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ACC 1100 Sample Final Exam – Summer 2020 1 QUESTION ONE Selected 20x1 balances of GNT Industries were made available as below: Accumulated other comprehensive income (loss), January 1 ($12,000 ) Common shares, January 1, 80,000 issued and outstanding $32 0,000 Cost of goods sold $350,000 Cash dividends declared on common shares $72,000 Long -term debt $125,000 Unrealized gain on FVT OCI investments $16,000 Other operating expenses $339 ,500 Preferred shares, January 1, $2, 6,000 issued and outstanding $80,000 Retained earnings, January 1 $206,000 Revenue s $840,000 On March 31, 20x1, GNT declared a nd distributed a 3% stock dividend, w hich resulted in the distribution of common shares with a market value of $ 34 ,32 0. On September 30, 20x1, GNT spent $2.6 per share to repurchase and cancel 8,500 common shares. On December 20, 20x1, GNT declared and paid a tot al cash dividends of $ 50,000. For the year ended December 31, 20x1, GNT reported $650,000 net earnings. Required 1. Prepare in good format the Shareholders’ Equity Section of balance sheet for the as at December 31, 20 x1 for GNT Industries . Ignore section title. Calculate each amoun t to the nearest cent. 2. Determine the respective amount of cash dividends paid to preferred shares and common shares during 20x1. ACC 1100 Sample Final Exam – Summer 2020 2 QUESTION T WO For each of the following, circle the letter that corresponds with the best response. Marks are not deducted for incorrect answers. 1. Which of the following scenarios would a company be in a position to recognize revenues at the current time? I. computer consultant delivers software discs to client II. sale of gift certificates III. receipt of cash for magazine subscription a. I only. b. I and II . c. I and III . d. All of the above . e. None of the above . 2. Which of the following revenue recognition methods allows a company to recognize revenues before the contract is completed? I. Percentage –of–completion method. II. Completed –contract method III. Recovery method. a. I only . b. I and II . c. I and III . d. II and III . e. All of t he above . 3. Graham construction company has just begun construction on a three year project on January 1, 2000. The project costs for the next three years are expected to be $14,000,000 in the first year, $22,000,000 in the second year and $24,000,000 in year three. The company has negotiated for a sales price of $75,000,000 for the total project, with payments being collected in each of the years on January 1 of $20,000,000 in year one, $25,000,000 in year two and $30,000,000 in year three. Using the com pleted contract method, determine the amount of revenue that would be recorded in the first year of the project: a. $0 . b. $6,000,000 . c. $17,500,000 . d. $20,000,000 . e. None of the above . ACC 1100 Sample Final Exam – Summer 2020 3 4. Which of the following items would be reported on the income statement net of tax? a. Other income and expense. b. Discontinued operations. c. Cost of sales. d. Cumulative effect of change in accounting method. e. None of the above. 5. Bugle’s Variety Stores uses the percentage of credit sales method to estimate bad debt expense. The company currently estimates bad debt expense to be 1 1/2% of credit sales. During 2000, Bugle reported credit sales of $1,450,000. In other activity during the year, Bugle wrote off $21,000 of accounts receivable, of which, $8,000 were applicable to sales made in 2000. Bad debt expense for 2000 was: a. $21,000 . b. $13,000 . c. $21,750 . d. $43,750 . e. None of the above . 6. Southwest Information Systems incurred a major maintenance overhaul expense on a computer system wh ich is expected to increase the life of the system for an additional 8 years. The cost of the overhaul should be: a. Charged to expense . b. Charged to other comprehensive income . c. Charged to the asset account . d. Charged to retained earnings . e. None of the above . 7. Rickshaw Industries uses the outstanding accounts receivable method of estimating doubtful accounts. At December 31, 1999, Rickshaw had accounts receivable of $870,000 and an allowance for uncollectible accounts of $49,000. During 200 0, Rickshaw wrote off accounts totalling $48,000 and collected $1,300 on accounts which had been written of in 1999. An aging of accounts receivable indicates that $51,400 is needed in the allowance for doubtful accounts as of December 31, 2000. The bad de bt expense for 2000 is: a. $51,400 . b. $48,000 . c. $51,700 . d. $49,100 . e. None of the above . ACC 1100 Sample Final Exam – Summer 2020 4 8. Assume the following shares outstanding at December 31, 2010: • Preferred shares, $3, cumulative, 1,000 shares outstanding with dividends in arrears for 2008, 2009, and 2010. • Common shares, 2,000 shares outstanding. No shares were issued or purchased during 2011. Total dividends declared in 2011 amounted to $30,000. The total amount of dividends to which common shareholders are entitled is: a. $30,000. b. $27,000. c. $27,000. d. $18,000. e. None of the above . 9. Low -Tek Products reported a decline in market value of one of its trading investments. This would result in: a. No effect on comprehensive income. b. A loss charged to other compreh ensive income. c. An unrealized loss on the income statement in the amount of the decline. d. A realized loss on the income statement. e. None of the above. 10. Which of the following is the least liquid asset. a. Accounts receivable . b. Prepaid Insurance . c. Inventory . d. Temporary Investments . e. None of the above . 11 . If a company declares and distributes a stock dividend what is the effect on its retained earnings and earnings per share? Retained Earnings earnings per share a. unchanged unchanged b. unchanged decreased c. decreased unchanged d. decreased decreased e. decreased increased ACC 1100 Sample Final Exam – Summer 2020 5 12. In comparison to the percentage of credit sales method, the aging of accounts receivable method: a. Results in a higher percentage of accounts receivable written off in the period determined uncollectible. b. W ould delay recognition of bad debt expense. c. W ould imply balance sheet accuracy is more important than income statement accuracy. d. W ould ordinarily yield identical financial statement amounts. e. None of the above. 13. Advances in computer technology, including cheaper mass memory and optic al scanning, is causing more companies to change inventory methods and procedures from: a. Actual costing to standard costing . b. Standard costing to actual costing . c. Perpetual inventory to periodic inventory . d. Periodic inventory to perpetual inve ntory . e. None of the above . 14. In a period of declining prices, gross margin percentages would be higher using: a. Average cost than FIFO . b. FIFO than average cost . c. Specific identification than average cost . d. FIFO than specific identification . e. None of the above . 15. H-Lo Sporting Goods and Fast Out Sports Outlet are identical in every respect except that Hi -Lo uses FIFO and Fast Out uses average cost. Assuming merchandise costs are steadily increasing, the current ratio and gross profit margin for Hi -Lo, compared to Fast Out would be: Current Ratio Gross Profit a. Higher Higher b. Lower Lower c. Lower Higher d. Higher Lower e. None of the above . 16. Boron Electronic’s cash flow statement sho ws positive operating cash flows, positive investing cash flows, and negative financing cash flows. This could indicate that the company is: a. Selling off investments in order to purchase equipment and retire debt. b. Using cash from operations and sell ing investments in order to pay dividends. c. Issuing debt securities and selling investments to provide operating cash flows. d. Selling equipment and issuing share capital in order to retire debt. e. None of the above. ACC 1100 Sample Final Exam – Summer 2020 6 Using the following informatio n for questions 17 – 18. Mano Inc. had the following activity with one of its inventory items during a current period. Units Unit Cost Total Cost Beginning inventory 80 $25.00 $2000 Purchases: June 1 160 27.50 4,400 June 15 160 30.00 4,800 Sales June 8 100 June 30 140 17. Using a periodic inventory system and the weighted -average cost flow, the cost of goods sold for the month of June was valued at: a. $4,400 . b. $6,600 . c. $4,480 . d. $6,720 . e. None of the above . 18. Using a perpetual inventory system and the FIFO cost flow, the ending inventory was: a. $4,200 . b. $4,400 . c. $4,800 . d. $5,250 . e. None of the above . 