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2007 MT -ACCT - NAME STUDENT NUMBER McGill University...

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NAME:___________________________ STUDENT NUMBER:________________ McGill University Centre for Continuing Education Introduction to Financial Accounting MGCR 211 FINAL EXAMINATION SOLUTION Lecturers: Ed Bierbrier Date: April 17, 2007 Brian Davies Time: 6:00pm - 9:00pm Jocelyn Perreault Kim Ryan CIRCLE YOUR LECTURERS NAME Instructions: - This is a closed book exam. - You are allowed dictionaries. - Only non-text storing calculators are allowed - This exam consists of 11 questions. - Total number of pages including cover sheet: Question Mark Available Grade Received 1 15 2 8 3 7 4 5 5 5 6 8 7 5 8 7 9 24 10 10 11 6 Total 100 1
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Question 1 ( 15 marks - 27 minutes) Part A (10 marks) Find the following information in Dominion Citrus financial statements which are provided with the exam paper. a) Revenue for the year ended December 31, 2005. $125,849,000 b) Operating income for the year ended December 31, 2005. $3,451,000 c) Net earnings for the year ended December 31, 2005. $2,321,000 d) The 2005 amortization of property, plant and equipment $923,000 e) Total assets on December 31, 2005 $41,229,000 f) “Long-term liabilities” on December 31, 2005. $2,889,000 g) Total current liabilities on December 31, 2005. $17,966,000 h) Basic Earnings per share on December 31, 2005 $0.12 i) Dividends paid during 2005. $990,000 j) The amount Dominion spent on additions to property, plant and equipment during 2005. $2,091,000 k) The amount of long-term liabilities that was retired (paid off) during 2005. $1,693,000 l) The amount of cash raised in 2005 by issuing preferred shares. $75,000 m) The amortization rate used on buildings. 4% to 5% diminishing balance 2
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Question 1 – Cont’d n) The event/time which determines revenues are recognized from product sales. Upon shipment to customers o) The accumulated amortization at December 31, 2005. $9,580,000 Part B (5 marks) a) Compute the amount of working capital on December 31, 2005. 26,445,000 – 17,966,000 = 8,479,000 b) Compute the 2005 Current ratio. 26,445,000/17,966,000 = 1.47 c) Compute the 2005 Quick ratio. (3,034,000 + 15,571,000)/17,966,000 = 1.0355 d) Compute the 2005 Gross Profit ratio. 23,128,000/125,849,000 = 18.38% e) Compute the 2005 Accounts Receivable Turnover ratio. 125,849,000/[(15,571,000 + 12,288,000)/2] = 9.03 3
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Question 2 (8 marks - 14 minutes) Lavender Inc. uses a perpetual inventory system and had the following activity for a single inventory item: Units Unit Cost June 1, opening inventory balance 180 $2.00 Purchases: June 7 300 2.80 June 11 100 3.20 June 18 150 3.00 Sales: June 12 350 June 20 160 Required: Using the perpetual system , determine the cost of the ending inventory and the cost of goods sold for each sale under: (a) FIFO (4 marks) (b) Moving average (round unit cost to nearest cent) (4 marks) 4
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Question 2 - 8 marks Solution : (a) FIFO: June 12 sale: (180 × $2.00 + 170 × $2.80) = 360 + 476 = $836 June 20 sale: (130 × $2.80 + 30 × $3.20) = (364 + 96) = $460 Total cost of sales = $836 + $460 = $1,296 Ending inventory: (70 × $3.20) + (150 × $3.00) = $674 (b) Moving average: June 12 sale average cost: (180 × $2.00 + 300 × $2.80 + 100 × $320) ÷ 580 = $2.62 per unit Cost of sale = 350 × $2.62 = $917 June 20 sale average cost: (230 × $2.62 + 150 × $3.00) ÷ 380 = $2.77 per unit Cost of sale = 160 × $2.77 = $443 Total cost of goods sold: $917 + $443 = $1,360 Ending Inventory: 220 × $2.77 = $610 5
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Question 3 (7 marks - 13 minutes) Bro & Martino, Inc., a furniture store, uses a periodic inventory system. The company president has heard that a perpetual inventory system would help him make better decisions in the day-to-day management of his business. He has come to you, the company accountant, for more information.
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