ACCT 550 Final Exam

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

Potential Matches:

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

2 : Earning process completed and realized or realizable

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

4 : Valuing assets at amounts originally paid for them

5 : Yearly financial reports

6 : Stable dollar assumption

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

8 : Presentation of error-free information with representational faithfulness

9 : Business enterprise assumed to have a long life

10 : Accruals and deferrals in adjusting and closing process

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)

3. (TCO B) Adjusting Entries: Data relating to the balances of various accounts affected by adjusting or closing entries appear below. (The entries which caused the changes in the balances are not given.) You are asked to supply the missing journal entries which would logically account for the changes in the account balances. Interest receivable at 1/1/1X was $5,000. During 201X cash received from debtors for interest on outstanding notes receivable amounted to $8,000. The 201X income statement showed interest revenue in the amount of $10,900. You are to provide the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

4. (TCO B) Adjusting Entries: Accumulated depreciation-machinery at 1/1/1X was $150,000. At 12/31/1X, the balance of the account was $300,000. During 201X, one piece of equipment was sold. The equipment had an original cost of $100,000 and was 1/2 depreciated when sold. You are to prepare the missing adjusting entry. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

5. (TCO B) Adjusting Entries: Allowance for doubtful accounts on 1/1/1X was $70,000. The balance in the allowance account on 12/31/1X after making the annual adjusting entry was $70,000 and during 201X bad debts written off amounted to $40,000. You are to provide the missing adjusting entry. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

6. (TCO B) Adjusting Entries: Prepaid rent at 1/1/1X was $50,000. During 201X rent payments of $110,000 were made and charged to "rent expense." The 201X income statement shows as a general expense the item "rent expense" in the amount of $140,000. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

7. (TCO B) Adjusting Entries: Retained Earnings at 1/1/1X was $0 and at 12/31/1X was $400,000. During 201X, cash dividends of $60,000 were paid and a stock dividend of $100,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry. For each journal entry write Dr. for debit and Cr. for credit. (Points : 10)

8. (TCO C) Presented below is information related to Tidal Wave Company.

Retained earnings, December 31, 20X2	$ 2,350,000
Sales	2,600,000
Selling and administrative expenses	240,000
Earthquake loss (pre-tax) on plant (extraordinary item)	250,000
Cash dividends declared on common stock	53,600
Cost of good sold	1,000,000
Gain resulting from computation error on depreciation charge in 2009 (pre-tax)	520,000
Other revenue	80,000
Other expenses	50,000

Instructions: Prepare in good form a multiple-step income statement for the year 20X2. Assume a 30% tax rate and that 100,000 shares of common stock were outstanding during the year. (Points : 40)

9. (TCO D) The following balance sheet was prepared by the bookkeeper for Diamone Company as of December 31, 201x Diamond Company.

Balance Sheet as of December 31, 201X is as follows .

Cash	$90,000	Accounts payable	$75,000
Accounts receivable (net)	42,200	Long-term liabilities	100,000
Inventories	57,000	Stockholders' equity	218,500
Investments	76,300
Equipment (net)	96,000
Patents	32,000
	$393,500		$393,500

The following additional information is provided:
(1) Cash includes the cash surrender value of a life insurance policy $5,000 and a bank overdraft of $4,000 has been deducted.
(2)The net accounts receivable balance includes:


(a) accounts receivable debit balances $50,000;
(b) accounts receivable credit balances $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 $46,300, and franchises $17,000.
(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.
Instructions:
Prepare a balance sheet in good form (stockholders' equity details can be omitted).

Do not worry about balancing the statement but rather use your time to compute the account balances properly for presentation purposes. (Points : 40)

10. (TCO E) Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $2,500 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
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