ACCT 210 Final, Fall 2001

Fane mgeee A mre nee = St TS . : pMETHCAN USIVTESILY LIBRARY oy CELT ' i} American University of Berrut School of Business . ACCT 210 , ‘Final Exam Fall 2001-2002 Feb 6, 2002 Instructor:____ 7 = Time: 2 Hours The exain contains 6 questions, make sure you answer them all, show all supporting computations! Good Luck! | > Amen actnaanewenen S pie ~ - peu UNIVERSIT' LIBGARY OF Coit Question 1 (25 points, 30min): ~ Circle the correct answer for the following: . Use the following data for questions 1 &2. The financial statements of Traylor, Inc., provide the following information: Dec. 31, - Dec 31 2002 2001 - Accounts receivable a. $ 50,000 $60,000 + Inventory see 90,000 -.- 82,000 Prepaid expenses 4,000 8,000 + Accounts payable (for merchandise) 46,000 44,000 Accrued expenses payable : 10,000 20,000 + Net sales - 500,000~ . + Cost of goods sold.... wie 240,000° . Operating expenses (including .” depreciation of $16,000)..... sessaees 140,000 Refer to the above data. Compute the amount of cash received from customers during 2002 in the operating activities section of the cash flow statement. ‘a ~—- $60,000. b $500,000. c $510,000. ~ d $490,000. 2. Refer to the above data. Compute the amount of Traylor’s cash payments for purchases of merchandise customers during 2002 in the operating activities section of the cash flow statement. a $240,000. b = $250,000. c $234,000. d- $246,000. 3. During the last month of its fiscal year, Hidden Acres Resort received numerous : payments in advance from customers. By the end of the month many, but not all of these guests had completed their stays. The entry to record this event is an example of an adjusting entry : a _—s Tocconvert assets to expenses. ° ; b To convert liabilities to revenues. ~ ce To accrue unpaid expenses.. dad‘ To accrue uncollected revenue 4, Chelsea Corporation’s financial statements for the current year include the following: rp y' 8 Income from continuing operations $520,000 Cash dividends paid to preferred stockholders... . 102,000 Gain from discontinued operations (net of TAXES) cccssrevseeeees 310,000 Cumulative effect of accounting change (reduction _’ \ in net income, net of tax benefit) .... 220,000 j . Extraordinary loss (net of tax benefit)... 85,000 On the basis of this information, net income for the current year is: a ‘$717,000. © . b $513,000. \ c $965,000. y d $525,000. iy 5. Leisure Attire ‘Corporation discontinued Princess Fashions, its entire line of children’s ¢ clothing, in November of 2001. Prior to the disposal, Princess \ Fashions generated a loss of $300,000 (net of tax) for the period from January through the sale date. Because of the value of the real estate and machinery, there was a gain of $750,000 (net of tax) on the actual sale. How should this situation be reported in the financial statements of Leisure Attire for 2001? : j a $450,000 included | in the 2001 income statement as an. extraordinary item. : : b $300,000 loss included in income from operations and a ’ ) $750,000 gain reported in the “discontinued. operations” ha . section of the income statement. c $450,000 adjustment to beginning retained earnings in the statement of retained earnings. Yr. d $450,000 gain in the “discontinued operations” section of the : a income statement. ; : 6. On January 1, 2001, Slim Corporation had 120,000 shares of $2 par value common stock : outstanding. On April 1, 2001, Slim issued an additional 10,000 shares in exchange for a building. What is the weighted average number of shares to be used in the computation of basic EPS for the par oumnrae year 20017? a 120,000. b = 127,500. t ce 130,000. d 130,000 plus the number of shares of convedible preferred , stock outstanding. : . Tr All cP “AF TFET TH . . eetiee cnet ou ee - > JAMERIOWN UMW ERGT - _ ; | LIBRARY ok OF BOIRUT ce Question 2: (10 points, 15 min) The Excalibur Corporation manufactures and sells video games for personal computars. The Unadjusted Trial Balance as.at December 31,2002 appears below: December 31 is the Company's fiscal year-end. The company uses a perpetual inventory system. Account Title Debits Credits Cash . $ 23,300 Accounts receivable 32,500 Allowance for doubtful accounts $ 100 . Supplies 2,000 ‘. |Prepaid rent 14,000 Inventory 65,000 Equipment 80,000 Accumulated depreciation-Equipment 15,000 ; - ‘Accounts Payable 26,000 Wages Payable 3,000 |Notes Payable __ 30,000 Capital stock 80,000 Retained Earnings 28,550 Sales revenue - ‘ 180,000 Cost of Goods Sold- 107,500 Wage expense 32,350 Utility Expense 6,000 $ 362,650 $ 362,650 Information necessary to prepare the year-end adjusting entries appear below: (7tme equipment was purchased on Mar 4, 2000 and is being depreciated using the Straight line method over eight years with no salvage value. 2. Accrued wages at year end should be $4,500. \.3. The company estimates that 2% of all Accounts Receivable will probably ~ not be collected. + [Ae ent ee AMERICAN UNTVERSIT Libe \RY E vey ~~ « Use the following data for questions 7 &8. On March 1, year 1, Cornish Corporation issues $30 million of 10%, 20-year bonds payable at par.. Interest on the bonds is payable semiannually each March 1 and September 1. Refer to the above data. The amount of ¢ash paid to bondholders for interest during year I, is: a $3,000,000 b $1,500,000 ¢ $2,500,000 d = $150,000 Refer to the above data. Interest expense on this bond issue reported in Cornish’s year I, income-statement is: a $2,500,000, $1,500,000 b ¢ . $3,000,000 d = $150,000 Which of the following represents revenue for the month of June for BDPHP Medical Group, Inc.? . a __ Performed medical services for a patient in June. Total amount of the invoice was $4,000, but no payment has been received as of the end of June. Collected cash of $2,400 in June on an account receivable. The receivable originated in January from services performed for a patient. c During June, new capital stock was issued i in exchange for _ $35,000 cash.. d _ Borrowed $5,000 from National Bank on June 15. 10. During a period of steadily falling prices, which of the following methods of measuring the cost of goods sold is likely-to result in reporting the highest gross profit? Specific identification. Average cost. LIFO. FIFO. Instructions: Prepare the closing entries at Dec 31, 2002 General Journal Descriptions Ma we. oldlare. Je Lit ceue. Seay (oeht } —DWe_ ooh MK Gel sen Cee acres BS a vA ef Ain Sie seul! ; : ; Ve Coe. Seas / creel E/ © Gael Gleh — daha cob) ellag om ffl Prone cag ——— . © peu! Fe bhuw fo “4 Fe, “we JP Sue Hem rere acesih LeMay UNTWEnai? Wo. ee LIBRarRy OF tetkug 4. The company borrowed $30,000 on September 1,2002. The principal is due to be repaid in 10 years. Interest is payable twice a year on each August31 and February 28 at an annual interest rate of 10%. ‘ 5.. The company supplies on hand at year-end were $1,200. Required: > Prepare the necessary adjusting entries at Dec 31,2002 Question 3: (20points,20min) _ An analysis of changes in selected balance sheet accounts of Conestoga Corporation shows the following for the current year (Dec 31, 2002) : Marketable Securities account: Debt entries......: $ 400,000 Credit entries......: .» 700,000 Plant and equipment accounts: / Debit entries to asset accounts 1,300,000 Credit entries to asset accounts .. 1,700,000 Debit entries to accumulated depreciation accounts (resulting from sales of plant assets) 500,000 Credit entries to accumulated depreciation accounts (representing depreciation for the current year) .... 