TEST BANK ACCOUNTING PRINCIPLES 11TH EDITION WEYGANDT ch02WeyAP 11e TB CE a

COMPREHENSIVE EXAMINATION A (CHAPTERS - 5) Topic A-I Multiple Choice 20 10 A - II Matching 10 10 A - III Adjusting Entries 15 20 A - IV Closing Entries 10 10 A-V Journal Entries 18 12 A - VI Multiple-Step Income Statement 15 10 A - VII Correcting Entries 12 15 100 87 Checking Work Points Approximate Minutes Problem 92 A-2 Test Bank for Accounting Principles, Eleventh Edition Problem A - I — Multiple Choice (20 points) Instructions: Designate the best answer for each of the following questions The ACER Company has five plants nationwide that cost $60 million The current market value of the plants is $190 million The plants will be recorded and reported as assets at: a $60 million b $250 million c $190 million d $130 million An increase in an expense: a increases revenues b increases assets c decreases liabilities d decreases owner's equity A proprietorship business with total owner's equity of $90,000 paid a $12,000 business debt As a result of this transaction, total owner's equity: a increased to $90,000 b increased by $12,000 c decreased by $12,000 d did not change The left side of an account is always: a the balance of that account b the credit side c the debit side d carried forward to the next accounting period In a service-type business, revenue is recognized: a when the service is performed b at the end of the year c at the end of the month d when cash is received The purpose of recording depreciation on productive assets is to: a reflect the decline in the market value of the assets each period b allocate the original cost of productive assets to expense over its useful life c reduce income when the company has an exceptionally profitable year d be in conformity with the revenue recognition principle Trans Company debited Prepaid Insurance for $1,320 on July 1, 2014, for a one-year fire insurance policy If the company prepares monthly financial statements, failure to make an adjusting entry on July 31 for the amount of insurance that has expired would cause: a assets to be overstated by $1,320 and expenses to be understated by $1,320 b expenses to be overstated by $110 and assets to be understated by $110 c assets to be overstated by $110 and expenses to be understated by $110 d expenses to be overstated by $1,320 and assets to be understated by $1,320 Comprehensive Examination A A-3 Which one of the following accounts is not closed at the end of an accounting period? a Owner's Capital account b Service Revenue account c Owner's Drawing account d Insurance Expense account Sullivan Bike Company received a $450 check from a customer for the balance due The transaction was erroneously recorded as a debit to Cash $540 and a credit to Service Revenue $540 The correcting entry is: a debit Accounts Receivable, $450; credit Cash, $450 b debit Service Revenue, $540; credit Accounts Receivable, $90; credit Cash, $450 c debit Service Revenue, $540; credit Cash $90; credit Accounts Receivable, $450 d debit Cash, $90; debit Service Revenue, $450; credit Accounts Receivable, $540 10 During the year, Sally’s Pet Shop’s inventory account balance decreased by $29,000 If the company’s cost of goods sold for the year was $245,000, purchases must have been: a $187,000 b $216,000 c $274,000 d Unable to determine Problem A - II — Matching (10 points) Match the items below by entering the appropriate letter in the space Partnership Liabilities Revenues General ledger Expense Recognition Principle Unearned service revenue Income summary Intangible assets Freight-out 10 Sales returns and allowances A A contra-revenue account B Creditorship claims on total assets C Noncurrent resources that not have a physical substance D Gross increases in owner's equity resulting from business activities entered into for the purpose of earning income E The matching of efforts (expenses) with accomplishments (revenues) F Freight costs incurred by the seller G An economic entity which is not a separate legal entity H A temporary account used in closing revenue and expense accounts I Contains all assets, liabilities, and owner's equity accounts J A liability created when cash is received in advance of performing a service for a customer A - 12 Test Bank for Accounting Principles, Eleventh Edition Problem A - III — Adjusting Entries (15 points) The following information for Mountaintop Company is available on June 30, 2014, the end of a monthly accounting period You are to prepare the necessary adjusting journal entries for Mountaintop Company for the month of June for each situation given Appropriate adjusting entries had been recorded in previous months You may omit journal entry explanations Mountaintop Company purchased a 2-year insurance policy on March 1, 2014 and debited Prepaid Insurance for $5,280 On January 1, 2014, a tenant in an apartment building owned by Mountaintop Company paid $4,140 which represents six months' rent in advance The amount received was credited to the Unearned Rent account On June 1, 2014, the balance in the Supplies account was $600 During June, supplies costing $1,200 were purchased A physical count of supplies at June 30 revealed that there was $420 still on hand On March 31, 2014, Mountaintop Company purchased a delivery van for $36,000 It is estimated that the annual depreciation will be $7,200 Mountaintop Company has two employees who earn $65 and $70 per day, respectively They are paid each Friday for a five-day work week that begins each Monday Assume June 30 is a Thursday in 2014 Comprehensive Examination A A - 11 Problem A - IV — Closing Entries (10 points) The end of the period account balances after adjustments of Hernandez Shoe Repair are as follows: Account Balances (After Adjustments) Cash Supplies Prepaid Rent Equipment Accumulated Depreciation—Equipment Accounts Payable Owner’s Capital Owner’s Drawing Service Revenues Supplies Expense Depreciation Expense Rent Expense Salaries and Wages