FACULTY OF BUSINESS

PRESIDENT UNIVERSITY

FINAL EXAMINATION
Academic Year 2022-2023
Current Semester : 20222
Period : January 09, 2023 - May 28, 2023
Subject : Intermediate Accounting 1
Lecturer : Mila A. Reyes, BSBA, CPA, MBA
Study Program : Accounting
Date : 12 May 2023 Room : A426

Instructions to Students :
1. This examinations consist of 5 problems.
2. Time allowed for this examination is 2.5 hours. Use the time allotted efficiently.
3. Sanctions will be given to those students who are not following the examination rules.
4. All answers must be in INK. Use paper line as your answer sheet. The number to the
corresponding question must be written correctly.
5. Students are to use proper English and are required to write neatly and clearly. Do not use
TIP-X or correction fluid. Do not use abbreviations.
6. This is an OFFLINE examination. Use of hand phone/computers are NOT ALLOWED
Use of calculator is ALLOWED. Use ruler to draw lines.
7. If you have questions you can ask me directly. Concentrate so you can finish on time.
8. Anybody caught cheating/copying from his/her seatmate will automatically FAIL the subject.
9. Observe SILENCE during the examination period.
10. READ THE INSTRUCTIONS CAREFULLY BEFORE ANSWERING EACH PROBLEM.

"HONESTY IS THE FASTEST WAY TO PREVENT A MISTAKE

FROM TURNING INTO A FAILURE"
James Altucher

Problem 1 (75 minutes)

Listed below are amounts taken directly from Holmes Company's financial statements
prepared on December 31, 2019, their second year of operation:
Cash
Accounts payable $ 3,200 Notes R
Accounts receivable 1,800 Accoun
Accumulated depreciation-building 8,000 Allowan
Accumulated depreciation-equipment 2,000 Mercha
Advertising expense 600 Prepaid
Allowance for doubtful accounts 200 Supplie
Building 20,000 Land
Cash 2,200 Building
Delivery expense 600 Accumu
Depreciation expense-Display equipment 1,200 Equipm
Depreciation expense-office equipment 300 Accumu
Equipment 6,000 Franchi
Franchise 3,000 Patents
Freight-in 200 Accoun
Insurance expense 100 Salaries
Land 12,000 Share c
Legal expense 700 Share p
Merchandise inventory, January 1 3,700 Retaine
Merchandise inventory, December 31 5,100 Sales
Notes Receivable 200 Sales d
Office salaries expense 1,300 Sales re
 Patents 3,000 Purcha
Prepaid insurance 500 Purcha
Purchases 15,700 Purcha
Purchase returns and allowances 1,000 Freight-
Purchase discounts 100 Sales s
Retained earnings 6,000 Store re
Salaries payable 400 Store s
Sales 24,000 Advertis
Sales discounts 400 Delivery
Sales returns and allowances 200 Deprec
Sales salaries expense 3,700 Office s
Share capital, ordinary ?? Deprec
Share premium, ordinary 5,000 Insuran
Store rent expense 1,200 Legal e
Store supplies expense 500
Supplies 300

Required:
From the above information, you are required to prepare:
1. Trial balance
2. Income Statement
3. Statement of owner's equity
4. Statement of financial position Proble

Problem 2 (25 minutes) 1.

The following information pertains to Pelican Company as of June 30, 2020, which is the end of
the company's accounting year.
2.
1. Pelican Company owed interest on June 30 amounting to $1,450 on a note payable to
the bank. The interest has not yet been recorded.

2. The balance of the Supplies account was $6,700, but a physical count of the actual 3.
supplies showed there was only $2,750 worth of supplies on hand. 3950

3. On August 1, 2019, Pelican Company rented a vacant building it owned to another

company. Pelican Company received $6,000 for one year's rent in advance and credited 5500 4.
this amount to Unearned Rent.

4. On March 1 of the current year Pelican company took out an insurance policy for one year
paying $2,400 in advance. The company debited Insurance Expense for the entire amount 1600 5.
when it was paid.

5. On July 1, 2019, Pelican Company purchased office equipment for $69,000. The 11400
Equipment was expected to have a useful life of five years and a salvage value of $12,000. 6.
Depreciation is calculated on a straight-line basis.

6. The balance in the Unearned Service Revenue account on June 30, 2020 is $8,900, of 1600
which $7,300 remains unearned. 7.

