ACCT 201 Final Exam | Complete Solutions (Answered)

ACCT 201 Final Exam | Complete Solutions (Answered) Select the financing activities from the list below. (Select all that apply.) Issued a Stock Issued a Notes Payable The statement of shareholders' equity reports the ______. changes that occurred in shareholders' equity during the accounting period How many of the following accounts are assets? Supplies Expense Retained Earnings Notes Payable Depreciation Expense Common Stock Equipment Haira Noia, Inc., issued $10,000 of stock to its owners for cash. It recorded the transaction by increasing assets and increasing liabilities. Which of the following statements are correct? (Select all that apply.) Liabilities will be too high Shareholders equity will be too low Determine the missing amounts in the following multi-step income statement: Sales $1,000 Cost of Goods Sold ? Gross Profit 300 Operating Expenses 100 Operating Income ? Interest Expense 10 Net Income ? 700 and 190 COGS: 1000-300=700 Net Income: = 190 At December 31, Year 1, Lord of the Fries, Inc.'s assets were $50,000 and liabilities were $40,000. At December 31, Year 2, its assets are $120,000 and liabilities are $50,000. During the year, it did not issue new stock and did not declare or pay dividends. Calculate net income for Year 2. 50,000-40,000=10,000 120,000-50,000=70,000 70,000+10,000 =80,000 Answer: 80,000 Using the following information for Morris Lest Co. for the year ended December 31, Year 2 and assuming no new stock was issued during the year, Total Assets at December 31, Year 2 equals _______. Revenues for the year ended December 31, Year 2 $850 Net Income for the year ended December 31, Year 2 $370 Retained Earnings, December 31, Year 1 $280 Retained Earnings, December 31, Year 2 $360 Total Shareholders' Equity at December 31, Year 2 $725 Total Liabilities at December 31, Year 1 $605 Total Liabilities at December 31, Year 2 $40 765 Assets = Liabilities + SE = (725+40)= 765 Land is reported on the balance sheet at its original purchase price. From the list of assumptions and principles, which one best supports this accounting treatment? Historical Cost Principle Indicate the financial statement where you would expect to find each line item: Wages Expense Wages Paid to Employees Wages Payable Wages Expense- Income Statement Wages Paid to Employees- Statement of Cash Wages Payable- Balance Sheet During the year, Proffitts, Inc., had revenue of $93,000 and expenses of $33,000. During the year, it collected $14,000 from its customers and paid $3,000 of its expenses and $20,000 of dividends to its owners. Net income for the year equals ______. 60,000 93,000-33,000= 60,000 In its first month of business, Sea World Cruises, Inc., collected $38,000 from customers in advance during May. At May 31, it had a balance in its Unearned Revenue of $4,000. What is the amount of Revenue earned that had been collected in advance? 42,000 38,000+4,000 = 42,000 In its first month of business, Eel Electronics sold $5,000 of goods to customers of which $3,000 has been collected. Using accrual accounting, Eel Electronics should report revenues of ______. 5,000 amount earned = revenue Jurassic Pork, Inc., had $100 of supplies on May 1. It purchased $800 of supplies on account during May. Jurassic Pork paid $300 of the $800 it owed for its supplies. At May 31, Jurassic Pork only had $150 of supplies left. Supplies Expense on the May 31 income statement will equal ______. 750 100+800-150= 750 BB+Purchases-EB The dollar amount shown on the Income Statement for Supplies Expense represents ______. the cost of supplies used during the period Wok On Water, Inc.'s employees had worked during the first month of May and earned $9,000. Wok on Water had paid $1,000 of the amount owed. How much will be reported as Wages Payable on its May 31 balance sheet? 8,000 9,000-1,000=8,000 The entry to record cash collected from customers in advance includes a ______. (Select all that apply.) Debit to Cash Credit to Unearned Revenue On January 1, Sew What, Inc., purchased $2,000 of supplies on account. The entry includes a debit to _______. Supplies and credit to Supplies Payable Doolittle & Dalley, Inc., collected $400 owed from customers for services previously recorded. Record the entry. DO NOT INCLUDE $ SIGNS IN YOUR ANSWER. Cash 400 Accounts Receivable 400 If a company debited an expense, the credit may have been to ______. (Select all that apply.) 1) a payable account such as Supplies Payable, Utilities Payable, Interest Payable 2) an asset such as Prepaid Insurance, Supplies, Inventory, or Accumulated Depreciation 3) Cash How many of the following accounts have a normal credit balance? Unearned Revenue Sales Revenue Accounts Receivable Accumulated Depreciation Cost of Goods Sold Inventory Prepaid Expenses 3- Unearned Revenue, Sales Revenue, Accumulated Depreciation Given the Accounts Payable T-account, match the correct description with each number. For the beginning (1. or 2.) and ending balances (5. or 6.), select "Blank" for the side that is opposite the account's normal balance. 