150,000 The income statement for the current year ended Dec 31, 2002 included the following items relating to the transactions summarized above: Net sales $2,500,000 Gain on sales of marketable securities vo 70,000 Loss on sales of plant assets sees 200,000 All payments and proceeds relating to these transactions were in cash. Required: : ; ; : co ; Prepare the Cash Flow from investing activities section for the current year ended Dec 31, 2002, SHOW ALL SUPPORTING COMPUTATIONS eet 5 { Question 4: (15points, 20 min) _ The stockholders’ equity section of the balance sheet of McLintock Corporation (with certain details omitted) appears below: Stockholders’ equity: 6% cumulative preferred stock, $100 par, callable at $110, 200,000 shares authorized, 7? shares issued... sesesecssecseseesteeseaseess $12, 000,000 Common stock, $10 par, 500,000 shares authorized, os 77 shares issued 00.0... eeessesesessseeseeeees doteesescsvadersseneseeasaecnenecsaesesssaeaeeeeacans 3,500,000 ‘ Additional paid-in capital: _ ‘ Preferred stock... “ 196,000 Common stock ... . 14,700,000 Total paid-in capital .... Retained earnings Total stockholders’ equity........... ecetcteeiet essssnesscessnsesessssossveeh . $34,000,000 Note : there was one year’s dividends in arrears Required: 1. What is the total amount of legal capital? 2. Determine the number of shares of common stock issued . 3. Determine the number of shares of preferred stock issued 4. What is the total amount of annual preferred stockholders dividends? 5. What is the average issue price of a share of common stock? 6. Calculate the book value per common share. Question 5: (15points, 15min) On November 30, 2001, Sterling Transport signed a 5—year installment note in the amount of $50,000 in conjunction with the purchase of a motor coach. This note is payable in equal monthly installments of $1,112, which include interest computed at an annual rate of 12%. The first monthly payment is made on December 31, 2001. This note is fully amortizing over 60 months. $30,396,000, _3,604,000 - ae: f . ; [ee | | . _ JAMERICNN CNTVERSITY . , . ‘ gt _ LIBiVRY ; “= | i . vf OF +. RUT . : | | ; Required: 1,Prepare the journal entry on Nov 30, 2001 to record the purchase of the Motor Coach. 2.Prepare an amortization table for the first two payments. ; 3.Prepare the necessary journal entry to record the payment on Dec 31, 2001. ° j 4. With respect to this note, determine the amount of interest expense that should be i reported in Sterling’s 2001 income statement? - | 5.Determine the amount of the total liability for this note payable in Sterling's Balance sheet at Dec 31, 2001? . | 6. Determine the total interest over the life of the loan. | 7 Question 6: (15 points, 20 min) | At December 31, 2001 Mayson Corporation owned the following investments in the capital stock of publicly held corporations (all classified as available for sale | securities): . Cost Market Value New Technology, Inc.( 4500 shares : . ' Cost $70per share; Market value, $83) i $315,000 _ $373,500 Bowers, Inc. ( 2250 shares: cost, $100 per 225,000 209,250 Share; market value, 93) ; $540,000 - $582,750 i The following transactions occurred during 2002: 1, On June 4, 2002 Mayson sold 1000 shares of New Technology at a price of $75 per share, . 2. On September 30 2002 Mayson sold 250 shares of Bowers at a price of $94 per P P P | 7 share. . The market value per share of New Technology, Inc. and Bowers, Inc. at Dec 31, 2002 was $78 & $95 respectively. _ Required: . ; ; . — - 1. Illustrate the presentation of Marketable Securities and the Unrealized Holding \ Gain or Loss in Mayson’s Balance Sheet at Dec 31, 2001. . ‘. 2. Prepare the journal entries to record the sale of June 4, 2002 and September 30, 2002 . "3. Prior to Mark to Market adjustment at the end of 2002, determine the unadjusted balance in the marketable securities controlling account and the Unrealized Holding Gain ( or Loss) on investment -Assume that no unrealized gains or losses have been recognized since last year. . 4,” Prepare the Mark to Market adjusting entry at Dec 31, 2002: Show supporting a” schedule of Marketable Securities and all computation, . _™é