ACCT 229 Exam 2 Practice Test | Exams Accounting

Name Section _________________

EXAM 2

Accounting 229

Ch. 4-7

Multiple Choice (46 pts.) _____________

Workout/Other (54 pts.) _____________

Total Score (100 pts.) _____________

Texas A&M University is dedicated to establishing an atmosphere of academic integrity. To insure that each student

is aware of what constitutes academic dishonesty, the Academic Integrity Task Force has published definitions of

academic misconduct. Please read the following definitions and clarifications from the proposed honor system.

Indicate by your signature at the bottom of the page if you understand the definitions.

Cheating: Intentionally using or attempting to use unauthorized materials, information, notes, study or other

devices or materials in any academic exercise.

Clarification:

a. During an examination, looking at another student’s exam or using external aids (for example,

books, notes, calculators, conversations with others, electronic devices) unless specifically allowed

in advance by the instructor.

Complicity: Intentionally or knowingly helping, or attempting to help, another to commit an act of academic

dishonesty.

Clarification:

a. Knowingly allowing another to copy from one’s paper during an exam.

b. Distributing test questions or substantive information about the test without the instructor’s

permission.

c. Conspiring or agreeing with one or more persons to commit, or attempting to commit, any act

of scholastic dishonesty.

I understand the honor system definitions and clarifications concerning academic dishonesty during exams. I

also understand that a violation of any of the above will be grounds for reporting and adjudication as

described in the honor system procedures.

On my honor, as an Aggie, I have neither given nor received unauthorized aid on this academic work.

Signature ________________________________________ Date _______________________

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Name Section _________________ EXAM 2 Accounting 229 Ch. 4- Multiple Choice (46 pts.) _____________ Workout/Other (54 pts.) _____________ Total Score (100 pts.) _____________ Texas A&M University is dedicated to establishing an atmosphere of academic integrity. To insure that each student is aware of what constitutes academic dishonesty, the Academic Integrity Task Force has published definitions of academic misconduct. Please read the following definitions and clarifications from the proposed honor system. Indicate by your signature at the bottom of the page if you understand the definitions. Cheating: Intentionally using or attempting to use unauthorized materials, information, notes, study or other devices or materials in any academic exercise. Clarification: a. During an examination, looking at another student’s exam or using external aids (for example, books, notes, calculators, conversations with others, electronic devices) unless specifically allowed in advance by the instructor. Complicity: Intentionally or knowingly helping, or attempting to help, another to commit an act of academic dishonesty. Clarification: a. Knowingly allowing another to copy from one’s paper during an exam. b. Distributing test questions or substantive information about the test without the instructor’s permission. c. Conspiring or agreeing with one or more persons to commit, or attempting to commit, any act of scholastic dishonesty. I understand the honor system definitions and clarifications concerning academic dishonesty during exams. I also understand that a violation of any of the above will be grounds for reporting and adjudication as described in the honor system procedures. On my honor, as an Aggie, I have neither given nor received unauthorized aid on this academic work. Signature ________________________________________ Date _______________________

Problem 1: Given each of the following circumstances, make the appropriate year -end adjusting entry: (3 pts. ea.)

A company has ending accounts receivable of $200,000, net credit sales of $ 90,000, and a balance before adjustment in Allowance for Doubtful Accounts of $4,000. The company estimates 2% of net credit sales will be uncollectible.
A company using the perpetual inventory method has a balance in its inventory of $3,000, but the physical year-end count revealed there was $2,800 of merchandise on hand.
A company using double declining balance depreciation owns an asset with a cost of $12,000. The asset has a five-year life and a salvage value of $4,000. This is the end of the asset’s third year. Problem 2: The following errors were discovered during a company’s preparation of their monthly bank reconciliation: A. The bank debited the company’s account for a $50 check written by another company. B. A check written by the company for $190 was returned with the bank statement. The company’s accountant had recorded the check for $910. C. The company’s accountant had entered a deposit in the ledger for $45. The deposit was recorded by the bank in the correct amount of $54. Determine if the error was a bank error or a book error (put a check mark in appropriate column) and determine whether the dollar amount of the error should be added or subtracted from the selected account (again, by placing a check mark in the appropriate column). (1 pt. each) Error Bank Book Add Subtract A. B. C.

Problem 5: A company uses the allowance method for accounting for bad debts. For each of the following conditions determine the effect on the accounting equation: Indicate I-Increase; D - Decrease; NE- no effect. (6 pts.)

