ADM 1340 Midterm Exam Feb1-2013-Solutions

8/9/2019 ADM 1340 Midterm Exam Feb1-2013-Solutions

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+A,' 1- Multiple Choice 30 mar.s / 4 minutes#

Select the best answer for each of the following multiple-choice questions and enter youranswer on the Scantron Sheet. Failure to use the Scranton Sheet will result in zero marksfor Part 1.Only one answer will be accepted for each question. here is no penalty for

guessing. !o account will be taken of any e"planations pro#ided.Question Nos. 1 to 10 are each worth 1 mark. Question Nos. 11 to 20 are each worth 2marks.

1. $ecording an asset at what you paid for it instead of what you hope to be able tosell it for is an e"ample of which characteristic of accounting information%

a. $ele#ance b. imelinessc. !eutralityd. &onsistency

'. (hich of the following is a re#enue recognition criterion%a. $ecorded re#enues and e"penses are reliable. b. $ecorded re#enues and e"penses are probable.c. here is reasonable assurance that recorded re#enues and e"penses will

ultimately be recei#ed or paid.d. here is a high probability that recorded re#enues and e"penses will

result in related cash flows.

). (hich of the following sequences concerning the accounting cycle is correct%a. *ournalize+ post+ ad,usting entries+ financial statements b. ransaction analysis+ trial balance+ post+ ad,usted trial balancec. Post+ ad,usting entries+ closing entries+ financial statementsd. d,usting entries+ closing entries+ ad,usted trial balance+ financial

statements

. (hich of the following accounts normally has a credit balance%a. ccumulated amortization b. ccounts recei#ablec. /i#idends declaredd. $ent e"pense

0. he sale of merchandise to a customer partly for cash and partly on accountwould require which of the following entries%

a. /r. ccounts recei#able+ /r. &ash+ &r. Sales re#enue b. /r. &ash+ /r. ccounts payable+ &r. Sales re#enuec. /r. &ash+ &r. Sales re#enued. /r. ccounts payable+ /r. ccounts recei#able+ &r. Sales re#enue

. he purchase of land for a combination of cash and a 10-year note would requirewhich of the following entries%

a. /r. 2and+ /r. &ash+ &r. 2ong-term note payable b. /r. 2and+ &r. &ash+ &r. 2ong-term note payablec. /r. &ash+ &r. 2ong-term note payable+ &r. 2andd. /r. 2and+ /r. 2ong-term note payable+ &r. &ash

3. !ormal operating acti#ities are di#ided into which two main groups%a. $e#enues and e"penses b. Operating and !on-Operating $e#enuesc. ssets and 2iabilitiesd. /ebits and &redits

(


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4. (hen a firm has substantially completed the earnings process+ a re#enue is saidto be5

a. $ecognized b. 6arnedc. $ealized

d. $ealizable

7. (hich of the following would equal cash recei#ed from customers%a. Sales plus increase in accounts recei#able b. Sales plus increase in accounts payablec. Sales plus decrease in accounts recei#abled. Sales plus decrease in accounts payable

18. (hich of the following would equal the purchases of in#entory%a. 9n#entory plus change in accounts payable b. &ost of goods sold plus change in in#entory

c. Purchases plus change in accounts payabled. 9n#entory plus change in purchases

11. he ,ournal entry to record a payment on account willa. /ebit ccounts Payable+ and &redit $etained 6arnings b. /ebit &ash+ &redit 6"pensesc. /ebit 6"penses+ &redit &ashd. /ebit ccounts Payable+ &redit &ash

1'. Purchasing computer equipment for cash willa. 9ncrease both total assets and total liabilities b. /ecrease both total assets and shareholders equityc. /ecrease both total liabilities and shareholders equityd. :a#e no effect on total assets+ total liabilities or shareholders equity.

1). On September 1+ 2ostForest ppartments 2td. recei#ed ;)+88 from a tenant forthree months rent. he receipt was credited to


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1. contra-asset will usuallya. ppear on the 9ncome Statement b. :a#e a credit balancec. ppear on the =alance Sheet

d. =oth b and c

13. (hen preparing closing entries+ the account 9ncome Summary will usually bea. /ebited for $e#enue and debited for 6"penses b. &redited for /i#idendsc. /ebited for /i#idendsd. /ebited for 6"penses and credited for $e#enue

14. (hich of the following will not appear on an unadusted trial balance%a. /i#idends b. &ommon Stock

c. Opening $etained 6arningsd. &losing $etained 6arnings

17. &ash recei#ed in ad#ance from a customer would ha#e the following effectsa. 9ncrease the !et &ash Pro#ided by Operating cti#ities and 9ncrease the

&alculation of Profit b. !o effect on !et &ash Pro#ided by Operating cti#ities and 9ncrease the

&alculation of Profitc. 9ncrease the !et &ash Pro#ided by Operating cti#ities and !o effect on the

&alculation of Profitd. 9ncrease the !et &ash Pro#ided by Operating cti#ities and 9ncrease $e#enue

'8. Flowers &atering 2td has a /ecember )1 year-end. 9n September they boughtSupplies of ;+88 and recorded the entry for the purchase. t year-end+ a countof supplies shows they ha#e ;'+'48 left+ what is the entry to record the suppliesused%

/r &r a. Supplies '+'48 &ash '+'48 b. Supplies 6"pense '+'48 Supplies '+'48c. Supplies 6"pense '+)'8

