Principles of Accounting 1 Spring 2010Final Exam (120 minutes)
1. In the following journal entry, revenue is being recognized:
A) at the same time cash is collected B) before the cash is collected C) after the cash is collected D) no revenue is being recognized
2. Up-State Corporation ordered materials from Down-State Manufacturing on October 1, 2008. Down-State shipped the materials by rail on October 5 and the railroad notified Up-State on October 12 that the goods had arrived. Up-State picked up the materials on October 13. The terms of the sale are FOB shipping point. On what date should Up-State consider this a purchase? A) October 1 B) October 5 C) October 12 D) October 13
3. Company X produces and sells 3 products: X1, X2, and X3. The company recently developed a new advertising campaign for X3. The costs incurred to develop this ad would be considered:
A) facility-sustaining costs B) product-sustaining costs C) batch-related costs D) unit-related costs
4. An unfavorable sale price variance reflects
A) Fewer units sold than budgeted. B) A lower actual selling price than budgeted. C) An increase in the cost of products causing a decrease in income for the period. D) A decrease in the amount of cash received from customers.
5. A cash sale would impact the:
A) income statement only B) balance sheet and income statement only C) balance sheet and statement of cash flows only D) balance sheet, income statement, and statement of cash flows
6. Limited liability means:
A) A company is only liable for an amount that is established by a pre-set limit. B) Creditors are limited to just the cash available in the company at the time of the loss. C) Creditors of a company can only claim the assets of the firm and not the assets of the owners of the firm. D) Creditors of a firm can claim all the assets of a company and all of the owners’ personal assets.
7. In times of declining prices, ______ generally result(s) in the ______ cost of goods sold.
A) LIFO and FIFO, same B) FIFO, lower C) LIFO, lower D) LIFO, higher
Use the following to answer questions 8 and 9:ThinkStyles, Inc. applies manufacturing overhead on the basis of the number of indirect labor hours required. The following information is available: Estimated ActualIndirect Labor Hours 3,100 3,180Manufacturing Overhead Costs $111,600 $124,000
8. The predetermined manufacturing overhead rate per indirect labor hour is:
A) $35 B) $36 C) $39 D) $40
9. The amount of over/underapplied manufacturing overhead is:
A) $9,520 underapplied B) $3,200 underapplied C) $12,400 underapplied D) $12,400 overapplied
10. On April 30, Crossover Company had a general ledger cash balance of $216,854. At the end of April, the bank statement had a balance of $249,322. Deposits in transit amounted to $26,500 and there was a service charge of $180. Outstanding checks totaled $59,148. What is the reconciled/adjusted amount of cash?
A) $183,706 B) $184,026 C) $216,674 D) None of the above.
11. The journal entry to record wages earned by assembly line workers would include a:
A) credit to Indirect Labor B) debit to Finished Goods Inventory C) debit to Work In Process Inventory D) credit to Cost of Goods Manufactured
12. On September 1, 2009, Olpe Corporation paid $2,400 in advance for a one year insurance policy that covers the period September 1, 2009 through August 31, 2010. What amount of insurance expense should Olpe report for the year ended December 31, 2009? A) $800 B) $1,200 C) $2,400 D) $0
13. The Pacioli Manufacturing Company has kept track of the number of units they have produced each month and the cost to produce those units for the past six months.Month Number of Units Cost of Units ProducedJuly 10,000 $60,000Aug. 11,000 $66,000Sept. 20,000 $110,000Oct. 16,000 $90,000Nov. 12,000 $70,000Dec. 18,000 $102,000
Using the high/low method, what is the estimated total cost if 14,000 units are produced in January?
