Final Examination Booklet
Financial Accounting
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Financial Accounting
EXAMINATION NUMBER:
06169300
Complete the following exam by answering the questions and compiling your answers into a word-processing document. When youre ready to submit your answers, refer to the instructions at the end of your exam booklet. Be certain to indicate the proper question number before each of your answers. Remember to show your work if an answer requires a mathematical solution.
Part A: Answer each of the following questions. Each answer is worth 20 points.
1. The following information was made available from the income statement and balance sheet of Lauren Company.
Item
12/31/10
12/31/09
Accounts Receivable
$53,400
58,600
Accounts Payable
35,600
32,700
Merchandise Inventory
85,000
79,000
Sales (2010)
243,000
Interest Revenue (2010)
5,600
Dividend Revenue (2010)
1,200
Tax Expense (2010)
12,300
Salaries Expense (2010)
28,000
COGS (2010)
65,000
Interest Expense (2010)
3,600
Operating Expenses
28,500
Complete the cash flow from operating activities section for Lauren Company using the direct method for the year ended December 31, 2010.
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Examination
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1
2. Given the following balance sheet, complete a horizontal analysis. Compute the percentage to the nearest tenth of a percent.
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Jills Bikes
Comparative Balance Sheet
For Years Ended December 31, 2011 and 2010
(in thousands)
2011
2010
Difference
Percentage
Assets
Current Assets
Cash and Equivalents
$72
$94
Accounts Receivable, net
122
104
Inventory
288
232
Total Current Assets
482
430
Property, Plant and Equipment
638
358
Total Assets
$1,120
$788
Liabilities
Current Liabilities
Accounts Payable
$242
$148
Accrued Liabilities
48
66
Total Current Liabilities
290
214
Long-Term Liabilities
346
208
Total Liabilities
636
422
Stockholders Equity
Common Stock
70
60
Retained Earnings
414
306
Total Stockholders Equity
484
366
Total Liabilities and
$1,120
$788
Stockholders Equity
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2 Financial Accounting
Part B: Answer each of the following questions. Each answer is worth 4 points.
1. Record the following transactions using the accounting equation.
Example:
Assets
=
Liabilities
+
Equity
XXXX(cash)
XXXX(accounts payable)
A. Amanda invests $17,000 cash into her merchandising business.
B. She buys $6,500 of office equipment and $3,000 of office supplies with cash from Office Depot.
C. Additional purchases were supplies for $35,000 on account from various suppliers.
2. Journalize the following transactions and omit the explana-tions.
A. ABC Corporation purchased $15,000 of office furniture by putting $7,000 down in cash and the rest on account on April 8.
B. The corporation paid $60,000 for a two-year lease on April 19.
C. The corporation had sales of $45,000, of which $35,000 were on account on April 20.
D. The corporation borrowed $25,000 by signing a note payable on April 22.
E. The corporation paid $1,250 on one of its accounts payable on April 26.
3. Prepare a trial balance from the following information for Learn a New Language, Inc. for December 31, 2012.
Accounts payable
$5,012
Common stock
$9,692
Cash
$3,928
Notes payable
$1,439
Wages expense
$777
Marketing expense
$493
Equipment
$8,345
Accounts receivable
$1,142
Inventory
$8,074
Sales
$6,616
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Final Examination 3
4. Compute the missing information from this post-closing trial balance.
Cash
$34,689
Accounts Receivable
9,467
Prepaid Rent
5,000
Prepaid Insurance
(A)
Supplies
944
Accounts Payable
$5,389
Wages Payable
(B)
Common Stock
37,049
Retained Earnings
8,234
_______
_______
Total
$52,356
$52,356
5. Journalize the following transactions using the perpetual inventory method.
Aug. 6 Purchased $830 of inventory on account from Johnston with terms of 2/10, n/30.
Aug. 8 Purchased $2,611 of inventory for cash from Pillner Company.
Aug.15 Paid for August 6 purchase from Johnston. Aug. 17 Purchased $1,743 of merchandise on account
from Luis Company with Terms of 3/15, n/45.
