 20% = 17,000
2005 depreciation expense: $68,000 x 20% = 13,600
Accumulated depreciation at the beginning of 2006: $45,600
Book value at the beginning of 2006 = $54,400
Depreciation expense for 2006 = (54,400 10,000) / 4 = 11,100
Book value at 12/31/06: $43,300.

Practice Exam 3 - Solution

8. A
9. D
10. A
Impairment test for Goodwill:
Step 1: Compare FV and BV of reporting unit. FV = 700 and BV = 580.
An impairment loss must be recognized if book value of the reporting unit acquired
exceeds it fair value. In this case, it does not, so no impairment loss is recognized.
11. D
12. B
13. A
The lump-sum purchase price ($80,000) should be allocated based on the relative
fair market values of the machines.
Machine A = (15,000/120,000) x $80,000 = $10,000.
Machine B = (60,000/120,000) x $80,000 = $40,000.
14. C

15. A

16. B
17. D

Practice Exam 3 - Solution

Sum of the years digits = (8*9)/2 = 36


3rd year of the assets useful life:
($120,000 salvage value) x (6/36) = $18,000 depreciation expense
Salvage value = $12,000
18. A
Goodwill is not amortized.
19. A
20. C
150% declining balance rate = 1.5 x straight-line rate (5%) = 7.5%
2006 depreciation expense:
Beg BV x 0.075 x 10/12 = 11,875.
Beg BV = 190,000 = assets cost.
21. B
Depletion in 2009 = ($164,000

20,000) = $8.20 per ton

4,000 = $32,800

22. B
23. B
24. A

Ending inventory is assumed to consist of 700 gallons from beginning inventory:


700 x $7.20 = $5,040

25. D
26. D
27. B
COGS is understated by $55,000 and depreciation expense is understated by 10,000, so
net income is overstated by $65,000.
28. B

Practice Exam 3 - Solution

Retained earnings was understated by $33,000 at the end of 2007. Net income is
overstated by $65,000 in 2008 (see above), so retained earnings will be overstated by
$32,000 at the end of 2008.
29. C
30. D
31. B
Salaries Payable
40,000
Cash paid for wages
(Reduction in liability)

1/1 Balance

165,000
143,000

Wages expense
(solve for this)

18,000

12/31 Balance

Salaries expense = $143,000


32. A
1/1 Balance
Purchased
12/31 Balance

Prepaid Insurance
6,000
$5,000
2,000

Insurance used = expense


(solve for this)

3,000

Insurance expense = $5,000.

33. D
34. B
35. B
36. D
Total equity increased by $124,000 (178,000 54,000). If capital stock went up by
$132,000, then retained earnings must have decreased by $8,000. If $26,000 of
dividends were paid, then net income must have been $18,000.
37. A
38. B
4

Practice Exam 3 - Solution

[(6,000,000 20%) 900,000] / 3 = 100,000 puzzles


100,000 ($3.50 $2.00) = $150,000

39. A
Since the exchange does not have commercial substance, Valley should record the new
equipment at the BOOK value of the equipment given up.
Journal entry would be:
Accumulated depreciation (old)
Equipment (new)
Equipment (old)

20,000
30,000
50,000

40. B

41. B
42. A
43. A
Gain (loss) = FV asset given up BV as asset given up

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