1- Blank 2- Beginning Balance 3- Payments to Merchandisers 4- Purchases on Account 5- Blank 6- Ending Balance The adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to ______. Interest Expense and credit to Interest Payable On November 1, Nim Com Soup, Inc., borrowed $23,000 by issuing a 9-month note at 6%. Interest Payable at December 31, equals ______. 230 PRT 23,0000.062/12 The debit side of the Retained Earnings T-Account will include which of the following after recording the closing entries? (Select all that apply.) Dividends for the month Expenses for the month The Sweet Dairy Air, Inc., had Salary Expense of $800 on its adjusted trial balance. Record the entry to close this expense at the end of the accounting period. DO NOT INCLUDE $ SIGNS IN YOUR ANSWER. Retained Earnings 800 Salary Expense 800 For which reconciling items on a bank reconciliation must the company record an entry to adjust its balance to the true cash balance? (Select all that apply.) NSF check from a customer Bank Service Charge FILLO, Inc.'s inventory activity in May was as follows: Inventory, May 1 10 units @ $8 each Purchase, May 7 30 units @ $6 each Sale, May 18 25 units @ $15 each Assets- 180 Inventory Liabilities - 180 Accounts Payable SE- No effect Florist Gump, Inc., purchased $10,000 of merchandise on account with discount terms of 2/10, n/30, FOB destination. Using the net method, what is the entry to record the purchase? DO NOT INCLUDE $ IN YOUR ANSWER. Inventory 9800 Accounts Payable 9800 10,000(0.98) = 9800 The following data was extracted from the records of Shear-Lock Combs, Inc.: Sales Revenue 400 units at $35 per unit Purchases 300 units at $20 per unit Beginning Inventory 150 units at $16 per unit What is the gross profit using the FIFO method? 6,600 Gross Profit = Sales - Cost of Goods Sold =$6,600 (= $14,000 - ((150 x $16) + (250 x $20)). Florist Gump, Inc., uses the FIFO method and had the following inventory activity for June: Beginning Inventory, June 1 500 units @ $3 each Purchase, June 15 100 units @ $3.50 each Sale, June 25 200 units @ $7 each Record the entry for the sale of inventory on account for June 25. Assets - Debit Accounts Receivable and Credit Inventory Liabilities - No effect SE- Credit Sales and Debit Cost of Goods Sold The adjusting entry to record the estimated doubtful accounts causes a(n) ______. (Select all that apply.) Decrease in assets Decrease in SE Prior to writing off a specific account, Lettuce Eat, Inc. had the following balances: Accounts Receivable $27,000 Allowance for Doubtful Accounts (credit) 3,000 Lettuce Eat, Inc., writes off a bankrupt customer's account receivable in the amount of $700. After the write-off of this customer's account has been recorded, what is Accounts Receivable, Net balance? 24,000 27,000-3,000= 24,000 Booked Solid, Inc., has the following account balances at the end of the year before adjustments: Accounts Receivable $50,000 Allowance for Doubtful Accounts $400 credit balance Sales $500,000 Doubtful Accounts Expense $0 Management estimates that 6% of accounts receivable will be uncollectible. After the correct adjusting entry has been made, what is total Doubtful Accounts Expense on the income statement for the year? 2,600 = answer 50,000*0.06=- credit balance (400) = 2,600 Using the accounts receivable method, Thistle Do Nicely, Inc. estimates that $4,000 of its receivables will be uncollectible. Prior to adjustment, the Allowance for Doubtful Accounts has a $400 debit balance. Determine the amount and on which year-end financial statement the line items appear. Doubtful Accounts Expense of $4,400 on the Income Statement and Allowance for Doubtful Accounts of $4,000 on the Balance Sheet The Merchant of Tennis, Inc., had $10,000 of inventory at the beginning of the period. During the period it purchased $40,000. Based on a physical count of inventory at the end of the accounting period, it had $4,000 in inventory. Based on this information, calculate Cost of Goods Sold for the period. 46,000 10,000+40,000-4,000 = 46,000 A capital expenditure _________. is debited to a long-term asset account Shear Lock Combs, Inc., manufactures combs. On January 1, Year 1, it purchased a $400,000 machine with an estimated useful life of 5 years or 500,000 combs and a $50,000 salvage value. The machine actually produced 120,000 combs in Year 1 and 110,000 combs in Year 2. Record the adjusting entry to record depreciation for Year 2 using the straight-line method: Depreciation Expense 70,000 Accumulated Depreciation 70,000 400,000-50,000/5 Florist Gump, Inc., purchased a truck on January 1, Year 1, at a cost of $89,000. The truck has an estimated useful life of 5 years or 112,000 miles. The estimated salvage value is $16,000. In Year 1, the truck was driven 20,000 miles. In Year 2, the truck was driven 25,000 miles. Accumulated Depreciation using straight-line depreciation at December 31, Year 2, after two years of use, equals (rounded to the nearest dollar) ______. 