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2005 Exam

# 2005 Exam - University of Waterloo Final Examination Term...

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University of Waterloo Final Examination Term: Fall Year: 2005 Student Name UW Student ID Number Course Abbreviation and Number AFM 101 Course Title Core Concepts of Accounting Information Section(s) 001, 002, 003, 004 Instructor Duane Kennedy Date of Exam Wednesday, December 14, 2005 Time Period Start time: 4:00 pm End time: 6:30 pm Duration of Exam 2.5 hours Number of Exam Pages 25 (including this cover sheet) Exam Type Special Materials Additional Materials Allowed Cordless calculators may be used. The calculator must be standalone with no communication or data storage features. Both the examination paper and multiple choice card must submitted. M ARKING S CHEME : Question Score Question Score 1 (14 marks) 6 (8 marks) 2 (10 marks) 7 (8 marks) 3 (8 marks) 8 (12 marks) 4 (4 marks) 9 (8 marks) 5 (8 marks) 10 (35 marks)

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Total score: 115 marks 2
Question 1 (14 Marks) Required: Answer the following independent questions. A) King Limited issued \$1,000,000, 10 percent, 10 year bonds dated July 1, 2005. Interest is paid semi- annually on June 30 and December 31. The issue price was \$1,135,903 based on a market interest rate of 8 percent. The company uses the effective interest rate method of amortization. Complete the following table: Date Interest Payment Interest Expense Amortization of Discount or Premium Book Value July 1, 2005 --- --- --- \$1,135,903 Dec. 31, 2005 B) Columbia Corporation issued 3,000, 10 year bonds at 103 on November 1, 2005, which results in an effective interest rate of 8%. The bonds have a \$1,000 face value and a 9% stated interest rate. Interest is payable annually on October 31. The company uses the straight-line amortization method. Record the payment of interest on October 31, 2006. C) Weber Company issued \$5,000,000, 8 percent, 10 year bonds dated May 1, 2005. Interest is paid semi- annually on October 31 and April 30. The market rate of interest was 6 percent. Record the sale of the bonds on May 1, 2005.

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Question 2 (10 Marks) The records of Shorter Company reflected the following for the month of February: Date Transaction Number of Units Unit Cost Feb. 1 Beginning inventory 600 \$3 Feb. 2 Purchase 500 \$4 Feb. 5 Sale (selling price \$12/unit) 700 Feb. 12 Purchase 600 \$5 Feb. 15 Sale (selling price \$13/unit) 700 Feb. 23 Purchase 900 \$6 Feb.28 Ending inventory ? Shorter Company uses a periodic inventory system. Required: Complete the following table for February: Inventory Method Number of Units FIFO LIFO Weighted Average Revenue Cost of Goods Sold Gross Margin Cost of Ending Inventory
Question 3 (8 Marks) Reba Company reported net income of \$10,000 for 2005. Additional 2005 information is as follows: Expenditure for the purchase of equipment \$6,000 Amortization expense for plant and equipment 2,000 Dividends paid on common stock 900 Net increase in accounts payable 400 Net decrease in inventory 200 Purchase of computer equipment in exchange for note payable 1,500 Amortization of patent 100 Net decrease in accounts receivable 300 Cash received from sale of equipment 3,500 (net book value \$2,800) Required: Prepare the operating activities section of the statement of cash flows for Reba Company for 2005 using the indirect method. Please use the following table to complete this question.

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Reba Company
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