Exam 2 A (2) - Exam #: Fundamentals of Financial Accounting...

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Unformatted text preview: Exam #: Fundamentals of Financial Accounting ACC 311 ><Jt Exam 1 '1 ' 42w W Form A dwcvmi filed flit Instructor Section Meeting Time usInmw-an:muan.—I—.—u-n—uumunmmwmmmmmm—————wmmmuuuu‘ f” I } 90 NOT OPEN : until given instructions to do so. I I l__................... u—uuuuwmwmmwm———————uumwuumummmmmm————— Instructions 1. Assume that the accrual basis of accounting applies to all questions, unless a question specifically instructs otherwise. 2. Confirm that you have 12 numbered pages. There are also one blank sheet of paper at the end of the exam that you may use for scratch paper. 3. On your Scantron answer sheet, write and bubble in your name, section number, and the Test Form letter noted above. 4. Use a #2 pencil only to mark your responses on your Scantron answer sheet. Mark clearly and erase completely as needed. You should also mark your answers on your exam. However, only multiple choice answers marked on your Scantron answer sheet will be graded. 5. Multiple choice questions are 2 points each; all other questions have their point value noted with the problem. 6.. Cell phones, PDA's and calculators capable of storing text are NOT allowed at your desk during the exam. Please silence all cell phones and do not access them during the exam. 7. Bring your entire exam, Scantron answer sheet and student ID to the front of the room when you have finished. 8. You are reminded of the University” 3 honor policy which requires you do your own work and not give or receive assistance on this exam. >5 Ace 311 ~ Exam 1 Form A — Page 1 Spring 2008 SECTION I - MULTHPLE CHOICE (50 points - 2 points each) - Please choose the BEST answer for each question and record your answer on the Scantron answer sheet. 1. Which of the following statements is false? \a/f Property, plant, and equipment are classified as long~term assets on the balance sheet. “'ng elf Current liabilities are debts expected to be paid out of current assets within the next year. Trwz» @ Accumulated depreciation is the amount of depreciation reported on the income-statement for the current year. W v0? Current assets are resources of a company which might include cash and prepaid expenses. e. None of the above (M 2. Two sisters operate a bed and breakfast on the coast of Maine. As customers make reservations they are required to pay cash in advance equal to one—half of the rate for their stay. How should the sisters account for the cash received as reservations are made? Q Cash xx Unearned Revenue xx 1). Cash xx Revenue xx {/67 Unearned Revenue xx Revenue XX fl Prepaid Expense xx Cash xx e. Cash xx Prepaid Expense XX 3. At the end of 2007, Libby Company reported an ending balance for retained earnings of $50,000. During 2008, the company reported the following amounts: Dividends declared and paid, $30,000; sales revenue, $80,000; expenses, $40,000. The 2008 Statement of Stockholders” Equity should report an ending balance for retained earnings of: gflgfi駧§figm / sags - 9 ” {MAWWVMM 0. $80,000 36,909 [.{W d. $90,000 «me ~_/ collection of an account receivable '0 :a. mat. Cereal?) providing a product or service to customers (cash not yet collected) ’0 " sale of additional stock to investors ’3‘ la: Canada‘s;th meant fl payment of a cash dividend to stockholders .5, megaka Wag, Ace 311 ~ Exam 1 Form A - Page 2 Spring 2008 5. Adjusting entries: Va’. Usually are recorded on the first day of the month . Always decrease expenses and decrease revenues Will usually acne incorn statt balance and oce sheet account balance w I Always affect the ...... e. Two or more of the above are correct 6. If a company fails to adjust an Unearned Rent account for rentlthatvhasflbueefin earned, What effect will this have on that month's financial statements? Maw“ a. Assets will be understated and revenues will be understated. b. Liabilities will be understated and revenues will be understated. G.) Liabilities will be overstated and revenues will be understated. d. Assets will be overstated and revenues will be understated. e. Unable to determine with the information given r 7 Franklin, Inc. was formed in 2007 and started the year with total assets of $60,000 and total X liabilities of $40,000. During 