University Temple Fox School of Business and Management Dr. Steven Balsam
Accounting 011 Exam #2 November 3/5, 2003
Instructions: You have 60 minutes. Answer the questions on the pages provided and please remember to show all work so that you may receive partial credit. Also please put your name on each page in case the pages get separated. Good luck!
Name
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Answer Sheet for Multiple Choice 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________
Multiple Choice 12 questions, 5 points each 1. How much must be invested now to receive $30,000 for 15 years if the first $30,000 is received today and the rate is 9%? a. b. c. d. 2. $241,821 $263,585 $450,000 $219,376
What will be the balance on September 1, 2010 in a fund which is accumulated by making $24,000 annual deposits each September 1 beginning in 2003, with the last deposit being made on September 1, 2010? The fund pays interest at 8% compounded annually. a. $255,279 b. $214,148 c. $181,440 d. $137,918 During the year, Jantz Company made an entry to write off a $4,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $80,000 and the balance in the allowance account was $4,500. The net realizable value of accounts receivable after the write-off entry was a. $80,000. b. $79,500. c. $71,500. d. $75,500.
3.
Use the following information for questions 4 & 5 A trial balance before adjustments included the following: Debit Sales Sales returns and allowance Accounts receivable Allowance for doubtful accounts 4. $14,000 53,000 760 Credit $425,000
If the estimate of uncollectibles is made by taking 1% of net sales, the amount of the adjustment is a. $3,350. b. $4,110. c. $4,250. d. $4,870. If the estimate of uncollectibles is made by taking 10% of gross account receivables, the amount of the adjustment is a. $4,540. b. $5,300. c. $5,224. d. $6,060.
5.
Use the following information for questions 6 & 7 James Co. has the following data related to an item of inventory: Inventory, March 1 200 units @ $4.20 Purchase, March 7 700 units @ $4.40 Purchase, March 16 140 units @ $4.50 Inventory, March 31 300 units 6. The value assigned to ending inventory if James uses LIFO is a. $1,334. b. $1,280. c. $1,260. d. $1,350. The value assigned to cost of goods sold if James uses FIFO is a. $1,334. b. $1,280. c. $3,270. d. $3,216.
7.
Use the following information for questions 8 & 9 Dolan Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2002. Its inventory at that date was $420,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows: Date December 31, 2003 December 31, 2004 December 31, 2005 8. Inventory at Current Prices $535,000 580,000 676,000 Current Price Index 107 125 130
What is the cost of the ending inventory at December 31, 2003 under dollar-value LIFO? a. $500,000. b. $535,000. c. $505,600. d. $449,400. What is the of cost the ending inventory at December 31, 2004 under dollar-value LIFO? a. $464,000. b. $475,000. c. $467,080. d. $500,000.
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During 2004, Stone Co., a manufacturer of chocolate candies, contracted to purchase 200,000 pounds of cocoa beans at $3.00 per pound, delivery to be made in the spring of 2005. Because a record harvest is predicted for 2005, the price per pound for cocoa beans had fallen to $2.30 by December 31, 2004. Of the following journal entries, the one which would properly reflect in 2004 the effect of the commitment of Stone Co. to purchase the 200,000 pounds of cocoa is a. Cocoa Inventory ........................................................... 600,000 Accounts Payable ............................................. 600,000 b. Cocoa Inventory ........................................................... 460,000 Loss on Purchase Commitments ................................. 140,000 Accounts Payable ............................................. 600,000 c. Estimated Loss on Purchase Commitments ................. 140,000 Estimated Liability on Purchase Commitments .. 140,000 d. No entry would be necessary in 2004.
11.
On January 1, 2004, the merchandise inventory of Biggs, Inc. was $1,400,000. During 2004 Biggs purchased $2,800,000 of merchandise and recorded sales of $3,500,000. The gross profit rate on these sales was 25%. What is the merchandise inventory of Biggs at December 31, 2004? a. $700,000. b. $875,000. c. $1,575,000. d. $2,625,000.
Use the following information to answer question 12 The following data concerning the retail inventory method are taken from the financial records of Stone Company. Beginning inventory Purchases Freight-in Net markups Net markdowns Sales 12. The ending inventory at retail should be a. $178,000. b. $150,000. c. $138,000. d. $102,000. Cost $119,000 448,000 12,000 -- -- -- Retail $170,000 640,000 -- 40,000 28,000 672,000
Problem 1 (10 points) The Very Successful Car Dealership sells cars either for cash or on credit. Currently they are offering no interest for 3 years on all purchases (quarterly payments however beginning three months after purchase). The Short of Cash Corporation purchases a car at the list price of $24,000, electing to take advantage of the no interest financing quarterly payments are thus 2,000. If they would have borrowed the money from their bank they would have had to pay 8 percent annually. Record the sale.
Problem 2 (30 points) ACDC uses the lower of cost or market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2005, consists of products D, E, F, G, H and I. Relevant per-unit data for these products appear below. Item D Cost Replacement Cost Estimated Selling Price Estimated Selling Expense Normal Profit 75 120 $120 30 20 Item E 80 72 $110 30 20 Item F 80 70 $95 30 20 Item G 80 30 $90 25 20 Item H 50 70 $110 30 20 Item I 36 30 $90 30 20
Using the lower of cost or market rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2005, for each of the inventory items above. Item D Unit value per balance sheet Item E Item F Item G Item H Item I