FATÝH UNIVERSITY

FACULTY OF ECONOMIC AND ADMINISTRATIVE SCIENCES

DEPARTMENT OF MANAGEMENT & DEPARTMENT OF ECONOMICS

MAN 202 PRINCIPLES OF ACCOUNTING II

MIDTERM EXAM

 

Instructor: Ali COSKUN

Duration: 75 Minutes                                                                                                                 March 24, 2004

QUESTIONS

Question 1.

Fashion World uses a periodic inventory system.  The beginning inventory of a particular product, and the purchases during the current year, were as follows:

 

Beginning Inventory (Jan.1)         400 Units        $  9.00 per unit   = $3,600

January 13 Purchased                1000 Units        $  9.50 per unit   =   9,500

January 18 Purchased                1400 Units        $10.00 per unit   = 14,000

January 22 Purchased                1200 Units        $10.25 per unit   = 12,300

The sale available in year           4000 Units                                  $39,400

At December 31, the ending inventory of this product consisted of 1,500 units.

Determine the cost of the year-end inventory and the cost of goods sold for this product under each of the following methods of inventory valuation:

a) Average cost

b) Last in First out (LIFO)

 

Question 2.

On September 1, 2003, Hydro Equipment Corporation sold equipment priced at $450,000 in exchange for a six-month note receivable with an annual interest rate of 8%, all due at maturity.

a) Prepare the journal entry on September 1, 2003.

b) Prepare the December 31, 2003 (fiscal year-end), adjusting entry made by Hydro with regard to this note receivable.

c) Prepare the entry made by Hydro on March 1, 2004 (maturity date of note), to record collection of note and interest.

 

Question 3.

At the end of the year the unadjusted trial balance of Blanchard Provisions included the following accounts:

                                                                          Debit                     Credit

Sales (80% represent credit sales)                                               $ 2,787,750

Accounts receivable                                          372,000

Allowance for doubtful account                                                           4,365

Blanchard Provisions can use either balance sheet approach or income statement approach to estimating uncollectible accounts expense.

a) If Blanchard uses the balance sheet approach to estimating uncollectible accounts expense, and aging the accounts receivable indicates the estimated uncollectible portion to be $24,000, how much will the uncollectible accounts expense for the year be?

b) If the income statement approach to estimating uncollectible accounts expense is followed, and uncollectible accounts expense is estimated to be 1% of net credit sales, how much will the amount of uncollectible accounts expense for the year be?

 

CHOOSE ONE OF THE FOLLOWING QUESTIONS AND ANSWER:

 

Question 4.

At December 31, 2002, Fairman Industries' portfolio of investments in marketable securities consisted of the following:

Number of shares                      Cost                 Current Market Value

HydroTech Inc.                10,000 shares                   $10 per share                 $18 per share

CompuSoft                         5,000 shares                   $50 per share                 $42 per share        

a) Illustrate the presentation of marketable securities and unrealized holding gain (or loss) in Fairman's financial statements at December 31, 2002.  Indicate the financial statement and section in which each item appears.

b) Assume that in 2003, Fairman made the following sales of securities:

On March 11, 2003, Sold 5,000 shares of its investment in HydroTech, Inc., at a price of $20 per share.

On October 22, 2003, Sold 1,000 shares of its investment in CompuSoft at a price of $40 per share.

Prepare the journal entries for these transactions.

c) At December 31, 2003, the market values of these stocks are: HydroTech, $21 per share; CompuSoft, $37 per share.  Complete the following schedule showing cost and current market value of securities owned by Fairman at the end of 2003.

                        Number of shares                      Cost                 Current Market Value

HydroTech Inc.                                                                                                                    

CompuSoft       

d) Prepare the “mark-to-market” adjusting entry required at December 31, 2003. 

 

Question 5.  

The Cash account in the ledger of Seymour Company showed a balance of $6,134 at March 31. The bank statement, however, showed a balance of $5,443 at the same date. The only reconciling items consisted of a $1,210 deposit in transit, a bank service charge of $28, outstanding checks totaling $745, and an NSF check from N. Webb, one of Seymour's customers.

a) What is the amount of the adjusted cash balance on March 31?

b) What is the amount of the NSF check?

c) Give the journal entry necessary, if any, to adjust Seymour Company's accounting records at March 31.