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
31, 2006
(CHOOSE FIVE OF THE FOLLOWING QUESTIONS AND ANSWER)
Question 1. (20 points)
Complete the
following statements about promissory notes and interest by entering amounts in
the spaces provided. (Use 360 days in
one year.)
(a) The interest
on $50,000 for 100 days at 14% is $____________
(b) The interest
on $3,200 for 45 days at 18% is $____________
(c) A 90-day note
dated September 20 will mature on ____________
(d) If interest
expense on a 16%, one-year note is $4,000, the amount of the note is
$____________
Question 2. (20 points)
The general
ledger controlling account for Accounts Receivable has a balance of $220,500 at
year-end before adjustment. The company uses the balance sheet approach to
estimating uncollectible accounts. By aging the individual customers' accounts,
it was determined that the doubtful accounts amounted to $5,100. Prepare the year-end adjusting entry for
uncollectible accounts under each of the following independent assumptions.
(a.) If the Allowance
for Doubtful Accounts has a credit balance of $2,865.
(b.) If the Allowance
for Doubtful Accounts has a debit balance of $910.
Question 3. (20 points)
The Cash account in the ledger of Raintree Ranch shows a balance of $16,200 at December 31, 2001. The December 31 bank statement shows a balance of $19,025. The only reconciling items consist of:
Bank service charges of $12.
Deposit in transit of $1,725.
NSF check from customer P. J. Floyd in the amount of $228.
Error in recording check no. 970 for utilities: check was written in the amount of $458 but was recorded in Raintree Ranch's accounting records as $548.
Outstanding checks.
(a) What is the amount of the adjusted cash balance at December 31, 2001?
(b) What is the total amount of outstanding checks at December 31, 2001?
(c) Give the journal entry necessary, if any, to adjust Raintree Ranch's accounting records at December 31, 2001. (An explanation is not required; a single compound journal entry is acceptable.)
Question 4. (20 points)
Billboard, Inc., purchased a new machine on January 1, 2001, at a cost of
$120,000. The machine’s estimated useful
life at the time of the purchase was 5 years, and its residual value was
$20,000.
Prepare a
complete depreciation schedule, beginning with calendar year 2001, under 150%
declining-balance methods.
Question 5. (20 points)
Machinery
acquired new on January 1 at a cost of $40,000 was estimated to have a useful
life of 10 years and a residual salvage value of $10,000. Straight-line
depreciation was used.
On January 1,
following six full years of use of the machinery, management decided that the
estimate of useful life had been too long and that the machinery would have to
be retired after two more years, that is, at the end of the eighth year of
service.
Under this
revised estimate, What would be the depreciation
expense for the seventh (7th) year of use.
Question 6. (20 points)
On October 12,
1999, Stanley Corporation invested $600,000 in short-term marketable
securities. The market value of this
investment was $630,000 at December 31, 1999, but had slipped to $625,000 by
December 31, 2000.
(a) In financial
statements prepared on December 31, 1999, how does Stanley Corporation report this
Marketable Securities and the Unrealized Holding Gain (or Loss) on investment?
(b) Assuming
(c) Assuming
Question 7. (20 points)
Mark-to-market Direct
write-off
Financial asset Cash Equivalent
Bank
reconciliation Uncollectible accounts
expense
Allowance for
doubtful accounts
Each of the
following statements may describe one of the technical terms listed above. In the space provided below each statement,
indicate the accounting term described.
____________________
(a) Method of accounting for uncollectible receivables which fails to match
revenue and expense.
____________________
(b) An estimate of the portion of year-end accounts
receivable that ultimately will turn out to be uncollectible.
____________________
(c) Schedule explaining any differences between cash balances appearing in the
accounting records and in the monthly bank statement.
____________________
(d) Balance sheet valuation standard applicable to investments in marketable
securities.
____________________
(e) Cash and assets convertible directly into known amounts of cash, such as
marketable securities and receivables.