ACC121 Final Exam Study Guide

1. Which financial statement would you utilize to determine whether a company will be able to pay liabilities which are due in 30 days
A. Income statement
B. Balance sheet
C. Statement of retained earnings
D. Statement of cash flows

2. Which of the following is an objective of the external audit of a company’s financial statements
A. To provide a forecast of the company’s future earnings.
B. To assure no fraud has been committed by the company’s management.
C. To provide credibility and assurance that the financial statement information conforms with generally accepted accounting principles in all material respects.
D. To detect all accounting errors made by the accounting system and employees.

3. Huron has provided the following year-end balances:
Cash, $25,000
Patents, $7,900
Accounts receivable, $9,300
Property, plant, and equipment, $98,700
Prepaid insurance, $3,600
Accumulated depreciation, $10,000
Inventory, $37,000
Trademarks, $12,600
How much are Huron’s current assets
A. $85,900.
B. $71,300.
C. $74,900.
D. $102,100.

4. Which group requires CPAs to follow a professional code of ethics and standards
A. American Institute of Certified Public Accountants
B. Internal Revenue Service
C. Securities & Exchange Commission
D. Local taxing agency

5. Match each career with the related definition by entering the appropriate letter in the space provided.

Careers Definitions

_ ___(1) financial analyst a. Chief executive officer who has primary responsibility for the financial information presented in the financial statements.

_____(2) Independent auditor b. Advisor who analyzes financial and other economic information to form forecasts and stock recommendations.

_____(3) CEO c. CPA who examines financial statements and attests to their fairness.

_____(4) Tax practitioner d. Individual who provides tax planning and tax services.

6. Phipps Company borrowed $25,000 cash on October 1, 2010, and signed a six-month, 8% interest-bearing note payable with interest payable at maturity. Assuming that no adjusting entries have been made during the year, what is the amount of accrued interest payable to be reported on the December 31, 2010 balance sheet

_____________

7. On January 1, 2011 Miller Corporation had retained earnings of $18,000. During 2010, Miller reported net income of $25,000, declared and paid dividends of $20,000, and issued stock for $10,000. What were Miller’s retained earnings on December 31, 2011

_____________

8. A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $10,000 credit balance in retained earnings. What is the balance in the contributed capital account

____________

9. During 2010, Sigma Company earned service revenues amounting to $900,000, of which $700,000 was collected in cash; the balance will be collected in January 2011. What amount should the 2010 income statement report for service revenues

_______________

10. A company receives a $55,000 cash deposit from a customer on December 15 but will not deliver the goods until January 20. What month will revenue be recorded

_______

11. On January 1, 2011, the general ledger of Global Corporation included supplies inventory of $2,000. During 2011, supplies purchases amounted to $6,000. A physical count of inventory on hand at December 31, 2011 determined that the supplies inventory was $1,300. How much is the 2011 supplies expense

_______

12. A company reported the following information for its most recent year of operation: purchases, $300,000; beginning inventory, $20,000; and cost of goods sold, $10,000. How much was the company’s ending inventory

__________

13. Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers:

Date Transaction Number of Units Cost per Unit

1/1 Beginning inventory 100 $800

5/5 Purchase 200 $900

8/10 Purchase 300 $1,000

10/15 Purchase 200 $1,050

During the year, 150 laptop computers were sold.

What was cost of goods sold using the FIFO cost flow assumption _________

14. Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers:

Date Transaction Number of Units Cost per Unit

1/1 Beginning inventory 100 $800

5/5 Purchase 200 $900

8/10 Purchase 300 $1,000

10/15 Purchase 200 $1,050

During the year, 150 laptop computers were sold.

What was cost of goods sold using the LIFO cost flow assumption _____

15. On January 1, 2010, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $2,000 for transportation and installation. The expected useful life of the machine is 9 years and the residual value is $6,000. How much is the annual depreciation expense assuming use of the straight-line depreciation method

__________

16. A company purchased an oil well for $50,000. It is estimated that 100,000 barrels can be extracted from the well. What is the depletion expense assuming 30,000 barrels are extracted and sold?

________

17. The following data were provided by the detailed payroll records of Mountain Corporation for the month of March 2011:

Wages $35,000

Income Taxes Withheld 7,350

Union dues 175

FICA taxes at a 7.65% rate (no employee has reached the maximum)

Requirements:

a) Prepare the journal entry to record the payroll and the related employee deductions.

b) Prepare the journal entry to record the employers FICA payroll tax expense.

18. For each of the transactions listed below, indicate whether it is an operating (O), investing (I) or financing (F) activity on the statement of cash flows. Also, indicate if the transaction increases (+) or decreases (-) cash.

