ACCT101 2010-2011 TERM11

SAMPLE FINAL EXAM

(This sample final exam paper is to provide students additional practice
only. You can NOT use this sample final exam to predict your performance
in the real final exam)

INSTRUCTIONS TO CANDIDATES
1

The time allowed for this examination paper is 3 hours.

2.

You are required to answer ALL questions.

You are required to provide the answers for Part A and the answers and the
workings for Part B in the Answer Script. Please write your answers to Part A
on the FIRST page of your answer script. No penalty for incorrect answers in
Part A.

PARTA
Question 2
Question 3
Question 4
Question 5
Question 6
Question 7
Question 8

Multiple-choice questions
Bonds
equity
Account receivables
inventory
Adjusting journal entries
Ratios
Statement of cash flows

2010 checked correct. can use directly.

ACCT101

PART A
Provide the answers (in CAPITAL letter) on the first page of the Answer Script.
1. 1.
A.
B.
C.
D.

Failure to record accumulated depreciation at year-end will:

overstate assets
overstate total liabilities
understate assets
understate owners' equity

Answer is A.
Thus, fail to record accumulated depreciation will a. overstate assets; b. understate
depreciation expense.
2. When a portion of prepaid rent expires, what will be the effect on the balance sheet
equation?
A. This transaction affects only the income statement, so there will be no effect
on the balance sheet.
B. There will be no overall effect on total assets, because two different asset
accounts will change by the exact dollar amount, with one increasing and the
other decreasing.
C. Total assets and total liabilities will go down by the exact same dollar amount.
D. Total assets and net income will go down by the exact same dollar amount.
Answer is D
3. On January 1, 2002, Dimaggio Shipping Company acquires equipment at a cost
of $65,000 with an estimated useful life of 10 years and an estimated salvage
value of $5,000. The company uses the double-declining balance method of
depreciation. What will be the net book value of the asset on December 31, 2003?
A.
B.
C.
D.
E.

$35,600.
$38,900.
$40,460.
$41,600.
$40,000.

Answer is D
4. In the statement of cash flows, use of cash for financing activities includes:
A.
B.
C.
D.
E.

payment of an account payable.

payment of interest.
cash used to buy equipment.
cash used to purchase treasury stock.
cash used to buy inventory.

ACCT101

Answer is D
5.

Outstanding shares of stock are:

A. authorized shares that have not yet been issued.
B. issued shares.
C. also called treasury shares.
D. issued shares that are still in circulation.

Answer is D
6. A common adjustment in the bank reconciliation process is:
A.
B.
C.
D.
E.

Outstanding checks are added to the balance per bank statement.

Outstanding checks are deducted from the balance per bank statement.
Deposits in transit are deducted from the balance per bank statement.
Deposits in transit are added to the balance per books.
None of above.

Answer is B
7. Skyline Mine Company acquired a mineral deposit for $6,600,000 in 2003.
Geologists estimate the deposit contains 1,500,000 tons of ore. During 2003 and
2004, Skyline Mine Company removed 350,000 tons and 400,000 tons of ore,
respectively. Assume no residual. The carrying amount of the mineral deposit on
December 31, 2004, will be:
A.
B.
C.
D.
E.

$1,760,000.
$3,300,000.
$4,840,000.
$5,060,000.
$6,600,000.

Answer is B
8. Rosie Flores owns 1,400 shares of the Osage Company. On January 13, 2005, the
Osage Company declared and issued a 4% stock dividend. The market price per share of
the Osage Company's stock is $40, and the par value is $1.50 per share. What is the
journal entry to be made by the Osage Company with respect to the stock dividend
distribution to Rosie Flores?
A. Retained Earnings
Common Stock
B. Retained Earnings
Common Stock
Additional Paid-in Capital
Cash
C. Retained Earnings
Common Stock
D. Retained Earnings
Common Stock
Additional Paid-in Capital

84
84
2,240
75
1,925
240
2,240
2,240
2,240
84
2,156
3

ACCT101

Answer is D.
9. To prepare the statement of cash flows using the indirect method:
A.
B.
C.
D.
E.

an increase in inventory is added to net income.

a purchase of a machine is subtracted from net income.
cash paid for dividends is added to net income.
a decrease in accounts payable is subtracted from net income.
depreciation expense is subtracted from net income.

