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ACG 2024 Final Exam Solved
A check correctly written by a company for $321 was incorrectly recorded by that same company as $312. On the bank reconciliation - ANS-$9 should be deducted from the cash balance per books A co,Amy's net credit sales are $750,000, average cash is $5,000, average inventory totals $50,000, and average net account receivables is $60,000. How much is the average collection period? - ANS-29.2 days A company has the following accounts and balances: Accounts payable- $40, Accounts receivable- $70, Accumulated depreciation- $50, Buildings- $500, Cash- $100, Common stock- $690, Equipment- $120, Inventory- $200, Investment in bonds- $20, Land- $150, Notes payable- $300, Patents- $10, Prepaid insurance- $20, Retained earnings- $150, Trademarks- $40, What are its current assets and property, plant, and equipment? - ANS-$390,000 and $720, A company has the following asset account balances: buildings and equipment $6,400,000. Accumulated depreciation $1,600,000. Patents $1,050,000. Inventory $1,200,000. Goodwill $4,000,000. How much will be reported on the balance sheet under property plant and equipment? - ANS-$4,800, A company has the following: Dec. 1 Beg. Bal. 40 units. $42 per unit Dec. 14 Purchase. 60 units. $43 per unit Dec. 21 Purchase. 55 units. $44 per unit The company sold 100 units at $75 each and has a tax rate of 20%. Assuming that a periodic inventory system is used and operating expenses are $1,000, what is the company's after tax net income using LIFO? - ANS-$1,716 (7,500-[(55 x $44) + (45 x $43)] - 1,000) = 2,145 x 80% A company purchased a truck for $50,000 on January 1 of its first year. The truck was originally depreciated on a straight-line basis over 8 years with an estimated salvage
value of $10,000. At the end of the fourth year, before year-end adjusting entries have been recorded, the company decided to revise the estimated life of the truck to a total of Armand to change its estimated salvage value to $2,000. How much depreciation expense should be recorded for the fourth year? - ANS-$11, A company's gross profit rate is lower this year compared to the prior year. Which of the following would not be a possible cause for this decline in the gross profit rate? - ANS- The company began selling products with a higher markup A corporation began the year with $3,500 of supplies on hand and recorded as assets. On the last day of the accounting period, there are $1,100 of unused office supplies on hand. What should the accountant do? - ANS-Debit supplies expense for $2,400 and credit Supplies for $2, A Corporation declared a cash dividend of $2 per share on 50,000 shares of common stock on July 15. The dividend is to be paid one month later on August 15 to stockholders of record on July 31. The correct entry to be recorded on the date of payment of August 15 will include a - ANS-Debit to the Dividends Payable account and a credit to the Cash account A corporation has the following: Sales revenue- $430, Sales returns and allowances- $20, Sales discounts, $10, Cost of goods sold- $310, Operating expenses- $60, Other expenses- $10, How much is its gross profit? - ANS-$90, A corporation issued 1,000 shares of its $3 par value common stock for $12 per share and later repurchased 50 of those shares for $9 per share. Which of the following will be debited when the repurchase of the shares is journalized? - ANS-Treasury stock for $ A corporation issued 2,500 shares of $6 par value common stock for $7 per share. Which of the following is included in the journal entry to record the issuance? - ANS- Reddit to common stock for $15, A corporation issues a $500,000, 4%, 15-year mortgage note. The terms provide for annual installment payments of $44,971. What is the remaining unpaid principal balance of the mortgage payable account after the second annual payment? - ANS-$449, A corporation uses a perpetual inventory system. It purchased $3,000 of merchandise on August 2 o account with terms of 1/10, n/30. It returned $250 of the merchandise of August 4. It pays on August 12. Which of the following is part of the journal entry it records when it pays on August 12? - ANS-Credit inventory for $27.
