ACCT&201 FINAL EXAM SP 2019

Name

1. MULTIPLE CHOICE QUESTIONS (@1.50 points)

a. The primary objective of financial accounting is:
A. To serve the decision-making needs of internal users.
B. To provide important data to internal managers for effective internal decision making.
C. To monitor and control company activities.
D. To provide useful information to external users for decision making regarding the results operations
and financial position of the company.
E. None of the above.
b. Which of the following accounting principles requires that a company use the allowance methods
record its bad debt expenses, when the mounts of bad debts are material?
A. Going-concern assumption. D. Matching principle.
B. Business entity assumption. E. Cost principle.
C. Consideration assumption.
c. Which of the following statements is incorrect?
A. “Temporary accounts” is another name for nominal accounts.
B. Permanent accounts carry a zero balance at the beginning of each accounting period.
C. The Income Summary account is a temporary account.
D. Permanent accounts remain open as long as the asset, liability, or equity items recorded in the
accounts continue in existence.
E. The closing process does not apply to permanent accounts.
d. During the month of March, Cooley Computer Services made credit purchases totaling $47,500 and
credit sales of $12,000. Also during the month of March, Cooley paid $38,900 cash on its accounts
payable balance. If the balance in the accounts payable account at the beginning of March was
$81,300, what is the balance in accounts payable at the end of March?
A.
B. $77,900. D. $89,900. F. $6,900.
C. $72,700. E. $101,900.

e. If throughout an accounting period the fees for legal services paid in advance by clients are recorded in
an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those
fees that has been earned is:
A. Debit Legal Fees Earned and credit Unearned Legal Fees.
B. Debit Cash and credit Legal Fees Earned.
C. Debit Cash and credit Unearned Legal Fees.
D. Debit Unearned Legal Fees and credit Legal Fees Earned.
E. Debit Unearned Legal Fees and credit Accounts Receivable.
f. When recording the journal entry to account for the supplies used during the accounting period, which
account is credited?
A. Supplies C. Prepaid supplies E. Accounts Receivable
B. Supplies Expense D. Supplies Receivable

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ACCT&201 FINAL EXAM SP 2019

g. A company records the following journal entry: debit Cash $1,470, debit Sales Discounts $30, and
credit Accounts Receivable $1,500. This means that a customer has taken what percentage cash
discount for early payment?
A. 1% B. 2% C. 5% D. 10% E. 15%

h. Cushman Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances
of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Gross Profit and Net
income, respectively equals:
A. $770,000 and 402,000. D. $390,000 and 115,000.
B. $402,000 and 350,000. E. $408,000 and 217,000.
C. $390,000 and 117,000.

i. A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45, and FOB shipping
point. The freight charge was $500. On June 20, it returned $800 of that merchandise. On June 24, it
paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June
24 equals:
A. $9,224. B. $9,424. C. $10,200. D. $10,300. E. $10,500.

j. On December 31 of the current year, Plunkett Company reported an ending inventory balance of
$215,000. The following additional information is also available:
 Plunkett sold and shipped goods costing $38,000 to Savannah Enterprises on December 28
with shipping terms of FOB destination. The goods were included in the ending inventory
amount of $215,000. The good were still on transit on December 31.
 Plunkett purchased goods costing $44,000 on December 29. The goods were shipped FOB
shipping point and were received by Plunkett on January 2 of the following year. The
shipment was a rush order that was supposed to arrive by December 31. These goods were
included in the ending inventory balance of $215,000.
 Plunkett's ending inventory balance of $215,000 included $15,000 of goods being held on
consignment from Carole Company. (Plunkett Company is the consignee.)
 Plunkett's ending inventory balance of $215,000 did not include goods costing $95,000 that
were shipped to Plunkett on December 27 with shipping terms of FOB destination and were
still in transit at year-end.
Based on the above information, the amount that Plunkett should report in ending inventory on December
31 is:
A. $156,000 B. $171,000 C. $194,000 D. $209,000 E. $200,000

k. A company has $90,000 in outstanding accounts receivable and it uses the allowance method to
account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are
uncollectible. The current debit balance (before adjustments) in the allowance for doubtful accounts is
$800. The journal entry to record the adjustment to the allowance account includes a debit to Bad
Debts Expense for:
A. $4,600 E. None of
B. $5,400
C. $6,200
D. $6,800
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ACCT&201 FINAL EXAM SP 2019

l. Lomax Enterprises purchased a depreciable asset for $23,000 on March 1, Year 1. The asset will be
depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage
value is $2,200, what will be the amount of accumulated depreciation on this asset on December 31,
Year 4?
A. $5,200.00 B. $19,933.33 C. $20,800.00 D. $17,333.33 E. $4,333.33

m. Thomas Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $100,000. The
asset is expected to have a salvage value of $15,000 at the end of its five-year useful life. If the asset is
depreciated on the double-declining-balance method, the asset's book value on December 31, Year 3
will be (Do not round intermediate calculations):
A. $21,600 B. $27,540 C. $32,400 D. $90,000 E. $18,360

n. In the process of reconciling its bank statement for April, Donahue Enterprises' accountant compiles the
following information:
Cash balance per company books on April 30 $6,275
Deposits in transit at month-end $1,300
Outstanding checks at month-end $ 620
Bank charge for printing new checks $ 45
Note receivable and interest collected by bank on Donahue’s behalf $ 770
A check paid to Donahue during the month by a customer is returned by the bank as
$ 480
NSF