Answer is D

10. Use the following selected information from PDG Company to determine the
amount that will be reported on the balance sheet for retained earnings:
Total Revenues
Total Expenses
Dividends
Beginning Cash
Ending Cash
Beginning Retained Earnings
A.
B.
C.
D.
E.

$1,100,000
$750,000
$200,000
$500,000
$430,000
$3,000,000

$3,230,000.
$3,350,000.
$3,150,000.
$3,000,000.
None of the above.

Answer is c
11. Tango Company purchased a building and land for $350,000 on June 14, 2003. If
the assets had been purchased separately, the company would have paid $210,000
for the building and $170,000 for the land. For what amount will the land be
recorded?
A.
B.
C.
D.
E.

$156,579.
$169,405.
$170,000.
$187,321.
$210,000.

Answer is A
12. Preferred stock dividends must be accounted for in the earnings-per-share
calculation. Preferred dividends are:

ACCT101

A.
B.
C.
D.
E.

added to net income in the numerator of the EPS calculation.

subtracted from common shares in the denominator of the EPS calculation.
added to common shares in the denominator of the EPS calculation.
subtracted from net income in the numerator of the EPS calculation.
None of above.

Answer is D
13. On January 1, 2003, Sandy Koufax Manufacturing Company purchased factory
equipment at a cost of $205,000 with an estimated useful life of 10 years and
$5,000 expected salvage value. What is the effect of the transaction on the year
ended December 31, 2003 statement of cash flows (direct method)?
A.
B.
C.
D.
E.

Operating activity cash outflow of $205,000.

Operating activity cash outflow of $20,500.
Investing activity cash outflow of $205,000.
Financing activity cash outflow of $205,000.
Investing activity cash inflow of $205,000.

Answer is C
14. Gomez Company received $7,200 on April 1, 2002 for one year's rent in advance.
The December 31, 2002 adjusting entry (assume no adjusting entry has been made
before December 31, 2002) is
a. debit Rent Revenue and credit Unearned Rent, $1,800.
b. debit Rent Revenue and credit Unearned Rent, $5,400.
c. debit Unearned Rent and credit Rent Revenue, $1,800.
d. debit Unearned Rent and credit Rent Revenue, $5,400.
Answer is D
Question 2
Chua Boon Limited, through its subsidiaries, is engaged in import, export and
distribution of steel and iron products and commission agents, and investment holding,
property investment and development and general merchants. To finance its expansion in
China and Malaysia, Chua Boon Ltd issued a 12-year, $1,500,000, 10% bonds on
January 1, 2005, which is dated as of January 1, 2005. The bond pays interest every June
30 and December 31, with the principal to be paid at the end of 12 years. The effective
interest rate on the bond is 12%. The company uses effective-interest amortization.
Financial
Tables
12 periods, 10%
12 periods, 12%
24 periods, 5%
24 periods, 6%

PV factor

PVA factor

0.3186
0.2567
0.3101
0.2470

6.8137
6.1944
13.7986
12.5504

ACCT101

Required:
1. Given this information and using the financial tables provided, calculate the items
A, B1 to B4, C1 to C4 and fill in the table (round to the nearest integer value and
draw the same table in your Answer Script).
Date

Interest Interest
payment expense

1-Jan-05
30-Jun-05
31-Dec-05

75,000
75,000

Date

Unamortized
Discount (or Premium)

B2
C2

B3
C3

B1
C1

Interest
payment

1-Jan-05
30-Jun-05
31-Dec-05

Discount (or Premium)

amortization

75,000
75,000

Interest
expense

Discount (or Premium)

amortization

78,707
78,929

Bond Book
Value
A
B4
C4

Unamortized
Bond Book
Discount (or Premium) Value
188,220
184,513
180,584

3,707
3,929

2. Prepare journal entries for Chua Boon Limited for these two dates (round to the
nearest integer value).
(i)
January 1, 2005
(ii)
June 30, 2005
Cash +
Discount on Bonds Payable+
Bond Payable +

