Bcomprehensiveexam b

8/18/2019 Bcomprehensiveexam b

1/16

COMPREHENSIVE EXAMINATION BPART 2

(Chapters 7–9)

Prob e! B"I — Multiple Choice — Cash and Receivables.Choose the best answer for each of the following questions and enter thedentifying letter in the space provided.

____ 1. When should the loss on an uncollectible account receivable berecorded as an expense for accrual accounting purposesa. When it is deter!ined that an account cannot be collected.

b. "n the sa!e period in which the sale on account occurs.c. When the balance is past due for !ore than # !onths.d. When a lawyer indicates that collection efforts would cost !ore than

the account is worth.

____ $. %ow should unearned discounts& finance charges& and interest includedin the face a!ount of install!ent accounts receivable be presented inthe balance sheet

a. 's a current liability. b. 's a deduction fro! the related install!ent accounts receivable.c. Within the net a!ount of install!ent accounts receivable.d. 's an addition to the related install!ent accounts receivable.

____ #. (urler Co!pany)s account balances at (ece!ber #1 for 'ccountsReceivable and the related 'llowance for (oubtful 'ccounts are

*+,,&,,, and *1#&,,,& respectively. -ro! an analysis of accountsreceivable& it is esti!ated that *$+&,,, of the (ece!ber #1 receivableswill be uncollectible. 'fter ad ust!ent for the above facts& the netreali/able value of accounts receivable would bea. *+,,&,,,.

b. *0+0&,,,.c. *0 2&,,,.


2/16

Comprehensive Exam B

d. *00$&,,,.

____ 3. Which group of ite!s listed below should be included in the cashaccount

a. 4ilver coins& postage sta!ps& de!and deposits& personal chec5s. b. 6ro!issory notes& de!and deposits& !oney orders& silver coins.c. Money orders& postdated chec5s& personal chec5s& ti!e deposits.d. 4ilver coins& !oney orders& de!and deposits& personal chec5s.

____ . Which of the following !ethods of accounting for uncollectibleaccounts does not properly !atch costs with revenuesa. 6ercentage of sales

b. 6ercentage of receivablesc. (irect write7off d. 'ging schedule

____ 8. Certain infor!ation relative to the $,1$ operations of 9all Co. follows:'ccounts receivable& ;anuary 1& $,1$ *3+&,,,'ccounts receivable collected during $,1$ 2$&,,,

Cash sales during $,1$ $3&,,,"nventory& ;anuary 1& $,1$ #8&,,,"nventory& (ece!ber #1& $,1$ ##&,,,6urchases of inventory during $,1$ +,&,,,


3/16


?u!ber @nitsAriginal Cost Botal Current"te! "n "nventory 6er @nitAriginal CostReplace!ent Cost

' &,,, *1.,2 * &3 , *1.,+9 &,,, 1.#, 8& ,, 1.1C &,,, 1. , 0& ,, 1.,( &,,, 1.8, +&,,, 1.8

&,,, 1.+, 2&,,, 1.0,Botal $ &,,, *#8&3 ,

'ppropriate@pper =ower "nventory

=i!it =i!it (esignated Daluation"te! EFCeilingFG EF-loorFG Mar5et EBotalsG'9C(

Botal

dditional (ata:4elling price is *$.,,>unit for all ite!s. (isposal costs a!ount to 1,H of selling price and a Fnor!alF profit is # H of selling price.

#str$%t&o#sCo!plete the last four colu!ns above.

Prob e! B"III — ?otes Receivable.An (ece!ber #1& $,11 9erry Corporation sold so!e of its product to -lynnCo!pany& accepting a #H& four7year pro!issory note having a !aturity valueof * ,,&,,, Einterest payable annually on (ece!ber #1G. 9erry Corporationpays 8H for its borrowed funds. -lynn Co!pany& however& pays +H for its


4/16


borrowed funds. Bhe product sold is carried on the boo5s of 9erry at aanufactured cost of *#1,&,,,. 'ssu!e 9erry uses a perpetual inventory

syste!.#str$%t&o#s

EaG6repare the ournal entries to record the transaction on the boo5s of 9erryCorporation at (ece!ber #1& $,11. E'ssu!e that the effective interest!ethod is used. @se the interest tables below and round to the nearestdollar.G

EbGMa5e all appropriate entries for $,1$ on the boo5s of 9erry Corporation.EcG Ma5e all appropriate entries for $,1# on the boo5s of 9erry Corporation.or @se on 6roble! 97"""

