FACULTY OF
ECONOMIC AND ADMINISTRATIVE SCIENCES
DEPARTMENT
OF MANAGEMENT & DEPARTMENT OF ECONOMICS
MAN 201
PRINCIPLES OF ACCOUNTING I
MIDTERM EXAM
II
Instructor: ALI COSKUN
Duration: 90 Minutes December 12, 2005
QUESTIONS
QUESTION 1
Wild Woods,
a large campground, 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.
Salaries earned
by campground employees that have not yet been paid amount to
$7,250.
2.
Depreciation on buildings
owned by the campground is based on a 30-year life. The original cost
of the buildings was $720,000. The Accumulated Depreciation: Buildings account has a credit balance of $140,000 at December 31, prior to the adjusting
entry process. The straight-line method
of depreciation is used.
3.
On May 1, Wild
Woods purchased a 8-month insurance policy for $24,000.
4.
Boy Scout of WSU, used the campground
in December. The agreement specifies that they will
pay $120 per day. The amount will
be paid when they leave the
Camp in January. They have spent
15 days in the campground during December.
5.
Several campsites
are currently being leased on a long-term basis
by a group. Three months’ rent
of $6,000 was collected in advance and credited
to Unearned Camper Revenue on October 1 of the current year.
6.
A bus to
carry campers to and from
town and the airport had been rented the
first week of December at a daily rate of $28. At December 31, no rental payment has been made, although
the campground has had a use of the bus
for 15 days.
7.
Wild Woods
invests some of its excess cash
in certificates of deposit
(CDs) with its local bank. Accrued interest revenue on its CDs at December 31 is $1,150. None of the interest has yet been received.
8.
A nine-month bank loan in the amount
of $75,000 had been obtained
on October 1. Interest is to be computed at an annual rate of 8% and is payable when the loan
becomes due.
9.
As of December 31, Wild Woods has earned $22,500 of revenue from current campers
who will not be billed until they
check out except the Boy Scout of WSU.
For each of the above
numbered paragraphs, prepare the necessary adjusting entry.
QUESTION 2
The
Fox Company adjusts and closes its accounts monthly. Adjusted balances of the
ledger accounts of Fox Company on October 31, 2005 are listed below in
alphabetical order:
Accounts payable .......................... $ 40,600 Accounts
receivable ....................... $ 19,150
Accumulated Depreciation:
Equipment 2,250 Capital
stock ................................. 110,000
Cash
............................................... 27,500 Depreciation
expense: Equipment 250
Dividends
........................................
7,000 Dividends payable ......................... 7,000
Equipment
...................................... 30,000 Insurance
expense ........................ 3,200
Interest
payable .............................. 2,600 Land ............................................ 110,000
Maintenance expense
...................... 7,000 Notes
payable ................................ 31,000
Notes
receivable .............................. 35,000 Prepaid rent .................................. 12,000
Rent expense ................................... 33,000 Retained earning ........................... 55,000
Service
revenue ............................... 79,600 Salaries expense ........................... 42,500
Unearned
service revenue ................. 2,150 Unexpired
Insurance .................... 3,600
Required:
a. Prepare an
income statement for the month ended October 31, 2005.
b. Prepare a
statement of retained earnings for the month ended October 31, 2005.
c. Prepare a
balance sheet on October 31, 2005.
d. Prepare
journal entries to close the accounts.
QUESTION 3
Safe
Travel, Inc., operates a bus that takes tourists at
several resorts on excursions. The
company adjusts its accounts at the end of each month. Selected account balances appearing on the
April 30 unadjusted trial balance are as follows:
Unexpired Insurance................................................................. 1,200
Bus ......................................................................................... 90,000
Accumulated Depreciation: Bus................................................... $27,500
Unearned
Passenger Revenue..................................................... 2,550
1.
The bus is being depreciated over a 15-year
estimated useful life, with no residual value.
2.
The unearned passenger revenue represents
tickets good for future rides sold to a resort hotel for $25 per ticket on April
1. During April, some of the tickets were used, but 30 tickets for future rides
has not been used by the passengers.
3.
Five months’ rent had been prepaid on March 1.
4.
The unexpired insurance is a 12-month fire
insurance policy purchased on February 1.
Required:
What
are the adjusted balances of the same accounts on the April 30 adjusted trial balance.