Practice Exam – Quarter/Semester 1 2021

School of Business/UEH

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EXAM INSTRUCTIONS
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You may begin writing when instructed by the Exam Supervisor at the start of the exam.
Clearly indicate which question you are answering on any Examination Answer Booklets used .

Unit Name:

Unit Number:

Number of Questions:

Total Number of Pages:

Value of Questions:

Answering Questions: Answer all questions in the Examination Answer Sheets provided.

Lecturer/Unit Coordinator: Mr. Manoj Menon

Time Allowed: 120 minutes

RESOURCES ALLOWED
Only the resources listed below are allowed in this exam……..

It is a closed-book examination. Students are not allowed to bring any paper materials to exam hall.
Only calculators approved by the ISB are allowed. Other mobile devices are PROHIBITED.

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Question 1 Ex. 190
The worksheet for Gibler Rental Company appears below. Using the adjustment data below,
complete the worksheet.
Adjustment data:
1) Prepaid rent expired during August, $3.
2) Depreciation expense on equipment for the month of August, $8.
3) Supplies on hand on August 31 amounted to $6.
4) Salaries and wages expense incurred at August 31 but not yet paid amounted to $10.

GIBLER RENTAL COMPANY

Worksheet
For the Month Ended August 31, 2016

Adjusted Income
Trial Balance Adjustments Trial Balance Statement Balance
Sheet
Account Titles Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 20 20 20
Accounts 12 12 12
Receivable
Prepaid Rent 8 3 5 5
Supplies 10 4 6 6
Equipment 50 50 50
Accum.
Depreciation— 10 8 18 18
Equipment
Accounts Payable 20 20 20
Owner’s Capital 29 29 29
Owner’s Drawings 2 2 2
Rent Revenue 73 73 73
Depreciation 6 8 14 14
Expense
Rent Expense 4 3 7 7
Salaries and
Wages Expense 20 10 30 30
Totals 132 132
Supplies Expense 4 4 4
Salaries Payable 10 10 10
Totals 25 25 150 150 55 73 95 77
Net Income 18 18
Totals 73 73 95 95

Instructions
a) Show all adjusting entries in journal form.
Date Account Titles Debit Credit
31-Aug Rent Expense 3
Prepaid Expense 3
31-Aug Depreciation Expense 8
Accumulated Depreciation - Equipment 8
31-Aug Supplies Expense 4
 Supplies 4
31-Aug Salaries and Wages Expense 10
Salaries Payable 10

b) Show all closing entries in journal form.

Date Account Titles Debit Credit
31-Aug Rent Revenue 73
Income Summary 73
31-Aug Income Summary 55
Depreciation Expense 14
Rent Expense 7
Salaries and Wages Expense 30
Supplies Expense 4
31-Aug Income Summary 18
Owner’s Capital 18
31-Aug Owner’s Capital 2
Owner’s Drawings 2

c) Prepare income statement and balance sheet.

GIBLER RENTAL COMPANY
Income Statement
For the Month Ended August 31, 2016
Revenues:
Rent revenue $73
Expenses:
Depreciation expense $14
Rent expense 7
Salaries and wages expense 30
Supplies expense 4
Total expenses 55
Net income $18

GIBLER RENTAL COMPANY

Balance Sheet
August 31, 2016
Assets
Current assets:
Cash $20
Accounts receivable 12
Prepaid rent 5
Supplies 6
Total current assets 43
Non-current assets:
Equipment 50
Accumulated depreciation - Equipment (18)
Total non-current assets 32
Total assets $75
Liabilities and Owner’s Equity
Liabilities:
Accounts payable 20
Salaries payable 10
Total liabilities 30
Owner’s capital 45
Total liabilities and owner’s equity $75

Question 2A Ex. 210

Newell Company completed the following transactions in October:
 Credit Sales Sales Returns Date of
Date Amount Terms Date Amount Collection
Oct. 3 $ 600 2/10, n/30 Oct. 8
Oct. 11 1,700 3/10, n/30 Oct. 14 $ 400 Oct. 16
Oct. 17 5,000 1/10, n/30 Oct. 20 1,000 Oct. 29
Oct. 21 1,400 2/10, n/60 Oct. 23 200 Oct. 27
Oct. 23 2,300 2/10, n/30 Oct. 27 400 Oct. 28

