Mini_Test_2_SP_2011_VB - NAME: Do NOT open your exam until...

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Unformatted text preview: NAME: Do NOT open your exam until you are told to do so! Without opening your exam, pull out your scantron and fill it in as follows: your last name & first initial (use your legal name per the University system). your net id (this is the same as your Enterprise ID & is the first part of your University email address) Your section number (see below): Section # ADA ADC AD1 ADK ADH ADJ ADG ADL Start Time 8:00 9:00 9:00 12:00 9:00 12:00 9:00 12:00 TA Name Lindsay Lindsay Kellie Kellie Mo Mo Christina Christina Scantron Entry 100 150 200 250 300 350 400 450 Section # ADQ ADR ADM ADP ADO ADS ADT AND Start Time 1:00 2:00 12:00 1:00 1:00 2:00 2:00 1:00 TA Name Lori Lori David David Benjii Benjii Alain Alain Scantron Entry 500 550 600 650 700 750 800 850 Please keep in mind the following course policy regarding academic integrity: There should be no communication between students in any manner during the entire exam period. This means no talking, whispering or signaling to each other and no electronic communication. It is your job to keep your scantron/exam booklet hidden from wandering eyes. Keep your test FLAT on your desk at all times! If you are allowing your exam/scantron to be visible to other students it will be assumed that YOU are cheating. You must use an Accy 202 calculator- NO personal calculators. All books and papers & cell phones must be securely placed in a back-pack or other case and placed completely under the student’s seat. Please turn off your cell phone before putting it away! Baseball hats, headphones and/or sunglasses may not be worn during an exam. All extra wearing apparel and parcels must be on the floor, under the student’s desk or seat during quizzes, tests or exams. By enrolling in this course students agree to abide by the rules & regulations stated in Article 4 of the Student Code. If academic dishonesty is evident your exam will be confiscated and turned over to the Accountancy Department Head for resolution. In this event, I will recommend a penalty of an “F” for the course. In especially serious cases, the Department Head may impose harsher penalties such as expulsion from the University. Please keep in mind that expulsion for cheating becomes part of your permanent academic record which will follow you for the rest of your academic career. 1.  Considerourmodelsalescollectioncyclestudiedinclass. Whichofthefollowingstepsinthe sales/collectionprocessshouldoccurfirst?    A. Billthecustomer  B. Recordtherevenue  C. Approvethecredit  D. Shiptheproduct  E. Collectthepayment           2.  Roscousestheallowancemethodofaccountingforbaddebts. Uponcompletinganaginganalysisof accountsreceivable,theaccountantforRoscoestimatedthat$5,000ofthecurrent$98,000ofaccounts receivablewouldbeuncollectible.Theallowancefordoubtfulaccountshada$400debitbalanceat year endpriortoadjustment.TheamountofbaddebtexpensethatshouldappearinRosco'sincome statementfortheyearis   A. $5,000.  B. $5,400.  C. $4,600.  D. $400  E. Zero         3.  OnApril21st,TimReiersonfromPwCgaveapresentationtitled: FinancialReportingFraud: An externalauditor sperspective. Pleaseconsidertheinformationdiscussedduringthepresentationand selectthetruestatementbelow:   A. Theexternalauditorhasaprofessionalresponsibilitytodesigntheirauditsuchthattheydetect material,financialreportingfraud.  B. Fraud,althoughcostlywhenithappens,isunusual.  C. Itisimportantthatauditproceduresarepredictablefromyeartoyearastoomuchvariationcauses unnecessaryinefficiencyandstrainedclientrelations.  D. Alloftheabove  E. AandB     4.  ThefollowinginformationpertainstoJacobsenCo.'saccountsreceivableatDecember31,2009:     #Days Outstanding 0 30 31 60 61 120 Over120   $ Amount $500,000.00 $230,000.00 $115,000.00 $60,000.00 EstimatedPortion Uncollectible 2.00% 5.00% 10.00% 20.00%  During2009,Jacobsenwroteoff$12,000inreceivablesandrecovered$6,000thathadbeenwrittenoffin prioryears.Jacobsen'sDecember31,2008,allowanceforuncollectibleaccountswas$30,000.Underthe agingmethod,whatamountofallowanceforuncollectibleaccountsshouldJacobsenreportatDecember 31,2009?   