Instructor: Salah Shubair / Faculty of Commerce
Time :Two hours / Department of Accounting
Final exam. (2015/2016)
Name:…………………………………………… Student No. …………….…
Q.1 Multiple Choice (20 Points)
1 / 2 / 3 / 4 / 5 / 6 / 7 / 8 / 9 / 10A / D / B / A / A / C / B / D / C / C
Q.2 —Statement of cash flows. ( 6 points )
For each event listed below, select the appropriate category which describes the effect of the event on a statement of cash flows:
a. Cash provided/used by operating activities.
b. Cash provided/used by investing activities.
c. Cash provided/used by financing activities.
d. Not a cash flow.
C 1. Payment on long-term debt
C 2. Issuance of bonds at a premium
A 3. Collection of accounts receivable
D 4. Cash dividends declared
D 5. Issuance of ordinary shares to acquire land
B 6. Sale of non-trading securities (long-term)
A 7. Payment of employees' wages
C 8. Issuance of share capital–ordinary for cash
A 9. Payment of income taxes payable
B 10. Purchase of equipment
C 11. Purchase of treasury shares (ordinary)
B 12. Sale of real estate held as a long-term investment
Q. 2 ( 6 points )
1. c 4. d 7. a 10. b
2. c 5. d 8. c 11. c
3. a 6. b 9. a 12. b
Course: Intermediate Accounting(1) / The Islamic University of GazaInstructor: Salah Shubair / Faculty of Commerce
Time :Two hours
Final 2015/2016 / Department of Accounting
Final ex
Name:…………………………………………… Student No. …………….…
Q.1 Multiple Choice (20 Points)
1. Garlic, Pepper, and Salt are partners in a plumbing service. The business reported net income of $108,000 for 2014. The partnership agreement provides that profits and losses are to be divided equally after Pepper receives a $60,000 salary, Salt receives a $24,000 salary, and each partner receives 10% interest on his beginning capital balance. Beginning capital balances were $40,000 for Garlic, $48,000 for Pepper, and $32,000 for Salt. Pepper’s share of partnership income for 2014 is:
a. $68,800.
b. $36,000.
c. $31,200.
d. $27,200.
2. Gilligan, Skipper, and Professor are partners with a profit and loss ratio of 4:3:3. The partnership was liquidated and, prior to the liquidation process, the partnership balance sheet was as follows:
GILLIGAN, SKIPPER, AND PROFESSOR
Balance Sheet
January 1, 2014
Assets Liabilities and Equity
Cash $ 60,000 Gilligan, Capital $216,000
Other assets 540,000 Skipper, Capital 240,000
Professor, Capital 144,000
Total Assets $600,000 Total Liabilities & Equities $600,000
After the partnership was liquidated and the cash was distributed, Skipper received $96,000 in cash in full settlement of his interest.
The liquidation loss must have been:
a. $360,000
b. $144,000
c. $504,000
d. $480,000
3 . Keisler Corporation reports:
Cash provided by operating activities TL200,000
Cash used by investing activities 110,000
Cash provided by financing activities 140,000
Beginning cash balance 90,000
What is Keisler’s ending cash balance?
a. TL250,000. b. TL320,000.
c. TL470,000. d. TL540,000.
4. During 2015 the DLD Company had a net income of W200,000. In addition, selected accounts showed the following changes:
Accounts Receivable W12,000 increase
Accounts Payable 4,000 increase
Buildings 16,000 decrease
Depreciation Expense 6,000 increase
Bonds Payable 32,000 increase
What was the amount of cash provided by operating activities?
a. W198,000
b. W200,000
c. W206,000
d. W238,000
5 . Packard Corporation reports the following information:
Net cash provided by operating activities €275,000
Average current liabilities 150,000
Average non-current liabilities 100,000
Dividends declared 60,000
Capital expenditures 110,000
Payments of debt 35,000
Packard’s cash debt coverage is
a. 1.10.
b. 1.83.
c. 2.75.
d. 6.11.
6 . Purest owes $1 million that is due on February 28. The company borrows $800,000 on February 25 (5-year note) and uses the proceeds to pay down the $1 million note and uses other cash to pay the balance. How much of the $1 million note is classified as long-term in the December 31 financial statements?
a. $1,000,000.
b. $0.
c. $800,000.
d. $200,000.
7. Vista newspapers sold 4,000 of annual subscriptions at $125 each on September 1. How much unearned revenue will exist as of December 31?
a. $0.
b. $333,333.
c. $166,667.
d. $500,000.
8. Purchase Retailer made cash sales during the month of October of $132,600. The sales are subject to a 6% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the sale transactions?
a. Debit Cash for $132,600.
b. Credit Sales Tax Payable for $7,506.
c. Credit Sales for $125,094.
d. Credit Sales Tax Payable for $7,956.