Apply the lower of cost or market rule to determine ending inventory Cost. Market value $400. $ $200. $ $300. $500 - ANS-$ Asset turnover - ANS-Net sales/Avg total assets At the start of the current year a company issued a $250,000 note to a bank. The company must pay the bank $50,000 plus interest each January 1 for the next five years starting at the beginning of next year. The company will report the note payable on its current years balance sheet as - ANS-Current liabilities $50,000 and long-term debt $200, At the start of the current year, investors contribute $10,000 to a newly formed corporation. During the year, the corporation earned revenues of $45,000, paid expenses of $22,000, and paid dividends to the owners of $5,000. It also borrowed $10,000 by issuing a note. At the end of the year, the balance in retained earnings will be - ANS-$18,000 credit At the start of the year, a company's Allowance for Doubtful Accounts had a credit balance of $22,000. During the year it had credit sales of $1,100,000. It also wrote off $50,000 of uncollectible accounts receivable during the year. Past experience indicates that the allowance should be 2% of the balance in receivables. If the accounts receivable balance at December 31 was $250,000 what is the bad debt expense for the year? - ANS-$33, At the. Start if the current year, a company paid for the following in cash: Copyrights $1,500, Equipment $25,000, Goodwill $4,500, Inventory $1,500, Land $15,000, Patents $2,500, Research and development $1,500, Supplies $4,000, Trademarks $1,200, It amortized its intangibles over 10 years. Determine its current year amortization expense - ANS-$400, Average collection period - ANS-365/accounts receivable turnover Balance of $360,000. Inventory does not include: - ANS-FOB destination purchases not yet received (24,000) FOB shipping point goods sold and shipped (9,000)
Goods held on consignment (none) Ending inventory = $360,000-24,000-9,000= $327, Balance sheet - ANS-Assets = Liabilities + Equity Callable bonds - ANS-Bonds that the issuing company can buy back at a stated dollar value prior to maturity Cash-basis accounting - ANS-- recognize revenues when cash is collected
- recognize expenses when the expenses are paid Categories of assets - ANS-- current assets
- long-term investments
- property, plant, and equipment
- intangible assets Categories of liabilities - ANS-- current liabilities
- long-term liabilities Chief accounting officer - ANS-Maintains the business entity's accounting records Ensures that the business entity uses an adequate system of internal controls Prepares the business entity a financial statements, tax returns, and internal reports Chief executive officer - ANS-Has responsibility for managing a business entity and operations Communicates with stakeholders Corporation - ANS-Owned by 1 or more owner Difficult to create Limited liability Credits - ANS-Increase
- liabilities
- equities
- revenues Decrease
- assets
- expenses
- dividends Current assets - ANS-- accounts receivable
- inventories
- prepaid expenses
- short-term investments
FOB destination - ANS-Ownership of goods passes from seller to buyer when goods are delivered to the buyer FOB shipping point - ANS-Ownership of goods passes from seller to buyer when goods are delivered to carrier Forming a corporation does not necessarily involve - ANS-Incurring debt Fraud triangle - ANS-- opportunity
- financial pressure
- rationalization Gross profit - ANS-Sales revenue - Cost of goods sold Gross profit rate - ANS-Gross profit / Net sales If a transaction affected two accounts and total assets decreased by $4,000, then - ANS-Total liabilities must have decreased by $4,000 or total stockholders equity must have decreased by $4, If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest annually would sell at an amount - ANS-Greater than face value In its first year, a company performed services for a customer and billed the customer $14,000. In the second year, the customer pays the company for the services rendered in the first year. In the first year, the company incurred and paid $6,000 of wage expense. If the company uses the accrual-basis of accounting, then it will report - ANS- Revenue of $14.000 and expense of $6,000 in the first year In the annual report, where would a financial statement reader find out if the company's financial statements give a fair depiction of its financial position and operating results? - ANS-Auditor's report Income statement - ANS-Revenue - Expenses = Net Income Intangible assets - ANS-- copyrights
- patents
- trademarks
- goodwill Interest - ANS-Principal x Interest rate x Time Internal control activities - ANS-- establishment of responsibility
- segregation of duties
- documentation procedures
- physical controls
- independent internal verification
- human resource controls Internal users - ANS-- management
- marketing personnel
- finance personnel