2007 the business recorded $100,000 in revenues, $55,000 in expenses and dividends of $10,000. Owners' equity at the end of 2007 was: a. $20,000 r :9: i: “an. $35,000 an, ass deltas, masts $45,000 too? a o a $55,000 same $65,000 8. During 2008, its second year in operation, Flag Company delivered goods to customers for which customers promised to pay $5,850,000. The amount of cash collected from customers was $5,960,000. The amount of accounts receivable at the beginning of 2008 was $1,200,000. Based on this information, What is the amount of accounts receivable that Flag Company would report at the end of 2008? a. $5,850,000 b. $5,740,000 c. $1,310,000 Cl. $1,200,000 \(cfi.oroaa @$1,090,000 9. A group of people establishing a business might prefer to set it up as a corporation rather than a partnership / a. to have limited liability 3b.? to avoid double taxation because of the ease of formation . because a corporation is considered to be a separate business entity and a partnership is not g e. 3 both a. and d. are correct Ace 311 - Exam 1 Form A ~ Page 3 Spring 2008 10. Which of the following provides addiggialdgbtadlsnbougtemspresented in the main body of the . financial statements? “Van-unnuwm N we, . auditor’s report . management discussion and analysis section of the annual report notes to the financial statements president’s state of the company report 11. Douglas Corporation had the following transactions during the : June Ist Owners started the company by investing $3 50,000 in cash. June 3rd Purchased $200,000 of equipment by making a $50,000 cash down payment and signing a note payable for the balance. June 10th Performed $30,000 worth of services to customers of which $20,000 was paid in cash with the balance owed by customers. June 28th Received a bill for utilities used of $500 that will be paid next month. edema threet What are the totai assets and total liabilities for Douglas at the end of June? . . . . is»; w Assets Liabilities A Lg silk L... mint. 05nd {gagalagnhtg fit, 520,000 149,500 w a» 8%. WWW . ($22100?) (£sz {3/} 530,000 150,500 “New teamm raster-3. 0. 529,500 150,000 ;‘:§zb:: eerie finiawae; “knights ufilfies Eng. d 530,500 160,500 es sea e none of the above ._ w negates : nausea --Mgmgmg 12. Which of the following changes in retained earnings during a period wiil be reported in the financing activities section of the statement of cash flows? PM 1. A cash dividend paid during the period 2. Net income for the period . 2 0.. Neither 1 nor 2 “(1. Both 1 and 2 13. Retained earnings refers to: a. the amount reported as "the bottom tine" on the income statement the accumulated amount of past earnings that have not been distributed to stockholders as " ' dividends [’05 the total amount of stockholders‘ equity for a corporation ,df the amount that stockholders have invested by purchasing a corporation's stock 2.” the amount that stockhoiders have invested by purchasing a corporation's stock, less the amount of dividends they have received. Ace 311 — Exam I Form A - Page 4 Spring 2008 14. A company receives a $25,000 cash deposit from a customer on March 15, but will not deliver the goo untii April 20. Which. of the following statements is true? X a. cash will be reported on the statement of cash flows for March _f:‘::~«<,’ revenue will be recorded and reported on the income statement for Aprii J Nat: mart-ed be W it ~. A a liability will be reported on the balance sheet at the end of March v/ Wee-ea“ All of the above are true. 7 'e. i' Only A. and C. are true. 15. The acquisition (purchase) of land in exchange for shares of its own common stock is a. only reported in the statement of cash flows if the direct method is used e” b. a noncash transaction and would be reported in the body of the statement of cash flows K w a cash transaction and wouid be reported in the body of the statement of cash flows 1 a noncash transaction that is not reported in the body of a statement of cash flows 16. Dividends paid to stockholders are recorded on the: a. income statement as an expense b. balance sheet as an asset c. retained earnings statement as an increase @retained earnings statement as a decrease 17. Sarah, Inc. had the foliowing accounting information at the end of 2008: Sales revenue 70,000 Cash received from customers W000” Cost of goods sold {30,0003 Rent expense 8,0007 Wage expense 5,000) \fi‘figfipfifi Advertising expense (3,000”) at {a 4, ,9 Cash paid out for operations <=¢ir000~ A What amount should be reported for net income for 2008? a 15,000 b 31,000 0. 