Solutions.W10.midterm - 1 Concordia University Department...

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Concordia University Financial Accounting Department of Accountancy COMM 217 All Sections Suggested Solution Mid-term Examination Winter 2010 Question 1 (24 marks) Multiple-choice (1.5 marks per correct answer) 1. b 2. a 3. c 4. c 5. b 6. c 7. a 8. b 9. d 10. d 11. c 12. d 13. c 14. b 15. b 16. b 1
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Question 2 (8 marks) a. Equipment 5,000 Share capital /common shares 5,000 b. Cash 10,000 Notes payable 10,000 Computer 2,000 Furniture and fixtures 8,000 Cash 10,000 c. Prepaid rent 2,400 Cash 2,400 d. Cash 1,525 Accounts receivable 275 Sales revenue 1,800 e. Retained earnings/Dividends declared 6,000 Dividends payable 6,000 Question 3 (34 marks; 62 minutes) Req. 1 (9 marks) a) Unearned sales revenue ......................................... 2,400 Sales revenue ............................................... 2,400 Cost of goods sold .................................................. 1,500 Merchandise inventory .................................. 1,500 (b) Insurance expense .................................................. 750 Prepaid insurance ......................................... 750 $1,800 x 5/12 = $750 (c) Amortization expense .............................................. 9,600 Accumulated amortization ............................. 9,600 (d) Supplies expense .................................................... 1,100 Supplies on hand (supplies inventory) ............ 1,100 $2,050 – $950 = $1,100 (e) Interest expense ...................................................... 1,750 Interest payable ............................................. 1,750 $35,000 x 6% x 10/12 = $1,750 (f) Income tax expense ................................................ 2,550 Income tax payable ....................................... 2,550 $8,500 x 30% = $2,550 per income statement, Req. 2 2
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Req. 2 (10 marks) Fashion World Inc. Income Statement For the Year Ended December 31, 2009 Sales revenue $241,350 ($238,950 + $2,400) Less: Sales discount (4,500) Sales returns and allowances (4,600 ) Net sales 232,250 Cost of goods sold 158,500 ($157,000 + $1,500) Gross margin 73,750 Operating expenses: Insurance expense 750 Amortization expense 9,600 Supplies expense 1,100
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