Intermediate Accounting – Final Exam
ACCT215 – Intermediate Accounting Final Exam
Directions Part I: Please prepare your responses to the following ten questions in 1 Excel workbook. Each problem is worth 10 points. 1. Lee Financial Services pays employees monthly. Payroll information is listed below for January 2011, the first month of Lee’s fiscal year. Assume that none of the employees exceeded any relevant wage base. Salaries $ 500,000 Federal income taxes to be withheld 100,000 Federal unemployment tax rate 0.80% State unemployment tax rate (after FUTA deduction) 5.40% Social Security (FICA) tax rate 7.65% Required: Prepare the appropriate journal entries to record salaries and wages expense and payroll tax expense for the January 2011pay period. 2. The petty cash fund of Western Glass Company contained the following items on November 30, 2011: Currency and coins $ 23 Receipts for the following expenditures Delivery charges $42 Office supplies 50 Restaurant receipt for entertaining a customer 110 202 An I.O.U. from an employee 25 Total $250 The petty cash fund was established on November 1, 2011, with a transfer of $250 from cash to the petty cash account. Required: Prepare the journal entries to establish the petty cash account and to replenish the fund at the end of November. 3. The Fitzgerald Company maintains a checking account at the Bank of the North. The bank provides a bank statement along with canceled checks on the last day of each month. The October 31, 2011 bank statement included the following information: Balance, October 1, 2011 $ 32,690 Deposits 86,000 Checks processed (75,200) Service charges (350) NSF checks (1,600) Monthly loan payments deducted directly by bank from account (includes $400 in interest) (3,400) Balance October 31, 2011 $38,140 The company’s general ledger cash (checking) account had a balance of $42,544 at the end of October. Deposits outstanding totaled $4,224 and all checks written by the company were processed by the bank except for those totaling $5,620. In addition, a check for $500 for the purchase of office furniture was incorrectly recorded by the company as a $50 disbursement. The bank correctly processed the check during October. Required: Prepare a bank reconciliation for the month of October. Prepare the necessary journal entries at the end of October to adjust the general ledger cash account. 4. Charleston Company has elected to use the dollar-value LIFO retail method to value its inventory. The following data has been accumulated from the accounting records: Cost Retail Merchandise inventory, January 1, 2011 $320,000 $ 500,000 Net purchases 670,000 1,020,000 Net markups 14,000 Net markdowns 4,000 Net sales 650,000 Pertinent retail price indexes January 1, 2011 1.00 December 31, 2011 1.10 Required: Estimate the ending inventory for December 31, 2011. 5. On January 1, 2011, American Corporation purchased 25% of the outstanding voting shares of Short Supplies common stock for $210,000 cash. On that date, Short’s book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Short’s net income reported on December 31, 2011, was $80,000. During 2011, Short also paid cash dividends in the amount of $24,000. Required: Prepare the journal entries necessary to record the above information on American Corporation’s books during 2011. 6. How should bond issue costs be accounted for on the books of the issuing corporation? 7. On January 1, 2011, Field Company purchased 12% bonds, dated January 1, 2011, with a face amount of $20 million. The bonds mature in 2020 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. Required: Determine the price of the bonds at January 1, 2011. Prepare the journal entry to record the bond purchase by Field on January 1, 2011. Prepare the journal entry to record interest on June 30, 2011, using the straight-line method. Prepare the journal entry to record interest on December 31, 2011, using the straight-line method. 8. Billingsly Products uses the conventional retail method to estimate its ending inventories. The following data has been summarized for the year 2011: Cost Retail Inventory, January 1 $ 53,000 $ 78,000 Purchases 322,360 466,000 Net markups 8,000 Net markdowns 16,700 Net sales 392,000 Required: Estimate the ending inventory as of December 31, 2011. 9. On March 17, 2011, a flood destroyed the entire inventory of Beatty Co. The following information is available from its accounting records: Inventory, January 1, 2011 $208,000 Purchases, Jan 1 – Mar 17 420,000 Sales, Jan 1 – Mar 17 600,000 Normal gross margin 40% Required: Compute the estimated cost of inventory lost in the flood. 10. Shown below is activity for one of the products of Denver Office Equipment: January 1 balance, 500 units @ $55 $27,500 Purchases January 10 500 units @ $60 January 20 1,000 units @ $63 Sales January 12 800 units January 28 750 units A: Required: Compute the ending inventory and cost of goods sold assuming Denver uses LIFO and a perpetual inventory system. B: Required: Compute the ending inventory and cost of goods sold assuming Denver uses LIFO and a periodic inventory system.