ACCT 210 Midterm, Spring 2002

r {AMERICAN ENIVERSIT LIBRARY OF BEIRUT — American University of Beirut School of Business ACCT 210 a Midterm Exam | LInRARY | Spring 2001-2002 -_—_—— April 24, 2002 — Name: —__ +: Sine Section: \ Instructor:_{ Yime: 2 Hours The exam contains 5 questions, make sure you answer them all, show all supporting computations! €eod Buek! Question 1: (25points, 25 min) [ow rican UNIVERSIT LIBRARY oe BEPROP Circle the correct answer for each of the following: Ne |.Mike Rodgers, owner of Mike’s Taco Barn, also owns a personal residence that cost $130,000, but has a market value of $250,000. During preparation of the financial statements for Mike’s Taco Barn, the accounting principle most relevant to the presentation of Mike’s home is: : The concept of the business entity. A 4 The cost principle. c The going-concern assumption. d_ The objectivity principle. 2.Rolling Acres Development Corporation recently sold a parcel of land for $50,000 more than its cost. This transaction: a _ Increased assets and liabilities. _ b! Increased stockholder’s equity and assets. * c Reduced assets and stockholder’s equity. ad Increased assets and left liabilities and stockholder’s equity 3.MicroDevices sold and delivered modems to Dale Computers for $360,000 to be paid by Dale in three equal installments over the next three months. The journal entry made by Micro Devices to record this transaction will inchide: a _ A debit to Sales Revenue for $360,000. ’ @ A debit to Accounts Receivable for $360,000. A debit to Accounts Receivable for $120,000. € dA debit to Cash Due for $360,000. a Uy 4.Video Connection offered books of video rental coupons to its patrons at $30 per book. Each book contained a certain number of coupons for video rentals. During the current period 1,000 books were sold for $30,000, and this amount was credited to Unearned Rental Revenue. At the end of the period it was determined that $10,000 worth of book coupons had been used by customers to rent videos. The appropriate adjusting entry at the end of the period would be: a Debit Rental Revenue $20,000 and credit Unearned Rental Revenue $20,000. b Debit Rental Revenue $10,000 and credit Unearned Rental SL Revenue $10,000. c Debit Unearned Rental Revenue $20,000 and credit Rental Revenue $20,000. @ Debit Unearned Rental Revenue $10,000 and credit Rental Revenue $10,000. Use the following data for questions 5 through 7. Towne Electronics Co. uses a perpetual inventory system. The company’s beginning inventory of a particular style of large screen televisions and its purchases during the month of January were as follows: Quantity Unit Cost Total Beginning inventory (Jan. 1).........6.. 40 $200 $8,000 Purchase (Jan. 12)... 20 221 4,420 Purchase (Jan. 28) 10 158 1,580 Total .... ZO $14,000 On January 15, Towne Electronics Co. held its annual Super Bow! Large Screen TV Sale Day. On this day 55 of these televisions were sold. The remaining 15 units above remain in inventory at January 31. , Bo Ada \ ZY¥ RID 5.Refer to the above data. Assuming that Towne Electronics uses the LIFO flow assumption, the cost of goods sold to be recorded at January 15 is: (& $11,420. = b $11,000. 4 © SI1315. d Some other amount. 6.Refer to the above data. Assuming that Towne Electronics uses the average cost flow assumption, the cost of goods sold to be recorded at January 15 is: » C&> $11,385. ws b $11,000. c $11,315. d= Some other amount. 7.Refer to the above data. Assuming that Towne Electronics uses the periodic inventory system and the LIFO flow assumption, the value of its ending inventory of this television set will be: a $2,580. b $2,685. $3,000. c On (d Some other amount. Use the following data for question 8. At year-end, the perpetual inventory records of Ward Products indicate 105 units of a particular product in Inventory, acquired at the following dates and unit costs: Acquisition Date Quantity Unit Cost Total $22 $ 990 36 2.160 $3,150 However, a complete physical inventory taken at year-end indicates only 95 units of this product actually are on hand. 8.Determine the dollar amount of the shrinkage loss assuming that Ward uses A LIFO flow assumption. ( (a $360 1'\ey $220 ~ ¢ $630 d. $210 9.The entry to record depreciation expense is an example of: a Aclosing entry. (hb. An adjusting entry. c Cash basis accounting. “ d A reduction in owner’s equity that does not affect the ~ computation of net income for the period. 