1,311,780
188,220
1,500,000

Interest Expense +
Discount on Bond Payable Cash -

78,707
3,707
75,000

3. What is the balance sheet presentation of this bond for Chua Boon Limited at
December 31, 2005?
Bonds Payable
$1,500,000
Less: Discount on Bond Payable

180,584
$1,319,416

Question 3
Jenny Corporation starts business on Jan 1 2009. During 2009, Jenny Company provides
you with the following information:
(i)

The corporation sells 12,000 shares of $10 par common stock for $13.00
6

1,311,780
1,315,487
1,319,416

ACCT101

per share.
The corporation sells 5,000 shares of $50 par, 10% cumulative preferred
stock for $59 per share.
(iii) The corporation receives a building with a market value of $115,000 and
issues 6,400 shares of $10 par common stock in exchange.
(ii)

Required:
1. Prepare journal entries for each of the above transactions.
2. What is the total paid-in capital on Dec 31 2009?
Solutions:
1.
General Journal
Date
Account
Debit
i.
Cash
156,000
Common stock
Paid-in capital in excess of par - common
ii.
Cash
295,000
Preferred stock
Paid-in capital in excess of par - preferred
iii.
Building
115,000
Common stock
Paid-in capital in excess of par - common

Credit
120,000
36,000
250,000
45,000
64,000
51,000

2. Paid in capital = 120,000+ 36,000+250,000+45,000+64,000+51,000=566,000

Question 4
ABC company has fiscal year ending on December 31. The following schedule is taken
from its past three years annual reports (in US dollars). ABC Company uses the
allowance method to account for potentially uncollectible receivables.
Added to
Expenses

Write-offs

Allowance for Uncollectible Accounts

Balance at
Beginning of
Year

Balance at
End of Year

Year ended December 31, 2006

171,000

40,000

142,000

Year ended December 31, 2007

142,000

64,000

89,000

Year ended December 31, 2008

52,000

153,000

*Note: all the figures are in thousands. Provide your answers in thousands as well.
Assume that no recovery of accounts previously written off occurred.
Required:
1)

Solve for the four unknowns (A to D) in the table above

Allowance for Uncollectible Accounts:

Beginning Balance + Uncollectible Accounts Expense (MAKE a buffer) Write Off
(USE a buffer)= Ending Balance
7

ACCT101

A = 69,000
B = 117,000
B=C (last year ending is this year beginning)=117,000
D=88,000
2)

Make the journal entries related to the allowance for uncollectible accounts in
2007 (using the figure provided). (2 marks)

Dr Uncollectible Accounts Expense +

Cr Allowance for Uncollectible Receivables +
Record bad debt expense (MAKE the buffer)

64,000

Dr Allowance for Uncollectible Receivables Cr Accounts Receivable Write off bad debt (USE the buffer)

89,000
89,000

64,000

Question 5
Simon Inc. had the following inventory purchases and sales during 2005. The company
uses the perpetual inventory method.
Date
2005
Jan. 1
Feb. 5
Mar. 10
Apr. 15
May 20
Jun. 25
Nov. 30
Total

Purchased
Units
Unit
Total
Units
Price
100
$4
$400
200
$5
$1,000
100
100
$6
$600
150
$7
$1,050
200
160
$8
$1,280
710
$4,330
300

Sold
Selling
Price

Total

$10

$1,000

$11

$2,200

Required:
1)

What is the companys cost of goods sold and ending inventory in dollars at the
end of 2005 under LIFO, FIFO (rounded to a cent)?

Inventory Costing Method

COGS
8

Ending Inventory

ACCT101

$1400

$2930

$1850

$2480

FIFO
LIFO

2)

Under the current economic conditions which method (LIFO, FIFO) would put
the company in the best tax position? Why?

