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University of Illinois, Urbana Champaign *

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102

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Accounting

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Apr 3, 2024

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pdf

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NAME: Do NOT open your exam until you are told to do so! BEFORE STARTING : Without opening your exam, pull out your scantron and fill it in as follows (bubble carefully & avoid losing class administration points):  your last name & first initial (use your legal name per the University system).  your net id (this is the same as your Enterprise ID & is the first part of your University email address)  your UIN number  Your section number (use “scantron entry” number below to bubble in to scantron).  Make sure the exam version on your scantron is bubbled as Version A. Section Start TA Scantron # Time Name Entry AD1 8:00 Mike Shanahan 100 AD2 9:00 Mike Shanahan 150 AD3 10:00 Tessa Grembowski 200 AD4 11:00 Tessa Grembowski 250 AD5 12:00 Brandon Stieren 300 AD6 1:00 Brandon Stieren 350 DURING THE EXAM  There should be no communication between students in any manner during the entire exam period. This means no talking, whispering or signaling to each other and no electronic communication.  Bubble your scantron as you are working . Time will not be allowed for bubbling after the exam has ended.  Use the table attached to your assigned seat. You cannot lean over and use the adjacent table!  It is your job to keep your scantron/exam booklet hidden from wandering eyes . Keep your test FLAT on your desk at all times! If you are allowing your exam/scantron to be visible to other students it will be assumed that YOU are cheating.  All books and papers & cell phones must be securely placed in a back-pack or other case and placed completely under the student’s seat. Please turn off your cell phone before putting it away!  Baseball hats, headphones and/or sunglasses may not be worn during an exam. All extra wearing apparel and parcels must be on the floor, under the student’s desk or seat during quizzes, tests or exams.  By enrolling in this course students agree to abide by the rules & regulations stated in Article 4 of the Student Code. If academic dishonesty is evident your exam will be confiscated and turned over to the Accountancy Department Head for resolution. In this event, I will recommend a penalty of an “F” for the course. In especially serious cases, the Department Head may impose hars her penalties such as expulsion from the University. Please keep in mind that expulsion for cheating becomes part of your permanent academic record which will follow you for the rest of your academic career. AFTER THE EXAM 1. Double check that your test version is properly bubbled on your scantron. You can see your test version on the last page of the exam or above in the the last bullet under the “before starting” section above. 2. When turning in your exam, bring your exam booklet (so we can see the color), photo ID and scantron. 3. Turn in your scantron & show a photo i.d. if asked to do so.

1. A company made no adjusting entry on December 31 for $28,000 of December wages which were paid in January. This oversight would: A. Understate December 31 net income by $28,000. B. Overstate December 31 net income by $28,000. C. Have no effect on December 31 net income. D. Overstate December 31 liabilities by $28,000. E. Both B and D 2. As of December 31, 2015, Gill Co. reported accounts receivable of $216,000 and an allowance for uncollectible accounts of $8,400. During 2016, accounts receivable increased by $22,000, and $7,800 of bad debts were written off. An analysis of Gill Co.'s December 31, 2016, accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. Bad debt expense for 2016 would be: A. $6,540. B. $7,800. C. $7,140. D. $7,740 E. None of the above 3. Arrow Company sells computers at a selling price of $3,500 each. Each computer has a 36 month warranty that covers replacement of defective parts. During 2012, Arrow sold 38,000 computers and as indicated below, projects that 4,385 computers (of the 38,000 sold in 2012) will eventually be returned for future warranty work. Arrow projects that the future warranty work related to these 4,385 units will cost on average $200 per warranty claim. Projected Future Warranty Work (in units) Total Within 0-12 Within 13-24 Within 25-36 Units Sold months of sale months of sale months of sale Total 2010 30,000 900 1,165 1,400 3,465 2011 35,000 1,050 1,360 1,630 4,040 2012 38,000 1,140 1,475 1,770 4,385 3,090 4,000 4,800 11,890 Arrow began 2012 with a Warranty Liability account balance of $645,000 and during 2012 Arrow serviced warranty claims costing $743,000. What value did Arrow report as Warranty Liability on its 12/31/2012 Balance Sheet? A. $779,000 B. $877,000 C. $743,000 D. $618,000 E. None of the above

