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ACC 202 Final Exam
Name
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) In a perpetual inventory system, the inventory account 1)
A) is not adjusted for cost of goods sold until the end of the accounting period.
B) is debited for purchases and credited for sales returns.
C) is debited for purchases and credited when the goods are sold, and the cost is transferred to cost of
goods sold.
D) is debited for purchases and credited for purchase returns and freight-in.
2) What is consigned inventory?
2)
A) Goods that have been segregated for shipment to a customer
B) Goods that are sold, but payment is not required until the goods are sold
C) Goods that are shipped, but title remains with the consignor
D) Goods that are shipped, but title transfers to the receiver
3) Winsor Co. records purchases at net amounts. On May 5 Winsor purchased merchandise on account,
$80,000, terms 2/10, n/30. Winsor returned $6,000 of the May 5 purchase and received credit on account. At
May 31, the balance had not yet been paid.
By how much should the account payable be adjusted on May 31? 3)
A) $0 B) $1,480
C) $1,600
D) $1,720
4) Nichols Company had 600 units of “Dink” in its inventory with a cost of $12 each. It purchased 900 more
units of “Dink” for $18 each. Nichols then sold 1,050 units at a selling price of $30 each. The LIFO liquidation
overstated normal gross profit by
4)
A) $1,800.
B) $900.
C) $2,700.
D) $0.
5) RF Company had a January 1 inventory of $300,000 when it adopted dollar-value LIFO. During the year,
purchases were $1,800,000 and sales were $3,000,000. December 31 inventory at year-end prices was
$430,080, and the price index was 112.
What is RF Company’s gross profit? 5)
A) $1,330,380
B) $1,294,080
C) $1,248,000
D) $2,605,920
6) Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2024. Its
inventory at that date was $1,100,000 and the relevant price index was 100. Information regarding inventory for
subsequent years is as follows:
Date
December 31, 2025
December 31, 2026
Inventory at
Current Prices
$1,284,000
1,450,000
Current
Price Index
107
125
December 31, 2027
1,625,000
130
What is the cost of the ending inventory at December 31, 2026 under dollar-value LIFO? 6)
A) $1,200,000
B) $1,160,000
C) $1,164,200
D) $1,157,000
7) Web World began using dollar-value LIFO for costing its inventory last year. The base year layer consists of
$600,000. Assuming the current inventory at year-end prices equals $828,000 and the index for the current year
is 1.10, what is the ending inventory using dollar-value LIFO?
7)
A) $910,800
B) $828,000
C) $768,000
D) $752,727
8) Charlie, Inc. has had some turnover in its parts inventory area. As a result, some inventory counting errors
have been made in taking the physical ending inventory in the last two fiscal years. Its financial statements for
the years 2026 and 2025 contained errors as follows:
Ending inventory
Fiscal 2026
$2,000 understated
Fiscal 2025
$16,000 overstated
Charlie has a 9/30 fiscal year-end. Assume that no correcting entries were made and that no additional errors
occurred in fiscal 2027. Ignoring income taxes, by how much will working capital be overstated or understated
at 9/30/25?
8)
A) $18,000 understated
C) $18,000 overstated
B) $16,000 overstated
D) $14,000 understated
9) Which of the following is not a consideration in choosing how to apply the lower-of-cost-or- net realizable
value method to inventory? 9)
A) Tax rules
B) The number of end products produced
C) The method used in previous periods
D) All of these are considerations in choosing how to apply the lower-of-cost-or-net realizable value method to
inventory.
10) How is the gross profit method used as it relates to inventory valuation?
A) To estimate cost of goods sold
B) To provide an inventory value of LIFO inventories
C) To verify the accuracy of the perpetual inventory records
D) To verify the accuracy of the physical inventory
10)
11) Which of the following is not a basic assumption of the gross profit method? 11)
A) The total amount of purchases and the total amount of sales remain relatively unchanged from the
comparable previous period.
B) If the sales, reduced to the cost basis, are deducted from the sum of the opening inventory plus purchases, the
result is the amount of inventory on hand.
C) Goods not sold must be on hand.
D) The beginning inventory plus the purchases equal total goods to be accounted for.
12) The retail inventory method is based on the assumption that the12)
A) ratio of cost to retail changes at a constant rate.
B) final inventory and the total of goods available for sale contain the same mix of goods with similar gross
profits.
C) ratio of gross margin to sales is approximately the same each period.
D) proportions of markups and markdowns to selling price are the same.
13) RS Corporation, a manufacturer of ethnic foods, contracted in 2025 to purchase 600 pounds of a spice
mixture at $3.00 per pound, delivery to be made in spring of 2026. By 12/31/25, the price per pound of the spice
mixture had risen to $3.25 per pound. In 2025, RS should recognize
13)
A) a loss of $150.
