ACC 230 Exam 3 Review PDF

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ACC 230 Exam 3 Review (Final) Fall 2018 Practice Exam

1. What is the direct labor static budget for 2016? a. Direct Labor Static Budget = Budgeted Production * Budgeted Labor Hours per Unit of Production * Budgeted Hourly Wage Rate b. Direct Labor Static Budget = 2 * 13.70 * 5420 = $148,508 2. What was the direct labor flexible budget variance for 2016? (Positive # means favorable variance, Negative means unfavorable) a. Flexible Budget Variance = (Actual Production * Budgeted Labor Hours per Unit of Production * Budgeted Hourly Wage Rate) – (Actual Production * Actual Labor Hours per Unit of Production * Hourly Wage Rate) b. Flexible Budget Variance = (6330 * 2 * 13.70) – (6330 * 1.7 * 14.20) = 173,442 – 152,806.2 = $20,635.8

3. What were total expenses for the year? a. Total Expenses = Total Revenue - (Total Assets - Total Liabilities - Total Paid-In Capital) b. Total Expenses = 21,240 – (15,282 – 8,195 – 4,084) = 21240 – 3003 = $18,237

4. What was the cash balance on January 31st? a. To find Cash Balance, we use the transactions to add and subtract from the starting cash value, located in the top of the Assets table. From there we follow the steps. b. Cash Balance = Cash + (Stock Sold to investors, #1) + (Money borrowed from Bank, #2) – (Bought Merchandise from suppliers THIS month, #3) – (Bought Equipment from Manufacturer from THIS month, #4) – (Payment to Merchandise Suppliers from promise, #5) + (Sold Merchandise, #6) – (Rent Payment, #7) + (Money received from customers, #8) – (Wage, Utility Payments, #9) c. Cash Balance = (52427 + 43000 + 24000 – 3458 – 38400 – 3645 + 16568 – 556 + 3923 – 5960) = $87,899 5. What were total equities on January 31st? a. To find total equities, we need to use select parts of the table and the answer to #6 (Net income) to find the solution. b. Total Equities = Total Assets (Bold in the table) + (Stock sold to Investors, #1) + (Money borrowed from bank, #2) + (Money promised to pay next month, second number in #3) + (Money promised to be paid in next 3* months, second number in #4) – (Payment to Merchandise Suppliers from promise, #5) + (Net income, answer to the next question) c. Total Equities = (403368 + 43000 + 24000 + 5002 + 4400 – 3645 + 4800) = $480,925

6. What was net income in January? *Solve this before doing #5 a. Net Income = (Sold Merchandise; Receiving Cash, first number in #6) + (Promises to Pay, second number in #6) – (Previous Cost of Merchandise, third number in #6) – (Paid Wages, #9) b. Net Income = (16568 + 4952 – 10760 – 5960) = $4800

7. Which of the following transactions is consistent with this entry? a. Since $60,000 was added into the cash account, and $60,000 was decreased from the Accounts Receivable account, this means the customer had bought items but had not paid for them, which is why the accounts receivable account went down. Therefore, the answer is C.

8. The required adjusting entries on January 31st decreased net income by a total of… a. To solve this, we need to: 1. find rent expenditure for one month 2. find depreciation for the whole year 3. find equipment depreciation for one month 4. find interest expenditure for one month 5. find total daily wages. b. Rent Expenditure for One Month = (Lease Price) / (12 Months) i. Rent Expenditure for One Month = (30,000) / 12 = $2500 for one month c. Depreciation for the Whole Year = ($ of Equipment Purchase – Salvage Value) / (Estimated Life) i. Depreciation for the Whole Year = (50,000 – 4000) / 10 = $4600 d. Equipment Depreciation for One Month = (Depreciation for the Whole Year) / 12 i. Equipment Depreciation for One Month = (4600 / 12) = $383.33 e. Interest Expenditure for One Month = (($ of Equipment Purchase – Down Payment) * Annual Interest Rate) / 12 i. Interest Expenditure for One Month = ((50000 – 5000) * (0.07)) / 12 = $262.50 f. Daily Wages = (Amount of Daily Wage) * (How many days are left before Pay Day), In this case 3 i. Daily Wages = (1800) * (3) = $5400

g. Decreased Net Income = b + d + e + f i. Decreased Net Income = 2500 + 383.33 + 262.50 + 5400 = 8545.83 = ~$8546.00 9. The required adjusting entries on January 31 decreased Total Assets by a total of...? a. Decreased Total Assets = Rent Expenditure for One Month + Equipment Depreciation for One Month b. Decreased Total Assets = 2500 + 383.33 = 2883.33 = ~$2883.00

10. The effect is that Accounts Payable was understated. Basic accounting terms Accounts Receivable (AR): Money owed to you for goods or services (ASSET) Inventory: The dollar amount of a product or supply you have on hand for sale or use (ASSET) Prepaid Item: The amount paid for an expense which is not yet expendable (such as 6 months of rent in advance) (ASSET). Accounts Payable (AP): Money you owe to someone for goods and services (LIABILITY) Wages Payable: Wages which have been earned but have not yet been paid to the employee (LIABILITY) Notes Payable: Money borrowed which will be paid back in the future. If the final payment date is a year or less, it is short-term liability. If the final payment is greater than a year, it is considered long-term liability (LIABILITY) Interest Payable: Interest owed on debt but not yet paid (LIABILITY) Retained Earnings (RE): The total money made during the life of the organizations (revenue less expenses) less (subtract) any dividends paid to investors (EQUITY) Static budget: budgeted cost for budgeted activity Flexible budget: budgeted cost for an actual activity

Spring 2018 Practice Exam

1. What was the 2017 master (static) budget for total costs? a. Master (static) Budget for Total Tosts = Total Variable Costs + Total Fixed Costs (Master Budget column) b. Master Static Budget = 90300 + 107500 = $277,800 2. What was the 2017 flexible budget for total costs? a. Flexible Budget for Total Costs = ((Total Variable Costs (master budget column) * Production (actual results column) / Production (master budget column)) + Total Fixed Costs (master budget column) b. Flexible Budget for Total Costs = ((90300 * 11900)/10500) + 187500 = $289,840

3. What was the direct labor flexible budget variance for 2017? a. Flexible Budget Variance = (Actual Production * Budgeted Hours per Unit of Production * Budgeted Hourly Wage Rate) – (Actual Cost) b. Flexible Budget Variance = (6110 * 3 * 10) – (198503) = -$15,203 Unfavorable

4. What was the cost of the equipment sold in 2017? a. Cost of Equipment Sold = Equipment (Jan 1) + Purchases of equipment - Equipment (Dec 31) – Depreciation

b. Cost of Equipment Sold = (13040) + 6765 – (14251) – 1480 = $4,074 15. X Company's budgeted overhead cost function for the year was $390,000 + $4.25X, where X represents the number of units produced. For the year, budgeted production was 10,700 units, and actual production was 12,000 units. What was the flexible budget for the year? a. Flexible budget = Y- int of equation (big number not next to X) + ((X-intercept (small number next to X) * actual production)) b. Flexible Budget = (390000) + (4.25 * 12000) = $441,000 16. X Company's budgeted overhead cost function for the year was $370,000 + $5.30X, where X represents the number of units produced. For the year, budgeted production was 9,500 units, and actual production was 12,200 units. What was the static budget for the year? a. For this, we want to the static budget, so the budgeted cost. It’s the same steps as above, but instead of the actual production we do the budgeted production. b. Static Budget = (370000) + (5.3 * 9500) = $420,350

18.X Company, a merchandiser, purchases $5,100 of supplies with cash, but the accountant records the transaction as an increase in Merchandise Inventory and an increase in Accounts Payable. The result is that the accounting equation: will not balance because Retained Earnings will be overstated by $5,100 a. will not balance because equities will exceed assets by $5,100 b. will not balance because assets will exceed liabilities by $5,100 c.

will not balance because Cash will be overstated by $5,100

d. will balance. e. will not balance because Accounts Payable will be overstated by $5,100

19. Total assets at the beginning of the year were $12,155. What were total assets at the end of the year? a. Total Assets at the End of the Year = total assets at the beginning of the year (given where the question is asked) + $ borrowed from bank (#1) + Bought equipment for (first number of #3) - down payment (second number of #3) + Bought $ of materials (#4) + sold products to customers, on account (first

number of #5) - product cost to manufacture (second number of #5) - paid wages (#7) - paid $ to suppliers for materials (#8) - Recorded $ for depreciation (first number of #9) - $ for expiration of prepaid rent (second number of #9) b. Total Assets at the end of the year = (12155) + (8563) + (9975) – (5936) + (8491) + (11901) – (8331) – (1106) – (3655) – (1900) – (518) = $29,639

21. What will appear on X Company’s January Income Statement? a. There are two parts to this problem. You have to find the rent expense and the telephone expense.

b. Rent Expense = ($ per fax * total faxes sent) + payment at the beginning of each month c. Telephone Expense = (Cost of bill on Jan 31 - fixed charge for the following month) d. Rent Expense = (0.1 * 1300) + 350 = $480. Telephone Expense = (340 – 102) = $238

