THE UNIVERSITY OF THE WEST INDIES ST.

AUGUSTINE
2008

EXAMINATIONS OF

DECEMBER

Code and Name of Course: ACCT 1002 Introduction to Financial Accounting Date and Time: INSTRUCTIONS TO CANDIDATES: This paper has 6 pages and 3 questions.

Paper: B.Sc. Duration: 2 hrs.

INSTRUCTIONS:

Past Papers with Multiple Choice and/or True/False questions will no longer be distributed in our database due to Examinations policy.

ALL questions must be attempted. Total marks for the examination 75 marks. Question 1 is worth 15 marks and has 10 multiple-choice questions, each worth 1.5 marks. An Answer Sheet is provided for the multiple-choice questions. Record your response on the Answer Sheet provided by shading the appropriate letter corresponding to your answer choice. In the event that you wish to change your answer to any of the questions, you should thoroughly erase the previous answer(s) and then shade your new answer. Attach the multiple-choice Answer Sheet to the Final Examination Script. Questions 2 and 3 are multi-part questions worth 30 marks each, giving a total of 60 marks. These questions consist of three parts each. Show ALL workings. The use of non-programmable calculators will be permitted.

The University of the West Indies

Course Code: ACCT 1002

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page 4 Question 2 i. The following information is available for Island Nites Co. at August 31, 2007: 1. 2. The bank statement balance is $23,195.85 The following cheques were issued in August but were not included among the paid cheques returned by the bank with the August bank statement: Cheque # Amount 00556 $840.00 00570 $354.25 00571 $451.30 A credit memorandum returned with the bank statement showed that the bank had collected a customers note for Island Nites Co. and had credited the amount collected, $800 to the companys account. Two debit memoranda accompanied the bank statement as follows: - Service charge for collection of note - $2.50 - A cheque received from Rook Co. on August 10 for $200, deposited by Island Nites Co. on that date, was returned by the bank marked Insufficient Funds (NSF) The business records show cash of $22,009.85 Cash receipts of $1,057.05 were deposited on August 30 via the banks night safe facility, but did not appear on the bank statement until September 3, 2007

3.

4.

5. 6.

Required: a) Prepare a bank reconciliation as at August 31, 2007 12 marks b) How much cash is actually available for immediate disbursement by Island Nites Co.? 1 mark c) Journalize the entries that should be made by Island Nites Co. 2 marks Total 15 marks

ii.

Kneehigh Sox Co. was established in October 2007. The Co. established a petty cash fund of $500 to permit small disbursements in cash. The fund is to be maintained on the imprest system. At the end of the first month, a summary of petty cash vouchers show petty cash expenditures of $22.75 for transportation costs associated with the purchase of inventory, $50.80 for postage stamps, and $19.05 for delivery charges in connection with the sale of goods. By the end of the third month of operations, a decision is taken to reduce the fund to $150.

Required: a) Prepare the journal entry to record establishment of the fund b) Record the replenishment of the fund at the end of the first month c) Journalize the reduction in the fund 1 mark 3 marks 1 mark 5 marks

The University of the West Indies

Course Code: ACCT 1002

08/..../...../

page 5 Question 2 (contd) iii. Journalize the following transactions Required: a) Mar. 1: Received a 90-day, 10% note for $36,000, dated March 1, from Burke Co. on account. 2.5 marks b) May 30: The note of March 1 was dishonored 3.5 marks c) Accepted $33,000 in full settlement of the amount owed on the note dishonored on May 30. The allowance method of accounting for uncollectible receivables is used. 4.0 marks Total 10.0 marks . Question 3 i. The following data is available: Cost $300,000 327,250 Retail $450,000 515,000 350,000

Feb. 1 Merchandise inventory 2-28 Purchases (net) 2-28 Sales (net) Required:

a) Determine the estimated cost of the inventory as of February 28 by the retail method, presenting details of the computation in good order 5 marks st b) If at the end of the 1 quarter, sales totaled $900,000 and the cost of merchandise available for sale totaled $800,000, estimate the cost of the merchandise inventory as of the end of the quarter, based on an estimated gross profit rate of 40%. 5 marks Total 10 marks ii. Immediately prior to the process of liquidation, partners M, N, and O have capital balances of $70,000, $20,000, and $30,000 respectively. There is a cash balance of $10,000, noncash assets total $160,000, and liabilities total $50,000. The partners share net income and losses in the ratio of 2:2:1

Required: Journalize the entries to record the liquidation outlined below, using Assets as the account title for the noncash assets and Liabilities as the account title for all creditors' claims. a) b) c) d) e) Sold the noncash assets for $80,000 in cash. Divided the loss on realization. Paid the liabilities. Received cash from the partner with the deficiency. Distributed the cash to the partners. Total
The University of the West Indies Course Code: ACCT 1002

2 marks 2 marks 2 marks 2 marks 2 marks 10 marks

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page 6 Question 3 (contd) iii. Zee Co. is authorized to issue 20,000 shares of $2 par, 10% cumulative preferred stock and 30,000 shares of $8 par common stock. On January 2, the company issued 15,000 shares of preferred stock at par and 20,000 shares of common stock at $10. Retained earnings as at December 31, 2007, amount to $60,000.

Required: a) Journalize the issue of the shares . b) Prepare the stockholders equity section of the balance sheet for 2007 Total 4 marks 6 marks 10 marks

END OF EXAMINATION

The University of the West Indies

Course Code: ACCT 1002

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