ACCT 212 Final Exam (Retired 1) | Questions and Answer solutions | 100% Guaranteed Pass
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ACCT 212
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DeVry University, Chicago
Page 1: Question: (TCO 3) Closing temporary accounts is necessary at the end of the accounting period. (1) Explain the closing process, include each set of entries required (15 points) and (2) provide an example of closing the Dividend account in the form of a journal entry. (10 points). (Points : ...
question tco 3 closing temporary accounts is necessary at the end of the accounting period 1 explain the closing process
include each set of entries required 15 points and 2 provide an exam
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ACCT 212
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ACCT 212 Final Exam (Retired 1)
Question 1.1. (TCO 3) Closing temporary accounts is necessary at the end of the accounting
period. (1) Explain the closing process, include each set of entries required (15 points) and
(2) provide an example of closing the Dividend account in the form of a journal entry. (10
points). (Points : 25)
Closing entries are journal entries used to empty temporary accounts at the end of a reporting period
and transfer their balances into permanent accounts. The use of closing entries resets the temporary
accounts to begin accumulating new transactions in the next period. Otherwise, the balances in these
accounts would be incorrectly included in the totals for the following reporting period.
The basic sequence is as follows:
1. Debit all revenues account and credit the income summary account, thereby clearing out the
balances in revenue account.
2. Credit all expenses account, and debit the income summary account, thereby clearing out all the
balances in expense account.
3. Close the income summary account to the retained earnings account. If there was a profit in the
period, then this entry is a debit to that income summary account and a credit to the retained
earnings account. If there was a loss in the period, then this entry is a credit to the income
summary account and debit to the retained earnings account.
The net result of these activities is to move the net profit or loss for the period into the retained earning
account, which appears in the stockholder's equity section of the balance sheet.
Since the income summary account is only a transitional account, it is also acceptable to close directly to
the retained earnings account and bypass the income summary account entirely.
Journal entry for closing dividend:
Retained Earnings Account Debit
To Dividends Account Credit
2. (TCO 2) As required to complete Course Project 1, one must follow the cycle that includes
10 steps to complete the accounting cycle. (1) Explain how information from the journal
entries get into the ledger accounts (15 points) and (2) provide an example of information
that would be transferred. (10 points) (Points : 25)
The journal entries recorded during the first step provide information about which accounts are to be
debited and which to be credited and also the size of the debit or credit. The debit and credit values of
journal entries are transferred to ledger accounts one by one in such a way that debit amount of a
, ACCT 212 Final Exam (Retired 1)
journal entry is transferred to the debit side of the relevant ledger account and the credit amount is
transferred to the credit side of the relevant ledger account.
After posting all the journal entries, the balance of each account is calculated. The balance of an asset,
expense, contra-liability and contra-equity account is calculated by subtracting the sum of its credit side
from the sum of its debit side. The balance of a liability, equity and contra-asset account is calculated the
opposite way by subtracting the sum of its debit side from the sum of its credit side.
4. (TCO 4) Thomas Manufacturing had 4 units of their product in inventory at $250 per
unit to start the month. During the month, they purchased an additional 7 units at
$250 per unit and another 12 units at $275 per unit. Also, at the end of the month,
they sold 12 units and ended the month at 8 units. Calculate their ending inventory
and cost of goods sold using one of the following: LIFO, FIFO or Average Cost
methods. Show all computations.(Points : 24)
LIFO METHOD
When using this method the inventory purchased recently is sold first.
Sold goods = 12 units
Given units are sold from $275 lot purchased at last.
Cost of goods sold = $275 * 12 = $3,300
Ending inventory units = 8units
Of these, 4 units will be taken to be beginning inventory and balance 4 units will be tabulated as from
$250 lot first purchased.
Ending inventory = $250 * 8 = $2,000
5. (TCO 4) A retailer needs to determine the cost of the shoes the company purchased
in order to determine the inventory value to report on its balance sheet in a particular
period. (1) Discuss the steps involved in determining the cost of shoes inventory as
reported on the company’s balance sheet (15 points), and (2) use an example to
show the impact of purchase discounts and allowances received by the company on
the cost of shoes inventory (10 points). (Points : 25)
Steps involved in determining the Cost of Shoes inventory:
1. Cost of purchase: Cost of purchase of shoes is the major cost in shoe inventory valuation, this
purchase cost includes (a) Duties and taxes paid (b) Inward Freight paid (c) Other expenditure
directly attributable to the acquisition of inventory i.e. any commission paid to middle man to acquire
the inventory
2. Other costs: Cost incurred in bringing the shoe inventory to its present location and condition i.e.
unloading of shoes, local transport paid, and arranging the shoes in the showroom.
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