PAGE 1 UNIVERSITY OF ILLINOIS AT CHICAGO AC 110 FINANCIAL ACCOUNTING SAMPLE EXAM ANSWERS ANSWER KEY FOR TEST- C:\SAMPLE2 1. d. $1,323 $1,350 - ($1,350 x 2%) = $1,323 Chapter:5 QUESTION: 14 OBJECTIVE:1 2. a. $ -0- Sales discount = $ -0- since invoice was paid after 10 days Chapter:5 QUESTION: 15 OBJECTIVE:1 3. d. Sales Discounts Lost Chapter:5 QUESTION: 16 OBJECTIVE:1 4. c. $84,800 $85,000 + 1,200 - 1,400 = $84,800 Chapter:5 QUESTION: 20 OBJECTIVE:2 5. c. both the periodic and perpetual inventory systems. Chapter:5 QUESTION: 24 OBJECTIVE:4 6. d. The perpetual system eliminates the need for an annual inventory count. Chapter:5 QUESTION: 25 OBJECTIVE:2 7. b. In contra accounts to the Purchases account Chapter:5 QUESTION: 31 OBJECTIVE:3 8. b. $163,000 $18,000 + 160,000 - 15,000 = $163,000 Chapter:5 QUESTION: 56 OBJECTIVE:3 9. a. $41,000 $250,000 - 163,000 - 74,000 - 5,000 = $8,000 Net Income; $39,000 + 8,000 - 6,000 = $41,000 Chapter:5 QUESTION: 57 OBJECTIVE:3 10. a. $100,000 Chapter:5 QUESTION: 60 OBJECTIVE:3 11. b. Liabilities increase and owners' equity decreases $5,000. Chapter:5 QUESTION: 61 OBJECTIVE:3 12. d. Assets and liabilities increase $5,000. Chapter:5 QUESTION: 62 OBJECTIVE:2 13. c. Assets and owners' equity increase $1,500. Chapter:5 QUESTION: 64 OBJECTIVE:2 PAGE 2 UNIVERSITY OF ILLINOIS AT CHICAGO AC 110 FINANCIAL ACCOUNTING SAMPLE EXAM ANSWERS 14. b. The periodic inventory system. Chapter:5 QUESTION: 65 OBJECTIVE:2,3 15. a. Provide up to date information on inventory for management control. Chapter:5 QUESTION: 94 OBJECTIVE:2 16. a. Gross purchases less purchase returns and allowances less purchase discounts plus transportation-in. Chapter:5 QUESTION: 95 OBJECTIVE:3 17. a. The cost of goods available for sale consists of ending inventory and purchases. Chapter:6 QUESTION: 5 OBJECTIVE:2 18. b. $701 (10 x $4.10) + (20 x $4.20) = $125; $826 - 125 = $701 COGS Chapter:6 QUESTION: 18 OBJECTIVE:4 19. d. $126 (30 x $4.20) = $126 Chapter:6 QUESTION: 19 OBJECTIVE:4 20. d. $705 (20 x $4.00) + (10 x $4.10) = $121 ending inventory; $826 - 121 = $705 COGS Chapter:6 QUESTION: 21 OBJECTIVE:4 21. d. $345.50 (50 x $2.36) + (10 x $2.45) = $142.50 ending inventory; $488 - 142.50 = $345.50 COGS Chapter:6 QUESTION: 22 OBJECTIVE:4 22. a. sells more merchandise during the accounting period than it has purchased. Chapter:6 QUESTION: 31 OBJECTIVE:5 23. b. LIFO FIFO Chapter:6 QUESTION: 33 OBJECTIVE:5 24. b. The ability to computerize the inventory system today has resulted in an increase in the use of the periodic system. Chapter:6 QUESTION: 37 OBJECTIVE:5 25. d. The lower-of-cost-or-market method is an exception to the matching principle. Chapter:6 QUESTION: 39 OBJECTIVE:6 PAGE 3 UNIVERSITY OF ILLINOIS AT CHICAGO AC 110 FINANCIAL ACCOUNTING SAMPLE EXAM ANSWERS 26. c. Sigma sells its inventory faster than Delta. Delta Sigma ----- ----- Gross profit % ($500,000 - 300,000)/$500,000 40% ($800,000 - 400,000)/$800,000 50% Inventory turnover ($300,000/$50,000) 6 ($400,000/$50,000) 8 Net income and costs of storage and investment cannot be determined from the information provided in the question. Chapter:6 QUESTION: 44 OBJECTIVE:7 27. a. $2,595 (App 6A) (400 x $5.10) + (100 x $5.15) = $2,595 Chapter:6 QUESTION: 48 OBJECTIVE:9 28. b. $2,580 (App 6A) (100 x $5.00) + (400 x $5.20) = $2,580 Chapter:6 QUESTION: 50 OBJECTIVE:9 29. b. The cash balance will decrease $6,000. Chapter:6 QUESTION: 54 OBJECTIVE:8 30. d. $51,100 Chapter:6 QUESTION: 58 OBJECTIVE:4 31. b. Deposits in transit Chapter:7 QUESTION: 17 OBJECTIVE:3 32. a. $ 500 decrease Adjustments for Adjustments for Net decrease in cash cash receipts - cash payments = for adjustments $ 100 - ($400 + 200) = $ 500 decrease Chapter:7 QUESTION: 26 OBJECTIVE:3 33. c. $16,110 Book Interest Cash receipts NSF Adjusted cash balance + earned + error - check = balance $16,200 + $ 50 + ($510 - 150) - $ 500 = $16,110 Chapter:7 QUESTION: 27 OBJECTIVE:3 