Acc 201 Final

Question 1

Which accounts normally have credit balances?

Answer 1

Revenues, Liabilities, and Equity

Question 2

Which of the following is an error?
A debit balance in the Dividends account
b. A credit balance in an expense account
c. A credit balance in a liabilities account
d. A credit balance in a revenue account

Answer 2

B. A credit balance in an expense account

Question 3

What is the balance in cash at September 30, 2022?

Answer 3

Cash (Debit) + Cash Sales (Debit) - Paid Expenses (Credit)

Question 4

Which of the following is an asset?
a. Sales Revenue
b. Notes Payable
c. Rent Expense
d. Prepaid Insurance

Answer 4

D. Prepaid Insurance

Question 5

Adjusting entry for supplies

Answer 5

Debit Supplies Expense 4,500
Credit Supplies 4,500

Question 6

Status of Accounts before adjustments - overstated/understated

Answer 6

If a company fails to make an adjusting entry to record supplies expense, then expense will be UNDERSTATED

Question 7

Account Balance after adjustment

Answer 7

$4,200-1,800= 2,400

Question 8

Temporary Accounts

Answer 8

CLOSED - All revenue accounts, all expense accounts, dividends

Question 9

Permanent Accounts

Answer 9

Asses, Liabilities, stockholders equity

Question 10

Normal Balance of sales, returns, and discounts

Answer 10

Sales Revenue= Credit
Sales Returns and Allowances= Debit
Sales Discounts= Debit

Question 11

A credit sale of $1,400 is made on July 15, terms 2/10, net/30, on
which a return of $100 is granted on July 18. What amount is
received as payment in full on July 24?
a. $1,400
b. $1,274
c. $1,350
d. $1,372

Answer 11

B. $1,274

Question 12

Formula to Calculate Gross Profit Rate

Answer 12

1. Net Sales = Revenue - Returns - Discounts
2. Gross Profit Rate= (Net Sales - COGS) / Net Sales

Question 13

Factor that determines inventory ownership

Answer 13

Legal Title determines whether or not goods should be included in physical count

Question 14

Doe Company uses a periodic inventory system. Details for the
inventory account for the month of January 2022 are as follows:

Units Per unit price Total
Balance 300 $5.00 $1,500
Purchase 150 5.30 795
Purchase 150 5.50 825

An end of the month inventory showed that 240 units were on hand.

If the company uses LIFO, what is the value of the ending inventory?
a. $1,264
b. $1,200
c. $1,302
d. $1,920

Answer 14

B. 1200

Question 15

Which inventory method results in the highest net income

Answer 15

FIFO

Question 16

Calculate ending inventory using lower of cost or net realizable value

Answer 16

Units x lower number

Question 17

Days In Inventory

Answer 17

1. Inventory Turnover= COGS / Average Inventory
2. Days in Inventory= 365 / Inventory Turnover

Question 18

Internal Control Procedures
An accounts payable clerk also has access to the approved
supplier master file for purchases. The control principle of
a. establishment of responsibility is violated.
b. independent internal verification is violated.
c. documentation procedures is violated.
d. separation of duties is violated.

Answer 18

D. Separation of duties is violated

Question 19

Identify which control activity is violated and explain
how the situation creates an opportunity for a fraud.

Wellstone Company’s treasurer received an award for
distinguished service because he had not taken a
vacation in 30 years.

Answer 19

Human Resource Controls

Question 20

Identify which control activity is violated and explain
how the situation creates an opportunity for a fraud.

To save money spent on order slips and to reduce
time spent keeping track of order slips, a local
restaurant does not buy pre-numbered order slips.

Answer 20

Documentation Procedures

Question 21

Two individuals at a retail store work the same cash register. This is

a. a violation of establishment of responsibility
b. a violation of segregation of duties
c. supporting the establishment of responsibility
d. supporting internal independent verification

Answer 21

A. a violation of establishment of responsibility

Question 22

Jalen Hurts has been a trusted employee for over 10 years. He is responsible for ordering merchandise inventory, receiving the inventory items, and authorizing the payment for these items. Which internal control principle is being violated?

a. Segregation of duties
b. Documentation procedures
c. Establishment of responsibilities
d. None

Answer 22

A. Segreation of duties

Question 23

Limitations of Internal Controls

Answer 23

costs should not exceed benefits, human element, size of business

Question 24

Treatment of reconciling items (Check Notes)

Answer 24

Outstanding checks= deducted
NSF Checks= deducted

Question 25

Which of the following would be deducted from the balance per bank on a bank reconciliation? a. Outstanding checks. b. Deposits in transit. c. Notes collected by the bank. d. Service charges.

