Devry ACCT212 final exam (spring 2014)

Question 1.1.(TCO
3) At the end of the period it is necessary to close all temporary
accounts. (1) Explain why this process is required (15 points) and (2)
provide an example of the closing of an expense account, Rent Expense in
the form of a journal entry. (10 points) (Points : 25)

Question 2.2.(TCO
2) As required to complete Course Project 1, one must follow the cycle that
includes 10 steps to complete the accounting cycle. (1) Explain how to
construct an Unadjusted Trial Balance (15 points) and (2) provide an
example of the application of the debit/credit rules in the development of
the trial balance. (10 points)(Points : 25)

Question 3.3.(TCO
5) Internal Control Procedures are required to safeguard company assets and
to ensure ethical operation of the business. (1) Explain how separation of
duties can satisfy the purpose of internal control (15 points) and (2)
provide an example of how this control could be implemented. (10 points) (Points : 25)

Question 4.4.(TCO
4) Inventory valuation methods determine the cost of goods sold and the
inventory balance. (1) Explain how the First in First out (FIFO) method is
applied (15 points) and (2) provide an example of the impact that this
method of inventory valuation will have on Gross Profit. (10 points) (Points : 25)

Question 5.5.(TCO
1) To evaluate the financial operation and health of a business ratio
analysis is used. (1) Provide the formula for the Current Ratio and explain
how it is computed (10 points) and (2) provide an example of how this ratio
can be used in decision-making in business. (15 points) (Points : 25)

Question 1.1.(TCO
6) BagODonuts Company bought a used delivery truck on January 1, 2010, for
$19,200. The van was expected to remain in service 4 years (30,000
miles). BagODonuts’ accountant estimated that the truck’s residual
value would be $2,400 at the end of its useful life. The truck
traveled 8,000 miles the first year, 8,500 miles the second year, 5,500
miles the third year, and 8,000 miles in the fourth year.

1. Calculate depreciation expense for the truck for each year
(2010-2013) using the:
a. Straight-line method.
b. Double-declining balance method.
c. Units of Production method.
(For units-of-production and double-declining balance, round to the
nearest two decimals after each step of the calculation.)
2. Which method best tracks the wear and tear on the van?
3. Which method would BagODonuts prefer to use for income tax
purposes? Explain in detail why BagODonuts prefers this method. (Points : 25)

Question 2.2.(TCO
7) ABC Inc. was incorporated on 1/15/12. Their corporate charter authorized
the following capital stock:
Preferred Stock: 7%, par value $100 per share, 100,000 shares.
Common Stock: $1 par value, 500,000 shares.

The following transactions occurred during the year:

1/19/12 – Issued 100,000 shares of common stock for $17 cash per share.
1/31/12 – Issued 3,000 shares of preferred stock for $115 cash per share.
11/1/12 – Repurchased 30,000 shares of common stock for $22 cash per share.
12/1/12 – Declared and paid a total dividend of $95,000.

Required:
1. Prepare the journal entry for each transaction listed above.
2. In your own words, explain the main differences between common and
preferred stock.
(Points : 25)

Question 3.3.(TCO
5) Internal Control Procedures are in place to protect the assets of every
business as mentioned in the textbook and our discussions. Of the
seven internal control procedures, list five of these controls and describe
how each procedure is implemented. (5 points each with 2 points for listing
and 3 points for a description)(Points
: 25)

Question 4.4.(TCO
2) Below are the accounts of Super Pool Service, Inc. The accounts have
normal balances on June 30, 2012. The accounts are listed in no particular
order.

Account

Balance
Common
stock
$5,100
Accounts
payable
$4,400
Service
revenue
$17,100
Land $28,800
Note payable
$9,500
Cash $5,200
Dividends
$6,100
Utilities
expense
$2,100
Accounts
receivable
$10,600
Delivery
expense
$700
Retained earnings
$25,600
Salary
expense
$8,200

Prepare
the company’s trial balance as of June 30, 2012, listing accounts in proper
sequence, as illustrated in the chapter. For example, Accounts Receivable
comes before Land. List the expense with the largest balance first, the
expense with the next largest balance second, and so on.

(Points : 25)

Question 5.5.

(TCO4) Linda’s Lampshades
started business on Jan. 1, 2001. They had the following inventory
transactions:

Journals – Jan. 2001

Purchases

Supplier
Date
Received Quantity
Unit Cost Amount

Donna
01/10/01 110
12.00
1320.00

Thomas
01/15/01 160
14.00
2240.00

Cindy
01/18/01 150
15.00
2250.00

Sales

Customer
Date shipped Quantity Sel.
Price

Amount

Norilene
01/16/01
200
25.00 5000.00

1. Calculate the ending inventory, using the
perpetual inventory method:

A. Using FIFO

B. Using LIFO

C. Using Average Cost

2. Prepare the following
statement

Using

FIFO LIFO Average
Cost

Sales

Cost of
Sales

Gross Profit

(Points : 25)