The company writes off an account receivable as uncollectible. Assets Liabilities Stockholders’ Equity
The company reinstates an account receivable and then collects on the receivable. Assets Liabilities Stockholders’ Equity
The company records bad debt expense. Assets Liabilities Stockholders’ Equity Problem 6: During 2012, Aggie, Inc. had $800,000 of sales on credit. Also, during 2012 the company wrote off $14,000 of accounts receivable as definitely uncollectible and collected $1,000 from individuals whose accounts had been written off during the previous years. The company estimates its bad debts each year to be 2% of credit sales. On January 1, 2012, the accounts receivable balance was $30,000, and on December 31, 2012, the balance was $51,000. The January 1, 2012 balance in the Allowance for Doubtful Accounts was $5,500 (cr). (2 pts. each) A. Determine the amount of cash collected from credit sales during the year 2012. $_______________________

B. Determine the December 31, 2012 balance in the Allowance for Doubtful Accounts: $______________________

(after adjustment) C. Determine Net Realizable Value on December 31, 2012: $ __________________________

Problem 7: Aqua Co. purchased a patent on January 1, 2011, for a price of $70,000. Legal fees related to the acquisition of this patent were $10,000. At the time of purchase, the patent has a remaining legal life of 15 years. However; due to technological advances, Aqua believes the patent will only give them a competitive advantage for the next 10 years. In late December 2013, Aqua received notice that they were being sued for patent infringement. On January 1, 2014, they spend $14,000 in a successful defense of the patent. a) Prepare the journal entry to record amortization expense on December 31, 2011: ( 3 points ) b) Determine the book value of the patent on December 31, 2014, after adjustments: ( 3 points ) $_________________________ Problem 8: Match each of the terms below with the appropriate definition: (1 pt each) _____ Book Value _____ Depreciable Base _____ Capital Expenditure _____ Amortization A. Expenditures that increase the productive life or productive capacity of an asset. B. Expenditures for the normal upkeep of a long term asset C. Process of allocated the cost of a fixed asset to expense over its useful life. D. The excess of the purchase price of a business over the fair market value of the business’s assets and liabilities. E. Estimated amount to be recovered at the end of the company’s estimated useful life of an asset. F. Process of allocated the cost of an intangible asset over its useful life. G. The cost of an asset less its salvage value. The maximum amount an asset can be depreciated. H. Acquisition cost of an asset less its accumulated depreciation.

Multiple Choice: 2 points each Use the following set of numbers to answer questions 1-3. (Bubble correct corresponding letters on your scantron!) A. $ 47.00 AB. $ 35.87 BD. $144. B. $ 50.25 AC. $ 37.45 BE. $ 45. C. $ 49.22 AD. $ 46.80 CD. $143. D. $147.20 AE. $ 49.25 CE. $ 37. E. $ 35.20 BC. $ 48.53 DE. $ 34. The following table shows the inventory records for Aggie Company for the month of February. Date Description # of units Cost per unit Total Feb. 1 Beg. Inventory 15 $2.00 $30. Feb. 10 Purchase 10 2.10 21. Feb. 12 Sale 13 117. Feb. 16 Purchase 6 2.20 13. Feb. 26 Purchase 9 2.25 20. Feb. 27 Sale 10 77.

Determine cost of goods sold if the company uses the average cost inventory method. (As discussed in class) (note: round average cost to 2 decimal places)
Determine gross profit if the company uses perpetual LIFO.
Determine ending inventory if the company uses perpetual FIFO.
Answer the following as true or false, then select the correct corresponding multiple -choice answer. _____________ A year end physical inventory count is required if a company is using the periodic inventory method but not if they are using the perpetual inventory method. ____________ A company using the periodic inventory method will debit the asset account, Purchases, when merchandise held for resale is bought. A. True, True B. True, False C. False, False D. False, True