Answer 25

A. outstanding checks

Question 26

Calculate adjusted cash balance Nilson Company gathered the following reconciling information in preparing its August bank reconciliation: Cash balance per books, 8/31 $28,000 Deposits in transit 1,200 Notes receivable and interest collected by bank 6,800 Bank charge for check printing 160 Outstanding checks 16,000 NSF check 1,360 The adjusted cash balance per books on August 31 is: a. $33,280. b. $32,080 c. $18,400 d. $19,680

Answer 26

Cash Balance per books 28,000 Add: Notes and Interest. +6,800 Deduct: Bank Charge. - 160 Deduct: NSF Check. -1,360 =33,280 A. 33,280

Question 27

3 Classifications of Recievables

Answer 27

Accounts Receivable Notes Receivable Other Receivables

Question 28

Calculate Bad Debt Expense using the % of receivables Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $55,000. If the balance of the Allowance for Doubtful Accounts is an $11,000 debit before adjustment, what is the amount of bad debt expense for that period? a. $55,000 b. $11,000 c. $66,000 d. $44,000

Answer 28

Estimated collectibles + Allowance for doubtful accounts $55,000 + $11,000= $66,000 C. $66,000

Question 29

Calculate Maturity Value of a Note Receivable

Answer 29

Interest= 10,000 x .09 x 5/12= 375 Maturity Value= $10,000 + 375= $10,375

Question 30

Calculate the Average Collection Period for Accounts Receivable The financial statements of the Bell Company report net sales of $600,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and the end of the year, respectively. What is the average collection period for accounts receivable in days? a. 24.3 days b. 73.0 days c. 36.5 days d. 48.7 days

Answer 30

365/Accounts Receivable Turnover 365/(180,000+40,000)/2 365/10 36.5 C. 36.5 days

Question 31

Characteristics of plant assets

Answer 31

Have physical substance, used in the operations, not intended for sale, provide service

Question 32

Definition of Depreciation

Answer 32

-a process of allocating to expense the cost of a plant asset over its useful life -a cost allocation process; not a valuation process

Question 33

Calculate the cost of land improvements Wesley Hospital purchased land for a new parking lot for $100,000. The paving cost $60,000 and the lights to illuminate the new parking area cost $24,000. Which of the following statements is true with respect to these additions a. $184,000 should be debited to the Land account. b. $24,000 should be debited to Land Improvements. c. $84,000 should be debited to the Land account. d. $84,000 should be debited to Land Improvements.

Answer 33

$60,000 paving cost + $24,000 parking area cost = $84,000 D. $84,00 should be debited to land improvements

Question 34

Calculate Depreciation expense using the STRAIGHT-LINE METHOD

Answer 34

Annual Depreciation= (Cost - salvage value) / useful life x months/year

Question 35

A company purchased factory equipment on June 1, 2022 for $128,000. It is estimated that the equipment will have an $8,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2022 is a. $12,000 b. $7,000 c. $6,000 d. $5,000

Answer 35

128,000 - 8,000 / 10 x 7/12 = $7,000 B. 7,000

Question 36

Calculate Gain/Loss on Disposal

Answer 36

Book Value = cost - accumulated depreciation Gain/Loss = book value - sale value

Question 37

Definition and common types of intangibles

Answer 37

Rights, privileges, and competitive advantages that result from ownership of long-lived assets that do not have physical substance Common types: patents, copy-rights, franchises, trademarks, goodwill

Question 38

Goodwill

Answer 38

Recorded only when an entire business is purchased, never amortized, written down if its value has been permanently impaired

Question 39

Calculate Amortization expense On July 1, 2022, Linden Company purchased the copyright to Norman Computer Tutorials for $210,000. It is estimated that the copyright will have a useful life of 5 years. The amount of amortization expense recognized for the year 2022 would be a. $42,000 b. $19,687 c. $38,850 d. $21,000

Answer 39

(purchase price / useful life x months / year) 210,000 / 5 x 6 / 12 = $21,000 D. $21,000

Question 40

Recording interest expense and interest payable

Answer 40

Interest expense is debited; interest payable is credited Interest 1,000 Interest Payable 1,000

Question 41

Accounting for the current portion of a long-term liability

Answer 41

Subtract

Question 42

Calculate Sales Revenue and sales tax payable A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $630,000, what is the amount of the sales taxes owed to the taxing agency? a. $600,000 b. $630,000 c. $31,500 d. $30,000

Answer 42

$630,000/1.05 = $600,000 $630,000 - $600,000 = $30,000 D. $30,000

Question 43

Calculate Interest

Answer 43

100,000 x .06 x 4/12

Question 44

Definition of convertible bonds

Answer 44

can be converted into common stock

Question 45

Bond Discount vs. Premium If bonds are issued at a premium, the contractual interest rate is a. higher than the market rate of interest. b. lower than the market rate of interest. c. too low to attract investors. d. adjusted to a higher rate of interest.

Answer 45

if bonds are issued at a premium, the contractual interest rate is HIGHER than the market rate of interest A. Higher than the market rate of interest

Question 46

Calculate Bond selling price Bonds with a face value of $600,000 and a quoted price of 104¼ have a selling price of a. $625,500. b. $624,150. c. $602,550. d. $624,000.

