* THE UNIVERSITY OF THE WEST INDIES CAVE HILL EXAMINATIONS OF APRIL/MAY. 2016. CODE AND NAME OF COURSE: ACCT1002—INTRODUCTION TO FINANCIAL ACCOUNTING* DATE AND TIME: DURATION: 2 HOURS INSTRUCTIONS TO CANDIDATES: This paper has 4 pages and 4 questions. ANSWER QUESTION ONE (1) AND ANY OTHER TWO (2) QUESTIONS. QUESTION 1 ~ 35 marks [Compulsory] The trial balance before adjustment on December 31, 2016 of Paul Financial Planners appears below: PAUL FINANCIAL PLANNERS Unadjusted Trial Balance December 31, 2015 Debit ‘Credit Cash Seeerte Stee Seer peace $15,000 Accounts Receivable 2,200 Prepaid Insurance 6,000 Supplies 1,800 Equipment 7 26,000 Accumulated Depreciation—Equipment $ 4,000 Accounts Payable 3,000 Uneamed Service Revenue wv... ana i 5,000 Common Stock..... 10,000 Retained Earnings 3,000 Mortgage Payable... 24,000 Salaries and Wages Expense 4,000 Dividends .. 3,500 Service Revenue 416,000 Advertising Expense 4,100 Depreciation Expense 2'500 Rent Expense 41,900 $84,000 $64,000 TURN OVER: [The University ofthe West IndiosPage 2 QUESTION 4 (Cont'd) Other data: 1. Insurance expires at the rate of $500 per month. 2. Acount of supplies shows $1,000 of unused supplies on December 31, 2045 3. A utility bill for $1,000 has not been recorded and will not be paid until next month. 4. Invoices representing $5,000 of services performed during the month have not been recorded as of December 31, 2015. 5. The mortgage interest rate is 10% per annum. (The mortgage was taken out on December 1, 2015 and is due to be repaid by 2020). Require a, Prepare adjusting entries for the month of December 2015. (5 marks) b. Prepare an income statement for the month ending December 31, 2015, {10 marks) c. Prepare a retained earnings statement for the month ending December 31, 2015. (5 marks) d. Prepare a classified balance sheet at December 31, 2015. (15 marks) QUESTION 2 - 20 marks PART A~ 18 marks The bank statement for Jones Company indicates a balance of $1,730 on June 30. The cash balance per books had a balance of $798 on this date, The following information pertains to the bank transactions for the company. 4. Deposit of $760, representing cash receipts of June 30, did not appear on the bank statement. 2, Outstanding checks totaled $340. 3. Bank service charges for June amounted to $25 4, The bank collected a note receivable for the company for $1,400 plus $56 interest revenue. 5. . An NSF check for $80 from a customer was returned with the statement Req a. Prepare a bank reconciliation for June 30. (10 marks) b. Prepare any adjusting entries necessary as a result of the bank reconciliation ( marks). TURN OVER ‘The University of the West Indies ACCTI002 20161...Page 3 QUESTION 2 (Cont'd) PART B-5 marks Jim Gant has worked for Dr. Ken Flood for several years. Jim demonstrates a loyalty that is rare among employees. He hasn't taken a vacation in the last three years. One of Jim's primary duties at the medical office is to open the mail and list the checks received, He also takes cash from patients at the cashier window as patients leave. At times it is so hectic that Jim doesn't, bother with giving patients a receipt for the cash paid on their accounts. He assures them he will see to it that they receive the proper credit. When the traffic is slow in the office Jim offers to help Lisa post the payments to the patients’ accounts receivable. She is always happy to receive his help, because he is a very conscientious worker. Required: Identify three (3) principles of internal control that may be violated in this medical office situation. (6 marks) QUESTION 3 - 20 marks Philip Company uses the periodic inventory method and had the following inventory information available for 2015: Date Units Unit Cost Total Cost 4M Beginning Inventory 100 87 $ 700 3/20 Purchase 500 $8 4,000 8/25 Purchase 100 $9 900 11729. Purchase 300 $10 3,000 $8,600 A physical count of inventory on December 31 revealed that there were 380 units on hand. Required: ‘Answer the following independent questions and show computations supporting your answers. a. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $ (3 marks) b. Assume that the company uses the average cost method. The value of the ending inventory ‘on December 31 is $. . (3 marks) ©. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $_ (3 marks) d. Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less? (7 marks) e. Briefly identity the differences between a periodic and perpetual inventory system. (4 marks) TURN OVER The University of the West indies Course Code: ACCTI092 20161. JPage 4 QUESTION 4 - (20 MARKS) PART A- 10 marks Strickland Company uses the allowance method for estimating uncollectible accounts. Below are the transactions for January: January 5 — Sold merchandise to Sue Land for $1,800, terms n/15. April 15 Received $400 from Sue Land on account. August 21 Wrote off as uncollectible the balance of the Sue Land account when she declared bankruptcy. October 5 — Unexpectedly received a check for $650 from Sue Land, Required: Prepare journal entries to record the above transactions. (10 marks) PART B- 10 marks Jennifer Company purchased a new machine on October 1, 2014, at a cost of $104,000. The company estimated that the machine has a salvage value of $8,000. The machine is expected to be used for 80,000 working hours during its 8-year life. Required: Compute depreciation using the following methods in the year indicated. a) Straight-line for 2014 and 2015, assuming a December 34 year-end. (4 marks) b) _Declining-baiance using double the straight-line rate for 2014 and 2015. (4 marks) c) _ Units-of-activity for 2014, assuming machine usage was 2,900 hours. (Round depreciation per unit to the nearest cent) (2 marks) END OF QUESTION PAPER he University ofthe West Indies Course Coa ACCTI002 2016.