Student: Stanley

BUSI 1003 – Survey of Accounting

BUSI 1003 – Survey of Accounting Mock Mid Term Exam Please attempt this mid term under exam like conditions – that is, sit down in a quiet room, turn off your phone, take out some blank pieces of paper, your calculator and a pencil and answer all of the questions. Then compare your answers to the solution at the end of the document. Just reading this exam is a waste of your time. You must do accounting in order to understand it!   Question 1 — MULTIPLE CHOICE - 28 questions - Each question is worth 1 mark. Instructions: Chose the best answer for each of the following questions. 1. The matching principle states that: a) Assets must match Liabilities and Shareholders’ Equity b) Dividends must match Net Income c) Expenses must be recorded in the same period as the revenues that they give rise to. d) Retained Earnings must match liabilities. 2. Shareholders are primarily interested in: a) the assets of a company b) the profitability of a company c) the liabilities of a company d) the goodwill recorded on the Balance Sheet 3. What accounts would be listed on an Income Statement? a) Fees Earned, Rent Expense and Wages Expense b) Cash, Accounts Receivable and Prepaid Expenses c) Net Income and Dividends d) Sheldon’s quirky sense of humour 4. The following accounts appeared on the Balance Sheet of Wolowitz Engineering: Accounts Payable $ 100 Capital Stock $3,000 Retained Earnings $2,000 Cash 2,540 Bank Loan 2,300 Accounts Receivable 5,320 Machinery 10,500 Bonds Payable 18,560 Goodwill 7,600 What is the total amount of assets? a) $37,570 b) $25,960 c) $20,960 d) $5,000 5. How should Bernadette Inc. record the payment of an amount she owes her supplier? a) Increase cash and increase accounts payable b) Decrease cash and decrease accounts payable c) Increase cash and increase loans payable d) Decrease cash and decrease retained earnings   6. The Balance Sheet of Cooper Labs showed the following beginning and ending balances for March 2020: Total Assets Total Liabilities Beginning balance $10,430 $7,250 Ending balance 16,880 10,300 Cooper did not declare any dividends during the month but he did issue $3,000 in capital stock. How much was net income for the month? a) $400 b) $3,400 c) $6,450 d) $3,050 7. Farrah Fowler Research Ltd. provided lab services for Koothrapalli Inc. and invoiced him $34,200. How should she record this entry? a) Increase Unearned Revenue and Increase Retained Earnings b) Increase Cash and Increase Retained Earnings c) Increase Accounts Payable and Increase Retained Earnings d) Increase Accounts Receivable and Increase Retained Earnings 8. Which of the following is NOT considered a liability account? a) Accounts Payable b) Accounts Receivable c) Unearned Revenues d) Note Payable 9. The Balance Sheet of Farrah Fowler Ltd. as at February 28, 2020 had the following information: Accounts Payable $30,000 Accounts Receivable 75,000 Capital Stock 60,000 Retained Earnings ? Cash 110,000 Supplies 15,000 What is the balance of Retained Earnings? a) $ 90,000 b) $225,000 c) $140,000 d) $110,000 10. At Hofstadter Inc., total assets increased by $44,000 during the year and total liabilities increased by $12,000 during the same time. Net income during the year was $35,000 and dividends paid were $10,000. How much capital stock was issued? a) $7,000 b) $25,000 c) $32,000 d) Hofstadter should consider another line of business. He’s not making enough income.   