Final Examination
Principles of Accounting lI
ACCT 221
Spring 2013
Administrative Notes:
 You may use a calculator, your textbook, WileyPLUS resources, and
anything posted in our WebTycho classroom.
 There are multiple versions of the final exam. You must complete the exam
attached in the private message sent to you.
 The exam period is 4 days, but the exam must be completed and submitted
within 3 hours of the time you open the private message that contains your
exam.
 Type all answers on the Answer Sheet, which is also attached to the Private
Message.
 Attach your completed Answer Sheet in your assignment folder in
WebTycho.
 Late submissions will be penalized 10% per hour and any portion of an hour.
ACCT 221 Final Exam Sp13 VerA
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Multiple Choice: 2 points each
1. On January 1, 2013, Daniels Corporation issued $5,000,000, 10-year, 8% bonds
at 103. Interest is payable semiannually on January 1 and July 1. The journal
entry to record this transaction on January 1, 2013 is
a. Cash ............................................................................ 5,000,000
Bonds Payable.....................................................
5,000,000
b. Cash ............................................................................ 5,150,000
Bonds Payable.....................................................
5,150,000
c. Premium on Bonds Payable ........................................ 150,000
Cash ............................................................................ 5,000,000
Bonds Payable.....................................................
5,150,000
d. Cash ............................................................................ 5,150,000
Bonds Payable.....................................................
5,000,000
Premium on Bonds Payable ................................
150,000
2. Levin Company issued 500 shares of no-par common stock for $5,500. Which of
the following journal entries would be made if the stock has a stated value of
$2 per share?
a.
b.
c.
d.
Cash
Common Stock
5,500
Cash
Common Stock
Paid-in Capital in Excess of Par
5,500
Cash
Common Stock
Paid-in Capital in Excess of Stated Value
5,500
Common Stock
Cash
5,500
ACCT 221 Final Exam Sp13 VerA
5,500
1,000
4,500
1,000
4,500
5,500
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3. Motes industries owns 45% of Newton Company. For the current year, Newton
reports net income of $250,000 and declares and pays a $60,000 cash
dividend. Which of the following correctly presents the journal entries to
record Motes’ equity in Newton’s net income and the receipt of dividends
from Newton?
a.
b.
c.
d.
Dec. 31 Stock Investments ..........................
Revenue from Stock Investments
Dec. 31 Cash ................................................
Stock Investments ....................
112,500
Dec. 31 Stock Investments ...........................
Revenue from Stock Investments
Dec. 31 Cash .................................................
Stock Investments .....................
112,500
Dec. 31 Stock Investments ..........................
Revenue from Stock Investments
Dec. 31 Cash .................................................
Stock Investments .....................
85,500
112,500
27,000
27,000
112,500
60,000
60,000
85,500
27,000
27,000
Dec. 31 Revenue from Stock Investments
112,500
Stock Investments ............................................ 112,500
Dec. 31 Stock Investments ...........................
27,000
Cash........................................
27,000
4. Talbot, Inc. has the following income statement (in millions):
Wilkinson, INC.
Income Statement
For the Year Ended December 31, 3
Net Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Net Income
$300
120
180
44
$136
Using vertical analysis, what percentage is assigned to Cost of Goods Sold?
a.
b.
c.
d.
30%
40%
100%
None of the above
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5. Mah, Inc. completed Job No. B14 during 2013. The job cost sheet listed the
following:
Direct materials
Direct labor
Manufacturing overhead applied
Units produced
Units sold
$55,000
$30,000
$20,000
3,000 units
1,800 units
How much is the cost of the finished goods on hand from this job?
a.
b.
c.
d.
6.
$105,000
$63,000
$42,000
$51,000
In the month of June, a department had 20,000 units in beginning work in
process that were 70% complete. During June, 80,000 units were transferred
into production from another department. At the end of June there were
10,000 units in ending work in process that were 40% complete. Materials
are added at the beginning of the process, while conversion costs are
incurred uniformly throughout the process. The equivalent units of production
for materials for June were
a.
b.
c.
d.