C) a loss of $1,800.
B) a gain of $150.
D) no gain or loss.
14) A markup of 15% on cost is equivalent to what markup on selling price?
A) 13%
B) 15%
C) 17%
D) 11%
14)
15) The following data concerning the conventional retail inventory method are taken from the financial records
of Welch Company.
Beginning inventory
Purchases
Freight-in
Net markups
Net markdowns
Sales
Cost
$ 196,000
896,000
24,000
–
–
–
Retail
$ 280,000
1,280,000
–
80,000
56,000
1,344,000
If a count of the ending inventory reveals that merchandise actually on hand amounts to $144,000 at retail, the
business has 15)
A) sustained a deferred gain.
B) sustained a loss.
C) no gain or loss as there is close coincidence of the inventories.
D) realized a windfall gain.
16) Which of the following costs are capitalized for self-constructed assets?
A) Materials and labor directly related to construction only
B) Labor and overhead directly related to construction only
C) Materials, labor, and overhead directly related to construction only
D) Materials and overhead directly related to construction only
16)
17) When boot is involved in an exchange having commercial substance, 17)
A) gains or losses are recognized in their entirety.
B) only gains should be recognized.
C) a gain or loss is computed by comparing the fair value of the asset received with the fair value of the asset
given up.
D) only losses should be recognized.
18) When an asset is sold in the middle of the fiscal year, 18)
A) the gain or loss cannot be determined.
B) the gain or loss will be deferred until the following year.
C) depreciation should be updated through the date of the sale.
D) the gain or loss is based on the asset’s book value at the end of the last fiscal year.
19) Bob’s Corner Store is adding gasoline pumps with underground tanks to store the fuel. The tanks have an
estimated life of 30 years. Bob’s estimates that the cost to remove the tanks is $1,115,000. Based on an 11%
discount rate, the fair value of the ARO is estimated to be $48,706.
What amount would be recorded as accretion expense and depreciation expense, respectively, for the ARO in
the first year? 19)
A) $4,871 and $4,871
C) $5,358 and $4,871
B) $1,624 and $4,871
D) $5,358 and $1,624
20) Lewis Company traded machinery with a book value of $950,000 and a fair value of $900,000. It received
from Timmons Company a machine with a fair value of $1,000,000. Lewis also paid cash of $100,000 in the
exchange. Timmons’s machine has a book value of $950,000. What amount of gain or loss should Lewis
recognize on the exchange (assuming a lack of commercial substance)? 20)
A) $5,000 loss
C) $50,000 loss
B) $ -0D) $100,000 gain
21) Neenah Foundries is improving the pipes in its cupola operations. The pipes will extend the useful life of its
old system of piping. The old pipe system cost $1,500,000 and has accumulated depreciation of $1,450,000. It
can be sold for scrap of $25,000. The cost of the new system is $1,200,000. What is the entry to record this
transaction? 21)
A)
Plant Asset (new system)
Accumulated Depreciation (old system)
Loss on Disposal of Plant Asset
Plant Asset (old system)
Cash
B)
Plant Asset
Cash
C)
Accumulated Depreciation
Cash
D)
Plant Asset (new system)
Loss on Disposal of Plant Asset
Cash
1,200,000
1,450,000
25,000
1,500,000
1,175,000
1,175,000
1,175,000
1,200,000
1,200,000
1,175,000
25,000
1,200,000
22) Zelany Company purchased equipment on June 1, 2022 for $1,500,000. At the time of acquisition, the
machine was estimated to have a useful life of five years and an estimated salvage value of $300,000. The
company has depreciated the asset using the straight-line method. In May 2025, the company decided to cease
production of one of its product lines and to dispose of the equipment. On June 1, 2025, the machine was sold
for $790,000. The journal entry to record the sale of the machine will include
22)
A) a credit to Equipment for $780,000.
B) a debit to Loss on Disposal for $110,000.
C) a credit to Accumulated Depreciation — Equipment for $600,000.
D) a credit to Gain on Disposal for $10,000.
23) Which of the following principles best describes the conceptual rationale for the methods of matching
depreciation expense with revenues? 23)
A) Partial recognition B) Immediate recognition
C) Systematic and rational allocation D) Associating cause and effect
24) NOLO Company determines that equipment it has for sale has suffered a permanent impairment in value
because of technological changes. After the impairment loss has been recorded, the equipment will be reported
at its 24)
A) cost.
B) net realizable value.
C) carrying value.
D) fair value.
25) Asset turnover is a measure of 25)
A) liquidity.
B) how efficiently a company uses its assets to generate sales.
C) how profitably a company uses its assets.
D) how quickly assets can be converted to cash.
