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ACCTG 211 Final: ACCTG211 Exam 1C 2015 Fall

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turquoisegnu128
28 Sep 2018
School
PSU
Department
Accounting
Course
ACCTG 211
Professor
All

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ACCTG!211!–!Exam!1!–!Practice!Test!Solutions!
1. Our!accountant!should!have!increased!accounts!receivable!and!revenue!for!this!
accounting!period!because!the!revenue!was!earned!during!the!current!accounting!
period.!However,!he!did!not!the!revenue!so!both!accounts!receivable!and!revenue!will!
be!understated.!
!Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
U!
!
!
!
!
!
U!
!
!
!
!
!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
U!
!
NE!
!
U!
!
U!
!
NE!
!
U!
!
!
2. Our!accountant!should!have!recorded!salary!expense!for!the!period!and!increased!
salaries!payable!for!the!same!amount;!however,!he!did!not!record!this!transaction!so!
both!salary!expense!and!salaries!payable!will!be!understated.!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
!
!
U!
!
!
!
!
!
U!
!
!
!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
NE!
!
U!
!
O!
!
NE!
!
U!
!
O!
!
!
3. Our!accountant!should!have!increase!revenue!for!the!current!period!while!decreasing!
unearned!revenue,!a!liability,!because!the!revenue!has!now!been!earned.!Our!
accountant!did!not!do!either!of!these!so!revenue!will!be!understated!and!unearned!
revenue,!a!liability,!will!be!overstated.!!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
!
!
O!
!
!
!
U!
!
!
!
!
!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
NE!
!
O!
!
U!
!
U!
!
NE!
!
U!
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4. We!can!initially!deduce!from!the!information!given!that!expenses!are!overstated!and!
assets!are!understated.!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
U!
!
!
!
!
!
!
!
O!
!
!
!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
U!
!
NE!
!
U!
!
NE!
!
O!
!
U!
!
!
5. Our!accountant!should!have!recorded!the!insurance!expense!and!then!reduced!the!
asset!prepaid!insurance.!Since!he!did!not!record!this!transaction,!expenses!will!be!
understated!and!assets!will!be!overstated.!
!Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
O!
!
!
!
!
!
!
!
U!
!
!
!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
O!
!
NE!
!
O!
!
NE!
!
U!
!
O!
!
!
!
!
6. We!can!initially!deduce!that!liabilities!and!expenses!are!overstated.!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
!
!
O!
!
!
!
!
!
O!
!
!
!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
NE!
!
O!
!
U!
!
NE!
!
O!
!
U!
!
!
!
!
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7. Ending!inventory!being!overstated!means!that!assets!are!overstated!because!inventory!
is!an!asset.!!Additionally!we!know!that!COGS!was!understated!if!inventory!was!
overstated.!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
O!
!
!
!
!
!
!
!
U!
!
!
!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
O!
!
NE!
!
O!
!
NE!
!
U!
!
O!
!
!
8. This!problem!is!a!wordy!way!of!saying!that!depreciation!expense!is!overstated.!Buildings!
are!depreciated;!however,!land!is!not!depreciated.!Since!the!value!of!the!land!
depreciated!along!with!the!value!of!the!building,!it!causes!us!to!overstate!depreciation!
expense.!
!
Thus,!we!can!initially!deduce!that!depreciation!expense!and!accumulated!depreciation!
are!overstated.!Remember!that!when!accumulated!depreciation!is!overstated!assets!will!
be!understated.!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
U!
!
!
!
!
!
!
!
O!
!
!
!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
U!
!
NE!
!
U!
!
NE!
!
O!
!
U!
!
!
!
9. Because!COGS!was!understated!last!period!our!accounting!system!will!adjust!for!this!
and!overstate!COGS!the!next!period.!!Since!nothing!else!was!wrong!the!effects!next!year!
will!look!like!this.!
Assets!
!
Liabilities!
!
SE!
!
Rev!
!
Exp!
!
NI!
NE!
!
NE!
!
NE!
!
NE!
!
O!
!
U!
!
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Document Summary

However, he did not the revenue so both accounts receivable and revenue will be understated. Our accountant did not do either of these so revenue will be understated and unearned revenue, a liability, will be overstated. U: we can initially deduce from the information given that expenses are overstated and assets are understated. O: our accountant should have recorded the insurance expense and then reduced the asset prepaid insurance. Since he did not record this transaction, expenses will be understated and assets will be overstated. Ne: we can initially deduce that liabilities and expenses are overstated. U: ending inventory being overstated means that assets are overstated because inventory is an asset. Additionally we know that cogs was understated if inventory was overstated. O: this problem is a wordy way of saying that depreciation expense is overstated. Buildings are depreciated; however, land is not depreciated.

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Related Questions

1-May Issued common stock in exchange for cash $50,000
1-May Purchased a one-year insurance policy to beconsumed evenly over the next 12 months $4,800
1-May Prepaid the next 6 months of rent $3,600
1-May Purchased for cash a truck to be used in thebusiness $18,000
5-May Received prepayment of cash for a contracted jobto be performed in June $4,500
5-May Purchased Office Supplies on credit $1,200
10-May Billed customers for servicesprovided $8,600
12-May Paid advertising expense $1,300
23-May Paid salaries to employees $1,500
31-May Paid dividends to stockholders $1,000

Adjusting Entries: Recognize rent for month ofMay
Recognize insurance for month of May
Recognize Depreciation for on month
Truck has a 5 year useful life and a $3,000 salvageValue
An inventory count of office supplies at may 31 showed$500 of suppies on hand
Employees' salaries earned durning May but not to bepaid until June was $500

REQUIRED: Place in t-account form.

