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UMUC ACCT 301 ACCT/301 ACCT301 FINAL EXAM Solutions

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ACCT 301 Accounting for Nonaccounting Managers Final Exam Answers

1. The accounting profession can be divided into three major categories; specifically, the practice of public accounting, private accounting, and governmental accounting. A somewhat unique and important service of public accountants is:

2. The primary private sector agency that oversees external financial reporting standards is the:

3. Which of the following equations properly represents a derivation of the fundamental accounting equation?

4. Failure to record the receipt of a utility bill for services already received will result in:

5. The proper journal entry to record Ransom Company’s billing of clients for $500 of services rendered is

6. The appropriate journal entry to record equipment depreciation expense would consist of a debit to Depreciation Expense and a credit to which of the following accounts?

7. At the end of the current accounting period, Johnson Company failed to record utilities consumed during the period. Johnson will be billed for the utilities during the next accounting period. As a result, current period assets, liabilities, equity, and income, respectively, are:

8. Current assets are those assets which management intends to convert into cash or consume within:

9. On a classified balance sheet, the appropriate ordering of specific classifications is:

10. The Sales account and Purchases account should include:

11. Purchasers of merchandise may be dissatisfied with the quality of goods purchased on account and return the goods to the seller with an indication that payment will not be forthcoming. In this case, the document prepared by the purchaser is called:

12. When reconciling the ending cash balance per the bank statement to the correct adjusted cash balance, how would deposits in transit be handled?

13. A bank reconciliation sometimes points to the need for adjusting entries. In general, the source of the adjustments is:

14. Malcom’s financial statements revealed uncollectible accounts expense of $8,000, accounts receivable of $140,000, and allowance for uncollectible accounts of $12,000. The net realizable value of Malcom’s accounts receivable is:

15. Branz Company had credit sales during the current year which amounted to $700,000. Historically, 3% of credit sales are uncollectible. If Branz uses the allowance method of recording uncollectible accounts, a proper journal entry for the year would be:

16. Which of the following inventory methods will always produce the same results under both a periodic and perpetual system?

17. An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is:

18. Investor Corporation owns 30% of Investee Corporation. Investee had net earnings of $100,000 during the year and paid dividends of $30,000. Investor’s Investment in Investee account contained a $70,000 balance at the beginning of the year. What would be the correct balance of this account at the end of the year?

19. Investor Corporation owns 30% of Investee Corporation. Investee had net earnings of $100,000 during the year and paid dividends of $30,000. Investor’s Investment in Investee account contained a $70,000 balance at the beginning of the year. How much dividend income will Investor record?

20. Which of the following items should be expensed as incurred?

21. Lancer Corporation purchased a parcel of land as a factory site for $150,000. Construction began immediately on a new building. Costs incurred are as follows:

22. On January 1, 20X2, Lynn Corporation purchased a machine for $100,000. Lynn paid shipping expenses of $1,000 as well as installation costs of $2,400. The machine was estimated to have a useful life of ten years and an estimated salvage value of $6,000. In January 20X3, additions costing $7,200 were made to the machine. These additions significantly improved the quality of output, but did not change the life or salvage value of the machine. If Lynn records depreciation under the straight-line method, depreciation expense for 20X3 is:

23. If an asset is impaired, and future cash flows will not allow recovery of the recorded amount, then the firm should reduce the asset in the accounts. In addition,

24. The Discount on Notes Payable:

25. If the journal entry to record an accrued liability were accidentally recorded twice, it would:

26. On June 1, Surge Corporation issued $100,000 of 9%, 5-year bonds. The bonds are dated June 1, 20X1. The bonds were issued at 96, and pay interest on December 1 and June 1. The entry to record issuance of the bonds is:

27. On April 1, 20X1, German Corporation issued $100,000 of 7%, 5-year bonds dated April 1, 20X1, at 101. Interest is paid on March 31 and September 30. The proper entries to record bond interest expense for the (entire) year ended 20X1 would include a decrease in interest expense for premium amortization in the amount of (round to the nearest dollar and assume straight-line amortization):

28. In reviewing corporate equity on a balance sheet, what would be included in the description “Total Capital Stock”?

29. Which of the following statements about treasury stock is false?

30. Financial statement ratio analysis may be undertaken to study liquidity, turnover, profitability, and other indicators. To which does the current ratio most relate?

31. Zhang Corporation had net income of $100,000, paid income taxes of $30,000, and had interest expense of $8,000. What was Zhang’s times interest earned ratio?

32. Which of the following functions is managerial accounting intended to facilitate?

33. Cost accounting information can be used for:

34. The term “committed costs” refers to those:

35. Lansing Corporation provides household painting services. During June, its busiest month, Lansing had total direct labor hours of 20,000 and total costs of $274,000. During December, its slowest month, the company had direct labor hours of 12,500 and total costs of $214,000. The company is planning for 16,000 direct labor hours in July. How many dollars should the company budget for fixed costs during July?

36. With the job order cost system, a credit balance in the Factory Overhead account at the end of an accounting period would indicate:

37. The theoretically correct method of allocating under- or overapplied overhead is to:

38. Mills Manufacturing computed the physical flow of completed units for the month of January 1, 20X1, as follows:In addition to the above, units in ending work in process at January 31, 20X1, were 12,000. Materials are added at the beginning of the process. The work in process at January 1, 20X1, was 80% complete as to conversion costs and the work in process at January 31, 20X1, was 60% complete as to conversion costs. What are the equivalent units of materials and conversion for the month of January 20X1, assuming a weighted-average application of the process costing method?

40. With the top-down budgeting approach the budget:

41. There are a number of benefits associated with budgeting. Which of the following is not frequently cited as a benefit of the budget process?

42. A business unit is known as a profit center:

43. The basic difference between a static budget and a flexible budget is that:

44. Wang Company provides the following information for their first year of operation:

45. Nina Company has two production departments — fabrication and assembly. These departments are supported by janitorial and engineering service units. Janitorial costs are allocated to the production departments based on square footage while engineering is allocated based on machines in use within each department. The following table reveals relevant facts about the various departments:

46. Which of the following statements regarding capital budgeting decisions is incorrect?

47. Analyze the following statements regarding capital budgeting decisions and determine which is correct.

48. Which of the following would not be included on a balance sheet?

49. Which of the following errors will be disclosed in the preparation of a trial balance?

50. Simmons Company received and recorded a $5,000 payment for services to be rendered in the future. If the income statement approach to adjusting entries is used, the appropriate adjusting entry at the end of the accounting period for $3,000 of revenue not yet earned would be: