Accounting 2610Final Practice ExamTOTALPark CompanyAccounting 2610 Final Practice ExamProfessor Xiumin Martin Fall 2011Name ___________________________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 11 pages and has 100 points available. 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 ReceivedQuestion I 8Question II 15Question III 30Question IV 16Question V 32TOTAL 100Question I (8 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. At the beginning of the year, the firm delivered products costing $30 to customers who paid $50 for these products in the prior year. Balance sheet: Income statement: Retained earnings portion of the statement of shareholders’ equity:Cash flow statement: 2. Three month after the beginning of the fiscal year, the firm purchased a headquarter building for $120 cash. The building has an estimated salvage value of $40 and useful life of 10 years. The firm uses the straight line method of depreciation.Balance sheet: Income statement: Retained earnings portion of the statement of shareholders’ equity: Cash flow statement: Question II (15 points) You have been hired as the accountant to prepare financial statements for Hungry Dog, Inc.Unfortunately, on your way to deliver the statements to the client, one of their pets decided that the financial statements that you’ve prepared would make a tasty treat. You were able to salvage the following information:Hungry Dog, Inc. Hungry Dog, Inc.Balance Sheet Income StatementYear-Ending Dec. 31, 200412/31/2003 12/31/2004ASSETS REVENUESCash ( C ) ( D ) Sales Revenue 70,000Accounts Receivable 5,000 5,500 Cost of Sales ______(A)____Inventory 10,000 13,000 Gross Margin 30,000Plant & Equipment (net) 15,000 _____( F )Total Assets ( B ) ???? OTHER EXPENSES======= ======= Wages Expense 18,000LIABILITIES Overhead Expense 5,000Accounts Payable 3,000 5,000 Total Other Expenses 23,000Notes Payable 6,000 6,000Total Liabilities 9,000 11,000Net Income ????EQUITY =======Contributed Capital 20,000 20,000Retained Earnings 5,000 ( E )Total Equity 25,000 ???? Hungry Dog, Inc.Statement of Cash FlowsTotal Liabilities and Equity 34,000 ???? Year-Ending Dec. 31, 2004======= =======Cash from Operations 6,000 Cash from Investing (3,000)Cash from Financing (2,000)Net Change in Cash ????Based on other shreds of information, you’ve also been able to determine that:(i) That “Cash from Investing” related to a purchase of Plant and Equipment, and that no Plant and Equipment was sold during the year.(ii) The only “Financing” activity was a payment of dividends in the amount of $ 2,000. Using the above information, please provide the items indicated on the following page:A. (2) Cost of Sales for Year-Ending Dec. 31, 2004: ___________________B. (2) Total Assets as of December 31, 2003: ___________________ C. (2) Cash Balance – December 31, 2003: ____________________D. (2) Cash Balance - December 31, 2004: _____________________E. (3) Retained Earnings – December 31, 2004: ____________________F. (2) Plant and Equipment – December 31, 2004: ____________________G. (2) How much “Depreciation Expense” is included in the line item “Other Expenses” on the Income Statement for the year-ending December 31, 2004?Question III (30 points)The KnickKnack Shop buys Thigamajigs in quantity, and sells them in smaller lots.The business was started on January 1, 1980, and recently celebrated their fifteenth anniversary. The KnickKnack Shop decided to use a Periodic LIFO Inventory valuation system, and their December 31, 2004 Inventory was composed of the following layers. 1980 Layer: 2,000 Thigamajigs @ $ 10 $ 20,000 1987 Layer: 4,000 Thigamajigs @ $ 20 80,000 1996 Layer: 3,000 Thigamajigs @ $ 30 90,000 2004 Layer: 1,000 Thigamajigs @ $ 40 40,000 Inventory as reported on Dec. 31, 2004 Balance Sheet $ 230,000 During 2005, KnickKnack had the following Inventory transactions: Jan. 1, 2005 – Mar. 18, 2005: Sold 4,000 Thigamajigs @ $ 100 each March 19, 2005: Purchased 10,000 Thigamajigs @ $ 45 each Mar. 20, 2005 – Dec. 30, 2005: Sold 11,000 Thigamajigs @ $ 120 eachBased on the information provided above,
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