Cash

Accounts payable

Service Revenue

Unearned Revenue

Supplies Expense

Dividend Expense

Accounts Receivable

Truck

Accumplated Dep

Prepaid Insurance

Prepaid rent

Supplies

Salaries payable

Stock

Salaries Expense

Advertising Expense

Dep Exp

Insurance Exp

Rent Exp

REQUIRED: Prepare an income statement:

INCOME STATEMENT

Service Revenue

Expenses: Supplies Expense
Salary Expense
Rent Expense
Insurance Expense
Advertising Expense
Depreciation Expense
NET INCOME
STATEMENT OF RETAINED EARNINGS
Beg Bal Retained earnings $- 0
Plus Net Income
Less Dividends Paid
End bal Retained Earnings

REQUIRED: Prepare the balance sheet:

BALANCE SHEET

ASSETS
Current:
Cash
Acc Rec
Supplies
Prepaid Rent
Prepaid Insur
TOTAL CURRENT ASSETS

Truck
Accum Dep
TOTAL ASSETS

LIABILITIES
Acc. Payable
Unearned Revenue
Salary Payable
EQUITY
Stock
Retained Earnings
TOTAL LIAB. + EQUITY

QUESTION 6

Which of the following statements is not true regarding prepaidexpenses?

Prepaid expenses represent assets.

Prepaid expenses are shown in a special section of the incomestatement.

Prepaid expenses become expenses only as goods or services areused up.

Prepaid expenses appear in the balance sheet.

4 points

QUESTION 7

The balance of an unearned revenue account:

Appears in the balance sheet as a component of stockholders'equity.

Appears in the income statement along with other revenueaccounts.

Appears in a separate section of the income statement forrevenue not yet earned.

Appears in the liability section of the balance sheet.

4 points

QUESTION 8

As of January 31, Hudson Corporation owes $600 to U-Rent-It forequipment used during January. If no adjustment is made for thisitem at January 31, how will Hudson's financial statements beaffected?

Cash will be overstated at January 31.

Net income for January will be overstated.

Stockholders' equity will be understated.

The financial statements will be accurate since the $600 doesnot have to be paid yet.

4 points

QUESTION 9

The accountant for the Linville Company forgot to make anadjusting entry to record revenue earned but not yet billed tocustomers. The effect of this error is:

An overstatement of assets.

An overstatement of stockholders' equity.

Understatement of both assets and stockholders' equity

Overstatement of both assets and stockholders' equity.

4 points

QUESTION 10

An adjusting entry involving recognition of unrecorded revenueis necessary at the end of March in which of the followingsituations?

Financial Consultants received payment in February forconsulting services rendered in March.

Financial Consultants began working for a client on March 15;bills will be sent monthly beginning April 15.

Financial Consultants made payment in January for office rentfor the first three months of the year.

On March 31, a major customer paid his bill for a consulting jobcompleted in February.

4 points

QUESTION 11

Which of the following entries causes an immediate decrease inassets and in stockholders' equity?

The entry to record depreciation expense.

The entry to record revenue earned but not yet received.

The entry to record the earned portion of rent received inadvance.

The entry to record accrued wages payable.

4 points

QUESTION 12

The CPA firm auditing Greer Company found that net income hadbeen overstated. Which of the following errors could be thecause?

Failure to record depreciation expense for the period.

No entry made to record purchase of land for cash on the lastday of the year.

Failure to record payment of an account payable on the last dayof the year.

Failure to make an adjusting entry to record revenue which hadbeen earned but not yet billed to customers.

please Help! :(

PART A: Nittany Lions Corporation adjusts itsaccounts only at year-end. The following information is availableas a source for preparing adjusting entries at December 31,2015.

On November 1, 2015, the company borrowed $120,000 for one yearat 9% interest and recorded a full yearof accrued interest expense. Interest is payable at maturity.

On October 1, 2015, Nittany Lions collected seven month’s rentin the amount of $10,500 in advance from the renter. At that date,the company debited Cash and credited Unearned Rent Revenue for$10,500.

The Supplies Inventory account had a $4,500 balance at thebeginning of the year (January 1, 2015). During the year, $6,000 ofsupplies were acquired, with the Supplies Expense account debitedat the time of purchase. The supplies count at the end of the year(December 31, 2015) showed $5,000 of supplies is still on hand.

The company owes 6-month property taxes of $1,500 on land ownedfor 2015. The taxes will be paid when they are billed in February2016. No related expense has been recorded.

Required:

For each of the above numbered items, prepare the necessaryadjusting journal entry. If no adjusting entry is required, explainwhy. Put the adjusting journal entries in the worksheet titled“Part A Answers to Part A.”

If Nittany Lions failed to prepare necessaryadjusting entries like you did in Requirement A, indicate theeffect that each item will have on the company’s financialstatements for the year ended December 31, 2015. UseO for overstated, U forunderstated, and NE for no effect. Organize youranswer in tabular form, using the column headings shown below andprovided in the worksheet titled “Part A Answers to Part B.”

Example 0: At year end, employees earned $4,000in wages which will be paid on the next payroll date in January2016. The adjusting journal entry will be:

Rent Expense (+E, -NI, -R/E,-SE) 4,000

Salaries Payable(+L) 4,000