11. In March 2019, Facebook Inc. received $340,000 from one of their customers for ads that will be posted on users’ accounts in January 2020. How should Facebook record this receipt? a) Increase Cash and Increase Unearned Revenue b) increase Prepaid Expenses and Increase Unearned Revenue c) This transaction will not affect any of their accounts d) Increase assets and increase retained earnings 12. The balance in the Supplies account, before adjustment at the end of the year, is $4,000. What is the required adjustment if the amount of supplies that were actually counted at the end of the year is $1,750? a) increase supplies account by $1,750 b) increase supplies account by $2,250 c) decrease supplies account by $2,250 d) decrease supplies account by $1,750 13. Koothrapalli Inc. pays $3,000 for an insurance premium for coverage from January 1, 2013 to December 31, 2015. (It’s a 3 year policy.) On December 31, 2013, how much is the balance of the Prepaid Insurance account? a) $1,500 b) $3,000 c) $2,000 d) $1,000 14. Which of the following accounts should be classified as a current asset? a) Note Payable b) Accounts Receivable c) Dividends d) Property, Plant and Equipment 15. At the end of the month at Bernadette Ltd., $19,900 of fees have been earned but not billed to clients. How should Bernadette record this? a) Increase Cash and increase Accounts Payable b) Decrease Unearned Revenue and Increase Retained Earnings (Fees Earned) c) Increase Accounts Receivable and Increase Retained Earnings (Fees Earned) d) Bernadette should do a better job of recording her billings on time. 16. On October 1, Sheldon Cooper Labs signs a contract and receives $30,000 from his customer. He performs the work evenly over the months of October and November. When should he record the revenue for this contract? a) $15,000 in October and $15,000 in November b) $30,000 in October c) $30,000 in November d) He can record revenue whenever he’d like.   17. At Koothrapalli Curry Shop, total sales for the year were $8,300,000, sales discounts were $100,000, sales returns and allowances were $45,000. The cost of goods sold during the year was $5,000,000. Operating expenses totalled $2,000,000. What is the amount of gross profit? a) $8,200,000 b) $8,155,000 c) $1,155,000 d) $3,155,000 18. Using a perpetual inventory system, the purchase of $30,000 of merchandise on account would include a(n): a) increase in Sales. b) increase in Merchandise Inventory. c) decrease in Merchandise Inventory. d) decrease in Sales. 19. On March 1, 2019, Bernadette lent $5,000 to Howard. Howard signed a promissory note that specified that he would repay the $5,000 back to Bernadette, along with 6% interest on July 31, 2019. How much will Howard pay Bernadette on July 31? a) $5,125 b) $5,000 c) $5,300 d) Bernadette should just give Howard the money. She shouldn’t make him pay her back. 20. At the end of the year, before the accounts are adjusted, the Allowance for Doubtful Accounts has a negative balance of $250. An aging of the Accounts Receivable balance indicates that the estimate of uncollectible accounts is $850. How much is the Bad Debts Expense for the year? a) $ 600 b) $ 850 c) $ 250 d) $1,100 21. At the end of the year, before the accounts are adjusted, the Allowance for Doubtful Accounts has a negative balance of $250. The company estimate bad debts expense using the percentage of Accounts Receivable sales method. The figure that 1% of the balance of Accounts Receivable (currently $85,000) will become uncollectible. How much is the Bad Debts Expense for the year? a) $250 b) $350 c) $850 d) $600 22. Bernadette’s Creepy Experiments Ltd. bought some lab equipment for $50,000. She estimates that the equipment will have a useful life of 5 years and a salvage value of $5,000. If she uses the double declining balance method of depreciation, how much will depreciation expense be for the second year of the equipment’s life? a) $10,000 b) $12,000 c) $20,000 d) $ 9,000 23. Which of the following is an example of an intangible asset? a) Patents b) Accounts Receivable c) Land d) Effective study habits 24. Koothrapalli Inc. purchased equipment on July 1, 2019 for $16,200. The equipment was expected to have a useful life of 3 years and a residual value of $900. Koothrapalli uses the straight method of depreciation. What is the amount of depreciation for the year ended December 31, 2019? a) $2,550 b) $5,100 c) $1,800 d) $ 900 Use the following data for questions 25 and 26: At Penny Blossoms Ltd., the inventory records show the following information: Beginning Inventory - 27 units at $600 each Purchase #1 - 54 units at $690 each Purchase #2 - 63 units at $780 each Purchase #3 - 56 units at $825 each Penny has 48 units on hand at the end of the month and she uses the periodic inventory system. 