19 . ABC Company repurchased and cancelled 1,000 of its common shares for $7,000. The original issue price on the shares was $8 per share. Which accounts are affected by this transaction? a. Common Shares decreases by $7,000 Cash decreases by $7,000 b. Investment in ABC Co. increases by $7,000 Cash decreases by $7,000 c. Common Shares decreases by $8,000 Gain on repurchase of shares increases by $1,000 Cash decreases by $7,000 d. Common Shares decreases by $8,000 Contributed surplus increases by $1,000 Cash decreases by $7,000 e. None of the above. ACC 1100 Sample Final Exam – Summer 2020 7 20 . The purpose of recording depreciation is to: a. Provide funds for the replacement of the asset. b. Allocate the cost of the asset to the periods benefiting from its use. c. Approximate the market value of the asset. d. Reduce the asset to its estimated replacement cost. e. None of the above. 21. Econ -o-ride, reported depreciation expense for one of its machines for the first three years of $8,000, $4,800, $2,800. The method being used is most li kely: a. Straight line. b. Double diminishing balance. c. Specific identification . d. Units of production. e. None of the above. 22 . Graystoke Computing acquired an asset on January 1, 1997 and has been depreciating the asset using straight -line depreciation and a 10 year life. In preparing its December 31, 1999 financial statements, Graystoke has revised its estimates and now believes the total life will be only a total of 8 years. Graystoke should: a. Charge 1999 expense for the amount of extra depreciation that would have been charged in 1997 and 1998 had the shorter life been used. b. Record a charge to retained earnings for the under depr eciation in 1997 and 1998. c. Adopt an accelerated depreciation method to catch up on the depreciation. d. Allocate the book value as of January 1, 1999 over its remaining life. e. None of the above. 23. Grainsville Co. purchased a sorting machine on Jan. 1, 2000 for $15,000 with an expected residual value of $4,000 in 5 years. Grainsville uses the double -diminishing method to record amortization. In 2001, Grainsville would record depreciation expense of: a. $1,400 . b. $2,160 . c. $3,600 . d. $6,000 . e. None of the above . ACC 1100 Sample Final Exam – Summer 2020 8 24. Tickets Unlimited purchased 10 new computers to use in its offices for $4,000 each on January 1, 2008. The estimated residual value of each computer is $500 with an expected useful l ife of 5 years. The company uses the straight -line method of depreciation and has a December 31st year end. On January 1, 2010, management realized that with new technological advances, the computers are unlikely to have any residual value and will likel y be disposed at the end of 2011. What is the depreciation expense for 2010? a. $8,000. b. $8,667. c. $10,000. d. $13,000. e. $20,000. 25 . Company A uses accelerated depreciation and Company B uses straight -line depreciation. If the two companies are identical in all other respects, Company A will report: a. A higher total asset turnover ratio. b. A lower total asset turnover ratio. c. Identical total asset turnover ratios. d. Total asset turnover rates are not affected by depreciation methods. e. None of the above. 26. Due to differences in amortization methods, Microscan Co. reported $20,000 in financial accounting depreciation and $32,000 in tax depreciation (CCA) during the asset’s first year. This item represents the only difference between tax and financ ial accounting. Income before depreciation for both financial accounting and tax is $80,000. Microscan Co.’s income tax rate is 30%. Microscan Co. would report income tax expense and a deferred tax liability of: a. $6,000 and $9,600 . b. $18,000 and $9,6 00 . c. $18,000 and $3,600 . d. $24,000 and $6,000 . e. None of the above. 27 . The Greenplanet Laboratories, Inc. equipment account, net of accumulated depreciation, increased by $35,000 during 1999. During the year Greenplanet sold equipment for $24,000 realizing a gain of $7,000. Amortization expense for the year was $9,000. All other changes in the equipment account came from cash purchases of equipment. Cash payments for equi pment totaled : a. $27,000 . b. $61,000 . c. $35,000 . d. $59,000 . e. None of the above. ACC 1100 Sample Final Exam – Summer 2020 9 28. A company controls less than 20 percent of the voting shares of another compa ny. Of the methods below, the one that is most likely to be acceptable for accounting for this investment would be: a. Cost method . b. Significant control method . c. Equity method . d. Consolidation method . e. None of the above . 