The following information is for X Company for March and April: 1. X Company rents a fax machine for $300 per month, payable at the beginning of each month. The rental agreement calls for an additional $0.11 per fax for faxes in excess of 100 per month, payable the following month. In March, 1,300 faxes were sent. 2. On March 31, X Company received a $267 bill from the utility company for utilities provided in March. The bill was paid in April. 3. On March 31, X Company received a $311 bill from the phone company. The bill was paid in April. It contained the following charges: a. normal monthly charge, in advance, for April, $122 b. long-distance calls in March, $189

22. For X Company in March, how much larger will expenses be on the accrual basis rather than the cash basis? a. First, you have to find the additional cost with the agreement. b. Additional fee with the agreement = (How many faxes were sent in March - excess limit per month) * $ per fax in excess of __ per month

c. Additional Fee with the Agreement = (1300 – 100) * (0.11) = $132 d. Total Cost (Answer) = Additional fee with agreement + ($ utilities paid in march) + ($ long distance calls in March) e. Total Cost = 132 + 267 + 189 = $443 23. A machine was purchased on January 1, 2009 for $72,000. Its estimated useful life was 6 years and its estimated disposal value in 6 years was $6,000. Using straight-line depreciation, what would be the result of the adjusting entry on December 31, 2012? a.

Equipment and Paid-In Capital both decrease by $11,000.

b. Equipment and Paid-In Capital both decrease by $12,000. c.

Equipment and Retained Earnings both decrease by $12,000.

d. Equipment and Retained Earnings both increase by $33,000. e.

Equipment and Retained Earnings both decrease by $33,000.

f.

Equipment and Retained Earnings both decrease by $11,000.

We know that Equipment and Retained Earnings both decrease by ____. But how do we get that number? That number = (purchase cost of the machine - disposal value) / (years) That Number = (72000 – 6000) / 6 = $11,000

24. What was net income for the year? a. Net Income for the year = retained earnings on Dec 31 - retained earnings on Jan 1 b. Retained earnings on Dec 31 = Total Assets - Total Liabilities - Paid- In Capital (All under Dec 31) i. RE on Dec 31 = 12683 – 7809 – 4931 = $1943 c. Retained earnings on Jan 1 = Total Assets - Total Liabilities - Paid - In Capital (All under Jan 1) i. RE on Jan 1 = 15553 – 7911 – 4750 = $2,892 d. Net Income = (1943) – 2892 = $-949

26. Assume that all merchandise purchases are on account. What was the January 31 Balance in the Merchandise inventory account? a. Step 1: Cost of Goods Sold - Payments of Accounts Payable b. Step 2: Accounts Payable (Jan 31) - Accounts Payable (Jan 1) c. Step 3: (your answer) = - (Step 1 - Step 2) + Merchandise Inventory (Jan 1) d. Step 1: 316983 – 308086 = $8897. Step 2: 76266 – 57304 = $18962. e. Step 3: -(8897 – 18962) + 50938 = $61,003

27. Assume that all merchandise purchases are on account. What was the January 31 balance in the Cost of equipment sold account? a. Step 1: Equipment (Jan 1) – Depreciation. Step 2: Step 1 + purchases of equipment. b. Step 3: (Answer): Step 2 - Equipment (Dec 31) c. Step 1: 13800 – 1720 = 12080. Step 2: 12080 + 8848 = 20928 d. Step 3: 20828 – 16629 = $4,299

28. Assume that all merchandise purchases are on account. What was the January 31 balance in the Accounts Payable account? a. Step 1: Cost of Goods Sold - Payments of accounts payable. Step 2: Merchandise Inventory (Jan 31) Merchandise Inventory (Jan 1). Step 3: Step 1 + Step 2 b. Step 4 (Answer): Accounts Payable (Jan 1) + Step 3 c. Step 1: 337278 – 335025 = $2253. Step 2: 38423 – 53498 = $-15075. d. Step 3: (2253 + (-15075)) = -$12822. e. Step 4: 50826 + (-12822) = -$38,004 30) The following information is for X Company, a merchandiser:

Equipment (January 1)

???

Equipment (December 31)

$14,765

Purchases of equipment

$6,920

Depreciation

$1,057

Costs of equipment sold

$3,768

Loss from sale of equipment

$1,000

What was the balance of the equipment account on January 1?

