It is most beneficial to you to write this mock midterm UNDER EXAM CONDITIONS. This means: Complete the midterm in 2 hour(s). Work on your own. Keep your notes and textbook closed. Attempt every question. After the time limit, go back over your work with a different colour or on a separate piece of paper and try to do the questions you are unsure of. Record your ideas in the margins to remind yourself of what you were thinking when you take it up at PASS. The purpose of this mock exam is to give you practice answering questions in a timed setting and to help you to gauge which aspects of the course content you know well and which are in need of further development and review. Use this mock exam as a learning tool in preparing for the actual exam. Please note: Come to the PASS workshop with your mock exam complete. During the workshop you can work with other students to review your work. Often, there is not enough time to review the entire exam in the PASS workshop. Decide which questions you most want to review the Facilitator may ask students to vote on which questions they want to discuss in detail. Facilitators do not bring copies of the mock exam to the session. Please print out and complete the exam before you attend. Facilitators do not produce or distribute an answer key for mock exams. Facilitators help students to work together to compare and assess the answers they have. If you are not able to attend the PASS workshop, you can work alone or with others in the class. Good Luck writing the Mock Exam!! Dates and locations of mock exam take-up: Tuesday October 30 6-8pm SA 416, Thursday November 1 6-8pm MC 5050
1. Accounts on the Statement of Financial Position are ordered in: a) Decreasing value b) Increasing value c) Alphabetically d) Order of Liquidity 2. The requirement for an asset to be considered current is: a) Will be used in two years or less b) Will be used in 6 months or less c) Will be used in 1 year or less d) Will be sold in 1 year or more 3. Which of the following transactions defies the basic accounting equation? a) Increase Shareholders Equity, decrease Liability b) Increase Current Asset decrease Non-Current Asset c) Increase Shareholders Equity, increase Liability d) Decrease Liability, decrease Asset 4. Which of the following statements is untrue? a) Debits increase asset accounts, credits increase liability and shareholder s equity accounts b) The net effect on the Balance Sheet is $0 when an asset increases by $300 and cash decreases by $300 c) An asset can carry a credit balance d) Selling more shares of your company would result in an increase in common shares, resulting in a debit to Shareholders Equity 5. On March 1 20x8, Stripes Inc. was paid $10 for a future job to be completed. Which of the following statements is true? a) Under accrual accounting, debit unearned revenue $10, credit cash $10 b) Under accrual accounting, debit cash $10, credit unearned revenue $10 c) Under accrual accounting, debit A/R $10, credit unearned revenue $10 d) Under accrual accounting, debit unearned revenue $10, credit A/P $10
6. You take out a bank loan for $100 on Nov. 1 20x8. Interest is 6%, compounded annually, payments are made on the first of every month. On your year end, Dec. 31 20x8, what will be the balance in the Interest Expense account? a) $1 b) $500 c) $6 d) $3 7. You purchased a one year insurance policy for $2 400 on April 1 20x8. What will the balance in the Prepaid Insurance account be on December 31 20x8? a) $1 800 b) $0 c) $600 d) $200 8. On May 1 20x8, Ravens Inc. had $1234 of supplies on hand. Over the course of the month, they bought $567 of supplies. At the end of the month they did a physical inventory of supplies and counted $890. What is the transaction to record this? a) DR Cash $911 CR Supplies $911 b) DR Supplies Expense $911 CR Supplies $911 c) DR Supplies Expense $890 CR Supplies $890 d) DR Supplies 9. In order to prepare for fiscal year end, several accounts must be closed. Which of the following statements is untrue? a) All income statement accounts are temporary and therefore must be closed. b) All accounts are closed by debit/crediting them their total balance, depending on what balance they are currently carrying c) The difference that occurs between total debits and credits is the net income/loss d) Retained Earnings can ONLY be credited during closing transactions