10. In which of the following situations would an adjusting entry be made at the end of January to accrue an unpaid expense? Ali’s Daycare purchased playground equipment on January | with an estimated useful life of six years. On January 25, Ali’s Daycare hired a college student to drive the minibus; the new employee is to begin work in February. January 31 falls on a Tuesday; salaries are paid on Friday of each week. On January 31, Ali’s Daycare paid the interest owed on a note payable for January. 4 / Question 2: ( 20points, 30 min) \ On May 15, Garth Taylor began a new business, called Studio Uno-a recording studio to be rented out to artists on an hourly or daily basis. The following six transactions were completed by the business during May: a Issued to Taylor 8,000 shares of capital stock in exchange for his investment of $40,000 cash. b Purchased land and a building for $135,000, paying $20,000 cash and signing a note payable for the balance. The land was considered to be worth $90,000 and the building $45,000. c Installed special insulation and soundproofing throughout most of the building at a cost of $20,000. Paid $5,000 cash and agreed to pay the balance in 60 days. Taylor considers these items to be additional costs of the building. d= Purchased office furnishings costing $5,400 and recording equipment costing $23,100 from Total Warehouse. Paid $8,000 cash, with the balance due in 30 days. e Borrowed $35,000 from a bank by signing a note payable. f Paid the full amount of the liability to Total Warehouse arising from the purchases in d above. Instructions 1. Post the above transactions directly in the T accounts below. Identify each entry in a T account with the letter shown for the transaction. This exercise does not call for the use of a journal. Cash Office Furnishings Notes Payable Q@_ \Wooos 4. QYoooo d.Suc9 BIS O00 €- %5e00 |[€. Sooo t-33090 d. Yooo \- PoYdO soo uso \S9 005 Land Recording Accounts Payable Equipment 3 SDR too f-30 590 C. iS c00 d ~AOSO a) A Lx a SOOB0 24100 INova Buildings po Capital Stock YL US 000 / 1 1 Ass. O- baogg C- Roan |. | % | \ / — LO o00 GY 000 2. Prepare a trial balance at May 31,2002 Cas\h Tavs | Tavseo lu (, aa “- ‘ Dou Shurgs fi Suoo _ y f = . L. Becatdisrg ‘Surornunl “3 Aloo ; = w/P SO o0g) ALP - Noos) Gita’ dhock oaoa09 Question 3 : (30 points 30min) Yankee Company uses a perpetual inventory system and FIFO. for the valuation of its inventory, and the net cost method . Beginning Inventory on Oct !, 2002 consisted of two layers: the earliest layer of 235 units at $35/unit and second layer of 250 units at $37/unit. Yankee Company engaged in the following transactions in October: Round all numbers to the nearest dollar. (No Decimals). Oct 7 8 Sold 245 units at a price of $40/unit on credit to Boris Lund X Purchased 300 units at a cost of $39/unit on credit from Hilton Company, terms, 2/10, n/30. , Purchased 200 units for $7,800 cash from Main Company Sold 300 units to Sue Martin on credit at a price of $45/unit. Returned 100 units of damaged merchandise received from Hilton Company on Oct 8 for credit . Received check from Boris Lund for his purchase of Oct 7. Sold 225 units for $11,250 cash Paid Hilton Company the balance from transactions of Oct 8 and Oct 14 Instructions: I. Prepare journal entries to record the above transactions( omit explanations). General Journal Date scriptions Debit Credit Lock HRa5 LSeuo} tou : LoS CCS Tawa: (erat) as 45 ; Say _ SS Ny wockh | Gav (CGosray Si? aude Wu 6G YSIS YiLoo \ASaa L aay b% Lh | dD doy an Nag ML S900 3500 Stoo —, N¥Oo > - ackts Gosh « pera) Salen Woo C018 Gas133.) LVS } Sav BSYAS Ale AN Purdhare Oss purr (a (Bon x ) 9 Cosh 2. Post to the inventory subsidiary ledger below: “P cre &S Soba Ad Yu | | | Aa X dake eck a pas \ \ (, 44 Question 4:(20points,30min) y / f as Forum Consulting adjusts its books each month and closes its books at the end of the year. The trial balance at January 31, 2001, before adjustments is as follows: Debit Credit w.. $ 44,050 Accounts Receivable. we 30,000 Supplies 3,750 Prepaid Advertising . 8,400 Equipment vs . 72,000 Accumulated Depreciation: Equipment.. $ 25,000 Unearned Consulting Fees “ 19,500 Income Taxes Payable.... . 17,600 Capital Stock 20,000 Retained Earnings.... 26,500 Consulting Fees Earned.. . 87,300 Salaries Expense Utilities Expense Rent Expense $195,900 The following information relates to month-end adjustments: a According to contracts, consulting fees received in advance that were earned in January total $13,000. On November 1. 2000, the company paid in advance for 6 months’ advertising in professional journals. * At January 31, supplies on hand amount to $1,250. The equipment has an original estimated useful life of 6 years. The corporation is subject to income taxes of 40% of taxable income. (Assume taxable income is the same as “income before taxes.”) ioe Week awd (S00 S Ceoontar, cfs Loo NOOO Kdue~¢ tx ee luos