ACCT101 2010-2011 TERM11

SAMPLE FINAL EXAM(This sample final exam paper is to provide students additional practice

only. You can NOT use this sample final exam to predict your performance in the real final exam)

INSTRUCTIONS TO CANDIDATES

1 The time allowed for this examination paper is 3 hours.

2. You are required to answer ALL questions.

3 You are required to provide the answers for Part A and the answers and the workings for Part B in the Answer Script. Please write your answers to Part A on the FIRST page of your answer script. No penalty for incorrect answers in Part A.

PARTA Multiple-choice questionsQuestion 2 BondsQuestion 3 equityQuestion 4 Account receivablesQuestion 5 inventoryQuestion 6 Adjusting journal entriesQuestion 7 RatiosQuestion 8 Statement of cash flows

12010 checked correct. can use directly.

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PART A

Provide the answers (in CAPITAL letter) on the first page of the Answer Script.

1. 1. Failure to record accumulated depreciation at year-end will:A. overstate assetsB. overstate total liabilitiesC. understate assetsD. understate owners' equity

Answer is A.

Thus, fail to record accumulated depreciation will a. overstate assets; b. understate depreciation expense.

2. When a portion of prepaid rent expires, what will be the effect on the balance sheet equation?A. This transaction affects only the income statement, so there will be no effect

on the balance sheet.B. There will be no overall effect on total assets, because two different asset

accounts will change by the exact dollar amount, with one increasing and the other decreasing.

C. Total assets and total liabilities will go down by the exact same dollar amount.

D. Total assets and net income will go down by the exact same dollar amount.

Answer is D

3. On January 1, 2002, Dimaggio Shipping Company acquires equipment at a cost of $65,000 with an estimated useful life of 10 years and an estimated salvage value of $5,000. The company uses the double-declining balance method of depreciation. What will be the net book value of the asset on December 31, 2003?

A. $35,600.B. $38,900.C. $40,460.D. $41,600.E. $40,000.

Answer is D

4. In the statement of cash flows, use of cash for financing activities includes:

A. payment of an account payable.B. payment of interest.C. cash used to buy equipment.D. cash used to purchase treasury stock.E. cash used to buy inventory.

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Answer is D

5. Outstanding shares of stock are:A. authorized shares that have not yet been issued.B. issued shares.C. also called treasury shares.D. issued shares that are still in circulation.

Answer is D

6. A common adjustment in the bank reconciliation process is:

A. Outstanding checks are added to the balance per bank statement.B. Outstanding checks are deducted from the balance per bank statement.C. Deposits in transit are deducted from the balance per bank statement.D. Deposits in transit are added to the balance per books.E. None of above.

Answer is B

7. Skyline Mine Company acquired a mineral deposit for $6,600,000 in 2003. Geologists estimate the deposit contains 1,500,000 tons of ore. During 2003 and 2004, Skyline Mine Company removed 350,000 tons and 400,000 tons of ore, respectively. Assume no residual. The carrying amount of the mineral deposit on December 31, 2004, will be:

A. $1,760,000.B. $3,300,000.C. $4,840,000.D. $5,060,000.E. $6,600,000.

Answer is B

8. Rosie Flores owns 1,400 shares of the Osage Company. On January 13, 2005, the Osage Company declared and issued a 4% stock dividend. The market price per share of the Osage Company's stock is $40, and the par value is $1.50 per share. What is the journal entry to be made by the Osage Company with respect to the stock dividend distribution to Rosie Flores?

A. Retained Earnings 84 Common Stock 84

B. Retained Earnings 2,240 Common Stock 75 Additional Paid-in Capital 1,925 Cash 240

C. Retained Earnings 2,240 Common Stock 2,240

D. Retained Earnings 2,240 Common Stock 84

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Additional Paid-in Capital 2,156

Answer is D.

9. To prepare the statement of cash flows using the indirect method:

A. an increase in inventory is added to net income.B. a purchase of a machine is subtracted from net income.C. cash paid for dividends is added to net income.D. a decrease in accounts payable is subtracted from net income.

