Devry ACCT550 final exam 2017 (

Question 1.1.(TCO A) Listed below
are some information, characteristics, and accounting principles and
assumptions. Match the term with the appropriate phrase that states its
application.
(Points : 30)

Potential Matches:

1 : Presentation of error-free information with
representational faithfulness= Presentation of error-free information with
representational faithfulness

2 : Economic activity can be identified with a
particular unit of accountability

3 : Implies that a company can divide its
economic activities into artificial time periods

4 : Earnings process completed and realized or
realizable

5 : Business enterprise assumed to have a long
life

6 : Notes as part of necessary information to a
fair presentation

7 : Application of the same accounting
principles as in the preceding year

8 : Affairs of the business distinguished from
those of its owners

9 : Valuing assets at amounts originally paid
for them

10 : Money is the common denominator of
economic activity and provides an appropriate basis for accounting
measurement and analysis

Answer

: Historical
cost principle

: Full
disclosure principle

: Economic
entity assumption

: Periodicity
assumption

: Going
concern principle

: Reliability
characteristic

: Economic
entity assumption

: Monetary
unit assumption

: Revenue
recognition principle

: Consistency
characteristic

Question 2.2.(TCO B) Adjusting entries: Unearned rent at
1/1/1X was $10,300 and at 12/31/1X was $10,000. The records indicate cash
receipts from rental sources during 201X amounted to $50,000, all of which
was credited to the Unearned Rent Account. You are to prepare the missing
adjusting entry. For each journal entry write DR for debit and CR for credit.
(Points : 10)

Question 3.3.(TCO B) Adjusting entries: On April 1, 201X,
Joker’s Company assigns $500,000 of its accounts receivable to the First
National Bank as collateral for a $300,000 loan due July 1, 201X. The
assignment agreement calls for Joker’s Company to continue to collect the
receivables. First National Bank assesses a finance charge of 2% of the
accounts receivable, and interest on the loan is 10% (a realistic rate of
interest for a note of this type.) On July 1, 201X, Joker’s paid First
National Bank all that was due from the loan it secured on April 1, 201X.
Prepare the journal entry to record this payment. You are to prepare the
missing adjusting entry. For each journal entry write DR for debit and CR for
credit. (Points : 15)

Question 4.4.(TCO B) Adjusting entries: Seymor Stars is
the new owner of Night Computer Services. At the end of August 201X, his
first month of ownership, Seymor is trying to prepare monthly financial
statements. At August 31, Seymor owed his employees $2,000 in wages that will
be paid on September 1. At the end of the month he had not yet received the
month’s utility bill. Based on past experience, he estimated that the bill
would be approximately $1,000. A telephone bill in the amount of $317 covering
August charges is unpaid at August 31. You are to provide the missing
adjusting entries that must be made. For each journal entry write DR for
debit and CR for credit. (Points : 15)

Question 5.5.(TCO C) Presented below is information
related to Blue Skies Company.

Retained earnings, December 31, 20X2	$650,000
Sales	1,400,000
Selling and administrative expenses	240,000
Hurricane loss (pre-tax) on plant (extraordinary item)	290,000
Cash dividends declared on common stock	33,600
Cost of goods sold	780,000
Gain resulting from computation error on depreciation charge in 20X1 (pre-tax)	520,000
Other revenue	120,000
Other expenses	100,000

Instructions: Prepare in good form a multiple-step income statement for the
year 2011. Assume a 30% tax rate and that 80,000 shares of common stock were
outstanding during the year. Show EPS computations as well. (Points : 40)

Question 6.6.(TCO D) The following balance sheet was
prepared by the bookkeeper for Stripes Company as of December 31, 201X
Stripes Company Balance Sheet as of December 31, 201X is as follows.

Cash	$ 80,000	Accounts payable	$ 75,000
Accounts receivable (net)	52,200	Long-term liabilities	100,000
Inventories	57,000	Stockholders’ equity	218,500
Investments	76,300
Equipment (net)	96,000
Patents
	$393,500		$393,500

The following additional information is provided.
(1) Cash includes the cash surrender value of a life insurance policy $12,000
and a bank overdraft of $2,500 has been deducted.
(2) The net accounts receivable balance includes

(a) accounts receivable debit balances $60,000;
(b) accounts receivable 0; and
(c) allowance for doubtful accounts $3,800.

