BA 211 – Principles of Accounting

Essay/Problem Final Exam Questions

Total Points ~ 40 Points

Chapter 5 ~

1. Assuming the use of a two-column (all-purpose) general journal, a purchases

journal, and a cash payments journal as illustrated in Chapter 5, indicate the
journal in which each of the following transactions should be recorded:
(Worth 6 Points)

a. Adjustment to prepaid insurance at the end of the month.

 General journal
b. Purchase of office equipment for cash.
 Cash Payments journal
c. Advance payment of a one-year fire insurance policy on the office.
 Cash Payments Journal
d. Purchase of office supplies for cash.
 Cash Payments journal
e. Adjustment to record accrued salaries at the end of the period.
 General journal
f. Adjustment to prepaid rent at the end of the month.
 General journal
g. Purchase of office supplies on account.
 Purchases journal
h. Purchase of services on account.
 Purchases journal
i. Purchase of an office computer on account.
 Purchases journal
j. Payment of six months’ rent in advance
 Cash Payments Journal
k. Adjustment to record depreciation at the end of the month.
 General journal

2. Otley Company does business in two customer segments, Retail and

Wholesale. The following annual revenue was determined from the
accounting system’s invoice information:

2015 2014
Retail $110,000 $92,000
Wholesale 140,000 164,000
Total Revenue $250,000 $256,000
 Prepare a horizontal and vertical analysis of the segments. Round to one
decimal place. (Worth 5 Points)
Horizontal Analysis Increase (Decrease)
2015 2014 Amount Percent
Retail 110,000 $92,000 $18,000 19.6%
Wholesale 140,000 164,000 (24,000) (14.6%)
Total Revenue $250,000 $256,000 ($6,000) 2.3%

Vertical Analysis
2015 2014
Amount Percent Amount Percent
Retail $110,000 44% $92,000 35.9%
Wholesale 140,000 56 164,000 64.1
Total Revenue $250,000 100% $256,000 100%

Chapter 6 ~

3. What is the normal balance (Debit or Credit) of the following accounts: (a)
Cost of Merchandise Sold, (b) Delivery Expense, (c) Merchandise Inventory,
(d) Sales, (e) Sale Discounts, (f) Sales Returns and Allowances (g) Sales Tax
Payable? (Worth 4 Points)
a) Debit
b) Credit
c) Debit
d) Credit
e) Debit
f) Debit
g) Credit
4. Summary operating data for Cummerbund Company during the current year
ended June 30, 2014, are as follows: Cost of Merchandise Sold - $2,400,000;
Administrative Expenses - $420,000; Interest Expense - $30,000; Rent
Revenue - $125,000; Net Sales - $3,750,000; and Selling Expenses - $550,000.

Prepare a single-step income statement. (Worth 5 Points)

Single Step Income Statement
Revenues
Net Sales…………………………………………. $3,750,000
Rent Revenue……………………………………. 125,000
Total revenues……………………… $3,875,000
Expenses
Cost of Merchandise Sold………………. $2,400,000
Administrative Expenses………………… 420,000
Interest Expense…………………………….. 30,000
Selling Expenses……………………………... 550,000
 Total Expenses…………………… $3,400,000
Net Income………………………………………... $475,000

Chapter 7 ~

5. The units of an item available for sale during the year were as follows:

Jan. 1 Inventory 18 units at $1,440

Feb. 17 Inventory 36 units at $1,656
July 21 Inventory 42 units at $1,872
Nov. 23 Inventory 24 units at $1,980

There are 32 units of the item in the physical inventory at December 31.
The periodic inventory system is used. Determine the inventory cost by:
(Worth 5 Points)

a) the First-in, First-out method:

Most recent costs, Nov. 23 24 units at $1,980 $47,520
Next most recent costs, July 21 8 units at $1,872 $14,976
Inventory, Dec. 31 32 units $62,496

b) the Last in, First-out method.

Beginning Inventory, Jan. 1 18 units at $1,440 $25,920
Next earliest costs, Feb. 17 14 units at $1,656 $23,184
Inventory, Dec. 31 32 units $49,104

6. The following financial statement data for the years ending December 31 for
Holland Company are shown below: (Worth 5 Points)

2014 2013
Cost of Merchandise Sold $1,452,500 $1,120,000
Inventories:
Beginning of year 380,000 320,000
End of year 450,000 380,000

a. Determine the inventory turnover for 2014 and 2013.

$1,452,500
 2014: $415,000 = 3.5

$1,120,000
 2013: = 3.2
$700,000
b. Determine the number of days’ sales in inventory for 2014 and
2013.
$415,000
 2014: $3,973 = 104.5
 $700,000
 2013: = 228.1
$3,068.5

Chapter 8 ~

7. Identify each of the following as relating to (a) the control environment, (b)
control procedures, or (c) information and communication. (Worth 3 Points)

1. Management’s philosophy and operating style.

 A) Control Environment
2. Report of company’s conformity with environmental laws and
regulations.
 C) Information and Communication
3. Separating related operations.
 B) Control Procedures

8. Identify each of the following reconciling items as (a) an addition to the cash
balance according to the bank statement (b) a deduction from the cash
balance according to the bank statement (c) an addition to the cash balance
according to the company’s records or (d) a deduction form the cash balance
according to the company’s records.

(Please note: none of the transaction reported by bank debit and credit
memos have been recorded by by the company.) (Worth 4 Points)

1. Bank service charges, $30.

Deduction from the cash balance according to the company’s
records
2. Check of a customer returned by bank to company because of insufficient
funds, $1,750.
Deduction from the cash balance according to the company’s
records
3. Check for $390 incorrectly recorded by the company as $930.
Deduction from the cash balance according to the company’s
records
4. Check for $50 incorrectly charged by bank as $500.
Addition to the cash balance according to the bank statement
5. Deposit in transit, $9,700.
Addition to the cash balance according to the bank statement
6. Outstanding checks, $33,110.
Deduction from the cash balance according to the bank statement
7. Note collected by bank, $24,600.
Addition from the cash balance according to the company’s records

9. Journalize the entries to record each of the following: (Worth 3 Points)

 a. Check No. 33694 is issued to establish a petty cash fund of $900.
b. At the end of the month the amount of cash in the petty cash fund is
now $70. Check No. 33749 is issued to replenish the fund, based on
the following summary of petty cash receipts:
i. Office supplies, $555
ii. Miscellaneous selling expense, $190
iii. Miscellaneous administrative expenses, $85
Journal

a. Petty Cash………………………………………………900
Cash…………………………………………………………………….…900
b. Office Supplies…………………………....................555
Miscellaneous selling expense.........................190
Miscellaneous administrative expenses…….85
Cash…………………………………………………………………….…830