Solved by verified expert :Principles of Accounting 1 Spring 2010Final Exam (120 minutes)Name: (please print)_____________________________Instructor’s Name:______________________________50 Multiple choice questions at 6.25 points each for total points available of 312.50.1. In the following journal entry, revenue is being recognized:Accounts ReceivableSales Revenuea. at the same time cash is collectedb. before the cash is collectedc. after the cash is collectedd. no revenue is being recognized2. 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?October 1October 5October 12October 133. 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)B)C)D)facility-sustaining costsproduct-sustaining costsbatch-related costsunit-related costs4. An unfavorable sale price variance reflectsA) 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)B)C)D)income statement onlybalance sheet and income statement onlybalance sheet and statement of cash flows onlybalance sheet, income statement, and statement of cash flows6. 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 ofthe loss.C) Creditors of a company can only claim the assets of the firm and not theassets of the owners of the firm.D) Creditors of a firm can claim all the assets of a company and all of theowners’ personal assets.7. In times of declining prices, ______ generally result(s) in the ______ cost ofgoods sold.A)B)C)D)LIFO and FIFO, sameFIFO, lowerLIFO, lowerLIFO, higher Use the following to answer questions 8 and 9:ThinkStyles, Inc. applies manufacturing overhead on the basis of the number ofindirect labor hours required. The following information is available:8.Indirect Labor HoursManufacturing Overhead CostsEstimated3,100$111,600Actual3,180$124,000Thepredetermined manufacturing overhead rate per indirect labor hour is:A)B)C)D)$35$36$39$409. The amount of over/underapplied manufacturing overhead is:A)B)C)D)$9,520 underapplied$3,200 underapplied$12,400 underapplied$12,400 overapplied10. 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 ofcash?A)B)C)D)$183,706$184,026$216,674None of the above.11. The journal entry to record wages earned by assembly line workers wouldinclude a:A)B)C)D)credit to Indirect Labordebit to Finished Goods Inventorydebit to Work In Process Inventorycredit to Cost of Goods Manufactured 12. On September 1, 2009, Olpe Corporation paid $2,400 in advance for a one yearinsurance policy that covers the period September 1, 2009 through August 31,2010. What amount of insurance expense should Olpe report for the year endedDecember 31, 2009?A)B)C)D)$800$1,200$2,400$013. The Pacioli Manufacturing Company has kept track of the number of units theyhave produced each month and the cost to produce those units for the past sixmonths.MonthJulyAug.Sept.Oct.Nov.Dec.Number of Units10,00011,00020,00016,00012,00018,000Cost of Units Produced$60,000$66,000$110,000$90,000$70,000$102,000Using the high/low method, what is the estimated total cost if 14,000 units areproduced in January?A)B)C)D)$62,000$70,000$75,000$80,00014. 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 receivableC) debit to sales returns and allowancesD) debit to cash15. Hasbrouck Corporation used $63,500 of direct materials, $46,000 of directlabor, and applied $94,500 of manufacturing overhead during October. Cost ofgoods sold for October was $218,200. Hasbrouck’s beginning and endingwork-in-process and finished goods inventories were as follows:Finished goodsWork-in-processBeginning inventory,00047,000Ending inventory$61,50041,300What was Hasbrouck’s cost of goods manufactured for October?A)B)C)D)$209,700$212,500$234,800None of the above.16. Halting, Inc. gathered the following direct labor cost information for the monthof July:Actual direct labor hoursStandard direct labor hours allowedfor actual productionActual direct labor rate per hourStandard direct labor rate per hourThe direct labor price variance is:A)B)C)D)$15,730U$23,975U$15,275F$23,520F68,50067,200$12.10$11.75 17. On December 31, 2009, Voyager Products, Inc. received a $20,000 deposit froma customer for a special order of merchandise to be manufactured and shippedin January 2010. Voyager Products, Inc. made the following journal entry onDecember 31, 2009:CashSales Revenue20,00020,000The financial statements dated December 31, 2009 would be:A)B)C)D)correctly statedin error, understating liabilities and overstating assetsin error, overstating net income and understating liabilitiesin error, understating net income and understating stockholders’ equity18. Allowance for Uncollectible Accounts had a beginning and ending balance of$3,500 and $4,600, respectively. If uncollectible accounts expense was $9,500for the period, the total dollar amount of accounts written off during the periodwas:A)B)C)D)$13,000$8,400$10,600$9,50019. 