90,000 equivalent units.
100,000 equivalent units.
104,000 equivalent units.
80,000 equivalent units.
7. A company budgeted unit sales of 204,000 units for January, 2013 and 240,000
units for February, 2013. The company has a policy of having an inventory of
units on hand at the end of each month equal to 30% of next month's
budgeted unit sales. If there were 61,200 units of inventory on hand on
December 31, 2013, how many units should be produced in January, 2013 in
order for the company to meet its goals?
a.
b.
c.
d.
214,800 units
204,000 units
193,200 units
276,000 units
ACCT 221 Final Exam Sp13 VerA
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8. A company's planned activity level for next year is expected to be 200,000
machine hours. At this level of activity, the company budgeted the following
manufacturing overhead costs:
Variable
Fixed
Indirect materials
$280,000
Depreciation
$120,000
Indirect labor
400,000
Taxes
20,000
Factory supplies
40,000
Supervision
100,000
A flexible budget prepared at the 160,000 machine hours level of activity
would show total manufacturing overhead costs of
a.
b.
c.
d.
$576,000.
$720,000.
$768,000.
$816,000.
9. A company developed the following per-unit standards for its product: 2 pounds
of direct materials at $4 per pound. Last month, 1,500 pounds of direct
materials were purchased for $5,700. The direct materials price variance for
last month was
a. $5,700 favorable.
b. $300 favorable.
c. $150 favorable.
d. $300 unfavorable.
10. In incremental analysis,
a.
b.
c.
d.
costs are not relevant if they change between alternatives.
all costs are relevant if they change between alternatives.
only fixed costs are relevant.
only variable costs are relevant.
ACCT 221 Final Exam Sp13 VerA
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Problem 1: 15 points
Here are comparative balance sheets for Doherty Company.
Doherty Company
Comparative Balance Sheets
December 31, 2013
Assets
Cash
2013
2012
$ 33,000
$ 10,000
Accounts receivable
18,000
14,000
Inventories
25,000
18,000
6,000
9,000
0
18,000
60,000
32,000
(20,000)
(14,000)
$ 122,000
$ 87,000
$ 17,000
$ 7,000
Bonds payable
37,000
47,000
Common stock ($1 par)
40,000
23,000
Retained earnings
28,000
10,000
$ 122,000
$ 87,000
Prepaid expenses
Long-term investments
Equipment
Accumulated depreciation—Equipment
Total assets
Liabilities and Stockholder’s Equity
Accounts payable
Total liabilities and stockholder’s equity
Additional information:
1. The 2013 Income Statement reported $6,000 in depreciation expense, a $4,000 loss on
sale of investments and Net income of $33,000.
2. Cash dividends of $15,000 were declared and paid.
3. Long-term investments that has a cost of $18,000 were sold for $14,000
4. Sales for 2013 were $120,000.
Instructions: Prepare a statement of cash flows for 2013 using the indirect method.
ACCT 221 Final Exam Sp13 VerA
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Doherty Company
Statement of Cash Flows
For the Year Ended December 31, 2013
Adjustments to reconcile net income to net cash provided
by operating activities
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Problem 2: 10 points
Nemani Corporation is projecting a cash balance of $31,785 in its December 31,
2013, balance sheet. Nemani schedule of expected collections from customers for
the first quarter of 2013 shows total collections of $180,885. The schedule of
expected payments for direct materials for the first quarter of 2013 shows total
payments of $40,200. Other information gathered for the first quarter of 2013 is:
sale of equipment $3,392; direct labor $70,178, manufacturing overhead $34,583,
and purchase of securities $12,372. Selling and administrative expenses are
projected to be $45,117; this figure includes $1,117 in depreciation expense on the
office equipment. All costs and expenses will be paid in cash. Nemani wants to
maintain a balance of at least $25,000 cash at the end of each quarter.
Instructions: Complete the cash budget for the first quarter.
