Accounting 2610 Final Exam Professor Xiumin Martin Fall 2011 Name ___________________________ Section ___________________________ General Instructions: Please observe the Olin School’s Code of Conduct requirements. 1. You have 2 hours to complete the exam. 2. This exam is closed book, closed notes. You may use calculators. 4. This exam packet should have 14 pages and has 102 points available with additional one page for time value tables. 5. Please check that you have all the pages. 6. Review the complete exam in order to allocate your time appropriately. 7. If a question is ambiguous, write your assumptions on the exam along with your answer. You will receive credit provided your assumptions are necessary and reasonable. 8. Write your answers neatly in the space provided. 9. You must turn in your exam packet before you leave, even if you don’t want to have it graded. 10. Monitor your time and good luck! Points Available Points Received Question I 20 Question II 15 Question III 17 Question IV 16 Question V 32 Extra credit 2 TOTAL 1022 Question I (20 points) Below is a list of items and subtotals from the financial statements (balance sheet, income statement, statement of shareholders’ equity and cash flow statement). Balance sheet: current assets, investments, net PP&E, intangibles and other assets, current liabilities, long-term liabilities, common stock, additional paid in capital, treasury stock, retained earnings. Income statement: revenues, expenses, gains, losses. Retained earnings portion of the statement of shareholders’ equity: net income, dividends. Cash flow statement: cash flow from operating activities, cash flow from investing activities, cash flow from financing activities Describe all the effects of each of the following transactions on the above items, as reported in the financial statements for the current fiscal year. For the cash flow statement part, you should only describe (and classify) actual cash flows. For example: The firm incurred administration salaries of $200 and paid $150. Balance sheet: current assets (cash) down $150; current liabilities (salaries payable) up $50; retained earnings down $200. Income statement: expense (salaries) up $200. Retained earnings portion of the statement of shareholders’ equity: net income down $200. Cash flow Statement: cash from operating activities down $150. 1. On Jan 1 of current year, the firm acquired 500 shares of its common stock at $45 per share. Subsequently on December 3 of the same year, the firm reissued 100 shares of the stock at $70 per share. Balance sheet:3Income statement: Retained earnings portion of the statement of shareholders’ equity: Cash flow statement: 2. On January 1 of the current year, the firm purchased an equipment for $50,000 cash. The equipment has an estimated salvage value of $4,000 and estimated useful life of 4 years. The firm uses double declining balance method of depreciation. Balance sheet: Income statement: Retained earnings portion of the statement of shareholders’ equity: Cash flow statement: 3. The firm wrote off bad debts $100 in January in the current year and subsequently recovered $10 in June. Balance sheet: Income statement: Retained earnings portion of the statement of shareholders’ equity: Cash flow statement: 4. The company issued bond at discount (90% of PAR) at the beginning of the current year and the PAR value is 2 million dollars. The duration of the bond is 5 years. Annual coupon interest rate is 6% and coupon is paid semi-annually. The Company uses straight line method for calculating interesting expense and amortization of bond discount. Balance sheet:4Income statement: Retained earnings portion of the statement of shareholders’ equity: Cash flow statement: 5. The firm declared 50% stock dividend. Number of shares outstanding is 5 million and PAR value is $1. Balance sheet: Income statement: Retained earnings portion of the statement of shareholders’ equity: Cash flow statement: Question II (15 points) A. The following information is for the next 3 questions (7 points). Given the following multiple step income statement of Tri-State Company Sales $75,000 Cost of goods sold: Beginning inventory (a) Purchases 24,000 Ending inventory 8,000 Cost of goods sold $28,000 Gross margin (b) Operating expenses (c) Net income $16,000 1 (3). Calculate Item (a), Beginning Inventory: A. $12,000 B. $ 4,000 C. $44,000 D. $16,000 2 (2). Calculate Item (b), Gross Margin: A. $12,0005 B. $103,000 C. $47,000 D. $28,000 3 (2) Calculate Item (c), Operating Expenses: A. $12,000 B. $33,000 C. $16,000 D. $31,000 B. The following information is for the next four questions (8 points): Town Wholesalers had the following inventory activities for 2007: Date Activity Beginning Balance 40 units @ 12 = $ 480 Purchase, Mar. 15 75 units @ 14 = $1,050 Purchase, Apr. 7 70 units @ 16 = $1,120 Purchase, Nov. 3 30 units @ 18 = $ 540 215 units $ 3,190 During 2007, 160 units were sold. 1. What is the amount of the December 31, 2007 inventory assuming that Town Wholesalers maintains a FIFO periodic inventory system? A. $ 690 B. $2,500 C. $2,250 D. $ 940 2. What is the amount of the 2007 cost of goods sold assuming that Town Wholesalers maintains a FIFO periodic inventory system? A. $ 690 B. $2,500 C. $2,250 D. $ 940 3. What is the amount of the December 31, 2007, inventory assuming that Town Wholesalers maintains a LIFO periodic inventory system? A. $ 690 B. $2,500 C. $2,250 D. $ 940 4. What is the amount of the 2007 cost of goods sold assuming that Town Wholesalers maintains a Weighted Average periodic inventory system (round to nearest whole dollar)? A. $ 816 B. $2,500 C. $2,374 D. $ 11 Question III (17 points) Part A (10 points)61. Sparkle Water Company prepares an aging schedule before preparing its adjusting journal for the Allowance for Doubtful Accounts entry at the end of each year. At December 31, 2009, the aging schedule shows the following: Age Accounts Receivable Percent Uncollectible Current $100,000 1% 30 days old 50,000 4% 60 days old 20,000 10%
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