一、 Multiple Choice Questions (10 Points):

1. Amounts received in advance from customers for future products or services:

A. Are liabilities.
B. Are revenues.
C. Increase income
D. Are not allowed under GAAP.
E. Require an outlay of cash in the future.

2. The board of directors of a corporation:

A. May not also be executive officers of the corporation, due to the separate entity principle.
B. Are responsible for overseeing corporate activities.
C. Are responsible for day-to-day operations of the business.
D. Are elected by the corporate registrar.
E. Do not have the power to bind the corporation to contracts, due to lack of mutual agency.

3. Sandoval needs to determine its year-end inventory. The warehouse contains 24,000 units, of
which 3,400 were damaged by flood and are not sellable. Another 2,400 units were purchased from
Markor Company, FOB shipping point, and are currently in transit. The company also consigns goods
and has 4,400 units at a consignee's location. How many units should Sandoval include in its year-
end inventory?
A. 22,600
B. 25,000
C. 27,400
D. 30,800
E. 34,200

4. If a check correctly written and paid by the bank for $501 is incorrectly recorded in the
company's books for $510, how should this error be treated on the bank reconciliation?
A. Add $9 to the book balance.
B. Add $9 to the bank's balance.
C. Subtract $9 from the book balance.
D. Subtract $9 from the bank's balance.
E. Subtract $9 from the bank's balance and add $45 to the book's balance.

5. Jasper makes a $90,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the
transaction should be:
A. Debit Accounts Receivable $90,000; credit Notes Receivable $90,000.

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 B. Debit Notes Receivable for $90,000; credit Cash $90,000.
C. Debit Notes Receivable $90,000; credit Sales $90,000.
D. Debit Cash $90,000; credit Notes Receivable for $90,000.
E. Debit Notes Payable $90,000; credit Accounts Payable $90,000.

6. On April 12, Hong Company agrees to accept a 60-day, 9%, $7,200 note from Indigo Company
to extend the due date on an overdue account. What is the journal entry that Indigo Company
would make, when it records payment of the note on the maturity date? (Use 360 days a year.)
A. Debit Notes Payable $7,200; debit Interest Expense $162; credit Cash $7,362.
B. Debit Cash $7,308; credit Interest Revenue $108; credit Notes Payable $7,200.
C. Debit Notes Payable $7,200; credit Interest Expense $108, credit Cash $7,092.
D. Debit Cash $7,308; credit Interest Revenue $108; credit Notes Receivable $7,200.
E. Debit Notes Payable $7,200; debit Interest Expense $108; credit Cash $7,308.

7. A company has sales of $398,400 and its gross profit is $167,900. Its cost of goods sold equals:
A. $167,900.
B. $230,500.
C. $398,400.
D. $566,300.
E. $(228,700).

8. On December 31 of the current year, Plunkett Company reported an ending inventory balance of
$217,500. The following additional information is also available:

• Plunkett sold and shipped goods costing $38,500 to Savannah Enterprises on December 28
with shipping terms of FOB shipping point. The goods were not included in the ending
inventory amount of $217,500.
• Plunkett purchased goods costing $44,500 on December 29. The goods were shipped FOB
destination and were received by Plunkett on January 2 of the following year. The shipment
was a rush order that was supposed to arrive by December 31. These goods were included in
the ending inventory balance of $217,500.
• Plunkett's ending inventory balance of $217,500 included $15,500 of goods being held on
consignment from Carole Company. (Plunkett Company is the consignee.)
• Plunkett's ending inventory balance of $217,500 did not include goods costing $95,500 that
were shipped to Plunkett on December 27 with shipping terms of FOB destination and were
still in transit at year-end.

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Based on the above information, the amount that Plunkett should report in ending inventory on
December 31 is:

A. $157,500
B. $173,000
C. $196,000
D. $202,000
E. $211,500

9. A company purchased $1,900 of merchandise on July 5 with terms 3/10, n/30. On July 7, it
returned $210 worth of merchandise. On July 8, it paid the full amount due. The amount of the
cash paid on July 8 equals:
A. $210.
B. $1,633.
C. $1,639.
D. $1,690.
E. $1,900.

