FINAL PRACTICE EXAM
ACC 2101 Spring 2012
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Last 6 digits of your Social Security Number _______________
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College Code of Academic Integrity and all policies related to it.
___________________________________________
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Instructions for Scantron form:
1. In the NAME box, print your name (last name, first name)
2. In the SUBJECT box, print your section number (e.g., BTA, BTB, BTC, etc.)
3. In the ID NUMBER box, print the last 6 digits of your Social Security
Number + 111. For example, if your SSN is 999-46-1234, print 461234111.
Then fill in the bubbles below each of the 9 digits.
4. In the TEST FORM box, mark the version of your exam (A, B, C, or D)
5. Use only a #2 pencil to mark bubbles on the Scantron.
Failure to follow these instructions will result in a 5% penalty to your exam grade.
Other instructions:
Before the exam:
1. Do not open the exam until instructed to do so by the proctor.
During the exam:
2. This exam has 40 questions. Make sure you have a complete exam.
3. You will not be allowed to go to the restroom or leave your seat during the exam.
4. You may not use cell phones, laptops, or other wireless devices during the exam.
5. You must keep your photo ID available. A proctor will come by to check your ID
at some point during the exam.
6. Proctors cannot answer questions.
7. Choose the best answer for each question.
At the end of the exam:
8. At the end of the exam, we will give a 10 minute warning and a 5 minute
warning. After the 5 minute warning is given, you will not be allowed to leave
the room and must remain seated until every exam has been collected.
9. Stop writing immediately when time is called. Continuing to work after time is
called will result in an immediate 10% penalty to your exam grade. In order
to be fair to all the students, this rule will be very strictly enforced.
The exam and Scantron sheet must be handed in together at the end of the exam.
Otherwise, your exam will not be graded. Note also that only the Scantron
sheet will be graded.
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1. Bay Back Company acquired equipment on June 30, 2011, for $210,000. The residual
value is $35,000 and the estimated life is 5 years or 40,000 hours. Compute the
balance in Accumulated Depreciation as of December 31, 2013, if Bay Back
Company uses the double-declining-balance method of depreciation.
A)
B)
C)
D)
E)
$68,040
$134,400
$141,960
$40,320
None of the above
2. Which of the following statements is FALSE?
A)
B)
C)
D)
E)
A trial balance is the same as a balance sheet
A trial balance can verify the equality of debts and credits
A trial balance can be taken at any time
A trial balance lists all the accounts with their current balances
None of the above
3. An adjusting entry recorded April salary expense that will be paid in May. Which
statement best describes the effect of this adjusting entry on the companys
accounting equation?
A)
B)
C)
D)
E)
Assets decrease, liabilities increase, and stockholders equity decreases
Assets are not affected, liabilities increase, and stockholders equity decreases
Assets decrease, liabilities are not affected, and stockholders equity decreases
Assets are not affected, liabilities increase, and stockholders equity increases
None of the above
4. When bonds are issued at a discount and the effective interest method is used for
amortization, at each interest payment date, the interest expense:
A) Increases.
B) Decreases.
C) Remains the same.
D) Is equal to the change in carrying value.
E) None of the above
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5. Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations.
Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an
estimated amount in the range of $100,000 to $200,000, with all amounts in the range
considered equally likely. How should Higgins report this litigation?
A) As a liability for $100,000 with disclosure of the range.
B) As a liability for $150,000 with disclosure of the range.
C) As a liability for $200,000 with disclosure of the range.
D) As a disclosure only. No liability is reported.
E) None of the above
6. Lail Inc. accounts for bad debts using the allowance method. On June 1, Lail Inc.
wrote off Andrew Green's $2,500 account. Based on Lail's estimation, Andrew Green
will never pay any portion of the balance in his account. What effect will this writeoff have on Lail Inc.'s balance sheet at the time of the write-off?
A) An increase to stockholders' equity and a decrease to liabilities.
B) No effect.
C) An increase to assets and an increase to stockholders' equity.
D) A decrease to assets and a decrease to stockholders' equity.