(3) Inventories do not include goods costing $3,000 shipped out on
consignment. Receivables of $3,000 were recorded on these goods.
(4) Investments include investments in common stock, trading $13,000, available-for-sale
$48,300, and franchises $15,000.
(5) Equipment costing $5,000 with accumulated depreciation $4,000 is no
longer used and is held for sale. Accumulated depreciation on the other
equipment is $40,000.
(6) An unrecorded liability was not recorded on the balance sheet of $2,000.

Instructions:
Prepare a balance sheet in good form (stockholders’ equity details can be
omitted). (Points : 40)

Page 2

Question 1.1.(TCO E) Jack Sawyer is presently leasing a
copier from John Office Equipment Company. The lease requires 11 annual
payments of $3,500 at the end of each year and provides the leaser (John)
with an 8% return on its investment. You may use the following 8% interest
factors.

	9 Periods	10 Periods	11 Periods
Future Value of 1,	1.99900,	2.15892,	2.33164
Present Value of 1,	.50025,	.46319,	.42888
Future Value of,	12.48756,	14.48656	16.64549
Ordinary Annuity of 1
Present Value of	6.24689	6.71008	7.13896
Ordinary Annuity of 1
Present Value of	6.74664	7.24689	7.71008
Annuity Due of 1

Instructions
(a) Assuming the computer has an 11-year life and will have no salvage
value at the expiration of the lease, what was the original cost of the
copier to John?
(b) What amount would each payment be if the 11 annual payments are to be
made at the beginning of each period? (Points : 25)

Question 2.2.(TCO F) Northville Paper and Paint
deposits all receipts and makes all payments by check. The following
information is available from the cash records.
April 30
BANK RECONCILIATION

Balance per bank	$26,746
Add: Deposits in transit	2,100
Deduct: Outstanding checks	(3,800)
Balance per books	$25,046

Month of May Results	Per Bank	Per Books
Balance May 31	$27,995	$24,355
May deposits	10,000	12,889
May checks	11,100	16,080
May note collected	3,000	-0-
(not included in April deposits)
May bank service charge	35	-0-
May NSF check of a customer	900	-0-
returned by the bank
(recorded by bank as a charge)

Calculate the following amounts.
(1) Deposits in transit on May 31
(2) Outstanding checks on May 31 (Points : 25)

Question 3.3.(TCO G) Tan Company was formed on December
1, 2010. The following information is available from Tan’s inventory record
for Product Lotion.

	Units	Unit Cost	Total Cost
January 1, 2011 (beginning inventory)	1,600	$18.00
Purchases:
January 1, 2011	2,600	$20.00	$52,000
January 5, 2011	2,400	$21.00
January 25, 2011	1,000	$22.00
February 16, 2011	1,800	$23.00
March 15, 2011	1,600	$18.00

A physical inventory on March 31, 2011, shows 2,400 units on hand.
Instructions:
Prepare schedules to compute the ending inventory at March 31, 2011, under
each of the following inventory methods.
(a) FIFO
(b) LIFO
(c) Weighted-average
Show supporting computations in good form. (Points : 40)

Question 4.4.(TCO G) In your audit of Garza Company,
you find that a physical inventory on December 31, 2010, showed merchandise
with a cost $471,000 was on hand at that date. You also discover the
following items were all excluded from the inventory count.
•Merchandise of $61,000, which was shipped by Garza as f.o.b. shipping
point. The buyer is the Bontemps Company.
•Merchandise costing $33,000, which was on consignment. The consignee
is the Proctor Company.
•Merchandise costing $95,000, which was shipped by Garza f.o.b. destination
to a customer on December 29, 2010. The customer was scheduled to
receive the merchandise on January 2, 2011.
•Merchandise costing $103,000 shipped by a vendor f.o.b. destination on
December 30, 2010, and received by Garza on January 4, 2011.
•Merchandise costing $85,000 shipped by a vendor f.o.b. shipping point on
December 31, 2010, and received by Garza on January 5, 2011.
Based on the above information, calculate the amount that should appear on
Garza’s balance sheet at December 31, 2010, for inventory. (Points : 20)

Answer

Question 5.5.(TCO H) On January 2, Year 1, Logan Co.
purchased a manufacturing machine for $864,000. The machine has an 8year
estimated life and a $144,000 estimated salvage value. Logan expects to
manufacture 1,800,000 units over the life of the machine. During Year 2,
Logan manufactured 300,000 units.

Instructions:
Calculate the Year 2 depreciation expense using (1) straight-line depreciation
and (2) double-declining balance depreciation. (Points : 40)

Devry ACCT550 final exam 2017 (

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