May 8, 2020
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May 8, 2020

ACCT 2050 Final Exam Answer Sheet – Spring 2020 (100 Points)
Name:_________________ 7-Digit UMN ID: _________________

Part 1: True or False Questions (10 points). Answers should be filled in the table below.
Question No. 1 2 3 4 5
Question No. 6 7 8 9 10

Part 2: Multiple Choice Questions (30 points). Answers should be filled in the table below.
Question No. 11 12 13 14 15
Question No. 16 17 18 19 20
Question No. 21 22 23 24 25

Part 3: Comprehensive Questions (60 points).
26. Inventory Valuation Methods
Hamilton Company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2019, the accounting records provided the following information for a product:
Units Unit Cost
Inventory, December 31, 2018 1,940 \$ 8
For the year of 2019:
Purchase, March 21 6,030 7
Purchase, August 1 4,040 5
Inventory, December 31, 2019 2,920
________________________________________

(1) Compute ending inventory and cost of goods sold for the year of 2019 under FIFO method. (5 points)

(2) Compute ending inventory and cost of goods sold for the year of 2019 under LIFO method. (5 points)

(3) Compute ending inventory and cost of goods sold for the year of 2019 under average cost method. (5 points)

27. Depreciation and Disposal of Long-term Assets
Shining Cookie Company, Inc., in Murfreesboro, TN bought a new ice cream maker at the beginning of the year 1 at a cost of \$10,000. The estimated useful life was four years, and the residual value was \$1,000.
(1) Suppose the firm uses straight-line depreciation method, what is the firm’s depreciation expense in year 3? What is the firm’s depreciation expense in year 4? (4 points)

(2) Suppose the firm uses double-declining-balance depreciation method, what is the firm’s depreciation expense in year 3? What is the firm’s depreciation expense in year 4? (5 points)

In 2019, Shining Cookie Company sold a delivery truck that had been used in the business for three years. The records of the company reflected the following:

Delivery truck cost \$ 58,000
Accumulated depreciation 43,000
________________________________________
(3) Prepare the journal entry for the disposal of the truck, assuming that the truck was sold for \$16,100 cash. (4 points)

(4) Assume that the truck was sold for \$15,000 cash (as opposed to \$16,100), is there any impact of the disposal on the income statement? Why? (2 points)

28. Bonds Payable
On January 1 of 2019, Victor Corporation sold bonds with a face value of \$1,450,000 and a coupon rate of 9 percent. The bonds mature in three years and pay interest semiannually every June 30 and December 31. Victor uses the straight-line amortization method and also uses a premium account. Assume an annual market rate of interest of 8 percent. Round your final answers to the nearest whole dollars.
(To answer this question, you may need the PV of \$1 table and the PV of annuity of \$1 table. You can find these tables on the last page of this exam.)
(1) Prepare the journal entry to record the issuance of the bonds. (6 points)

(2) Prepare the journal entry to record the interest payment on December 31, 2019. (6 points)

(3) What is the book value of bonds payable that will appear on the firm’s balance sheet on December 31, 2019? (3 points)

(4) If instead, the firm pays interest annually every December 31 (as opposed to paying interest semiannually every June 30 and December), and all the other bond characteristics (i.e. face value, coupon rate, bond term) as well as the annual market rate of interest remain unchanged. Do you think this will affect the calculation of the bond issue price compared to what you got in question (1)? How? (3 points)

29. Cash Flows from Operations and Free Cash Flow
Darwin Company, a manufacturer, has provided the following information pertaining to its assets and liabilities:
12/31/2018 12/31/2019
Account receivable \$10,000 \$4,000
Inventory \$11,000 \$12,000
Prepaid insurance \$4,000 \$7,000
Wage payable \$3,000 \$4,000
Unearned revenue \$4,000 \$2,000

In addition, Darwin also reported that its net income in 2019 was \$10,000 and the depreciation expense in 2019 was \$5,000.
(1) How much was Darwin’s cash flow from operating activities in 2019? (8 points)

Suppose Darwin Company has also provided the following information pertaining to its cash flows from investing and financing activities in 2019:

Cash flows from investing activities
Purchase of property, plant and equipment (5,000)
Cash flows from financing activities
Proceeds from issuance of stock 3,000
Payment of cash dividends (2,000)

(2) How much was Darwin’s free cash flow in 2019? (4 points)

Present Value of \$1

Periods 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091
2 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264
3 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513
4 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830
5 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209
6 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645
7 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132
8 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665
9 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241
10 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855

Present Value of Annuity of \$1

Periods 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091
2 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7591 1.7355
3 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 2.4869
4 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699
5 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 3.8897 3.7908
6 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553
7 6.4720 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 5.0330 4.8684
8 7.3255 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.5348 5.3349
9 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952 5.7590
10 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446