A) $62,000 B) $70,000 C) $75,000 D) $80,000
14. Which of the following would be part of the entry to record a sales return? A) credit to sales returns and allowances B) debit to accounts receivable C) debit to sales returns and allowances D) debit to cash
15. Hasbrouck Corporation used $63,500 of direct materials, $46,000 of direct labor, and applied $94,500 of manufacturing overhead during October. Cost of goods sold for October was $218,200. Hasbrouck’s beginning and ending work-in-process and finished goods inventories were as follows:
Beginning inventory Ending inventoryFinished goods $70,000 $61,500Work-in-process 47,000 41,300
What was Hasbrouck’s cost of goods manufactured for October?
A) $209,700 B) $212,500 C) $234,800 D) None of the above.
16. Halting, Inc. gathered the following direct labor cost information for the month of July:
Actual direct labor hours 68,500Standard direct labor hours allowed for actual production 67,200Actual direct labor rate per hour $12.10Standard direct labor rate per hour $11.75
The direct labor price variance is:
A) $15,730U B) $23,975U C) $15,275F D) $23,520F
17. On December 31, 2009, Voyager Products, Inc. received a $20,000 deposit from a customer for a special order of merchandise to be manufactured and shipped in January 2010. Voyager Products, Inc. made the following journal entry on December 31, 2009:
The financial statements dated December 31, 2009 would be:
A) correctly stated B) in error, understating liabilities and overstating assets C) in error, overstating net income and understating liabilities D) in error, understating net income and understating stockholders’ equity
18. Allowance for Uncollectible Accounts had a beginning and ending balance of $3,500 and $4,600, respectively. If uncollectible accounts expense was $9,500 for the period, the total dollar amount of accounts written off during the period was:
A) $13,000 B) $8,400 C) $10,600 D) $9,500
19. Kozicek Corporation reported credit sales of $200,000, accounts receivable of$110,000 at the beginning of the year and accounts receivable of $150,000 at the end of the year. Cash receipts/collections from customers during the year were:
A) $160,000 B) $200,000 C) $240,000 D) $310,000
20. A cost that does not change in total as the activity changes is a:
A) Fixed cost B) Variable cost C) Mixed cost D) None of the aboveUse the following information for questions 21 and 22.Hepler Enterprises began the year with $188,200 of finished goods inventory. During the year the company manufactured goods costing $712,000. At the end of the year, $207,500 of finished goods remained in inventory. Actual manufacturing overhead was $141,500 and applied manufacturing overhead totaled $143,900.
21. Prior to any adjustment for overhead application, cost of goods sold was:
A) $692,700 B) $731,300C) $774,000D) $900,200
22. Assuming the overapplied or underapplied manufacturing overhead was considered small and, therefore, closed out to Cost of Goods Sold, the cost of goods sold reported on the income statement for the period was:
A) $675,000 B) $690,300 C) $695,100 D) $728,900
23. The Manhattan Company sells its one and only product for $89.00 per unit. Variable costs per unit amount to $63.50 and total fixed costs are $3,697,500. If Manhattan increases its selling price to $95, how will this affect the breakeven point in units?
A) The breakeven point will increase 27,619 units. B) The breakeven point will decrease 106,078 units. C) The breakeven point will increase 41,300 units. D) The breakeven point will decrease 27,619 units.
24. Bonita Enterprises purchased $42,000 of merchandise on account, terms 2/10, n/30. Assuming Bonita uses the net price method to account for purchase discounts, and it pays for the merchandise on the 30th day after the purchase, the journal entry to record the payment would include a:
A) credit to Cash for $41,160 B) credit to Inventory for $42,000 C) debit to Accounts Payable for $42,000 D) debit to Purchase Discounts Lost for $840
25. A company’s accounts payable was $600,000 at the beginning of the year and $632,000 at the end of the year. Cost of goods sold for the year was $637,000. Inventory at the beginning of the year was $420,000 and at the end of the year $455,000. How much cash did the company pay to its suppliers during the period?