Bable 1-uture Dalue of 1

6eriods $H #H 3H 8H +H1 1.,$,,, 1.,#,,, 1.,3,,, 1.,8,,, 1.,+,,,$ 1.,3,3, 1.,8,2, 1.,+18, 1.1$#8, 1.1883,# 1.,81$1 1.,2$0# 1.1$3+8 1.121,$ 1.$ 2013 1.,+$3# 1.1$ 1 1.182+8 1.$8$3+ 1.#8,32

1.1,3,+ 1.1 2$0 1.$188 1.##+$# 1.382##Bable $

6resent Dalue of 16eriods $H #H 3H 8H +H

1 ,.2+,#2 ,.20,+0 ,.281 3 ,.23#3, ,.2$ 2#$ ,.28110 ,.23$8, ,.2$3 8 ,.+2,,, ,.+ 0#3# ,.23$#$ ,.21 13 ,.++2,, ,.+#28$ ,.02#+#

3 ,.2$#+ ,.+++32 ,.+ 3+, ,.02$,2 ,.0# ,#,.2, 0# ,.+8$81 ,.+$12# ,.030$8 ,.8+, +Bable #

-uture Dalue of Ardinary 'nnuity of 16eriodic Rents $H #H 3H 8H +H

1 1.,,,,, 1.,,,,, 1.,,,,, 1.,,,,, 1.,,,,,$ $.,$,,, $.,#,,, $.,3,,, $.,8,,, $.,+,,,

-4


5/16


# #.,8,3, #.,2,2, #.1$18, #.1+#8, #.$383,3 3.1$181 3.1+#8# 3.$3838 3.#038$ 3. ,811

.$,3,3 .#,213 .318#$ .8#0,2 .+888,

Bable 36resent Dalue of Ardinary 'nnuity of 1

6eriodic Rents $H #H 3H 8H +H1 ,.2+,#2 ,.20,+0 ,.281 3 ,.23#3, ,.2$ 2#$ 1.231 8 1.21#30 1.++8,2 1.+###2 1.0+#$8# $.++#++ $.+$+81 $.00 ,2 $.80#,1 $. 001,

3 #.+,00# #.0101, #.8$22, #.38 11 #.#1$1#3.01#38 3. 0201 3.3 1+$ 3.$1$#8 #.22$01

Prob e! B"IV — -"-A vs. ="-A."n co!paring and contrasting -"-A vs. ="-A inventory procedures& thefollowing listing was developed. Iou are to co!plete the tabulation with ananswer of FI 4F or F?AF as de!onstrated by the first ite!. 'ny co!bination

of yes7no answers is possible in each situation. -"-A ="-A

,. @sually !atches the actual physical flow of goods._ Ies___ ?o1. !phasi/es the inco!e state!ent in that it !atches the !ore

recent costs with revenue. _____ _____ $. (efers tax pay!ents in ti!es of rising prices. _____ _____ #. 6ossibility of liquidating the base !ay be a significant negative

aspect. _____ _____ 3. Will probably not be adopted if prices are expected to decline.

. !phasi/es the balance sheet in that the !ore recent costsare contained in the inventory account. _____ _____

8. Can use price indexes to cost layers. _____ _____ 0. 4witching to this !ethod could cause proble!s in the equity

!ar5ets& with loan covenants& etc. _____ _____


6/16


+. "nco!e figure !ore accurately reflects cash available fordividends& invest!ents& etc. _____ _____

2. Bends to s!ooth inco!e in periods of fluctuating prices.___ 1,. "nco!e figure is !ore FrealF in that it doesn)t contain Fpaper

profits.F _____ _____ 11. ' change to this !ethod !ust be ustified Ei.e.& to the auditorG

other than solely on the basis of the tax effect._____ _____ 1$.6erpetual inventory results !ay be different fro! periodic

inventory results. _____ _____ 1#. "s acceptable to the "R4 Ei.e.& for inco!e tax purposesG.____ 13.


7/16


writing the words overstated& understated& or no effect in the appropriatecolu!n. Both colu!ns !ust be answered for each transaction.

EbG6repare all necessary correcting entries for $,1$.

