Examination: 11052 Financial Accounting Mid Term, Spring 2008 Examiner: Prof. Barbara Schöndube-Pirchegger First name: Last name: Matriculation number: The following aid can be used: non-programmable calculator without communication- or text processing function. Hint: A maximum of 20 points can be reached from solving the 4 assignments below. Use the space /tables provided to enter your answers. Good Luck! Assignment 1 (4 points) Key figures have been taken from the year x5 accounts of the Peerless Company. They are given below. The accounts, however, are incomplete. Fill in the blanks which are letter-coded. (Amounts are in 000). Total liabilites, end x5 A = Expenses in x5 70 Total owners equity, start x5 30 Total assets, end x5 80 Revenues in x5 B = Capital contributed by owners in x5 10 Total liabilities, start x5 20 Total owners equity, end x5 45 Profit or loss in x5 C = Total assets, start x5 D =
Assignment 2 ( 6 points) The (unadjusted) trial balance of Clay Employment Services, Inc., given below pertains to December 31, 20x7, which is the end of Clay s annual accounting period. You are required to make the adjusting journal entries at December 31, 20x7. Data needed for the adjusting entries include: a) Depreciation on building, $1000. b) Supplies on hand at year-end, $200 c) Depreciation on furniture, $2,000. d) Salaries owed but not yet paid, $500. e) Accrued service revenue, $1,300. f) $3,000 of the unearned service revenue has been earned. CLAY EMPLOYMENT SERVICES, INC. Trial Balance December 31, 20x7 Balance Account Title Debit Credit Cash $ 6.000 Accounts receivable 5.000 Supplies inventory 1.000 Furniture 10.000 Accumulated depreciation-furniture $ 4.000 Building 50.000 Accumulated depreciation-building 30.000 Accounts payable 2.000 Salary payable Unearned service revenue 8.000 Common stock 10.000 Retained earnings 2.000 Dividends 25.000 Service revenue 60.000 Salary expense 16.000 Supplies expense Depreciation expense-furniture and fixtures Depreciation expense-building Miscellaneous expense 3.000 Total $ 116.000 $ 116.000 Required: Journalize Clay s adjusting entries at December 31, 20x7! a) Page 2 of 6
b) c) d) e) f) Page 3 of 6
Assignment 3 (5 points) On June 1, 2008, Michael Moe incorporated Moe s Mowing, Inc., a company that provides mowing and landscaping services. During the month of September, the business made the following journal entries. Required: Decide whether each entry is or. If it is, make the required entry in order to the mistake. 1) The business purchased equipment for $3,500 on account. Inventory 3,500 Accounts payable 3,500 2) The business provided $2,600 of services to a customer on account. Accounts Receivable 2,600 Unearned Service Revenue 2,600 3) The business paid $200 cash to repair equipment. Repair Expense 200 Cash 200 Page 4 of 6
4) On September 20, the business paid $150 for outstanding salaries earned in August. Salary Expense 150 Cash 150 5) 500 owed by a bankrupt customer are regarded uncollectible and therefore the business writes the amount off. Bad debt expense 500 Cash 500 Page 5 of 6
Assignment 4 (5 points) The financial year of Subtex Corp. ends June 30. On July 20 John Cover examines the pro forma financial statements of Subtex and discovers the following errors: 1) Subtex received 2000 from customers in June, 10% of which were prepayments for deliveries in July. Subtex recorded sales revenues of 2000 in June. 2) The firm bought equipment worth 1200 in June and paid cash but failed to record the purchase until July. 3) Interest payments of 120 for a loan outstanding are due and paid end of January each year and interest expense is recorded. Subtex failed, however, to accrue interest expense for that loan at the end of June. 4) The firm earned service revenue of 600 on account in April but misclassified it as revenue from sales. 5) At the beginning of May, Subtex rented additional office space for 1 year and paid 2100 for 3 months in advance. However, it neglected to record the necessary expiry adjustment at the end of June. Required: Determine for each error the effect on profit of the actual and the forthcoming financial year as well as the effect on retained earnings. Use the following notation: U: understated O: overstated NE: no effect Use the table below to fill in your answers. Profit Retained earnings year actual forthcoming actual forthcoming 1 2 3 4 5 Page 6 of 6