10. In preparing a bank reconciliation for Dec. 31 20x7, you noticed a cheque for $690 to pay an account payable had been written as $960 by mistake. Which of the following statements is true to correct the mistake? a) Deduct $270 from the balance per books b) Deduct $270 from the balance per bank c) Add $270 to the balance per bank d) Add $270 to the balance per books 11. How would you record purchasing 10 shares at $10/share through FVTPL? a) DR FVTPL Investment $100 CR Cash $100 b) DR Loss on Investment $100 CR Cash $100 c) DR Cash $100 CR Gain on Investment $100 d) DR FVTPL Investment $100 CR Accounts Payable $100 12. While preparing a bank reconciliation, Marbles Co. started with a balance per books of $5. There were two NSF cheques totaling $300, and the bank service charges amounted to $40. The outstanding cheques totaled $500 and outstanding deposits totaled $750. What is the balance per bank? a) $4 660 b) $3 500 c) $4 910 d) $4 410
13. Pinetree Co. began operations on Jan. 1 20x7 and has a fiscal year end on Dec. 31. Pinetree Co. estimates that approximately 4% of all credit sales will not be collected. In 20x7 they made $400 of cash sales and $200 of credit sales. They received $175 in payments on account of credit sales. They wrote off $10 of credit accounts, and recovered nothing from accounts previously written off. What is the transaction to record bad debt expense? a) DR Bad Debt Expense $10 CR A/R $10 b) DR Allowance for Doubtful Accounts $8 CR A/R $8 c) DR Bad Debt Expense $8 CR Allowance for Doubtful Accounts $8 d) DR Allowance for Doubtful Accounts $10 CR A/R $10 14. BUSI Inc decided to turn an outstanding A/R into a note receivable on June 1 20x7. The note is $75, interest is 7% and payments are due on the first of every month starting July 1. What is the journal entry to record this transaction? a) DR Notes Receivable $75 CR Accounts Receivable $75 b) DR Accounts Receivable $75 CR Notes Receivable $75 c) DR Cash $75 CR Accounts Receivable $75 d) DR Notes Receivable $75 CR Cash $75 15. Royale Co. enters a two-year service contract on Jan. 1 20x6 at a contracted price of $400. At the time, the total costs are estimated to be $250. For the first year, total costs incurred amounted to $75, and they expected to incur $130 to finish the project. What is the revenue and profit to be realized for 20x6? a) Revenue to be realized = $228, Profit to be realized = $111 150 b) Revenue to be realized = $148, Profit to be realized = $72 150 c) Revenue to be realized = $400, Profit to be realized = $150 d) Revenue to be realized = $120, Profit to be realized = $58 500
16. (6 marks) Oakwood Inc. began operations Jan. 1 20x8 and calculates its allowance for doubtful accounts by aging the accounts receivable based on the following percentages: Days Past Invoice Date % Estimated Uncollectible 0-30 1% 31-60 6% 61-90 20% 90+ 60% In 20x8 they had $700 of credit sales, collected $500, and wrote off $30. At Dec. 31 20x8, their accounts receivable were distributed as follows: Days Past Invoice at Dec 31 0-30 $95 31-60 40 61-90 20 90+ 10 Prepare all journal entries to record the above transactions. 17. (9 marks) On January 1 20x8, Cubebox Inc signed a 3 year service contract for $500, total costs are estimated to be $300. In the first year, costs amounted to $120, and Cubebox estimated there would be $185 of future costs. Costs for the second year amounted to $95, Cubebox estimated there would be $100 of future costs. Calculate the revenue and profit to be realized for 20x8 and 20x9. 18. (10 marks) On May 1 20x7 you bought 5 shares of Sureway Co (or SW for short) for $5 each. Your SW shares are classified as FVTOCI. The market price per share is as follows: Date Market Share Dividend Paid May 1 20x7 $5 - Dec 31 20x7 $5.5 $2.5 Dec 31 20x8 $4.75 0 Dec 31 20x9 $6 $3 Prepare all journal entries associated with the investment.
19. (20 marks) LL Kool J opened a lawn mowing business on January 1 20x8 because he loves the smell of fresh cut grass. He started by investing $50 of his own money, and calling the business FreshGrass Inc. Below is a list of all transactions that occurred during the fiscal year 20x8. Jan 1. Signed on to a 1 year lease, monthly rent is $1 250, paid first and last rent. Jan 1. Bought $4 worth of lawn care equipment, the lawn care equipment will be depreciated using the straight-line method and will be useful for 5 years. Jan 12. Bought a one year insurance policy for $3 600, it will be effective Feb 1 20x8 Jan 31 20x9. Jan 20. Hired a receptionist, weekly salary is $430. Jan 30. Bought $2 of supplies on account Feb 1. Tom Harby is LL Kool J s first customer and pays for an entire year s worth of lawn care up front. FreshGrass Inc was paid $1 200 for monthly lawn care services. Feb 5. FreshGrass Inc completed $2 of lawn care for their next-door neighbor, who paid on account. Feb 10. FreshGrass paid $1 of its account payable. Feb 15. Replenished supply closet by purchasing $750 of supplies on account. Feb 28. Did a physical count of supplies inventory, LL Kool J found he had only $400 of supplies on hand. It is now February 28 th (the last day of the month). Prepare all initial and adjusting entries for the above transactions.