- human resource personnel Inventory turnover - ANS-Cost of goods sold / average inventory LIFO - ANS-Newest inventory is sold first Oldest inventory is ending inventory Liquidity - ANS-the speed that an asset is converted into cash or used by the business Net sales - ANS-Sales revenue - sales returns and allowances - sales discounts On December 14 a company sold $4,000 of merchandise on account to a customer with terms 1/10, n/30. On December 20 the customer returned $500 of merchandise to the company. The company received no payments from that customer in December. On December 21 the company received $2,000 fro a different customer for merchandise to be delivered in January. Assuming the company has only these two customers what. Is its accounts receivable on December 31? - ANS-$3, On January 1, a corporation issued $1,000,000, 14%, 5-year bonds. The bonds sold for $1,084,096. This price resulted in an effective interest rate of 13% on the bonds. Interest is payable annually on January 1. Use the effective interest method to determine the amount of interest expense for the first year - ANS-$140, On January 1, a corporation issues $200,000 of a 8%, 5-year bonds for $208,400. Interest is paid annually. If the corporation uses the straight line method of amortization, the amount of bond interest expense for the first year is - ANS-$14, Outstanding stock - ANS-Stock that has been issued and is being held by stockholders Overstated beginning inventory/Understated ending inventory - ANS-Overstated COGS Understated net income Ownership passes to the buyer when the public carrier accepts the goods if the goods are shipped - ANS-FOB shipping point Par value stock - ANS-Stock that has been assigned a value per share in the corporate charter Partnership - ANS-Owned by 2 or more owners Simple/easy to create
She a bonds contractual rate is higher than the market rate - ANS-Above face value (premium) Sole proprietorship - ANS-Owned by one person Simple/easy to create Unlimited liability Stakeholder rights - ANS-- to vote in the election of the corporations board of directors
- to share in the corporations earnings via dividends
- to maintain the same percentage ownership when it issues new shares of stock
- to share in assets upon liquidation of the corporation in proportion to their relative holdings of stock Statement of cash flows - ANS-Cash inflows - cash outflows = net cash flow Statement of stockholders equity - ANS-Beginning equity + owner contributions + Net income - Dividends = Ending equity Steps of managing receivables - ANS-1. Determine to whom to extend credit
- Establish a payment period
- Monitor collections
- Evaluate the liquidity of receivables
- Accelerate cash receipts from receivables when necessary Straight line depreciation method - ANS-Divide plant assets depreciable cost by its estimated useful life The effects of performing services for cash on the basic accounting equation are to - ANS-Increase assets and increase stockholders' equity The partnership form of business organization - ANS-is tax advantaged in comparispm to a corporation Three activities of a business - ANS-- financing
- investing
- operating Treasurer - ANS-Maintains custody of the corporations funds Oversees the company's cash position Treasury stock - ANS-A corporations own stock that has been issued, fully paid for, and reacquired by the corporation but not retired Trial balances may balance even when - ANS-- a transaction was not journalized
- a journal entry was not posted to the ledger
- a transaction was journalized more than once or posted more than once
- incorrect accounts were used to journalize or post the transaction
- offsetting errors are made in recording two or more transactions Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited - ANS-When an account is determined to be uncollectible Understated beginning inventory/Overstated ending inventory - ANS-Understated COGS Overstated Net Income When a bonds contractual rate is lower than the market rate - ANS-Below face value (discount) Which of the following accounts appears on the adjusted trial balance with its beginning balance but appears on the balance sheet with its ending balance? - ANS-Retained earnings Which of the following describes that sequence in which financial statements are prepared? - ANS-Income statement, Retained earnings statement, and Balance sheet Which of the following is not an asset? - ANS-Accounts Payable Which of the following is not one of the main factors that contributed to fraudulent activity and Is also known as part of the fraud triangle? - ANS-Bonding Which of the following is the sequence of events for the recording process? - ANS- Journalize, post, prepare a trial balance Which of the following would increase a company's current ratio? - ANS-Negotiate with a creditor to reclassify a note payable in 3 months into a note payable due in 2 years Which of the following would not be subtracted from the balance per books on a bank reconciliation? - ANS-Outstanding checks Working capital - ANS-Current assets - Current liabilities
