Multiple Choice ReviewAdjusting and Reversing EntriesStatement of Cash FlowsCrimson and Blue, Inc.Liabilities & Stockholders Equity:Stockholder’s Equity Transactions (II)Treasury StockEach share of common stock was originally sold for $29.Treasury StockPreferred DividendsTime Value of MoneyHints: 1. Assume interest rate is ANNUAL unless stated otherwise!BondsFINAL EXAM REVIEW Review: Sunday, December 10th 3:00- 6:00 PM 8 am: CAPF 1020; 9:30am: 1111 Exam: Wednesday December 13th 7:30-10:00PM 1 Multiple Choice Review 1. At the end of October, XYZ's bank statement arrives. When preparing the bank reconciliation, it is discovered that there were deposits in transit of $2,000, an NSF check for $200, outstanding checks for $1,400, and a bank service charge of $15. If the ledger account cash balance on 10/31 was $9,800, what should be the correct cash balance after reconciling the cash account? a. $9,800 b. $9,585 c. $10,400 d. $12,015 e. None of the above are correct. 2. Which of the following accurately describes the concept of reliability? a. A number can be objectively determined using a consistent technique. b. Two different accountants using the same approach would determine different values for the same asset. c. Estimating ending inventory for quarterly reporting emphasizes reliability over timeliness. d. All numbers on financial statements are subjective. 3. Which of the following descriptions accurately describes the concept of relevance? a. A sole-proprietor’s purchase of a car for personal use should be recorded on the financial statements of the sole proprietor’s business. b. Accountants only record information that is useful for decision making and determining the economic performance of the company. c. A number can be objectively determined using a consistent technique. d. All assets should be recorded at their historical cost. 4. Jake’s Warehouse grants a 90-day warranty on all stereos. Historically, approximately 2.5% of all sales prove to be defective. Sales in July are $100,600. In August, $2,900 of defective units are returned for replacement. What entry must Jake’s Warehouse make at the end of July to record the warranty expense? a. Debit Warranty Expense and credit Cash, $4,865 b. Debit Warranty Expense and credit Cash, $2,900 c. Debit Warranty Expense and credit Estimated Warranty Payable, $2,515 d. Debit Warranty Expense and credit Estimated Warranty Payable, $2,900 d. No entry is needed at July 31FINAL EXAM REVIEW Review: Sunday, December 10th 3:00- 6:00 PM 8 am: CAPF 1020; 9:30am: 1111 Exam: Wednesday December 13th 7:30-10:00PM 2 5. You have decided to sell your car to your brother-in-law. However, you are not sure what the selling price should be. What would be the most relevant value in deciding the price of the car? a. The car's original cost when you bought it five years ago b. Your brother-in-law's estimate of what the car is worth c. Your estimate of what the car is worth d. The fair market value of the car. Fair market value is the amount a third party (a person you do not know) would pay. 6. Which of the following is not an example of an accrual: a. Interest revenue. b. Interest expense. c. Depreciation. d. All of the above are accruals. 7. After inventory arrives at a merchandising company and is recorded, the amount reported in inventory is adjusted by all but one of the following items. Which one? a. freight in b. purchases returns and allowance c. quantity discounts d. early payment discounts 8. Professor Shaftel wants to give you some money, but he also wants to test your comprehension of the material covered in ACCT 200. Thus, he has provided you with the following three options to receive the funds. Assume a 4% interest rate and choose the best option or receive nothing! a. $3,000,000 today b. $500,000 at the end of each year for 6 years. c. $1,000,000 today; $1,500,000 at the end of three years; and $500,000 at the end of the sixth year. 9. Which of the following is not a contra account?: a. accumulated depreciation b. discount on bonds payable c. allowance for uncollectible accounts d. supplies expenseFINAL EXAM REVIEW Review: Sunday, December 10th 3:00- 6:00 PM 8 am: CAPF 1020; 9:30am: 1111 Exam: Wednesday December 13th 7:30-10:00PM 3 10. The concept of conservatism is best illustrated in which of the following statements? a. Never understate your liabilities. b. Never understate your assets. c. Never overstate your assets. d. Never overstate your liabilities. e. Both (a) and (c). f. Both (b) and (d). 11. Which of the following is not a special feature of preferred stock? a. cumulative b. participating c. splitting d. convertible 12. If the par value of Disney’s stock is $3 per share and Ellie pays $15 for one share, what do you call the $12 difference. a. Net Income. b. Stock Rights. c. Additional Paid-In Capital. d. Treasury Stock 13. What does FASB stand for? a. Federal Accounting Securities Board. b. Financial Accounting Securities Board. c. Generally Accepted Accounting Principals. e. Financial Accounting Standards Board. 14. The term normal balance refers to: a. the amount a company would like to keep in an account at all times b. the debit side of the T-account c. the side where increases to the account are generally found d. the amount of cash that is typically found in a specific bank account 15. Name the agency that Congress created in 1930 to make and enforce financial reporting rules. a. FASB b. CPA c. GAAP d. SECFINAL EXAM REVIEW Review: Sunday, December 10th 3:00- 6:00 PM 8 am: CAPF 1020; 9:30am: 1111 Exam: Wednesday December 13th 7:30-10:00PM 4 Adjusting and Reversing Entries Mr. Horton starts his own bakery specializing in cupcakes. Make the appropriate entries for Mr. Horton’s Bakery based on the transactions described below. 1. On Jan 1, Mr. Horton sold common stock in the amount of $500,000 cash. 2. On March 31, Mr. Horton purchases a giant oven. The oven cost $320,000. Mr. Horton paid $120,000 cash and signed a note for the remaining amount. Interest of 10% is compounded annually and due in 1 year. The oven has a useful life of 10 years, a salvage value of 5% of cost, and will be depreciated using the double-declining balance