29,200 89,000-16,000/5= 14,600 14,600 * 2 ( 2 years of use) = 29,200 Which of the following accounts are closed at the end of the accounting period? Allowance for Doubtful Accounts Accumulated Depreciation Depreciation Expense Doubtful Accounts Expense Gain on Sale of Equipment All of these are closed except for Allowance for Doubtful Accounts and Accumulated Depreciation. Ditchits, Inc., sold its equipment for $7,000 that cost $600,000 and had accumulated depreciation equal to $594,000 at the time of the sale. Calculate the gain or loss on the sale of this equipment. 1,000 600,000-594,000= 6,000 sold for 7,000 gain of 1000 On January 1, Year 1, Sew What, Inc., signed a $1,000,000, 7%, 10-year mortgage note to buy a new warehouse. The note will be repaid in 10 equal annual installments of $142,378 beginning on December 31, Year 1. Record the amounts in the Notes Payable T-account below for the year ended December 31, Year 1, given this information: Notes Payable [a] [c] [b] [d] [e] [f] Do not include $ signs in your answers. Use the first row to record the issuance of the note and put 0 on the opposite side. Use the second row to record the installment payment and put 0 on the opposite side. Use the last row to record the ending balance and put 0 on the opposite side. a - 0 b- 1,000,000 c- 72378 d- 0 e- 0 f- 927622 On January 1, Year 1, Pasta Disasta, Inc., issued a $400,000, 11%, 4-year installment note. On December 31, Year 2, Pasta Disasta made its second annual installment payment of $163,686. The journal entry to record the second installment payment includes: Cash - credit $163,686 Interest Expense- debit $30,835 Notes Payable- debit $132,851 Microhard, Inc., issued a $85,000, 10-year, 10% bonds dated January 1, at 100.000. By what amount should the Cash account be debited when the bonds are issued? DO NOT INCLUDE $ IN YOUR ANSWER 85,000 If a bond is sold at a discount, Interest Expense reported on the Income Statement in subsequent years __________. Increases each year if a bond is sold at a discount, Bonds Payable, Net ________. Increases each year On November 1, Year 1, Bondage, Inc., issued $30,000 of 10-year, 6% bonds at 100.000. The bonds pay interest annually on November 1. Which of the following will appear on Bondages balance sheet at December 31, Year 1? Interest Payable 300 Dewey, Cheatem & Howe, Inc., received cash from selling 500 shares of its $0.50 par value common stock at $12 per share. Show the effect of issuing stock on the accounting equation: Assets- 6000 Cash Liabilities - No effect SE- 250 Common Stock, 5,750 Paid in Capital excess of par Common Stock = par value * shares issued Paid in Cap- = (price-par)*shares issued Booked Solid Co. received $1,000,000 for the issuance of its stock on January 1. The credit to the Common Stock account was $100,000. Which of the following is true? Paid-in Capital in Excess of Par is credited for $900,000. Dilution Solutions, Inc., repurchased 500 shares of its $2 par value common stock for $10,000. The journal entry to record this transaction includes a ______. (Select all that apply.) $10,000 credit to Cash $10,000 debit to Treasury Stock In Year 1, Stock to the Hand, Inc., issued 10,000 shares of the 100,000 shares of $0.30 par value common stock it is allowed to sell. The total received from issuing its common stock is $100,000. Stock to the Hand bought back 1,000 shares of its stock at a cost of $11 each. It also declared and paid a $0.10 per share dividend to its common shareholders. Stock to the Hand has no preferred stock. What is the number of shares issued? 10,000 The date, which follows the date of declaration, and determines which shareholders will receive the dividend is the ______. Date of Record On December 1, the board of directors of Buy & Large, Inc., declared a cash dividend of $2 per share on the 300,000 common shares outstanding on record at December 31, payable January 10 of the following year. No other dividends were declared in either year. Show the effect on the accounting equation of the entry to be recorded on December 31: Assets - no effect Liabilities- no effect SE- no effect because the payment date isn't until January 10 Lox, Stock & Bagel, Inc.'s, balance sheet reported the following amounts on its year-end balance sheet: Common Stock, $0.40 par value, 2,000,000 authorized, ___?____ issued $ 50,000 Paid-in Capital in Excess of Par 80,000