Name:



Name: ______________________

AF Accounting

Final Exam Review

Classify each of the following activity as either: operating, investing or financing:

1.___________ Cash paid for salary expenses.

2.___________ Cash paid for dividends.

3.___________ Cash paid to purchase land.

4.___________ Cash earned as revenue.

5.___________ Cash acquired from owners.

6.___________ Cash borrowed from creditors.

True or False:

1._____ Auditors guarantee financial statements are absolutely correct.

2._____ The best opinion an Auditor can give is a Qualified opinion.

3._____A transaction for the purchase of land will go in the balance sheet and the income statement.

4._____ When the company pays a dividend the dollar amount is entered in the balance sheet, income statement and statement of cash flows.

5._____When the company borrows money from a creditor the dollar amount is entered in the balance sheet and the statement of cash flows.

6._____ Accruals accounting recognizes (records) events in the period in which the event occurs regardless of whether or not cash was exchanged in the event.

7._____ Entries to update the account balances prior to preparing financial statements are known as adjusting events.

8. _____ The income statement is used to show Assets and Liabilities for a company.

9. _____ The statement of cash flows shows the net income or loss for the fiscal period.

10. _____ Expenses are matched with Revenues in order to measure a company’s net earnings.

Problem:

Professional Perks Business Services Company started business on January 1, 2004. The following business events took place that year. Record the events on the provided form.

1. Issued 30,000 shares of $10 par Common Stock for $15 on January 1, 2004

2. On January 1, paid $12,000 to purchase computer equipment.

3. On March 1, collected $36,000 cash as an advance for services to be performed in the future.

4. On May 1, borrowed $5,000 from the local Bank by giving the bank a note payable. The note is due to be repaid in one year along with 9% interest.

5. On May 10, Purchased land for $7,000 cash

6. On June 1, Collected $9,000 from accounts receivable

7. June 2, Paid $4,000 on accounts payable

8. June 20, Paid cash operating expenses of $17,000.

9. Sept 15 completed a job and received $19,000 cash for services rendered.

10. Sept. 20 Purchased merchandise inventory on account for $45,000, terms 2/10, n/30

11. Sept 25 returned $1,500 of damaged merchandise purchased in transaction 10.

12. Oct 1 Sold merchandise inventory that cost $23,000 for $42,000 on account , terms 1/10, n/45

13. Nov 1 Estimated uncollectible accounts expense (bad debts) to be 1 % of 2004 credit sales $3,000

14. Nov 1, paid for the merchandise in transaction 10 within the discount period

15. Nov 5 Wrote off $30 of accounts receivable that were deemed uncollectible

16. Nov 6 Received $20 from a bad debt that had been previously written off. Reinstate the $20 to the proper accounts.

17. Nov 6 Recorded the $20 cash received from the receivable in transaction 15

18. December 31, Paid a $1 cash dividend per share to the stockholders.

19. Dec 31 paid cash at the end of the year, recorded accrued interest on the bank note. (see transaction 4)

20. On December 31, 2004 adjusted the books to recognize the revenue earned by providing services related to the advance described in transaction 3. The contract required Professional Perks to provide services for a one year period starting March 1.

Matching:

|1 |Unearned Revenue |A |Is an account that has a balance opposite of the normal balance and has the |

| | | |effect of reducing the asset to which it is associated |

|2 |Deferral |B |Is a liability because it represents an obligation to provide future services. |

| | | |(Businesses can be obligated to provide services as well as to pay cash.) Is |

| | | |revenue that has been collected but the service has not yet been performed |

|3 |Depreciation |C |A contra Asset Account which is used in the adjusting event to tract the loss |

| | | |of value of its related Asset account (Will show the balance of the total loss|

| | | |of value at any point) |

|4 |Accumulated Depreciation |D |Is the process of recognizing the used portion of a long-term tangible asset by|

| | | |allocating its cost to expense over its useful life |

|5 |Depreciation Expense |E |Events in which a revenue or expense is recognized after cash changes hands |

|6 |Book Value |F |Portion of original cost of a long-term asset allocated to an expense account |

| | | |in a given period |

|7 |Contra Asset Account |G |Is the expected value of an asset at the end of its useful life. (Historical |

| | | |Cost – the accumulated depreciation) |

Fill in the Blank

All assets have a _________________ balance side.

All liabilities have a _________________balance side.

All Equity accounts have a _____________balance side.

You always increase an account on what side?_________________

You always decrease an account on what side? ________________

Reconciliation Problem

The following information is available for the Teton Co. for the month of April 2004:

A: The unadjusted balance in the cash account on Teton’s books was $8715.71

B: The April 30 balance shown on Teton’s bank statement was $8472.36

C: A customer that owed Teton $700 on a note paid the $700, and $35 for interest, directly to Teton’s bank. Teton did not know about this payment prior to receiving its bank statement

D: Teton had made a deposit of $1,635.25 near the end of April that had not cleared the bank when it prepared Teton’s bank statement (outstanding)

E: Teton discovered that a check it had written for $153.15 had been erroneously recorded in its books at $135.15. This check had been written to pay an account payable

F: Three checks that Teton had written during April had not cleared the bank by April 30. The amounts of these checks were: $147.90, $372.15, $209.45.

