Professional Documents
Culture Documents
Instructions to Students
You should have:
• This question paper: 12 pages (including this cover page) •
A pencil & a calculator
SECTION ONE:
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Instructions: Carefully read each question and answer in the spaces provided.
1) A. On first of January 2017 Emaar Corporation purchased concrete mixer for 850,000
AED to use in activities for the next five years. The estimated salvage value is 84,000
AED.
Required: Compute the depreciation expense and complete the following
depreciation table for each of the five years assuming Double Declining Balance
Method is used. (5 marks)
Depreciation rate is 0.2 * 2= 0.4
Year Book Value Depreciation Accumulated Book Value
Beginning Balance Expense Depreciation Ending
Balance
2017 850,000 340,000 340,000 510,000
2018 510,000 204,000 544,000 306,000
2019 306,000 122,400 666,400 183,600
2020 183,600 73,440 739,840 110,160
2021 110,160 26,160 766,000 84,000
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2) On January 1, 2017, Bugles Company purchased a delivery cart for 69,250 AED
cash plus 2,150 AED for sales tax, the estimated life is five years and salvage value is
6,400 AED. On December 31, 2017, Bugles recorded annual straight line depreciation for
13,000 AED on the delivery cart. In 2018, Bugles Company obtained new information.
The delivery cart’s estimated useful life was changed from five years to four years, and
the estimated salvage value was increased to 7,400 AED.
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3) A. Galaxy Company purchased and installed a machinery on January 1, 2015, at a
cost of 212,600. Straight line depreciation is calculated each year for four years
assuming a seven years life and no salvage value. The machine is disposed off on July 1,
2019 during the fifth year of its service. The company uses the calendar year.
1. Prepare the general journal entry to update depreciation on July 1, 2019. (3 Marks)
July 1, 2015 Depreciation Expense 15,186
2. Prepare the general journal entry to record the disposal of the equipment for 80,484
AED Cash. (7 Marks)
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B) Bata Company purchases and installs a machinery on Jan. 1, 2017 at a total cost of
340,000 AED. Straight line depreciation is taken assuming an eight year life and 24,000
salvage value. The machine is disposed off on April 1, 2019, during its third year of
service. Depreciation has been recorded till Dec. 31, 2017.
Required: Prepare entries to record the partial year depreciation on April 1,2019 and the
disposal of the machine if it is sold for 240,000 cash. (10 Marks)
Annual Depreciation = (340,000 – 24,000)/8= 39,500 AED
On disposal of asset:
Cash 240,000
Machinery 340,000
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SECTION TWO:
Instructions: Carefully read each question and answer in the spaces provided.
4) Prepare adjusting entries at December 31, 2018, for Keesha Company’s year-end
financial statements for each of the following separate transactions and events.
(a) Keesha Company sold a fully loaded washing machine (that costs AED 12,000) for
AED 23,000 cash with a one- year warranty that covers parts. Warranty expenses is
estimated at 7.5% of sales. An adjusting entry records the warranty expense at the
end of each year.
(b) Keesha Company earned AED 67,750 of AED 84,000 previously received in advance
and originally recorded unearned service revenue.
(c) Keesha Company records a year end entry AED 75,000 of previously unrecorded cash
sales (costing AED 52,000) and its sales taxes @ 8.5%.
(d) Keesha Company owed salary of AED 350 per day to eight salesmen for the last five
days of 2018.
Prepare adjusting entries for all of the above at 31 st December, 2018
(e) Keesha Company borrowed AED 210,000 cash on December 1 st, 2018 by signing a 90
day 6% note with a face value of AED 210,000.
Prepare the journal entries to record:
(i) The issuance of the note
(ii) Payment of the note at maturity (Use 360 days a year, round interest to a whole
number).
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Date Description Debit Credit
2018
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SECTION THREE:
Instructions: Carefully read each question and answer in the spaces provided.
6) A comparative statement of the financial position for Mercury Trading Co. for 2017 and
2018 appears below:
Mercury Trading Company
Comparative Statement of Financial Position
December 31, 2018 December 31, 2017
Assets
Current Assets
Cash AED 245,000 AED 360,000
Accounts Receivable 150,000 290,000
Inventory 85,000 60,000
Prepaid Insurance 40,000 0
Non-Current Assets
Land 590,000 485,000
Building 425,000 235,000
Accumulated Depreciation - Building (180,000) (150,000)
Total Assets 1,355,000 1,280,000
Liabilities and Equity
Liabilities
Current Liabilities
Accounts Payable 575,000 595,000
Salaries payable 0 35,000
Non-Current Liabilities
Long-term Notes Payable 50,000 160,000
Equity
Capital Common Stock 610,000 400,000
Retained Earnings 120,000 90,000
Total Liabilities and Equity 1,355,000 1,280,000
Additional information:
1. Net income for the year was AED 40,000.
2. A new building was purchased for cash.
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3. An old building with a cost of AED 100,000 and a book value of AED 40,000 was sold
for AED 54,000 cash.
4. Cash was paid for the purchase of a land during the year.
5. AED 110,000 of the long-term note payable was paid by issuing common stock.
6. Common stock of AED 100,000 were issued for cash.
7. Cash dividends were paid during the year.
Required
Prepare a statement of cash flows for the year ended December 31, 2018, using the indirect
method.
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Net Decrease in Cash = (115,000) 1 Mark
Plus Beginning Cash Balance 360,000 1 Mark
= Ending Cash Balance 245,000 1 Mark
**(2016 Buildings Balance 235,000– 100,000 Sold Building then the answer is deducted from
2017 Buildings Balance 425)
235,000 – 100,000 = 135,000) then 425,000 – 135,000 = 290,000 new buildings purchases
***90,000 (R.E. 1/1/2017) + 40,000 (net income 2017) – 120,000 (R.E. 31/12/2017)
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