A. $21,000.  B. $45,000.  C. $33,000.  D. $24,000.  E. Noneoftheabove            5.  Pleaseconsiderthepoint of sale,installmentandcost recoverymethodsofrevenuerecognitionand selectthetruestatementbelow.   A. Theinstallmentmethodismoreconservativethanthepointofsalemethodandisusedlessoften  thanthe  cost recoverymethod.  B. Ofthethreemethods,thecost recoverymethodisusedleastoftenandisthemostconservative.  C. Thecost recoverymethodislessconservativethantheinstallmentmethodandisaccordinglyused  lessoften.  D. Ofthethreemethods,thepoint of salerevenuerecognitionmethodisusedmostoftenandisthe  mostconservativeofthethreemethods.  E. Companiesusingthecostrecoverymethodwillreportahighergrossprofitintheyearofsalethan companiesusingthepoint of salemethod.     6.  HazeltonManufacturingpreparestheirbankreconciliationattheendofeverymonth.AttheendofMay, thegeneralledgercheckingaccountshowedanun reconciledbalanceof$1,650.Outstandingchecks totaled$350anddepositsintransitwere$150.Thebankstatementlistedservicechargesof$30and showedanNSF*checkof$85.00.    Giventhisinformation,thecorrectedgeneralledgercashbalanceis:    *TheNSFcheckisan$85.00paymentreceivedfromacustomerearlierinthemonthnotacheckwrittenbyHazelton.     A. $1,535  B. $1,705  C. $1,355.  D. $1,565.  E. Noneoftheabove     7.  ContinuewiththeHazeltonproblemabove. Whichoftheabovejournalentrieswouldbemadetoadjust fortheNSFcheck?   A. Noentrywouldbenecessaryasthisrepresentsareconcilingitemtothebank.     B.AccountsReceivable$85.00  Cash$85.00     C.BadDebtExpense$85.00  AccountsReceivable$85.00     D.AccountsReceivable$85.00  AllowanceforDoubtfulAccounts$85.00     E.Cash$85.00  AccountsReceivable$85.00        8.  ContinuewiththeHazeltonproblemfacts. Whatistheendingcashbalancereportedonthe5/31stbank statement?   A. $1,035  B. $1,905  C. $1,735  D. $1,650  E. Noneoftheabove     9.  Usethefollowinginformationtocalculatecashpaidforsalaries:   A. $75,680  B. $85,400  C. $79,000  D. $82,080  E. Noneoftheabove  F. $82,320          10.  Oneriskpresentinthesales/collectioncycleistheriskthatthecustomerisnotbilledfortheirorder.   A. Thelikelihoodthattheriskdescribedwouldgoundetectedissmall. Thisisbecausethecustomer remittance(whenreceived)wouldneedtoberecordedintheaccounts. Thisprocesswould independentlybringthemissingtransactiontotheaccountingdepartment'sattention.  B. Providingaccountingwithaduplicatecopyoftheapprovedsalesorderissufficienttoeliminatethis risk.  C. Inresponsetothisrisk,companiesshouldoccasionallycounttheirinventory(i.e."physicalcount") andcomparethecountedvaluetothegeneralledgerbalance. Thisprocessandtheresulting investigationofdifferencescouldbeconsideredapreventativecontroltowardtheriskdescribed.  D. Inresponsetothisrisk,accountingshouldperiodicallyverifythenumericalsequenceofthe pre numberedsaleorderforms(receivedfromthesalesdepartment)&followuponmissingforms.   E. IfbothC&Dwereimplementedtheriskofcustomersnotbeingbilledcouldbeeliminated.         11.  FranklinConsultingCompanymaintainsitsrecordsonacashbasis. During2006thefollowing cash flowswererecorded: Cashreceivedfromcustomers$500,000,andcashpaidforsalaries,utilities, andadvertising,$200,000,$50,000and$50,000respectively. Youdeterminethatcustomersowedthe company$50,000and$25,000atthebeginningoftheyearandend ofyearrespectively. Thecompany owedsalariestotaling$50,000atthebeginningoftheyearanddidnotoweanysalariesattheendofthe year. Determinetheaccrualnetincomefortheyear.   A. $200,000  B. $225,000  C. $125,000  D. $275,000  E. Noneoftheabove     12.  Merchandisewassoldoncreditfor$30,000,terms3/15,n/30.Whichofthefollowingjournalentry descriptionscorrectlydescribesthecashcollection?   A. Cashisdebitedfor$30,000,"salesdiscountsexpired"iscreditedfor$900andaccountsreceivableis creditedfor$29,100ifthecollectionisafterthediscountperiod.  