FINAL EXAM The Hashemite University, Department of Accounting, Dr Husam Al-Khadash Principle of Accounting,

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1 FINAL EXAM The Hashemite University, Department of Accounting, Dr Husam Al-Khadash Principle of Accounting, Name: Seat No. Student No. Question One (11 marks): Identify the answer of each of the following cases, then fill in your answer in the following box Case answer 1. Mary's Boutique has total receipts for the month of $16,170 including sales taxes. If the sales tax rate is 5%, what are Mary's sales for the month? 2. Noyes Company exchange it s old truck (cost $64000 less $22000 accumulated depreciation) plus cash $17000 for a new truck. The old truck has fair market value $40000, what is the cost of the new asset? 3. Elvis Costello Company purchased a new machine on Oct.1,2002, at a cost of $ The company estimated that the machine will have a salvage value of $ The machine is expected to be used for working hours during it s 5 years life. By using the straight-line method what is the depreciation expense for 2002? 4. Elvis Costello Company purchased a new machine on Oct.1,2002, at a cost of $ The company estimated that the machine will have a salvage value of $ The machine is expected to be used for working hours during it s 5 years life. Assuming the machine usage was 1700 hours in 2002 and by using the activity method how much the depreciation expense for 2002? 5. Amman Mining Company purchased land on February 1,1998,at a cost of $ It estimated that a total of tons of mineral was available for mining. After it has removed all the natural resources, the company will be required to restore the property to its previous states because of strict environmental protection laws. It estimates the cost of this restoration at $90000.It believes it will be able to sell the property afterward for $ It incurred developmental cost of $ before it was able to do any mining. In 1998 resources removed totaled tons. It sold tons. What is the total amount of depletion for 1998?

2 Question 3 (39 Marks): Choose the best answer for each of the following using table below: In case of using subsidiaries, the balance of a control account in the general ledger: a. must always be zero. b. must equal the amount of total assets. c. is always greater than the composite balance of individual accounts in a related subsidiary ledger. d. must equal the balance of individual accounts in a related subsidiary ledger. 2. In case of using subsidiaries, the adjusting entries are recorded: a. only on the work sheet. b. only in the general ledger. c. in the general journal. d. in the special journals. 3. Entries in a sales journal a. are made from sales invoices. b. will indicate the invoice number in the reference column of the sales journal. c. will occupy two lines of the sales journal. d. indicate either a cash debit or accounts receivable debit. 4. Winter Furniture factors $400,000 of receivables to Kwik Factors,Inc. Kwik Factors assesses a 2% service charge on the amount of receivables sold. Winter Furniture factors its receivables regularly with Kwik Factors. What journal entry does Winter make when factoring these receivables? a. Cash ,000 Loss on Sale of Receivables... 8,000 Accounts Receivable ,000 b. Cash ,000 Accounts Receivable ,000 c. Cash ,000 Accounts Receivable ,000 Gain on Sale of Receivables... 8,000 d. Cash ,000 Service Charge Expense... 8,000 Accounts Receivable , A 30-day note dated July 8 has a maturity date of: a. August 8. b. August 7. c. August 9. d. August The maturity value of a $20,000, 12%, 3-month note receivable is: a. $20,600. b. $20,240. c. $22,400. d. $20, Voight Company's account balances at December 31 for Accounts Receivable and Allowance for Doubtful Accounts were $1,400,000 and $70,000 (Cr.), respectively. An aging of accounts receivable indicated that $108,000 are expected to become uncollectible. The amount of the adjusting entry for bad debts at December 31 is a. $108,000. b. $38,000. c. $178,000. d. $70, An accounting organization whose purpose is to formulate and publish international accounting standards is the a. International Accounting Principles Board b. International Accounting Standards Committee c. Financial Accounting Standards Board d. Securities and Exchange Commission 9. Milton Company issued a four-year note payable for $100,000 on January 1, Each January the company is required to pay $25,000 on the note. How will this note be reported on the December 31, 2002 balance sheet? a. Long-term debt, $100,000. b. Long-term debt, $75,000. c. Long-term debt, $50,000; Long-term debt due within one year, $25,000. d. Long-term debt, $75,000; Long-term debt due within one year, $25, Kim Rice has worked 44 hours this week. She worked in excess of 8 hours each day. Her regular hourly wage is $15 per hour, and 150%of each additional hour (the week is 5 working days) What are Kim's gross wages for the week? a. $660. b. $690. c. $990. d. $720.