Nemani Corporation
Cash Budget
For the Quarter Ending March 31, 2013
ACCT 221 Final Exam Sp13 VerA
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Problem 3: 10 points
Elias Corporation has the following cost records for February 2013.
Indirect factory labor
Direct materials used
Work in process, 6/1/12
Work in process, 6/30/12
Finished goods, 6/1/12
Finished goods, 6/30/12
$ 4,612
22,361
2,769
3,633
4,609
7,429
Factory utilities
Depreciation, factory equipment
Direct labor
Maintenance, factory equipment
Indirect materials
Factory manager's salary
$ 401
1,585
31,084
1,792
2,268
3,315
Instructions: Prepare a cost of goods manufactured schedule for February 2013.
Elias Corporation
Cost of Goods Manufactured Schedule
For the Month Ended June 30, 2013
Manufacturing overhead:
ACCT 221 Final Exam Sp13 VerA
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Problem 4: 4 points
Willis Corporation has 72,615 shares of common stock outstanding. It declares a
$2.20 per share cash dividend on August 1 to stockholders of record on September
15. The dividend is paid on October 31.
Instructions: Prepare the entries on the appropriate dates to record the declaration
and payment of the cash dividend.
Date
Account Description
Debit
Credit
Problem 5: 10 points
Caballero Manufacturing incurs unit costs of $7.90 ($6.10 variable and $1.80 fixed)
in making a sub-assembly part for its finished product. A supplier offers to make
12,500 of the assembly part at $5.75 per unit. If the offer is accepted, Caballero will
save all variable costs but no fixed costs.
Instructions: Prepare an analysis showing the total cost savings, if any, Caballero
will realize by buying the part.
Make
Buy
Total annual cost
Caballero Company should _______________ the part because total annual costs to
make are less than total costs to buy.
ACCT 221 Final Exam Sp13 VerA
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Problem 6: 5 points
On July 1, Browning Corporation purchases 550,000 shares of its $6 par value
common stock for the treasury at a cash price of $10 per share. On September 1, it
sells 275,000 shares of the treasury stock for cash at $13 per share. The balance
in the retained earnings account is $6,345,000.
Instructions: Journalize the two treasury stock transactions.
Date
Account Description
Debit
Credit
Problem 7: 4 points
Johnson Company has a unit-selling price of $450, variable costs per unit of $269,
and fixed costs of $265,580.
Instructions: Compute the break-even point in units using either (a) the
mathematical equation or (b) contribution margin per unit. Round answer up to the
next whole unit.
ACCT 221 Final Exam Sp13 VerA
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Problem 8: 10 points
Holmes Company has a factory machine with a book value of $89,851 and a
remaining useful life of 4 years. A new machine is available at a cost of $315,275.
This machine will have a 4-year useful life with no salvage value. The new machine
will lower annual variable manufacturing costs from $630,925 to $425,840.
Instructions: Prepare an analysis showing whether the old machine should be
retained or replaced.
Retain Equipment
Replace Equipment
Total costs
The equipment should be _______________ because total costs are lower than to
retain the machine.
Problem 9: 6 points
For Perez Company, variable costs are 68% of sales, and fixed costs are $215,000.
Management's net income goal is $68,610.
Instructions: Compute the required sales needed to achieve management's target
net income of $68,610.
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Essay Question: 6 points
Keller Company requires its marketing managers to submit estimated cost-volumeprofit data on all requests for new products, or expansions of a product line.
Gina Lamb is a new manager. Her calculations show a fixed cost for a new project
at $100,000 and a variable cost of $5. Since the selling price is only $15 for the
proposed product, 10,000 would need to be sold to break even. That is
approximately twice the volume estimate for the first year. She shares her dismay
with Anne Smythe, another manager.
Anne strongly advises her to revise her estimates. She points out that several of the
costs that had been classified as fixed costs could be considered variable, since
they are step costs and mixed costs. When the data has been revised classifying
those costs as variable costs, the project appears viable.
Required:
1. Who are the stakeholders in this decision?
2. Is it ethical for Gina to revise the costs as indicated? Briefly explain.
3. What should Gina do?
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