Exam 1 ACC1300-8 Fall 2010 - Solution

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KEY

Name___________________________________

(Please print)

ACC 1300 - Financial Accounting

Fall, 2010 Exam I

Professor Shimoff

Instructions:

y You have 1 hour and 15 minutes to complete the test.

y This test is closed-book and closed-notes.

y Please write legibly.

y Please write down all your calculations so that I can understand how you arrive at your answers.

y Be sure you label accounts with specific titles, and indicate increases and decreases clearly.

I pledge my honor that I have neither received nor provided unauthorized assistance during the completion

of this work.

Signature



1. Transactions analysis. 15 points. Using the template provided, record the effect on the balanc

transaction described below. No adjusting transactions are necessary. Specify account titles, am

(increase or decrease) of the effect.a. On September 1, 2010, Lucy Piniella creates a business called Cubbies to operate a day care center. The

from Lucy in exchange for Cubbies stock.

b. On September 3, Cubbies purchases supplies costing $830 on account.

c. On September 15, the company pays its employees $2,600 for their work during the first half of the mon

d. On September 30, the company collects $19,000 from customers for day care provided in September.

e. On September 30, two customers pay Cubbies $3,000 in advance for day care that will be provided in Oc

ASSETS LIABILITIES

Cash Supplies A/P Unearned

Rev

Co

Ca

A 40000

B 830 830

C (2600)

D 19000

E 3000 3000



2. Is it revenue in March? 10 points. Consider separately each event below, and indicate (i.e., answer

yes or no) whether the company should recognize revenue (under the accrual basis, as required by

generally accepted accounting principles) in an income statement for the month of March.

a. The publisher of Trout Illustrated delivers magazines in March. Customers paid for their annual

subscriptions in January.

Is it revenue in March? Yes

b. A custom T-shirt manufacturer completes production of an order for an upcoming rock concert.

The manufacturer will deliver the T-shirts in April and will collect on delivery.

Is it revenue in March? NO

c. The Boston Red Sox sell and collect for season tickets in March. The season begins in April.


d. Target Stores collects cash in March from customers for sales made on account in January.


e. NewStar Real Estate Company earns rent on office space occupied by tenants in March. Under

the rental contract, the tenants will pay in June.

Is it revenue in March? YES



Problem 3: Balance sheet in good form (30 points)

From the following account balances, create a balance sheet in good format.

The following items are listed in alphabetical order. From this data prepare a properly classified

and formatted balance sheet for the Maxs Company as of December 31, 2010.

Accounts Payable $34,000

Accounts Receivable $26,700

Accumulated Depreciation $52,500

Property Plant & Equipment $484,500

Bonds Payable Due 12/31/14 $250,000

Capital Stock $200,000Cash $60,800

Cost of goods Sold $1,500,000

General Administrative Expenses $250,000

Income Tax Expense $75,000

Income Tax payable $9,700

Interest Expense $10,000

Inventory $127,900

Notes Payable due 4/15/11 $6,500

Patents $45,000Prepaid Rent $3,600

Retained earnings as of 12/31/2010 $175,000

Revenue $2,500,000

Selling Expenses $500,000

Wages payable $7,300

Unearned Revenue $13,500



Problem 3: Answer sheetBalance sheet for Maxs Company

Assets

Cash $ 60,800

Accounts Receivable $ 26,700

Inventory $ 127,900Prepaid Rent $ 3,600

Patents $ 45,000

PPE $ 484,500

Accumulated Depreciation $ (52,500)

Total Assets $ 696,000

Liabilities

Accounts Payable $ 34,000

Wages Payable $ 7,300

Income Taxes Payable $ 9,700Unearned Revenue $ 13,500

Notes Payable $ 6,500

Bonds Payable $ 250,000

Total Liabilities $ 321,000

Shareholders Equity

Capital Stock $ 200,000

Retained Earnings $ 175,000

Total Shareholders Equity $ 375,000

Total Liabilities and Shareholders Equity $ 696,000



Problem 4 (adjusting entries: 18 points) For each independent transaction below record the

original transactionAND adjustment (if needed) at the END OF DECEMBER (2009) in preparing

the ANNUAL balance sheet for Marina Bay Fishing. Specify account titles, amounts and the

direction (increase or decrease) of the effect.

a) Marina Bay Fishing has a customer who paid $2,400 in cash for 1 years worth of fish bait to be delivered at the beginning of each month. The contract started on

October 1, 2009.

b) Marina Bay Fishing bought a beautiful sports fishing boat on July 1st

, 2009 for

$100,000 with half with cash and half with a bank loan. The boat has a useful life

of 5 years and a salvage value of $5,000.

c) The bank loan from b) calls for interest payments every twelve months on June

30th

. The principal is to be repaid at the end of the three year loan. The annual

interest rate is 8%. (Note: only make one adjusting entry for the appropriate

portion of the year.d) Marina Bay signed a lease agreement to lease boat hauling equipment on

October 1, 2009 after their old equipment was damaged in a hurricane. Marina

Bay had to pay the first 6 months of the lease on October 1 which totaled

$48,000.

e) At the end of December, Marina Bay received an utility bill for $2,000. They will

pay this bill on January 15th of the following year.



Problem #4 Answer Sheet

ASSETS LIABILITIES

Cash PPE

Accum.

Dep

Prepaid

Lease

Unearned

RevBank Note

Interest

Payable

Ut

Pa

A1 2400 2400

A2 (600)

B1 (50,000) 100,000 50,000

B2 (9500)

C1 2000

C2 NONE

D1 (48,000) 48,000

D2 (24,000)

E1 2



5. Statement of Cash Flows. 27 points.

Presented below are 2009 and 2010 partial balance sheets for the Morrison Corporation:

Morrison Corporation

Partial Balance Sheets

As of December 31

(all amounts in thousands)

2010 2009

Assets

Cash ................................................................... $ 70 $ 65

Accounts Receivable .......................................... 130 118

Prepaid Rent ...................................................... 75 60 Total Current Assets ........................................ $ 275 $ 243

Liabilities & Shareholders Equity

Salaries Payable ................................................. 275 300

Short-term Bank Loan Payable ........................... 275 300

Interest Payable ................................................. 175 142

Total Current Liabilities .................................... 530 496

Retained Earnings .................................................. 290 190

Additional information:

y Net income for 2010 was $180, depreciation expense for 2010 was $42, Revenue for 2010 was

$250, Salary Expense was $400 in 2010, and Interest expense was $50.



Problem 5A: How much cash did Morrison collect from its customers in 2010? ____$238_____

250 - 12

Problem 5B: How much in dividends (if any) were paid in 2010? ___$80__________

Problem 5C: How much did Morrison pay its workers in 2010? ______$425_________

Problem 5 D: Prepare the operating section of a statement of cash flows for 2010 using the indirect

method.

Morrison Corporation

Statement of Cash Flows

For the year ending December 31, 2010

Net Income $ 180

Depreciation $ 42

A/R $ (12)

Prepaid Rent $ (15)

Salaries Payable $ (25)

Interest Payable $ 33

Operating Cash

Flows $ 203

Documents

Exam 1 ACC1300-8 Fall 2010 - Solution