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Solutions for Midterm exam W08 (Mar.1)

Solutions for Midterm exam W08 (Mar.1) - CONCORDIA...

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CONCORDIA UNIVERSITY FINANCIAL ACCOUNTING DEPARTMENT OF ACCOUNTANCY COMM 217 ALL SECTIONS SUGGESTED SOLUTION MID-TERM EXAMINATION WINTER 2008 Question 1 (21 marks) Multiple-choice (1.5 marks per correct answer) 1. d 2. a 3. d 4. d 5. c 6. b 7. b 8. c 9. c 10. c 11. d 12. b 13. c 14. a
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Question 2 (28 marks) Req. 1 (9 marks) a) Wages expense ........................................................ 2,000 Wages payable ............................................... 2,000 Interest receivable ..................................................... 1,000 Interest revenue .............................................. 1,000 ($10,000 x 10%) Land .......................................................................... 15,000 Note payable ................................................... 15,000 Amortization expense ............................................... 1,500 Accumulated amortization .............................. 1,500 ($15,000 – 0) / 10 years. The equipment has been amortized for 3 years, 2004, 2005 and 2006. Total accumulated amortization is $4,500 or $1,500 per year. This indicated that the salvage value is zero. Retained earnings ..................................................... 10,000 Dividend payable ............................................ 10,000 Income tax expense .................................................. 12,900 Income tax payable ........................................ 12,900 $43,000* x 30% = $12,900. * Income before income taxes = ($140,500 - $2,000) + $1,000 – ($64,000 + $500 + $5,500 + $25,000 + $1,500) = $43,000 2
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Req. 2 (8 marks) HTQ Inc. Income Statement For the Year Ended December 31, 2007 Sales $140,500 Less: sales returns and allowance ( 2,000 ) Net sales 138,500 Cost of goods sold 64,000 Gross profit 74,500 Operating expenses: Wages expense ($23,000 + $2,000 ) 25,000 Rent expense 5,500 Amortization expense 1,500 Miscellaneous expense 500 Total operating expenses 32,500 Operating income 42,000 Other income: Interest income 1,000 Net income before taxes 43,000 Income tax expense (12,900) Net Income $ 30,100 Earnings per share $2.01 ($30,100 /15,000) Req. 3 (7 marks) HTQ Inc Balance Sheet As at December 31, 2007 Assets
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