6. Given the following information, prepare a balance sheet for Isaiahs Tool Shed for the year ending December 31, 2012.
Cash
$65,750
Retained Earnings
$179,319
Common Stock
$35,000
Equipment
$27,500
Accounts Receivable
$11,478
Accounts Payable
$29,450
Land
$30,000
Inventory
$78,311
Prepaid Supplies
$7,357
Income Taxes Payable
$4,209
Office Computers
$11,345
Other PPE
$31,446
Accum. Depr. (all)
$23,459
Prepaid Insurance
$8,250
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4 Financial Accounting
7. Rick Companys beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows: (Note: The company uses a perpetual system of inventory.)
Units
Unit Price
Total Cost
January 1Beginning inventory
18
$24
$432
March 12Sold
13
April 11Purchase
45
$29
$1,305
June 20Sold
33
Aug 16Purchase
35
$27
$945
Sept 11Sold
29
Total Cost of Inventory
Ending inventory is 23 units.
$2,682
What is the cost of goods sold for Rick Company for 2012 using LIFO?
8. Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If this is the only error in Years 1 and 2, fill in the items below, indicating which items will be understated, overstated, or correctly stated for Years 1 and 2.
Item
Year 1
Year 2
Ending inventory
___________
_____________
Beginning inventory ___________
_____________
Cost of goods sold
___________
_____________
9. Below is a list of treatments of accounting topics. Place GAAP on the line if the treatment is GAAP-based and place IFRS on the line if the treatment is IFRS-based.
A. Interest and dividend income are reported in the investing section of the cash flow statement.__________
B. Interest expense is reported in the financing section of the cash flow statement. ___________
C. The use of LIFO is prohibited. ___________
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Final Examination 5
10. Record the necessary journal entries from the following bank reconciliation information for July 31, 2011:
Bank Balance, July 31, 2011
$36,739
Checkbook Balance, July 31, 2011
36,444
Bank collection of note receivable
1,200 + 165
interest
Bank service charge
35
Deposits in transit
2,400
Outstanding checks
1,245
NSF check from customer
330
Correction of book error (check #456 written for $160,
recorded at $610)gas expense
11. Journalize the following transactions for Tammy Company:
Sept. 1 Sold $3,500 of merchandise to Jim on account
Oct. 1 Exchanged Jims account receivable for a four-month, 8% note for $3,500
Dec. 31 Recorded accrued interest on Jims note
Feb. 1 Jim paid off his note with interest (round to nearest dollar)
12. A truck was purchased on January 2 at a cost of $60,000. Its expected to be used for five years and to have a residual value of $5,000 after 120,000 miles of service. The truck was driven for 23,000 miles the first year and 25,000 miles the second year. Calculate the depreciation expense to the nearest dollar for the first and second years.
Method
Year 1
Year 2
Straight-line
________
________
Double-declining-balance ________
________
Units-of-production
________
________
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6 Financial Accounting
13. Prepare the general journal entries for the following transactions:
Jan. 2, 2011 Purchased land with a building on it for $750,000. The land is worth $300,000. Paid $150,000 cash down and signed a mortgage payable for the balance.
Dec. 31, 2011 Depreciation is computed using the straight-line method. The estimated salvage value of the building is $75,000 and has an estimated life of 20 years.
July 1, 2012 The building and land are sold for $825,000 cash.
14. Journalize the following treasury stock transactions:
June 3 Reacquired 350 shares of $12 par common stock at $10 per share.
June 7 Sold 180 shares of treasury stock for $16 per share.
June 8 Sold 150 shares of treasury stock for $9 per share.
15. Lowry Landscapes had net income of $50,000 for 2010. Land was sold for $40,000, of which $3,000 was a gain. The beginning cash balance was $53,000, and the ending cash balance was $151,000. Depreciation expenses were $11,000. Prepare a statement of cash flows for the year ended December 31, 2010, for Lowry Landscapes using the indirect method.
SUBMITTING YOUR ASSIGNMENT
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Final Examination 7
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8 Financial Accounting