(ACCT2010)[2016](f)midterm~=ap4g0j^_43846.pdf downloaded by twbfung from http://petergao.net/ustpastpaper/down.php?course=ACCT2010&id=11 at 2017-10-17 00:48:47. Academic use within HKUST only.

HONG KONG UNIVERSITY OF SCIENCE & TECHNOLOGY

DEPARTMENT OF ACCOUNTING
ACCT 2010: Principles of Accounting I
Dr. Shih-Jen Kathy Ho — Fall 2016

Mini Exam 1 Monday September 26, 2016 8-9 p.m. LTA

STUDENT NAME (print): .....................................................................................................................

STUDENT ID: ........................................................................................................................................

English or other name on seating chart: ...............................................

Instructions:
1. You have 60 minutes to complete this examination.
2. SWITCH OFF MOBILE PHONES BEFORE YOU START.
3. The examination question consists of 6 pages (including this cover page). Please ensure that you
have all of the pages.
4. Show your work. Answers without supporting work will not receive credit.
5. Illegible answers will not be graded.
6. Proctors would not respond to queries about the interpretation of exam questions. Do your best
to understand and answer exam questions.
7. In your answers involving journal entries, you need not write descriptions of transactions.
8. Failure to stop writing once the exam period ends will result in the disqualification of your exam
and a zero grade will be assigned to your mid-term.
9. Please put your answer on the separate answer sheets provided.

For marker use only

Exam part Points Points
Awarded
Available
Part I (MC questions) 14 questions @ 2.5 points each 35
Problem 1: 32
Problem 2 9
Total 76

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Multiple Choice Questions (14 questions @2.5 points each= 35 points total)

Choose the single BEST answer for each of the following multiple-choice questions.

1. Which of the following describes the impact on the balance sheet when a company uses cash to
purchase the stock of another company?
A. Total assets increase.
B. Stockholders' equity increases.
C. Stockholders' equity decreases.
D. Total assets remain the same.

2. Which of the following is not considered to be a recordable transaction?

A. Signing a contract to have an outside cleaning service clean offices nightly.
B. Paying employees their wages.
C. Selling stock to investors.
D. Buying equipment and agreeing to pay a note payable and interest at the end of a year.

3. Which of the following best describes the term "retained earnings" of a company?
A. The amount of total profits earned by a company since it began operations.
B. The amount of claim that the owners have on the assets of the company.
C. The future economic resources of a company.
D. The amount of total profits earned by a company since it began operations that have
not been distributed to owners in the form of dividends.

4. A chart of account is
A. the same as a balance sheet.
B. usually a listing of accounts in alphabetical order.
C. usually a listing of accounts in financial statement order.
D. used in place of a ledger.

5. Which of the following accounts are normally reported as current liabilities on a classified
balance sheet?
A. Accounts Payable and Prepaid Insurance
B. Interest Payable and Interest Receivable
C. Income Taxes Payable and Unearned Revenue
D. Common Stock and Accounts Payable

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6. Payment is made for machinery that was purchased previously on credit. What effect does this
transaction have on the accounting equation?
A. Assets and liabilities increase.
B. Assets and contributed capital increase.
C. Liabilities decrease and retained earnings increase.
D. Assets and liabilities decrease.

7. At the beginning of 2014, a corporation had assets of $270,000 and liabilities of $160,000.
During 2014, assets increased $25,000 and liabilities increased $5,000. What was stockholders'
equity on December 31, 2014?
A. $140,000.00
B. $130,000.00
C. $190,000.00
D. $80,000.00

8. Which of the following statements is true about a sole proprietorship?

A. The owner and the business are separate legal entities but not separate accounting
entities.
B. The owner and the business are separate accounting entities but not separate legal
entities.
C. The owner and the business are separate legal entities and separate accounting entities.
D. Sole proprietorships are subject to double taxation.

9. Within which of the following would you find the inventory method(s) being used by a business
entity?
A. Balance sheet.
B. Income statement.
C. Notes to the financial statements.
D. Headings of the financial statements.

10. The statement of cash flows has which of the following economic activity categories?
A. Cash, credit, and noncash
B. Financing, investing, and operating
C. Financing, credit, and operating
D. Operating, management, and investing

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11. Jarret Company

Jarret Company reported the following information for the year ended December 31, 2016.

Cash …$125,000 Inventory $215,000

Land...275,000 Unearned revenue 117,000

Equipment...350,000 Common stock $300,000

Refer to the information provided for Jarret Company above. What is the total amount of
current assets reported on December 31, 2016
A. $125,000
B. $340,000
C. $457,000
D. $615,000

12. If the sum of the debits is NOT equal to the sum of the credits in an adjusted trial balance, then
A. there is no concern because the two amounts are not meant to be equal.
B. it is likely that an error was made in journalizing or posting transactions or in computing
the account balance.
C. the chart of accounts does not balance.
D. it is safe to proceed with the preparation of financial statements.

13. Which of the following is not a proper application of the revenue realization principle?
A. Recording the sale of merchandise on credit as sales revenue.
B. Recording rent received in advance as unearned rent revenue.
C. Recording interest revenue when cash is collected rather than when earned.
D. Reducing the unearned service revenue account for service revenue performed at the
end of the accounting period.

14. Which of the following describes the reporting of interest expense on the income statement?
A. It is reported as an operating expense.
B. It is a component of operating income.
C. It is deducted from operating income.
D. It is added to operating income.

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Problem 1 – Journal Entries (32 points)

Caputo Florists registered for business on May 1, 2016. Several transactions which occurred in
2016 are described below. Record each transaction in proper journal form (use the form provided on
the following page and exclude written explanations.)

1) May 15, 2016 Issued 10,000 shares of common stock in exchange for $50,000
in cash from investors for use in starting the business. Par value
of the stock is $0.1 per share.

2) May 22, 2016 Purchased a new delivery van for $28,000 by paying 10% down
in cash and issuing a 2-year note for the remaining balance due.

3) May 28, 2016 Purchased flowers, the merchandise inventory, for resale in the
business for $2,000 in cash.

4) June 1, 2016 Paid $7,000 in cash for rent covering the period of 6/1-
12/31/16.

5) June 3, 2016 Received $2,000 from a customer as down payment for floral
arrangement for a wedding scheduled for September 1, 2016.

6) June 6, 2016 Recorded the first week’s sales $4,250, of which $2,850 was in
cash and the remainder was on account. The cost of the goods
sold was $3,200. (There are two entries for this transaction.
One for sales revenue, the other for cost of goods sold.)

7) June 7, 2016 Paid the previous week’s salaries to employees of $1,200.

Partial list of Chart of Accounts

Cash Unearned Revenue
Accounts Receivable Common Stock
Notes Receivable Additional Paid-In Capital
Inventory Sales Revenue
Prepaid Rent Cost of Goods Sold
Delivery Van Wages Expense
Notes Payable

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Problem 2 (9 points)
The list of accounts presented below are from the accounting records of Able Company on September 30,
2015.
Required 1: Prepare an Income Statement for Able Company (6 points). Be sure to properly date the
statement.
Required 2: Calculate the ending balance of retained earnings. (3 points).

Able Company
Adjusted Trial Balance
For the Year ended Sept. 30, 2015
Account Debit Credit
Cash $4,200
Accounts receivable 3,000
Inventory 2,300
Buildings &equipment 145,000
Accounts payable $900
Unearned revenue 1,700
Notes payable 7,000
Common Stock 46,000
Retained earnings 97,700
Sales Revenue 15,400
Cost of goods sold 7,800
Salaries expense 4,400
Depreciation expense 1,200
Dividends 800
Total $168,700 $168,700

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