29 . Appliance Company in its first years of operations, offers a one year limited warranty on its irons. Appliance estimates that the warranty cost will be $5.00 per iron. During 2001, Appliance sold 3,000 irons at an average price of $60 and incurred $4,000 i n warranty costs. Appliance would report, a year -end liability of: a. $15,000 . b. $4,000 . c. $11,000 . d. $19,000 . e. None of the above. 30. Recording equipment was purchased on July 1, 2010 for $108,000. At that time it was estimated to have a 6-year useful life and no residual value. On September 30, 2011, there was a fire in the recording studio and the equipment suffered water damage and is beyond repair. The company received $60,000 from the insurance company for the equipment. Assume th e company used the straight -line method of depreciation and has a December 31st year end. The 2011 income statement would have included: a. A loss of $25,500. b. A loss of $30,000. c. A loss of $39,000. d. A loss of $48,000. e. None of the above . ACC 1100 Sample Final Exam – Summer 2020 10 31. The Statement of Cash Flows of Grumby Limited revealed the following: Positive cash flows from operating activities. Negative cash flows from investing activities. Positive cash flows from financing activities. This pattern of cash flows most likely means that the company: a. Is using cash generated from operations to buy long -term assets and to reduce its debt or pay cash dividends. b. Is using cash from operations and from the sale of capital assets to reduce its debt or pay cash dividends. c. Is using cash from operations and from borrowing or issuing shares to acquire capital assets. d. Is experiencing operating cash flow shortages and is repaying its debt or paying cash dividends from cash generated from the sale of capital assets. e. None of the ab ove. 32. Wiggly Worm Company declared a 6% share dividend, when its non par common share was selling publicly for $30 per share. Prior to the share dividend the company had 100,000 shares of common shares outstanding. The share dividend would result in an increase in share capital of : a. $150,000 . b. $180,000 . c. $30,000 . d. $12,000 . e. None of the above 33. Smith & Barn’s capital structure included the following securities: common shares -weighted average shares outstanding, 12,000; 8$ , cumulative , preferred shares – 1,800 issued and outstanding. The convertible preferred was issued in 1999. Smith & Barn’s 2000 net income is $36,000. Basic earnings per share for 2000 is: a. $3.00 b. $2.60 c. $1.80 d. $1.67 e. None of the above ACC 1100 Sample Final Exam – Summer 2020 11 34 . HI Inc.’s accounting records contain the following information before income taxes: Cost of goods sold $ 90,000 Net sales 210,000 Gain on sale of land 10,000 Gain on discontinued operations 20,000 Operating expenses 60,000 Income tax expense 5,000 Loss on disposal of d iscontinued assets (6,000) What is the net income from c ontinuing operations ? a. $65,000. b. $55 ,000 . c. $59 ,000 . d. $79,000. e. None of the above. 35. Gamma Company has current assets of $300,000, and total assets of $800,000, a current ratio of 2 and a total debt to total asset ratio of 0.625. Gamma Company’s long -term liabilities are: a. $312,500 . b. $300,000 . c. $243,750 . d. $350,000 . e. None of the above . 36. Cisco Company has a December 31 year end. On September 1, 2018 the company purchased an equipment for $120,000 and signed 3 years note payable, 6% annual interest rate. And on November 1 signed $60,000 notes payable with 5% interest that will due on March 31,2020. What is the total interest expense of Cisco company for the year ending December 31,2018? a. $2400 b. $2900 c. $3000 d. $500 e. None of the above 37. Cactus Company has the following selected information from adjusted trial balance for the year ending December 31, 201 8: Salaries Payable $ 4 0,000 Equipment 14 0,000 Interest Payable, due October 15, 201 9 3,000 Insurance expense 20,000 Notes Payable, 6-month, 5% 80,000 Notes Payable, 5 -year, 8%, due December 31, 201 9 35 ,000 Notes Payable, 5 -years,7% due on December 31,2020 50,000 Payroll and Benefits Payable 27,000 Income Tax Expense 6,000 ACC 1100 Sample Final Exam – Summer 2020 12 The t otal current liability section of balance sheet is equal to: a. $185,000 b. $235,000 c. $158,000 d. $182,000 e. $191,000 QUESTION THREE For each of the following INDEPENDENT cases, prepare any journal entry necessary on the underlined date . 