7. On March 1 of the current year Pelican Company paid $5,760 in advance for a one-year 1920
advertising campaign. Pelican Company debited Prepaid Advertising for the entire amount
when it was paid. 8.

8. Salaries earned by employees but not yet paid amounted to $2,500.

9. A truck was purchased on April of the current year amounting to $120,000. It was 3750 9.
estimated that it has a useful life of 8 years with no salvage value.

10. A note receivable was received from a customer on November 1, 2019. By June 30 of the
current year $700 of interest had accrued on the note but had not been received. 10.

Required:
Prepare adjusting entries for the year ended June 30, 2020.
Problem 3 (15 minutes) Proble

On January 10, 2020, Maxim Company purchased $18,000 of merchandise from Norway, Inc., 1.
FOB shipping point, terms 3/10, n/30. Maxim Company pays for the freight cost of $500 on
January 11. Damage goods totaling $1,500 are returned to Norway, Inc. for credit on June 12. Jan.
The fair value of the goods is 800. On January 19, Maxim Company pays Norway, Inc. in full,
less the purchase discount. Both companies use a perpetual inventory system.

Required:
1. Prepare entries on the books of Maxim Company for the above transactions.

2. Prepare entries on the books of Norway, Inc. for the above transactions. The
merchandise purchased by Maxim company on June 10 had a cost of $14,800.

Problem 4 (15 minutes)

The Patriot Company estimates its ending inventory for its quarterly financial statements by
using the gross profit method. The following information is available:

First Second Third

Quarter Quarter Quarter

Inventory, January 1 $ 20,000 Proble

Purchases 50,000 $ 55,000 $ 60,000
Purchases return 1,000 2,000 1,000
Sales 95,000 90,000 98,000
Sales returns 2,000 1,000 3,000

The company used a gross profit rate of 40% of net sales in the first two quarters, but in the
third quarter the cost of goods sold increased by 10%

Required:
What is the ending inventory at the end of the third quarter?
Problem 5 (20 minutes)

The following data were taken from the books and records of Lambert Audio Supply as
of December 31, 2021:

LAMBERT AUDIO SUPPLY

WORKSHEET
For the Year Ended December 31, 2021
Proble
Unadjuste Adjusted
d
Trial Trial
No. Balance Balance
Accounts Dr. Cr. Dr. Cr. Adjust

11 Cash $ 9,500 $ 9,500 $ 1.

12 Accounts Receivable 16,100 16,100
13 Merchandise Inventory 36,000 40,000
14 Prepaid Insurance 3,800 1,800 2,000
20 Equipment 80,000 80,000 2.
21 Accumulated Depreciation-Equipment $ 16,000 24,000 8,000
30 Accounts Payable 20,400 20,400
40 J.K. Lambert, Capital 83,000 83,000
41 J.K. Lambert, Drawing 15,000 15,000 3.
50 Sales 480,000 480,000
51 Sales Returns and Allowances 12,000 12,000
52 Sales Discounts 8,000 8,000
60 Purchases 325,000 325,000 4.
61 Purchase Returns and Allowances 10,400 10,400
62 Purchase Discounts 6,800 6,800
63 Freight-in 12,200 12,200
70 Freight-out 7,000 7,000 5.
71 Advertising Expense 16,000 16,000
80 Salaries and Wages Expense 59,000 64,000 5,000
81 Utilities Expense 17,000 17,000
TOTAL $ 616,600 $ 616,600 Closin
82 Insurance Expense 2,000
83 Depreciation Expense 8,000 1.
84 Salaries and Wages Payable 5,000
90 Income Summary 36,000 40,000
669,600 669,600

Required: 2,
Based on the above, prepare
1. Adjusting entries recorded by Lambert Audio Supply.
2.. Closing Entries
3. Post closing trial balance

3.

