Canadian International Matriculation Programme Sunway College FINANCIAL ACCOUNTING PRINCIPLES (BAT4M) FINAL EXAMINATION Date : 8 December 2015 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 20 printed pages including cover page. 2. The examination is worth 30% of your final mark. 3. The examination consists of three parts. PARTS CONTENT MARKS A Multiple Choice Questions 20 (Knowledge & Understanding) B Thinking & Application 50 C Communication 30 Total 100 4. Please answer Part A on the answer sheet provided on page 5. Solutions for Part B and C 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
PART A: MULTIPLE CHOICE QUESTIONS (K/U) ----------------------------------- Please CIRCLE the correct answer on the answer sheet provided in Page 5. (20 Marks)
PART B: THINKING & APPLICATION ----------------------------------- Question 1 (50 marks) The adjusted trial balance of Applesauce Store contained the following information: Applesauce Store Trial Balance as at 31 December 2014 Debit Credit Equipment $ 110,000 Building 190,000 Accumulated Depreciation - Equipment $ 42,900 Accumulated Depreciation Building 52,500 Cash 23,800 Accounts Receivable 50,300 Prepaid Insurance 2,400 Merchandise Inventory 75,000 Accounts Payable 79,300 Interest Payable 8,000 Property Tax Payable 4,800 Sales Commission Payable 4,300 Utilities Payable 1,000 Mortgage Payable 80,000 Owner s Capital 60,300 Owner s Drawings 28,000 Sales 628,000 Sales Returns and Allowances 5,000 Sales Discount 3,000 Interest Revenue 4,000 Purchases 307,400 Purchase Return and Allowances 8,000 Purchase Discounts 15,000 Freight-in 10,000 Freight-out 2,000 Insurance Expense 7,200 Interest Expense 11,000 Office Salaries Expense 32,000 Sales Salaries Expense 76,000 Sales Commission Expense 14,500 Property Tax Expense 4,800 Utilities Expense 12,000 Depreciation Expense - Equipment 13,300 Depreciation Expense Building 10,400 988,100 988,100
Other additional information: 1. Merchandise inventory on December 31, 2014, is $27,000. 2. Equipment and building are used 60% by Selling Department and the remaining by Administrative Department. 3. Utilities Expense and Insurance Expense are 70% selling and 30% administrative. 4. $20,000 of the mortgage payable is due for payment next year and the remaining balance in the subsequent years. 5. Applesauce Store uses a periodic inventory system.
Instructions: (i) Prepare a multiple-step income statement for the year ended December 31, 2014. (18 marks)
(ii) Prepare a classified balance sheet as at December 31, 2014. (12 marks)
Question 2 The balance sheet of Coconut Company shown below does not balance. COCONUT COMPANY Balance Sheet as at 31 December 2014 Assets Cash 2,600 Accounts Receivable 7,600 Supplies 6,000 Equipment 8,300 24,500 Liabilities Accounts Payable 9,766 Owner s Equity Owner s Capital 11,557 21,323 An examination of the ledger and journal reveals the following errors: 1. Cash of $360 received from a customer on account was debited to Cash $630 and credited to Accounts Receivable $630. 2. A credit posting to Sevice Revenue for $2,500 was omitted. 3. A withdrawal of $800 by the owner was posted as a credit to Owner s Drawing, $800 and credit to Cash $800. 4. A payment on account for $1,130 was debited to Accounts Payable for $1,130 and credited to Cash for $1,130 twice. 5. A cash purchase of supplies for $2,400 was posted as debit Supplies $4,200 and credit Accounts Payable $2,400. 6. The purchase of equipment on acccount for $225 was debited to Equipment for $252 and debited to Accounts Payable $225.
Instructions: Prepare a correct balance sheet. (10 marks)
Question 3 Whatever Company purchased equipment on January 1, 2007 for $70,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life. Instructions: Answer the following independent questions. (i) Compute the amount of depreciation expense for the year ended December 31, 2007, using the straight-line method of depreciation. (1 mark) (ii) If 16,000 units of product are produced in 2007 and 24,000 units are produced in 2008, what is the book value of the equipment at December 31, 2008? The company uses the units-of-activity depreciation method. (4 marks)
(iii) If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation Equipment account at the end of its useful life? (5 marks)
PART C: COMMUNICATION ----------------------------------- (30 marks) 1) List down the types of adjusting entries and briefly explain each of the adjusting entries. (10 marks)
2) Briefly explain the advantages of subsidiary ledgers. (8 marks)
3) Briefly explain the advantages and disadvantages of perpetual inventory system against periodic inventory system. (12 marks)