KeyExam 2A Sp 2010

KeyExam 2A Sp 2010 - Form A Second Examination Acct 3110...

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Unformatted text preview: Form A Second Examination Acct 3110 April 13, 2010 Dr. B. D. Merino Name(PRINT) E 5? Student ID Number _ FORM A 1. Fill in the information on this page and your Scantron now (i.e., name, test form) I 2. The examination consists of 11 pages, including this cover page. Be certain you have a complete copy before starting. 3. Points will be awarded ONLY if the appropriate computations are included in your answer and neatly and clearly shown. Use the back of each previous page to show work if more room and cross reference the work. No Work shown, NO credit. 4. You will have 85 minutes to complete the exam. Spend your time wisely; try to allocate time based on the value of the problem. POINTS POSSIBLE YOU'RE SCORE I. MULTIPLE CHOICE 45 II. REVENUE RECOGNITION 19 _ III. DOLLAR VALUE LIFO 8 IV. RETAIL INVENTORY METHODS 20 V. INVENTORY ERRORS mg Total 100 Extra Credit (4 Points) TOTAL Form A 1. Multiple Choice (45 points) 5 points each ~- Record your answer on the SCANTRON. l. The Percentage of Credit Sales method used to estimate bad debt expense emphasizes: a. The income statement and accurate valuation of the Net Realizable Value of Accounts Receivable. b. The balance sheet and accurate valuation of the Net Realizable Value of Accounts Receivable. a. c. The income statement and the matching principle. . The balance sheet and the matching principle. 0. c and d are emphasized . 2. On July 2, a fire destroyed the entire merchandise inventory on hand of Lacunas Wholesale Corporation. The following information is available: W m” :3 EM)? Mt ir a") (A Wat Inventory January $ 300,000 Purchases, January 1 through July 2 S 875,000 Sales, January 1 through May 1 $1,300,000 Gross profit ratio 40% I, M 7 5" @ $395,000 V3??? / w b. $360,000 f3 7, r 0. $302,550 d. $455,000 e. none of the above 3. Cathy's Sporting Goods began operations in 2008; the store sells jet skis and other sporting equipment. Jet ski customers pay 1/3 of the price when they buy a jet ski and agree to pay 1/3 of the sales price dining each of the next two years. The company uses the installment method for recording revenue clue to the uncertainty about collectibility; the store manager provides the following information related to 2008, 2009, and 2010: 2008 2009 2010 Sales of ski jets sales $ 900,000 $1,500,000 2,100,000 Cash Collected: 2008 sales " 300,000 300,000 200,000 2009 sales ' 500,000 400,000 2010 sales 700,000 Gross profit ratio 50% 40% 30% In 2009, Cathy's Sporting Goods would recognize realized gross profit of: a. $270,000 _ b. $300,000 0%, g; -g. \ t3"; _‘ $ 320,000 0 ‘ W, (5 $350,000 Tampa 01-0 v“ . none of the above E7 3’77 ,9 5 Form A I. Multiple Choice 4. Generally, which inventory costing method (1) approximates current costs for Ending Inventory and (2) results in the highest net income number. Assume increasing prices (inflation) and increasing inventory levels over time. Ending inventory Highest Net Income a. LIFO FIFO b. FIFO LIFO __ LIFO LIFO FIFO FIFO 6. None of the above combinations 5 & 6, The A & D Brothers operate a retail ski equipment and supplies store; management has provided the following data related to each line of inventory. Use the data, below, to answer both question 5 and question 6. Skis Boots Historical cost $128,000 $127,000 f 20': g Replacement cost 130,000 120,000 2 fig? Selling price 160,000 150,000 ’ " #52, Disposal costs 28,000 15,000 // é “him” ' Normal profit 16,000 15,000 /' ’ 6 5. In applying the lower of cost or market (lam) rule, the skis‘ inventory would be valued at: a. $ 132,000 (“km 128,000 0. $130,000 (1. $ 116,000 6. none of the above 6. In applying the lower of cost or market (1cm) rule, the inventory of boots would be valued at: a. $135,000 _ b. $127,000 $7 “3‘9 $125,000 / E55 $120,000 / 21:? e. none of the above Form A I. Multiple Choice Use the information below, related to the Beal