SolutionsExam2Su_09 - Print Last Name flit Score Print...

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Unformatted text preview: Print Last Name flit Score Print First Name ACCT 2101 EXAM 2 SUMMER 2009 (100 PTS.) Instructions: 1. This exam is open book, open notes. Sharing of materiais is not permitted. The only electronic device permitted is the caicuiator that wiii be suppiied. 2. You must show all work to receive any credit. 3. it you feet a probiem is unciear, you may state your assumption in writing and give the best answer you can. 4. Make sure you have a cover sheet pius 7 numbered pages. Toobigi foomoteson the\muflfrewfi“have‘t°'beimuChdsmaw l. (7 pts.) On 12/1/09, Elchorn Corpi borrowed $120,000 by issuing a one—year} 10% note payable Record the necessary journal entries for the following dates: 12/31/09: 12/1/10: II. (10 pts.) The following transactions occurred during the month of January for the Clark Company: l/l Beginning inventory consists of 50 units @ $30 l/6 Sold 40 units @ $50 1/9 Purchased 100 units @ $32 1/16 Sold 80 units @ $52 l/ZO Purchased l 10 units @ $33 1/28 Sold 60 units @ $54 (A) Compute cost of goods sold for January assuming the weighted average method is used with a periodic inventory system: 3 (8) Compute cost of goods sold for January assuming a FIFO perpetual inventory method is used: S (C) Compute cos of goods sold for January assuming a LIFO periodic inventory in ethod is used: 33 a ‘vr l 3 III. (4 pts.) Lemke Company was undergoing an end of year audit of its financial records. The auditors were in the process of reviewing Lemke’s inventory for year end, December 31, 2007. They completed an end of year inventory, The value of the ending inventory prior to any adjustments was $202,000, but before finishing up they had a few questions. Discussion with Lemke’s accountant revealed the following: (l) The physical count of the inventory did not include goods costing $95,000 that were shipped to Lemke FOB destination on December 27 and were still in transit at year-end. (2) Lemke received goods costing $25,000 on January 2‘ The goods were shipped FOB shipping point on December 26 by Wohlers Company. The goods were not included in the physical count. Determine the correct amount for Lemke Company’s ending inventory: $ IV. (5 pts.) Denver Co. has a paint mixer that cost $3 l,500 plus $400 to install. The estimated salvage value at the end of its useful life in l5 years is $l ,900. Denver estimates that the machine can mix 850,000 cans of paint during its lifetime. Compute the second full year’s depreciation expense using the units of production method assuming that the machine mixes 5l,000 cans of paint during that year: $ ; V. (4 pts.) The following data are for Tiant Shoe Shop for 2009: Beginning inventory $605000 Net purchases $80,000 Net sales revenue $009000 Normal gross margin rate 35% What is the estimated ending inventory? S U) VI. (16 pts.) — Multiple choice: Circle the 911;; best answer for each question. 1. if 2008 ending inventory is overstated by $400, then: a) 2008 beginning inventory must have been overstated by $400. b) 2009 beginning inventory will be understated by $400. c) 2008 cost of goods sold will be overstated by $400. 2008 ending retained earnings will be correct. 2009 ending retained earnings will be correct. 2. Which one of the following is not capitalized? a) trademarks b) natural resources research and development costs interest costs during construction periods e) an expenditure that merely increases an asset’s useful life 3. Which of the following are included in an employer‘s payroll tax expense? a) Employer portion of FICA taxes b) Federal unemployment taxes ell/State unemployment taxes All of the above None of the above 4. Sales taxes collected by a company on behalf of a state 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. A credit to a liability account. e) A debit to a liability account. 5. Management can estimate the amount of loss that will occur due to litigation against the company. If the likelihood ofloss is reasonably possible. a loss contingency should be ( isclosed but not reported as a liability. bl disclosed and reported as a liability. c) neither disclosed or reported as a liability. d) reported as a liability but not disclosed. e) disclosed and reported as a deduction from stockholders’ equity. 6. In a perpetual inventory system. the cost of purchases is debited to: a) Purchases. Cost of goods sold. inventory. d) Accounts payable. e) Accounts receivable. 4 /2 7. At the beginning of 201 0, Angel Corporation began offering a 1-year warranty on its products. The warranty program was expected to cost Angel 4% of net sales. Net sales made under warranty in 2010 were $180 million. Fifteen percent of the units sold were returned in 2010 and repaired or replaced at a cost of $5.3 million. The amount of warranty expense on Angels 2010 income statement is: $ 5.3 million. 