Spring2008-exam1

Spring2008-exam1 - ACCOUNTANCY 321 Spring, 2008 EXAM I I....

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
ACCOUNTANCY 321 Spring, 2008 EXAM I I. Heather, a CPA was hired by Sitlani Company in 2007 to determine the effect of a number of errors on the firm’s financial statements. Treat each section (A through C) as independent. For each item, you are to indicate the effect of the errors on net income, retained earnings, and working capital for 2006 and 2007. Assume that all items are material and ignore income tax effects. The firm’s fiscal year ends on December 31. Your answers should be labeled NO EFFECT, OVER (for overstated), or UNDER (for understated) and include the dollar amount . A. Beginning merchandise inventory in 2006 was overstated by $3,000. In addition, merchandise inventory at the end of 2006 did not include merchandise which was then in transit to Sitlani Company (to which Sitlani Company had title). This shipment of $12,000 was erroneously recorded as a credit purchase in January of 2007 rather than correctly in 2006. (6 points) 2006 Net Income _________________________________________________________ 2006 Retained Earnings ____________________________________________________ 2006 Working Capital _____________________________________________________ 2007 Net Income _________________________________________________________ 2007 Retained Earnings ____________________________________________________ 2007 Working Capital _____________________________________________________ B. On January 1, 2005, Sitlani Company spent $10,000 cash to purchase supplies (which are used at a uniform rate) for a five year period (2005 – 2009). The amount was recorded as an asset in 2005. However, no adjusting entries have ever been made. Assume that all supplies are considered current. In addition, interest income of $36,000 was received on July 1, 2005. It covered a 2 year period from date of receipt. It was originally recorded as revenue, and no adjusting entries have ever been made. Assume that only 12 months of interest is considered current. (6 points) 2006 Net Income _________________________________________________________ 2006 Retained Earnings ____________________________________________________ 2006 Working Capital _____________________________________________________ 2007 Net Income _________________________________________________________ 2007 Retained Earnings ____________________________________________________ 2007 Working Capital _____________________________________________________ 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
C. The Sitlani Company purchased a machine for $200,000 on January 1, 2003 and expensed it when purchased. The machine is expected to last 10 years with no salvage value. Straight line depreciation is used for all fixed assets.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/09/2009 for the course ACCTG 321 taught by Professor Will during the Spring '08 term at San Diego State.

Page1 / 5

Spring2008-exam1 - ACCOUNTANCY 321 Spring, 2008 EXAM I I....

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online