1. Peter Limited purchased Machine C on January 1, 2010 for $420,000, estimating its useful life to be 20 years and its residual value to be $20,000. Peter uses the double -diminishing -balance method for depreciation purposes. It is now December 31, 2011 and Peter has not recorded any depreciation expense for the year. 2. Laura Corp. purchased Machine A and Machine B from a vendor on December 31, 2011 for $210,000 and $140,000 respectively. Installation of both machines occurred on December 31, 2011. Laura paid installation costs of $2,000 for Machine A. During installation, accidental damage occurred to Machine B that required repairs costing $5,000. Laura signed a $250,000 note payable to the machine vendor and paid the balance of the purchase pri ce and other expenditures in cash. 3. Starr, Incorporated purchased Machine D on January 1, 2011 for $280,000 (estimated residual value = $12,000). Starr uses the units -of -production method for depreciation purposes and estimates that Machine D has a total capacity of 100,000 units. On September 30, 2011 , Starr sold Machine D for $250,000. By this date, Machine D had produced 9,000 units in total. On September 30, Starr had not yet recorded any depreciation expense for the year. ACC 1100 Sample Final Exam – Summer 2020 13 QUESTION FOUR Journalize the following passive investment transactions for Arthur Brothers Wholesale Inc. Assume that Arthur Brothers uses Fair Value Through Profit or Loss , or FVTPL , for investments of this type. a. June 1, 2010: Purchased 800 shares of CIBC bank stock at $80 per share, with the intent of holding the shares for the indefinite future. b. September 15, 2010: Received cash dividend of $0.25 per share on the CIBC investment. c. December 31, 2010: At year -end, adjusted the investment account to current fair value of $75 per share. d. February 14, 2011: Sold the shares for the market price of $82 per share. ACC 1100 Sample Final Exam – Summer 2020 14 QUESTION FIVE Comparative financial data of ABC Inc. appears below. ABC Inc. Balance Sheet As at December 31 st Assets 2011 2010 Cash $ 39,500 $ 18,850 Accounts receivable 38,050 16,250 Merchandise inventory 48,675 51,475 Prepaid expenses 1,500 9,350 Long -term investments 52,500 47,250 Capital (fixed) assets (net) 108,450 100,250 $ 288,675 $ 243,425 Liabilities and Shareholders ' Equity Accounts payable $ 38,650 $ 32,925 Bonds payable 40,125 62,350 Common shares 100,000 85,000 Retained earnings 109,900 63,150 $ 288,675 $ 243,425 ABC Inc. Income Statement For the year ended December 31, 2011 Sales revenue $ 184,390 Expenses: Cost of goods sold $ 73,130 Operating expenses excluding dep recia tion 17,705 Depreciation expense 31,550 Income tax expense 9,640 Interest expense 2,865 Loss on sale of capital assets 2,750 137,640 Net income $ 46,750 Additional information: a. During 2011, capital assets with an historical cost of $36,900 and accumulated depreciation of $32,050 were sold for cash. b. Bonds matured and were paid off at face value for cash. c. Accounts payable represents amounts owing to suppliers of merchandise inventory only . Required: a) Pre sent in good form the 2011 statement of cash flows . Use the indirect method . b) Us e the ABC data to calculate the following items (show all of your calculations): i) Cash collected from customer in 2011 ii) Cash paid to suppliers of merchandise inventory in 2011 iii) Return on equity for 2011 iv) Acid -test ratio at December 31, 2011 ACC 1100 Sample Final Exam – Summer 2020 15 RATIO DEFINITIONS FOR EXMINATIONS Profitability Ratios Gross profit percentage Gross Profit Net sales Net profit margin percentage Net income Net sales Return on total assets (ROA) Net income + [Interest expense × (1 – Tax rate)] Average total assets Return on equity (ROE) Net income Average shareholders’ equity* Basic earnings per share (EPS): (disclosed in the income statement) Net income – Preferred dividends Average common shares outstanding Asset Efficiency (or Ratios Accounts receivable turnover Net sales Average accounts receivable Inventory turnover Cost