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Comprehensiveexam B
Comprehensiveexam B
PART 2
(Chapters 79)
Problem B-I Multiple Choice Cash and Receivables.
Choose the best answer for each of the following questions and enter the identifying
letter in the space provided.
_____ 1. When should the loss on an uncollectible account receivable be recorded as
an expense for accrual accounting purposes?
a. When it is determined that an account cannot be collected.
b. In the same period in which the sale on account occurs.
c. When the balance is past due for more than 3 months.
d. When a lawyer indicates that collection efforts would cost more than the
account is worth.
_____ 2. How should unearned discounts, finance charges, and interest included in the
face amount of installment accounts receivable be presented in the balance
sheet?
a. As a current liability.
b. As a deduction from the related installment accounts receivable.
c. Within the net amount of installment accounts receivable.
d. As an addition to the related installment accounts receivable.
_____ 3. Durler Company's account balances at December 31 for Accounts
Receivable and the related Allowance for Doubtful Accounts are $800,000
and $13,000, respectively. From an analysis of accounts receivable, it is
estimated that $28,000 of the December 31 receivables will be uncollectible.
After adjustment for the above facts, the net realizable value of accounts
receivable would be
a. $800,000.
b. $787,000.
c. $759,000.
d. $772,000.
_____ 4. Which group of items listed below should be included in the cash account?
a. Silver coins, postage stamps, demand deposits, personal checks.
b. Promissory notes, demand deposits, money orders, silver coins.
c. Money orders, postdated checks, personal checks, time deposits.
d. Silver coins, money orders, demand deposits, personal checks.
_____ 5. Which of the following methods of accounting for uncollectible accounts does
not properly match costs with revenues?
a. Percentage of sales
b. Percentage of receivables
c. Direct write-off
d. Aging schedule
Comprehensive Exam B
B-2
_____ 6. Certain information relative to the 2012 operations of Ball Co. follows:
Accounts receivable, January 1, 2012
Accounts receivable collected during 2012
Cash sales during 2012
Inventory, January 1, 2012
Inventory, December 31, 2012
Purchases of inventory during 2012
Gross profit on sales
$48,000
92,000
24,000
36,000
33,000
80,000
27,000
Item
Number Units
In Inventory
5,000
5,000
5,000
5,000
5,000
25,000
Upper
Limit
("Ceiling")
Original Cost
Per Unit
$1.09
1.30
1.50
1.60
1.80
Lower
Limit
("Floor")
Total
Original Cost
$5,450
6,500
7,500
8,000
9,000
$36,450
Designated
Market
Current
Replacement Cost
$1.08
1.15
1.05
1.65
1.70
Appropriate
Inventory
Valuation
(Totals)
A
B
C
D
E
Total
Additional Data:
Selling price is $2.00/unit for all items. Disposal costs amount to 10% of selling price and
a "normal" profit is 35% of selling price.
Instructions
Complete the last four columns above.
Comprehensive Exam B
B-3
2%
1.02000
1.04040
1.06121
1.08243
1.10408
3%
1.03000
1.06090
1.09273
1.12551
1.15927
4%
1.04000
1.08160
1.12486
1.16986
1.21665
6%
1.06000
1.12360
1.19102
1.26248
1.33823
8%
1.08000
1.16640
1.25971
1.36049
1.46933
6%
0.94340
0.89000
0.83962
0.79209
0.74726
8%
0.92593
0.85734
0.79383
0.73503
0.68058
Table 2
Present Value of 1
Periods
1
2
3
4
5
2%
0.98039
0.96117
0.94232
0.92385
0.90573
3%
0.97087
0.94260
0.91514
0.88849
0.86261
4%
0.96154
0.92456
0.88900
0.85480
0.82193
Table 3
Future Value of Ordinary Annuity of 1
Periodic Rents
1
2
3
4
5
2%
1.00000
2.02000
3.06040
4.12161
5.20404
3%
1.00000
2.03000
3.09090
4.18363
5.30914
4%
1.00000
2.04000
3.12160
4.24646
5.41632
6%
1.00000
2.06000
3.18360
4.37462
5.63709
8%
1.00000
2.08000
3.24640
4.50611
5.86660
Comprehensive Exam B
B-4
Table 4
Present Value of Ordinary Annuity of 1
Periodic Rents
1
2
3
4
5
2%
0.98039
1.94156
2.88388
3.80773
4.71346
3%
0.97087
1.91347
2.82861
3.71710
4.57971
4%
0.96154
1.88609
2.77509
3.62990
4.45182
6%
0.94340
1.83339
2.67301
3.46511
4.21236
8%
0.92593
1.78326
2.57710
3.31213
3.99271
Comprehensive Exam B
B-5
LIFO
Yes__
No___
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
______
B-6
Comprehensive Exam B
______
______
______
______
______
______
______
______
______
______
______
______
18. If used for tax purposes, it must be used for financial reporting
purposes.
______
______
19. Somewhat opens door for profit manipulation and may cause
poor purchase decisions.
