BUSA 100

FINAL EXAM

Mr. Moloney

Multiple Choice (1.5 points each 45points total)

1. The balance sheet shows the financial position of a business as of a specific date. a. True b. False 2. The major sections of a balance sheet are assets, liabilities, owner's equity, revenues, and expenses. a. True b. False 3. In reconciling the bank balance on a bank reconciliation, the amount of an unrecorded bank service charge should be: a. added to the book balance of cash b. deducted from the book balances of cash c. added to the bank statement balance d. deducted from the bank statement balance e. ignored 4. If a business pays $300 to satisfy a previously recorded liability, the effect of the payment is to reduce the liability and a. owner's equity b. an expense account c. an asset account 5. When expenses are greater than revenues, a company will report a net loss. a. True b. False 6. The properties owned by a business enterprise are called a. assets b. liabilities c. capital d. income e. expense 7. The normal balance of any account is always on the debit side. a. True b. False 8. The Accumulated Depreciation account is a a. liability account b. capital account c. contra-asset account d. revenue account e. none of the foregoing

9. The cost of a piece of equipment was $10,000. The Accumulated Depreciation on that piece of equipment is $3,000. The book value of the piece of equipment is a. $10,000 b. $ 3,000 c. $13,000 d. $ 7,000 e. none of the foregoing 10. The order of preparation of financial statements in a business is a. Statement of Owner's Equity, Income Statement, Balance Sheet b. Income Statement, Statement of Owner's Equity, Balance Sheet c. Balance Sheet, Income Statement, Statement of Owner's Equity d. none of the foregoing 11. The balance of the Drawing account is closed at the end of an accounting period. a. True b. False 12. Real accounts are: a. unusual accounts b. income statement accounts c. balance sheet accounts d. temporary accounts e. journal accounts 13. Failure to record depreciation during a fiscal period results in an understatement of net income. a. True b. False 14. Prior to recording adjustment entries, the Office Supplies account had a $359 debit balance while a physical count of the supplies showed $105 of unused supplies on hand. The required adjusting entry is: a. debit Office Supplies $105 and credit Office Supplies Expense $105 b. debit Office Supplies Expense $105 and credit Office Supplies $105 c. debit Office Supplies Expense $254 and credit Office Supplies $254 d. debit Office Supplies $254 and credit Office Supplies Expense $254 e. some other entry 15. If the Cash Short and Over account has a debit balance at the end of the accounting period, it indicates a net shortage of cash for that period. a. True b. False 16. The amount of the outstanding checks included on the bank reconciliation is shown as a. deduction from the book balance of cash b. an addition to the bank statement balance c. a deduction from the bank statement balance d. an addition to the book balance of cash 17. Employers are generally required to pay payroll taxes consisting of the following: a. federal unemployment b. FICA (Social Security and Medicare) c. state unemployment d. all of the foregoing

18. Under terms of FOB Destination, the buyer pays the freight charges. a. True b. False 19. Which of the following accounts has a normal credit balance? a. Sales Discounts b. Freight In c. Sales Returns and Allowances d. Purchases Discounts e. none of the foregoing 20. If Current Assets are $85,000; Plant and Equipment is $124,000; Current Liabilities are $57,000; and Long-Term Liabilities are $118,000 the current ratio is: a. .69:1 b. .48:1 c. 1.49:1 d. l.05:1 e. none of the foregoing 21. On November 2, merchandise with a list price of $6,400 is sold, subject to a trade discount of 30 percent with terms of 2/10, n/30. Payment is received from the customer on November 12. The amount to be recorded for the sale is a. $4,390.40 b. $6,400 c. $4,480 d. $6,208 e. none of the foregoing 22. An annual accounting period (12 consecutive months) for a business is called a fiscal year. a. True b. False 23. The amount of the beginning merchandise inventory for an accounting period would be placed on the financial statements a. as a plant asset b. as a current asset c. in the cost of goods sold section d. both B and C 24. The account Interest Expense would be placed on the financial statements a. as a current asset b. as a plant asset c. as an administrative expense d. as an other expense

Questions 25 and 26: Balances of accounts at the end of the year, before adjustments, are as follows: Sales, $900,000; Purchases Discounts, $10,000; Sales Returns and Allowances, $30,000; Purchases, $750,000; Beginning Merchandise Inventory, $120,000; and Purchases Returns and Allowances, $40,000. The inventory of merchandise at the end of the year is $130,000.

25. The amount of the cost of merchandise sold is a. $690,000. b. $700,000. c. $715,000. d. $900,000. e. none of the foregoing 26. The amount of gross profit is a. $170,000. b. $180,000. c. $210,000. d. none of the foregoing 27. A return of $200 has been recorded on a purchase invoice for $2,200, terms 2/10, n/30 which is paid within the discount period. The amount of the discount is a. $40. b. $22. c. $44. d. $10. 28. The account Unearned Subscriptions at the end of the accounting period would be classified a. as an asset b. as a liability c. as revenue d. as an expense 29. The adjusting entry for rent received in advance that is partially earned during the year is a. Rent Income Income Summary b. Unearned Rent Rent Income c. Income Summary Rent Income 30. Fred Starskey earns a regular hourly salary of $4.50. He is paid time-and-a-half for all hours in excess of 40. Last week he worked a total of 50 hours. Before this week, Fred had earned $14,000. What is Fred's gross pay? a. $260 b. $225 c. $247.50 d. $270 e. none of the above

Problems: ANSWER ALL PROBLEMS ON PINK ANSWER SHEET

Payroll (10points)
31. The monthly salaries for December and the year-to-date earnings as of November 30 for the three employees of the Scott Medical Center are listed below. Compute the amount of social security tax and Medicare tax to be withheld from each of the employee's gross pay for December. Assume a 6.5 percent social security tax rate and a base of $60,000 for the calendar year. Assume a 1.5 percent Medicare tax rate and a base of $140,000 for the calendar year. Employee No. 1 2 3 December Salary $4,400 5,600 5,400 Y-T-D Earnings through Nov. 30 $48,400 61,600 59,400 Soc. Sec. Tax for Dec. __________ __________ __________ Medicare Tax for Dec. __________ __________ __________

Problems: ANSWER ALL PROBLEMS ON PINK ANSWER SHEET

32.

