Acc 281 Final Exam Review Questions And Correct Answers

ACC 281 FINAL EXAM REVIEW
QUESTIONS AND CORRECT
ANSWERS
AA2companyA2purchasedA2landA2forA2$84,000A2cash.A2RealA2estateA2brokers'A2commissio
nA2wasA2$5,000A2andA2$7,000A2wasA2spentA2forA2demolishingA2anA2oldA2buildingA2onA2theA
2landA2beforeA2constructionA2ofA2aA2newA2buildingA2couldA2start.A2ProceedsA2fromA2salvag
eA2ofA2theA2demolishedA2buildingA2wasA2$1,200.A2UnderA2theA2historicalA2costA2principle,A2
theA2costA2ofA2theA2landA2wasA2recordedA2at:
A.A2$94,800
B.A2$84,000
C.A2$89,000
D.A2$96,000A2-A2Ans--A.A2$94,800
Solution:A2$84,000+$5,000+$7,000=$96,000
$96,000-$1,200=$94,800

TheA2balanceA2inA2theA2AccumulatedA2DepreciationA2accountA2representsA2the:
A.A2cashA2fundA2toA2beA2usedA2toA2replaceA2plantA2assets
B.A2amountA2toA2beA2deductedA2fromA2theA2costA2ofA2theA2plantA2assetA2toA2arriveA2atA2itsA2
fairA2marketA2value
C.A2amountA2chargedA2toA2expenseA2inA2theA2currentA2period
D.A2amountA2chargedA2toA2expenseA2sinceA2theA2acquisitionA2ofA2theA2plantA2assetA2-
A2Ans--D.A2amountA2chargedA2toA2expenseA2sinceA2theA2acquisitionA2ofA2theA2plantA2asset


AtA2DecemberA231,A22014A2HowellA2Company'sA2inventoryA2recordsA2indicatedA2aA2balan
ceA2ofA2$858,000.A2UponA2furtherA2investigationA2itA2wasA2determinedA2thatA2thisA2amount
A2includedA2theA2following:
•A2$168,000A2inA2inventoryA2purchasesA2madeA2byA2HowellA2shippedA2fromA2theA2sellerA21
2/27/14A2termsA2FOBA2destination,A2butA2notA2dueA2toA2beA2receivedA2untilA2JanuaryA22nd
•A2$111,000A2inA2goodsA2soldA2byA2HowellA2withA2termsA2FOBA2destinationA2onA2Decemb
erA227th.A2TheA2goodsA2areA2notA2expectedA2toA2reachA2theirA2destinationA2untilA2JanuaryA
26th.
•A2$9,000A2ofA2goodsA2receivedA2onA2consignmentA2fromA2WestwoodA2Company
WhatA2isA2Howell'sA2correctA2endingA2inventoryA2balanceA2atA2DecemberA231,A22014?
A.A2$681,000
B.A2$570,000
C.A2$690,000
D.A2$849,000A2-A2Ans--A.A2$681,000
Solution:A2$858,000-$168,000=$690,000
$690,000-A2$9,000=A2$681,000
TheA2$111,000A2isA2notA2accountedA2forA2inA2thisA2situationA2becauseA2itA2isA2forA2SOLDA2
goods.

,QuarkA2Inc.A2justA2beganA2businessA2andA2madeA2theA2followingA2fourA2inventoryA2purcha
sesA2inA2June:A2

JuneA21A2150A2unitsA2$825
JuneA210A2200A2unitsA2$1,120
JuneA215A2200A2unitsA2$1,140
JuneA228A2150A2unitsA2$885
A2$3,970
AA2physicalA2countA2ofA2merchandiseA2onA2JuneA230A2revealsA2thatA2thereA2areA2200A2unit
sA2onA2hand.A2UsingA2theA2FIFOA2inventoryA2method,A2theA2amountA2allocatedA2toA2endin
gA2inventoryA2forA2JuneA2is
A.A2$1,180A2
B.A2$1,170A2
C.A2$1,100A2
D.A2$1,105A2-A2Ans--B.A2$1,170
Solution:A2TheA2totalA2unitsA2purchasedA2inA2JuneA2wasA2700.A2700-
200=500,A2meaningA2thatA2500A2unitsA2wereA2sold.A2FIFOA2(firstA2in,A2firstA2out)A2requiresA
2thatA2theA2firstA2500A2unitsA2thatA2wereA2purchasedA2areA2theA2firstA2500A2toA2go.A2Theref
ore,A2allA2150A2unitsA2fromA2JuneA21stA2areA2gone,A2totalingA2$825A2andA2150A2unitsA2gon
e.

