Principles of Accounting 1 Spring 2010

Final Exam (120 minutes)

 Version D                                                                              

Name: (please print)_____________________________

Instructor’s Name:______________________________

50 Multiple choice questions at 6.25 points each for total points available of 312.50.  However, the maximum grade is 300.  Select the BEST answer.  You are permitted to use a simple four-function calculator.  This is a closed book, closed note, and closed neighbor exam.  You are NOT permitted to have scratch paper.  Turn in the exam and scantron with your name, instructor name, and exam version letter noted on both.  You will be required to show a picture ID upon turning in your exam and scantron.

Indicate your answer on a SCANTRON using pencil.  Do not mark your SCANTRON until you have selected your FINAL answer.  Erasures confuse the SCANTRON.  All adverse consequences of erasures and mismarks are your responsibility.

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:

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.

        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:

            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:

   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 above

Use 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) $731,300

C) $774,000

D) $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?

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?  

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:

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.

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:

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?

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:

            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 mercPrinciples of Accounting 1 Spring 2010

Final Exam (120 minutes)handise 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

Please Note:    This homework is due in 3 hours. 

Examine the role of management as it relates to finance in a corporation.  In your post, discuss the role of management by addressing the following prompts:

• Explain the various aspects of finance that management must understand. 
• Describe why a manager needs to understand the characteristics and importance of financial markets including their liquidity, competitiveness, and efficiency.
• Interpret the function of the Financial Balance Sheet in assisting in management’s decision making process.
• Discuss what could happen if management does not fulfill responsibilities related to finance.  Share a real world example from your own professional experience or from an external source.

Your post should be 400 words in length.