50,000 d. 61,000 e. none of the above 18. Buying assets needed to operate a business is an example of a(n) lat” delivering activity 11217. financing activity g) investing activity ' . operating activity Ace 311 — Exam 1 Form A - Page 5 Spring 2008 19. An increase in an expense a; increases revenues. 4b: increases assets. ,0: decreases liabilities. decreases owner's equity. 20. Before month—end adjusting entries are made, the March 3 I, trial balance of Ankur Enterprise contains reVenue of $9,000 and expenses of $4,400. Adjustments are necessary for the following items: - depreciation expense for March is $1,300 I — revenue earned, but not received by the client is $2,800 We“ Elite-vi ‘ — revenue collected in advance (unearned revenue) that is now earned is $3,500 - After adjusting entries are made net income is equal to ere“ "" um“? a. $3,300 ' -' rages get“? ‘0. $4 600 '“ no e.» _ 3 A ‘ g} "" (wilt? :J'm c. $7,400 7 , is View“; a- d. $8,100 (his (ates) W I Laces) tamed? alga-ea Current assets reported in the balance sheet are generally reported in order of their liquidity. Unearned Revenues are increased as a result of a product or service being provided. c Expenses on the income statement are reported as they are incw'red, not as they are paid. ed. The statement of cash flows reports the inflows (sources) and outflow (uses) of cash during the accounting period. @ssnco 21. Which statement is incorrect regarding the financial statements? 22. A trial balance proves a. the mathematical equality of debits and credits . the ledger is posted correctly that all transactions have been recorded correctly __ at? that all transactions have been posted 23. Big Sky Airline operates as a domestic airlines carrier. The company recently sold some old baggage handling equipment. This type of activity would be considered what type of activity on the statement of cash flows? 2;. an operating activity $5? an investing activity c. a financing activity d. a sales activity e. none of the above Ace 313 - Exam 1 Form A — Page 6 Spring 2008 24. Given the following infomation, how much cash did. the Lindsey company pay for salaries in 2008? Saiaries expense $84,000 Saiaries payable January 1, 2008 $ 5,300 Salaries payable December 31, 2008 $ 3,200 Cash paid for salaries in 2008 was: 87% f 9 m} a. $81,900 :Mf/ 170 D $84,000 ‘39, are e: 6. $86,100 e, "so e53 ‘ $0 a» w a: 25. If accounts receivable have increased during the accounting period a; revenues on an accrual basis are less than revenues on a cash basis . revenues on an accruai basis are greater than revenues on a cash basis lei” revenues on an accrual basis are the same as revenues on a cash basis ,0? expenses on an accrual basis are greater than expenses on a cash basis Amwa means. 4’“ 4%“. Ace 311 ~ Exam I Form A — Page 7 Spring 2008 SECTION IE (50 points) You MUST show your work to receive credit for your answers and to receive partial credit. Please try to be as neat and organized as possible. PROBLEM l (22 points) A. Prepare the journal entries that would be required on the date of each of the activities listed below. If a journal entry is not required, please state the reason. Use good form. B. Prepare any necessary adjustingjoumal entries that may be required on November 30 2008 for the activities listed beiow. If an adjusting journal entry is not required, please state the reason. Use good form. Note: The. company prepares financial statements at the end of each month. 1. Revenue earned for services rendered to customers, but not yet billed, totaled $5,000 on November 30. Journal entry on November 30, 2008 Ape/Eu ficglwmefi Rwy fittiooa) 2. On September 1, 2008, the company loaned $24,000 to an employee for one year at an interest rate of 12%. Both principal and interest are due on August 31, 2009. Journai entry on September I, 2008 woke. misexake 2})“er Cfl‘fékfip "29% r {30 Q Journai entry on November 30, 2008 “flamers -. “2.3% 5;.) memes ' tar-to taped» w ,tr. e: 2.55th 1%‘50 "HE.