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 theend of the year. Cash receipts/collections from customers during the year were:A)B)C)D)$160,000$200,000$240,000$310,00020. A cost that does not change in total as the activity changes is a:A) Fixed cost B) Variable costC) Mixed costD) None of the aboveUse the following information for questions 21 and 22.Hepler Enterprises began the year with $188,200 of finished goods inventory. During theyear 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) $692,700B) $731,300C) $774,000D) $900,20022. Assuming the overapplied or underapplied manufacturing overhead wasconsidered small and, therefore, closed out to Cost of Goods Sold, the cost ofgoods sold reported on the income statement for the period was:A)B)C)D)$675,000$690,300$695,100$728,90023. 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. IfManhattan increases its selling price to $95, how will this affect the breakevenpoint in units?A)B)C)D)The breakeven point will increase 27,619 units.The breakeven point will decrease 106,078 units.The breakeven point will increase 41,300 units.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 purchasediscounts, and it pays for the merchandise on the 30th day after the purchase,the journal entry to record the payment would include a:A)B)C)D)credit to Cash for $41,160credit to Inventory for $42,000debit to Accounts Payable for $42,000debit to Purchase Discounts Lost for $84025. 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 theperiod?A)B)C)D)$612,000$640,000$662,000None of the above26. If a company’s selling price per unit increases, what is the impact on itscontribution margin and breakeven point?A)B)C)D)Contribution MarginIncreaseDecreaseNo effectIncreaseBreakeven PointIncreaseNo effectIncreaseDecrease27. The bookkeeper who records cash receipts also deposits daily cash receipts atthe bank on his way home from work. This is a violation of which of thefollowing characteristics of good internal control:A) requiring proper authorizationB) separating incompatible duties C) physically controlling assets and documentsD) maintaining adequate documents and records28. 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.’stotal assets?A)B)C)D)$1,735,000$1,820,000$1,970,000$2,205,00029. The Torbel Company ordered $80,000 of inventory from Borton Industries andwas given terms of 3/15 n/45. Which of the following describes how soon thepayment must be made in order to receive a discount and the amount of thediscount available?A)B)C)D)Payment Made WithinBetween 3 and 15Days45 DaysBetween 2 and 15Within 15 DaysAmount of Discount$12,000$ 9,600$ 2,400$ 2,40030. The following journal entry affected the accounting equation by:CashXXXCapital StockXXXA)B)C)D)increasing assets and increasing liabilitiesdecreasing assets and increasing owners equityincreasing liabilities and decreasing owners equityincreasing assets and increasing owners equity31. Moreland Corp. purchased a building for $35 million that will house its newmanufacturing plant. This is part of Moreland’sA)B)C)D)Operating activitiesFinancing activitiesInvesting activitiesAll of the above Use the following to answer questions 32 and 33:Carrington Company has a perpetual inventory system and uses the LIFO method ofinventory costing. Carrington reported the following events during the month of March:DateMar. 1351016212530EventBeginning Inv.PurchaseSalePurchaseSaleSalePurchaseSaleNumber of UnitsBoughtSold100755014011070175120Unit Price$10$11$12$1432. The cost of goods sold for the March 21st sale is:A)B)C)D)$700$720$785$ 84033. The ending inventory on March 31st is:A)B)C)D)$1,440$1,620$1,640$1,96034. Triple Tee Company sells their only product for $22.00. Variable costs per unitare $14.80, while total fixed costs amount to $550,000. The company wants toearn a before-tax profit of $400,000. The total unit sales needed to achieve thedesired before-tax profit is:A) 64,190B) 76,389C) 131,945 D) 137,26635. Distance Solutions’ president receives a bonus equal to 8% of income before taxand bonus. If the tax rate is 30%, what is Distance Solutions’ net income forthe year assuming income before tax and bonus was $1,300,000?A)B)C)D)$104,000$390,000$806,000$837,20036. Pratt Company currently produces and sells 12,000 units of its product eachmonth at a sales price of $15 each. Another firm has offered to buy anadditional 1,000 units at $10 per unit. Pratt’s total cost per unit is as follows:Direct MaterialDirect LaborVariable overheadFixed cost$3.001.503.802.00Fixed costs per unit are based on production of 12,000 units per month. PrattCompany currently