Solutions - Midterm Fall07

# Solutions - Midterm Fall07 - SUGGESTED SOLUTION TO MID-TERM...

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SUGGESTED SOLUTION TO MID-TERM EXAM COMM 217 – Fall 2007 QUESTION 1 (1.5 mark each) 1. B 2. C 3. D 4. D 5. A 6. D 7. B 8. D 9. C 10.C

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√ = ½ mark Part A – 6 marks 1. Amount of note receivable = 50,000 – 20,000 = 30,000 (√) Cash (√) 20,000 Note Receivable (√) 30,000 Sales (√) 50,000 Cost of Goods Sold (√) 18,000 Merchandise Inventory (√) 18,000 2. Cash paid = 25,000 – 10,000 = 15,000 (√) March 15 Deposit on Equipment (√) 10,000 Cash (√) 10,000 July 10 Equipment (√) 35,000 Deposit on Equipment (√) 10,000 Cash (√) 25,000 3. Retained Earnings (√) 67,000 Dividends payable (√) 67,000 Available marks = 14 x ½ = 7 marks; Maximum = 6 marks The extra mark is for students who record the cost of goods sold. Those who do not record it are not penalized for omitting the journal entry. Part B – 8 marks 1. Supplies Expense = 5,500 + 7,000 – 2,000 = 10,500 (√ √) Supplies Expense (√) 10,500 Supplies Inventory (√) 10,500 Revenue Earned = 2,500 x 75% = 1,875 (√) Unearned Revenue (√) 1,875 Consulting Revenue (√) 1,875 Prepaid Rent = 12,000 (√) – [(12,000/6) (√) x 2 (√)] = 8,000 Prepaid Rent (√) 8,000 Rent Expense (√) 8,000 2. (2 marks) The company paid \$12,000 for rental space for six months, from November 1, 2006 to April 30, 2007. Given that the rental space was used for two months only in 2006, the rent expense for 2006 should be equal to \$4,000, which is the rent for November and December 2006. The remaining amount, \$8,000, is paid in advance and will benefit the company in 2007, not in 2006. For this reason, the balance of the Rent Expense account should be reduced by \$8,000. This is consistent with the matching principle. 2
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## This note was uploaded on 12/09/2009 for the course ACCO comm 217 taught by Professor Mroz during the Fall '09 term at Concordia Canada.

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Solutions - Midterm Fall07 - SUGGESTED SOLUTION TO MID-TERM...

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