Professional Documents
Culture Documents
Exam Grade:
Financial Accounting
ACCT 22500 - Spring 2009
Exam #1: Form A
(100 points)
DO NOT OPEN
until given instructions to do so
Instructions:
1. Remove your hat during the exam and have only pencils and calculators available at your seat
(note that cell phones are not permissible as calculators).
2. Turn off all cell phones, pagers, and other electronic devices.
3. In the space provided above, write your name and ID, and check your class time.
4. Confirm that you have 8 consecutively numbered pages (including this cover page and the blank
page at the end).
5. Read all instructions carefully.
6. All multiple-choice answers must be marked in the space provided next to each question.
7. Show all computations (and label them well) to receive partial credit on non-multiple choice
questions.
8. You are reminded of the Colleges academic honesty policy requiring you to do your own work and
not give or receive assistance on this examination. Keep your eyes on your own work and your
own test covered.
9. Bring your entire exam book (including the blank page) and the calculator to the front of the room
when you have completed the exam.
1 of 17
Op Rev
= Operating Revenue
Op Exp
= Operating Expense
Other Item = Other revenue or expense item
(2) and whether the account usually has a debit (Dr) or credit (Cr) balance.
Classification
(CA, NCA, CL, NCL, SE, Op
Rev, Op Exp, or Other Item)
NCL
Debit or Credit
Balance
(Dr or Cr)
Cr
NCA
Cr
Op Exp
Dr
4. Service revenue
Op Rec
Cr
NCA
Dr
6. Prepaid insurance
CA
Dr
7. Contributed capital
SE
Cr
Account
1. Note payable (due in 20 years)
2. Loss on sale of building
5. Equipment
3. Define Separate Entity Assumption: Operations between the business must be completely
separate from that of the managers and owners
4. What does GAAP stand for? Generally Accepted Accounting Principals
2 of 17
Direction
and Amount
of Effect on
Cash
+ 27,000
(750)
+13
(8500)
(497)
Sample
(1516)
3 of 17
Received a $600 deposit from a customer who wanted her dining table and chairs refinished in
December.
Purchased on credit $960 in supplies to be used in 2009.
Paid $1,000 for advertising in the local paper in November.
Received $6,700 cash from Ithaca College (customer) for repairing several bookcases in
November.
The Company paid $2,040 on its accounts to suppliers in late November.
JOURNAL ENTRIES
Accounts
(1)
Debit
600
Cash (A+)
(2)
600
960
Supplies (+A)
(3)
Credit
960
1000
Cash (-A)
(4)
1000
Cash (+A)
6700
6700
2040
Cash (-A)
2040
B. Given the transactions in Part A, complete the T-account for Cash in good form and determine
the ending balance. The Companys Cash balance on November 1 (the beginning of the month)
was $2,300.
CASH
1) 600
4) 6700
3) 1000
5) 2040
$4260
4 of 17
Income Statement
Transaction
Assets
Liabilities
Stockholders
Equity
Example
+30,000
NE
+30,000
NE
NE
NE
(a)
+23000
NE
+23000
+23000
NE
+23000
(b)
NE
+990
-990
NE
+990
-990
(c)
-14000
NE
-14000
NE
+14000
-14000
(d)
+1500
+1500
+1500
NE
NE
NE
Revenues
Expenses
Net
Income
5 of 17
1.
2. Stoner Corporation reported the following for 2007: total assets, $90,000; total liabilities,
$35,000; and contributed capital, $40,000. Therefore, retained earnings was
A) $5,000.
B) $40,000.
C) $20,000.
D) $15,000.
E) None of the above is correct.
6 of 17
increase
or
decrease
4. For the most recent year, what are Krogers three largest liability accounts by size? What
percentage is each to total liabilities? (Show computations. Round percentages to two decimal
places.)
Largest Liabilities
Accounts Payable
5. What statement would you look at to determine if Krogers paid dividends in 2007?
Statement of Shareholders Equity
7 of 17
February 2,
2008
February 3,
2007
918
786
4,855
555
7,114
12,498
2,687
22,299
1,592
4,050
815
2,231
8,689
LIABILITIES
Current liabilities
Current portion of long-term debt
Accounts payable
Accrued salaries and wages
Other current liabilities
Total current liabilities
Long-term debt
Other long-term liabilities
Total Liabilities
SHAREOWNERS EQUITY
Common stock
Accumulated earnings
Common stock in treasury, at cost, 284 shares in 2007 and 232 shares in
2006
Total Shareowners Equity
Total Liabilities and Shareowners Equity
803
778
4,609
565
6,755
11,779
2,681
21,215
906
3,804
796
2,075
7,581
6,529
1,167
17,385
6,154
2,557
16,292
3,856
6,480
3,433
5,501
(5,422)
4,914
22,299
(4,011)
4,923
21,215
2007
(52 weeks)
$
70,235
2006
(53 weeks)
$
66,111
2005
(52 weeks)
$
60,553
53,779
12,155
644
1,356
2,301
474
1,827
646
1,181
50,115
11,839
649
1,272
2,236
488
1,748
633
1,115
45,565
11,027
661
1,265
2,035
510
1,525
567
958
1.71
1.56
1.32
End of Exam
8 of 17
Debit
Credit
300
300
b.) During 2008, office supplies amounting to $4,600 were purchased for cash and debited in full to
Supplies. At the beginning of 2008, the count of supplies on hand was $510 and, at December 31, 2008,
it was $300.