Transaction

Type of Activity Effect on Cash
A) Sold stock for cash
B) Collected cash from customers on account
C) Purchased equipment
D) Paid operating expenses
E) Repaid the bank loan
F) Paid dividends to stockholders

19. Record the following transactions indicating the account affected and whether the account increased (+) or decreased (-)

Transaction

Assets

Liabilities

Stockholders Equity

A)

Paid accounts payable of $15,000

B)

Purchased $1,000 of supplies on account

C)

Borrowed $20,000 cash from the bank

D)

Purchased equipment for $18,000 and paid cash

E)

Sold stock and received $50,000 cash

F)

Earned $90,000 of revenue on account

G)

Collected $70,000 accounts receivable

H)

Paid dividends of $13,000

I)

Paid operating expenses of $12,000

J)

Depreciation expense for the year, $23,000

K)

Accrued year end wages of $4,000

L)

Received cash for services provided, $75,000

M)

Paid $12,000 for a 2 year insurance policy

N)

Insurance expired for the year $6,000

O)

Accrued interest expense on note, $1,000

20 . Letter Account Title Letter Account Title

A Cash G Notes payable

B Accounts receivable H Contributed capital

C Supplies I Retained earning

D Prepaid Insurance J Revenue

E Equipment K Operating expenses

F Accounts payable

During 2010, the company completed the transactions given below. Indicate the appropriate journal entry for each transaction by giving the account letter and amount.

Transaction Letter Debit Letter Credit
1) Paid $500 in operating expenses 500 500
2) Paid $12,000 for a two year insurance policy 12,000 12,000
3) Purchased equipment for $40,000. Paid $10,000 cash and signed a $30,000 note 40,000 10,000

30,000

4) Issued capital stock and received $8,000 cash 8,000 8,000
5) Received cash for services provided $7,500 7,500 7,500
6) Received $2,100 on accounts receivable 2,100 2,100
7) Insurance expired for the year, $23,000 23,000 23,000
8) Accrued year end expenses of $4,000 4,000 4,000
9) Paid accounts payable of $1,2,00 1,200 1,200
10) Earned $9,000 of revenue on account 9,000 9,000
11) Paid dividends to stockholders, $3,000 3,000 3,000

21. National Shops, Inc. reported the following amounts on its balance sheet as of December 31, 2010:

Inventory $325,000

Notes payable 100,000

Cash 150,000

Contributed capital 250,000

Equipment 700,000

Accumulated depreciation 600,000

Accounts receivable 30,000
Accounts payable 45,000

Retained earnings 210,000

Requirements:

1. What is the amount of National’s total assets? _______

2. What is the amount of National s total liabilities? _____

3. What is the amount of National s stockholders equity ____

22. For each of the accounts listed below, indicate whether the normal balance is a debit (DR) or credit (CR)

______ Inventory ______ Prepaid insurance

______ Notes payable ______ Accounts payable

______ Retained earnings ______ Cost of Goods Sold

______ Equipment ______ Cash

______ Accounts receivable ______ Wage Expense

_____ Revenue _____ Contributed capital

23. Indicate whether the following items would be added (+) or subtracted (-) from the company s books or the bank statement during the preparation of a bank reconciliation.

Reconciling item Company s Books Bank Statement
Outstanding checks
Bank service charge
Interest earned on the account
Deposits in transit
A check written for $59 but was incorrectly recorded in the check register for $95

24. The following data were taken from the records of Lilo Corporation for the year ended December 31, 2010:

Sales 900,000

Sales returns and allowances 10,000

Selling and administrative expenses 170,000

Cost of goods sold 510,000

The income tax rate is 35%.
Based on the above data, prepare a multiple-step income statement using good form. Include gross profit and pretax income. Use the form below.

25. For each of the accounts listed below, indicate whether they would be classified as an

ASSET (A) , LIABILITY (L), STOCKHOLDERS EQUITY (SE), REVENUE (R), EXPENSE (E)

_____ Inventory ______ Prepaid insurance

______ Notes payable ______Accounts payable

______ Retained earnings ______Cost of Goods Sold

______ Equipment ______Cash

______ Accounts receivable ______ Wage Expense

_____Revenue

26. For each of the accounts listed below, indicate which financial statement they would be included on Balance Sheet (BS) or Income Statement (IS)
______ Inventory ______ Prepaid insurance

______ Notes payable ______Accounts payable

______ Retained earnings ______Cost of Goods Sold

______ Equipment ______Cash

______ Accounts receivable ______ Wage Expense

______Revenue ______Contributed capital

27. Compute the missing amounts for each independent case.

Total

Revenues

Total

Expenses

Net Income

(Loss)

Total

Assets

Total

Liabilities

Stockholders

Equity

28. Compute the missing amounts for each independent case.

Sales

Revenue

Beginning

Inventory

Purchases Total

Available

Ending

Inventory

Cost of

Goods Sold

Gross

Profit

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