Supplies '+)'8d. Supplies '+'48 Supplies 6"pense '+'48

!S(6$S

1 C 11 D

2 C 12 D

3 A 13 C

4 A 14 A

5 A 15 A

6 B 16 D7 A 17 D

8 B 18 D

9 C 19 C

10 B 20 C

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!ES'( 22 & Mar.s#

!umber of /ays Outstanding

otal 8-)8 )1-8 1-78 71-1'8 o#er 1'8

ccounts $ecei#able ;)88+888 ;13+'08 ;'+188 ;03+888 ;7+788 ;)+308

6stimated Percentage


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Ans9er Continued

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!ES'( 23 & Mar.s#

=& &o. started its operations on /ecember '8+ '81'. =& &o. purchases in#entory onaccount from multiple suppliers but makes only cash sales. he company is happy toha#e appropriate technology to keep a perpetual record of its in#entory. On /ecember )1+

'81'+ the company had an ending in#entory of )8 units at a unit price of ;1).?anagement has decided to use F9FO costing of in#entory. he following informationrelates to the month of *anuary '81) for =& &o.5

Date Description nits nit +rice

*an. ' Purchase 1'8 ;1*an. 3 Sale 18 14*an. 7 Purchase 118 11*an. 18 Purchase return 18 11*an. '0 Sale 08 10

,e5uired6

a# Prepare all ,ournal entries for the month of *anuary for =& &o.:# /etermine the ending in#entory amount for =& &o. as at *anuary )1+ '81).(c)=& &oGs management finds out that the net realizable #alue of each product is ;1.

(hat will be the ending in#entory amount for =& &o. at *anuary )1+ '81) after

this finding%

ASWE,-

a# *ournal 6ntries5

*an. ' ?erchandise 9n#entory 148 D1 markEccounts Payable D1'8 K ;1E 148

*an. 3 &ash '0'8 D1 markESales $e#enue D18 K 14E '0'8

&ost of Boods Sold 17)8?erchandise 9n#entory D)8 K 1)EHD118 K 1E 17)8

*an. 7 ?erchandise 9n#entory D118 K 11E 1'18 D1 markEccounts Payable 1'18

*an. 18 ccounts Payable D18 K 11E 118 D1 markE?erchandise 9n#entory 118

*an. '0 &ash D08 K 10E 308 D1 markESales $e#enue 308

&ost of Boods Sold D18 K 1EHD8 K 11E 048?erchandise 9n#entory 048

:# 6nding 9n#entory *anuary )1+ '81)ll 8 units belong to purchase of *an. 75 8 K ;11 J ;8 D' marksE

c# 6nding 9n#entory *anuary )1+ '81)&ost J ;8 !$L J 8 K ;1 J ;48

2ower of cost and !$L J ;8 D1 markE

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!ES'( 24 11 Mar.s#

'ES; C(,+(,A'(

;

ccounts payable 17+308

ccounts recei#able 108+088

ccumulated depreciation-buildings )3+088

ccumulated depreciation-equipment '0+888

=uildings '08+888

&ash '1+'08

&ommon shares )30+888

/i#idends 7+'086quipment '+088

Boodwill )4+888

2and ''+'08

2ong-term in#estments )+308

?erchandise in#entory )31+'08

?ortgage payable Dlong-termE 70+308

?ortgage payable due within one year )1+'08

Prepaid e"penses 17+088

$etained earnings+ )1 *anuary+ '81' '17+088

Short-term bank loan payable '08

Profit for the year ended )1 *anuary '81' )+308

he abo#e information relates to !9!6S9L &O$PO$9O! whose year end is )1*anuary '81'.

$6C


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Ans9er Continued-

'ES; C(,+(,A'(

Statement o= Changes in E5uit>

?anuar> 317 2012

Common Shares ,etained Earnings 'otal E5uit>ear @387000 @1&7000 @*07000

+ro=it @ 43780 @ 43780

@22&780 @*03780

Diidends @ %720# @ %720#

End o= Bear @387000 @21%700 @%4700

ear - mar.

+ro=it - mar.

Diidends - mar. End o= Bear - mar.

!9!6S9L &O$PO$9O!

Statement of Financial Position

*anuary )1+ '81'

&urrent ssets

&ash '1+'08

ccounts $ecei#able 108+088

?erchandise 9n#entory )31+'08

Prepaid 6"penses 17+088

otal &urrent ssets 0'+088

6ach asset and total J .0 mark " 0 J '.0 marks

9n#estments .0 mark )+308

Property+ plant+ and equipment

2and ''+'08

=uildings '08+888

2ess5 ccumulated depreciation )3+088 '1'+088

6quipment '+088

2ess5 ccumulated depreciation '0+888 )3+088Boodwill )4+888 )18+'08

otal assets 71+0886ach &arrying mountJ .0 mark " J ' marks !o marks for total of 2 assets.

2iabilities

&urrent liabilities

ccounts payable 17+308

=ank loan payable '08

?ortgage payable due within one year )1+'08otal current liabilities ''+'086ach liability and total J .0 mark " J ' marks !on-current liabilities

?ortgage payable .0 mark 70+308

otal liabilities .0 mark )''+888

ShareholdersM equity

&ommon shares .0 mark )30+888

$etained 6arnings .0 mark '17+088 07+088

71+088

'

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ADM 1340 Midterm Exam Feb1-2013-Solutions