Supplies Expense (-SE +E)
4810
Supplies (-A)
4810
c.) On October 1, 2008, the company received $21,000 from one of its clients for services to be provided
to the client each month for one year beginning on October 1, 2008. The $21,000 received was
recorded as Unearned Fee Revenue.
Unearned Fee Revenue (-L)
Service Revenue (+R +SE)
5250
5250
9 of 17
BANK STATEMENT
Deductions
Balance, December 1, 2008
Deposits during December
Checks cleared during December
Bank service charge
NSF check SK Company
Balance, December 31, 2008
CASH
Additions
$30,400
$29,500
80
2,300
Balance
$ 3,800
34,200
4,700
4,620
2,320
$ 2,320
12/1/08
3,800
Deposits 37,690
12/31/08 6,790
34,700
Checks
written
Prepare Decembers bank reconciliation to determine the correct cash balance. Use the following form:
Correct cash
Correct cash
10 of 17
Part 3: Accounting and Reporting Sales and Accounts Receivable and Ratio Analysis (26 points)
A. Selected data from recent financial statements of Mattel Inc. appear below (in millions). Answer the
following questions and show well-labeled computations for partial credit.
December 31, December 31,
2008
2007
(In millions)
Accounts receivable, less allowances of $26 million and $21 million in 2008 and 2007,
respectively
618 $
901
874
991
...
Total Assets
4,805
2008
Net Sales
4,675 $
2006
5,918 $
5,970 $
5,650
Cost of sales
3,234
3,193
3,038
Gross Profit
2,684
2,777
2,612
719
709
651
1,423
1,338
1,232
542
730
729
Interest expense
82
71
80
Interest (income)
(25)
(33)
(30
(3)
(11)
(4
)
)
488
703
683
108
103
91
380 $
600 $
Net Income
SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS AND
ALLOWANCES
592
Balance at Additions
Beginning Charged to
Net
of Year Operations Deductions
(In millions)
Balance
at
End of
Year
11 of 17
20 $
? $
19
21
25
19
1.
2.
Debit
Credit
Assuming all sales were on credit, what amount of cash did Mattel collect
from customers in 2008?
million
3. Compute Mattels Net Profit Margin for the last three years. Show percentage to two decimal places.
NP = NI / NS %
Year
4.
Computation
Result
2008
380/5918
6.42%
2007
600/5970
10.05%
2006
592/5650
10.48%
The industry average for net profit margin is 10.26%. What does this and the above results suggest
about Mattel?
As the years progresses, Mattel is not generating its revenues into net income as efficiently because it
has had generated less revenue over time
B. The following transactions were selected from the records of Califano Company:
Spring 2009 ACCT 225 Exam #1A
12 of 17
Oct. 12
Oct. 15
Oct. 22
Oct. 23
Oct. 30
Sold goods to Ms. Albinder, who charged the $3,000 purchase on her VISA credit
card. VISA charges Califano a 2% credit card fee.
Sold merchandise to Ms. Luzzi for $5,000 on account, terms 3/10, n/30.
Ms. Luzzi returned $1,000 of items purchase on Oct. 15 (they were the wrong size),
and credit was given to the customer.
Collected cash from Ms. Luzzi from the Oct. 15 purchase.
Collected cash from Ms. Albinder for the Oct. 12 purchase.
Assuming returns and any discounts are treated as contra-revenues, compute net sales based on these
transactions by filling in the following schedule:
Sales revenue
8000
1000
Sales discounts
1000
60
6940
13 of 17
C. At the end of 2008, the unadjusted trial balance of Bird Industries, Inc., indicated $176,000 in Accounts
Receivable, a credit balance of $12,100 in Allowance for Doubtful Accounts, and Sales Revenue (all on
credit) of $14,360,000. Based on prior experience, Bird estimates a 0.1 percent bad debt rate on credit sales.
You must show well-labeled computations (below problem) to receive partial credit.
a.
What is the amount of bad debt expense that should be recorded for 2008?
b. Show where and how Accounts Receivable will be reported on the 2008 balance sheet.
Which section of the classified balance sheet will it appear?
How will the receivables line be written?
D.
Lane Enterprises uses the aging approach to estimate bad debt expense. At the end of 2008, Lane estimates
that $3,900 of the $270,000 in accounts receivable will likely be uncollectible. The allowance for doubtful
accounts has a $200 debit balance at year-end. You must show well-labeled computations (below
problem) to receive partial credit.
a.
What is the amount of bad debt expense that should be recorded for 2008?
b. Show where and how Accounts Receivable will be reported on the 2008 balance sheet.
How will receivables line be written?
14 of 17
15 of 17
2007
Assets
Cash
Accounts receivable
Inventory
Property and equipment
Accumulated depreciation
Total assets
Change
$48
106
142
876
(500)
$672
$32
83
161
840
(460)
$656
$+16
+23
-19
+36
(+40)
$ 16
$131
12
109
266
154
$672
$136
10
120
250
140
$656
$ -5
+2
-11
+16
+14
$ 16
Additional Information:
Property and equipment costing $15 with accumulated depreciation of $10 were sold for cash (no gain
or loss).
2008
$1,200
788
412
16 of 17
280
50
82
12
60
22
$ 38
Rittenberg Company
Statement of Cash Flows
For the year ended December 31, 2008
17 of 17