25. What is the cost of the inventory she should report on the Balance Sheet if she uses the First In First Out (FIFO) method? a) $39,600 b) $28,800 c) $125,400 d) $118,110 26. What is the cost of the inventory she should report on the Balance Sheet if she uses the Weighted Average (or Average Cost) method? a) $118,110 b) $ 34,740 c) $113,088 d) $ 35,712   27. Penny Blossoms bought a delivery van for $50,000. On October 20, the balance in the accumulated depreciation account was $15,000. On that day, she got into an accident with the van and it was a complete write off. Her insurance company paid her $30,000. How should she record this transaction? Assets = Liabilities + Equity Cash Van Accum.Deprec.-Van Accounts Payable Retained Earnings a) + $30,000 +$50,000 - $15,000 + $65,000 b) -$30,000 - $50,000 +$15,000 -$65,000 c) +$30,000 - $50,000 +$15,000 -$5,000 d) +50,000 -$15,000 -$35,000 28. Hofstadter Research Services Inc. bought a vehicle for $36,000. Leonard figures that the car will have a useful life of 8 years and a residual value of $1,000. How much will the depreciation expense be for the first year if Hofstadter uses the straight line method of depreciation? a) $4,500 b) $9,000 c) $4,375 d) Leonard should give this car to Penny. One of her car’s warning lights is on and it’s bothering Sheldon.   Answer questions 2, 3, 4 & 5 in the space below each question. Question 2 - Koothrapalli Inc. began operations on January 1, 2020. The following transactions occurred during the year: a) Rajesh Koothrapalli invested $15,000 of his own money into the business in exchange for 1,000 common shares. b) On April 1, Rajesh bought a number of pieces of equipment for his lab. In total, they cost $10,000. He paid cash for them. The equipment is expected to have a useful life of 5 years with no salvage value. c) On February 1, 2020, he signs a one year lease and pays $2,000 in total for rent for February 2020 and January 2021 (first and last month’s rent x $1,000/month). d) He made his first sale! On October 1, he finished some research for Leonard’s Applied Physics Ltd. and invoiced him $20,000 for this work. e) Rajesh buys lab supplies worth $2,000 and pays cash. Information for Adjusting Entries on December 31: 1) Rajesh take depreciation using the double declining method. 2) Rajesh owes his employees $200 for work they did to December 31, 2020. He will pay them in January. 3) He counts the lab supplies and finds that he has $500 worth of supplies left in the cupboard. A = L + E Cash Prepaid Expenses Accounts Receivable Lab Supplies Equip- ment Accum. Deprec. Wages Payable Capital Stock Retained Earnings a) b) c) d) e) Adj. #1 Adj. #2 Adj. #3   Question 3 - 6 marks (12 minutes) The following transactions took place at Cooper’s Molecular Model Shop: July 3 Purchased 300 models for $6 each on account. July 9 Returned 10 models from the July 3rd purchase because they were the wrong variety. The supplier gave Cooper a credit for this return. July 13 Paid the remaining amount due from the July 3rd purchase. Aug 1 Sold 50 models to Farrah Fowler Inc. at a price of $10 each on account. The cost of the models to Cooper were $6 each. Aug 19 Received payment for the amount owed by Farrah Fowler Inc. Cooper’s Models uses the perpetual inventory method. Record all the transactions in the table below. A = L + E Cash Merchandise Inventory Accounts Receivable Accounts Payable Retained Earnings July 3 July 9 July 13 Aug 1 Aug 19 Question 4 - 12 marks (24 minutes) The following items were taken from the February 28, 2014 financial statements of Emily Inc. Salaries Expense $ 96,000 Accounts receivable $ 86,500 Supplies $ 23,200 Capital Stock 40,000 Bad Debts Expense 10,800 Advertising Expense 24,000 Accounts payable 57,000 Administrative Expenses 73,400 Equipment 60,000 Accumulated Depreciation-Equip. 