34. c. Notes receivable result from a written promise to pay within a specified period of time. Chapter:7 QUESTION: 31 OBJECTIVE:4 35. b. When a company uses a subsidiary ledger, the accounts receivable account in the general ledger becomes an optional account. Chapter:7 QUESTION: 32 OBJECTIVE:4 PAGE 4 UNIVERSITY OF ILLINOIS AT CHICAGO AC 110 FINANCIAL ACCOUNTING SAMPLE EXAM ANSWERS 36. d. Ben & Jerry's expects to collect only $8,499,326 from its customers. Chapter:7 QUESTION: 33 OBJECTIVE:4 37. b. At the end of the accounting period when an adjusting entry for uncollectible accounts is recorded Chapter:7 QUESTION: 38 OBJECTIVE:4 38. c. $11,750 ($1,200,000 - 25,000) x 1% = $11,750 Chapter:7 QUESTION: 41 OBJECTIVE:4 39. d. $12,850 $11,750 + 1,100 = $12,850 Chapter:7 QUESTION: 42 OBJECTIVE:4 40. b. $11,900 $13,000 - 1,100 = $11,900 Chapter:7 QUESTION: 43 OBJECTIVE:4 41. b. $157,000 $136,000 + 720,000 - 690,000 - 9,000 = $157,000 Chapter:7 QUESTION: 45 OBJECTIVE:4 42. a. No effect--assets increase and decrease by the same amount. Chapter:7 QUESTION: 49 OBJECTIVE:4 43. d. 12.00 $145,000 + 10,000 = $155,000 ending Accounts Receivable; ($145,000 + 155,000)/2 = $150,000 average Accounts Receivable; $1,800,000/$150,000 = 12.00 turnover rate Chapter:7 QUESTION: 50 OBJECTIVE:4 44. c. The company has increased the amount of time customers have to pay their accounts before they are past due. Chapter:7 QUESTION: 51 OBJECTIVE:4 45. b. Assets and revenues increase $5,000. Balance Sheet Income Statement Assets = Liabilities + Owners Equity + Revenues - Expenses Notes Rec. 5,100 Sales 5,000 Discount on N/R (100) Chapter:7 QUESTION: 62 OBJECTIVE:6 46. d. No effect; the customer pays the amount due to the bank. No effect; the note balance was eliminated when the note was discounted; the bank receives the payment. Chapter:7 QUESTION: 67 OBJECTIVE:7 PAGE 5 UNIVERSITY OF ILLINOIS AT CHICAGO AC 110 FINANCIAL ACCOUNTING SAMPLE EXAM ANSWERS 47. a. A 6-month note receivable received from another company for a cash loan to that company Chapter:7 QUESTION: 68 OBJECTIVE:8 48. b. The company may offer cash discounts to increase the collection period. Chapter:7 QUESTION:106 OBJECTIVE:7 49. b. subtracted from the book balance. Chapter:7 QUESTION:107 OBJECTIVE:3 50. d. $46,000 Chapter:7 QUESTION:109 OBJECTIVE:4 51. b. A company's operating assets are important to its short-term liquidity. Chapter:8 QUESTION: 1 OBJECTIVE:1 52. b. All operating assets, except Land, are subject to depreciation, amortization, or depletion. Chapter:8 QUESTION: 9 OBJECTIVE:1,5 53. d. $1.20 ($14,500 - 2,500)/10,000 hours = $1.20/hr. Chapter:8 QUESTION: 28 OBJECTIVE:5 54. b. $4,800 ($14,500 - 2,500) x 4/10 = $4,800 depreciation expense Chapter:8 QUESTION: 29 OBJECTIVE:5 55. d. $7,250 (100%/4) x 2 = 50%; $14,500 x 50% = $7,250 depreciation expense Chapter:8 QUESTION: 30 OBJECTIVE:5 56. c. Double-declining-balance See question 32 answer for SYD and SL depreciation. ($33,000 - 6,000)/80,000 miles = $.3375/mile (15,000 x $.3375) = 5,062.50 units of production depreciation (100%/5) x 2 = 40%; ($33,000 x 40%) = 13,200 DDB depreciation DDB depreciation is the largest for 1995 Chapter:8 QUESTION: 34 OBJECTIVE:5 57. d. $6,000 Book value will be equal to residual value of $6,000; maximum depreciation expense under any method is $27,000 over 5 years. Chapter:8 QUESTION: 35 OBJECTIVE:5 58. c. $240,000 ($1,000,000 + 500,000 - 300,000)/400,000 tons = $3/ton 80,000 tons x $3/ton = $240,000 depletion expense Chapter:8 QUESTION: 51 OBJECTIVE:9 PAGE 6 UNIVERSITY OF ILLINOIS AT CHICAGO AC 110 FINANCIAL ACCOUNTING SAMPLE EXAM ANSWERS 59. c. 1.50 times ($1,500,000 + 1,700,000)/2 = $1,600,000 average total assets $2,400,000/$1,600,000 = 1.50 times--asset turnover rate Chapter:8 QUESTION: 59 OBJECTIVE:11 60. d. Gain on the sale of operating assets Chapter:8 QUESTION: 65 OBJECTIVE:11 (c) 1996 by Harcourt Brace & Company. All rights reserved.