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Introduction to Financial Accounting
UGBA 102A
Final Practice Exam
Name:
Berkeley email:
General Instructions:
Please follow the UC Berkeley Code of Conduct requirements and sign the Honor Code.
The penalty for cheating is an automatic grade of F for the course and appearance before
the Committee on Student Conduct.
1. You have 2 hours to complete the exam.
2. This exam is closed book. You are permitted to use a calculator.
3. Please check that you have all the pages. Do not begin until instructed to do so.
4. If a question is ambiguous, write your assumptions on the exam along with your answer.
5. Write your answers neatly in the space provided.
6. You must turn in your exam packet before you leave, even if you don’t want to have it
graded.
7. Exams written in pencil will not be considered for a re-grade. Use a pen if you think you
might submit your exam for a re-grade request.
8. Review the complete exam in order to allocate your time appropriately. TIP: Don’t get
stuck on one question!
9. Good luck!
Honor Code:
As a member of the UC Berkeley community, I act with honesty, integrity, and respect for
others. I am the person whose name is on the exam and I completed this exam in
accordance with the honor code.
Signature:
Part I. Multiple Choice
1. Which of the following best describes liabilities and stockholders' equity?
A) They are the sources of financing an entity's assets.
B) They are the economic resources owned by a business entity
C) They are reported on the income statement.
D) They both increase when assets increase.
2. Which of the following accounts normally have a debit balance?
A) Prepaid expenses, Wages payable, Dividends.
B) Cash, Utilities expense, Accounts receivable.
C) Retained earnings, Cost of goods sold, Wages expense.
D) Utilities expense, Prepaid expenses, Wages payable.
3. Which of the following describes the impact on the balance sheet when cash is received from
the collection of an account receivable?
A) Current assets will not change.
B) Current assets will increase.
C) Stockholders' equity will increase.
D) Total assets will increase.
4. Which of the following journal entries is created as the result of an accrual?
A)
Deferred revenue xxx
Revenue xxx
B)
Interest expense xxx
Interest payable xxx
C)
Cash xxx
Deferred revenue xxx
D)
Revenue receivable xxx
Unearned revenue xxx
5. Maxim Corp. has provided the following information about one of its products:
Date Transaction
Number of
Units Cost per Unit
1/1
Beginning
Inventory 200 $ 140
6/5 Purchase 400 $ 160
11/10 Purchase 100 $ 200
During the year, Maxim sold 400 units.
What is ending inventory using the average cost method?
A) $48,000.
B) $64,000.
C) $50,000.
D) $62,000.
6. On July 1, 2019, Allen Company signed a $100,000, one-year, 6 percent note payable. The
principal and interest will be paid on June 30, 2020. How much interest expense should be
reported on the income statement for the year ended December 31, 2019?
A) $6,000.
B) $3,000.
C) $1,500.
D) $0.
7. The Tanner Company has provided the following information after year-end adjustments:
• Allowance for doubtful accounts increased $19,000.
• Accounts receivable increased $390,000 during the year.
• Accounts written off as uncollectible totaled $20,000.
• Sales totaled $2,500,000.
• Sales discounts were $100,000.
What was the amount of Tanner's net sales?
A) $1,990,000.
B) $2,380,000.
C) $2,400,000.
D) $2,420,000.
8. Which of the following statements is incorrect?
A) Ending inventory exceeds beginning inventory when purchases are greater than cost of
goods sold.
B) Cost of goods sold exceeds purchases when ending inventory is less than beginning
inventory.
C) Cost of goods available for sale will always be equal to or greater than cost of goods sold.
D) Ending inventory is greater than beginning inventory when purchases are less than cost of
goods sold.
9. The CHS Company has provided the following information:
• Accounts receivable written-off as uncollectible during the year amounted to $11,500.
• The accounts receivable balance at the beginning of the year was $150,000.
• The accounts receivable balance at the end of the year was $210,000.
• The allowance for doubtful accounts balance at the beginning of the year was $14,000.
• The allowance for doubtful accounts balance at the end of the year after the recording of bad
debt expense was $12,900.
• Credit sales during the year totaled $900,000.
How much cash was received from collections of accounts receivable?
A) $888,500.
B) $828,500.
C) $690,000.
