ACCT-202 Study Guide - Midterm Guide: Contingent Liability, Photocopier, Common Stock

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Published on 3 Mar 2020
School
Georgetown University
Department
Accounting
Course
ACCT-202
Accounting 202
Spring 2019
Exam 1 Name: SOLUTION
Professor Anderson Section Time: ____________________
Instructions:
-- READ CAREFULLY! Failure to follow instruction can result in substantial loss of
points.
-- Exam consists of Part I (current and contingent liabilities) worth 30 points; Part II
(long-term liabilities) worth 38 points; Part III (leases) 26 worth points; and Part IV
(annual report) worth 6 points. You should allocate your time accordingly.
-- There are 14 pages in this exam. Make sure you have all of the pages before you
begin.
-- All work is to be done on the attached pages.
-- For problems requiring computations, work must be shown in order to get credit.
Zero points will be given to any correct answer showing no supporting
calculations. Showing your work is also necessary for partial credit. Therefore,
label all your work and make it as neat as possible.
-- If journal entries are required, use descriptive account titles (no abbreviations or
acronyms) that indicate you know what you are doing. Be sure the journal entry
is in the proper form, including the date. You should make no abbreviations
anywhere in your answers.
-- Failure to turn in your exam at the end of the exam period results in a grade of
zero.
-- GOOD LUCK!
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2
Part I Current and Contingent Liabilities (30 Total Points)
1. (2 Points) On October 1, 2018, Emma’s Electronics Inc. borrowed $60 million and
issued a twelve-month non-interest bearing note. On September 30, 2019,
Emma’s Electronics will satisfy this note with a payment of $64 million. What
amount of interest relating to this note will Emma’s Electronics recognize on its
income statement for the year ending December 31, 2018?
Interest Expense: $1 million
Interest Expense = ($64 million - $60 million) x (3/12) = $1 million
2. (7 Total Points) On January 1, 2018, Kelly’s Kite Company granted its six employees
15 vacation days. Employees earn $210 each per day. Vacation days may be
carried over to the following year. During 2018, the six employees each took 11
vacation days.
a. (2 Points) What is the total expense Kelly’s Kite Company should recognize for
compensated absences in 2018?
Total Expense: $18,900
Total Expense = 6 employees x 15 days x $210 = $18,900
b. (2 Points) What is Kelly’s Kite Company’s vacation pay liability on December
31, 2018?
Vacation Pay Liability: $5,040
Vacation Pay Liability = 6 employees x (15 days 11 days) x $210 =
$5,040
c. (3 Points) Suppose in 2014 each of the 6 employees used 3 vacation days.
Prepare Kelly’s Kite Company’s journal entry to record this vacation if the
employees earn $214 per day in 2014.
Date
Account Title
Debit
Credit
2014
Vacation Pay Liability*
3,780
Compensation Expense**
72
Cash***
3,852
*6 employees x $210 x 3 days
**6 employees x ($214 - $210) x 3 days
***6 employees x $214 x 3 daysa
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3
3. (6 Points) Below is an excerpt from Dell Technologies’ fiscal 2018 warranty footnote.
Prepare all of Dell’s warranty journal entries for the fiscal year ended February 2, 2018.
Date
Account Title
Debit
2018
Warranty Expense
905 million
Estimated Warranty Liability
2018
Estimated Warranty Liability
970 million
Cash
Fiscal Year Ended
February 2, 2018
February 3, 2017
January 29, 2016
(in millions)
Warranty liability:
Warranty liability at beginning of period
$
604
$
574
$
679
Warranty liability assumed through EMC merger
transaction
125
Costs accrued for new warranty contracts and changes in
estimates for pre-existing warranties (a) (b)
905
852
754
Service obligations honored
(970
)
(947
)
(859
)
Warranty liability at end of period
$
539
$
604
$
574
Current portion
$
367
$
405
$
381
Non-current portion
$
172
$
199
$
193
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