A) $612,000 B) $640,000 C) $662,000 D) None of the above
26. If a company’s selling price per unit increases, what is the impact on its contribution margin and breakeven point? Contribution Margin Breakeven PointA) Increase IncreaseB) Decrease No effectC) No effect IncreaseD) Increase Decrease
27. The bookkeeper who records cash receipts also deposits daily cash receipts at the bank on his way home from work. This is a violation of which of the following characteristics of good internal control:
A) requiring proper authorization B) separating incompatible duties C) physically controlling assets and documents D) maintaining adequate documents and records
28. For 2008, Parker Inc. reported total liabilities of $720,000, current assets of $235,000, and total shareholders’ equity of $1,250,000. What are Parker Inc.’s total assets?
A) $1,735,000 B) $1,820,000 C) $1,970,000 D) $2,205,000
29. The Torbel Company ordered $80,000 of inventory from Borton Industries and was given terms of 3/15 n/45. Which of the following describes how soon the payment must be made in order to receive a discount and the amount of the discount available? Payment Made Within Amount of Discount A) Between 3 and 15Days $12,000 B) 45 Days $ 9,600 C) Between 2 and 15 $ 2,400 D) Within 15 Days $ 2,400
30. The following journal entry affected the accounting equation by: Cash XXX Capital Stock XXX A) increasing assets and increasing liabilities B) decreasing assets and increasing owners equity C) increasing liabilities and decreasing owners equity D) increasing assets and increasing owners equity
31. Moreland Corp. purchased a building for $35 million that will house its new manufacturing plant. This is part of Moreland’s
A) Operating activities B) Financing activities C) Investing activities D) All of the above
Use the following to answer questions 32 and 33:Carrington Company has a perpetual inventory system and uses the LIFO method of inventory costing. Carrington reported the following events during the month of March:
Number of Units Date Event Bought Sold Unit PriceMar. 1 Beginning Inv. 100 $10 3 Purchase 75 $11 5 Sale 50 10 Purchase 140 $1216 Sale 110 21 Sale 70 25 Purchase 175 $1430 Sale 120
32. The cost of goods sold for the March 21st sale is:
A) $700 B) $720 C) $785 D) $ 840
33. The ending inventory on March 31st is:
A) $1,440 B) $1,620 C) $1,640 D) $1,960
34. Triple Tee Company sells their only product for $22.00. Variable costs per unit are $14.80, while total fixed costs amount to $550,000. The company wants to earn a before-tax profit of $400,000. The total unit sales needed to achieve the desired before-tax profit is:
A) 64,190 B) 76,389 C) 131,945 D) 137,266
35. Distance Solutions’ president receives a bonus equal to 8% of income before tax and bonus. If the tax rate is 30%, what is Distance Solutions’ net income for the year assuming income before tax and bonus was $1,300,000?
A) $104,000 B) $390,000 C) $806,000 D) $837,200
36. Pratt Company currently produces and sells 12,000 units of its product each month at a sales price of $15 each. Another firm has offered to buy an additional 1,000 units at $10 per unit. Pratt’s total cost per unit is as follows: Fixed costs per unit are based on production of 12,000 units per month. Pratt Company currently has the capacity to produce 15,000 units per month. By how much would profit change if Pratt accepts this offer?
A) $7,000 increase B) $5,500 increase C) $1,700 increase D) $300 decrease
37. If a product has a cost of $600 and a selling price of $1,800, what is the product’s markup percentage?
A) 33% B) 67% C) 150% D) 200%
38. Grover Company’s economic order quantity is 2,800 units. Demand for the year is 108,000 units. There are three days between the time an order is placed and the day it is received. Grover operates 360 days per year. What is the daily demand?
A) 300 B) 900 C) 934 D) 2,700
39. WyKan Corporation sells three types of speaker systems, the Model A, the Model B and the Model C. The profit report for these speaker systems for the most recent period is shown below by product line. The facility sustaining costs are fixed and allocated as shown below between each of the three product lines.