9. Dotel Company’s 12/31/15 statement of financial position reports assets of $6,000,000 and liabilities of $2,500,000. All of Dotel’s assets’ book values approximate their fair value, except for land, which has a fair value that is $400,000 greater than its book value. On 12/31/15, Egbert Corporation paid $6,500,000 to acquire Dotel. What amount of goodwill should Egbert record as a result of this purchase?
a. $ -0-
b. $ 500,000
c. $2,600,000
d. $3,000,000
10. Platteville Corporation has the following account balances at 12/31/15:
Amortization expense $ 10,000
Goodwill 140,000
Patents, net of $30,000 amortization 90,000
What amount should Platteville report for intangible assets on the 12/31/15 statement of financial position?
a. $ 90,000
b. $120,000
c. $230,000
d. $240,000
Q.3 ( 8 points )
Barkley Corp. obtained a trade name in January 2014, incurring legal costs of $20,000. The company amortizes the trade name over 8 years. Barkley successfully defended its trade name in January 2015, incurring $4,900 in legal fees. At the beginning of 2016, based on new marketing research, Barkley determines that the recoverable amount of the trade name is $16,500.
Instructions
Prepare the necessary journal entries for the years ending December 31, 2014, 2015, and 2016. Show all computations.
Q.4 ( 12 points )
Described below are certain transactions of Larson Company for 2015:
1. On May 10, the company purchased goods from Fry Company for $50,000, terms 2/10, n/30. The invoice was paid on May 18.
2. On June 1, the company purchased equipment for $60,000 from Raney Company, paying $20,000 in cash and giving a one-year, 9% note for the balance.
3. On September 30, the company borrowed $108,000, by signing a one-year zero-interest-bearing $120,000 note at First State Bank.
Instructions
(a) Prepare the journal entries necessary to record the transactions above using appropriate dates.
(b) Prepare the adjusting entries necessary at December 31, 2015 in order to properly report interest expense related to the above transactions. Assume straight-line amortization.
Q. 5 —Premiums. ( 6 points )
Edwards Co. includes one coupon in each bag of dog food it sells. In return for 4 coupons, customers receive a dog toy that the company purchases for $1.20 each. Edwards's experience indicates that 60 percent of the coupons will be redeemed. During 2014, 100,000 bags of dog food were sold for $ 9 each , 12,000 toys were purchased, and 40,000 coupons were redeemed.
Instructions
Prepare the necessary journal entries for the year 2014.
Q.3 ( 8 points )
2014
Dec. 31 Amortization Expense - Trade Name 2,500
Trade Name 2,500
($20,000 ÷ 8 years)
2015
Dec. 31 Amortization Expense – Trade Name 3,200
Trade Name 3,200
[($20,000 - $2,500 + $4,900) ÷ 7 years]
2016
Dec. 31 Loss on Impairment 2,700
Trade Name 2,700
Carrying value = $20,000 - $2,500 + $4,900 - $3,200 = $19,200
Carrying value = $19,200
Recoverable amount = (16,500)
Loss on impairment = $ 2,700
2016
Dec. 31 Amortization Expense – Trade Name 2,750
Trade Name 2,750
($16,500 ÷ 6 years)
Q.4 ( 12 points )
(a) May 10, 2015
Purchases/Inventory 50,000
Accounts Payable 50,000
May 18, 2015
Accounts Payable 50,000
Cash 49,000
Purchase discount 1,000
June 1, 2015
Equipment 60,000
Cash 20,000
Notes Payable 40,000
September 30, 2015
Cash 108,000
Notes Payable 108,000
(b) Interest Expense 2,100
Interest Payable ($40,000 × .09 × 7/12) 2,100
Interest Expense 3,000
Notes Payable ($12,000 × 3/12) 3,000
Q. 5 ( 6 points )
2014
Premium Expense $18,000 (1)
(1) 100,000 × .6 = 60,000; 60,000 ÷ 4 = 15,000; 15,000 × $1.20 = $18,000.
Premium Inventory (12,000 x £1.2) 14,400
Cash 14,400
Cash (100,000 boxes x £9) 900,000
Premium Expense 18,000
Sales Revenue 900,000
Premium Liability 18,000
Premium Liability 12,000
Premium Inventory [(40,000 ÷4) x £1.2] 12,000
Q. 6 ( 10 points )
Place the letter of the best matching phrase before each word.
K 1. Indenture L 6. Times Interest Earned
G 2. Serial Bonds O 7. Mortgage
C 3. Bonds Issued at Par F 8. Premium on Bonds
I 4. Carrying Value H 9. Reacquisition Price
B 5. Nominal Rate D 10. Market Rate
a. Bonds issued in the name of the owner.
b. Rate set by party issuing the bonds which appears on the bond instrument.
c. The interest paid each period is the effective interest at date of issuance.
d. Rate of interest actually earned by the bondholders.
e. Results when bonds are sold below par.
f. Results when bonds are sold above par.
g. Bond issues that mature in installments.
h. Price paid by issuing corporation for its own bonds.
i. Book value of bonds at any given date.
j. Ratio of current assets to current liabilities.
k. The bond contract or agreement.
l. Indicates the company’s ability to meet interest payments as they come due.
m. Ratio of debt to equity.
n. Exclusive right to manufacture a product.
o. A document that pledges title to property as security for a loan.
Q.6 ( 10 points )
1. k 3. c 5. b 7. o 9. h
2. g 4. i 6. l 8. f 10. d