26) Slotkin Products purchased a machine for $65,000 on July 1, 2025. The company intends to depreciate it
over 8 years using the double-declining balance method. The salvage value is $5,000. Depreciation for 2026 to
the closest dollar is 26)
A) $8,125.
B) $32,500.
C) $12,500.
D) $14,219.
27) A schedule of machinery owned by Micco Co. is presented below:
Machine X
Machine Y
Machine Z
Estimated
Salvage Value
$40,000
80,000
60,000
Total Cost
$600,000
800,000
300,000
Estimated
Life in Years
14
10
6
Micco computes depreciation by the composite method.
The composite rate of depreciation (in percent) for these assets is
A) 8.94.
B) 10.59.
C) 15.56.
27)
D) 8.57.
28) Hart Corporation owns machinery with a book value of $570,000. At fiscal year-end 2026, is estimated that
the machinery will generate future cash flows of $600,000. If the machinery has a fair value of $420,000 at that
time, Hart should recognize a loss on impairment of 28)
A) $150,000. B) $ 0. C) $30,000.
D) $180,000.
29) Jellies Incorporated had average total assets in 2025 of $6,340,000. It reported sales for of $8,212,000 that
year. Average liabilities for the year were $5,190,000. Net income for the year was $964,000. What is Jellies’
return on assets for 2025?
29)
A) 18.57%
B) 11.74%
C) 15.21%
D) 6.58%
30) Purchased goodwill should
30)
A) not be amortized.
B) be written off by systematic charges as a regular operating expense over the period benefited.
C) be written off as soon as possible against retained earnings.
D) be written off as soon as possible as an unusual item.
31) The costs of organizing a corporation include legal fees, fees paid to the state of incorporation, fees paid to
promoters, and the costs of meetings for organizing the promoters. These costs are said to benefit the
corporation for the entity’s entire life. These costs should be31)
A) expensed as incurred.
B) capitalized and amortized over 5 years.
C) capitalized and never amortized.
D) capitalized and amortized over 40 years.
32) The following information is available for Barkley Company’s patents:
Cost
Carrying amount
Expected future net cash flows
Fair value
$3,440,000
1,920,000
1,600,000
1,300,000
Barkley would record a loss on impairment of
32)
A) $ 620,000. B) $ 320,000. C) $1,920,000.
D) $1,840,000.
33) The general ledger of Duke Corporation as of December 31, 2025, includes the following accounts:
Copyrights
Deposits with advertising agency (will be used to promote goodwill)
Discount on bonds payable
Excess of cost over fair value of identifiable net assets of
acquired subsidiary
Trademarks
Duke’s balance sheet at December 31, 2025 will report total intangible assets of
$ 80,000
30,000
50,000
520,000
60,000
33)
A) $660,000. B) $610,000. C) $690,000. D) $640,000.
34) General Products Company bought Special Products Division in 2025 and recorded $750,000 of goodwill
related to the purchase. On December 31, 2026, the fair value of the Special Products Division is $6,000,000
and it is carried on General Product’s books for a total of $5,100,000, including the goodwill. What goodwill
impairment should be recognized by General Products in 2026?
34)
A) $0 B) $750,000
C) $150,000
D) $900,000
35) Twilight Corporation acquired EOW Products on January 1, 2025 for $6,400,000, and recorded goodwill of
$1,200,000 as a result of that purchase. At December 31, 2026, the EOW Products Division had a fair value of
$5,440,000. The net identifiable assets of the Division (including goodwill) had a carrying value of $5,740,000
at that time. What amount of loss on impairment of goodwill should Twilight report in 2026?
35)
A) $ -0-
B) $960,000
C) $660,000
D) $300,000
36) IFRS allows reversal of impairment losses when36)
A) the reversal is greater than the amount of the original impairment.
B) there has been a change in economic conditions or the expected use of the asset.
C) the reversal falls in a subsequent fiscal year of the company’s operations.
D) reversal of impairment losses is never allowed.
37) Which of the following is not a correct statement about federal income taxes? 37)
A) Corporations pay federal income taxes but partnerships do not.
B) Because of differences between tax rules and GAAP, the amount reported by a corporation as expense may
differ from the amount of taxes paid.
C) Federal income taxes are an expense of the seller.
D) All of these are correct statements about federal income taxes.
38) Unearned revenue in which of the following situations? 38)
A) Target sells gift cards.
B) Target makes a sale to a customer who uses their Target credit card.
C) Home Depot purchases grills on account from Weber.
D) Home Depot sells a Weber grill that comes with a manufacturer’s 10-year warranty.
39) Darren Company becomes aware of a lawsuit after the date of the financial statements, but before they are
issued. A loss and related liability should be reported in the financial statements if the amount can be reasonably
estimated, an unfavorable outcome is highly probable, and 39)
A) the damages appear to be material.