10. All of the following are purposes of internal control EXCEPT:

A. to encourage adherence to company policies
B. to ensure accurate and reliable accounts records
C. to promote operational inefficiency
D. to safeguard assets
E. None of above

11. Cushman Company had $848,000 in net sales, $371,000 in gross profit, and $212,000 in
operating expenses. Cost of goods sold equals:
A. $212,000.
B. $265,000.
C. $371,000.
D. $477,000.
E. $848,000.

12. Retained earnings:

A. Generally consists of a company's cumulative net income less any net losses and dividends
declared since its inception.
B. Can only be appropriated by setting aside a cash fund.
C. Represent an amount of cash available to pay shareholders.
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 D. Are never adjusted for anything other than net income or dividends.
E. Represents the amount shareholders are guaranteed to receive upon company liquidation.

13. December 31 of the current year, the unadjusted trial balance of a company using the percent of
receivables method to estimate bad debt included the following: Accounts Receivable, debit
balance of $97,200; Allowance for Doubtful Accounts, credit balance of $961. What amount
should be debited to Bad Debts Expense, assuming 5% of outstanding accounts receivable at the
end of the current year are estimated to be uncollectible? (Ch09)
A. $4,860.
B. $5,821.
C. $3,007.
D. $3,899.
E. $961.

14. Gaston owns equipment that cost $26,500 with accumulated depreciation of $18,550. Gaston
sells the equipment for $7,200. Which of the following would not be part of the journal entry to
record the disposal of the equipment?
A. Debit Accumulated Depreciation $18,550.
B. Credit Equipment $26,500.
C. Debit Cash $7,200.
D. Debit Loss on Disposal of Equipment $750.
E. Credit Gain on Disposal of Equipment $750.

15. Damaged and obsolete goods that can be sold:

A. Are included in inventory at their net realizable value.
B. Should be disposed of immediately.
C. Are included in inventory at their full cost.
D. Are never counted as inventory.
E. None of above

16. . A company has $103,000 in outstanding accounts receivable and it uses the allowance method
to account for uncollectible accounts. Experience suggests that 5% of outstanding receivables are
uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is
a(n) $930 debit. The journal entry to record the adjustment to the allowance account includes a
debit to Bad Debts Expense for:
A. $4,220
B. $6,080
C. $5,150

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 D. $930
E. None of these is correct.

17. At the end of the day, the cash register's record shows $1,264, but the count of cash in the cash
register is $1,252. The correct entry to record the cash sales is
A. Debit Cash $1,252; Credit Sales $1,252.
B. Debit Cash $1,264; credit Cash Over and Short $1,252; credit Sales $12.
C. Debit Cash $1,264; credit Sales $1,264.
D. Debit Cash $1,252; debit Cash Over and Short $12; credit Sales $1,264.
E. Debit Cash Over and Short $12, credit Sales $12.

18. The following information is available for Fenton Manufacturing Company at June 30:

Cash in bank account $6,555

Inventory of postage stamps $75
Money market fund balance $12,500
Petty cash balance $360
NSF checks from customers returned by bank $877
Postdated checks received from customers $416
Money orders $357
A nine-month certificate of deposit maturing on December 31 of current year$8,100

Based on this information, Fenton Manufacturing Company should report Cash and Cash Equivalents
on June 30 of:
A. $15,372
B. $19,415
C. $19,772
D. $20,292
E. $20,367

19. Wickland Company installs a manufacturing machine in its production facility at the beginning
of the year at a cost of $156,000. The machine's useful life is estimated to be 20 years, or 110,000
units of product, with a $1,000 salvage value. During its second year, the machine produces 4,400
units of product. Determine the machines' second year depreciation under the units-of-production
method. (Do not round intermediate calculations.)
A. $7,750.

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 B. $6,200.
C. $6,240.
D. $7,800.
E. $7,850.