4. Calistoga Produce estimates bad debt expense at ½% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,900, respectively, at December 31, 2015. During 2016, Calistoga's credit sales and collections were $315,000 and $519,000, respectively, and $1,720 in accounts receivable were written off. Calistoga's 2016 bad debt expense is: A. $2,175 B. $1,720 C. $1,575 D. $1,395 E. None of the above 5. A check that was outstanding on last period's bank reconciliation was not among the checks shown as clearing the bank in the current period. As a result, in preparing this period's reconciliation, the amount of this check should be: A. Added to the book balance of cash. B. Added to the bank balance of cash. C. Deducted from the bank balance of cash. D. Deducted from the book balance of cash. E. Ignored in preparing the current period bank reconciliation. 6. Dillon Company's bad debts are material in dollar amount and can be estimated. Dillon accordingly uses the U.S. GAAP method required for these conditions. Which of the following entries would be made by Dillon to record the write off of a customer account balance? A. Bad Debt Expense (Debit) Accounts Receivable (Credit) B. Allowance for Doubtful Accounts (Debit) Accounts Receivable (Credit) C. Bad Debt Expense (Debit) Allowance for Doubtful Accounts (Credit) D. Sales Revenue (Debit) Accounts Receivable (Credit) E. None of the above

7. Before making any month-end adjustments, Bobwhite Company reported $265,000 of unadjusted net income as of March 31, 2013. Adjusting entries are necessary for the following items: (i) Depreciation for the month of March: $4,200. (ii) Effective March 1, 2013, Bobwhite took out a 7 month loan totaling $200,000. The loan charges a 6% interest rate (APR) and the principle and interest are both due at maturity. (iii) During March 2013 Bobwhite purchased $1,800 of supplies. The supplies were counted at the end of the month and it was noted that $300 of supplies were remaining. The March entry to record the purchase was debited entirely to the income statement, and no additional entries have been made since this time. (iv) Fees collected in advance during February 2013 and earned in March 2013: $3,600. The February entry to record the cash collection was credited entirely to the balance sheet, and no additional entries have been made since this time. (v) March 1,2013 Bobwhite paid $21,000 for three months of rent on the office building ($7,000 per month). The March 1 entry to record the cash payment was debited entirely to the income statement, and no additional entries have been made since this time. (vi) March 1, 2013 Bobwhite paid $21,250 for 85, 60 second radio spots. Bobwhite debited the entire payment to the balance sheet and has made no additional entries. As of March 31, 2013, 55 of the radio spots were used. After recording items (i) through (vi) as necessary, Bobwhite's adjusted net income for March is: A. $263,950 B. $262,700 C. $261,686 D. $256,400 E. None of the above Continued on next page.

8. Continue with the facts provided in Q#7 for Bobwhite and consider that during Module 2B we learned to classify adjusting entries into 3 categories: Category 1: (a) Adjustments to an existing deferred revenue account balance or (b) adjustments to an existing deferred expense account balance. Category 2: (a) Adjustments to accrue additional revenue or (b) adjustments to accrue additional expense. Category 3: Adjustments to correct an error. Consider the journal entry you proposed in the prior question for situation (ii) and classify this adjusting journal entry into one of the above 3 categories. A. Category 1 (a) B. Category 1 (b) C. Category 2 (a) D. Category 2 (b) E. Category 3 9. A company purchased new computers at a cost of $14,000 on September 30. The computers are estimated to have a useful life of 4 years and a residual value of $2,000. The company uses the straight- line method of depreciation. How much depreciation expense will be recorded for the computers for the first year ended December 31? (Do not round intermediate calculations. Do round final answers, as applicable, to the nearest $1). A. $250 B. $750 C. $875 D. $3,000 E. None of the above Continued on next page.

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