midterm_f2008_solution

midterm_f2008_solution - UNIVERSITY OF WATERLOO School of...

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UNIVERSITY OF WATERLOO School of Accounting and Finance AFM 101 Professor Duane Kennedy Mid-Term Examination Fall 2008 Date and Time: October 16, 2008, 7:15 – 8:45pm Pages: 16, including cover Name: __ Solution _____ Student Number: ___________ Tutorial Number and Time: ___________________ Instructions: 1) Cordless calculators may be used. The calculator must be standalone with no other communication or data storage features. 2) Answers for the multiple-choice questions must be recorded on the UW answer card. All other questions must be answered in the space provided on the examination paper. Answers written outside of the provided space will not be graded. You must submit both this examination paper and the UW answer card. 3) Show details of all calculations. 4) The final page of the examination contains a list of ratios. For your convenience, this page may be detached from the examination paper. 5) Please verify that this examination paper has the appropriate number of pages. Question Maximum Marks Mark Awarded 1 20 2 12 3 12 4 8 6 28 Total 80
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(20 Marks) The following information relates to activities for Freeland Limited for 2008. a) Net income for the year ended December 31, 2008, was $45,000. b) An additional piece of land was purchased on November 30, 2008. The purchase price was paid in cash. Property taxes for 2008 were $16,400. They were paid in cash and included in the calculation of net income. c) During the year, a piece of equipment was sold for $15,000, received in cash. Any gain or loss on the sale was included in net income. A new piece of equipment costing $40,000 was purchased in April. The seller of the equipment accepted a long-term note payable as full payment. Interest is payable annually on the note and the interest expense of $2,000 for 2008 was included in net income. d) Dividends were paid in cash on December 1. e) Capital stock was issued on September 30. f) The company retired $10,000 of bonds on March 15 when they matured. The company issued new bonds on October 1. The new bonds have a ten-year life. Both transactions occurred at the par (i.e., face or stated) value. Selected account balances at December 31, 2007 and 2008 are shown in the following table. All account balances have the usual sign. 2007 2008 Cash $48,000 $69,700 Accounts receivable 37,000 28,000 Inventories 24,000 38,400 Prepaid expenses 5,000 2,500 Equipment 50,000 70,000 Accumulated amortization, equipment 23,000 31,000 Amortization expense, equipment 16,000 21,000 Land 200,000 275,000 Accounts payable 26,000 21,000 Interest payable 1,500 3,100 Long-term notes payable 31,000 71,000 Bonds payable 75,000 100,000 Capital stock 120,000 140,000 Retained earnings 87,500 117,500 Required: Prepare the statement of cash flows for Freeland Limited for 2008 using the indirect method. Please use the table on the following page to complete this question.
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This note was uploaded on 12/02/2010 for the course AFM 20220098 taught by Professor Sproule during the Fall '09 term at Waterloo.

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midterm_f2008_solution - UNIVERSITY OF WATERLOO School of...

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