20. Stockholders' equity consists of which of the following?

A. Premiums and discounts.
B. Paid-in capital and par value.
C. Retained earnings and cash.
D. Long-term assets.
E. Paid-in capital and retained earnings.

二、Calculations and Entries (45 Points):

1. Ceres Computer Sales uses the perpetual inventory system and F.I.FO cost flow assumption and
had the following transactions during December. The beginning balance is 120 units, unit price
$35.

Dec 1 Sold 100 units merchandise on account for $5,000, terms 5/10, n/30.
3 Purchased 20 units merchandise for cash, unit price $36.
4 Purchased 100 units merchandise on credit, Invoice price $24 per unit, terms 1/20,
n/30. In addition, Paid freight charges of $200 for merchandise ordered. (FOB
shipping point)
5 Issued a credit memorandum to a customer who returned 6 units merchandise sold
Dec 1.
11 Received payment for merchandise sold December 1.
15 Received a credit memorandum for the return of faulty merchandise purchased on
December 4 for $600.
23 Paid for the merchandise purchased December 4 less the portion that was returned.
24 Sold 150 units merchandise on credit , selling price$40, terms 5/10, n/30.
31 Received payment for merchandise sold on December 24.

Required:
(1) Prepare the general journal entries to record these transactions. (8 Points)
(2) Calculate “Cost of Goods sold” and “Ending inventory cost”.(2 Points)

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2. The following information is available for the Aston Company for the month of December.
a. On December 31, after all transactions have been recorded, the balance in the company's Cash
account has a balance of $136,010.
b. The company's bank statement shows a balance on December 31 of $146,395.
c. Outstanding checks at December 31 include check #3030 in the amount of $7,625 and check #3556
in the amount of $7,295.
d. A credit memo included with the bank statement indicates that the bank collected $3,900 on a
noninterest-bearing note receivable for Aston. The bank deducted a $100 collection fee, and credited
the remainder of $3,850 to Aston's account.
e. A debit memo included with the bank statement shows a $335 NSF check from a customer, J.
Brown.
f. A deposit placed in the bank's night depository on December 31 totaled $8,375, and did not appear
on the bank statement.
g. Examination of the checks on the bank statement with the entries in the accounting records reveals
that check #3445 for the payment of an account payable was correctly written for $12,250, but was
recorded in the accounting records as $12,700.
h. Included with the bank statement was a debit memorandum in the amount of $125 for bank service
charges. It has not been recorded on the company's books.

Required:
1. Prepare the December bank reconciliation for the Aston Company. (6 points)
2. Prepare the general journal entries to bring the company's book balance of cash into
conformity with the reconciled balance as of December 31. (4 points)

2.

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3. On January 1 ,2019, Howard Co.’s Accounts Receivable beginning balance is $450,000 and
Allowance for Doubtful Accounts debit balance of $10,000. During 2019, the company completed
several transactions summarized as follows:
a. Sold $1,500,000 of merchandise on account (That had cost $450,000);
b. Received $850,000 cash in payment of accounts receivable;
c. Wrote off $20,000 of uncollectible accounts receivable;
d. Received additional $15,000 cash for previous bad debt written off from one of credit customers.
The company estimated that 3% of accounts receivable would be uncollectible.
Required:
（1） Prepare all Journal entries from transaction “a” to “d”; (4 Points)
（2） Calculate the ending balance of “Accounts Receivable” on Year end of 2019. (2
Points)
（3） Determine 2019 bad debt expense recorded 2019 Income Statement. (5 Points);
（4） Prepare adjusting entries for bad debt on December 31,2019. (4 Points)

4. Alpha purchased a machinery for $600,000 on January 1, 2020 and has been depreciating the
machine using the double-declining-balance method based on a five-year estimated useful life and
$5,000 residual value. On Dec 31, 2021, Alpha decided to sold this machinery for $200,000
Required:
(1) Calculating Annual depreciation expense from 2020 to 2021 and prepare related adjusting
entries; (3 Points)
(2) What is book value of Machinery on Dec 31,2021 before disposal? (2 Points)
(3) Prepare the Journal entries for sale of this machinery on Dec 31,2021. (5 points)