The adjusted cash balance per the books on April 30 is:

A. $6,900 B. $8,160 C. $4,600 D. $6,520 E. $5,840

o. On April 1, a company paid the $3,300 premium on a three-year insurance policy with benefits
beginning on that date. What will be the insurance expense on the annual income statement for the
year ended December 31?
A. $3,300.0
0.
B. $1,100.
00.
C. $2,475.
00.
D. $825.00
.
E. $91.67.
p.
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ACCT&201 FINAL EXAM SP 2019

q. Lucia Company reported cost of goods sold for Year 1 and Year 2 as follows:
Year 1 Year 2
Beginning inventory $120,000 $130,000
Cost of goods purchased 250,000 275,000
Cost of goods available for sale 370,000 405,000
Ending inventory 130,000 135,000
Cost of goods sold $240,000 $270,000
Lucia Company made two errors: 1) ending inventory at the end of Year 1 was overstated by $15,000 and
2) ending inventory at the end of Year 2 was understated by $6,000. Given this information, the correct cost
of goods sold figure for Year 2 would be:
A. $249,000 B. $264,000 C. $276,000 D. $285,000 E. $291,000

r. A company had beginning inventory of 10 units at a cost of $20 each on March 1. On March 2, it
purchased 10 units at $22 each. On March 6 it purchased 6 units at $25 each. On March 8, it sold 22
units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 22 units sold?
A. $470 B. $490 C. $450 D. $570 E. $520

s. A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they
purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8,
8 units were sold for $55 each. Using the FIFO perpetual inventory method, what was the value of the
inventory on November 8 after the sale?
A. $194 B. $304 C. $276 D. $280 E. $288

t. Meng Co. maintains a $300 petty cash fund. On January 31, the fund is replenished when actual cash
remaining is $32. The accumulated receipts on that date represent $80 for office supplies, $160 for
merchandise inventory, and $20 for miscellaneous expenses. The journal entry to replenish the fund on
January 31 is:
A. Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Dr.
Cash over and short, $8; Cr. Petty cash, $268.
B. Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Cr.
Petty cash, $260.
C. Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Cr.
Cash $260.
D. Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Dr.
Cash over and short, $8; Cr. Cash, $268.
E. Dr. Office Supplies, $80; Dr. Merchandise inventory, $160; Dr. Miscellaneous expenses, $20; Cr.
Cash over and short, $8; Cr. Cash, $252.

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ACCT&201 FINAL EXAM SP 2019

2. Prepare journal entries for May 6, 7,13 and 14 only to record the following merchandise
transactions of Geo Company, which applies the perpetual inventory system. (10 points)

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ACCT&201 FINAL EXAM SP 2019

3. Clarion Co. completed the following transactions and events involving the purchase and operation of
equipment in its business.
Jan 1, 2017: Paid $300,000 cash plus $10,000 in sales tax and $12,500 in transportation (FOB shipping
point) for a new loader, which is estimated to have a four-year life and a $25,500 salvage
value. Loader costs are recorded in the Equipment account.
Jan 3, 2017: Paid $15,000 to enclose the cab and install air conditioning in the loader to enable
operations under harsher conditions. This increased the estimated salvage value of the
loader by another $1,500.
Dec 31, 2017: Recorded double-declining balance depreciation on the loader.

Jan 1, 2018: Paid $40,500 to overhaul the loader’s engine, which increased the loader’s estimated
useful life by two years.
Feb 17, 2018: Paid $1,000 to repair the loader after the operator backed it into a tree.
Dec 31, 2018: Recorded double-declining balance depreciation on the loader.
Dec 31, 2018: Sold the loader for $250,000 cash.

REQUIRED: Prepare journal entries to record these transactions and events (20 Points)
SHOW YOUR WORK
General Journal form provided

4. Bella Beauty Company has provided the following amounts for its fiscal year ended April 30, 2019. All
balances are normal balances.
 Cash $ 45,000
 Accounts Receivable $ 72,000
 Sales $ 1,270,000
 Sales Discounts $ 19,050
 Sales Returns & Allowances $ 25,400
 Cost of Goods Sold $ 750,000
 Selling Expenses $ 169,050
 Administrative Expenses $ 125,400
 Other Expenses $ 28,000
 Capital, Bella $ 100,000
 Withdrawals, Bella $ 6,000
REQUIRED: Prepare a multiple-step income statement for the year ended April 30, 2019 (10 points)

USE THE SINGLE RULED PAPER PROVIDED FOR YOUR ANSWER

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ACCT&201 FINAL EXAM SP 2019

5. At December 31, 2018, Ethan Company reports total sales of $8,000,000 for its calendar year of which 40% are
cash sales and the rest are credit sales. In addition, its unadjusted trial balance includes the following items:
Accounts receivable $ 2,600,000 Debit
Allowance for doubtful accounts 15,000 Debit

An aging analysis of the $2,600,000 of accounts receivable outstanding is given below.