30,000 Sales 400,200 Inventory 122,800 Notes payable (due July 30, 2019) 103,600 Unearned Revenue 52,600 Land 36,000 Cash 17,800 Cost of Goods Sold 143,000 The beginning retained earnings balance was $18,100. Dividends of $8,000 were paid during the year. Required: a) Prepare a multi-step income statement for the year ending February 28, 2014. $ $ b) Calculate Retained Earnings as at February 28, 2014:   c) Prepare the classified balance sheet as at February 28, 2014. ASSETS LIABILITIES & SHAREHOLDERS’ EQUITY $ $ $ $   Question 5 - 4 marks, 8 minutes The Comic Center of Pasadena’s inventory records for Marvel Comic Books show the following data for 2014: Beginning Inventory 300 comic books at $4.50 each February 9, 2014 125 comic books for $4.85 each May 4, 2014 240 comic books for $5 each November 7, 2014 335 comic books for $5.25 each At the end of the year, Stuart had 145 Marvel comic books left in his store. Calculate the Cost of Goods Sold for the year using: a) First In First Out (FIFO) inventory costing method b) Weighted Average cost inventory costing method   BUSI 1003 Mid Term Marking Key Question 1 - Multiple Choice questions: 30 marks – 1 mark each question 1 C 16 A 2 B 17 D 3 A 4 B 5 B 18 B 6 A 19 A 7 D 20 A 8 B 21 D 9 D 22 B 10 A 23 A 11 A 24 A 12 C 25 A 13 C 26 D 14 B 27 C 15 C 28 c Question 2 – 8 marks 1 mark each transaction A = L + E Cash Prepaid Expenses Accounts Receivable Lab Supplies Equip- ment Accum. Deprec. Wages Payable Capital Stock Retained Earnings a) +15,000 +15,000 b) -10,000 +10,000 c) -2,000 +1,000 or +$2,000 -1,000 Or no effect d) +20,000 +20,000 e) -2,000 +2,000 #1 -3,000 -3,000 #2 +200 -200 #3 -1,500 -1,500 Question 3 – 6 marks – A = L + E Cash Merchandise Inventory Accounts Receivable Accounts Payable Retained Earnings July 3 +1,800 +1,800 July 9 (60) (60) July 13 (1,740) (1,740) Aug 1 (300) +500 +500 (300) Aug 19 +500 (500) Question 4 - 12 marks – ½ mark for each  Emily Inc. Income Statement For the year ended February 28, 2014  Sales $400,200 Cost of Goods Sold 143,000 Gross Profit 257,200 Operating Expenses: Salaries Exp. $96,000 Bad Debts Exp. 10,800 Admin.Exp. 73,400 Advertising Exp. 24,000 204,200 Net Income $53,000 d) Calculate Retained Earnings as at February 28, 2014: $18,100 + $53,000 - $8,000 = $63,100 Emily Inc. Balance Sheet (As at) February 28, 2014  ASSETS LIABILITIES & SHAREHOLDERS’ EQUITY Current Assets Current Liabilities Cash $17,800 Accounts Payable $57,000 Accounts Receivable 86,500 Unearned Revenue 52,600 Inventory 122,800 Total current liabilities 109,600 Supplies 23,200 Long Term Liabilities Total Current Assets 250,300 Note Payable 103,600 Capital Assets/Property, plant & Equip/Fixed Assets Total Liabilities 213,200 Land 36,000 Shareholders’ Equity Equipment 60,000 Capital Stock 40,000 Accum.Deprec. (30,000)  Retained Earnings 63,100 Total Capital Assets 66,000 Total Shareholders’ Equity 103,100 Total Assets $316,300 Total liab.&S/E $316,300 Question 5 - 4 marks – a) 2 marks Number of comic books sold = 300 + 125 + 240+ 335 – 145 = 855 comic books 300 comic books at $4.50 each $1,350.00 125 comic books for $4.85 each 606.25 240 comic books for $5 each 1,200.00 190 comic books for $5.25 each 997.50 855 comic books $4,153.75 b) Average cost: 2 marks $1,350 + $606.25 + $1,200 + (335 x $5.25) = $4,915 = $4.915/book 300 + 125 + 240 + 335 1,000 books COGS = $4.915 x 855 books = $4,202.325

Budget: $23.00

Due on: April 24, 2020 00:00

Posted: 5 months ago.

Answers (0)