FATİH UNIVERSITY

FACULTY OF ECONOMIC AND ADMINISTRATIVE SCIENCES

DEPARTMENT OF MANAGEMENT & DEPARTMENT OF ECONOMICS

MAN 202 PRINCIPLES OF ACCOUNTING II

FINAL EXAM

Instructor: ALI COSKUN June 2, 2004

QUESTIONS

Question 1.

The accounting department of Shining Company has assembled the following information for the year ended December 31, 2003:

Book value of plant assets sold............................................................................ $ 540,000

Cash and cash equivalents, Jan. 1............................................................................................. 675,000

Cash paid to acquire plant assets........................................................................................... 1,200,000

Cash payments for operating expenses................................................................................ 2,000,000

Cash sales.................................................................................................................................... 650,000

Collections on accounts receivable......................................................................................... 2,800,000

Collections on loans (excluding receipts of interest).............................................................. 450,000

Cost of marketable securities sold ............................................................................................ 250,000

Credit sales.................................................................................................................................. 2,950,000

Dividends paid................................................................................................................................ 260,000

Dividends received........................................................................................................................... 60,000

Gain on sales of plant assets........................................................................................................ 50,000

Income taxes paid.......................................................................................................................... 130,000

Interest received.............................................................................................................................. 100,000

Interest paid....................................................................................................................................... 80,000

Loans made to borrowers............................................................................................................ 300,000

Loss on sales of marketable securities....................................................................................... 20,000

Payments on accounts payable to merchandise suppliers............................................... 1,200,000

Proceeds from issuing capital stock ......................................................................................... 750,000

Purchases (all on account)....................................................................................................... 1,350,000

Prepare the cash flows from operating activities section of the Statement of Cash Flows for the company for the year ending December 31, 2003. Use the direct method of reporting cash flows from operating activities.

Question 2.

Prepare the cash flows from investing activities and financing activities section of the Statement of Cash Flows for Shining Company for the year ending December 31, 2003 using the information given in the Question 1.

Question 3.

The ledger accounts of Atkinson Corporation on December 31, 2003 are listed below in alphabetical order:

Accumulated Depreciation: equipment $ 10,800 Interest Receivable …..…..………………… 2,200

Accounts Receivable ………………… 74,400 Inventory ……….………..………………… 200,000

Accounts Payable …………………… 95,000 Land …………….…………………………… 150,000

Additional paid in capital: Common Stock 220,000 Long-term Notes Payable ………………… 50,000

Allowance for doubtful accounts ……… 7,000 Notes Receivable (due within one year) … 2,000

Cash ……………………………….............… 33,100 Office Supplies ………………………….… 800

Common Stock ……………………………… 40,000 Prepaid Office Rent ………………………. 12,000

Equipment …………………………………. 36,000 Retained Earnings ……………………..… ?

Income Taxes Payable …………………… 17,000 Salaries Payable ………..………………… 3,700

Interest Payable …..……..………………… 1,800 Treasury Stock …………….……………… 10,000

Prepare a balance sheet by using these items and computing the amount of retained earning at December 31, 2003. Include a proper balance sheet heading.

Question 4.

Calculate the working capital and the current ratio of the Atkinson Corporation using the information given in Question 3?

Question 5.

Sonic Stereo uses a periodic inventory system. Shown below are Sonic's beginning inventory of a particular product and purchases during January:

Beginning Inventory (Jan.1) 10 Units $300 per unit

January 13 Purchased 10 Units $320 per unit

January 19 Purchased 5 Units $340 per unit

January 26 Purchased 10 Units $360 per unit

January 8 Sold 8 Units $600 per unit

January 15 Sold 10 Units $675 per unit

January 23 Sold 5 Units $700 per unit

January 28 Sold 7 Units $750 per unit

On January 31 physical counts show that 4 units of this product was on hand.

Compute the ending inventory on January 31 and the cost of goods sold during January using the First in First out (FIFO) method

Compute the gross profit of the company for the month January

Question 6.

During 2003, Worldwide Company disposed of plant assets in following transactions:

July 1, 2003: Worldwide Company traded in an old automobile for a new one. The old automobile originally cost $40,000 and its accumulated depreciation amounted to $25,000. The list price of new automobile was $55,000. Worldwide Company paid $35,000.

December 31, 2003: Worldwide Company sold a machine that originally cost $100,000 for $14,000 cash. The machine was placed in service on January 1, 1999. It has been depreciated annually using the double-declining (200%) balance method with an estimated salvage value of $2,000 and an estimated useful life of 10 years.

Prepare the journal entries to record each of the disposal trancastions.

Question 7.

Early in the year 2003 JTK Corporation was organized. The corporation was authorized to issue 1,000,000 shares of $1 par value common stock and 10,000 shares of $200 par value, 7% cumulative preferred stock. The following transactions (among others) occurred during the year:

Jan. 21 Issued for cash 250,000 shares of common stock at $6 per share.

Jan. 27 Issued 4,000 shares of preferred stock for cash of $800,000.

Mar. 11 The company purchased 20,000 shares of its own common stock in the open market for $200,000.

July 17 Reissued 10,000 shares of this treasury stock for $150,000.

Nov. 27 The first annual divided of $14 per share was declared on the preferred stock to be paid Dec. 13.

Dec. 13 Paid the cash dividend declared on November 27.

Prepare journal entries in general journal form to record the above transactions.

Question 8.

Wilcox Company uses the balance sheet approach in estimating uncollectible account expense. At year end an aging analysis of accounts receivable disclosed the following information:

Age group Total % Considered Uncollectible

Not yet due $50,000 2%

1-30 days past due 25,000 5%

31-60 days past due 10,000 11%

Over 60 days past due 4,000 25%

The Allowance for Doubtful Accounts before adjustment at Dec 31, 2003 showed a debit balance of $ 200.

What is the appropriate balance for Wilcox’s Allowance for Doubtful Accounts at December 31, 2003?

Prepare the adjusting entry needed to bring the Allowance for Doubtful Accounts to the proper amount.