FINANCIAL ACCOUNTING PRINCIPLES (BAT4M) FINAL EXAMINATION

Transcription

1 Canadian International Matriculation Programme Sunway College FINANCIAL ACCOUNTING PRINCIPLES (BAT4M) FINAL EXAMINATION Date : 6 June 2017 Time Length Lecturer : 8:30 a.m. 10:30 a.m. : 2 hours : Ms Rehnu Marimuthu Student Name : Period : Please read the following instructions carefully before you begin the examination: 1. This exam paper has 14 printed pages including cover page. 2. The examination is worth 20% of your final mark. 3. The examination consists of three parts. PARTS CONTENT MARKS A Multiple Choice Questions 20 (Knowledge & Understanding) B Thinking & Application 40 C Communication 24 Total All answers must be written in the space provided. 5. Answers must be written in standard English format for an academic audience. 6. Scientific or Graphing Calculator and only paper-based dictionaries are permitted. 7. Answers must be written in pen (black or blue only) or pencil. For office use only: K/U T/I C A TOTAL

2 PART A: MULTIPLE CHOICE QUESTIONS (K/U) Designate the best answer for each of the following questions. (20 Marks) 1. The balance sheet is frequently referred to as a. an operating statement. b. the statement of financial position. c. the statement of cash flows. d. the statement of owner's equity. 2. A debit is not the normal balance for which account listed below? a. Drawing b. Cash c. Accounts Receivable d. Service Revenue 3. If an individual asset is increased, then a. there must be an equal decrease in a specific liability. b. there must be an equal decrease in owner's equity. c. there must be an equal decrease in another asset. d. All of these answer choices are possible. 4. If services are rendered for credit, then a. assets will decrease. b. liabilities will increase. c. owner's equity will increase. d. liabilities will decrease. 5. If expenses are paid in cash, then a. assets will increase. b. liabilities will decrease. c. owner's equity will increase. d. assets will decrease. 6. A debit to an asset account indicates a. an error. b. a credit was made to a liability account. c. a decrease in the asset. d. an increase in the asset. 7. The double-entry system requires that each transaction must be recorded a. in at least two different accounts. b. in two sets of books. c. in a journal and in a ledger. d. first as a revenue and then as an expense.

3 8. A credit is not the normal balance for which account listed below? a. Capital account b. Revenue account c. Liability account d. Drawings account 9. The best interpretation of the word credit is the a. offset side of an account. b. increase side of an account. c. right side of an account. d. decrease side of an account. 10. An accountant has debited an asset account for $1,200 and credited a liability account for $500. What can be done to complete the recording of the transaction? a. Nothing further must be done. b. Debit an owner's equity account for $700. c. Debit another asset account for $700. d. Credit a different asset account for $ If a company determines cost of goods sold each time a sale occurs, it a. must have a computer accounting system. b. uses a combination of the perpetual and periodic inventory systems. c. uses a periodic inventory system. d. uses a perpetual inventory system. 12. The Merchandise Inventory account is used in each of the following for a perpetual inventory system except the entry to record a. goods purchased on account. b. the return of goods purchased. c. payment of freight on goods sold. d. payment within the discount period. 13. If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the a. Merchandise Inventory account will be increased. b. Merchandise Inventory account will not be affected. c. seller will bear the freight cost. d. carrier will bear the freight cost. 14. In a perpetual inventory system, the Cost of Goods Sold account is used a. only when a cash sale of merchandise occurs. b. only when a credit sale of merchandise occurs. c. only when a sale of merchandise occurs. d. whenever there is a sale of merchandise or a return of merchandise sold.

4 15. A credit granted to a customer for returned goods requires a debit to a. Sales Revenue and a credit to Cash. b. Sales Returns and Allowances and a credit to Accounts Receivable. c. Accounts Receivable and a credit to a contra-revenue account. d. Cash and a credit to Sales Returns and Allowances. 16. If goods in transit are shipped FOB destination a. the seller has legal title to the goods until they are delivered. b. the buyer has legal title to the goods until they are delivered. c. the transportation company has legal title to the goods while the goods are in transit. d. no one has legal title to the goods until they are delivered. 17. Freight terms of FOB shipping point mean that the a. seller must debit freight out. b. buyer must bear the freight costs. c. goods are placed free on board at the buyer's place of business. d. seller must bear the freight costs. 18. For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except a. to check the accuracy of the records. b. to determine the amount of wasted raw materials. c. to determine losses due to employee theft. d. to determine ownership of the goods. 19. The term "FOB" denotes a. free on board. b. freight on board. c. free only (to) buyer. d. freight charge on buyer. 20. Beginning inventory plus the cost of goods purchased equals a. cost of goods sold. b. cost of goods available for sale. c. net purchases. d. total goods purchased.