EcG "ndicate which of the correcting entries !ust be reversed in $,11 by preparing the necessary reversing entries.1$>#1>1$ 6hysical $,1$"nventory "nco!e

1. 'n invoice for *2&,,,& ter!s f.o.b. shipping point& was receivedand entered (ece!ber #,. Bhe invoice shows that the!erchandise was shipped (ece!ber $2& and the receivingreport indicates the !erchandise was received ;anuary $.___

$. 'n invoice for *#,,& ter!s f.o.b. shipping point& was receivedand entered (ece!ber #,. Bhe invoice shows that!erchandise was shipped (ece!ber $2& and the receivingreport shows the !erchandise was received (ece!ber #1.__

#. 'n invoice for *3&,,,& ter!s f.o.b. shipping point& wasreceived and entered ;anuary $. Bhe invoice shows the!erchandise was shipped (ece!ber #,& and the receivingreport indicates the !erchandise was received (ece!ber #1.

3. 'n invoice for *+,,& ter!s f.o.b. destination& was received and

entered (ece!ber #,. Bhe receiving report shows the!erchandise was received ;anuary $. ______ ______

. 'n invoice for * ,,& ter!s f.o.b. destination& was received andentered (ece!ber $2. Bhe receiving report indicates that the!erchandise was received (ece!ber #1. ______ ______


8/16


8. 'n invoice for *1& ,,& ter!s f.o.b. destination& was receivedand entered ;anuary $. Bhe receiving report indicates the!erchandise was received (ece!ber #1. ______ ______

0. Merchandise costing *1$&,,, and with a selling price of*1+&,,, was on consign!ent to Maris (istributing Co!panyand was on that co!pany)s pre!ises on (ece!ber #1. ?oentry has been !ade for the consign!ent. ______ ______

Prob e! B"VI — Conventional and ="-A Retail Method.KK?ote to "nstructor. 6art 9 is based on 'ppendix 27'.

.=and!ar5 9oo5 4tore uses the conventional retail !ethod.

#str$%t&o#s#1>1$.

Cost Retail"nventory 1>1>1$ * $+&2,, * 3,&,,,6urchases #88&8,, 81,&,,,6urchases Returns 2&,,, $,&,,,6urchase (iscounts 0&,,,4ales E


9/16


9.=and!ar5 9oo5 4tore has decided to switch to the ="-A retail !ethod for the period beginning 1>1>1#.

#str$%t&o#s6repare a schedule showing the co!putation of the 1$>#1>1# inventory under he ="-A retail !ethod ad usted for price level changes Ei.e.& dollar7value ="-A

Retail.G Without pre udice to your answer in require!ent ' above& assu!e thathe 1$>#1>1$ inventory co!puted under the ="-A Retail !ethod was *3,&,,,

and *$0& ,, at retail and cost& respectively& for purposes of this require!ent.ata for $,1# follows:

Cost Retail6urchases EnetG *#8,&,,, *3+ &,,,4ales EnetG 3,$&,,,Mar5ups EnetG #,&,,,Mar5downs EnetG 1 &,,,$,1$ 6rice "ndex 1,,$,1# 6rice "ndex 1$,

Prob e! B"VII — Multiple Choice — "nventoryor each of the following questions& select the letter of the state!ent which

best answers the question and write it on the line to the left of the question.

____ 1. Wade Co!pany esti!ates the cost of its physical inventory at March #1for use in an interi! financial state!ent. Bhe rate of !ar5up on cost is$ H. Bhe following account balances are available:

"nventory& March 1 *1&,,,&,,,6urchases during March ,,&,,,6urchase returns $8&,,,4ales during March + ,&,,,

Bhe esti!ate of the cost of inventory at March #1 would bea. *8$3&,,,.

b. *8+,&,,,.


10/16


c. *023&,,,.d. *+#8& ,,.

____ $. Most !ethods of pricing inventories are in accord with generallyaccepted accounting principles and generally are per!issible for inco!etax purposes. Bhe !ethod that !ust be used for financial reporting

purposes if used for tax purposes isa. !oving average.

b. weighted average.c. ="-A.d. -"-A.

____ #. ' co!pany has been using the -"-A cost !ethod of inventory valuationsince it was started 1, years ago. "ts $,1$ ending inventory was*1$,&,,,& but it would have been *2,&,,, if ="-A had been used. Bhus&if ="-A had been used& this co!pany)s inco!e before taxes would have

beena. *#,&,,, less in $,1$.

b. *#,&,,, less over the 1,7year period.c. *#,&,,, greater over the 1,7year period.d. *#,&,,, greater in $,1$.

____ 3. Why are inventories included in the co!putation of net inco!ea. Bo deter!ine cost of goods sold.

b. Bo deter!ine sales revenue.c. Bo deter!ine !erchandise returns.d. "nventories are not included in the co!putation of net inco!e.