3 11. The principle that requires circumstances and events that make a difference to financial statement users be reported is the a. Cost principle. b. Full disclosure principle. c. Matching principle. d. Revenue recognition principle. 12. A petty cash fund of $100 is replenished when the fund contains $5 in cash and receipts for $93. The entry to replenish the fund would: a. credit Cash Over and Short for $2. b. credit Miscellaneous Revenue for $2. c. debit Cash Over and Short for $2. d. debit Miscellaneous Expense for $ Deposits in transit: a. have been recorded on the company's books but not yet by the bank. b. have been recorded by the bank but not yet by the company. c. have not been recorded by the bank or the company. d. are checks from customers which have not yet been received by the company. 14. If a check correctly written and paid by the bank for $448 is incorrectly recorded on the company's books for $484, the appropriate treatment on the bank reconciliation would be to a. add $36 to the bank's balance. b. add $36 to the book's balance. c. deduct $36 from the bank's balance. d. deduct $448 from the book's balance. 15. Grant Company gathered the following reconciling information in preparing its July bank reconciliation: Cash balance per books, 7/31 $4,500 Deposits-in-transit 150 Notes receivable and interest collected by bank 850 Bank charge for check printing 20 Outstanding checks 2,000 NSF check 170 The adjusted cash balance per books on July 31 is a. $5,160. b. $5,010. c. $3,310. d. $3, One approach to the recognition of revenue using the cash basis is the a. Accrual method. b. Installment method. c. Percentage-of-completion method. d. Sales basis. 17.All of these transactions will appear in Cash Payments Journal : a) Owner withdrawal of cash, cash purchase of land, and paid utilities for cash. b) Owner withdrawal of cash, cash purchase of land, and purchased equipment on account. c) Owner withdrawal of cash, cash purchase of land, and purchased merchandise on account. d) Owner withdrawal of cash, cash purchase of land, and sold merchandise for cash. 18. Zendejas Company purchased a ruler for $2.00. The ruler is expected to last for ten years. The accountant expensed the cost of the ruler in the year of the purchase. Which constraint has the accountant followed (done) when making his accounting decision? a. Conservatism b. Full disclosure c. Going concern assumption d. Materiality 19. Operating guidelines include each of the following except a. Assumptions. b. Constraints. c. Principles. d. Qualitative characteristics. 20. Which accounting guideline assumes that an enterprise will remain in business long enough to carry out its existing objectives and commitments? a. Cost principle b. Economic Entity assumption c. Periodicity assumption d. Going concern assumption 21. Using the same accounting principles and methods from year to year within a company is called a. Comparability b. Consistency c. Relevance d. Reliability 22. The entry to record the dishonor of a note receivable assuming the payee expects eventual collection includes a debit to a. Notes Receivable b. Cash c. Allowance for Doubtful Accounts d. Accounts Receivable

4 23. Making payments from a petty cash fund requires a. a credit to Cash b. a credit to Petty Cash c. a debit to various expense accounts d. no accounting entry at the time payment is made from petty cash. 24. On April.1, 2002 Collins Company purchased Goodwill for $360000, indefinite life, for cash. The adjusting entry at December.31, 2002 will contain: a. Debit. Amortization expense / Goodwill $9000. b. Debit. Amortization expense / Goodwill $6750. c. Credit. Goodwill $750 d. Can not determine the amount due to indefinite useful life. 25. On a bank reconciliation, collection of a note receivable by the bank is a. added to the bank balance b. deducted from the bank balance c. added to the book balance d. deducted from the book balance 26. Porter Company purchased equipment for $180,000 on January 1, 2001, and will use the doubledeclining-balance method of depreciation. It is estimated that the equipment will have a 3-year life and an $8,000 salvage value at the end of its useful life. The amount of Depreciation expense recognized in the year 2003 will be a. $20,000. b. $12,000. c. $21,776. d. $13, A company paid $100 as oil change for its machine which has a cost of $3000, also it is paid $300 to improve the capacity of the machine.the cost of the machine will be : a. $3000 b. $3100 c. $3300 d. $3400

5 ANSWERS Case answer D C A D B A B B C B B C A B A B A D D D B D A B C B C

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