31) On May 1, 2010, X Company paid $63,000 in advance for a two-year insurance policy. After the adjusting entry on December 31, 2010, what will the financial statements show? A) Prepaid Insurance, $63,000; Insurance expense, $0 B) Prepaid Insurance, $21,000; Insurance expense, $42,000 C) Prepaid Insurance, $0; Insurance expense, $63,000

D) Prepaid Insurance, $42,000; Insurance expense, $21,000 E) Prepaid Insurance, $7,875; Insurance expense, $55,125 F) Prepaid Insurance, $55,125; Insurance expense, $7,875

32) On January 1, a tenant paid X Company $31,500 for one year of rent in advance, and X Company recorded the receipt as Unearned Rent. X Company makes an adjustment each month to recognize the rent that it has earned that month. As a result of the adjusting entry on March 31: A) the Unearned Rent account will increase by $23,625. B) there will be a $23,625 balance in the Unearned Rent account. C) there will be rent revenue of $23,625 on the March Income Statement. D) the Retained Earnings account will decrease by $23,625. E) the Cash account will increase by $23,625. F) the Cash account will decrease by $23,625. 33) The following transactions apply to X Company: Sold merchandise for cash $2,016 Paid wages $4,538 Purchased new equipment for cash $9,272 Paid dividends $1,399 Bought supplies on account $4,255 Paid operating expenses $5,453 Issued stock to investors for cash $1,789 Repaid a bank loan $5,301 Disposed of old equipment for cash $7,758 Loaned money to another company $3,340 Recorded depreciation during the year $1,297 What is the net effect of these transactions in the Investing Section of the Statement of Cash Flows (assume that a positive number means a net inflow and a negative number means a net outflow)? 34) X Company received its bill from the utility company in June and paid it in July. Its accountant failed to record the utility expense in June, but instead recorded it in July when it was paid. As a result, which of the following is true regarding 1) total assets on June 30 2) total liabilities on June 30 3) net income for June A) 1) overstated; 2) correct; 3) overstated B) 1) overstated; 2) overstated; 3) understated C) 1) correct; 2) correct; 3) understated D) 1) correct; 2) understated; 3) overstated E) 1) understated; 2) overstated; 3) correct

F) 1) understated; 2) understated; 3) correct

35) At the beginning of 2008, X Company expected to produce 3,100 units of its only product. Its estimate of fixed overhead was $12,000, and its estimate of total variable overhead was $21,421. At the end of 2008, 2,900 units were actually produced. What was X Company's flexible budget for total overhead in 2008?

36) During 2008, X Company, an accounting firm, billed clients for $136,000. 25% of the revenue was collected when services were provided; the remainder was on account. Collections of accounts receivable during 2008 were $7,159. The following additional information is available for 2008: Operating expenses, on account $4,772 Operating expenses, paid in cash $3,092 Employee salaries, paid in cash $1,540 Payments of Accounts Payable $4,830 Depreciation $7,159 Dividends $7,229 What was net income under the cash method for 2008?

37) For 2017, X Company estimated production of 3,200 units of a finished product and direct material cost of $21,088. Actual production in 2017 was 2,800 units of finished product, and actual direct material cost was $14,830. What was the direct material cost flexible budget variance in 2017?

38) The following events apply to X Company in 2017:

Performed services for clients on account

$9,989

Performed services for clients for cash

$4,949

Incurred operating expenses on account

$4,225

Paid salaries to employees

$1,993

Collected cash from accounts receivable

$2,896

Paid cash on accounts payable

$3,209

What was the net income in 2017?

39) The following information is for X Company’s operations during the year:

Sales on account

$5,895

Cash sales

$6,328

Cash collections from customers on account

$6,230

If the Accounts receivable at the end of the year was $1,119, what was the Accounts Receivable balance at the beginning of the year? X Company, a merchandising company, had the following transactions during the year: 1. 2. 3. 4. 5. 6. 7. 8.

Received $8,291 in cash contributions from the owners Purchased $8,294 worth of merchandise on account from suppliers Sold merchandise on account to customers for $12,180; the merchandise cost X Company $8,526 Paid $3,456 to suppliers for merchandise that X company had previously purchased on account. Collected $3,837 from customers who had previously purchased merchandise on account Bought equipment for $9,822 with a down payment of $5,618 and a $4,204 loan from the bank Paid wages of $1,175 Recognized the expiration of $583 of prepaid rent

40) If total equities at the beginning of the year were 14759, what were total equities at the end of the year?

41) During the year, X Company sold merchandise on account to customers for $409,000. The company collected $393,000 in cash from customers during the year. Which of these amounts appears on the Income Statement and which appears on the Statement of Cash Flows?

42) On January 1, a customer paid X Company $32,700 in advance for cleaning services. The cleaning was done in January, once in February, once in March, and once in April, so the payment was recorded as Deferred Revenue. What will be the result of the adjusting entry on January 31?

43) The following information is for X Company for the year:

Equipment (January 1)

$11,060

Equipment (December 31)

$8,372

Cost of equipment sold

$9,471

Purchase of equipment

$8,257

What was the depreciation expense for the year? 44) X Company prepares monthly financial statements. It rents space in a large office complex. On May 1, it paid rent for May and June. The accountant made the proper entry on May 1 but failed to make the proper adju...