E. depreciation expense is subtracted from net income.

Answer is D

10. Use the following selected information from PDG Company to determine the amount that will be reported on the balance sheet for retained earnings:

Total Revenues $1,100,000Total Expenses $750,000Dividends $200,000Beginning Cash $500,000Ending Cash $430,000Beginning Retained Earnings $3,000,000

A. $3,230,000.B. $3,350,000.C. $3,150,000.D. $3,000,000.E. None of the above.

Answer is c

11. Tango Company purchased a building and land for $350,000 on June 14, 2003. If the assets had been purchased separately, the company would have paid $210,000 for the building and $170,000 for the land. For what amount will the land be recorded?

A. $156,579.B. $169,405.C. $170,000.D. $187,321.E. $210,000.

Answer is A

12. Preferred stock dividends must be accounted for in the earnings-per-share calculation. Preferred dividends are:

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A. added to net income in the numerator of the EPS calculation.B. subtracted from common shares in the denominator of the EPS calculation.C. added to common shares in the denominator of the EPS calculation.D. subtracted from net income in the numerator of the EPS calculation.E. None of above.

Answer is D

13. On January 1, 2003, Sandy Koufax Manufacturing Company purchased factory equipment at a cost of $205,000 with an estimated useful life of 10 years and $5,000 expected salvage value. What is the effect of the transaction on the year ended December 31, 2003 statement of cash flows (direct method)?

A. Operating activity cash outflow of $205,000.B. Operating activity cash outflow of $20,500.C. Investing activity cash outflow of $205,000.D. Financing activity cash outflow of $205,000.E. Investing activity cash inflow of $205,000.

Answer is C

14. Gomez Company received $7,200 on April 1, 2002 for one year's rent in advance. The December 31, 2002 adjusting entry (assume no adjusting entry has been made before December 31, 2002) is

a. debit Rent Revenue and credit Unearned Rent, $1,800.b. debit Rent Revenue and credit Unearned Rent, $5,400.c. debit Unearned Rent and credit Rent Revenue, $1,800.d. debit Unearned Rent and credit Rent Revenue, $5,400.

Answer is D

Question 2

Chua Boon Limited, through its subsidiaries, is engaged in import, export and distribution of steel and iron products and commission agents, and investment holding, property investment and development and general merchants. To finance its expansion in China and Malaysia, Chua Boon Ltd issued a 12-year, $1,500,000, 10% bonds on January 1, 2005, which is dated as of January 1, 2005. The bond pays interest every June 30 and December 31, with the principal to be paid at the end of 12 years. The effective interest rate on the bond is 12%. The company uses effective-interest amortization.

Financial Tables

PV factor PVA factor

12 periods, 10% 0.3186 6.813712 periods, 12% 0.2567 6.194424 periods, 5% 0.3101 13.798624 periods, 6% 0.2470 12.5504

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Required:

1. Given this information and using the financial tables provided, calculate the items A, B1 to B4, C1 to C4 and fill in the table (round to the nearest integer value and draw the same table in your Answer Script).

Date Interest payment

Interest expense

Discount (or Premium) amortization

Unamortized Discount (or Premium)

Bond Book Value

1-Jan-05 A30-Jun-05 75,000 B1 B2 B3 B431-Dec-05 75,000 C1 C2 C3 C4

Date Interest payment

Interest expense

Discount (or Premium) amortization

Unamortized Discount (or Premium)

Bond Book Value

1-Jan-05 188,220 1,311,78030-Jun-05 75,000 78,707 3,707 184,513 1,315,48731-Dec-05 75,000 78,929 3,929 180,584 1,319,416

2. Prepare journal entries for Chua Boon Limited for these two dates (round to the nearest integer value).

(i) January 1, 2005(ii) June 30, 2005

Cash + 1,311,780 Discount on Bonds Payable+ 188,220 Bond Payable + 1,500,000

Interest Expense + 78,707 Discount on Bond Payable - 3,707 Cash - 75,000

3. What is the balance sheet presentation of this bond for Chua Boon Limited at December 31, 2005?

Bonds Payable $1,500,000Less: Discount on Bond Payable 180,584

$1,319,416

Question 3 Jenny Corporation starts business on Jan 1 2009. During 2009, Jenny Company provides

you with the following information:

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(i) The corporation sells 12,000 shares of $10 par common stock for $13.00 per share.