has the capacity to produce 15,000 units per month. By howmuch would profit change if Pratt accepts this offer?A)B)C)D)$7,000 increase$5,500 increase$1,700 increase$300 decrease37. If a product has a cost of $600 and a selling price of $1,800, what is theproduct’s markup percentage?A) 33%B) 67%C) 150% D) 200%38. Grover Company’s economic order quantity is 2,800 units. Demand for theyear is 108,000 units. There are three days between the time an order is placedand the day it is received. Grover operates 360 days per year. What is the dailydemand?A)B)C)D)3009009342,70039. WyKan Corporation sells three types of speaker systems, the Model A, theModel B and the Model C. The profit report for these speaker systems for themost recent period is shown below by product line. The facility sustaining costsare fixed and allocated as shown below between each of the three product lines.SalesVariable CostsContribution MarginFacility Sustaining CostNet Income (Loss)Model A_$200,000110,000$90,00050,000$40,000Model B$95,00060,000$35,00030,000$5,000Model C$155,000124,000$31,00040,000$(9,000)Wykan’s president insists on discontinuing Model C. He obviously has not takenacct 2101! What will be the company’s net income (loss) after eliminating ModelC?A)B)C)D)$45,000$36,000$(9,000)$5,00040. Palisades Corporation purchased equipment by signing a long-term notepayable. What was the effect of this transaction?A) increased assets and increased liabilitiesB) increased assets and increased owners equity C) increased assets and decreased owners equityD) increased owners equity and decreased liabilities41. The most likely explanation for the following journal entry would be:Unearned RevenueService RevenueA)B)C)D)XXXXXXperformed a service and immediately received the cashperformed a service and billed the customerperformed a service for a customer who had paid for the service ahead of timerecorded the receipt of cash from a customer for services previouslyperformedUse the following information for questions 42 and 43.Hepburn Corporation’s sales price is $30 per unit. Unit sales information is presentedbelow:Cash salesCredit salesMarch (Actual)10,00030,000April (Estimated)12,00040,000May (Estimated)13,00045,000Management estimates that 5% of credit sales are uncollectible, 30 % are collected in themonth of sale, and 65% in the following month. The March 31 ending inventory is 5,500units, 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 forApril?A)B)C)D)Sales Revenue$1,560,000$1,560,000$1,200,000$960,000Cash Receipts$1,305,000$945,000$945,000$870,00043. How many units should Hepburn produce during April?A)B)C)D)52,30052,40052,60057,800 44. Net income is found on which of the following two financial statements?A)B)C)D)Balance Sheet and Income StatementStatement of Shareholders Equity and Balance SheetStatement of Cash Flows and Balance SheetIncome Statement and Statement of Shareholders Equity45. What is a perpetual inventory system?A) A system that keeps a continuous record of the cost of inventory on hand andthe cost of inventory sold.B) A system that determines the inventory at the end of each accounting periodby 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 manydifferent types of costs. The cost of the glass for the picture frames, assuming itis significant to the overall cost, would be a:A)B)C)D)direct material costdirect labor costmanufacturing overhead costselling and administrative cost47. Lyco Company is a service firm. The company showed the following activitiesfor 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 nextmonth.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) $90,000B) $80,000C) $72,000 D) $23,00048. Fostoria Corporation began the current period with $21,975 of direct materials,purchased $97,950 of direct materials and $8,230 of indirect materials duringthe period and ended the period with $30,205 of direct materials. The totalamount of direct materials put into production during the current period was:A)B)C)D)$119,925$97,950$89,720$106,67049. J & C Electronics, Inc. gathered the following direct materials cost informationfor the month of July:Standard Quantity Allowed for productionQuantity used in productionActual price per gallon purchasedStandard price per gallon34,700 gallons33,900 gallons$8.50$8.85The direct materials usage variance is:$ 4,250U$ 4,425F$6,800U$7,080F50. Anthony Company sold merchandise on account to a customer at a price of$5,000. The merchandise had cost Anthony $4,200. The terms of the saleswere 3/10, n/30. If the customer paid within the discount period, by how muchdid this transaction increase Anthony’s net income?$5,000$4,850$ 650$ 300
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