Answer Key

Sample Exam 1
Dr. Goh Beng Wee
Question 1 (10 marks)
SMU Foods
Bank Reconciliation
July 31, 2008
BANK:
Balance, July 31
Add: Deposit in transit

$ 9,000
2,185
11,185

Less: Outstanding checks:

Check No.
1420
1421
1422
Adjusted bank balance, July 31

$ 850
2,500
2,366

BOOKS:
Balance, July 31
Add: EFT collection of rent
Bank collection of dividend revenue
Book error$140 check
recorded as $410
Less: NSF check
EFT payment of insurance
Service charge
Adjusted book balance, July 31
DATE
May
31

(5,716)
$ 5,469

$ 4,022
$

725
1,200
270

2,195
6,217

$ 445
275
28

ACCOUNTS AND EXPLANATIONS

Cash

POST.
REF.

(748)
$ 5,469

DEBIT
725

Rent Revenue
Rent Revenue by EFT deposit
31

725

Cash

$1200

Dividend Revenue
Dividend revenue collected by bank.
31

Cash

$1200

270

Accounts Payable Bill Company

Correction of check 1419
31

CREDIT

Accounts Receivable XYZ Company

Cash

270

445
445

ACCT111
NSF checks.
31

31

Insurance Expense
Cash
EFT payment of insurance expense.
Miscellaneous Expense
Cash
Bank service charge.

275
275

28
28

ACCT111

Question 2 (10 marks)

[2 marks]
1) 160 units @ $10.50

$ 1,680

100 units @ $11.00

$ 1,100

200 units @ $11.50

$ 2,300
$ 5,080

[3 marks]
2) Calculation of Inventory loss on valuation: (2 marks)
Inventory loss on valuation
= (200 units x ($11.50 - $10.75)) + (100 units x ($11.00 - $10.75)) = $ 175
Journal entry: (1 mark)
Inventory loss on valuation1
Inventory2

175
175

[5 marks]
3) Cost of good sold under FIFO = 240 units @ $10.50 = $2,520
Inventory loss on valuation under FIFO = $175 from above
Total inventory expense = 2,520 + 175 = 2,695 (2 marks)
Cost of goods sold under LIFO = 200 units @ $11.50 + 40 units @ $11.00 = $2,740
Inventory loss on valuation under LIFO = 60 units x ($11.00 - $10.75) = $15
Total inventory expense = 2,740 + 15 = 2,755 (2 marks)
Therefore management would prefer FIFO. (1 mark; 0 marks if no calculations)

1
2

Alternatives: Loss on write-down of inventory or Cost of goods sold

Alternative: Provision for inventory loss

ACCT111

Question 3 (10 marks)

Solutions:
1) 160,000 10,000 = 150,000 / 5 = 30,000 per year
Book value as at 1 July 2004 = 160,000 4x30,000 = 160,000 120,000 = 40,000
2) New depreciation from 1 July 2004 = 40,000 / (8-4) = 10,000
Book value as at 31 Dec 2005 = 160,000 4x30,000 1.5x10,000 = 160,000 135,000
= 25,000
3) DR Cash
30,000
DR Acc Depn
135,000
CR Equipment
160,000
CR Gain on Sale
5,000
4) DR Loss of Disposal 26,000
DR Acc Depn
135,000
CR Cash
1,000
CR Equipment
160,000
Question 4 (10 marks)
[2 marks per journal entry, total 6 marks]
1a)

Cash

84,753

Discount on Bonds Payable

15,247

Bond Payable
1b)

100,000

Interest Expense

3,390

Discount on Bond Payable

390

Cash
1c)

3,000

Interest Expense

3,406

Discount on Bond Payable

Cash

3,000

[2 marks]
2) Interest expense:
June 30, 20X5

406

$ 3,390

December 31, 20X5

3,406
$ 6,796

[2 marks]
3) Balance sheet presentation:
Bond Payable
Discount on Bond Payable

$ 100,000
14,451
$ 85,549

ACCT111

Question 5 (18 marks)

Dr
15,000

a) Inventory Loss/ Cost of goods sold

Inventory

Cr
15,000

b) Salary Expense
Salary Payable

1,506*
1,506

* 2510 x 3/5 = 1506

c) Office Equipment
General office expense

6,000
6,000

Depreciation expense
Accumulated depreciation for Office
equipment

5,400*
5,400

* (56,000 2,000)/10 = 5400

d) Depreciation expense
Accumulated Depreciation for Demonstration
Equipment

13,800*
13,800

* 46,000 x 2/5 x 9/12 = 13,800

e) Interest expense
Interest payable

500*
500

* 50,000 x 12% x 1/12 = 500

f) Warranty expense
Estimated warranty payable

10,558

g) Accounts payable
Cash

10,000

h) Rent expense
Prepaid rent

6,000*

10,558
10,000
6,000

*(16,000 /2) x 9/12 = 6,000

ACCT111

i) Allowance for uncollectible accounts

Accounts receivable

7,700
7,700

Uncollectible account expense

Allowance for uncollectible accounts

9,900*
9,900

*Desired ending balance in Allowance a/c = $100,000 x 0.5% + 150,000 x 1%

+ 100,000 x 4% + 50,000 x 10% = $11,000
Uncollectible expense = $11,000 + 7700 8800 = $9900
j. Retained earnings
Ordinary Share Dividend payable
Preference Share Dividend payable
*100,000 x 0.1 **5% x 50,000 = $12500

12,500

Each journal entry 2 marks, total = 12 x 1.5 = 18 marks

10,000*
2,500**

ACCT111

Emily Inc.
Statement of Cash Flow
For Year Ended December 31 2007
Net Cash Flows from Operating Activities
Net income
Adjustments for differences between net income and
cash flows from operating activities
Add:

Depreciation expense

9,500

3,280

Patent amortization expense

230

Loss on sale of Equipment

250

Decrease in accounts receivable (net)

2
1
1

1,390

1/2

410
30

1/2

20

1/2

Gain on Sale of Land

(840)

Gain on Sale of Patent

($600)

Decrease in inventories
Increase in income taxes payable
Increase in wage payable
Less:

Suggested
marks

Increase in prepaid items

Decrease in accounts payable

1/2

(40)

1/2

(260)

1/2

Net cash provided by operating activities

13,370

Cash Flows from Investing Activities

Payment for purchase of building

(20,260)

Proceeds from sale of land

3,920

1/2

Proceeds from sale of equipment

1,250
1,920

1/2

Proceeds from sale of patent

Net cash used for investing activities

1/2
(13,170)

Cash Flows from Financing Activities

Proceeds from issuance of common stock

$3,230

Payment of dividends

(4,130)

Net cash provided by financing activities

1/2
2
(900)

Net increase in cash

(700)

Cash, Dec 31, 2006

4,100

Cash, December 31, 2007

3,400
total marks=

14

Note: the mark allocated to depreciation expense and payment of dividend should
be 1 mark each instead of 2, hence making the total marks 12 instead of 14.

ACCT111

PART B
MCQ

Q1 D
Q2 B
Q3 D
Q4 D
Q5 A
Q6 C
Q7 C
Q8 D
Q9 C
Q10 D
Q11 D
Q12 D
Q13 C
Q14 B
Q15 A

Q16 A
Q17 A
Q18 C
Q19 C
Q20 C
Q21 B
Q22 D
Q23 C
Q24 D
Q25 D
Q26 B
Q27 C
Q28 C
Q29 A
Q30 B