CATEGORY AMOUNT Percentage Uncollectible Amount Uncollectible
Less than 30 days $ 600,000 2%
30 to 60 days 1,000,000 5%
60 to 90 days 560,000 7%
Over 90 days 440,000 10%
Total $ 2,600,000

REQUIRED 1: Using the above aging analysis, prepare the adjusting entry for this company to recognize bad debts
expense (6 Points)
DATE DESCRIPTION DEBIT CREDIT

12/31/2018

To record bad debts expense

REQUIRED 2: Assume that instead of using the accounts receivable aging analysis above, that the company
estimates bad debts expense as 3.50% of credit sales. Record the adjusting entry to recognize bad debts expense (3
Points)
DATE DESCRIPTION DEBIT CREDIT

12/31/2018

To record bad debts expense

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ACCT&201 FINAL EXAM SP 2019

6. Awree Natcacnotus has provided the following adjusted trial balance for the fiscal year ended Dec 31, 2018.

AWREE NATCACNOTUS INC

TRIAL BALANCE
DECEMBER 31, 2018
DEBIT CREDIT
Cash $ 457,000
Accounts Receivable 528,000
Allowance for Doubtful Accounts $ 32,700
Inventory 142,000
Other current assets 45,000
Equipment 500,000
Accumulated Depreciation - Equipment 200,000
Land 200,000
Accounts Payable 90,300
Salaries Payable 38,000
Other current liabilities 70,500
Long-Term Notes Payable 300,000
Capital, Lerriuqs 753,300
Withdrawals, Lerriuqs 97,000
Sales 1,520,000
Sales Discounts 31,000
Sales Returns and Allowances 57,000
Cost of Goods Sold 650,000
Salaries Expense 198,000
Administration Expense 32,000
Insurance Expense 9,000
Rent Expense 20,000
Office Supplies Expense 4,800
Miscellaneous Expense 12,000
Interest Expense 22,000

REQUIRED: Prepare a classified balance sheet as at Dec 31, 2018. Of the $300,000 long-term note payable,
$50,000 is due within the next year (20 points) (Hint: Net Income = $484,200) Do NOT prepare an income statement.

USE THE SINGLE RULED PAPER PROVIDED FOR YOUR ANSWER

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ACCT&201 FINAL EXAM SP 2019

7. BONUS / OPTIONAL: Bella Beauty Salon has provided you with the following unadjusted trial balance. As you
can see, the trial balance is not balanced since the previous accountant made a few errors. Also, adjusting
entries have not yet been recorded. Use the additional information given below to complete the partial
worksheet given. You do NOT need to show your work at all for this worksheet. The worksheet is your work.
The first entry has been completed for you. (10 points)
BELLA BEAUTY SALON, PARTIAL WORKSHEET DEC 31, 2016
UNADJUSTED TRIAL ADJUSTMENTS & ERROR ADJUSTED TR
BALANCE CORRECTIONS BALANCE
DEBIT CREDIT DEBIT CREDIT DEBIT CR
Cash & Cash Equivalents $ 557,000
Accounts Receivable 324,000
Allowance for Doubtful Accounts 12,000
Merchandise Inventory 136,000
Prepaid Insurance 26,000
Other Current Assets 10,000
Property, Plant, and Equipment (PPE) 890,000
Accumulated Depreciation - PPE 263,750
Accounts Payable 204,000
Other current Liabilities 54,000 (a) 10,000
Long-Term Notes Payable 100,000
Capital, Lerriuqs 821,600
Withdrawals, Lerriuqs 57,000
Sales 1,432,000
Cost of Goods Sold 650,000
Selling Expenses 198,000
Administration Expenses 86,000
General Expenses 13,450
Other Expenses 4,800 (a) 10,000 14,800
TOTAL $ 2,964,250 $ 2,875,350

ADDITIONAL INFORMATION
a) Accrued other expenses, which are part of other current liabilities, of $10,000, are not yet recorded.
b) Cash of $36,000 was received from a customer in payment of accounts receivable balance during the year. The
accountant erroneously debited Accounts Receivable and credited Cash.
c) Equipment costing $44,450 was purchased on credit on Dec 31, 2016, the last day of the year. While posting the
entry, the accountant debited the correct account, Property, Plant, and Equipment (PPE), but erroneously
debited accounts payable.
d) A Lower of Cost or Market analysis shows the replacement cost of inventory is $156,000
e) Uncollectible accounts are estimated as 6% of accounts receivable. Bad debts are classified as a selling
expense
f) $10,000 of prepaid insurance has not yet expired. The insurance is a General Expense

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ACCT&201 FINAL EXAM SP 2019

g) Depreciation on the property, plant, and equipment amounting to $57,000 has not yet been recorded. 60% is
administrative and 40% is selling
h) You have prepared a bank reconciliation and the only item on the bank reconciliation is outstanding checks of
$18,000.

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