ACCTG 215 Sections A B Fall 2010 Quiz 2 Name Student Number TA Quiz Section Time Instructions There are 15 multiple choice questions on the following pages Your final answers must be entered in the spaces provided on this cover page in order to be graded Code of Conduct By signing below you acknowledge that you are a member of a learning community at the Foster School of Business that is committed to the highest academic standards and that you adhered to these standards while completing this quiz Specific to this quiz by signing below you acknowledge that you did not receive or give help to others nor did you witness others receiving or giving help to others during the quiz Signature Signature required Date Multiple Choice Answers 1 2 C 3 B 6 7 D 11 8 D 12 A 4 C 9 A 13 B 5 B 10 D 14 B E A 15 B A PLEASE ALSO WRITE YOUR NAME ON THE REVERSE OF THIS EXAM 1 ACCTG 215 Sections A B Fall 2010 Short Questions 1 point each 1 Inventory for a manufacturing firm does not include A B C D E The cost of raw materials The cost of finished goods The purchase price of equipment used to manufacture goods The direct cost of labor to manufacture goods Inventory includes all of the above ANSWER C 2 The largest expense on a merchandising firm s income statement is typically A B C D E Salaries and wages Cost of goods sold Income tax expense Depreciation expense Interest expense ANSWER B 3 Baker Fine Foods begins the year with 12 000 of inventory During the year Baker purchases inventory for 150 000 and ends the year with 20 000 of inventory Baker will report cost of goods sold equal to A B C D E 150 000 158 000 142 000 170 000 None of the above ANSWER C Cost of goods sold beginning inventory 12 000 purchases 150 000 ending inventory 20 000 142 000 4 The LIFO conformity rule states that if LIFO is used for A One type of inventory it must be used for all types of inventory B Tax purposes it must be used for financial reporting purposes C One division with a company it must be used by all divisions in that company D A company s domestic operations it must also be used for the company s foreign operations E All of the above ANSWER B 2 ACCTG 215 Sections A B Fall 2010 5 Merchandise sold FOB destination indicates that A B C D E The merchandise has not yet been shipped The merchandise will not be shipped until payment is received The seller holds title until the buyer pays for the merchandise The seller transfers title to the buyer once the merchandise is shipped None of the above ANSWER E 6 In a period when inventory costs are steadily rising the inventory method that most likely results in the lowest overall income tax expense is A B C D E FIFO Lower of cost or market method Average cost LIFO Income tax expense is always the same regardless of the inventory costing method used ANSWER D 7 If a company overstates its ending balance of inventory in year 1 and it records inventory correctly in year 2 which one of the following is true A B C D E Net income is overstated in year 2 Cost of goods sold is overstated in year 1 Net income is understated in year 1 Retained earnings is overstated in year 1 None of the above ANSWER D 8 Internal research and development costs should be A B C D E Expensed in the period incurred Expensed in the period they are determined to be unsuccessful Capitalized pending determination of success Expensed if unsuccessful capitalized if successful None of the above ANSWER A 3 ACCTG 215 Sections A B Fall 2010 9 Goodwill is A B C D Amortized over the greater of its estimated life or forty years Only recorded by the seller of a business Recorded when an intangible asset is created internally The excess of the fair market value of a business over the fair market value of all net identifiable assets E All of the above ANSWER D 10 Gilbert Company performed ordinary annual maintenance on a delivery truck at a cost of 500 Gilbert s accountant debited the asset account Delivery Vehicles Was this treatment an error and if so what will be the effect on the financial statements of Gilbert A B C D E The error overstated assets and owners equity The repair was accounted for correctly In the years following net income will be overstated due to the error The error understated net income None of the above ANSWER A 4 ACCTG 215 Sections A B Fall 2010 Computational Questions 2 points each Use the following information to answer questions 11 and 12 Inventory records for Marvin Company reveal the following information Marvin sold 2 300 units of inventory during the month 11 Ending inventory assuming FIFO in a periodic inventory system would be A B C D E 5 140 5 080 5 060 5 050 None of the above ANSWER A Ending inventory 100 x 7 30 600 x 7 35 5 140 12 Cost of goods sold assuming LIFO in a perpetual inventory system would be A B C D E 16 640 16 740 16 660 16 760 None of the above ANSWER B Cost of goods sold Mar 5 400 x 7 20 Mar 14 600 x 7 25 100 x 7 20 Mar 20 500 x 7 30 Mar 26 600 x 7 35 100 x 7 30 Total 16 740 5 ACCTG 215 Sections A B Fall 2010 13 Niva Company has the following information for inventory items A B C and D The necessary end of period journal entry associated with the lower of cost ormarket method would record a credit to inventory for what amount A B C D E 675 475 875 375 None of the above ANSWER B Need to reduce inventory cost to the lower market value for items B and D 20 x 5 25 x 15 475 14 A machine has a cost of 18 000 an estimated residual value of 3 000 and an estimated useful life of five years The machine is being depreciated on a straightline basis At the end of the second year what amount will be reported for accumulated depreciation A B C D E 3 600 6 000 7 200 3 000 None of the above ANSWER B 18 000 3 000 5 years 3 000 per year x 2 years 6 000 6 ACCTG 215 Sections A B Fall 2010 15 Abbott Company purchases a computer for 10 000 The computer has an estimated useful life of 5 years and no residual value The computer is depreciated by the straight line method and is sold at the end of four years for 3 000 cash Abbott should record A B C D a gain of 1 000 a loss of 1 …