The accountant for Aggie Company prepared the following analysis of its inventory at year-end: Item Units Cost per Unit Estimated Sales Price/Unit Cost of Disposal (Selling Expense) Net Realizable Value Item A 100 $10 $16 $ Item B 150 25 32 6 Item C 120 30 48 16 Based on this information, Aggie should make a journal entry to increase Cost of Goods Sold by what amount? A. $ 0 B. $ 100 C. $ 390 D. $ 300 E. $ 290
The formula for inventory turnover is: A. Average Inventory divided by Cost of Goods Sold B. Cost of Goods Sold divided by Average Inventory C. Ending Inventory divided by Cost of Goods Sold D. Gross profit divided by Average Inventory E. Net Profit divided by average inventory
Selected account balances for a merchandising company are listed below. The company uses the periodic inventory method. Sales Revenue $ 100,000 Purchases $60, Sales Returns and Allowances 4,000 Freight-In 8, Inventory (beginning) 16,000 Purchase Discounts 3, Inventory (ending) 14,000 Freight – Out 1, Purchase Returns and Allowances 2,000 Sales Discounts 7, Determine the company’s gross profit. A. $27, B. $40, C. $24, D. $25, E. $31,
Under which of the following situations could a company have inventory profits? A. Prices are rising and the company is using periodic FIFO B. Prices are rising and the company is using periodic LIFO C. Prices are declining and the company is using periodic FIFO D. Prices are declining and the company is using periodic LIFO

Based on the aging of its accounts receivable at December 31, 2012 a company determined that the net realizable value of the receivables at that date is $304,000. Additional information is as follows: Accounts receivable at December 31,2012 384, Allowance for doubtful accounts at January 1, 2012 51,200 (cr) Accounts written off as uncollectible during the year 35, Collection on account previously written off 2, Determine bad debt expense for the year ending December 31, 2012 A. $ 28, B. $ 66, C. $ 18, D. $ 80, E. $ 62,
On January 2, 2010, College Corp. acquired equipment for $120,000. The salvage value of the equipment is estimated to be $20,000, with a useful life of 5 years or 20,000 hours. Assuming College uses the Double Declining Balance method of depreciation, what is the balance in the Accumulated Depreciation account on December 31, 2011? A. $36, B. $76, C. $48, D. $80, E. $32,
On March 30, 2011, Baldwin Corporation acquired equipment costing $96,000. The estimated life of the equipment is 3 years or 18,000 hours, after which Baldwin expects to be able to sell the machine for $6,000. Baldwin uses the machine for 3,500 hours during 2011 and 4,000 hours during 2012. Assuming Baldwin uses the Units of Production method of depreciation, the journal entry to record its 2012 depreciation expense would include a: A. debit to Depreciation Expense of $32, B. credit to Accumulated Depreciation of $30, C. credit to Depreciation Expense of $21, D. credit to Accumulated Depreciation of $20, E. debit to Accumulated Depreciation of $32,
A company acquired a group of assets for $250,000. The appraised value of the assets are: Land, $98,000; Building, $154,000; and Equipment, $28,000. If the company handles the transaction as a “lump-sum purchase”, the company will record the equipment at a cost of: A. $27, B. $35, C. $28, D. $25, E. $31,

Mann Inc. paid $16 million to purchase Woe Corporation. Woe’s balance sheet information on the date of purchase is shown below in millions of dollars: Asset Liabilities & SHE. Current Assets $13 Total liabilities $ LT Assets 23 Total SHE 11 $36 $ Mann had an independent appraiser come in and appraise Woe’s assets. The appraiser gave Woe’s assets a current market value of $40 million. Calculate the amount of goodwill that Mann, Inc. will record at the time of purchase: A. no goodwill be recorded B. $20 million C. $ 1 million D. $ 4 million E. $ 5 million
Natussi Corporation paid $250,000 to purchase equipment. In addition to the list price, Natussi incurred the following expenditures relating to the equipment:
- $1,500 freight to have the equipment shipped to its facility
- the vendor required Natussi to insure the equipment while in transit at the cost of $
- $1,200 for a 1 year insurance policy on the equipment after it has been installed
- $300 to test the equipment before it is placed in service
- $3,200 paid to installers to install the equipment
- $400 for maintenance costs during the first year in service
- $450 paid for repairs when the equipment was damaged during installation. Calculate the cost of the equipment: A. $255, B. $256, C. $256, D. $256, E. $255,
Mark the following statements as True or False, then select the corresponding multiple choice answer: _____ Failure to record depreciation expense for the year would result in total assets and net income being overstated for the period. _____ Research and development costs are added to the cost of the patent and are amortized over the lesser of the useful or legal live of the patent. A. True, True B. True, False C. False, True D. False, False

ACCT 229 Exam 2 Practice Test, Exams of Accounting

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B. Determine the December 31, 2012 balance in the Allowance for Doubtful Accounts: $______________________