The Islamic University of Gaza Course: Intermediate Accounting(1)

Faculty of Commerce Instructor: Salah Shubair

Department of Accounting Time :One hour

Mid. exam. (2017/2016)

….…………… .Name:…………………………………………… Student No

Q.1 Multiple Choice (10 Points)

1 2 3 4 5 6 7 8 9 10
C C D B D A A B A D

1. Which of the following is an ingredient of relevance?

a. Verifiability.
b. Timeliness.
c. Predictive value.
d. Neutrality.

2. Which of the following is an ingredient of faithful representation?

a. Confirmatory Predictive value.
b. Materiality.
c. Neutrality.
d. value.

3. Changing the method of inventory valuation should be reported in the financial

statements under what qualitative characteristic of accounting information?
a. Consistency.
b. Verifiability.
c. Timeliness.
d. Comparability.

4. Company A issuing its annual financial reports within one month of the end of
the year is an example of which enhancing quality of accounting information?
a. Comparability.
b. Timeliness.
c. Understandability.
d. Verifiability.

5. What is the quality of information that is capable of making a difference in a

decision?
a. Faithful representation.
b. Materiality.
c. Timeliness.
d. Relevance.
6. Neutrality is an ingredient of which fundamental quality of information?
 a. Faithful representation.
b. Comparability.
c. Relevance.
d. Understandability.

7
. According to the IASB Conceptual Framework, the elementsassets, liabilities,
and equitydescribe amounts of resources and claims to resources at/during a
Moment in Time Period of Time
a. Yes No
b. Yes Yes
c. No Yes
d. No No

8. Which of the following is not a basic element of financial statements?

a. Assets.
b. Statement of financial position.
c. Expenses.
d. Income.

9. Which of the following basic elements of financial statements is more

associated with the statement of financial position than the income statement?
a. Equity.
b. Income.
c. Gains.
d. Expenses.

10. Issuance of common stock for cash affects which basic element of financial
statements?
a. Revenues.
b. Losses.
c. Liabilities.
d. Equity.

Q.2 ( 15 points )
1- Portney, Grey, and Ross are partners with capital balances of $80,000, $200,000, and
$120,000, respectively. Profits and losses are shared in a 3:2:1 ratio. Grey decided to
withdraw.. Portney and Ross then agreed to pay Grey $230,000 for his withdrawal
from the partnership.
Required:
Prepare the journal entry to record Grey’s withdrawal under the bonus method.
.

Grey, Capital 200,000

Portney, Capital 22,500
Ross, Capital 7,5 00
Cash 230,000
2- Carter and Gore are partners in an automobile repair business. Their respective capital
balances are $425,000 and $275,000, and they share profits in a 3:2 ratio. Because of
growth in their repair business, they decide to admit a new partner. Bush is admitted
to the partnership, after which Carter, Gore, and Bush agree to share profits in a 3:2:1
ratio.
Required:
Prepare the necessary journal entries to record the admission of Bush :
Bush invests $300,000 for a one-fourth capital interest,. under the bonus method.

Cash 300,000
Carter, Capital 30,000
Gore, Capital 20,000
Bush, Capital 250,000

3- Dante, Milton, and Cervantes formed a partnership and agreed to share profits in a
3:1:2 ratio after recognition of 5% interest on average capital balances and annually
salary allowances of $45,000 to Milton and $36,000 to Cervantes. Average capital
balances were as follows:
Dante 300,000
Milton 240,000
Cervantes 180,000
Required:

Journalize the entry to record the division of net income $ 27,000

-3 Dante Milton Cervantes Total

Salary --- $45,000 $ 36,000 $ 81,000
Interest $15,000 12,000 9,000 36,000
Residual (45,000) (15,000) (30,000) (90,000)
Total $(30,000) $42,000 $ 15,000 $27,000
 Income Summary 27,000
Dante, Capital 30,000 ,
Milton, Capital 42,000
Cervantes, Capital 15,000

4- K. Decker, S. Rosen, and E. Toso are forming a partnership. Decker

is transferring
$50,000 of personal cash to the partnership. Rosen owns land worth
$15,000 and a small building worth $80,000, which she transfers to the
partnership. Toso transfers to the part- nership cash of $9,000, accounts
receivable of $32,000, and equipment worth $39,000. The partnership
expects to collect $29,000 of the accounts receivable.
Instructions
Prepare the journal entries to record each of the partners’ investments.

Cash..................................................................
50,000
Meissner, Capital...............................................
50,000

Land...............................................................
15,000
Building ........................................................
80,000
Cohen,
Capital.............................................................
95,000

Cash..................................................................
9,000
Accounts Receivable ....................................
32,000
Equipment...........................
39,000
Allowance for Doubtful Accounts.........................
3,000
Hughes,
Capital...........................................................
77,000