of goods sold Average inventory Accounts payable turnover Credit purchase Average accounts payable Asset turnover ratio Net sales Average total assets Short -Term Liquidity Ratios Current ratio Current assets Current liabilities Quick ratio Cash + Short -term investments + Receivables Current liabilities Debt Management (Solvency) Ratios Debt ratio Total liabilities Total assets Times -interest -earned ratio Earnings before income tax and interest expense Interest expense Stockholder (Market) Ratios Price/Earnings ratio Closing market price per common share at fiscal year end Earnings per share Dividend yield Dividend per common share Closing market price per common share at fiscal year end Average balance sheet items are generally beginning balance + ending balance, divided by two. Net sales = Sales – Sales discounts – Sales returns and allowances (assume all sales are on account). Credit purchase = Cost of goods sold – Beginning inventory + Ending inventory (assume all purchases are on account). Tax rate is the effective tax rate in the annual report. Otherwise, tax rate is tax expense divided by earnings before tax. ACC 1100 Sample Final Exam – Summer 2020 16 QUESTION ONE Question One Required 1 Solution:Step 1) Determine the ending balance of each equity account:
Common shares:
1/1/x1: 80,000 shares oustanding 320,000 $ 3/31/x1: 2,400 added oustanding shares from stock dividends 34,320 9/30/x1: (8,500) shares cancelled, each at $4.30 (36,550) 12/31/x1: 73,900 shares outstanding 317,770 $ 9/30/x1: Ave. issuing cost = ($320,000 + $34,320) / (80,000 x 103%) = $354,320 / 82,400 = $4.30 Contributed surplus:
1/1/x1: - $ 9/30/x1: 8,500 shares ($2.6 - $4.30) x 8,500 shares 14,450 12/31/x1: 14,450 $ Retained earnings:
1/1/x1: Beginning balance 206,000 $ x1 net earnings 650,000 Dividends declared ($34,320 + $50,000) (84,320) 12/31/x1: Engind balance 771,680 $ Accumulated other comprehensive income:
1/1/x1: Beginning balance (12,000) $ Unrealized gain on FVTOCI investments 16,000 12/31/x1: Ending balance 4,000 $ Step 2): Shareholders' Equity Section of Balance Sheet at 12/31/x1:
Common shares, 73,900 shares issued and outstanding 317,770 $ Preferred shares, $2, 6,000 issued and outstanding 80,000 Contrinuted surplus -- repurchase of common shares 14,450 Retained earnings 771,680 Accumulated other comprehensive income 4,000 Total Shareholders Equity 1,187,900 $ ACC 1100 Sample Final Exam – Summer 2020 17 QUESTION T WO 1. a 11. d 21. b 31. c 2. c 12. c 22. d 32 . b 3. a 13. d 23. c 33 . c 4. b 14. a 24. d 34 . a 5. c 15. a 25. a 35 . d 6. c 16. b 26. c 36. b 7. d 17. d 27. b 37. a 8. d 18. c 28. a 9. c 19. d 29 . c 10. b 20. b 30. a Calculations 5. $1,450,000 × 0.015 = $21,750 7. $51,400 – (49,000 – 48,000 + 1,300) = $49,100 8. $30,000 - (4 years x 1,000 x $3) = $18,000 (preferred dividends for 2008, 2009, 2010 and 2011 must be paid before common dividends can be paid) 17. Average cost per unit = (2,000 + 4,400 + 4,800)/(80 + 160 + 160) = $28 Cost of goods sold = (100 + 1 40) × $28 = $6,720 18. $4,800; ending inventory would consist entirely of the June 15 purchases 36. 120,000 x 6% x 4/12 + 60,000 x 5% x 2/12 = 2,900 37. 40,000+3,000+80,000+35,000+27,000 = 185,000 Question One Required 2 Solution:
Preferred cash dividends: ($2 x 6,000) 12,000$ Common cash dividends: ($50,000 - $12,000) 38,000$ ACC 1100 Sample Final Exam – Summer 2020 18 23. 2000 depreciation expense = 15,000 × (1/5 × 2) = $6,000; 2001 depreciation expense = (15,000 – 6,000) × 40% = $3,600 24 . Annual depreciation expense = [(10 x 4,000) - (10 x 500)] ÷ 5 = 7,000 2010 depreciation expense = [40,000 - (2 x 7,000)] ÷ 2 = 13,000 26. Income tax expense = (80,000 – 20, 000) × 30% = $18,000 Income tax payable = (80,000 – 32,000) × 30% = $14,400 Deferred tax liability = $18,000 - $14,400 = $3,600 27 . $35,000 = Purchases – (24,000 – 7,000) – 9,000; Purchases = $61,000 29 . (3,000 × $5) - $4,000 = $11,000 30. A ccumulated depreciation at September 30, 2011 = (108,000 ÷ 6) x (15/12) = 22,500 loss = 60,000 - (108,000 - 22,500) = 25,500 32. 100,000 × 6% × $30 = $180,000 33. [$36,000 - ($ 8 × 1,800)] ÷ 12,000 = $1.80 34. 210,000 -90,000 -60,000+10,000 -5,000=65,000 35. Total liabilities = $800,000 × 0.625 = $500,000; Current liabilities = $300,000/2 = $150,000; Long -term liabilities = $500,000 - $150,000 = $350,000 QUESTION THREE 1.
