FATέH UNIVERSITY

FACULTY OF ECONOMIC AND ADMINISTRATIVE SCIENCES

MAN 201 PRINCIPLES OF ACCOUNTING I

FINAL EXAM

Instructor: ALI COSKUN

Duration: 100 Minutes                                                                                                                                                                   January 11, 2005

QUESTIONS

Question 1. Smart Corporation is a merchandising company that sells computer parts. Smart Corporation uses a perpetual inventory system. It records sales at the gross invoice price and purchases at net cost. The following merchandising activities of the company  during June 2004.

 

June 1 Purchased 100 FX keyboards from Syberspace on account at a unit cost of $15. The terms of purchase was 1/10, n/30.

June  3 Smart Corporation returned 10 FX keyboards purchased on June 1 to Syberspace.

June 10 Sold 20 FX keyboards to Computer World on account for $35 each, terms 2/10, n/30.

June 10 Paid the accounts payable for the purchases on June 1 within discount period.

June 11 Sold 60 FX keyboards to Best Corporation for $2,000 cash.

June 13 Computer World returned 5 FX keyboards purchased on June 10. The amount reduced from the account receivable of Computer World.

June 15 Purchased 200 FX keyboards from Syberspace on account at $15 each. The terms of purchase was 1/10, n/30.

June 19 Sold 100 FX keyboards to Milkyway Company on account. The total sales price was $3,500, terms 2/10, n/45.

June 26 Collected accounts receivable from the sales on June 19. 

June 30 Paid the accounts payable for the purchases on June 15.

Required:

a.        Prepare the journal entries to record these transactions.

 

Question 2. Expert Accessories uses a periodic inventory system. Shown below are Expert’s beginning inventory of a particular product and purchases during January:

 

Beg. Inventory (Jan.1)        100 Units     x        $25 per unit           =   $  2,500

January 10 Purchased        500 Units     x        $26 per unit           =   $13,000

January 19 Purchased        500 Units     x        $28 per unit           =   $14,000

January 26 Purchased        100 Units     x        $29 per unit           =   $  2,900

January   8 Sold                     60 Units     x        $50 per unit           =   $  3,000

January 13 Sold                   200 Units     x        $45 per unit           =   $  9,000

January 25 Sold                   800 Units     x        $40 per unit           =   $32,000

               

a. Compute the dollar amounts of ending inventory on January 31 and the cost of goods sold during January using the Last in First out (LIFO) method.

b. How much is the gross margin for January.

 

Question 3. The ledger accounts of Clever Consulting on December 31, 2004 are listed below in alphabetical order:

 

Accumulated Depreciation: Equipment          $ 10,800 Notes Payable ……………………………     5,000

Accounts Receivable ……………………….   94,400    Notes Receivable …….…………………       2,000

Cash ………………………………...............   57,000       Office Supplies ………………………….         450

Capital Stock ………………………….……   80,000       Prepaid Office Rent ………………………    4,200

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

Income Taxes Payable ……………………..   17,000      Salaries Payable ………..…………………   1,700

Interest Payable ………..…………………..      1,000     Unearned Consulting Fees ………….….          3,100

Land …………….………………………….   50,000        Unexpired insurance………………………           250

 

Prepare a balance sheet by using these items and computing the amount of retained earning at December 31, 2004. Include a proper balance sheet heading.

 

 

Question 4.  Fred Allison, Inc. is a small recording studio in Stamford.  Musicians use the studio to record music.  New clients are required to pay in advance for studio services.  Musicians with established credit are billed for studio services at the end of each month.  Adjusting entries are performed on a monthly basis.  An unadjusted trial balance dated December 31, 2004, follows. 

 

FRED ALLISON, INC.

Unadjusted Trial Balance

December 31, 2004

 

                Cash......................................................................................................................      $  35,000

                Accounts receivable..........................................................................................          81,000

                Studio supplies...................................................................................................            3,300

                Unexpired insurance...........................................................................................            3,200

                Prepaid studio rent.............................................................................................            7,200

                Recording equipment.........................................................................................        120,000

                Accumulated depreciation: recording equipment..........................................                                  $  60,000

                Notes payable.....................................................................................................                                    100,000

                Interest payable..................................................................................................                                        3,000

                Income taxes payable.........................................................................................                                        1,300

                Unearned studio revenue..................................................................................                                        2,800

                Capital stock........................................................................................................                                      45,000

                Retained earnings...............................................................................................                                      20,600

                Studio revenue earned.......................................................................................                                    100,600

                Salaries expense..................................................................................................          15,000

                Supplies expense................................................................................................            1,900

                Insurance expense..............................................................................................            3,600

                Depreciation expense: recording equipment..................................................          22,000

                Studio rent expense............................................................................................          20,000

                Interest expense..................................................................................................            3,000

                Income taxes expense.........................................................................................         18,100         ________

                                                                                                                                                     $333,300             $333,300

Other Data

  1. Studio supplies on hand at December 31 amount to $800.
  2. On August 1, 2004, the studio purchased a one-year insurance policy for $4,800.  The entire premium was initially debited to Unexpired Insurance.
  3. The studio is located in a rented building.  On October 1, 2004, the studio paid $12,000 rent in advance for five months.  The entire amount was debited to Prepaid Studio Rent.
  4. The useful life of the studio’s recording equipment is estimated to be five years (or 60 months).  The straight-line method of depreciation is used.
  5. On September 1, 2004, the studio borrowed $100,000 by signing a 12-month, 12% note payable to Trust Bank.  The entire $100,000 plus 12 months’ interest is due in full on August 31, 2005.
  6. Records show that $1,500 of cash receipts originally recorded as Unearned Studio Revenue had been earned as of December 31.
  7. Salaries earned by recording technicians that remain unpaid at December 31 amount to $800.

 

Required

a.        For each of the numbered paragraphs, prepare the necessary adjusting entry.

b.        Prepare an adjusted trial balance as of December 31, 2004.

c.        Prepare an income statement for the year ended December 31, 2004.