Model A_ Model B Model CSales $200,000 $95,000 $155,000Variable Costs 110,000 60,000 124,000Contribution Margin $90,000 $35,000 $31,000Facility Sustaining Cost 50,000 30,000 40,000Net Income (Loss) $40,000 $5,000 $(9,000) Wykan’s president insists on discontinuing Model C. He obviously has not taken acct 2101! What will be the company’s net income (loss) after eliminating Model C? A) $45,000 B) $36,000 C) $(9,000) D) $5,000
40. Palisades Corporation purchased equipment by signing a long-term note payable. What was the effect of this transaction?
A) increased assets and increased liabilities B) increased assets and increased owners equity C) increased assets and decreased owners equity D) increased owners equity and decreased liabilities
41. The most likely explanation for the following journal entry would be: A) performed a service and immediately received the cash B) performed a service and billed the customer C) performed a service for a customer who had paid for the service ahead of time D) recorded the receipt of cash from a customer for services previously performed
Use the following information for questions 42 and 43.Hepburn Corporation’s sales price is $30 per unit. Unit sales information is presented below:
March (Actual) April (Estimated) May (Estimated)Cash sales 10,000 12,000 13,000Credit sales 30,000 40,000 45,000 Management estimates that 5% of credit sales are uncollectible, 30 % are collected in the month of sale, and 65% in the following month. The March 31 ending inventory is 5,500 units, and Hepburn wants to have 10% of the next month’s sales in ending inventory.
42. What are Hepburn Corporation’s expected sales revenue and cash receipts for April? Sales Revenue Cash ReceiptsA) $1,560,000 $1,305,000B) $1,560,000 $945,000C) $1,200,000 $945,000D) $960,000 $870,000
43. How many units should Hepburn produce during April? A) 52,300 B) 52,400 C) 52,600 D) 57,800
44. Net income is found on which of the following two financial statements?
A) Balance Sheet and Income Statement B) Statement of Shareholders Equity and Balance Sheet C) Statement of Cash Flows and Balance Sheet D) Income Statement and Statement of Shareholders Equity
45. What is a perpetual inventory system?
A) A system that keeps a continuous record of the cost of inventory on hand and the cost of inventory sold. B) A system that determines the inventory at the end of each accounting period by physically counting it. C) A system that records cash on hand. D) None of the above.
46. Memory Time Picture Frame Co. manufactures picture frames and incurs many different types of costs. The cost of the glass for the picture frames, assuming it is significant to the overall cost, would be a:
A) direct material cost B) direct labor cost C) manufacturing overhead cost D) selling and administrative cost
47. Lyco Company is a service firm. The company showed the following activities for the current month:
• Provided services for a client who will pay $82,000 next month.• Provided services for a client and received $30,000 cash.• Received a $10,000 advance payment for services to be provided next month.• Used $7,000 of office supplies to provide services.• Employees were owed $25,000 for work performed in the current month. What is the accrual basis income for the current month?
A) $90,000 B) $80,000 C) $72,000 D) $23,000
48. Fostoria Corporation began the current period with $21,975 of direct materials, purchased $97,950 of direct materials and $8,230 of indirect materials during the period and ended the period with $30,205 of direct materials. The total amount of direct materials put into production during the current period was:
A) $119,925 B) $97,950 C) $89,720 D) $106,670
49. J & C Electronics, Inc. gathered the following direct materials cost information for the month of July:Standard Quantity Allowed for production 34,700 gallonsQuantity used in production 33,900 gallonsActual price per gallon purchased $8.50Standard price per gallon $8.85
The direct materials usage variance is:
A) $ 4,250U B) $ 4,425F C) $6,800U D) $7,080F
50. Anthony Company sold merchandise on account to a customer at a price of $5,000. The merchandise had cost Anthony $4,200. The terms of the sales were 3/10, n/30. If the customer paid within the discount period, by how much did this transaction increase Anthony’s net income? A) $5,000 B) $4,850 C) $ 650 D) $ 300