Answer 46

$600,000 x. 1.0425= $625,500 A. $625,500

Question 47

Classification of corporations by purpose and ownership

Answer 47

Purpose= not for profit, for profit Ownership= publicly held, privately held

Question 48

Disadvantages of the corporate from of an organization

Answer 48

Corporation management= separation of ownership and management, government regulation, more taxes

Question 49

Stockholder's rights

Answer 49

Vote, Dividends, Residual Claim, Preemptive Rights (Keep same % of ownership)

Question 50

Definition of Treasury Stock

Answer 50

-corporation's own stock that is has reacquired from shareholders -contra stockholders equity account

Question 51

Effect of stock dividend and stock split on stockholders equity

Answer 51

No change

Question 52

Effect of transactions on total stockholders equity A corporation purchases 30,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders’ equity? a. Increase by $300,000. b. Decrease by $750,000. c. Increase by $750,000. d. Decrease by $300,000.

Answer 52

30,000 shares x. $25 per share = $750,000 decrease B. Decrease by $750,000 Treasury stock is a contra- equity account meaning it decreases stockholders’ equity

Question 53

Calculate Preferred Dividends Ace Inc. has 10,000 shares of 4%, $100 par value, cumulative preferred stock outstanding at December 31, 2020. What is the annual dividend on the preferred stock? a. $40 per share b. $40,000 in total c. $4,000 in total d. $0.40 per share

Answer 53

10,000. x .04 x 100 = $40,000 B. $40,000 in total

Question 54

Calculate Stockholders Equity What is the total stockholders’ equity based on the following account balances? Common Stock $2,300,000 Preferred Stock 120,000 Retained Earnings 570,000 Treasury Stock 60,000 a. $2,690,000 b. $2,930,000 c. $3,050,000 d. $2,180,000

Answer 54

Common stock + preferred stock + retained earnings - treasury stock $2,300,000 + 120,000 + 570,000 – 60,000 = $2,930,000 B. $2,930,000

Question 55

Items used to prepare the statement of cash flow

Answer 55

comparative balance sheets, current income statement, additional information

Question 56

Operating Activity

Answer 56

Income Statement Items Cash Inflows- 1. from sale of goods and services 2. from interest and dividends received Cash Outflows 1. to suppliers for inventory 2. to employees for wages 3. to government for taxes Ex. Paid the monthly rent expense Collected $20,000 cash for services performed

Question 57

Investing Activity

Answer 57

Changes in investments and long-term assets Cash Inflows 1. from sale of property, plant, and equipment 2. from sale of investments 3. from collection on principle on loans Cash Outflows 1. purchase Ex. Sold a piece of equipment

Question 58

Financing Activity

Answer 58

long-term liabilities and stockholders equity Cash Inflows 1. from sale of common + preferred stock 2. from issuance of debt (bonds + notes) Cash Outflows 1. to stockholders as dividends 2. to repay long-term debt 3. to reacquire stock (treasury) Ex. Purchased shares of the company’s own stock for cash

Question 59

Significant Noncash Activities

Answer 59

direct issuance of common stock to purchase assets, conversion of bonds into common stock, issuance of debt to purchase assets, exchanges of plant assets Ex. Issued a note to purchase assets

Question 60

The purchase of equipment would be classified as a(n) a. operating activity. b. investing activity. c. financing activity. d. significant noncash activity.

Answer 60

B. investing activity

Question 61

Where would an inventory increase be classified on the statement of cash flows? a. Operating activities section b. Investing activities section c. Financing activities section d. Significant noncash activity

Answer 61

A. Operating Activities section

Question 62

Calculate cash inflow/outflow Vanguard Company purchased treasury stock with a cost of $55,000 during 2022. During the year, the company paid dividends of $20,000 and issued common stock for proceeds of $876,000. Cash flows from financing activities for 2022 total a. $856,000 net cash inflow. b. $911,000 net cash inflow. c. $75,000 net cash outflow. d. $801,000 net cash inflow.

Answer 62

Common stock - treasury stock - dividends 876,000 - 55,000 - 20,000 = 801,000 inflow D. $801,000 net cash inflow

Question 63

Items that are added/subtracted to convert net income to net cash provided Which of the following adjustments to convert net income to net cash provided by operating activities is subtracted from net income? a. Gain on Disposal of Equipment. b. Depreciation Expense. c. Patent Amortization Expense. d. Depletion Expense.

Answer 63

+ add back non-cash expenses (depreciation, amortization, current liabilities) - deduct gains + add back losses analyze changes in non-cash, current assets, current liabilities A. Gain on Disposal of Equipment

Question 64

Amount Reported as investing activity If Martinelli Corporation realizes a gain of $81,000 on a cash sale of equipment having a book value of $600,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a. $519,000. b. $681,000. c. $600,000. d. $81,000.

Answer 64

total cash receive (book value + gain) will be recorded $600,000 + 81,000 = $681,000 B. $681,000

Question 65

Significant non-cash activities

Answer 65

-Direct issuance of common stock to purchase assets -Conversion of bonds into common stock -Issuance of debt to purchase assets -Exchange of plant assets