4.
 Shedule 1
HOLMES COMPANY
Trial Balance
December 31, 2019
Debit Credit
Revenue from Sales:
Cash $ 2,200 Sales
Notes Receivable 200 Less: Sales returns and all
Accounts receivable 1,800 Sales discounts
Allowance for doubtful accounts $ 200 Net sales
Merchandise inventory, January 1 3,700 Cost of Goods Sold:
Prepaid insurance 500 Merchandise inventory, Janu
Supplies 300 Add: Purchases
12,000 Less: Purchase retu
Building 20,000 Purchase disc
Accumulated depreciation-building 8,000 Net Purchases
Equipment 6,000 Add: Freight-in
Accumulated depreciation-equipment 2,000 Total purchases
Franchise 3,000 Total goods available for sale
Patents 3,000 Less: Mechandise inventor
Accounts payable 3,200 Cost of Goods Sold
Salaries payable 400 GROSS PROFIT
Share capital, ordinary 29,500 Operating Expenses
Share premium, ordinary 5,000 Selling Expenses
Retained earnings 6,000 Sales salaries expens
Sales 24,000 Store rent expense
Sales discounts 400 Store supplies expen
Sales returns and allowances 200 Advertising expense
Purchases 15,700 Delivery expense
Purchase returns and allowances 1,000 Depreciation expense
Purchase discounts 100 Total selling e
Freight-in 200 General and administrative e
Sales salaries expense 3,700 Office salaries expen
Store rent expense 1,200 Depreciation expense
Store supplies expense 500 Insurance expense
Advertising expense 600 Legal expense
Delivery expense 600 Total general
Depreciation expense-Display equipment 1,200 Total operating expenses
Office salaries expense 1,300 NET LOSS FROM OPERATION
Depreciation expense-office equipment 300
Insurance expense 100 Schedule 2
Legal expense 700
$ 79,400 $ 79,400
$ -

Share capital, Ordinary

Share capital, Ordinary
Premiun on ordinary share c
Total share capital
Retained earnings
Retained earnings, January 1
Problem 2 - Suggested Solution Net loss, December 31 (per i
Retained earnings, D
Interest expense $ 1,450 TOTAL SHAREHOLDERS' EQU
Accrued interest payable $ 1,450
To record accrued unrecorded interest.

Supplies expense $ 3,950

Supplies $ 3,950
To record used supplies for the period.

Unearned rent $ 5,500

Rent income $ 5,500
To record rent earned during the period.

Prepaid insurance $ 1,600

Insurance expense $ 1,600
To record unexpired insurance.

Depreciation expense-office equipment $ 11,400

Accumulated depreciation-office equipment $ 11,400
To record depreciation of office equipment.

Unearned service revenue $ 1,600

Service revenue $ 1,600
To record service revenue earned.

Advertising expense $ 1,920

Prepaid advertising $ 1,920
To record expired advertising.

Salaries expense $ 2,500

Accrued salaries payable $ 2,500
To record accrued salaries.

Depreciation expense-truck $ 3,750

Accumulated depreciation-truck $ 3,750
To record depreciation of truck.

Interest receivable $ 700

Interest income $ 700
To record accrued interest on notes receivable.
Problem 3 - Suggested Solution

Book of Maxim 2. Book of Norway, Inc.

10. Merchandise inventory $ 18,000 Jan. 10. Accounts Receivable

Accounts payable-Norway, Inc. $ 18,000 Sales
To record purchase of merchandise. To record

11. Merchandise Inventory $ 500 10. Cost of goods sold

Cash $ 500 Merchandise
To record payment for freight-in. To record

12. Accounts payable-Norway, Inc. $ 1,500 Jan. 12. Sales returns

Merchandise inventory $ 1,500 Accounts Rec
To record return of merchandise . To record

19. Accounts payable-Norway, Inc. $ 16,500 12. Merchandise invento

Cash $ 16,005 Cost of goods
Purchase Discount $ 495 To record t
To record payment in full.
19. Cash
Sales discounts
Problem 4 -Suggested Solution Accounts rece
To record
Inventory, January 1 $ 20,000
Purchases $ 165,000
Less: Purchase returns 4,000 161,000
Total goods available for sale $ 181,000
Less : Cost of goods sold
Fist and second quarter ($182,000 x 60%) $ 109,200
Third quarter ($95,000 x 70%) 66,500 175,700
Ending inventory, 3rd quarter $ 5,300
Problem 5 - Suggested Solution

Adjusting Entries

Income Summary $ 36,000

Merchandise Inventory, Jan.1 $ 36,000
To close merchandise inventory beginning.

Merchandise inventory, December 31, $ 40,000

Income summary $ 40,000
To record the ending inventory.

Insurance Expense $ 2,000

Prepaid insurance $ 2,000
To record expired insurance.

Depreciation expense $ 8,000

Accumulated Depreciation-Equipment $ 8,000
To record depreciation expense-equipment

Salaries and Wages Expense $ 5,000

Salaries and Wages Payable $ 5,000
To record accrued salaries

Closing Entries

Sales $ 480,000
Purchase Returns and Allowances $ 10,400
Purchase Discounts $ 6,800
Income summary $ 497,200
To close revenue to income summary account.