E) None of the above
7. Universal Travel Inc. borrowed $500,000 on November 1, 2011, and signed a 12month note bearing interest at 6%. Interest is payable in full at maturity on October
31, 2012. In connection with this note, Universal Travel Inc. should report interest
payable at December 31, 2011, in the amount of:
A)
B)
C)
D)
E)
$8,000
$30,000
$5,000
$25,000
None of the above
8. Jaye's Company paid $750 cash to replace a part on equipment sold under warranty.
To recognize the payment, which of the following are correct?
A) Debit Warranty Payable and credit Cash
B) Debit Warranty Expense and credit Cash
C) Debit Equipment Expense and credit Cash
D) Debit Parts Expense and credit Cash
E) None of the above
3
9. Sales taxes collected by a company on behalf of the state and local government are
recorded by:
A) A debit to an expense account.
B) A credit to a revenue account.
C) A debit to a revenue account.
D) A credit to a liability account.
E) None of the above
10. Bonds payable should be reported as a long-term liability in the balance sheet at:
A) Face Value.
B) Current bond market price.
C) Carrying value.
D) Face value less accrued interest since the last interest payment date.
E) None of the above
11. Garber Plumbers offers a 20% trade discount when providing $2,000 or more of
plumbing services to its customers. In March 2012, Garber provided $4,000 of
plumbing services to Red Oak, Inc. and $1,500 of services to Cyril, Inc. Each of these
customers was granted credit terms of 2/10, net 30. If both customers paid for the
plumbing services within the discount period, what was the net sales figure for these
two transactions?
A) $5,500.
B) $4,312.
C) $4,486.
D) $4,606.
E) None of the above
Use the information below to answer questions 12-14:
The following t-accounts are for Marlys Inc. for the month of July:
Accounts Payable
5,000 beg.
(a) 2,000 4,000 (b)
Cash
beg. 3,000
2,000 (a)
(c ) 5,000
(f) 3,450 3,500 (e)
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Accounts Receivable
beg. 3,500
(d) 6,000
5,000 (c)
12. Which of the following best describes what happened in transaction (a)?
A)
B)
C)
D)
E)
Marly collected $2,000 from customers for goods purchased on account
Marly purchased $2,000 of inventory on account
Marly paid suppliers $2,000 for goods previously purchased on account
Marly paid its $2,000 utility bill for the previous month
None of the above
13. What is the ending balance in the Cash account?
A)
B)
C)
D)
E)
$5,950 debit balance
$3,450 debit balance
$5,950 credit balance
$4,580 debit balance
None of the above
14. Which account was most likely credited in transaction (d)?
A)
B)
C)
D)
E)
Cash
Sales revenue
Inventory
Unearned revenue
None of the above
15. Crimson Inc. recorded credit sales of $750,000, of which $600,000 is not yet due,
$100,000 is past due for up to 180 days, and $50,000 is past due for more than 180
days. Under the aging of receivables approach, Crimson Inc. expects it will not
collect 1% of the amount not yet due, 10% of the amount past due for up to 180 days,
and 20% of the amount past due for more than 180 days. The allowance account had
a debit balance of $1,000 before adjustment. After adjusting for bad debt expense,
what is the ending balance of the allowance account?
A) $29,000.
B) $28,000.
C) $27,000.
D) $26,000.
E) None of the above
5
16. Ontario Resources, a natural energy supplier, borrowed $80,000 cash on October 1,
2011, to fund a geological survey. Ontario Resources issued a 9-month, 12% note
payable with principal and interest payable at maturity on June 30, 2012. Assume
adjusting entries are recorded only once a year on December 31, the fiscal year-end.
The journal entry on June 30, 2012 would include:
A) Debit to Interest Expense of $7,200
B) Credit to Interest Payable of $4,800
C) Debit to Interest Payable of $2,400
D) Credit to Notes Payable of $80,000
E) None of the above
17. Total stockholders equity for Dearborn Inc. at the beginning and end of 2010 was
$20,000 and $25,000, respectively. Assets at the beginning of 2010 were $32,000. If
liabilities increased by $9,000 in 2010, how much were Dearborns total assets at the
end of 2010?
A)
B)
C)
D)
E)
$32,000
$35,000
$41,000
$46,000
None of the above
18. Which of the following true is regarding LIFO and FIFO?
A) In a period of decreasing costs, LIFO results in lower total assets than FIFO.
B) In a period of decreasing costs, LIFO results in lower net income than FIFO.
