Loyola Marymount
University
Acct 211 Mid-term Exam 2B Fall,
2005
Instructions: This examination is worth 200
points. Write the each answer and show your work clearly on a separate
sheet of paper. Partial credit will be given if the workpaper is clear. You
will have 75 minutes for this exam. Be sure to read the entire question before
answering it.
Also, be sure to
answer the question asked, not the one you think should have been asked!
1. Kemp Company has
just completed a physical inventory count at year
end, December
31, 2003. Only the items on the shelves, in storage,
and in the
receiving area were counted and costed on the FIFO basis.
The inventory
amounted to $95,000. During the audit, the independent
CPA discovered
the following additional information:
(a) There were
goods in transit on December 31, 2003, from a
supplier
with terms FOB destination, costing $10,000.
Because
the goods
had not arrived, they were excluded from the physical
inventory
count.
(b) On December
27, 2003, a regular customer purchased goods for
cash
amounting to $1,000 and left them for pickup on January 4,
2004. Kemp
Company had paid $500 for the goods and, because
they were on
hand, included them in the physical inventory
count.
(c) Kemp
Company, on the date of the inventory, received notice
from a
supplier that goods ordered earlier, at a cost of $4,000,
had been
delivered to the transportation company on December 28,
2003; the
terms were FOB shipping point. Because the shipment
had not
arrived on December 31, 2003, it was excluded from the
physical
inventory.
(d) On December
31, 2003, there were goods in transit to customers,
with terms
FOB shipping point, amounting to $800 (expected
delivery on
January 8, 2004). Because the goods had
been
shipped,
they were excluded from the physical inventory count.
(e) On December
31, 2003, Kemp Company shipped $2,500 worth of
goods to a
customer, FOB destination on January 5, 2004.
Because the
goods were not on hand, they were not included in
the physical
inventory count.
(f) Kemp
Company, as the consignee, had goods on consignment that
cost $3,000.
Because these goods were on hand as of December 31,
2003, they
were included in the physical inventory count.
INSTRUCTIONS
Analyze the
above information and calculate a corrected amount for
the ending
inventory. Explain the basis for your treatment of each item.
2. McGuire Company
uses the periodic inventory method and had the following
inventory information available:
Units
Unit Cost
Total cost
1/1
Beginning inventory
100
$4
$400
1/20
Purchase
500
$5
$2,500
7/25
Purchase
100
$7
$700
10/20
Purchase
300
$8
$2,400
1,000
$6,000
A physical count
of inventory on December 31 revealed that there were 350 units
on hand.
INSTRUCTIONS
Answer the
following independent questions and show computations supporting your
answers.
1. Determine
the value of ending inventory assuming the company uses the FIFO method.
2. Determine
the value of ending inventory assuming the company uses the average cost
method.
3. Determine
the value of ending inventory assuming the company uses the LIFO method.
4. Determine
the difference in the amount of income that the company
would have reported
if it had used the FIFO method instead of the
LIFO method.
Would income have been greater or less?
3. Using the
following information, prepare a bank reconciliation for
Moore Company
for July 31, 2003.
a. The bank
statement balance is $2,206.
b. The cash
account balance is $2,830
c. Outstanding
checks totaled $585.
d. Deposits in
transit are $1,170.
e. The bank
service charge is $30.
f. A check for
$98 for supplies was recorded as $89 in the ledger.
4. The Broad
Company had a $500 credit balance in Allowance for
Doubtful
Accounts at December 31, 2003, before the current year's
provision for
uncollectible accounts. An aging of the
accounts
receivable
revealed the following:
Estimated Percentage
Uncollectible
————————————————————
Current
Accounts $130,000 1%
1-30 days past
due 12,000 3%
31-60 days past
due 10,000 6%
61-90 days past
due 5,000 12%
Over 90 days
past due 8,000 30%
————————
Total Accounts
Receivable $155,000
INSTRUCTIONS
(a) Prepare the
adjusting entry on December 31, 2003, to recognize
bad debts
expense.
(b) Assume the
same facts as above except that the Allowance for
Doubtful
Accounts account had a $500 debit balance before the
current
year's provision for uncollectible accounts.
Prepare
the
adjusting entry for the current year's provision for
uncollectible accounts.
5. Compute the maturity
value as indicated for each of the following
notes
receivable. (Maturity value is principle plus interest at maturity)
1. An $8,000,
6%, 3-month note dated April 20.
2. An $11,000,
9%, 72-day note dated March 5.
3. A $3,000, 6%,
30-day note dated September 10.
6. Equipment was
acquired on January 1, 2000, at a cost of $50,000. The
equipment was
originally estimated to have a salvage value of $5,000
and an estimated
life of 10 years. Depreciation has been recorded
through December
31, 2003, using the straight-line method. On
January 1, 2004,
the estimated salvage value was revised to $6,000
and the useful
life was revised to a total of 8 years.
INSTRUCTIONS
Determine the
Depreciation Expense for 2004.