winter09 - CONCORDIA UNIVERSITY DEPARTMENT OF ACCOUNTANCY...

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CONCORDIA UNIVERSITY FINANCIAL ACCOUNTING DEPARTMENT OF ACCOUNTANCY COMM 217 ALL SECTIONS SUGGESTED SOLUTION MID-TERM EXAMINATION Winter 2009 Question 1 (24 marks) Multiple-choice (1.5 marks per correct answer) 1. d 2. c 3. c 4. b 5. a 6. c 7. b 8. a 9. c 10. d 11. c 12. c 13. d 14. c 15. a 16. d
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Req. 1 (10 marks): July 1 Cash . ....................................................................... 100,000 Share capital . .................................................. 100,000 Sept. 1 Equipment (Truck) . .................................................. 20,000 Cash . ............................................................... 18,000 Accounts payable. ............................................ 2,000 Sept. 30 Cash. ........................................................................ 60,000 Notes payable . ................................................ 60,000 Oct. 15 Accounts receivable . ............................................... 2,500 Sales revenue . ................................................ 2,500 Cost of goods sold . ................................................. 1,500 Inventory . ........................................................ 1,500 Oct. 24 Cash . ....................................................................... 2,450 Sales discount ($2,500 x 2%) . .................. 50 Accounts receivable . ....................................... 2,500 Nov. 1 Prepaid insurance . .................................................. 12,000 Cash. ................................................................ 12,000 Req. 2 (5 marks): a. Dec. 31 Insurance expense ($12,000/12) x 2). ...................... 2,000 Prepaid insurance . .......................................... 2,000 b. Dec. 31 Service revenue [$20,000 x (1-40%)] . ..................... 12,000 Unearned service revenue . ............................. 12,000 c. Dec. 31 Cash ($490 - $409) . ................................................ 81 Accounts payable . ........................................... 81 Req. 3 (3 marks): The accounts that should be closed are Bad debt expense, Cost of goods sold, Insurance expense, and sales revenue. These are temporary (income statement) accounts that accumulate revenues and expenses related to a specific accounting period. They are closed to the Retained earnings
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winter09 - CONCORDIA UNIVERSITY DEPARTMENT OF ACCOUNTANCY...

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