Instructions
(a) Indicate the cash received for each collection. Show your calculations.
(b) Prepare the journal entry for the
(1) Oct. 17 sale. The merchandise sold had a cost of $3,500.
(2) Oct. 23 sales return. The merchandise returned had a cost of $140.
(3) Oct. 28 collection.
Newell uses a perpetual inventory system.
(a) Cash received for credit sales on Oct. 3 = 600 - 600×2% = $588
Cash received for credit sales on Oct. 11 = (1,700 – 400)×(1-3%) = $1,261
Cash received for credit sales on Oct. 17 = 5,000 – 1,000 = $4,000
Cash received for credit sales on Oct. 21 = (1,400 – 200)×(1-2%) = $1,176
Cash received for credit sales on Oct. 23 = (2,300 – 400)×(1-2%) = $1,862
(b)
Date Account Titles Debit Credit
17- Oct Accounts Receivable 5,000
Sales Revenue 5,000
23-Oct Sales Returns and Allowances 200
Accounts Receivable 200
Inventory 140
Cost of Goods Sold 140
28-Oct Cash 1,862
Sales Discounts 38
Accounts Receivable 1,900

Question 2B Ex. 195

Ford Co. uses a perpetual inventory system. Its records show the following for the month of May, in
which 75 units were sold.
Units Unit Cost Total Cost
May 1 Inventory 35 $ 8 $ 280
15 Purchases 30 12 360
18 Purchases 45 13 585
24 Purchases 40 14 520
Totals 150 $1,745

Instructions
The company sold 35 units on May 16 for $20.00 per unit and another 40 units on May 28 for $24.00
per unit.
Instructions
1. What is the value of the ending inventory using the FIFO cost assumption if 600 units remain on
hand at October 31. (Show computations)

Ending inventory:
Date Units Unit cost Total cost

2. What is the value of the cost of goods sold using the weighted-average cost method if 600 units
remain on hand at October 31. (Show computations)
3. Determine the difference in the amount of income that the company would have reported if it had
used the FIFO method instead of the Average-Cost method. Would income have been greater or
less?
Question 3A Ex. 196
Tubbs Sign Company uses the allowance method in accounting for uncollectible accounts. Past
experience indicates that 1% of net credit sales will eventually be uncollectible. Selected account
balances at December 31, 2015, and December 31, 2016, appear below:
12/31/15 12/31/16
Net Credit Sales $300,000 $400,000
Accounts Receivable 60,000 80,000
Allowance for Doubtful Accounts 4,800 ?

Instructions
(a) Record the following events in 2016.
Aug. 10 Determined that the account of L. Young for $600 is uncollectible.
Sept. 12 Determined that the account of J. E. Ford for $3,400 is uncollectible.
Oct. 10 Received a check for $400 as payment on account from L. Young, whose account
had previously been written off as uncollectible. She indicated the remainder of her
account would be paid in November.
Nov. 15 Received a check for $200 from L. Young as payment on her account.
(b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December
31, 2016.
(c) What is the balance of Allowance for Doubtful Accounts at December 31, 2016?

Question 3B Ex. 260

Zimmer Company sold the following two machines in 2017:

Machine A Machine B
Cost $76,000 $80,000
Purchase date 7/1/13 1/1/14
Useful life 8 years 5 years
Salvage value $4,000 $4,000
Depreciation method Straight-line Double-declining-balance
Date sold 7/1/17 8/1/17
Sales price $35,000 $16,000

Instructions
Journalize all entries required to update depreciation and record the sales of the two assets in 2017.
The company has recorded depreciation on the machines through December 31, 2016.
Question 4 Ex. 179
A comparative balance sheet for Halpern Corporation is presented below:
HALPERN CORPORATION
Comparative Balance Sheet
2017 2016
Assets
Cash $ 36,000 $ 31,000
Accounts receivable (net) 70,000 60,000
Prepaid insurance 25,000 17,000
Land 18,000 40,000
Equipment 70,000 60,000
Accumulated depreciation (20,000) (13,000)
Total Assets $199,000 $195,000

Liabilities and Stockholders' Equity

Accounts payable $ 11,000 $ 6,000
Bonds payable 27,000 19,000
Common stock 140,000 115,000
Retained earnings 21,000 55,000
Total liabilities and stockholders' equity $199,000 $195,000

Additional information:
1. Net loss for 2017 is $20,000.
2. Cash dividends of $14,000 were declared and paid in 2017.
3. Land was sold for cash at a loss of $4,000. This was the only land transaction during the year.
4. Equipment with a cost of $15,000 and accumulated depreciation of $10,000 was sold for $5,000
cash.
5. $22,000 of bonds were retired during the year at carrying (book) value.
6. Equipment was acquired for common stock. The fair value of the stock at the time of the
exchange was $25,000.

Instructions
a) Prepare a statement of cash flows for the year ended 2017, using the indirect method.
b) Compute the free cash flow.