7.2 million. $10.6 million. d) $27.0 million. e) $1.9 million. 8. Which inventory method is better described as having an income statement focus and why is it considered as such? a) FlFO; best approximates the value of ending inventory. b) LlFO; best approximates the value of ending inventory. LIFO; best approximates inventory cost necessary to generate revenue. d) FIFO; best approximates inventory cost necessary to generate revenue. e) Weighted average; best approximates the value of ending inventory. VII. (4 pts.) The Copper Grill has the following current assets: cash. $12 million; receivables, $50 million; inventory. $44 million; and other current assets $4 million. The Copper Grill has the following liabilities: accounts payable, $38 million; current portion of long—term debti $7 million; and long term debt, $12 million. 1) current ratio : 2) acid~test ratio : VIII. (4 pts.) Wyncote. lnc. purchased machinery on 1/1/05 at a total cost of $56,000. Estimated residual value is $6,000., and estimated life of the machinery is 8 years. Using the suin—of~the—years—digits method, calculate the depreciation expense for 2008: EB f U1 i ? IX. (5 pts.) The following information was available for Rawley Company at December 31, 2009: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $600,000; and sales $000,000. 1) Rawley‘s inventory turnover ratio in 2009 was: X. (5 pts.) Honey Bee Co. purchased a machine for $91,000 and uses straight—line depreciation. The machine has an estimated useful life of seven years and a salvage value of $7,000. Journalize the disposal of the machine if it was sold for $72,000 after two years. X1. (5 13155.} -‘ ' On 1/1/08, MAC Corp. purchased a machine for $60,000. The machine cost MAC $2,800 for delivery. At the end of 10 years, MAC expects to sell the machine for $2,000. Compute depreciation expense for 2009 using the double declining balance method: 33 KB. (4 pts.) On April 30, 2009, Clampett Oil Company purchased an oil well? with estimated reserves of 100,000 barrels of oil, for $1 million. During 2009, 10.000 barrels of oil were extracted from the well. Prepare the journal entry needed at the end of 2009. 5 5/ X111. (2 pts.) Applying the lower of cost or market rule, a determination has been made that inventory needs to be written down by $590. Prepare the journal entry. XlV. (4 pts.) Greg Glavine, a tree-agent pitcher, received two otters to play baseball in 2009: Braves ~ will pay him $i2,200,000 immediately. Indians ~ will pay him $2,900,000 immediately plus three equal annual installments of $X, commencing one year from now, Calculate X such that Greg would be indifferent between the two otters (assume an interest rate of 8%): XV. (9 pts.) a) Cherrywood industries is budgeting for the acquisition of land in the future. They can invest $200,000 todayat How on cash will they have for land acquisitions at the end of five years? b) Fier Enterriises is planning to invest $1 000 each year it] eight years. What will be the vatue ot Fier‘s investment at the end ofeight years it Fier can earn 8%? ‘ i c) Unbalanced Sheets, lnci has $30,000 in outstanding debt that will come due 7/3t/i4. it wishes to accumulate that amount by making six equal annual cash deposits, in a bank paying 6% interest; beginning 7/31/09 What is the amount of each deposit?$ XVI. (6 pts.) For each item below make a correcting journal entry. (a) The $70 cost of repairing a printer was charged to Computer Equipment. (b) The $5,500 cost of a major engine overhaul was debited to Repair Expense. The overhaul is expected to increase the operating efficiency of the truck. (c) The $5,000 closing costs associated with the acquisition of land were debited to Legal Expense. xvn. (6 pts.) Questions on Illustrative Financial Statement Extracts l. Refer to the “Gains on dispositions of assets, net” for Occidental Petroleum Corp. on pg. Sl, Suppose the amount reported for 2007 represents the gain from the sale of one machine, If the book value of the machine were $l00 million? what amount of proceeds did they receive? 35 2. Refer to Lincoln Electric on pp 93. Prepare the adjusting journal entry relating to the accrual of warranties in 2005. 3, Deteim'ne Home Depot’s gross profit rate for the fiscal year ended 2/3/08 (page l3): W A % ...
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This note was uploaded on 07/26/2009 for the course ACCT 2101 taught by Professor Turner during the Summer '08 term at Georgia Institute of Technology.

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SolutionsExam2Su_09 - Print Last Name flit Score Print...

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