B. Cashisdebitedfor$30,000,accountsreceivableiscreditedfor$29,100,and"salesdiscounts"is creditedfor$900ifthecollectioniswithinthediscountperiod.  C. Cashisdebitedfor$29,100andaccountsreceivableiscreditedfor$29,100ifthecollectioniswithin thediscountperiod.  D. Cashisdebitedfor$29,100,"salesdiscounts"isdebitedfor$900,andaccountsreceivableis  creditedfor$30,000ifthecollectioniswithinthediscountperiod.  E. Noneoftheabove         Continuedonnextpage.  13.   endmotorhomes. Startingin2009theybeganofferingdirect financingfortheircustomers. comprisedofsocialsecurityandtheirinvestmentportfolioincome. TheinstallmentloanofferedbyGH chargesacompetitiveinterestrateandrequiresasingleannualpaymentontheanniversarydateofthe purchaseasindicatedbelow,makingitsimpletoliquidatesomeinvestmentholdings.   YearofSale 30%ofpurchasepriceisdueatclosing  Year2 20%ofpurchaseprice  Year3 20%ofpurchasepriceisdue  Year4 20%ofpurchasepriceisdue  Year5 10%ofpurchasepriceisdue   Beforeextendingcredit,GHdoesathoroughbackgroundcheckofeachbuyer. financialpictureisextremelyuniqueand(giventheageoftheircustomerbase)canchangequicklydueto asuddenhealthissuesorsimplyasaresultofstockmarketfluctuations. Asaresult,GHisunableto predict,withcertainty,thecollectabilityoftheirinstallmentreceivables.In2009,GHsold$600,000of motorhomesoninstallmentcontracts. ThemotorhomeshadacarryingvaluetoGHontheirbalancesheet (motorhomeinventory)of$420,000.   AssumethatallcashcollectionswerereceivedasscheduledandthatGHusestheinstallmentmethodof accountingfortheirinstallmentnotes.   Selectthechoicebelowthatcorrectlyportraystheamountofrealizedgrossprofitthatwouldbereported byGHasaresultofthe2009sales.   A. 2009 2010 2011 2012 2013  36,000.00   36,000.00 2010 0   36,000.00   36,000.00 2012 0  36,000.00 2013 0 B. 2009 180,000.00  2011 0  C. 2009  180,000.00   2010  120,000.00 2011  120,000.00 2012  120,000.00 2013  60,000.00    D. 2009 54,000.00  2010 36,000.00 2011 36,000.00  2012 36,000.00 2013 18,000.00 E. Noneoftheabove      14.  PleasecontinuewiththeGoldenHorizonExampleabove. Whatisthenetrealizablevalueofthe installmentreceivableatDecember31,2010?   A. $294,000 B. $420,000  C. $210,000 D. $366,000  E. Noneoftheabove      15.  Forpurposesofthisquestion,assumeinstead,thatGoldenHorizonsusesthecost recovery method. WhatisthefirstyearduringwhichGHwouldrealizegrossprofitonthistransaction?   A. 2012 B. 2010  C. 2011  D. 2009 E. 2013        16.  ContinuewithoriginaltheGoldenHorizonquestion(i.e.usingtheinstallmentmethod)andinadditionto whatyouhavebeentoldabout2009,assumethatin2010,GHsold$800,000ofmotorhomeson installmentcontracts. ThemotorhomeshadacarryingvaluetoGHontheirbalancesheet(motorhome inventory)of$576,000.Assumingthatallcashcollectionswerereceivedasscheduledforthe2010salesas wellandthatGHisusestheinstallmentmethod. Whatistheamountofrealizedgrossprofitreportedon the2011incomestatement?   A. $80,800  B. $44,800  C. $84,000  D. $67,200  E. Noneoftheabove        17.  GershwinWallcoveringInc.shippedthewrongshadeofpainttoacustomerwhorefusedtoacceptthe order.Uponreceiptofthepaintbackfromthecustomer,Gershwinwoulddebit:   A. SalesRevenue  B. AccountsReceivable  C. Salesdiscount  D. OperatingExpense  E. Salesreturns&allowances       18.  Whenyouuseanagingscheduleapproachforestimatinguncollectibleaccounts:   A. Baddebtsexpenseismeasureddirectly,andtheallowanceforuncollectibleaccountsbalanceis measuredindirectly.  B. Baddebtsexpenseismeasuredindirectly,andtheallowanceforuncollectibleaccountsbalanceis measuredindirectly.  C. Baddebtsexpenseismeasureddirectly,andtheallowanceforuncollectibleaccountsbalanceis measureddirectly.  D. Baddebtsexpenseismeasuredindirectly,andtheallowanceforuncollectibleaccountsbalanceis measureddirectly.     19.  Whenpreparingabankreconciliation,whichofthefollowingwouldbesubtractedfromthecompany's cashbalance?   A. Interestincomepaidbythebank.  B. Thedollaramountofdepositsintransit.  C. Thedollaramountofoutstandingchecks.  