FATέH 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: 100 Minutes                                                                                             April 25, 2003

QUESTIONS

 

Question 1. (20 points)

An asset has been purchased on January 1, 1999 for $50,000 and has an estimated useful life of 4 years and residual income of $5,000.

Compute the depreciation on thisasset using the double(200%) declining balance method.Use the table below.

 

Date    

Depreciation expense

Accumulated depreciation

Book Value

Jan.   1 1999

 

 

 

Dec. 31 1999

 

 

 

Dec. 31 2000

 

 

 

Dec. 31 2001

 

 

 

Dec. 31 2002

 

 

 

                       

                                              

Question 2. (20 points)

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              % Considered

                                                  Total                    Uncollectable

Not yet due                               $50,000                         1%

1-30 days past due                     25,000                          3%

31-60 days past due                   10,000                        10%

Over 60 days past due                 4,000                        20%

The Allowance for Doubtful Accounts before adjustment at Dec 31, 2001 showed a credit balance of $700.

 

(a) What is the appropriate balance for Wilcox’s Allowance for Doubtful Accounts at December 31, 2001?

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

 

Question 3. (20 points)

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

 

Beginning Inventory (Jan.1)      10 Units           $30 per unit

January 13 Purchased              10 Units           $32 per unit

January 18 Sold                       11 Units           $60 per unit

January 22 Purchased              15 Units           $35 per unit

January 23 Sold                         5 Units           $65 per unit

January 28 Sold                       14 Units           $70 per unit

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

                       

(a) Prepare subsidiary inventory ledger.Use the First in First out (FIFO) method

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

 

Question 4. (10 points)

The ledger accounts of Allison Consulting on December 31, 2001 are listed below in alphabetical order:

 

Accounts payable …….…………………..  $   1,800           Inventory ……………..…………………….       4,200

Accumulated Depreciation: Equipment    10,800           Land …………….……………………………     50,000

Capital Stock ………………………………     70,000           Marketable Securities ……………………         700

Cash ………………………………..........…    47,100           Notes Payable  (due within one year)…    13,200

Consulting Fees Receivable ……………    34,400           Notes Receivable(due within one year)      2,000

Equipment ………………………………….     36,000           Retained Earnings ……………………..…      6,700

Income Taxes Payable ……………………    15,000           Salaries Payable ………..…………………      1,700

Interest Payable ………..…………………      2,100           Unearned Consulting Fees ………….….      3,100

 

What is Allison Consulting’s current ratio?

 

 

 

 

 

CHOOSE TWO (2) OF THE FOLLOWING QUESTIONS AND ANSWER:

 

Question 5. (15 points)

On October 1, 2001, Chandler Company borrowed $150,000 from a bank and signed a 12%, six-month note payable, with interest on the note due at maturity.

(a) Prepare the journal entries to record the borrowing on October 1 2001 and repayment of the notes payable at maturity

(b) Prepare the adjusting entry needed at December 31, prior to closing the accounts

 

 

Question 6. (20 points)

At December 31, 2002, Eastern Corporation portfolio of investments in marketable securities consisted of the following:                                                                                         

 

Toxic Chemical (1,000 shares, cost $60.00 per share, market value $63 per share)   

Healthy Food    (2,000 shares, cost $25.00 per share, market value $22 per share)

Jump Sports     (5,000 shares, cost $14.00 per share, market value $17 per share)      

           

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

(b)     Assume that on February 1, 2003, Eastern Corporation made the following sales of securities:

Sold 200 shares of its investment in Toxic Chemicals, at a price of $65 per share.

Sold 1,000 shares of its investment in Healthy Food at a price of $23 per share.

Prepare the journal entry to to record these sales transactions.

(c)      At December 31, 2003, the market values of these stocks are: Toxic Chemicals, $57 per share; Healthy Food, $19 per share; Jump Sports, $20.  Illustrate the presentation of marketable securities and unrealized holding gain (or loss) in Eastern Corporation's financial statements at December 31, 2003.

 

 

Question 7. (20 points)

At April 30, the balance of the Cash account according to the records of Place Company was $3,697. The April 30 bank statement showed a balance of $6,205. You are to prepare the bank reconciliation of Place Company at April 30, using the following supplementary information:

q       Deposit in transit at April 30, $4,250.

q       Outstanding checks: no. 120, $410; no. 121, $391; no. 127, $109; no. 134, $1,000.

q       Service charge by bank, $20.

q       A note receivable for $5,000 left by Place Company with bank for collection that had been collected and credited to company's account. No interest involved.

q       A check for $60 drawn by a customer, Martin Able, but deducted from Place's account by the bank and returned with the notation "NSF."

q       Place's check no. 480, issued in payment of $1,280 worth of office equipment, correctly written in the amount of $1,280 but erroneously recorded in Place's accounting records as $1,208.

 

(a) Perpare a bank reconciliation for Place Company at April 30.

(b) Give the journal entry necessary, if any, to adjust Place Company's accounting records at April 30.

 

 

 

Question 8. (20 points)

On March 31, 2000, Tracker Inc. signed a 3-year installment note in the amount of $200,000 in conjunction with the purchase of equipment. This note is payable in equal monthly installments of $4,708, which include interest computed at an annual rate of 12%. The first monthly payment is made on April 30, 2000. This note is fully amortizing over 36 months.

Complete the amortization table for the first two payments by entering the correct dollar amounts in the blank spaces provided.

 

Date

Payment

Interest Expense

Reduction in Unpaid Balance

Unpaid Balance

Issuance

 

 

 

$   200,000

April 30, 2000

$4,708

 

 

 

May 31, 2000