(ii) The corporation sells 5,000 shares of $50 par, 10% cumulative preferred stock for $59 per share.

(iii) The corporation receives a building with a market value of $115,000 and issues 6,400 shares of $10 par common stock in exchange.

Required:1. Prepare journal entries for each of the above transactions. 2. What is the total paid-in capital on Dec 31 2009?

Solutions: 1. General JournalDate Account Debit Credit i. Cash 156,000

Common stock 120,000 Paid-in capital in excess of par - common 36,000

ii. Cash 295,000 Preferred stock 250,000 Paid-in capital in excess of par - preferred 45,000

iii. Building 115,000 Common stock 64,000 Paid-in capital in excess of par - common 51,000

2. Paid in capital = 120,000+ 36,000+250,000+45,000+64,000+51,000=566,000

Question 4

ABC company has fiscal year ending on December 31. The following schedule is taken from its past three years’ annual reports (in US dollars). ABC Company uses the allowance method to account for potentially uncollectible receivables.

Allowance for Uncollectible AccountsBalance at

Beginning of Year

Added to Expenses

Write-offs Balance at End of Year

Year ended December 31, 2006 171,000 40,000 A 142,000

Year ended December 31, 2007 142,000 64,000 89,000 B

Year ended December 31, 2008 C D 52,000 153,000

*Note: all the figures are in thousands. Provide your answers in thousands as well. Assume that no recovery of accounts previously written off occurred.

Required:

1) Solve for the four unknowns (A to D) in the table above

Allowance for Uncollectible Accounts:

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Beginning Balance + Uncollectible Accounts Expense (MAKE a buffer) – Write Off (USE a buffer)= Ending Balance

A = 69,000

B = 117,000

B=C (last year ending is this year beginning)=117,000

D=88,000

2) Make the journal entries related to the “allowance for uncollectible accounts” in 2007 (using the figure provided). (2 marks)

Dr Uncollectible Accounts Expense + 64,000Cr Allowance for Uncollectible Receivables + 64,000

Record bad debt expense (MAKE the buffer)

Dr Allowance for Uncollectible Receivables - 89,000Cr Accounts Receivable - 89,000

Write off bad debt (USE the buffer)

Question 5

Simon Inc. had the following inventory purchases and sales during 2005. The company uses the perpetual inventory method.

  Purchased SoldDate 2005

Units Unit Price

Total Units SellingPrice

Total

Jan. 1 100 $4 $400      Feb. 5 200 $5 $1,000      

Mar. 10       100 $10 $1,000 Apr. 15 100 $6 $600      May 20 150 $7 $1,050      Jun. 25       200 $11 $2,200 Nov. 30 160 $8 $1,280      

Total 710   $4,330 300    

Required:

1) What is the company’s cost of goods sold and ending inventory in dollars at the end of 2005 under LIFO, FIFO (rounded to a cent)?

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Inventory Costing Method COGS Ending Inventory

FIFO$1400 $2930

LIFO$1850 $2480

2) Under the current economic conditions which method (LIFO, FIFO) would put the company in the best tax position? Why?

To be in the best tax position, the company should report lower net income. LIFO will report the highest cost of goods sold and thus lower net income and thus lower taxes.

