Final - Financial Accounting 1 Sample Final Exam Problems...

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Financial Accounting 1 Sample Final Exam Problems THIS FILE CONTAINS SAMPLE PROBLEMS FOR THE FINAL EXAM BASED ON PREVIOUSLY AVAILABLE PROBLEMS. IT DOES NOT ATTEMPT TO SIMULATE AN ACTUAL FINAL EXAM IN THAT THE QUESTIONS ARE NOT NECESSARILY BALANCED ACROSS TOPICS AND NO CONSIDERATION HAS BEEN GIVEN TO THE TOTAL TIME REQUIRED TO COMPLETE THE PROBLEMS. THE TYPE AND NATURE OF PROBLEMS ON THE ACTUAL FINAL EXAM MAY DIFFER AS TO CONTENT AND FORM. QUESTION 1. On September 30, 2007, Dragon City Machinery Ltd. sold a machine and accepted the customer’s non-interest-bearing note. Dragon City normally makes sales on a cash basis. Since the machine was unique, its sales price was not determinable using Dragon City’s normal pricing practices. After receiving the first of two equal annual instalments on September 30, 2008, Dragon City immediately sold the note with recourse. On October 12, 2009, Dragon City received notice that the note was dishonoured, and it paid all amounts due. At all times prior to default, the note was reasonably expected to be paid in full. Instructions (a) 1. How should Dragon City determine the sales price of the machine? 2. How should Dragon City report the effects of the non-interest-bearing note on its income statement for the year ended December 31, 2007? Why is this accounting presentation appropriate? (b) What are the effects of the sale of the note receivable with recourse on Dragon City’s income statement for the year ended December 31, 2008, and its balance sheet at December 31, 2008? (c) How should Dragon City account for the effects of the note being dishonoured? PLEASE NOTE THAT THIS IS A PRACTICE FINAL EXAM AND THAT THE ACTUAL FINAL MAY BE DIFFERENT AS TO CONTENT AND FORM OF QUESTIONS.
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QUESTION 2. During the current year, Petro Construction trades an old crane that has a book value of $68,000 (original cost $154,000 less accumulated depreciation $86,000) for a new crane from Carbon Manufacturing Ltd. The new crane cost Carbon $145,000 to manufacture. The following information is also available: Petro Construction Carbon Mfg. Ltd. Fair market value of old crane $ 55,000 Fair market value of new crane $160,000 Cash paid 105,000 Cash received 105,000 Instructions (a) Assume that this exchange is considered to involve dissimilar assets (culmination of the earnings process), and prepare the journal entries on the books of (1) Petro Construction; and (2) Carbon Manufacturing. (b) Assume that this exchange is considered to involve similar assets (no culmination of the earnings process), and prepare the journal entries on the books of (1) Petro Construction; and (2) Carbon Manufacturing. (c) Assuming the same facts as those in (a), except that the fair market value of the old crane is $87,000 and the cash paid is $73,000, prepare the journal entries on the books of (1) Petro Construction; and (2) Carbon Manufacturing. (d) Assuming the same facts as those in (b), except that the fair market value of the old
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This note was uploaded on 01/09/2010 for the course ACCT 351 taught by Professor Desmondtsang during the Spring '08 term at McGill.

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Final - Financial Accounting 1 Sample Final Exam Problems...

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