Page 1 of 10 Name Student Number TA circle one Section Time Brady Kim Sara 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 exam Specific to this exam 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 exam Signature Date A215 Winter 2013 Exam II KEY You have one hour and twenty minutes to complete this exam For problems that require calculations show your work We can only provide partial credit when you show your work Provide your answers in the space provided not on a separate answer sheet I have also included one blank page in case you need extra space to work some of the problems Please check to see that you have 10 pages they are numbered Exam breakdown o Chapter 6 6 questions worth 36 of points o Chapter 7 8 questions worth 40 of points o Chapter 8 7 questions worth 24 of points Page 2 of 10 1 2 pts Washington Company has the following inventory on hand at the end of fiscal 2012 Raw materials 22 000 Work in process 56 000 Finished goods 34 000 What amount will Washington report as inventory on its fiscal 2012 balance sheet ANSWER CH 6 112 000 22 000 56 000 34 000 112 000 2 4 pts Adams Company started January with 88 000 in inventory and no accounts payable On January 10 Adams purchased 568 000 of new inventory on credit with terms 5 10 n 30 On January 15 Adams returned 12 000 of inventory because it was defective On January 18 Adams paid its entire accounts payable balance For the month of January Adams reported cost of goods sold of 582 000 What is the dollar amount of ending inventory at the end of January ANSWER CH 6 34 200 88 000 568 000 12 000 556 000 x 05 582 000 34 200 3 3 pts For fiscal 2012 Jefferson Company reported a gross profit margin of 40 and net sales of 1 200 000 What was the dollar amount of cost of goods sold ANSWER CH 6 720 000 If the gross profit margin is 40 of sales then COGS is 60 of sales 1 200 000 x 60 720 000 Page 3 of 10 4 During the month of March Madison Company has the following transactions Date March 1 March 3 March 5 March 10 March 17 March 25 March 28 March 30 Transactions Beginning inventory Purchase Purchase Sale Sale Purchase Purchase Sale Units 10 25 20 30 15 10 20 25 Cost per Unit 200 205 210 Sale price per Unit 300 305 230 215 310 Total 2 000 5 125 4 200 9 000 4 575 2 300 4 300 7 750 5 pts Calculate ending inventory at March 31 assuming Madison uses a perpetual FIFO inventory system Ending inventory ANSWER CH 6 3 225 15 x 215 5 pts Calculate ending inventory at March 31 assuming Madison uses a perpetual LIFO inventory system Ending inventory ANSWER CH 6 3 150 10 x 200 2 000 5 x 230 1 150 Page 4 of 10 3 pts Assume that Madison uses FIFO for internal record keeping purposes and LIFO for external financial reporting purposes Provide the LIFO adjustment journal entry that Madison will record if Madison prepares financial statements at the end of March ANSWER CH 6 75 3 225 3 150 Cost of goods sold Inventory 75 75 5 5 pts Monroe Company is a merchandising company and uses the periodic method to account for inventory Monroe reports the following account balances for fiscal 2012 before recording any adjusting or closing journal entries you will not use all of the information below in your journal entry or entries Sales Sales discounts Sales returns Purchases Purchase returns Freight in Freight out Beginning inventory Ending inventory 700 000 200 1 200 580 000 1 400 150 100 22 000 34 000 Provide the period ending journal entry or entries required to update inventory to its proper ending balance and record cost of goods sold for the period ANSWER CH 6 Inventory ending Cost of goods sold Purchase returns Inventory beginning Purchases Freight in 34 000 566 750 1 400 22 000 580 000 150 We also accepted a combination of journal entries that close out the temporary accounts update inventory and report the appropriate cost of goods sold Page 5 of 10 6 2 pts Jackson Company uses the periodic method to account for inventory At the end of 2011 Jackson understates ending inventory by 10 000 Jackson correctly states ending inventory at the end of 2012 As a result of the error will Jackson s 2012 retained earnings be overstated understated or correctly stated circle one Overstated Understated Correctly stated ANSWER CH 6 Correctly stated 7 2 pts At the beginning of 2012 Fillmore Company purchases an acre of land for a new factory for 100 000 cash On the day of the purchase Fillmore installs pipes for water and poles for electricity both of which are considered land improvements Installing the pipes cost 2 000 cash and installing the poles cost 1 500 cash Fillmore expects both land improvements to last 20 years after which they will be worthless When Fillmore records the purchase of the land what amount will it debit to the land account ANSWER CH 7 100 000 Land improvements are kept in a separate account because they do depreciate Land does not depreciate 8 Van Buren Company paid 90 000 total 84 000 5 000 tax 1 000 shipping for the following basket of goods Item Car Truck Van Motorcycle Camper Appraised value of items 15 000 25 000 30 000 10 000 20 000 2 pts What amount of the purchase price should Van Buren allocate to the motorcycle ANSWER CH 7 9 000 10 000 100 000 10 x 90 000 9 000 2 pts What amount of the purchase price should Van Buren allocate to the van ANSWER CH 7 Page 6 of 10 27 000 30 000 100 000 30 x 90 000 27 000 9 2 pts Lincoln Company purchases Johnson Company for 210 million cash The book value of Johnson s assets is 215 million and the fair value of Johnson s assets is 220 million The book value of Johnson s liabilities is 14 million and the fair value of Johnson s liabilities is 15 million What amount will Lincoln Company report as goodwill when it records the purchase of Johnson Company ANSWER CH 7 5 million 210 220 15 5 10 Grant Company purchased a piece of equipment at the beginning of 2009 for 500 000 cash At the time of purchase Grant estimated the equipment had a service life of 10 years or 100 000 hours and a residual value of 20 000 Be careful to note the year in each …