Company’s Accounts Receivables and Sales for 2009, to answer questions 7—9. Beal company provides you with the following information for the year 2009: Accounts Receivable $ 940,000 Allowance for Uncollectible Accounts before adjustment at 12/31/09: $ 20,000 CR Credit Sales from 1/1/09 — 12/31/09 : $ 3,225,000 7. If Beal Company estimated bad debt expense as 2% of credit sales, the balance of Allowance for Uncollectible Accounts at 12/31/09, after adjustment, will be: 9’ 6.2}: c. ,(3) $84,500 *‘ f I .5, 13. $64,500 , , ,3 a; 59 ‘9 £2969 c. $45,000 55 :2 3,9 675/ d. $65,000 e. none of the above 6 ‘6. F 8 If Beal Company estimated bad debt expense using the 5% of accounts receivable, then the balance of Allowance for Uncollectible Accounts at 12/31/09, after adjustment, will be: a. $84,500 5)” b. $64,500 g Q; c. $45,000 marge? d. $65,000 W 0 @none of the above ‘ L 9. Assume that Beal Company reported the following data before adjustment for bad debts on 12/31/09. Accounts Receivable $ 940,000 Allowance for Uncollectible Accounts before adjustment at 12/31/09: $ 8,000 DR Credit Sales from 1/1/09 — 12/31/09 : $ 3,225,000 If the company used 5% of accounts receivable to estimate bad debts, then its bad debt expense for 2009 would be: 6:96 a. $84,500 b. $64,500 / 0. $45,000 9/} . $65,000 . one of the above Form A 11. Revenue Recognition--Long term Construction ( 19 points) Denton Construction entered into a construction contract with KDNT on October 1, 2008 to construct a new television tower. The fixed fee contracted price for construction of the tower was $3,600,000. The tower was completed on Feb 1, 2011. Contract costs incurred during each year, estimated remaining costs to complete the contract, billings during the year and cash collections dunng the year were as follows: 5%? 5 2009 2010 _ 2011 Total costs incurred each year $ 540,000 $ 900,000 $ 1,216,000 / 1/ ‘t a Year end estimate of remaining ' costs to complete project ...... .. 2,160,000 1,440,000 0 Amounts billed to KDNT during 9M; year ........................... .. 450,000 825,000 1,750,000 Amounts collected during year..... 407,500 830,000 1,800,000 7 Show all your work, no credit will be given for answers in any section of this question not supported by calculations. Round all percentages to three decimal places, i.e., .5557 =55.6%, and dollar amounts to the nearest cent. A (8 points) ASSUME Denton Construction uses the percentage of completion method.‘ Calculate each of the items, below. 1. Calculate the % complete at the end of 2009 .5220 % _ etc 5’45) Es; 9‘2 7 M C re. 2 Calculate the amount of gross profit recognized for 2009: 51m 2009 Gross Profit: *- 5 5?, :9 (94 l 9/69 :2 (7% {ewe-w; 7&0): 9w 3- (w 3. Calculate the amount of revenue recognized for 2009: 2009 Revenue f ’2 .0: W 20% (geeodflc?) 5 Form A 1 LL, 142%“ II. Revenue Recognition--Long term Construction ( Continued) B. (6 points) ASSUME Denton Construction uses the percentage of completion method. Calculate gross profit for 2010. 1 Calculate the amount of gross profit recognized in 2010: 2010 Gross Profit: {g 0 we gaw xgaa . . 9 .9..- “‘3 Jilin I: a; [7020): 36-901mm)” 5’2" ’ £2933 i so 2. Calculate the amount of revenue recognized in 2010: I" 2010 Revenue 5330 (gm?) :- //' (37m 30 (3W5) 575; gt? 0 3. Calculate the ending balance in Construction in Progress at the end of 2010. Ending Balance, Construction in Progress, 2010 f 5 5’07 C. (3 points) ASSUME Denton Construction uses the percentage of completion method, What would appear on the 2010 Balance Sheet, i.e., the account title, classification of the accounting and amount of the account? Account Title Classification of Account Amount ' I fZéee7/ fi'figycy we I). (2 points) ASSUME Denton Construction uses the completed contract method. What will be the balance in the Construction in Progress Account at the end of2010? 