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1 NAME: STUDENT No.: RECITATION SECTION: ACCOUNTING 101, FINAL EXAMINATION Fall Semester, 2002 INSTRUCTIONS: 1. There are 14 numbered pages in this booklet. There is a second booklet with financial information and present value tabels (14 pages total). Make sure you have all of the pages. 2. Please print your name and student number in the space provided on top of this page AND on all subsequent pages . 3. This is a 100 point exam. You have 120 minutes to complete it. Budget your time to achieve maximum points. 4. Answer the problems in the space provided within this booklet. Present your work in an orderly fashion to facilitate the awarding of partial credit. For partial credit, you must show your work. Partial credit can only be given for work that is presented in a clear, legible and logical manner. 5. In the interest of fairness to all students, NO questions will be answered during the exam. If you think a question is ambiguous, state an appropriate assumption explicitly and continue. 6. The exam is closed book. You are allowed only ONE 8.5 x 11 inch double-sided page of paper for notes. Part Points Allocated Points Scored I 18 II 17 III 22 IV 25 V 18 Total 100
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Part I – 18 points On March 15, 2000, Coca Cola (KO) purchased 10,000 shares of class A common stock in Coca- Cola Bottlers (CCE). Assume that this is the first share purchase KO has made in CCE. CCE has authorized 10,000,000 class A shares of common stock, and it has issued 2,000,000 of these shares. Class A shares of CCE have a par value of $0.25 per share. KO paid $15 per share to acquire the 10,000 shares. At the end of fiscal 2000 (Dec 31, 2000) the share price of CCE had risen to $17.50. In April, 2001, KO sold 2,000 of its shares in CCE at the prevailing market rate of $20/share. At the end of 2001, CCE declared and paid a cash dividend of $0.30/share. At the end of fiscal 2001 the price of CCE had fallen to $14. From the above information (and assuming that KO does not hold these securities for trading purposes) answer the following questions: 1. What was the journal entry for the share purchase on March 15, 2000? (2 points) DR Investment in Marketable Securities: Available for Sale 150,000 CR Cash 150,000 10,000 shares at $15/share acquired. 2. Would this journal entry have been different if KO had bought 800,000 shares of CCE? Explain your answer in no more than 2 sentences. (2 points) Yes. This would be more than 20% ownership but less than 50% so would be an active investment that would be accounted for using the equity method. 3. What journal entries would be made on December 31, 2000? (3 points) DR Allowance for mark to market 25,000 CR Comprehensive income unrealised gain/loss 25,000 $2.50 per share unrealized gain. This is available for sale so unrealized gains go to comprehensive income NOT income. 10,000 shares at $2.50/share. Name on the DR account is not critical as long as it is clear it is an asset
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