B) the cause for action occurred during the accounting period covered by the financial statements.
C) the court will decide the case within one year.
D) the Darren Company admits guilt.
40) All of the following accounts are included in both the current ratio and the acid-test ratio except
A) short-term investments.
C) inventory.
40)
B) net receivables.
D) cash.
41) The Sociologist is an academic publication available only by annual subscription. At December 31, 2025,
the Unearned Revenue account had a balance of $22,000. During 2026, 1,000 annual subscriptions were sold at
$224 each. Revenue earned during 2026 was $200,000. How much unearned revenue will be reported as of
December 31? 41)
A) $24,000
B) $25,000
C) $46,000
D) $0
42) Big Bear BBQ Company sold 200 smokers during 2025 for $1,700 each together with a 1-year warranty.
Warranty claims are estimated to be $150 per smoker. Actual warranty claims on the smokers in 2025 were
$12,550. Actual warranty claims on the smokers in 2026 are $18,500. The entry to record claims on 2026
warranty expenditures includes
42)
A) a debit to Warranty Expense for $18,500.
B) a debit to Warranty Expense for $17,450.
C) a debit to Warranty Liability for $17,450.
D) a credit to Warranty Liability for $1,050.
43) In 2025, Pollard Corporation began selling a new line of products that carry a two-year warranty against
defects. Based upon experience with other products, the estimated warranty costs as a percentage of sales
revenue are as follows:
First year of warranty
Second year of warranty
3%
5%
Sales revenue and actual warranty expenditures for 2025 and 2026 are presented below:
Sales revenue
Actual warranty expenditures
2025
$750,000
45,000
2026
$1,050,000
75,000
What is the estimated warranty liability at the end of 2026? (assume the accrual method) 43)
A) $24,000
B) $144,000
C) $30,000
D) $96,000
44) Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from the date of
issue. If the bonds were issued at a premium, this indicates that
44)
A) the nominal rate of interest exceeded the market rate.
B) the market and nominal rates coincided.
C) the effective yield or market rate of interest exceeded the stated (nominal) rate.
D) no necessary relationship exists between the two rates.
45) The replacement of an existing bond issuance with a new one is called 45)
A) troubled-debt restructuring.
B)
refunding.
C) reissue.
D)
like-kind exchange.
46) The total interest recorded on a zero-interest-bearing note is equal to 46)
A) the cash proceeds multiplied by the imputed interest rate.
B) there is no interest recorded for a non-interest-bearing note.
C) the difference between the maturity value of the note and the cash proceeds received.
D) the maturity value of the note multiplied by the effective interest rate.
47) On January 1, 2024, Ellison Co. issued eight-year bonds with a face value of $6,000,000 and a stated
interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table
values are:
Present value of 1 for 8 periods at 6% ……………………………………………….. .62741
Present value of 1 for 8 periods at 8% ……………………………………………….. .54027
Present value of 1 for 16 periods at 3% ……………………………………………… .62317
Present value of 1 for 16 periods at 4% ……………………………………………… .53391
Present value of annuity for 8 periods at 6% ………………………………………. 6.20979
Present value of annuity for 8 periods at 8% ………………………………………. 5.74664
Present value of annuity for 16 periods at 3% ……………………………………..12.56110
Present value of annuity for 16 periods at 4% ……………………………………..11.65230
The present value of the interest is
A) $2,260,998.
B) $2,235,524.
47)
C) $2,097,414.
D) $2,068,790.
48) At December 31, 2024, the following balances existed on the books of Tweedy Corporation:
Bonds Payable
Discount on Bonds Payable
Interest Payable
$6,000,000
840,000
150,000
If the bonds are retired on January 1, 2025, at 102, what will Tweedy report as a loss on redemption?
A) $600,000 B) $960,000
C) $810,000
48)
D) $1,110,000
49) On January 1, 2024, Ruettgers Company issued for cash a $500,000, 5 year note bearing annual interest at
10% to Smith, Inc. The market rate of interest for a note of similar risk is 12%. What interest expense would
be recorded on December 31, 2024? 49)
A) $0 B) $46,395
C) $55,675
D) $50,000
50) On December 31, 2024, Crosby Co. is in financial difficulty and cannot pay their $10,000,000 loan
obligation to Mayville, Inc. Mayville has agreed to accept 200,000 shares of Crosby stock ($1 par) that is
currently trading at $40 per share in full settlement of the debt. When recording the transaction, Mayville’s
entry will include
50)
A) a credit to Allowance for Doubtful Accounts of $2,000,000.
B) a credit to Note Receivable of $8,000,000.
C) a debit to Allowance for Doubtful Accounts of $2,000,000.
D) a debit to Loss on Restructuring of Debt of $2,000,000.
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