Next,A2allA2200A2unitsA2fromA2JuneA215thA2areA2gone.A2TotalingA2$1,945A2($825+
$1,120)A2andA2350A2unitsA2goneA2(150+200)

150A2moreA2unitsA2mustA2beA2sold.A2So,A2weA2divideA2JuneA215th'sA2purchaseA2totalingA2$
1,140A2andA2divideA2itA2byA2theA2200A2units.A2ThisA2givesA2usA2aA2priceA2ofA2$5.70A2perA2u
nit.

MultiplyA2$5.70A2byA2150,A2becauseA2weA2onlyA2needA2150A2moreA2units.A2ThisA2equalsA2
$855.A2ThisA2totalsA2$2,800A2($1,945+$855)A2andA2500A2units.

Lastly,A2subtractA2theA2$2,800A2fromA2theA2$3,970A2(givenA2inA2theA2question)A2toA2getA2yo
urA2answerA2ofA2$1,170.

AA2gainA2orA2lossA2onA2disposalA2ofA2aA2plantA2assetA2isA2determinedA2byA2comparingA2the
A.A2ReplacementA2costA2ofA2theA2assetA2withA2theA2asset'sA2originalA2cost
B.A2BookA2valueA2ofA2theA2assetA2withA2theA2asset'sA2originalA2cost
C.A2OriginalA2costA2ofA2theA2assetA2withA2theA2proceedsA2receivedA2fromA2itsA2sale
D.A2BookA2valueA2ofA2theA2assetA2withA2theA2proceedsA2receivedA2fromA2itsA2saleA2-A2Ans--
D.A2BookA2valueA2ofA2theA2assetA2withA2theA2proceedsA2receivedA2fromA2itsA2sale

WhichA2ofA2theA2followingA2isA2notA2anA2advantageA2ofA2aA2soleA2proprietorship?
A.A2LimitedA2liabilityA2
B.A2NoA2timeA2limitA2imposedA2onA2itsA2existenceA2
C.A2NoA2legalA2requirementsA2forA2startingA2theA2businessA2
D.A2NoneA2ofA2theA2aboveA2-A2Ans--A.A2LimitedA2Liability

, CharleneA2CosmeticsA2CompanyA2justA2beganA2businessA2andA2madeA2theA2followingA2fo
urA2inventoryA2purchasesA2inA2June:
JuneA21A2150A2unitsA2$A2780
JuneA210A2200A2unitsA2$1,170
JuneA215A2200A2unitsA2$1,260
JuneA228A2150A2unitsA2$A2990
Total:A2$4,200

AA2physicalA2countA2ofA2merchandiseA2inventoryA2onA2JuneA230A2revealsA2thatA2thereA2are
A2210A2unitsA2onA2hand.A2UsingA2theA2averageA2costA2method,A2theA2amountA2allocatedA2t
oA2theA2endingA2inventoryA2onA2JuneA230A2is
A.A2$1,323
B.A2$1,229
C.A2$1,260
D.A2$1,368A2-A2Ans--C.A2$1,260
Solution:A2TheA2averageA2costA2methodA2hasA2youA2takeA2theA2totalA2moneyA2spentA2onA2i
nventoryA2purchasesA2($4,200)A2andA2divideA2itA2byA2theA2totalA2numberA2ofA2unitsA2bough
tA2(700).

So,A2$4,200/700=A2$6.A2ThisA2meansA2that,A2onA2average,A2eachA2unitA2costsA2$6.

YouA2takeA2theA2quotientA2($6)A2andA2multiplyA2itA2byA2theA2unitsA2inA2handA2(210)A2toA2get
A2yourA2answer.A2


So,A2$6(210)=A2$1,260

GrossA2profitA2equalsA2theA2differenceA2between
A.A2SalesA2revenueA2andA2operatingA2expenses
B.A2NetA2incomeA2andA2operatingA2expenses
C.A2SalesA2revenueA2andA2costA2ofA2goodsA2soldA2plusA2operatingA2expenses
D.A2SalesA2revenueA2andA2costA2ofA2goodsA2soldA2-A2Ans--
D.A2SalesA2revenueA2andA2costA2ofA2goodsA2sold

FinancialA2informationA2isA2presentedA2below:
OperatingA2ExpensesA2$A236,000
SalesA2RevenueA2$150,000
CostA2ofA2GoodsA2SoldA2$105,000
GrossA2profitA2wouldA2be
A.A2$24,000
B.A2$114,000
C.A2$36,000
D.A2$45,000A2-A2Ans--D.A2$45,000
Solution:A2GrossA2profitA2isA2theA2differenceA2betweenA2salesA2revenueA2andA2costA2ofA2g
oodsA2sold.A2