April 2006 - University of Toronto Faculty of Arts and...

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Unformatted text preview: University of Toronto Faculty of Arts and Science & Rotman School of Management April Examinations 2006 MGT120HIS ‘ .9199“) ~ I Financial Accounting 1 & Duration: 2 hours Aids allowed: Non-programmable calculator This exam consists of 11 pages including 2 blank pages. Instructions: _ Please print your name, student number in the spaces provided below. There are fifteen multiple choice questions and three problems. Please write your answer for the multiple choice questions on the front of this question paper in the spaces provided below and for the problems, use the blank pages at the back of the exam paper Clearly show-all computations in order to obtain full marks for the problems. GOOD LUCK! Student name (LAST NAME FIRST) Student number Marks: ‘ Answers for the Multiple Choice Questions Part A (15 marks) 1. 9. Part B (10 marks) 2. 10. Part C (20 marks) 3. 11. Part D (8 marks) 4. 12. 5. 13. Total (53 marks) 6. 14. 7. 15. 8. Page 1 of11 Part A} 15 marks, 1 mark each! 1. 4. Given the following data: Net sales $100,000 Cost of goods sold 60,000 GTOSS margin M If net sales decreases by 10%, and cost of goods sold increases by 15%, gross margin would: increase by 40% decrease by 40% increase by 47.5% decrease by 47.5% 9.0 9".” Assume you are using net sales as the base in vertical analysis. Cost of goods sold.' in 2002 is 67%, and is 70% in 2003. This would always indicate that: gross margin has declined ' cost of goods sold as a percentage of net sales has increased the dollar amount of cost of goods sold has increased gross margin has declined, cost of goods sold as a percentage of net sales has increased, and the dollar amount of cost of goods sold has increased 9.0 57'!” Yukon Company has total current liabilities equal to $600,000 and working capital of $30,000. Northwest Company has the same amount of working capital, but it has total current liabilities of $40,000. The company with the better working capital position is: ' ' a. Northwest Company b. Yukon Company v c. They both have exactly the same working capital position. (1. indeterminable with the information given Berlin & Snider Enterprise’s Inventory account decreased $3 7,500 and its Accounts Payable account (which relates solely to the purchase of merchandise) decreased $13,760 during the year. Berlin & Snider also reported sales of $856,000 and cost of goods sold of $597,600 during the same period. Berlin & Snider’s payments to suppliers for inventory during the year were: ' a. $621,340 b. $573,860 c. $805,740 d. $648,860 Page20fll ,5. On January 1, 2004, Prepaid Insurance had a balance of $6,700 and on December 31, 2004, a balance of $8,320. The income statement for the year reported Insurance Expense of $49,3 10. Payments for insurance during the year amounted to: a. $49,310 b. $47,690 c. $50,930 d. $57,630 Mara Co. owns an office building and leases the offices under a variety of rental agreements involving rent paid in advance monthly or annually. Not all tenants make timely payments of their rent. Mara’s balance sheets contained the following data: ‘ 2004 2005 Rentals receivable $ 9,600 $12,400 Uneamed-rentals 32,000 24,000 During 2005, Mara received $80,000 cash from tenants. What amount of rental revenue should Mara record for 2005? ' a. $90,800 b. $85,200 c. $74,800 (1. $69,200 e. None of the above Tri-Square Company reported capital assets, net of accumulated amortization, on January 1, 2004, at $645,000 and $732,500 on December 31, 2004. The income - statement showed amortization of $48,300 and a $5,600 loss on sale of capital assets. Tri-Square Company acquired $213,000 of capital assets during the year. The proceeds from the sale of capital assets were: a. $125,500 b. $89,900 0. $71,600 (1. $77,200 Page3 ofll 8. The shareholders’ equity section of the balance sheet for Minturn Mine Corporation , is shown below: Share capital: Preferred shares, 10,000 shares authorized, 7,000 shares issued of $3.50 preferred, redemption value $56 per share $350,000 Common shares, 50,000 shares authorized, 18,000 shares issued 180,000 Total share capital _ ' $530,000 Retained earnings 300,000 Total share capital ' $_8__10=,__0_0__Q Assume there are 2 years’ dividends in arrears on the preferred shares, including the current year. The book value per share fer preferred shares is: a. $57.00 b. $60.50 c. $63.00 cl. $66.50 9. Giventhe following data, by how much would operating income change if FIFO is used rather than LIFO? Beginning inventory 1,000 units at $25 Purchases 2,400 units at $30 Units sold 1,500 a. decrease by $5,000 b. increase by $5,000 c. decrease by $7,500 d. increase by $7,500 10. Alpha Corporation purchased Beta Ltd. on August 31, 2003. Alpha Corporation recorded goodwill in the purchase of Beta. Alpha has determined that the Beta - goodwill will have an indefinite life. How will Alpha account for the Beta goodwill . in future accounting periods? . a. Alpha will amortize the Beta goodwill over a 50-year life. b. Ifthe value of the Beta goodwill increases in subsequent years, Alpha will increase the value in the Beta Goodwill account. .c. If the value of the Beta goodwill decreases in subsequent years, Alpha will decrease the value in the Beta Goodwill account. (1. Alpha is not allowed to change the value of the Beta Goodwill account regardless of any future increase or decrease in the value of Beta goodwill. Page4ofll 11. 12. 13. 14. 