FACULTY OF ECONOMIC AND
ADMINISTRATIVE SCIENCES
DEPARTMENT OF MANAGEMENT
& DEPARTMENT OF ECONOMICS
MAN 202 PRINCIPLES OF
ACCOUNTING II
MIDTERM EXAM
Instructor: Ali COSKUN
Duration: 80 Minutes March 24, 2005
(CHOOSE FIVE OF THE FOLLOWING QUESTIONS AND ANSWER)
Question 1. (20 points)
On February 28,
2005, Sunburst Company signed a 30-year, $500,000 mortgage note payable to
First Bank in conjunction with the purchase of a building. This mortgage note
payable will be paid in monthly installments of $6,143, which include interest
computed at the rate of %12 per year (%1 per month). The first monthly payment
will be made on March 31, 2005. This mortgage note payable is fully amortizing
over 30 years (360 months).
a) Prepare a
partial amortization table showing the original balance of this loan, and the
allocation of the first two monthly payments between interest expense and
reduction in the unpaid balance. (Round amounts to the nearest dollar)
|
Payment Date |
Monthly Payment |
Interest Expense |
Reduction in Unpaid Balance |
Unpaid Balance |
b) Prepare the journal entry to record first two monthly payments.
Question 2. (20 points)
On June 1, 2004, Syberspace Computer Corporation sold Computer parts priced
at $300,000 in exchange for a nine-month note receivable with an annual
interest rate of 12%, all due at maturity.
a) Prepare the
journal entry on June 1, 2004.
b) Prepare the
December 31, 2004 (fiscal year-end), adjusting entry made by Syberspace with regard to this note receivable.
c) Prepare the entry made by Hydro at maturity date of note, to record collection of note and interest.
Question 3. (20 points)
Selected transactions of Tiger
Company in 2004 are as follows.
May 5. Tiger
Company purchased 3,000 shares of the capital stock of Sweat Company. The
purchase price is $150 a share plus a brokerage commission of $9,000.
July 11. Tiger
Company sold 1,000 shares of the capital stock of Sweat Company at $170 per
share, less a brokerage commission of $2,000. These marketable securities had
been purchased on May 5.
August 23. Tiger
Company sold additional 1,000 shares of the capital stock of Sweat Company at $140
per share, less a brokerage commission of $2,000. These marketable securities
had been purchased on May 5.
December 31.
Prior to making mark-to-market adjusting entry Tiger Companys Marketable
Securities account has a balance of $250,000. At December 31, marketable
securities owned have a market value of $275,000.
a) Prepare
journal entries to record the transactions above.
b) Prepare the
mark-to-market adjusting entry required at December 31.
Question 4. (20 points) At the
end of 2004 an aging of the accounts receivable of Valley Supply produced the
following classification:
Not yet due
150,000
1 30 days past
due
..
35,000
31 60 days past
due
.. 18,000
61 90 days past
due
. 5,000
Over 90 days past
due
7,000
Total
..
$ 215,000
On the basis of
past experience, the company estimated the percentages probably uncollectible
for the above five age groups to be as follows: Not yet due, 1%; 1 30 days
past due, 6%; 31 60 days past due, 10%; 61 90 days past due, 25%; over 90
days, 50%.
The Allowance for
Doubtful Accounts before adjustment at Dec. 31 showed a credit balance of $3,400.
a) Compute the
estimated amount of uncollectible accounts based on the above classification by
age groups.
b) Prepare the
adjusting entry needed to bring the Allowance for Doubtful Accounts to the
proper amount at December 31.
c) On January 11,
2005 Valley Supply learned that an account receivable in the amount of $1,200
from Jerry Jones was worthless because of the bankruptcy of the customer.
Prepare the journal entry required on January 11 to write off this account.
Question 5. (20 points) On January
1, 2004 Baret Industries purchased new machinery with
an estimated useful life of 5 years. Cost of the machine was $100,000, with a
residual value of $5,000.
Prepare a
complete depreciation schedule beginning with calendar year 2004, under 200%
declining balance method.
Question 6. (20 points)
The cash
transactions and cash balances Soft Music, Inc. for December 2004 were as
follows:
1. The ledger account for
cash showed a balance at December 31 of $ 22,600.
2. The December bank
statement showed a closing balance of $ 33, 975.
3. Deposits made by Soft
Music of $ 5,500 had reached the bank too late and therefore not included in
the current statement.
4. The banks monthly
service charge was $ 125.
5. A credit memorandum
enclosed with the December bank statement indicated that a non-interest bearing
note receivable for $ 12,500 from Ann Rock, left with the bank for collection
had been collected and the proceeds credited to the account of Soft Music.
6. Examination of the paid checks revealed that three checks, all issued in December, and had not yet been paid by the bank: No.224, $1,000; No. 227, $ 4,000; and No. 231, $ 3,000.
7. Included with the bank statement was a $ 3,500 check from Betty Stone, a professional musician, charged back to Soft Music as NSF.
a) Prepare a bank reconciliation for Soft Music at December 31, 2004.
b) Prepare necessary journal entries (in general journal form) to
adjust the accounting records of Soft Music at December 31, 2004.