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. One risk present in the sales/collection cycle is the risk that the customer is not billed for their order. A. In response to this risk, accounting should periodically verify the numerical sequence of the pre
numbered sale order forms (received from the sales department) & follow up on missing forms. B. The likelihood that the risk described would go undetected is small. This is because the customer remittance (when received) would need to be recorded in the accounts. This process would independently bring the missing transaction to the accounting department's attention. C. In response to this risk, companies should occasionally count their inventory (i.e. "physical count") and compare the counted value to the general ledger balance. This process and the resulting investigation of differences could be considered a preventative control toward the risk described. D. Providing accounting with a duplicate copy of the approved sales order will be sufficient to eliminate this risk. E. If both A & C were implemented the risk of customers not being billed could be eliminated.
2. When preparing a bank reconciliation, which of the following would be added to the company's cash balance? A. The dollar amount of deposits in transit. B. The dollar amount of outstanding checks. C. Interest income paid by the bank. D. The bank service charges included on the bank statement. E. Both A and C
3. On December 31, 2007, Commonwealth Industries received a $10,000 deposit from a customer for a special order of merchandise to be manufactured and shipped in February, 2008. Commonwealth made the following journal entry on December 31, 2007: Cash $10,000 Sales Revenue $10,000 The financial statements dated December 31, 2007, would be: A. Correctly stated B. In error, understating net income and understating stockholders' equity C. In error, understating liabilities and overstating assets D. In error, overstating net income and understating liabilities E. None of the above
4. Under the allowance method, which of the following statements is correct when an adjusting entry for bad debt expense is recorded at year
end? A. Income from operations will decrease. B. Current liabilities will increase. C. Current assets are not affected. D. Gross profit will decrease. E. A and D
5. Franklin Consulting Company maintains its records on a cash basis. During 2006 the following cash
flows were recorded: Cash received from customers $500,000, and cash paid for salaries, utilities, and advertising, $200,000, $50,000 and $50,000 respectively. You determine that customers owed the company $50,000 and $100,000 at the beginning of the year and end
of year respectively. The company owed salaries totaling $50,000 at the beginning of the year and $25,000 at the end of the year. Determine the accrual net income for the year. A. $200,000 B. $225,000 C. $125,000 D. $275,000 E. None of the above
6. When preparing the monthly bank reconciliation, the accountant for Farris Corporation discovered that a check correctly written to one of Farris' suppliers for a $159 payment on account had been incorrectly recorded in the general ledger as a $195 payment. Which of the following statements is correct with respect to the bank reconciliation and related entries? A. On the reconciliation, the cash balance per the books will be decreased. B. On the reconciliation, the cash balance per the books will be increased. C. On the reconciliation, the cash balance per the bank statement will be increased. D. On the reconciliation, the cash balance per the bank statement will be decreased. E. Farris should call the bank to inform them about the error and would, therefore, not need to show a reconciling item on the bank reconciliation.
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end motor homes. Starting in 2009 they began offering direct financing for their customers. comprised of social security and their investment portfolio income. The installment loan offered by GH charges a competitive interest rate and requires a single annual payment on the anniversary date of the purchase as indicated below, making it simple to liquidate some investment holdings. Year of Sale 30% of purchase price is due at closing Year 2 20% of purchase price Year 3 20% of purchase price is due Year 4 20% of purchase price is due Year 5 10% of purchase price is due Before extending credit, GH does a thorough background check of each buyer. financial picture is extremely unique and (given the age of their customer base) can change quickly due to a sudden health issues or simply as a result of stock market fluctuations. As a result, GH is unable to predict, with certainty, the collectability of their installment receivables. In 2009, GH sold $600,000 of motor homes on installment contracts. The motor homes had a carrying value to GH on their balance sheet (motor home inventory) of $420,000. Assume that all cash collections were received as scheduled and that GH uses the installment method of accounting for their installment notes. Select the choice below that correctly portrays the amount of realized gross profit that would be reported by GH as a result of the 2009 sales. A. 2009 2010 2011 2012 2013
54,000.00 36,000.00 36,000.00 36,000.00 18,000.00 B. 2009 180,000.00 2009 180,000.00 2010 0 2011 0
2012 0 2013 0 C. 2010 120,000.00 2011 120,000.00
2012 120,000.00 2013 60,000.00 D. 2009 36,000.00 2010 36,000.00 2011 36,000.00 2012 36,000.00 2013 36,000.00 E. None of the above
8. Please continue with the Golden Horizon Example above. What is the net realizable value of the installment receivable at December 31, 2010? A. $420,000 B. $294,000 C. $210,000 D. $366,000 E. None of the above
9. For purposes of this question, assume instead, that Golden Horizons uses the cost
recovery method. What is the first year during which GH would realize gross profit on this transaction? A. 2013 B. 2012 C. 2011 D. 2010 E. 2009
10. Continue with original the Golden Horizon question (i.e. using the installment method) and in addition to what you have been told about 2009, assume that in 2010, GH sold $800,000 of motor homes on installment contracts. The motor homes had a carrying value to GH on their balance sheet (motor home inventory) of $576,000. Assuming that all cash collections were received as scheduled for the 2010 sales as well and that GH is uses the installment method. What is the amount of realized gross profit reported on the 2011 income statement? A. $84,000 B. $67,200 C. $80,800 D. $44,800 E. None of the above