— Qfl. D L Ace 313 m Exam 1 Form A - Page 8 Spring 2008 3. The company purchasedequipment on January 1, 2008, for $48,000 cash. It uses the straight-line depreciation method, and will record $6,000 of depreciation expense each year. Eournal entry on January I, 2008 gawk?! %% g. Q e: a} (Ath Mfg; more? Journal entry on November 30, 2008 Wet-a brim firs? v gm A (2;; l,» WMLV‘» L612: @ 4. An insurance policy was acquired on June 30, 2008. The premium paid for 2 years of insurance coverage-was $6,000, and coverage began on July 1, 2008. Journal entry on June 30, 2008 {3% was W... a. a, e e «:9 CL"?- bw. (9/ Q Journal entry on November 30, 2008 make; u¢l&,m_% Eflvkgfiwfigfi‘ r 'i" 5. The company received $2,400 of revenue in advance from a customer on November I, 2008. One- third of this amount was earned during the month of November, 2008. Journal entry on November 1, 2008 Clem 5. mm o QMWMrjbs “Ema ‘ -- . 'N “Z”; Malawi? Journal entry on November 30, 2008 LkWJx EU). gag) (ngxN- are. “liege b fiin w Ace 311 - Exam 1. Form A w Page 9 Spring 2008 6. The company received an order from a customer on November 20, 2008. The customer promised to pay $50,000 when the product is delivered. The company finished manufacturing the product on November 29, 2008 and expects to ship it to the customer on Decembei~ 3, 2008. Journal entry on November 20, 2008 ME) fi%wer’€,€£~ rifle” wlgflmfifi {Liam Journal entry on November 30, 2008 Pm; gm NéN_ :1 Ace 311 ~ Exam 1 Form A — Page 10 Spring 2008 PROBLEM 2 (9 points) The end of the period account balances after adjustments of the Dexter Cleaners and Laundry are as follows: Account Balances ~ After Adjustments (in alphabetical order) Accounts Payable 8,500 Accumulated Depreciation u Equipment 20,000 Cash $ 9,000 Cleaning Supplies 3,500 Cleaning Supplies Expense” 4,000 Contributed Capital 112,400 Depreciation Expense “" 2,000 gfilbleafiingllgevefiues 18,000 €qu meamemW 125,000 1 Laundgx fievenues7 4,000 Prepaid Rent 3,600 Rent Expense «=- 900 Salaries Expense W 2,400 Utilities Expense —-— 500 Prepare the end of the period closing entries for the Dexter Cleaners and Laundry. You may omit journal entry explanations. Di“ {,3 fififixmwfi who} y ‘Egfl Q a) Q mam am. am (a?) {Zea-in fierweafi (a?) EM. Emma‘s 5m Cg, . ,3: . ea saw-sea mas » n w ( {£33} beak-abides Rap: @139 (C26 my 1:690 (c?) geese we» ‘ "pew Ace 311 ~ Exam I Form A — Page 11 Spring 2008 PROBLEM 3 (19 points) Following are the most recent financial statements for Western Company. flaw E Assets 2008 20,01 1 Cash 184 114 “It? 1; 0 Accounts Receivable (net) fittest-“t 670 829 gnaw a. 0 Inventory 627 789 a“ i H itlaétaw a. T Land 817 787 QWWWQ a.“ 3: Fixed Assets (net) £423 4,381 {tea} 1 fi‘m8t'eve a» Total Assets 6,493 6,900 ,1 Liabilities and Shareholders’ Eguity f p Accounts payable 1,183 1,060 ("tea Mates “t” 0 Salaries payabie 131 118 "fig ” tmfitew "it C) Interest payable ' 15 33 $83 mat-view?“ “" Income Taxes payable 23 50 m owe-state a 5' Long-term debt 2,491 3,089 fist-tie? '2 .. 3 asset-tee a “F Capital Stock 432 42,4 "*8 new so Retained Earnings 2,218 2,126 was". J gmmm a, Total Liabilities and Shareholders’ Equity 6,493 6,900” Income Statement Sales Revenue 5,826 Cost of Goods Sold <2,710> Gross Margin 3,116 Seiling and Administrative expenses 1,234 5 Salaries expense 678 O Depreciation expense Qp‘fi‘r-‘nw mm? 353 gag-7.3 x fissile-MW agitate a misfit.“ 215 3" , i ‘ O - Loss on"salé"'0f fixed asset “6 QWWW“ “MW;- ‘3‘" Income before income taxes income taxes 0% Net income i Other information 7 ‘ 1. Fixed assets with a book value of $189 were sold for $183 during the year. There were no sales of land. 2. Fixed assets were purchased during the year 3. There were no noncash transactions that took place during the year. Required Prepare a Statement of Cash Flows in good form on the following page for Western Company for 2008. p02,? a: (X R, out) 3; g cm; weep 1-, “LE: 9M3 F‘j M\,,_f'gf.»iwxufir«\ an “3'3" - ‘ “r ‘ V? 'v , “a H‘L‘.‘ a“, 1 .36! 6}- M ‘5 sweet-s an Ace 311 -— Exam I Form A — Page 12 Spring 2008 Answer page for Problem 3 - Statement of Cash Flows. ...
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This note was uploaded on 03/03/2011 for the course ACC 311 taught by Professor Charrier during the Spring '08 term at University of Texas.

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Exam 2 A (2) - Exam #: Fundamentals of Financial Accounting...

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