2010 Construction in Progress Balance: [ Li 6 W fl £963 gag W /VV6 Form A III. Dollar Value LIFO (8 points) On January 1, 2009, the National Furniture Company adopted the dollar-value LIFO method of computing inventory. An internal cost index is used to convert ending inventory to base year. Inventory on January 1, 2009 was $200,000. Year—end inventories at year-end costs and cost indexes for its one inventory pool were as follows: ‘ Inventory at Cost Index Year Ended Year End (Relative to December 31 Costs Base Yearl 2009 $250 200 1.08 2010 $253000 1.12 2011 $299 000 1.15 Required: Calculate the ending inventory, dollar value LIFO method, at year end for each item, below. You must show your supporting calculations to receive any credit. Round all dollar amount to the nearest dollar. 1. (4 Points) Dollar Value Inventory Valuation at 12/31/09: DVL Inventory @ 12/31/09 ' Q 3 ‘7‘ @062 Form A IV. Retail Inventory Methods (20 Points) Use the information below, related to the Raffle Company’s inventory for 2009, for the four parts of this question (A through C) 3 Cost Retail Beginning Inventory $ 65,000 $100,000 Purchases (net) 515,000 645,000 Net Additional Markups “em—um 20,250 Net Markdowns 43,178 Sales 632,000 Round (if needed) to three decimal places, i.e., .5561 m 55.6% for ratios and to nearest cent for 1' j doliar amounts 9 .2 A. (7 points) Conventional (LCM) Retail Inventory Method Calculate each of the items, below, using the conventional retail method. Show all you work, / N0 credit will be given for answers not supported by work. L , . i g“ 5/9"” MM” 1. Cost to retail percentage " -« 5"!) W *7 Q 50”? a *7 22L, (9 .fla. vfiigafifiw 2. Ending inventory at Retail g _M2’?%§C/ 2. Ending inventory at Cost B. (5 Points) Average Retail Inventory Method Calculate the ending inventory at cost, using the average retail method. Show all you work, NO credit will be given for answers not supported by work. 71/339”, Ending inventory at Cost 95? 0’.) Form A IV. Retail Inventory Methods (continued) C. (8 points) LIFO Retail Inventory Method Calculate each of the items, below, using the LIFO retail method. Show all you work, N0 credit will be given for answers not supported by work. I 1. Cost to retail percentage Q~3§/{/ 955 2 Cost to retail ercenta e or g/ ‘ A e I.» y p g #5 gm: M3,. 2 A y ‘ r ,/.. ' f “ 3. Ending inventory at Cost 2&5? xii/Q "I; g?) (/(9 __ \ , .MN-Zflm www‘” Form A V. Inventory Errors (8 Points) For each of the inventory errors that occurred in 2010, determine the effect of the error on cost of goods available for sale, cost of goods sold, net income and retained earnings. Assume that the error is not discovered until 2011 and that a periodic inventory system is used. Ignore income taxes and use the letters, below, to classify the effect of each error. ‘ U=understatedg O = overstated; NE= no effect Cost of Goods Cost of Net Retained Available Goods Said Encome Earnings EX: . Overstatement of ending inventory ' NE U 0 O l. Overstaternent of purchases fag 5? n9 j; 2. Freight-in charges are understated {75" 43.51 gig I 3 . Understatement of ending inventory {Zea/g” QC; Mic 6&9” 4. Understatement of purchases + 5/5" 11/ 53 147 Understatement of ending inventory by The same amount EXTRA CREDIT (4 Points) Income Statement and Balance Sheet information abstracted from the recent annual report of XION Technologies appear below: BALANCE SHEET ($ in thousands) @ Year End 2009 2008 INVENTORIES (LIFO) $ 724 $ 699 From the notes to the financial statements Inventory is valued at last—in-first~out (LIFO) BASIS. The LIFO reserve is $162 thousand at year end 2009 and $128 thousand at year end 2008. (I) What is the estimate (33 amount) of FIFO ending inventory at 12/31/09? You must show your calculation of the amount to receive credit. ‘7 2, if ,3- an at a (2) What effect (increase/decrease) would it have on working capital if the company changed - from t0 1/; We!” (3) What effect wp‘nld _a_wghange to PI 0 have on cash flow? Explain why there is an effect. 1'0 ...
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KeyExam 2A Sp 2010 - Form A Second Examination Acct 3110...

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