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三、Problems (45 points):
On December 1, 20X1, P. Young launched a company called Business Star, which provides consulting
services, computer system installations, custom program development and sells computer software.
The company adopts the calendar year as the fiscal year for financial reporting purpose.
Business Star had following transactions and events in December 20X1 and January 20X2.
20X1
Dec 1 P. Young received shares by investing $80,000 cash and $6,000 office equipment in
the company.
2 The company purchased $2,840 of computer suppliers on credit from Deli Office
Products.
3 The company paid $2,580 cash for one year's premium on a property insurance
policy.
5 The company purchased office equipment for $12,000 cash.
7 The company completed $7,200 consulting services for Mary, who must pay within
30 days.
8 The company completed consulting services for a client and immediately received
5,000 cash.
8 The company purchased $5,800 merchandise from Kay Co. with terms of 5/10, n/30
and FOB shipping point. The shipping charge is $200 and paid in cash.
10 The company returned to Kay Co. unacceptable merchandise that had an invoice
price of $200.
12 The company paid the two weeks' salaries for its employees. (see information below)
12 The company purchased $7,200 merchandise from Blue Co. with terms of 5/10, n/30
and FOB shipping destination.
13 The company sold merchandise to Mike Co. for $20,000 under credit term of 5/10,
n/60, FOB destination. The merchandise had cost $12,500.
14 The company paid $500 cash for shipping charges related to the Dec 13 sale to Mike
Co.
15 Mike Co. returned merchandise from Dec 13 sale that had cost Business Star $1,250
and been sold for $2,000. The merchandise was restored to inventory.
17 The company sold $300 of merchandise (that had cost $150) on account to Peter Co.
which is promised to be paid within 30 days.
18 The company sent a check to Kay Co. for the Dec 8 purchase.
21 The company issued a note to borrow $6,000 cash from Bach Bank at 12% interest
for 30 days.
23 The company received the balance due from Mike Co. for Dec 13 sales less the
return on Dec 15.

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 23 After negotiation, the company received from Blue Co. a $200 allowance on Dec 12
purchase.
23 The company received $3,200 cash as partial payment for the work completed on
Dec 7.
24 The company sent a check to Blue Co. paying for Dec 12 purchases.
26 The company paid the two weeks' salaries for its employees. (see information below)
27 The company's client paid $12,000 cash for 60-day consulting fee in advance.
28 The company paid $8,560 cash for this month's advertising expenditure.
29 The company paid $700 cash for minor repairs to the company's office equipment.
30 P. Young withdrew $3,000 cash from Business Star for personal use.
30 The company paid $200 cash for this month's utility bill.
Additional information items
a. The company predicts the machine will be used for 5 years with no residual value.
Depreciation is to be charged on a straight-line basis.
b. The physical count showed $340 computer suppliers available on December 31.
c. The company pays its employee $4,500 for a five-day work. Salaries are paid every
two weeks on a Friday. December 1 is Monday and December 31 is Wednesday.
20X2 (Selected transactions and events)
Jan 16 The company accepted a $300, 180-day, 10% note from Peter Co. in granting a time
extension on his past-due account receivable.
20 The company repays the note (issued on Dec 21,20X1) plus interest to Bach Bank.
Required:
1. Prepare journal entries to record each of the transactions in December and January.
2. Prepare adjusting entries at the end of 20X1.
3. Open necessary T-accounts (serves as the ledger) based on above transactions (excluding those in
January). Post the journal entries and adjusting entries to these T-accounts and then prepare an
adjusted trial balance as at December 31,20X1.
4. Prepare necessary closing entries at December 31, 20X1.
5. Prepare an income statement for the year 20X1.
6. Prepare a statement of changes in equity for the year 20X1.
7. Prepare a classified balance sheet as at December 31, 20X1

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