Expense Utilities Expense $ 36,000 2,700 9,600 94,000 22,000 14,500 54,600 7,500 41,000 2,000 3,000 900 1,200 1,800 Instructions: Prepare the end of the period closing entries for Hernandez Shoe Repair You may omit journal entry explanations A - 12 Test Bank for Accounting Principles, Eleventh Edition Problem A - V — Journal Entries (18 points) Prepare the necessary general journal entries for the month of March for Dogwood Company for each situation given below Dogwood uses a perpetual inventory system Mar Paid cash of $6,000 for operating expenses that were incurred and properly recorded in the previous period Mar Purchased merchandise for $28,000 on account Credit terms: 1/10, n/30; Freight term: FOB Destination Mar 12 Borrowed $10,000 from Citizen’s Bank signing a 6%, 6-month note Mar 15 Paid for merchandise purchased on March The company takes all discounts to which it is entitled Mar 20 Sold merchandise for $25,000 to Chris Martin on account The cost of the merchandise sold was $16,000 Credit terms: 1/10, n/30 Mar 21 Freight term on sale made on March 20th was FOB destination Cash paid for shipping was $600 Comprehensive Examination A A - 11 Mar 22 Purchased a 2-year insurance policy for $4,100 cash Mar 25 Credited Chris Martin’s account for $400 for merchandise returned by him from the sale on March 20 The cost of the merchandise returned was $225 Mar 29 Purchased equipment for $34,000 paying $8,000 in cash and signing a 12-month, 6% note for the remainder A - 12 Test Bank for Accounting Principles, Eleventh Edition Problem A - VI — Multiple-Step Income Statement (15 points) Below is a partial listing of the adjusted account balances of Pacific Department Store at year end on December 31, 2014 Accounts Receivable Cost of Goods Sold Selling Expenses (includes depreciation) Interest Expense Accumulated Depreciation—Building Sales Discounts Unearned Service Revenue Inventory Administrative Expenses (includes depreciation) Sales Revenue Accounts Payable Interest Revenue $ 10,500 107,500 13,500 400 16,500 6,500 14,000 18,500 9,000 165,000 4,500 300 Instructions: Using the data provided as appropriate, prepare a multiple-step income statement for Pacific Department Store for the year ended December 31, 2014 Comprehensive Examination A A - 11 Problem A - VII — Correcting Entries (12 points) The following errors were made in journalizing and posting transactions in September in the Marburg Company Instructions: Prepare the correcting entries at September 30 assuming the incorrect entry is not reversed (Omit explanations.) The receipt of $9,000 from a customer for future service was recorded as a debit to Cash $900 and a credit to Service Revenue $900 A bill for $8,000 for new office equipment was debited to Supplies $8,000 and credited to Accounts Payable $8,000 A $1,000 payment for freight charges incurred on inventory purchased in September was debited to Inventory $1,000 and credited to Cash $1,000 A collection of $8,500 on account from a customer was recorded as a debit to Cash $8,500 and a credit to Service Revenue $8,500 A - 12 Test Bank for Accounting Principles, Eleventh Edition Solutions — Comprehensive Examination A Problem A - I — Multiple Choice (20 points) a d d c a b c a c 10 b Problem A - II — Matching (10 points) G B D I E 10 J H C F A Problem A - III — Adjusting Entries (15 points) Insurance Expense Prepaid Insurance 220 220 Unearned Rent Rent Revenue 690 Supplies Expense Supplies 1,380 Depreciation Expense Accumulated Depreciation—Delivery Van 600 Salaries and Wages Expense Salaries and Wages Payable 540 Problem A - IV — Closing Entries (10 points) Service Revenues Income Summary 690 1,380 600 540 41,000 41,000 Income Summary Supplies Expense Depreciation Expense Rent Expense Salaries and Wages Expense Utilities Expense 8,900 Income Summary Owner’s Capital 32,100 Owner’s Capital Owner’s Drawing 7,500 2,000 3,000 900 1,200 1,800 32,100 7,500 Comprehensive Examination A A - 11 Problem A - V — Journal Entries (18 points) Mar Accounts Payable Cash 6,000 Inventory Accounts Payable 28,000 Mar 12 Cash Notes Payable 10,000 Mar 15 Accounts Payable Inventory Cash 28,000 Mar 20 Accounts Receivable Sales Revenue Cost of Goods Sold Inventory 25,000 Mar 21 Freight-out Cash 600 Mar 22 Prepaid Insurance Cash 4,100 Mar 25 Sales Returns and Allowances Accounts Receivable Inventory Cost of Goods Sold 400 Mar 29 Equipment Cash Notes Payable 34,000 Mar 6,000 28,000 10,000 280 27,720 25,000 16,000 16,000 600 4,100 400 225 225 8,000 26,000 A - 12 Test Bank for Accounting Principles, Eleventh Edition Problem A - VI — Multiple-Step Income Statement (15 points) PACIFIC DEPARTMENT STORE Income Statement For Year Ended December 31, 2014 Sales revenues Sales Revenue Less: Sales discounts Net sales Cost of goods sold Gross profit Operating expenses Selling expenses Administrative expenses Total operating expenses Income from operations Other revenues and gains Interest revenue Other expenses and losses Interest expense Net Income $165,000 6,500 $158,500 107,500 51,000 13,500 9,000 22,500 28,500 300 400 Problem A - VII — Correcting Entries (12 points) May 31 Cash Service Revenue Unearned Service Revenue 8,100 900 May 31 8,000 Equipment Supplies May 31 No correction needed May 31 Service Revenue Accounts Receivable Note: No explanations either before or after entries (100) $ 28,400 9,000 8,000 8,500 8,500 ... Examination A A - 11 Problem A - IV — Closing Entries (10 points) The end of the period account balances after adjustments of Hernandez Shoe Repair are as follows: Account Balances (After Adjustments)... Freight-out 10 Sales returns and allowances A A contra-revenue account B Creditorship claims on total assets C Noncurrent resources that not have a physical substance D Gross increases in owner's... not a separate legal entity H A temporary account used in closing revenue and expense accounts I Contains all assets, liabilities, and owner's equity accounts J A liability created when cash