15. . Cash for services to be performed in 2003 is received in 2002. Using the accrual basis of accounting, the revenue should appear on: a. the 2003 income statement b. both the 2002 and 2003 income statements c. neither the 2002 nor 2003 income statement d. the 2002 income statement What will be the result if the adjusting entry to record the current period’s amortization on equipment is not recorded? a. The net income for the period will be understated. b. The net income for the period will be overstated. c. The net income for the period will not be affected. d. The assets for the period will be understated. On June 1, 2003, Magnum Carpet Enterprises Ltd. received $3,600 for services to be performed evenly over the next twelve months. The adjusting entry on December 31, 2003, would include a: . a. debit to Cash for $3,600 . b. debit to Service Revenue for $1,500 c. debit to Uneamed Service Revenue for $1,500 d. debit to Uneamed Service Revenue for $2,100 Using the aging-of-accounts-receivable method to estimate uncollectible receivables, Alamosa West Corporation estimates that $3,750 of its accounts » receivable will be uncollectible. Prior to adjustment, the Allowance for Uncollectible Accounts has a credit balance of $600. Uncollectible account expense to be reported on the income statement is: a. $4,350 3 b. $3,750 c. $3,150 d. $600 ’ If the bookkeeper mistakenly records a deposit of $360 as $630, the error would be shown on the bank reconciliation statement as a: > ’ a. $270 deduction from the bank balance b._ $270 deduction fiom the book balance c. $27 0 addition to the book balance d. $270 addition to the bank balance Page 5 of 11 Part B 1 10 marks} The following balance sheet dated December 31, 2003, is available for Lacerta Brothers, Inc. ’ Assets Cash $ 50,000 Marketable securities . 120,000 Accounts receivable 250,000 Inventory ' i . 150,000 Equipment 300,000 Total assets v m Liabilities and shareholders’ equity . Accounts payable $120,000 Salary payable 10,000 . Bonds payable 350,000 -. Common shares 200,000 Retained earnings 190,000 Total liabilities and shareholders’ equity m Additional information: 0 Net income for 2004 was $160,000. 0 Dividends paid during 2004 amounted to $2 per share. 0 No additional shares of stock were issued during the year. 0 The shares were issued for $5 each ‘ ' » 0 The price/eamings ratio Was 20. Calculate for the year ended December 31, 2004: - V b. ACid-teSt Ratio _ i d. Market Price per Share e. Dividend Yield Page 6 ofll Part C (20 marks! The following selected data for the Big Sky Ski Corporation were gathered by the accountants for the year ended December 31, 2004, who are responsible for preparing the financial statements: Cost of goods sold $47,300 Amortization expense , 14,100 Other operating expenses 15,700 Loss on sale of investments 1,900 Gain on sale of capital assets 6,200 Sales revenue . 99,700 Interest revenue * 7,100 Dividend revenue 3,200 Salary expense ' 24,700 Interest expense ' 5,200 Income tax expense - 2,700 Net income _ 4,600 The cash account began the year with a balance of $32,500 and ended the year with a balance of $191,500. Other relevant data gathered by the accountants: Accounts receivable decreased $12,600 Inventory increased . ._ , 7,800 Prepaid expenses decreased .. 2,300 Accounts payable increased ' ' 19,400 Salary payable increased - 1,400 Accrued liabilities decreased 4,900 Income tax payable increased 700 Acquisition of capital assets 42,000 Issuance of common shares 75,000 Proceeds from sale of investments 29,000 Collection of loan principal 25,200 Payment of dividends 18,000 Purchased equipment by signing a note'payable 25,000 Proceeds from sale of capital assets 26,700 Proceeds from sale of repurchased shares 25,000 Prepare the cash flow statement for the year ended December 31, 2004, using the ‘ indirect method and including a schedule of noncash investing and financing activities, if necessary. Use one of the blank pages at the end of the test. Page 7 of11 Part D 18 marks! The following four situations are independent. 1. Maldive company complete the construction of a building. The following independent items are costs and other aspects relevant to the purchase of the lot and construction: Cash payments to contractor - $100,000 Total Sales tax on materials used - In construction -. $ 3,000 Cost of land (building site $50,000 Cost to demolish old building on land $20,000 Proceeds from old building salvage $ 5,000 Power bill for electricity used in construction . $ 2,000 Interest on loans to finance construction 3 3,000 What is the final recorded cost for the land and the building? 2. - - Ocular Company trades an electron microscope for new optical equipment » and receives $30,000 cash as well. The old microscope had an original cost of $200,000 and has accumulated depreciation of $80,000 at the time of the trade. The old microscope has a fair market value of $160,000 at trade-in time. I What entry should be made to record the exchange? (no explanation required) Page 8 ofll 3. Micro-Com Technology Limited reports the following shareholders’ equity as of December 31, 2003: Preferred shares, $5.00, authorized 100,000 shares, » issued 80,000 shares $4,400,000 Common shares, authorized 200,000 shares, issued 150,000 shares, 146,000 outstanding 2,190,000 Retained earnings 3,400,000 gamma Assume the board of directors declares dividends totalling $1,850,000 to the shareholders. The preferred shares are cmnulative, and no dividends were declared last year. ' Calculate the amount of dividends per share each class of shares will receive. 4. The Allowance for Uncollectible Accounts has a $900 credit balance prior to adjustment. Based on an aging schedule of accounts receivable prepared on December 31, $14,500 of accounts receivablevare' estimated to be uncollectible. .- Prepare the adjusting entry on December 31st (no explanation required). Page 9 of11 Page 10 of11 Page 11 ofll ...
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This note was uploaded on 07/18/2010 for the course ACCOUNTING rsm100 taught by Professor Yuta during the Summer '10 term at University of Toronto- Toronto.

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April 2006 - University of Toronto Faculty of Arts and...

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