G. Teton has a checking account that earns interest on the minimum monthly balance. The bank statement showed that $35.12 interest earned during April.

H. The bank statement showed that check written by one of Teton’s customers was returned for NSF. The check was for $79.72. Teton did not know about the NSF check before receiving the bank statement.

I: The bank charged Teton a $10.00 service charge for the month of April.

Required:

1. Prepare Teton’s bank reconciliation for the month of April. Use the form provided on the following page.

2. Record the adjusting journal entries necessary to correct the unadjusted book balance.

|Bank Reconciliation |

|Unadjusted Book Balance |$ | |Unadjusted Bank Balance |$ |

| | | | | |

|Add: | | |Add: | |

| Note Receivable plus Interest | | | Outstanding Deposit | |

| Interest earned | | | | |

| | | | | |

|Subtract: | | |Subtract: | |

| NSF Checks | | | Outstanding Checks | |

| Bookkeeping check error | | |1) | |

| Service Charge | | |2) | |

| | | |3) | |

| | | |Total Outstanding Checks | |

|True Cash Balance | | |True Cash Balance | |

Amortization Schedule

On January 1, 2006, Brown Co. borrowed $100,000 cash from Central Bank by issuing a five-year 9 percent note. The principal and interest are to be paid by making annual payments in the amount of $25,709. Payment is to be made annually on December 31. (Round to the nearest $)

|BACO Co. |

|Amortization Schedule |

|$100,000, 5 yr. Term Note, 9% Interest Rate |

|Year |Prin. Bal on |Cash Payment |Applied to Interest |Applied to Principal |Prin. Bal |

| |Jan 1 |Dec. 31 | | |End of Period |

|2006 | | | | | |

|2007 | | | | | |

|2008 | | | | | |

|2009 | | | | | |

|2010 | | | | | |

Fill in the form for the following inventory.

The Smith Co. started the year with no inventory. During the year it purchased two identical inventory items. One of the items was sold during the year. Determine the Cost of Goods Sold and Ending Inventory for the three cost flow methods listed.

Smith Co.

|First purchase |$3000 |

|Second purchase |$5000 |

|Total |$8000 |

| |FIFO |LIFO |W. AVG. |

|Cost of Goods Sold | | | |

| | | | |

|Ending Inventory | | | |

Classifying Intangible and Tangible Assets: Use an I or T to identify the following assets.

1______ land

2______ franchise

3______copyright

4______ patent

5______delivery van

6_____ goodwill

7_____ equipment

Depreciation Problems

For the following Company’s determine the annual depreciation and the book value after each year. Please label each step.

1) The Barry Bearing Co. purchased equipment that cost $330,000. It will last 8 years and have an estimated salvage value of $10,000. You only have to calculate the first three years. Use double the declining balance method

2) You bought a delivery truck for $45,000. You believe it will have a useful life of 5 year. The trade in value will be $10,000. Use the straight line method

Statement of Cash Flow

1) Which method of completing the operating section of the Statement of Cash flow is recommended by the Financial Accounting Standards Board?

A: Direct

B: Indirect

2) Which of the following statements is true regarding preparing the statement of cash flows?

A: The information needed to prepare the statement of cash flows can be obtained from last year’s balance sheet and comparative income statements.

B: Revenue and expense accounts are most important in determining cash flow from financing activities.

C: Long-term asset accounts are used to determine cash flows from investing activities.

D: Cash paid for inventory is classified as an investing activities cash outflow.

3) Jackson Hole, Inc., owns equipment that cost $25,000. The equipment has a four-year useful life and a $5000 salvage value. Assuming the company uses straight line depreciation, the amount of depreciation expense that would appear each year on the statement of cash follows presented using the direct method would be

A: a $5000 cash outflow under operating activities

B: a $6250 cash outflow under operating activities

C: A $5000 cash outflow under investing activities

D: zero

4) A building costing $55000 with $16500 of accumulated depreciation was sold for $40,000. How would the cash flow from the sale appear on the statement of cash flow

A: $1,500 in operating activities and $38,500 in investing activities.

B: $40,000 in financing activities

C: $38,500 non-cash financing and investing activities and $1,500 in operating activities

D: $40,000 in investing activities

5) The owners of X company invested $2,000 in the company. X company used the cash to invest in Y company. On X’s statement of cash flow these transactions would be classified, respectively, as

A: an investing activity and an investing activity

B: a financing activity and an financing activity]

C: an investing activity and a financing activity

D: a financing activity and an investing activity

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download