______
______
______
______
Comprehensive Exam B
B-7
12/31/12
Physical
Inventory
2012
Income
________
________
________
________
________
________
________
________
________
________
________
________
________
________
B-8
Comprehensive Exam B
Cost
$ 28,900
366,600
9,000
7,000
Retail
$ 40,000
610,000
20,000
615,000
15,000
5,000
23,500
50,000
2,500
38,000
18,000
13,500
8,500
B. Landmark Book Store has decided to switch to the LIFO retail method for the period
beginning 1/1/13.
Instructions
Prepare a schedule showing the computation of the 12/31/13 inventory under the LIFO
retail method adjusted for price level changes (i.e., dollar-value LIFO Retail.) Without
prejudice to your answer in requirement A above, assume that the 12/31/12 inventory
computed under the LIFO Retail method was $40,000 and $27,500 at retail and cost,
respectively, for purposes of this requirement. Data for 2013 follows:
Cost
Retail
Purchases (net)
$360,000
$485,000
Sales (net)
402,000
Markups (net)
30,000
Markdowns (net)
15,000
2012 Price Index
100
2013 Price Index
120
Comprehensive Exam B
B-9
$1,000,000
500,000
26,000
850,000
Comprehensive Exam B
B-10
_____ *6. Kramer Company values its inventory by using the retail method (LIFO basis,
stable prices). The following information is available for the year 2012.
Beginning inventory
Purchases
Freight-in
Markups (net)
Markdowns (net)
Sales
Cost
Retail
$ 78,000
368,000
16,000
$140,000
628,000
18,000
6,000
610,000
Comprehensive Exam B
B-11
4. d
5. c
6. b
Item
A
B
C
D
E
Upper
Limit
("Ceiling")
$1.80
1.80
1.80
1.80
1.80
Lower
Limit
("Floor")
$1.10
1.10
1.10
1.10
1.10
Designated
Market
$1.10
1.15
1.10
1.65
1.70
Appropriate
Inventory
Valuation
(Totals)
$5,450
5,750
5,500
8,000
8,500
$33,200
12/31/11
Notes Receivable ........................................................................
Discount on Notes Receivable .........................................
Sales Revenve..................................................................
417,197
500,000
82,803
310,000
Comprehensive Exam B
B-12
(b)
12/31/12
Cash ...........................................................................................
Interest Revenue .............................................................
Discount on Notes Receivable .....................................................
Interest Revenue .............................................................
($417,197 .08 = $33,376 $15,000)
(c)
12/31/13
Cash ...........................................................................................
Interest Revenue .............................................................
Discount on Notes Receivable .....................................................
Interest Revenue .............................................................
[($417,197 + $18,376) .08 = $34,846 $15,000]
15,000
15,000
18,376
18,376
15,000
15,000
19,846
19,846
No-Yes
No-Yes
No-Yes
No-Yes
Yes-No
No-Yes
7.
8.
9.
10.
11.
12.
No-Yes
No-Yes
No-Yes
No-Yes
Yes-Yes
No-Yes
13.
14.
15.
16.
17.
18.
Yes-Yes
No-Yes
No-Yes
Yes-No
No-Yes
No-Yes
19. No-Yes
20. No-No
1.
2.
3.
4.
5.
6.
7.
Understated/Understated
No effect/No effect
No effect/Overstated
No effect/Understated
No effect/No effect
No effect/Overstated
Understated/Understated
(b)
1. Inventory ................................................................................
Cost of Goods Sold ....................................................
2. None
9,000
3. Purchases ..............................................................................
Accounts Payable ......................................................
4,000
800
5. None
9,000
4,000
Comprehensive Exam B
(c)
6. Purchases ..............................................................................
Accounts Payable ......................................................
1,500
7. Inventory ................................................................................
Cost of Goods Sold ....................................................
12,000
4,000
4. Purchases ..............................................................................
Accounts Payable ......................................................
800
1,500
B-13
1,500
12,000
4,000
1,500
$ 28,900
366,600
(9,000)
610,000
(7,000)
23,500
38,000
$403,000
650,000
$615,000
(15,000)
(5,000)
(2,500)
13,500
(8,500)
$ 23,250
Comprehensive Exam B
B-14
*B.
Inventory, December 31, 2012
Net purchases
Net markups
Net markdowns
Total (excluding beginning inventory)
Total (including beginning inventory)
Net sales
(402,000)
Inventory, December 31, 2013, at retail
Cost to retail percentage ($360,000 $500,000)
12/31/13 inventory at base ($138,000 1.20)
12/31/12 inventory at base
(40,000)
Increase at base
Increase at current prices, at cost ($75,000 1.20 .72)
12/31/13 inventory at LIFO cost
Cost
$ 27,500
360,000
360,000
$387,500
$ 138,000
72%
$ 115,000
$ 27,500
$ 75,000
64,800
$ 92,300
4. a
5. d
*6. b
Retail__
$ 40,000
485,000
30,000
(15,000
500,000
540,000