Question 6 Part A. Jeffery Services has the following unadjusted balances at year-end.Cash $13,000Prepaid insurance $2,100Office supplies $1,200Office equipment $12,000Accumulated depreciation-office equipment

$4,000

Accounts payable $3,000Salaries payable 0Unearned service revenue 5,000James Jeffery, capital 11,200James Jeffery, withdrawals 6,000Services revenue 15,000Salary expense 3,900Depreciation expense 0Supplies expense 0Insurance expense 0

The following information is available to use in making adjusting entries.a. Office supplies on hand are year-end is $200b. Prepaid insurance expired during the year is $350c. Unearned service revenue at year-end is $3000d. Depreciation expense for the year is $2,000e. Accrued salaries at year-end is $1,000

Required:Please complete the following work sheet on your answer script.

Jeffery Services Ltd. Work sheet Dec 31, 2009 (partial)

Accounts Trial Balance

Adjustments

Debit Credit Debit Credit

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Cash 13,000Prepaid insurance 2,100 b. 350Office supplies 1,200 a. 1000Office equipment 12,000Accumulated depreciation

4,000 d. 2000

Accounts payable 3,000Salaries payable e. 1000Unearned service revenue

5,000 c.2,000

James Jeffery, capital 11,200James Jeffery, withdrawals

6,000

Service revenue 15,000 c.2,000Salaries expense 3,900 e. 1,000Depreciation expense d. 2,000Supplies expense a. 1,000Insurance expense b. 350Totals 38,200 38,200 6,350 6,350

Question 7

The condensed financial statements of Kenneth Ho Pte Ltd for the years ended December 31 are provided below (all amounts in thousands).

Kenneth Ho Pte LtdIncome Statement

For the year ended December 31, 2004 and 2005  2004 2005Sales (All Credit Sales) 422 410Cost of sales 245 235Gross profit 177 175Net operating expenses 119 115Operating profit 58 60Interest expense 15 15Net Profit before taxation 43 45Income Tax 9 10Net Profit after taxation 34 35Dividends:     Preference shares 1 1 Ordinary shares 20 32  21 33

Kenneth Ho Pte LtdBalance sheet as at December 31, 2004 and 2005

  2004 2005Current assets     Cash 1 7 Accounts Receivable 54 58 Inventory 88 82  Total current assets 143 147Fixed assets 219 208Total Assets 362 355     Current liabilities    

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Accounts Payable 55 45 Tax Payable 9 10 Wage Payable 21 21  Total current liabilities 85 76  10% Debentures 150 150Total Liabilities 235 226

Shareholders' Equity     10% Preference Shares, $1 par, 10,000 outstanding shares 10 10 Ordinary Shares, $1 par, 100,000 outstanding shares 100 100 Retained Earnings 17 19  Total shareholders’ equity 127 129

Total Liabilities and Shareholders Equities 362 355

Calculate (to 2 decimal points) the following ratios for Kenneth Ho Pte. Ltd. for the year ended December 31, 2005.

a. Gross profit marginb. Current ratioc. Quick ratiod. Inventory turnovere. Average Accounts receivable collection period f. Debt to total assets

Gross profit margin: (net sales-cost of goods sold)/net sales=175/410=42.69%Current ratio: current assets/current liabilities=147/76=1.93Quick ratio: (cash + short-term investment + net account receivable)/current liabilities=(7+58)/76=0.86Inventory turnover: cost of goods sold/avg. inventory=235/85=2.76Average account receivable collection period: 365/ (sales/avg. account receivables)=56/410*365=50daysDebt to total asset: total liabilities/total assets=226/355=0.64

Question 8

Required: Use the letters below (either A or B or C) to indicate the effect of each of the four transactions on a firm's cash flows. Your concern should be with only the transaction described and at the date of the transaction described. Ignore related transactions prior to or after the transaction described.

A. Increase B. Decrease C. No effect

Transactions Cash FlowsI) Sale of long-term operating asset for $20,000 cash. The book value of the operating asset at date of sale

was $12,000.1.A

II) Depreciation expense of $5,000 was recorded. 2.C

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III) Purchase of long-term operating asset for $10,000 on a credit basis (A note is issued). 3.C

IV) Cash collection of accounts receivable = $5,000. 4.A

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