D) $701,500.
10. You have been asked to compute the cash equivalent price of a machine assuming the cost
(including principal and interest) is to be paid in two unequal payments after the acquisition
date. Which of the following table values would be used to find the cost of the machine?
A) Present value of a single amount.
B) Future value of an annuity.
C) Future value of a single amount.
D) Present value of an annuity.
11. Which of the following statements is incorrect?
A) Ordinary repairs and maintenance decrease net income.
B) Capital expenditures decrease assets.
C) Ordinary repairs and maintenance are recurring in nature.
D) Additions and improvements to a depreciable asset occur infrequently.
12. Which of the following best describes the objectives of depreciation?
A) To estimate the current market value of the asset.
B) To report the asset on the balance sheet at the estimated amount for which the asset could
be sold on the balance sheet date.
C) To estimate the remaining useful life of the asset.
D) To allocate the cost of a tangible asset to the periods in which it is use contributes to
earning revenue.
13. Which of the following is correct?
A) Deferred revenues are considered increases to stockholders' equity.
B) Working capital is measured as current liabilities minus current assets.
C) Working capital increases when a company pays the principal on a long-term note.
D) Deferred revenues will eventually become revenue earned.
14. Warren Company plans to depreciate a new building using the double-declining-balance
depreciation method. The building cost $800,000. The estimated residual value of the
building is $50,000 and it has an expected useful life of 25 years.
What is the buildings book value at the end of the first year?
A) $690,000.
B) $736,000.
C) $686,000.
D) $768,000.
15. Amanda Company purchased a computer that cost $10,000. It had an estimated useful life of
five years and a residual value of $1,000. The computer was depreciated by the straight-line
method and was sold at the end of the third year of use for $5,000 cash. Which of the
following statements correctly describes the computer sale?
A) Assets and stockholders’ equity both increase $5,000.
B) Assets decrease $5,000 and stockholders’ equity is not affected.
C) Assets and stockholders’ equity both increase by $400.
D) Assets and stockholders’ equity both decrease y $400.
16. Which of the following accounts would not be considered a tangible asset?
A) Buildings
B) Land
C) Equipment
D) Copyright
17. The journal entry to record the issuance of bonds at their par value results in which of the
following?
A) An increase in assets and liabilities equal to the bonds’ future cash flows.
B) An increase in assets equal to the par value of the bonds and an increase in liabilities
equal to the bonds’ future cash flows.
C) An increase in assets and liabilities equal to the par value of the bonds and their
associated interest payments.
D) An increase in assets and liabilities equal to the par value of the bond.
18. Zero coupon bonds are bonds that are issued:
A) At a rate that provides a large discount at issuance.
B) With a zero effective interest rate.
C) At a rate that has zero difference between the coupon rate and the market rate of interest.
D) As bonds that will have zero amortization recorded over the life of the bond.
19. When a bond payable is issued at a discount, which of the following would not occur as the
bond is amortized each year?
A) The book value of the bonds would increase.
B) Interest expense would increase.
C) The amount of amortization would be reported as an increase in cash flow from operating
activities.
D) The amortization for each year the bond approaches maturity would increase.
20. Watson Company has provided the following data about its common stock:
• Par value is $1 per share.
• 10,000,000 authorized shares
• 4,300,000 shares are outstanding
• 4,700,000 are issued
How many shares of treasury stock are there?
A) 0.
B) 400,000.
C) 5,300,000.
D) 5,700,000.
21. Which of the following statements is correct?
A) Cost of goods available for sale is allocated between costs of goods sold and inventory at
year-end.
B) A purchase of inventory on credit increases both cost of goods available for sale and cost
of goods sold.
C) Purchases of inventory during a period less that period's cost of goods sold equals ending
inventory regardless of the beginning inventory amount.
D) Cost of goods available for sale equals ending inventory plus purchases.
22. A company reported the following asset and liability balances at the end of 2018 and 2019:
2018 2019
Total Assets $6,800,000 $7,600,000
Total Liabilities 3,200,000 3,600,000
During 2019, cash dividends of $50,000 were declared and paid, and common stock was issued
for $100,000. What was the amount of net income for 2019?
A) $400,000.
B) $480,000.
C) $350,000.
D) $300,000.