____ . An (ece!ber #1& $,1$& %ill Co!pany& which sells only one product&adopted the periodic last7in& first7out !ethod of inventory valuation.Bhe inventory was valued at *3,&,,, on the (ece!ber #1& $,1$ balance

-10


11/16


sheet. Bhe nu!ber of ite!s in its inventory re!ained constant during$,1#. Bhe (ece!ber #1& $,1# inventory valuation would bea. less than *3,&,,, if prices were steadily decreasing.

b. less than *3,&,,, if prices were steadily increasing.c. greater than *3,&,,, if prices were steadily increasing.d. *3,&,,, regardless of any price changes.

____K8. Lra!er Co!pany values its inventory by using the retail !ethod E="-A basis& stable pricesG. Bhe following infor!ation is available for the year $,1$.

Cost Retail9eginning inventory * 0+&,,, *13,&,,,

6urchases #8+&,,, 8$+&,,,-reight7in 18&,,,Mar5ups EnetG — 1+&,,,Mar5downs EnetG — 8&,,,4ales 81,&,,,

't what a!ount would Lra!er Co!pany report its ending inventorya. *2 &0,,.

b. *28&,,,.c. *1,,,,.d. *1,$&,,,.

B


12/16


So $t&o#s ' Co!prehe#s& e E a!at&o# B

Prob e! B"I — 4olution.1. b 3. d$. c . c#. d 8. b

4olutions to co!putational Multiple Choice Juestions.

#. *+,,&,,, *$+&,,, N *00$&,,,.

8. *+,&,,, O *#&,,, O *$0&,,, *$3&,,, O *3+&,,, *2$&,,, N *3$&,,,.

Prob e! B"II — 4olution.'ppropriate

@pper =ower "nventory=i!it =i!it (esignated Daluation

"te! EFCeilingFG EF-loorFG Mar5et EBotalsG

' *1.+, *1.1, *1.1, * &3 ,9 1.+, 1.1, 1.1 &0 ,C 1.+, 1.1, 1.1, & ,,( 1.+, 1.1, 1.8 +&,,,

1.+, 1.1, 1.0, +& ,,*##&$,,

Prob e! B"III — 4olution.EaG 1$>#1>11 ?otes Receivable ........................................ ,,&,,,

(iscount on ?otes Receivable ............ +$&+,#4ales Revenve...................................... 310&120

Co!putation of 6resent Dalue of ?ote: Eusing +HG

-12


13/16


* ,,&,,, P .0# ,# N *#80& 1 1 &,,, P #.#1$1# N 32&8+$

6resent value of note 310&120-ace value of note ,,&,,,'!ount of discount * +$&+,#

1$>#1>11Cost of


14/16


Prob e! B"V — 4olution.EaG 1. @nderstated>@nderstated

$. ?o effect>?o effect#. ?o effect>Averstated3. ?o effect>@nderstated

. ?o effect>?o effect8. ?o effect>Averstated0. @nderstated>@nderstated

EbG 1. "nventory ................................................. 2&,,,

Cost of


15/16


8. 'ccounts 6ayable .................................... 1& ,,6urchases ......................................... 1& ,,

Prob e! B"VI — 4olution. Cost

Retail.9eginning "nventory * $+&2,, * 3,&,,,

6urchases #88&8,, 81,&,,,6urchase Returns E2&,,,G E$,&,,,G6urchase (iscounts E0&,,,G-reight7"n $#& ,,

Mar5ups #+&,,,Mar5up Cancellations E1+&,,,G


16/16


Cost to retail percentage E*#8,&,,, T * ,,&,,,G0$H1$>#1>1# inventory at base E*1#+&,,, T 1.$,G * 11 &,,,1$>#1>1$ inventory at base * $0& ,, E3,&,,,G"ncrease at base * 0 &,,,"ncrease at current prices& at cost E*0 &,,, P 1.$, P .0$G 83&+,,1$>#1>1# inventory at ="-A cost * 2$,,

Prob e! B"VII — 4olution.

1. c 3. a$. c . d

#. b K8. b

4olutions to co!putational Multiple Choice Juestions.

1. *1&303&,,, E+,H P *+ ,&,,,G N *023&,,,.8. *#+3&,,, T *83,&,,, N 8,H. *0+&,,, O E8,H P *#,&,,,G N *28&,,,.

-16

Bcomprehensiveexam b

Documents

Transcript of Bcomprehensiveexam b