To be in the best tax position, the company should report lower net income. LIFO will
report the highest cost of goods sold and thus lower net income and thus lower taxes.
Question 6
Part A. Jeffery Services has the following unadjusted balances at year-end.
Cash
$13,000
Prepaid insurance
$2,100
Office supplies
$1,200
Office equipment
$12,000
Accumulated depreciation-office
$4,000
equipment
Accounts payable
$3,000
Salaries payable
0
Unearned service revenue
5,000
James Jeffery, capital
11,200
James Jeffery, withdrawals
6,000
Services revenue
15,000
Salary expense
3,900
Depreciation expense
0
Supplies expense
0
Insurance expense
0
The following information is available to use in making adjusting entries.
a. Office supplies on hand are year-end is $200
b. Prepaid insurance expired during the year is $350
c. Unearned service revenue at year-end is $3000
d. Depreciation expense for the year is $2,000
e. Accrued salaries at year-end is $1,000
Required:
Please complete the following work sheet on your answer script.
Jeffery Services Ltd. Work sheet Dec 31, 2009 (partial)
Accounts
Cash
Prepaid insurance

Trial
Balance
Debit
13,000
2,100

Adjustments
Credit

Debit

Credit
b. 350

ACCT101
Office supplies
Office equipment
Accumulated
depreciation
Accounts payable
Salaries payable
Unearned service
revenue
James Jeffery, capital
James Jeffery,
withdrawals
Service revenue
Salaries expense
Depreciation expense
Supplies expense
Insurance expense
Totals

1,200
12,000

a. 1000
4,000

d. 2000

3,000
e. 1000
5,000

c.2,000

11,200
6,000
15,000
3,900

38,200

38,200

c.2,000
e. 1,000
d. 2,000
a. 1,000
b. 350
6,350

6,350

Question 7
The condensed financial statements of Kenneth Ho Pte Ltd for the years ended
December 31 are provided below (all amounts in thousands).
Kenneth Ho Pte Ltd
Income Statement
For the year ended December 31, 2004 and 2005
Sales (All Credit Sales)
Cost of sales
Gross profit
Net operating expenses
Operating profit
Interest expense
Net Profit before taxation
Income Tax
Net Profit after taxation
Dividends:
Preference shares
Ordinary shares

2004
422
245
177
119
58
15
43
9
34

2005
410
235
175
115
60
15
45
10
35

1
20
21

1
32
33

2004

2005

1
54
88
143
219
362

7
58
82
147
208
355

55
9

45
10

Kenneth Ho Pte Ltd

Balance sheet as at December 31, 2004 and 2005
Current assets
Cash
Accounts Receivable
Inventory
Total current assets
Fixed assets
Total Assets
Current liabilities
Accounts Payable
Tax Payable

10

ACCT101
Wage Payable
Total current liabilities

21
85

21
76

10% Debentures
Total Liabilities

150
235

150
226

Shareholders' Equity
10% Preference Shares, $1 par, 10,000 outstanding shares
Ordinary Shares, $1 par, 100,000 outstanding shares
Retained Earnings
Total shareholders equity

10
100
17
127

10
100
19
129

Total Liabilities and Shareholders Equities

362

355

Calculate (to 2 decimal points) the following ratios for Kenneth Ho Pte. Ltd. for the
year ended December 31, 2005.
a.
b.
c.
d.
e.
f.

Gross profit margin

Current ratio
Quick ratio
Inventory turnover
Average Accounts receivable collection period
Debt to total assets

Gross profit margin: (net sales-cost of goods sold)/net sales=175/410=42.69%

Current ratio: current assets/current liabilities=147/76=1.93
Quick ratio: (cash + short-term investment + net account receivable)/current
liabilities=(7+58)/76=0.86
Inventory turnover: cost of goods sold/avg. inventory=235/85=2.76
Average account receivable collection period: 365/ (sales/avg. account
receivables)=56/410*365=50days
Debt to total asset: total liabilities/total assets=226/355=0.64
Question 8
Required: Use the letters below (either A or B or C) to indicate the effect of each of
the four transactions on a firm's cash flows. Your concern should be with only the
transaction described and at the date of the transaction described. Ignore related
transactions prior to or after the transaction described.
A. Increase
B. Decrease
C. No effect
Transactions
I) Sale of long-term operating asset for $20,000 cash.
The book value of the operating asset at date of sale
was $12,000.
II) Depreciation expense of $5,000 was recorded.
III) Purchase of long-term operating asset for $10,000
on a credit basis (A note is issued).
IV) Cash collection of accounts receivable = $5,000.
11

Cash Flows
1.A
2.C
3.C
4.A

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12