Bank Reconciliation (15 points)

On March 31, 20X5, the Home Improvement Center received a bank statement containing a balance of $9,550. The balance in the firm's checkbook and Cash account on the same date was $10,200. The difference between the two balances is caused by the items listed below.

* *

A $3,245 deposit made on March 30 does not appear on the bank statement. Check 358 for $550 issued on March 29 and Check 359 for $1,650 issued on March 30 have not yet been paid by the bank. * A credit memorandum shows that the bank has collected a $1,000 note receivable and interest of $100 for the firm. * A service charge of $15 appears on the bank statement. * A debit memorandum shows an NSF check for $465. (The check was issued by Donald Smith, a credit customer.) * The firm's records indicate that Check 341 of March 1 was issued for $900 to pay the month's rent. However, the canceled check and the listing on the bank statement show that the actual amount of the check was $800. * The bank made an error by deducting a check for $325 issued by another business from the balance of the Center's account. Instructions: A. Prepare a bank reconciliation statement for the firm as of March 31, 20X5. Make certain it is in the correct format with all the necessary details.. B. Record entries for any items on the bank reconciliation statement that must be journalized. Date the entries April 2, 20X5. Use page 4 of a general journal.

33.

Income Statement (25points)

The adjusted trial balance data given below is from the Murphy Company's worksheet for the year ended December 31, 20X6. Prepare a classified income statement for the year. The expense accounts numbered 511-515 represent selling expenses, and those numbered 521-531 represent general and administrative expenses. ACCT. NO. ACCOUNT NAME 399 Income Summary 401 Sales 451 Sales Returns and Allowances 501 Purchases 502 Freight In 503 Purchases Returns and Allowances 504 Purchases Discount 511 Sales Salaries Expense 513 Advertising Expense 515 Travel Expense 521 Office Salaries Expense 523 Office Supplies Expense 591 Interest Expense ADJ. TRIAL BALANCE DEBIT CREDIT 60,000 56,000 210,000 3,500 95,000 2,500 1,200 1,800 55,000 2,000 11,000 17,500 600 1,600

Problems: ANSWER ALL PROBLEMS ON PINK ANSWER SHEET

(1.) Selected account balances of Rich and Company as of December 31, the end of the fiscal year, are listed below in alphabetical order.

Instructions Prepare a classified balance sheet.

BUSA 100 FINAL EXAM Answer Section PROBLEM 1. NOTE: Use forms 1 and 4.

Mr. Moloney

HOME IMPROVEMENT CENTER Bank Reconciliation Statement March 31, 20X5 Balance on bank statement Additions: Deposit of March 30 in transit Check incorrectly charged to account Deductions for outstanding checks: Check 358 of March 29 Check 359 of March 30 Total outstanding checks Adjusted bank balance Balance in books Additions: Note receivable and interest collected by bank Correction of error recording Check 341 Deductions: NSF check Bank service charge Adjusted book balance 9,550 3,245 __325 13,120 550 1,650 _2,200 10,920 10,200 1,100 __100 11,400 465 ___15 _1,200 _3,570

__480 10,920 PAGE 4

GENERAL JOURNAL DATE 20X5 Apr. 2 DESCRIPTION P.R. DEBIT 1,100 1,000 100 100 100 465 465 15 15 CREDIT

Cash Notes Receivable Interest Income To record note collected by bank 2Cash Rent Expense To correct error for Check 341 2Accts. Rec./D. Smith Cash To record NSF check 2Miscellaneous Expense Cash To record bank service charge

2. NOTE: Use form 12. MURPHY COMPANY Income Statement Year Ended December 31, 20X6 Operating Revenue Sales Less Sales Ret. & Allow. Net Sales Cost of Goods Sold Merch. Inv., Jan. 1, 20X6 Purchases Freight In Delivered Cost of Purch. Less Purch. Ret. & Allow. Purchases Discount Net Delivered Cost of Purch. Total Merch. Avail. for Sale Less Merch. Inv., Dec. 31, 20X6 Cost of Goods Sold Gross Profit on Sales Operating Expenses Selling Expenses Sales Salaries Expense Advertising Expense Travel Expense Total Selling Expenses General and Admin. Expenses Office Salaries Expense Office Supplies Expense Utilities Expense Payroll Taxes Expense Uncollectible Accounts Expense Depr. ExpenseOffice Equip. Total Gen. and Admin. Exp. Total Operating Expenses Net Income from Operations Other Income Interest Income Other Expenses Interest Expense Net Nonoperating Expenses Net Income for Year 210,000 3,500 206,500 60,000 95,000 2,500 97,500 1,200 1,800 3,000 94,500 154,500 56,000 98,500 108,000 55,000 2,000 11,000 68,000 17,500 600 3,700 1,100 1,300 500 24,700 92,700 15,300 500 1,600 1,100 14,200

3. Employee No. 1: Soc. Sec. Tax, $286; Medicare Tax, $66 Employee No. 2: Soc. Sec. Tax, zero; Medicare Tax, $84 Employee No. 3: Soc. Sec. Tax, $39; Medicare Tax, $81

Reference: [13.5.54a]

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