11. The following information pertains to Jacobsen Co.'s accounts receivable at December 31, 2009:
# Days Outstanding 0
120 Over 120 $ Amount $420,000.00 $140,000.00 $100,000.00 $120,000.00 Estimated Portion Uncollectible 2.00% 5.00% 10.00% 20.00% During 2009, Jacobsen wrote off $18,000 in receivables and recovered $6,000 that had been written off in prior years. Jacobsen's December 31, 2008, allowance for uncollectible accounts was $40,000. Under the aging method, what amount of allowance for uncollectible accounts should Jacobsen report at December 31, 2009? A. $28,000. B. $21,400. C. $55,400. D. $49,400. E. None of the above
12. On April 21st, Tim Reierson from PwC gave a presentation titled: Financial Reporting Fraud: An external auditor s perspective. Please consider the information discussed during the presentation and select the false statement below: A. It is important that audit procedures are predictable from year to year as too much variation causes unnecessary inefficiency and strained client relations. B. Fraud, although costly when it happens, is unusual. C. The external auditor has a professional responsibility to design their audit such that they have a "reasonable probability' of detecting all fraud, even if the fraud is unrelated to financial reporting. D. All of the above E. B and C
13. Which of the following source documents is typically used by the accounting department to update the individual customer account balance (i.e. A/R) for submitted payments? A. In order to achieve proper segregation of duties, the accounting department would not be responsible for updating the individual customer account balances. B. Approved Sales Order C. Daily Control Totals D. Deposit Ticket E. Remittance Advice
14. Rosco uses the allowance method of accounting for bad debts. Upon completing an aging analysis of accounts receivable, the accountant for Rosco estimated that $5,000 of the current $98,000 of accounts receivable would be uncollectible. The allowance for doubtful accounts had a $400 credit balance at year
end prior to adjustment. The amount of bad debt expense that should appear in Rosco's income statement for the year is A. $4,600. B. $5,400. C. $5,000. D. $400 E. Zero
15. Tom's Textile shipped the wrong product to a customer who refused to accept the order. Upon receipt of the order back from the customer, Tom would debit: A. Sales returns & allowances B. Operating Expense C. Accounts Receivable D. Sales discount E. Sales Revenue
16. The Soft Company reported the following information on their balance sheet at 12/31/2009: Accounts Receivable at 12/31/2009 (net of a $20,000 allowance for doubtful accounts) equaled $350,000 The controller at Soft provides you with the following information about 2010: Net credit sales totaled $2,700,000. Bad Debts were estimated at 1.5% of credit sales. Cash Collected from credit sales totaled $2,623,500. Value of customer accounts receivable balances that were written off $21,500 How much was Soft's 2010 bad debt expense? A. $40,500 B. $21,500 C. $19,000 D. $42,000 E. None of the above
17. Continue with all the facts per the previous question (i.e. Soft Company). For purposes of this question, assume that Soft uses the "combination method" of accounting for bad debts. They perform an aging analysis once per year and use the data for purposes of their year
end bad debt adjusting entry. After performing a thorough aging analysis, the controller decided that the net realizable value of the receivables reported on the balance sheet at 12/31/2010 should be $360,000. Given this information, what is the amount of bad debt expense reported on the 12/31/2010 income statement? A. $11,500 B. $26,000 C. $66,500 D. $88,000 E. None of the above
18. When you use an aging schedule approach for estimating uncollectible accounts: A. Bad debts expense is measured directly, and the allowance for uncollectible accounts balance is measured indirectly. B. Bad debts expense is measured indirectly, and the allowance for uncollectible accounts balance is measured directly. C. Bad debts expense is measured directly, and the allowance for uncollectible accounts balance is measured directly. D. Bad debts expense is measured indirectly, and the allowance for uncollectible accounts balance is measured indirectly.
19. Hazelton Manufacturing prepares their bank reconciliation at the end of every month. At the end of May, the general ledger checking account showed an un
reconciled balance of $1,360. Outstanding checks totaled $350 and deposits in transit were $150. The bank statement listed service charges o f $30 and showed an NSF* check of $85.00. Given this information, the corrected general ledger cash balance is: * The NSF check is an $85.00 payment received from a customer earlier in the month not a check written by Hazelton. A. $1,415. B. $1,245. C. $1,130. D. $1,160. E. None of the above
20. Continue with the Hazelton problem above. Which of the above journal entries would be made to adjust for the NSF check? A. Bad Debt Expense $85.00 Accounts Receivable $85.00 B. Accounts Receivable $85.00 Allowance for Doubtful Accounts $85.00 C. Accounts Receivable $85.00 Cash $85.00 D. Cash $85.00 Accounts Receivable $85.00 E. No entry would be necessary as this represents a reconciling item to the bank.
21. Continue with the Hazelton problem facts. What is the ending cash balance reported on the 5/31st bank statement? A. $1,615 B. $1,445 C. $1,045 D. $1,360 E. None of the above
22. Please consider the point
sale, installment and cost
recovery methods of revenue recognition and select the true statement below. A. Companies using the cost recovery method will report a higher gross profit in the year of sale than companies using the point
sale method. B. Of the three methods, the point
sale revenue recognition method is used most often and is the most conservative of the three methods. C. The installment method is more conservative than the point of sale method and is used less often than the cost
recovery method. D. The cost
recovery method is less conservative than the installment method and is accordingly used less often. E. Of the three methods, the cost
recovery method is used least often and is the most conservative.
23. Use the following information to calcul...
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