C) In a period of rising costs, LIFO results in lower net income than FIFO.
D) The amount reported for COGS is based on market value of inventory if LIFO
is used.
E) None of the above
6
19. On December 1, 2011, Debbies Plantscape receives $2,400 in advance for an
agreement to care, with equal monthly effort, for a clients office plants during the
months of December, January, and February. Assume adjusting entries have been
recorded for 2011. As of December 31, 2011, Debbies Plantscape would have:
A) A $1,600 liability to its client under accrual accounting, or a $2,400 liability to
its client under cash-basis accounting
B) Recognized $800 revenue under accrual accounting, or $2,400 revenue under
cash-basis accounting
C) A $0 liability to its client under accrual accounting, or a $1,600 liability to its
client under cash-basis accounting
D) Recognized $800 cash under accrual accounting, or $2,400 cash under cashbasis accounting
E) None of the above
20. When bonds are issued at a premium and the effective interest method is used for
amortization, at each subsequent interest payment date, the cash paid is:
A) Less than the interest expense.
B) Equal to the interest expense.
C) Greater than the interest expense.
D) More than if the bonds had been sold at a discount.
E) None of the above
21. Roberts Inc. uses the double-declining balance method for depreciation on its
computers. Which item is not needed to compute depreciation for the first year?
A)
B)
C)
D)
E)
Original cost
Epxected useful life in years
Estimated residual value
All of the above are needed
None of the above are needed
7
22. On November 10 of the current year, Flores Mills sold carpet to a customer for
$8,000 with credit terms 2/10, n/30. How would Flores record the sale on November
10?
A)
B)
C)
D)
E) None of the above
23. Tulip and Co. has total assets and liabilities of $30,000 and $17,000 respectively at
the beginning of 2002. If Tulip and Co. reports revenues of $125,000, expenses of
$85,000, and declares and pays dividends of $30,000 during 2002, how much will its
stockholders equity be at the end of 2002 (assuming there were no other transactions
that affected equity during 2002)?
A)
B)
C)
D)
E)
$53,000
$23,000
$57,000
$29,000
$62,000
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24. Inventory records for Marvin Company revealed the following:
Marvin sold 2,300 units of inventory during the month. Ending inventory assuming
weighted-average cost would be (round weighted-average unit cost to four decimals if
necessary):
A) $5,087.
B) $5,107.
C) $5,077.
D) $5,005.
E) None of the above
25. Equipment purchased for $85,000 on January 1, 2010, was sold on July 1, 2013 for
$30,000. The company uses the straight-line method of computing depreciation,
assuming a five year useful life and no salvage value. When recording the sale, the
company should record a debit to Accumulated Depreciation for:
A)
B)
C)
D)
E)
$51,000
$59,500
$68,000
Nothing; Accumulated Depreciation is not debited.
None of the above
26. Which of the following transactions would increase total assets?
I. Borrowed cash on a note payable, $80,000
II. Provided services on account, $10,000
III. Received cash from a customer as payment on account, $8,000
IV. Received a utility bill that will be paid later, $1,200
A)
B)
C)
D)
E)
I and II
I and III
II and III
I, II, and III
I, III, and IV
9
Use the information below to answer questions 27-29:
X2 Corporation issued bonds on January 1, 2010. The bonds pay interest annually on
December 31 each year. X2's accountant has projected the following amortization
schedule from issuance until maturity:
10
27. What is the annual stated interest rate on the bonds?
A) 3%.
B) 3.5%.
C) 6%.
D) 7%.
E) None of the above
28. What is the amount of the bond premium on December 31, 2013?
A)
B)
C)
D)
E)
$0
$4,212
$1,833
Cannot be determined from the information given.
None of the above
29. X2 retires the bonds on January 1, 2015, by repurchasing the bonds from investors for
$95,000. For the fiscal year ending December 31, 2015, the bond retirement would:
A)
B)
C)
D)
E)
Increase net income by $5,000
Decrease net income by $6,833
Decrease net income by $5,000
Increase net income by $5,943
None of the above
30. Irvin Inc. sold equipment on April 30, 2008 for $58,000 cash. The equipment was
purchased on January 1, 2005 for $100,000 and was being depreciated using straightline depreciation, assuming a ten year useful life and $10,000 salvage value. What
gain/loss would Irvin recognize if the equipment was sold on April 30, 2008?
