FATÝH UNIVERSITY
FACULTY OF ECONOMIC
AND ADMINISTRATIVE SCIENCES
FINAL EXAM
Instructor:
ALI COSKUN
Duration: 75 Minutes January
20, 2006
Question 1. (20 points)
Wild Woods, a large campground in Oregon, adjusts its accounts monthly and closes its accounts annually
on December 31.
Most guests of the campground pay at the time they check
out, and the amounts collected
are credited to Camper Revenue. The following information is available as a source for preparing the
adjusting entries at December 31:
1. A
nine-month bank loan in the amount of $100,000 had been obtained on October 1. Interest is to be computed at an annual rate of 6% and is payable when the
loan becomes due.
2. Depreciation on buildings owned by the campground
is based on a 25-year
life. The original cost of the buildings was
$750,000. The Accumulated Depreciation: Buildings account has a credit balance of $260,000 at December 31, prior to the adjusting
entry process. The straight-line method
of depreciation is used.
3. Salaries earned
by campground employees that have not yet been paid amount to
$14,250.
4. As
of December 31, Wild Woods has earned $35,000 of revenue from current
campers who will not be billed until they check
out.
5. Several lakefront
campsites are currently being leased on a long-term basis by
a group of senior citizens. Five months’ rent
of $6,000 was collected in advance and credited
to Unearned Camper Revenue on November 1 of the current year.
Prepare the necessary adjusting entry.
Question 2. (40 points)
Dekor Furniture Corporation is a merchandising
company that sells chairs. The company uses a perpetual inventory system. It
records sales at the gross invoice price and purchases at net cost. The
followings are the transactions in March 2002:
Mar 1 Dekor Furniture Corporation purchased 100
chairs at $35 each from Comfort Company on account, credit terms 2/10,n/30.
Mar 2 Purchased a computer system from Beta Company for $6,000, paying $1,200
cash and signing a 12 month, 10% note payable for the balance.
Mar 3 Sold twenty chairs on account to Rahat
Corporation for $80 each, terms 1/10, n/30.
Mar 8
Rahat Corporation returned one chair purchased on
March 3. The amount reduced from the account receivable of Rahat
Corporation.
Mar
12 Collected accounts receivable from the sales on March 3.
Mar
28 A $1,500 invoice was received from Easy Repairs for maintenance and repairs
done in Dekor Furniture’s building during March.
Mar
30 Paid the accounts payable for the purchases on
March 1.
Mar
31 Paid employees’ salaries, $2,000.
Prepare the journal entries to record these transactions.
Question 3. (20 points)
At the end of 2004, Sport Center had merchandise inventory costing $210,000. There were only two
merchandising transactions during the January
2005. On January 10, the company purchased inventory costing $788,000, on account. On January 22, Sport Center sold
merchandise inventory, which it had purchased at a total cost of $795,000, on account.
Compute the
ending inventory for January 2005.
Question 4. (20 points)
Troy
Pamona is the founder and manager
of Old City Playhouse. The business needs
to obtain a bank loan to finance
the production of its next play. As part of the loan application,
Pamona was asked to prepare
a balance sheet for the business. He prepared the following
balance sheet, which is arranged correctly but which contains several errors with respect
to such concepts
as the business entity and the
valuation of assets, liabilities, and owner’s equity.
Balance Sheet
September 30, 2005
Cash....................................... $
22,200 Liabilities:
Accounts Receivable................... 80,100 Accounts
Payable.............. $
35,000
Props and Costumes.................... 5,000 Salaries
Payable................... 31,200
Theater Building......................... 33,000 Total
Liabilities............ $66,200
Lighting Equipment...................... 9,100 Owner’s Equity:
Automobile................................ 25,000 Troy Pamona, Capital................ 108,200
Total...................................... $174,400 Total .................................. $174,400
In
discussions with Pamona and by
reviewing the accounting records of Old City Playhouse,
you discover the following facts:
1.
When
Pamona founded Old City Playhouse
several years ago, he invested
$55,000 in the business. However, Live Theatre, Inc.,
recently offered to buy his business for $108,200. Therefore, he listed
this amount as his equity in the above
balance sheet.
2.
The
automobile is Pamona’s classic 1945 Anadol, which he purchased
two years ago for $15,000. He recently saw a similar car advertised for sale at $25,000. He does not use the
car in the business.
3.
Pamona
explains to you that the
props and costumes were purchased
several days ago for $29,000. The business paid
$5,000 of this amount in cash and issued
a note payable to Actor’s Supply
Co. for the
remainder of the purchase price ($24,000). As this note is note due
until January of next year, it was
not included among the company’s liabilities.
4.
The
accounts receivable, listed as $80,100, include
$23,000 owed to the business by
Artistic Tours. The remaining $57,100 is Pamona’s estimate of future ticket sales from
September 30 through the end of the
year (December 31).
5.
The
amount of cash, $22,200, includes $9,000 in the company’s bank account, $8,100 on
hand in the company’s safe, and $5,100 in Pamona’s personal savings account.
6.
Old
City Playhouse rents the theater
building from Delf International at a rate of $11,000 a month. The $33,000 shown in the balance
sheet represents the rent paid
for next three months. Delf International acquired the building seven years ago at a cost of $180,000.
7.
The
lighting equipment was purchased on November 30 at a cost of $9,100,
but the stage manager says that
it isn’t worth a dime.
8.
The
accounts payable include business debts of $24,000 and the $11,000 balance of Pamona’s personal VISA card.
9.
Salaries
payable include $18,000 offered to Aslý Korkmaz to play the
lead role in a new play opening next
December and $13,200 still owed to
stagehands for work done through September 30.
Prepare a corrected balance sheet for
Old City Playhouse at September 30, 2005.