Bus 5021 Practice Problems and Study Guide Spring 2024

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University of Alberta *

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101

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Business

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May 16, 2024

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Bus 5021 Practice Problems and Study Guide Final Exam Spring 2024 Topics: Financial Accounting 1. Accrual VS Cash Basis of accounting; accrued revenues and accrued expenses 2. Recording process 3. Adjusting process 4. Closing process 5. Preparation of financials statements 6. Precreation of worksheet, all pre and post adjustments in the financials 7. Components and dates of financial statements 8. Why do we close accounts and which accounts will be closed 9. How to prepare an owner’s equity 10. SEC and FASB roles 11.Business entities; similarities and differences 12. GAAP role and financial statements audit by a CPA 13.Prepaid expenses & unearned revenues 14.Book of a share (stock) 15.Depreciation expense and accumulated depreciation, where do they belong? Depreciation and amortization; all methods in depreciation Managerial 1. Traditional overhead costing 2. ABC system and how it is different from traditional way of accounting for overhead 3. Be able to do problem in ABC 4. Break-even analysis in 4 ways; mathematical, CM both calculations in $$ and units and graphical 5. High-low method. What this this shows us

6. Contribution margin 7. CVP income statement and this is different from the regular income statement. 8. Variable, fixed and mixed costs 9. Recording of raw material, work in process, finished goods and COGS 10. Tangible and intangible assets 11. Job order and process costing 12.Why do we do high-low method, what do we gain from this? 13.Know the formula how the high-low method works. This one will be given in the final exam time! You must be able to calculate this Sample MC Questions 1. The net income (or loss) for the period a. is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet. b. cannot be found on the worksheet. c. is found by computing the difference between the income statement columns of the worksheet. d. is found by computing the difference between the trial balance totals and the adjusted trial balance totals 4. The worksheet does not show a. net income or loss for the period. b. revenue and expense account balances. c. the ending balance in the retained earnings account. d. the trial balance before adjustments 5. Closing entries are necessary for a. permanent accounts only. b. temporary accounts only. c. both permanent and temporary accounts. d. permanent or real accounts only. 6. If Income Summary has a credit balance after revenues and expenses have been closed to it, the closing entry for Income Summary will include a a. debit to the retained earnings account. b. debit to the dividends account. c. credit to the retained earnings account. d. credit to the dividends account.

7. The most efficient way to accomplish closing entries is to a. credit the income summary account for each revenue account balance. b. debit the income summary account for each expense account balance. c. credit the dividends balance directly to the income summary account. d. credit the income summary account for total revenues and debit the income summary account for total expenses 8. The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information: Revenues $7,000 Expenses: Salaries and Wages Expense $3,000 Rent Expense 1,500 Advertising Expense 800 Supplies Expense 300 Insurance Expense 100 Total expenses 5,700 Net income $1,300 The entry to close the revenue account includes a a. debit to Income Summary for $1,300. b. credit to Income Summary for $1,300. c. debit to Income Summary for $7,000. d. credit to Income Summary for $7,000. 9. The income statement for the year 2021 of Fugazi Co. contains the following information: Revenues $70,000 Expenses: Salaries and Wages Expense $45,000 Rent Expense 12,000 Advertising Expense 10,000 Supplies Expense 6,000

Utilities Expense 2,500 Insurance Expense 2,000 Total expenses 77,500 Net income (loss) $ (7,500) The entry to close total expenses includes a a. debit to Income Summary for $7,500. b. credit to Income Summary for $7,500. c. debit to Income Summary for $77,500. d. debit to Utilities Expense for $2,500. 10. The income statement for the year 2021 of Fugazi Co. contains the following information: Revenues $70,000 Expenses: Salaries and Wages Expense $45,000 Rent Expense 12,000 Advertising Expense 10,000 Supplies Expense 6,000 Utilities Expense 2,500 Insurance Expense 2,000 Total expenses 77,500 Net income (loss) $ (7,500) At January 1, 2021, Fugazi reported retained earnings of $50,000. Dividends for the year totalled $10,000. At December 31, 2021, the company will report retained earnings of a. $17,500. b. $32,500. c. $40,000. d. $42,500 62.Live Wire Hot Rod Shop follows the revenue recognition principle. Live Wire services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Live Wire on August 5. Live Wire receives the check in the mail on August 6. When should Live Wire show that the revenue was recognized?

a. July 31 b. August 1 c. August 5 d. August 6 63. A company spends $15 million dollars for an office building. Over what period should the cost be charged to expense? a. When the $15 million is expended in cash b. All in the first year c. Over the useful life of the building d. After $15 million in revenue is recognized 64. The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that a. assets should be matched with liabilities. b. efforts should be matched with accomplishments. c. owner withdrawals should be matched with owner contributions. d. cash payments should be matched with cash receipts. 65. A flower shop makes a large sale for $1,200 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,200 considered to be recognized? a. December 5 b. December 10 c. November 30 d. December 1 66. A candy factory's employees work overtime to finish an order that is sold on February 28. The office sends a statement to the customer in early March and payment is received by mid-March. The overtime wages should be expensed in a. February. b. March. c. the period when the workers receive their checks. d. either in February or March depending on when the pay period ends. 68. Under accrual-basis accounting, a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

70. Which one of the following is not an application of revenue recognition? a. Recording revenue as an adjusting entry on the last day of the accounting period b. Accepting cash from an established customer for services to be performed over the next three months c. Billing customers on June 30 for services completed during June d. Receiving cash when services are performed 72. The following is selected information from Motley Corporation for the fiscal year ending October 31, 2022. Cash received from customers $300,000 Revenue recognized 375,000 Cash paid for expenses 180,000 Cash paid for computers on November 1, 2021 that will be used for 3 years (annual depreciation is $16,000) 48,000 Expenses incurred, including interest, but excluding any depreciation 220,000 Proceeds from a bank loan, part of which was used to pay for the computers 100,000 Based on the accrual basis of accounting, what is Motley Corporation’s net income for the year ending October 31, 2022? a. $72,000 b. $104,000 c. $139,000 d. $155,000 73. Crue Company had the following transactions during 2022:  Sales of $4,800 on account to be collected in 2023  Collected $2,000 for services to be performed in 2023  Paid $1,625 cash in salaries  Purchased airline tickets for $250 in December for a trip to take place in 2023 What is Crue’s 2022 net income using accrual accounting-basis? a. $2,925 b. $3,175 c. $4,925 d. $5,175 74. Crue Company had the following transactions during 2022:  Sales of $4,500 on account to be collected in 2023

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