A215Winter 2013Exam IIKEYPage 1 of 10Name: __________________________ Student Number: _____________TA: (circle one) Brady Section Time: ______________KimSaraCode 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: _____________________A215Winter 2013Exam 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 whenyou 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 pointso Chapter 7: 8 questions worth 40% of pointso Chapter 8: 7 questions worth 24% of pointsPage 2 of 101. (2 pts) Washington Company has the following inventory on hand at the end of fiscal 2012:Raw materials: $22,000Work in process: $56,000Finished goods: $34,000What 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 = 720,000Page 3 of 104. During the month of March, Madison Company has the following transactions:Date Transactions Units Cost per Unit Sale price per Unit TotalMarch 1 Beginning inventory 10 $200 $2,000March 3 Purchase 25 $205 $5,125March 5 Purchase 20 $210 $4,200March 10 Sale 30 $300 $9,000March 17 Sale 15 $305 $4,575March 25 Purchase 10 $230 $2,300March 28 Purchase 20 $215 $4,300March 30 Sale 25 $310 $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 = $1,150Page 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 75Inventory 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 $700,000Sales discounts $200Sales returns $1,200Purchases $580,000Purchase returns $1,400Freight-in $150Freight-out $100Beginning inventory $22,000Ending inventory $34,000Provide 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) 34,000Cost of goods sold 566,750Purchase returns 1,400Inventory (beginning) 22,000Purchases 580,000Freight-in 150We 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 106. (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)OverstatedUnderstatedCorrectly statedANSWER (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 Appraised value of itemsCar $15,000Truck $25,000Van $30,000Motorcycle $10,000Camper $20,000(2 pts) What amount of the purchase price should Van Buren allocate to the motorcycle? ANSWER (CH 7)$9,000 (10,000