Sol_Midterm.W05 - Suggested Solution to Mid-term Exam COMM...

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Unformatted text preview: Suggested Solution to Mid-term Exam COMM 217 Winter 2005 Question 1 (15 marks, 1.5 marks per question) 1. A 2. B 3. D 4. A 5. A 6. B 7. C 8. A 9. C 10. A Question 2 41 Marks a Amortization expense, equipment 13,500 Accumulated amortization building and equipment 13,500 b Wages expense ($1,500 / 5) x 3 days 900 Wages Payable 900 c Supplies expense 9,000 Supplies inventory 9,000 d Insurance expense 4,800 Prepaid Insurance 4,800 ($7,200 / 18 months) x 12 months e Interest Expense 4,800 Interest Payable 4,800 $60,000 x 8% f Unearned service revenue 15,000 Service Revenue 15,000 g Accounts Receivable 3,500 Service Revenue 3,500 h Sales returns and allowances 1,000 Accounts Receivable 1,000 i Bad debt expense 11,600 Allowance for doubtful accounts 11,600 ($113,500 + $3,500 $1,000 ) x 10% j Income tax expense 2,500 Income tax payable 2,500 2. Sunrise Inc. Income Statement For the year Ended December 31, 2004 Revenue: Sales $150,000 Sales returns and allowances (1,000) Service revenue ($60,500 +$15,000 + $3,500) 79,000 Total revenue $228,000 Less: Cost of goods sold 123,500 Gross profit 104,500 Operating expenses: Amortization expense 13,500 Wages expense ($49,300 + $900) 50,200 Insurance expense 4,800 Interest expense 4,800 Utilities expense 4,000 Bad debt expense 11,600 Supplies expense 9,000 97,900 Income before income taxes 6,600 Income tax expense 2,500 Net Income $ 4,100 3. Sunrise Inc. Balance Sheet As at December 31, 2004 ASSETS LIABILITIES AND SHAREHOLDERS EQUITY Current assets: Current liabilities: Cash $ 50,000 Accounts payable $ 74,000 Accounts receivable (less allowance of doubtful accounts, $11,600) 104,400 Interest payable 4,800 Merchandise inventory 40,000 Wages payable 900 Supplies inventory 4,000 Unearned service revenue 15,500 Prepaid insurance 2,400 Income tax payable 2,500 Total current assets 200,800 Total current liabilities 97,700 Long-term assets: Long-term liabilities: Building and equipment 226,500 Note payable 60,000 Less: accumulated amortization...
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Sol_Midterm.W05 - Suggested Solution to Mid-term Exam COMM...

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