ACC 220 UMUC Finals Section 1 LATEST VERSION

University of Maryland University College

Final Examination

Acct220: Principles of Accounting I – Section 1 of 2

Do not forget, this is only Section 1 of your Final Exam. Section 2 consists of the 25 multiple choice questions located in the Final Exam location. Section 2 is worth 25% (1 point per question).

USE THE SEPARATE DOCUMENT, Final Exam Answer Sheet to complete and submit your answers.

For this exam, omit all general journal entry explanations.

Ensure to include correct dollar signs and commas.

Question 1: 40% points:

Flip Company's December 31, 2014 trial balance is as follows:

Flip Corporation

Trial Balance

December 31, 2014

Account

Debit

Credit

Cash

$43,500

Accounts Receivable

54,500

Allowance for Doubtful Accounts

500

Notes Receivable

30,000

Merchandise Inventory

55,000

Land

20,500

Building

150,000

Accumulated Depreciation, Building

$15,000

Equipment

50,000

Accumulated Depreciation, Equipment

21,000

Goodwill

26,000

Accounts Payable

24,500

Long Term Notes Payable

75,000

Common Stock, $10 par, 2,000 shares authorized & outstanding

20,000

Retained Earnings

147,000

Sales Revenue

700,000

Salaries Expense

150,000

Utilities Expense

3,500

Cost of Goods Sold

350,000

Administrative Expenses

55,000

Sales Expenses

15,000

_______

         Totals

$1,003,000

$1,003,000

            Flip is a small company and records adjusting entries & closing entries only at fiscal (calendar) year end. Correcting and adjusting entries have not been recorded.

Additional Information:

            a. Notes Receivable is a 3-months, 6% note accepted on December 1, 2014.

            b. Long Term Notes Payable is a 5-year, 5% note that was signed on July 1, 2014. Interest is payable annually.

            c. Building is depreciated at 3% per year. There is no salvage value.

            d. Equipment is depreciated at 15% year. There is no salvage value.

            e. Flip discovered, on December 30th, that the inexperienced bookkeeper recorded in the general journal and general ledger that day's $1,500 cash sales as a debit to Accounts Receivable and a credit to Sales Revenue.

            f. The year-end physical count for Merchandise Inventory reflected a value of $52,500. Any difference in value is treated as shrinkage, and is included as part of Cost of Goods Sold.

            g. Salaries for the last half of December, payable in January, amount to $6,500.

            h. Flip determined that the balance in the Allowance for Doubtful Accounts should be $2,650 after an aging of A/R schedule was completed.

Required:

            1a. Prepare in journal form, any required correcting entries for Flip Corporation (There is only one)

            (2 points)

            1b. Prepare in journal form, all end-of-the period adjusting entries for Flip Corporation (There are 7)

(14 points)

            1c. Prepare a December adjusted trial balance for Flip Corporation (9 points)

NOTE: Students are encouraged to prepare their own T-accounts, on a separate scratch sheet of paper, and track from the beginning balance thru all journal transactions to ending balances for all accounts used in this problem. Do not turn in your separate scratch sheet of paper - those are student personal working papers and not part of any solution required for this exam.

Question 1 (continued) – New Company for Parts d and e

Below is a Correct Adjusted Trial Balance for the year ended December 31, 2014, for Emily’s Dress Shop, Inc.

            1d. Prepare a classified balance sheet in good form, for the year ended December 31, 2014 for Emily’s Dress Shop, Inc. (9 points)

1e. Prepare in journal form, the closing entries for the year ended December 31, 2014 (No Dividends) for Emily’s Dress Shop, Inc. (6 points)

Emily’s Dress Shop, Inc.

Adjusted Trial Balance

December 31, 2014

Account Titles

Debit

Credit

Cash

81,000

Accounts Receivable

95,400

Allowance for Doubtful Accounts

4,770

Interest Receivable

270

Notes Receivable (Due in 3 months)

54,000

Merchandise Inventory

94,500

Land

36,900

Building

270,000

Accumulated Depreciation, Building

35,100

Equipment

90,000

Accumulated Depreciation, Equipment

51,300

Goodwill

46,800

0

Accounts Payable

44,100

Salaries Payable

11,700

Interest Payable

3,375

Long Term Notes Payable

135,000

Common Stock

36,000

Retained Earnings

264,600

Sales Revenue

1,260,000

Interest Revenue

270

Cost of Goods Sold

634,500

Salaries Expense

281,700

Utilities Expense

6,300

Administrative Expenses

99,000

Sales Expenses

27,000

Depreciation Expense

21,600

Interest Expense

3,375

Bad Debt Expense

3,870

         Totals

1,846,215

1,846,215

Question 2: 8 points: Inventory

Flip uses the periodic method and had the following inventory events during January:

Date

Units Purchased

Unit Cost

Date

Units Sold

Unit Sales Price

Jan. 1

150

$7.00

Jan. 2

100

$10.00

Jan. 5

225

7.25

Jan. 7

125

10.00

Jan. 10

100

7.50

Jan. 12

75

12.00

Jan. 15

150

7.50

Jan. 17

200

12.00

Jan. 20

200

7.75

Jan. 24

150

15.00

Jan. 25

150

8.00

Jan. 30

75

8.25

Note: January 1 amount was the beginning inventory and unit value.

(Round all total dollar values to the nearest dollar. Round all unit values to the nearest penny.)

Required:

a. Calculate cost of goods available for sale.

b. Calculate the dollar value of sales.

c. Calculate the value of Ending Inventory and Cost of Goods Sold under the following independent assumptions:

1) LIFO method

2) FIFO method

        3) Average-cost method

Question 3: 7 points:

Required: Prepare Flip's Supply Co. general journal entries for the following transactions:

Jan. 1

Accepted a customer’s (Franks Co) 120 day, 10% note, as settlement of an outstanding $15,000 account receivable for goods sold last year (assume 30 days in January)

Jan. 15

Purchased $10,000 in equipment from Edwards Equipment, signing a 9 month, 12% note (15 days in January)

Jan. 25

Loaned Douglas Co. $30,000 cash, accepting a 90 days, 10% note (6 days in January)

Jan. 31

Prepared accrual adjusting entry for any interest revenue and interest expense. Use the 360-day calendar.

Apr. 25

Received payment in full from Douglas Co. for outstanding note & interest

May 1

Received payment in full from Franks Co. for outstanding note & interest

Oct. 15

Paid Edwards Equipment in full

Question 4: 9 points:

Flip Company purchased a refrigerated delivery truck for $65,000 on April 1, 2016.  The plan is to use the truck for 4 years and then replace it.  At the end of its useful life the truck is expected to have a salvage value of $10,000.

               a. Prepare the depreciation table for Flip’s truck assuming that the company uses the straight-line method for depreciation.

               b. Prepare the depreciation table for Flip’s truck assuming that the truck was purchased on January 1, 2016 and the company uses the double-declining-balance depreciation method.

               c. Compute the depreciation expense for 2016 for Flip’s truck assuming the truck has an expected life of 200,000 miles and during 2016 the truck was driven 24,540 miles.  Round your depreciation expense per mile to three decimal places.

Question 5: 7 points:

Medina Company received its February bank statement on March 6. The statement showed a balance of $316,500. Included on the statement were memoranda showing collections from Medina customers (A/R), totaling $16,000.

The statement also showed a returned check for a customer who paid the balance on his account, for $2,825. The bank charged a returned check fee of $75 for this NSF check. This $75 charge will be added to the customer’s balance. There were other service charges for the monthly service charge and ATM fees, totaling $200. These are bank service charge expenses. Medina’s accountant looked at her accounting records. At the end of February, the cash balance was $312,300. The statement did not reflect a deposit made late on February 28th, for $14,900. There were also some outstanding checks, totaling $6,200.

Required:

a. Determine the adjusted balance in the cash account after completing a bank reconciliation.

b. Prepare three journal entries needed due to the reconciliation.

Question 6: 4 points:

Flip Company at the end of the fiscal 2014 year has the following information: Credit Sales, $2,500,000 Sales Returns & Allowances $25,000 Accounts Receivable $200,000 and Allowance for Doubtful Accounts with a credit of $1,500.

Required:

a. Prepare the general journal entry to record the end of the year adjusting entry if Flip uses 0.5% of Net Credit Sales as the basis for determining Bad Debt Expense.

b. Prepare the general journal entry to record the end of the year adjusting entry if Flip uses 5% of Accounts Receivable as the basis for determining Bad Debt Expense.

Do not forget, this is only Section 1 of your Final Exam. Section 2 consists of the 25 multiple choice questions located in the Final Exam location. Section 2 is worth 25% (1 point per question).