Income Summary $ 471,200

Sales Returns and Allowances $ 12,000
Sales Discounts $ 8,000
Purchases $ 325,000
Freight-in $ 12,200
Freight-out $ 7,000
Advertising Expense $ 16,000
Salaries and Wages Expense $ 64,000
Utilities Expense $ 17,000
Insurance Expense $ 2,000
Depreciation Expense $ 8,000
To close expenses to income summary account.

Income Summary $ 30,000

J.K Lambert, capital $ 30,000
To close income to capital account.

J.K Lambert, capital $ 15,000

J.K. Lambert, Drawing $ 15,000
To close withdrawal account to capital

LAMBERT AUDIO SUPPLY

Post - Closing Trial Balance
 December 31, 2021
Debit Credit

11 Cash 9,500
12 Accounts Receivable 16,100
13 Merchandise Inventory 40,000
14 Prepaid Insurance 1,800
20 Equipment 80,000
21 Accumulated Depreciation-Equipment 24,000
30 Accounts Payable 20,400
40 J.K. Lambert, Capital 98,000
84 Salaries and Wages Payable 5,000
$ 147,400 $ 147,400
 HOLMES COMPANY
Income Statement
For the Year Ended December 31, 2019

$ 24,000
les returns and allowances $ 200 Current Assets:
les discounts 400 600 Cash
$ 23,400 Notes Receivable
Accounts receivable
se inventory, January 1 $ 3,700 Less: Allowance for doubtful acco
$ 15,700 Merchandise inventory, December
Purchase returns and allowances $ 1,000 Prepaid insurance
Purchase discounts 100 1,100 Supplies
$ 14,600 Total Current Assets
Freight-in 200 Non-Current Assets:
tal purchases 14,800 Property, Plant and Equipment:
s available for sale $ 18,500 Land
echandise inventory, December 31 5,100 Building
13,400 Less: Accumulated deprec
$ 10,000
Equipment
Less: Accumulated deprec
es salaries expense $ 3,700 Total Property, Plant and E
re rent expense 1,200 Intangibles Assets:
re supplies expense 500 Franchise
vertising expense 600 Patents
 ivery expense 600 Total Intangible assets
preciation expense-Display equipment 1,200 Total Non-Current Assets
Total selling expenses $ 7,800 TOTAL ASSETS
nd administrative expenses
ce salaries expense $ 1,300
preciation expense-office equipment 300
urance expense 100 Liabilities:
700 Current Liabilities
Total general and adminisrative expenses 2,400 Accounts payable
ting expenses 10,200 Salaries payable
OM OPERATION $ (200) Total Liabilities

Shareholders' Equity
HOLMES COMPANY Shareholders' equity, December 31
Statement of Shareholders' Equity TOTAL LIABILITIES AND SHAREHOLD
For the Year Ended December 31, 2019

$ 29,500
n ordinary share capital 5,000
tal share capital $ 34,500

arnings, January 1 $ 6,000

December 31 (per income statement Sch. 1) (200)
tained earnings, December 31 5,800
EHOLDERS' EQUITY $ 40,300
counts Receivable-Maxim Company 18,000
18,000
To record sales of merchandise.

st of goods sold 14,800

Merchandise inventory 14,800
To record the cost of merchandise sold.

1,500
Accounts Receivable-Maxim Company 1,500
To record return of merchandise.

erchandise inventory 800

Cost of goods sold 800
To record the cost of goods returned.

16,005
les discounts 495
Accounts receivable-Maxim Company 16,500
To record collection of account in full.
 HOLMES COMPANY
Statement of Financial Position
December 31, 2019

ASSETS

$ 2,200
200
$ 1,800
wance for doubtful accounts 200 1,600
e inventory, December 31 5,100
500
300
al Current Assets $ 9,900

Plant and Equipment:

$ 12,000
$ 20,000
Accumulated depreciation-building 8,000 12,000

$ 6,000
Accumulated depreciation-equipment 2,000 4,000
al Property, Plant and Equipment $ 28,000

$ 3,000
3,000
al Intangible assets 6,000
Current Assets 34,000
$ 43,900

LIABILITIES AND EQUITIES

ounts payable $ 3,200

400
$ 3,600

ers' equity, December 31, 2019 (per schedule 2) 40,300

IES AND SHAREHOLDERS' EQUITY 43,900
-