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WUSTL ACCT 2610 - Practice Final II Fall 2011 - KEY

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Accounting 2610Final Practice Exam II (Key)TOTALPark CompanyAccounting 2610Final Practice Exam II (Key)Professor 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. 3. This exam packet should have 11 pages and has 100 points available. In addition, there is a supplement to the exam, containing t-accounts worksheet for question V(you do not have to use it) and PV/FV tables.4. PV/FV tables. Please check that you have all the pages. 5. Review the complete exam in order to allocate your time appropriately.6. 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.7. Write your answers neatly in the space provided. 8. You must turn in your exam packet before you leave, even if you don’t want to have it graded.9. Monitor your time and good luck! Points Available Points ReceivedQuestion I 20Question II 18Question III 14Question IV 16Question V 32TOTAL 100Question I (20 points)Below is a list of items and subtotals from the financial statements (balance sheet, incomestatement, 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. Ignore the effect of incometaxes. 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: : CA (inventory) -30, CL (advances from customers) -50 RE +20 Income statement: Rev +50, Exp +30 1Retained earnings portion of the statement of shareholders’ equity: net income+20Cash flow statement: no effect2. 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 usefullife of 10 years. The firm uses the straight line method of depreciation.Balance sheet: : CA (cash) -120, PP&E +120 Income statement: no effect Retained earnings portion of the statement of shareholders’ equity: no effectCash flow statement: investing -120Also accept Balance sheet: : CA (cash) -120, net PP&E +114 (PP&E +120, acc. dep. +6), RE -6Income statement: expense +6Retained earnings portion of the statement of shareholders’ equity: net income -6Cash flow statement: investing -1203. The firm recognized a bad debt expense of $20.Balance sheet: CA -20 (allowance +20), RE –20 Income statement: Exp +20 Retained earnings portion of the statement of shareholders’ equity: net income –20 Cash flow statement: no effect 4. The firm purchased 20 of its issued shares for $50 cash.2Balance sheet: CA (cash) –50, Treasury stock +50 Income statement: no effectRetained earnings portion of the statement of shareholders’ equity: no effectCash flow statement: financing –50 5. The firm declared and paid a dividend of $100.Balance sheet: CA (cash) -100, RE -100 Income statement: no effectRetained earnings portion of the statement of shareholders’ equity: dividends +100Cash flow statement: : financing -100 Question II (18 points)For this question, use Eliot’s balance sheet, income statement, excerpts from thestatement of cash flows (in the following page) and the additional information (in thefollowing page). The required work for this question appears on the following page. Balance SheetEliot Corporation December 31, 2005 2006 ASSETSCash and cash equivalents 148,995 (a)Accounts receivable 159,360 317,798Allowance for doubtful accounts (4,670) (5,962) Property and equipment 240,611 (c)Accumulated depreciation (52,356) (70,652)Other assets 379,518 2,195,726Total assets 871,458 LIABILITIES AND STOCKHOLDERS’ EQUITYAccounts payable 46,175 32,672Wages payable 33,522 82,6313Other liabilities 189,120 268,992 Preferred stock 58,217 0 Common Stock 161 267Additional paid-in capital 352,911 2,338,318Retained earnings 191,352 (b) Total liabilities, redeemable convertible 871,458Income StatementEliot CorporationYears ended December 31, 2004 2005 2006Revenues 439,508 1,465,934 (f) Depreciation expense 12,140 15,230 (d)Bad debt expense 231 635 (e)Other Expenses 240,671 1,107,605 2,529,443Total costs and expenses 253,042 1,123,470 Interest income (expense) and other, net (1,551) 4,190 10,042 Income tax expense 85,259 241,006 251,115 Net income (loss) 99,656 105,648 399,119 Excerpts from the statement of cash flowsYears ended December 31, 2004 2005 2006Net cash provided by operating activities . . . . . . . . . . . . . . .155,265 397,107 984,616Net cash provided by (used for) investing activities . . . . . . .(109,717) (314,954) (1,901,356)Net cash provided by (used for) financing activities. . . . . . . . . . . . . . . . . . (5,473) 8,090 1,194,618Additional information:1. The company did not sell any equipment in 2006. 2. No writeoffs of bad debts occurred during 2006. 3. The company did not declare any dividends in 2006. Required:41. (18 points; 3 points for each item) Compute the missing numbers (a) – (f) inthe balance sheet and income statement. No partial credit will be given for parts (a) –(f). Record ALL your answers in the table below:A(3 points)426,873B (3


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WUSTL ACCT 2610 - Practice Final II Fall 2011 - KEY

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