A)
B)
C)
D)
E)
$28,000 gain
$12,000 loss
$18,000 gain
$42,000 loss
None of the above
11
31. At the end of a reporting period, Gamble Corporation determines that its ending
inventory has a cost of $300,000 and a market value of $230,000. What would be the
effect(s) if Gamble applies the lower-of-cost-or-market rule for its inventory?
A) Decrease total assets.
B) Decrease net income.
C) Increase retained earnings.
D) Both A and B
E) None of the above
Use the following to answer questions 32-33:
Bricker Enterprises purchased a machine for $200,000 on April 1, 2006. The estimated
service life is ten years with a $20,000 residual value.
32. What is depreciation expense for 2006 if Bricker uses double-declining balance
depreciation?
A)
B)
C)
D)
E)
$40,000
$27,000
$36,000
$30,000
None of the above
33. What is the book value of the equipment at the end of 2007 if Bricker uses straightline depreciation?
A)
B)
C)
D)
E)
$31,500
$164,600
$168,500
$136,000
None of the above
12
34. On June 1, 2011, Triton Entertainment issued $12 million of three-year bonds at par
to fund a new Fun Park. The bonds, which mature on May 31, 2014, have a 6%
interest rate, with interest due each May 31 and November 30. The journal entry
recorded on May 31, 2013 would include:
A) A debit to Interest Payable for $60,000
B) A debit to Interest Expense for $360,000
C) A credit to Interest Payable for $300,000
D) A credit to Cash for $300,000
E) None of the above
35. At the beginning of 2009, Angel Corporation began offering a 2-year warranty on its
products. The warranty program was expected to cost Angel 4% of net sales. Net
sales made under warranty in 2009 were $180 million. Fifteen percent of the units
sold were returned in 2009 and repaired or replaced at a cost of $5.3 million. The
amount of warranty expense on Angel's 2009 income statement is:
A)
B)
C)
D)
E)
$5.3 million
$7.2 million
$1.9 million
$27 million
None of the above.
36. Northwest Fur Co. started the year with $94,000 of merchandise inventory on hand.
During the year, $400,000 in merchandise was purchased on account with credit
terms of 1/15, n/45. All discounts were taken. Northwest paid freight-in charges of
$7,500. Merchandise with an invoice amount of $5,000 was returned for credit. Cost
of goods sold for the year was $380,000. What is ending inventory?
A) $112,490.
B) $112,550.
C) $116,500.
D) $120,300.
E) None of the above
13
37. On September 1, 2011, Cooking with Tarla sold 600 one-year magazine subscriptions
for $81 each. Subscriptions start immediately. The total amount received was
recorded as Unearned Subscriptions Revenue. Which of the following accounts and
amounts will appear on the unadjusted trial balance at December 31, 2008?
A) Unearned Subscriptions Revenue, $48,600 credit balance
B) Subscriptions Revenue, $16,200 credit balance
C) Unearned Suscriptions Revenue, $16,200 credit balance
D) Suscriptions Revenue, $32,400 debit balance
E) None of the above
38. For 2010, Regal Inc. had revenues in excess of expenses. Which statement describes
Regals closing entries at the end of 2010?
A) Revenues will be credited, expenses will be debited, and retained earnings
will be credited
B) Revenues will be debited, expenses will be credited, and retained earnings
will be debited
C) Revenues will be credited, expenses will be debited, and retained earnings
will be debited
D) Revenues will be debited, expenses will be credited, and retained earnings
will be credited
E) None of the above
39. Which of the following statements is FALSE?
A) Assets that are increasing in value are still subject to depreciation.
B) Depreciation is a non-cash expense.
C) Accumulated depreciation represents a growing amount of cash to be used to
replace the existing asset.
D) Accumulated depreciation is that portion of a plant assets cost that has been
recorded previously as an expense.
E) None of the above
40. A loss is recorded on the sale of a plant asset when the:
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A)
B)
C)
D)
E)
Cash received exceeds the assets book value
Assets book value is less than its historical cost
Assets book value is greater than the amount of cash received from the sale
Cash received exceeds the cash paid for the replacement asset
None of the above
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