Dr. Depreciation Expense 37 ,800 Cr. Accumulated Depreciation 37 ,800 420 ,000* 2/20 = 42 ,000 (420 ,000 -42 ,000 )*2/20=37800 2.
Dr. Machinery A (210 ,000+2 ,000) 212 ,000 Dr. Machinery B 140 ,000 Dr. Repair Expense 5,000 Cr. Cash (357 ,000 -250 ,000) 107 ,000 Cr. Notes payable 250 ,000 3. Depreciation rate per unit for Machine D = (280 .000 – 12 ,000) / 100 ,000 = 2.6 8 per unit Accumulated depreciation at September 30, 2011 = 2.68 x 9 ,000 units = 24 ,120 Net book value at September 30, 2011 = 280 ,000 – 24 ,120= 255 ,880 Loss on sale of equipm ent = 255 ,880 -250 ,000 = 5 ,880 Dr. Depreciation Expense 24 ,120 Cr. Accumulated Depreciation 24 ,120 Dr. Cash 250 ,000 Dr. Accumulated Depreciation 24 ,120 Dr. Loss on Sale of Equipment 5,880 Cr. Equipment 280 ,000 ACC 1100 Sample Final Exam – Summer 2020 19 QUESTION FOUR (a) Dr. Long -term i nvestment ($80 × 800) 64,000 Cr. Cash 64,000 (b) Dr. Cash ($0.25 × 800) 200 Cr. Investment / Dividend income 200 (c) Dr. Unrealized loss ({$80 - $75} × 800) 4,000 Cr. Long -term i nvestment 4,000 (d) Dr. Cash ($82 × 800) 65,600 Cr . Gain on Sale of Investment 5,600 Cr. Long -term i nvestment 60,000 QUESTION FIVE (a) Operating activities: Net income $46,750 Adjustments to reconciled net income to cash: Amortization expense $31,550 Loss on sale of capital assets 2,750 Increase in accounts receivable (21,800) Decrease in merchandise inventory 2,800 Decrease in prepaid expense 7,850 Increase in accounts payable 5,725 28,875 Net cash provided by operating activities: $75,625 Investing activities: Purchase of long -term investments (5,250) Sale of capital assets (36,900 – 32,050 – 2,750) 2,100 Purchase of new capital assets {108,450 – 100,250 + 31,550 + 36,900 –32,050 } (44 ,600) Net cash used by investing activities (47,750) Financing activities: Repayment of bonds (22,225) Issue of shares 15,000 Net cash used by financing activities (7,225) Net change in cash 20,650 Add: beginning cash balance 18,850 = Ending cash balance $39,500 (b) (i) 184,390 - 21,800 = $162,590 (ii) 73,130 – 2,800 – 5,725 = $64,605 (iii) 46,750 / {[(85,000 + 63,150) + (100,000 + 109,900)] / 2} = 46,750 / 179,025 = 26.11% (iv) (39,500 + 38,050) / 38,650 = 77,550 / 38,650 = 2.01
