MINISTRY OF EDUCATION AND TRAINING INTRODUCTORY TO ACCOUNTING 1

NATIONAL ECONOMICS UNIVERSITY

MID-TERM TEST 2
Mode of study: Full time. Intake: 62

School of Advanced Education Programs Allowed time: 60 minutes

Question 1 (30 marks): The adjusted trial balance of Full Moon Corporation appears below.
Using the information from the adjusted trial balance, you are to prepare for the month ending
December 31:

1. an income statement.
2. a retained earnings statement.
3. a balance sheet.
FULL MOON CORPORATION
Adjusted Trial Balance
December 31, 2021

Debit Credit
Cash ................................................................................................... $ 2,900
Accounts Receivable.......................................................................... 2,200
Supplies.............................................................................................. 1,800
Equipment .......................................................................................... 16,000
Accumulated Depreciation—Equipment........................................... $ 4,000
Accounts Payable............................................................................... 3,300
Unearned Service Revenue................................................................ 5,000
Common Stock................................................................................... 10,000
Retained Earnings.............................................................................. 4,400
Dividends........................................................................................... 2,000
Service Revenue................................................................................. 4,200
Supplies Expense............................................................................... 600
Depreciation Expense........................................................................ 2,500
Rent Expense..................................................................................... 2,900 ______
$30,900 $30,900

Question 2 (10 marks) : Entries for bad debt expense.

A trial balance before adjustment included the following:
Debit Credit
Accounts receivable $120,000
Allowance for doubtful accounts 1,000
Sales $430,000
Sales returns and allowances 4,000

Give journal entries assuming that the estimate of uncollectible is determined by taking
(1) 5% of gross accounts receivable and
1
(2) 1% of net sales.

Problem 3 (20 marks) : Matlock Corporation sells item A as part of its product line.
Information as to balances on hand, purchases, and sales of item A are given in the following
table for the first six months of 2021.
Quantities
Unit Price
Date Purchased Sold Balance of Purchase
January 1 — 400 $3.60

February 14 1,500 — 1,900 $3.90

March 7 — 200 1,700 —

April 9 — 670 1030 —

June 8 600 — 1,630 $4.25

Instructions
(a) Compute the ending inventory at June 30 under the perpetual LIFO inventory pricing
method.
(b) Compute the cost of goods sold for the first six months under the periodic FIFO inventory
pricing method.
Problem 4 (40 marks) : At December 31, 2020, Sun Corporation reported the following plant
assets.
Land $ 9,000,000
Buildings $26,500,000
Less: Accumulated depreciation—buildings 11,900,000
14,600,000
Equipment 40,000,000
Less: Accumulated depreciation—equipment 4,000,000
36,000,000

During 2021, the following selected cash transactions occurred.

February 1: Purchased land for $3,200,000.
March 1: Sold equipment that cost $600,000 when purchased on January 1, 2012. The
equipment was sold for $190,000.
April 1: Sold land for $1,600,000. The land cost $2,000,000.
August 1: Purchased equipment for $1,500,000
Dec. 31: Retired equipment that cost $1,200,000 when purchased on December 31, 2010. No
salvage value was received.
Instructions
(a) Journalize the transactions. Sun Corporation uses straight-line depreciation for buildings and
equipment. The buildings are estimated to have a 40-year useful life and no salvage value; the
equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation
on assets disposed of at the time of sale or retirement.
(b) Record adjusting entries for depreciation for 2021.
(c) Prepare the plant assets section of Sun Corporation’s balance sheet at December 31,

Note: Closed book