5 PART B: THINKING & APPLICATION (40 marks) Question 1 Ritchie Company, which uses a periodic inventory system, had a beginning inventory on May 1, of 400 units of Product KJ at a cost of $7 per unit. During May, the following purchases were made. Purchases May units at $ units at $ units at $ units at $13 1,350 Ritchie Company sold 1,200 units of Product KJ during the month of May. Instructions: a) Compute the ending inventory for 31 May under the FIFO method. (3 marks) b) Compute the cost of goods sold for 31 May under the FIFO method. (5 marks)

6 c) Compute the ending inventory for 31 May under the LIFO method. (3 marks) d) Compute the cost of goods sold for 31 May under the LIFO method. (5 marks) e) Compute the ending inventory for 31 May under the Average-Cost method. (2 marks) f) Compute the cost of goods sold for 31 May under the Average-Cost method. (2 marks)

7 Question 2 Ran Brothers Co. sells Christmas angels. Ran Brothers determines that at the end of December, it has the following aging schedule of Accounts Receivable. Not Yet Number of Days Past Due Customer Total ($) Due Over 90 Claudia Uma Sue Jean Novil , Estimated Percentage Uncollectible 1% 5% 10% 20% 50% Total Estimated Bad Debts Expense Instructions: a) Fill up the blanks in the above schedule for the total estimated bad debts expense. (3 marks) b) Record bad debts expense if the Allowance for Doubtful Accounts has a debit balance $120. (3 marks) c) Record bad debts expense if the Allowance for Doubtful Accounts has a credit balance $120. (3 marks)

8 Question 3 Anni-Tasia Corporation purchased a machine on April 1, 2007, at a total cost of $900,000. The machine has an estimated useful life of 10 years or 1,000,000 units of output and a salvage value of $150,000. Instructions: a) Compute the annual depreciation expense for 31 December for the years 2007 and 2008 under the straight-line method. (4 marks) b) Compute the annual depreciation expense for 31 December for the years 2007 and 2008 under the units-of-activity method. Assume actual activity in terms of units of output was: ,000 units and ,000 units. (3 marks) c) Compute the annual depreciation expense for 31 December for the years 2007 and 2008 under the double-declining balance method. (4 marks)

9 PART C: COMMUNICATION (24 marks) Question The trial balance of Shadman Company contained the following information: Shadman Company Trial Balance as at 31 December 2016 Debit Credit Cash 6,500 Accounts Receivable 2,000 Supplies 3,075 Prepaid Insurance 2,000 Merchandise Inventory 500 Equipment 35,000 Accumulated Depreciation Equipment 4,000 Allowance for Doubtful Accounts 100 Notes Payable 14,000 Accounts Payable 12,000 Salaries Payable 1,300 Interest Payable 50 Unearned Rent Revenue 2,000 Owner s Capital 9,825 Owner s Drawing 2,000 Sales 20,300 Sales Return & Allowances 2,000 Sales Discount 300 Gain on Disposal 1,500 Rent Revenue 4,700 Cost of Goods Sold 3,000 Depreciation Expense - Equipment 1,000 Interest Expense 400 Salaries Expense 7,000 Supplies Expense 1,500 Rent Expense 2,000 Insurance Expense 1,500 Total 69,775 69,775 Other additional information: 1. Salaries expense is 60% selling and 40% administrative. 2. Insurance expense is 70% selling and 30% administrative. 3. Equipment is used 20% by Selling Department and 80% by Administrative Department. 4. The notes payable is a 60-months note.

10 5. Shadman Company uses a perpetual inventory system. (i) Prepare a multiple-step income statement for the year ended December 31, (12 marks)

11

12 (ii) Prepare an owner s equity statement for the year ended December 31, (2.5 marks)

13 (iii) Prepare a classified balance sheet as at December 31, (9.5 marks)

14