Mock Test (final exam)

Question 1 (chapter 14): Classify each transaction as cash flows from operating activity,
investing activity, financing activity, or noncash activity:
a. Purchase inventory for $2,000 on account
b. Direct issuance of common stock to purchase equipment cost $20,000
c. Pay salaries for employee for $4,000 cash
d. Conversion of $10,000 bonds payable into common stock.
e. Issuance of common stock for $10,000 cash
f. Issuance of note payable to purchase inventory cost $10,000
g. Declare and pay cash dividends of $8,000
h. Sign a long-term note payable to borrow $2,000 cash from Bank of America
i. Receive dividends from stock invesment for $1,000 cash
j. Receive interest from bank saving account for $100 cash
k. Purchase property for $30,000 cash
l. Pay income tax $6,000 cash to the government
m. Pay interest on note payable for $50 cash
n. Depreciation expense is $200
o. Purchase supplies for $4000 cash
p. An old equipment which had book value of $2,000 had been sold for $5,000 cash
q. Purchase a 5-year bond for $1,000 cash

Question 2 (chapter 5) Latvia opened Lava Company on June 1, 2021. Lava Company
completed the following merchandising transactions in the month of June.
Jun 1. The owner invests $10,000 cash in exchange for common stock.
Jun 2. Hire 3 new employees
Jun. 3 Purchased inventory from Minco for $3,800, FOB shipping point, terms 1/10, n/30.
The appropriate party also made a cash payment of $50 for freight on this date.
Jun 6. Purchase an equipment for $5,000 cash
Jun 12. Sold merchandise to Maxco for $4,200, FOB destination, terms 2/10, n/30. The
appropriate party also made a cash payment of $50 for freight on this date. The inventory
sold had a cost of $2,200.
Jun 14. Grant Maxco $200 credit for low quality merchandise allowance
Jun 19. Receiving payment from Maxco in full, less discount if any.
Jun 24. Paid Minco in full, less discount if any.
Jun 30. Depreciation expense (equipment) of the month is $100
Jun 30. Accrued salaries and wages expense is $1,000
Jun 30. Paid $250 for utilities bill of June
Jun 30 Declared and paid cash dividend for $200

Requirement
(a) Journalize the June transactions under perpetual inventory system
(b) Prepare closing entries for June, 2021
(c) Prepare Multiple-step income statement of Lava company for June, 2021.
(d) Prepare Classified balance sheet of Lava company on June 30, 2021.

Question 3 (Chapter 6): Ziad Company had a beginning inventory on January 1 of 150 units
of Product X at a cost of $20 per unit. During the year, the following purchases were made.

Mar. 15 400 units at $23

July 20 250 units at $24

Sept. 4 350 units at $26

Dec. 2 100 units at $29

During the year, 1,000 units were sold. Ziad Company uses a periodic inventory system.

(a) Determine the cost of goods available for sale.

(b) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the
assumed cost flow methods (FIFO, and average-cost).

Question 4 (chapter 6): Ziad Company had a beginning inventory on January 1 of 150 units
of Product X at a cost of $20 per unit. During the year, the following purchases were made.

Mar. 15 400 units at $23

July 20 250 units at $24

Sept. 4 350 units at $26

Dec. 2 100 units at $29

During the year, 1,000 units were sold.

Feb 2 100 units

June 1 200 units

Aug 5 300 units

Oct 10 400 units

Ziad Company uses a perpetual inventory system.

(a) Determine the cost of goods available for sale.

(b) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the
assumed cost flow methods (FIFO, and average-cost).
Question 5 (chapter 6): Serebin Company applied FIFO to its inventory and got the
following results for its ending inventory.

Cameras 100 units at a cost per unit of $65

DVD players 150 units at a cost per unit of $75

iPods 125 units at a cost per unit of $80

The cost of purchasing units at year-end was cameras $71, DVD players $67, and iPods $78.

Determine the amount of ending inventory at lower-of-cost-or-market.