D. Thebankservicechargesincludedonthebankstatement.  E. BothCandD      20.  Undertheallowancemethod,whichofthefollowingstatementsiscorrectwhenanadjustingentryforbad debtexpenseisrecordedatyear end?   A. Currentassetsarenotaffected.  B. NetRealizableValuewilldecrease.  C. Incomefromoperationswilldecrease.  D. Currentliabilitieswillincrease.  E. BandC     21.  NewarkCompanyhasprovidedthefollowinginformation:   Cashsales,$450,000  Creditsales,$1,350,000  Sellingandadministrativeexpenses,$330,000  Salesreturnsandallowances,$90,000  Depreciationexpense,$101,000  Grossprofit,$1,360,000  Decreaseinaccountsreceivable,$55,000  Baddebtexpense,$33,000  Writeoffofuncollectiblecustomeraccounts$5,000  Salesdiscounts,$43,000   HowmuchareNewark'snetsales?   A. $1,710,000  B. $1,667,000  C. $1,217,000  D. $1,800,000  E. Noneoftheabove    22.  ContinuingwiththeNewarkCompanyfactpatternprovidedabove,selectthesummaryentrythatwould properlyrecordthetotaldollaramountofcashcollectedoncustomeraccounts?    A. Cash  $1,357,000.00  SalesDiscounts  AccountsReceivable    $43,000.00                    $1,400,000.00  $1,252,000.00      $43,000.00                   $1,295,000.00   B.  Cash SalesDiscounts  AccountsReceivable    C.  Cash  AccountsReceivable   $1,405,000.00            $1,405,000.00   D. Cash  AccountsReceivable    $1,295,000.00                      $1,295,000.00  E. Noneoftheabove     23.  OnDecember15,2007,CommonwealthIndustriesreceivedanorderfromacustomerfor$10,000of merchandisetobemanufacturedandshippedinJanuary,2008.AtDecember31,theorderwascompleted &awaitingshipment. TheorderwasshippedJanuary2ndandthecustomerpaidthebalancedueon January8th. CommonwealthmadethefollowingjournalentryonDecember31,2007:    AccountsReceivable$10,000  SalesRevenue$10,000   ThefinancialstatementsdatedDecember31,2007,wouldbe:   A. Inerror,overstatingassetsandequity  B. Inerror,overstatingassetsandnetincomeandunderstatingliabilities  C. Inerror,understatingnetincomeandoverstatingassets  D. Correctlystated  E. Noneoftheabove    24.  Whenpreparingthemonthlybankreconciliation,theaccountantforFarrisCorporationdiscoveredthata checkcorrectlywrittentooneofFarris'suppliersfora$195paymentonaccounthadbeenincorrectly recordedinthegeneralledgerasa$159payment.Whichofthefollowingstatementsiscorrectwithrespect tothebankreconciliationandrelatedentries?   A. Onthereconciliation,thecashbalanceperthebookswillbedecreased.  B. Onthereconciliation,thecashbalanceperthebankstatementwillbeincreased.  C. Onthereconciliation,thecashbalanceperthebankstatementwillbedecreased.  D. Onthereconciliation,thecashbalanceperthebookswillbeincreased.  E. Farrisshouldcallthebanktoinformthemabouttheerrorandwould,therefore,notneedtoshowa reconcilingitemonthebankreconciliation.    25.  TheSoftCompanyreportedthefollowinginformationontheirbalancesheetat12/31/2009:   Accounts Receivable at 12/31/2009 (net of a $20,000 allowance for doubtful accounts) equaled $350,000   ThecontrolleratSoftprovidesyouwiththefollowinginformationabout2010:    Netcreditsalestotaled$2,800,000.  BadDebtswereestimatedat1.5%ofcreditsales.   CashCollectedfromcreditsalestotaled$2,623,500.   Valueofcustomeraccountsreceivablebalancesthatwerewrittenoff$21,500   HowmuchwasSoft's2010baddebtexpense?   A. $43,500  B.  $21,500  C.  $40,500  D. $42,000  E.  Noneoftheabove     26.  Continuewithallthefactsperthepreviousquestion(i.e.SoftCompany). Forpurposesofthisquestion, assumethatSoftusesthe"combinationmethod"ofaccountingforbaddebts. Theyperformanaging analysisonceperyearandusethedataforpurposesoftheiryear endbaddebtadjustingentry.After performingathoroughaginganalysis,thecontrollerdecidedthatthenetrealizablevalueofthereceivables reportedonthebalancesheetat12/31/2010shouldbe$440,000. Giventhisinformation,whatisthe amountofbaddebtexpensereportedonthe12/31/2010incomestatement?    A. $44,500.  B. $108,000.  C. $65,000.  D. $86,500.  E. Noneoftheabove    *** Double check your scantron   ...
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