Test #1 Practice 3310

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Kwantlen Polytechnic University *

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3310

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Accounting

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Feb 20, 2024

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1 Name: ______________________________________________ Student Number: ______________________________________ Date: _______________________________________________ ACCT 3310 Intermediate Financial Accounting I KWANTLEN POLYTECHNIC UNIVERSITY Practice Test #1 Question Topic Marks Minutes Question # 1 Adjusting Entries 20 marks 35 minutes Question # 2 Income Statement 15 marks 30 minutes Question # 3 Changes in Equity 5 marks 10 minutes Question # 4 SFP 20 marks 35 minutes 5 Bonus Marks Question # 5 Multiple Choice 20 marks 20 minutes TOTAL 80 marks 120 minutes NOTE – To save time you may use short forms for the Account Names in all questions including financial statements. Proper Titles and Headings and Subtotals are required.
2 Reminders for KPU Accounting Tests and Exams Bring KPU photo ID to all tests and exams. Bring your calculator , lead pencil, and eraser. Seating is determined by the Invigilator. Please cooperate if you are asked to relocate to a different seat before or during the test or exam. Please have nothing on the table top but the test or exam papers, calculator, writing instruments, and beverage/food. Make sure all other papers, books, cases, purses, backpacks, etc. are stored in a way that does not look like you have inappropriate access. Ensure all cell phones and other devices are silent and stored where they cannot be seen or accessed throughout the test or exam. Please be considerate of your fellow students. Minimize distractions due to noise, eating/drinking, or using too much space. You are not to leave the room unless you are handing in your paper. Please use the washroom before you begin so you will not need to be excused during the test or exam. If you finish early . . . please leave as quietly as possible. No content questions will be answered; only procedural questions such as typing errors. Hand-in all papers: questions, answers, scantron form, and scrap paper Use only paper provided by the Invigilator. TESTS and EXAMS must be an individual, independent effort. Cheating will be dealt with according to KPU policies (http://www.kpu.ca/policies C.8 Plagiarism and Cheating). Please keep your answers/papers to yourself – in a pile or turned up-side-down. As an Instructor, I participate in the Early Alert system ( http://www.kpu.ca/earlyalert.html ). If you achieve less than satisfactory results (C), you can expect to be contacted by someone from KPU asking if we can support or facilitate an improved learning experience for you. Final Exams become the property of the University. Exam Writing Tips Follow the time allocations, only go back to unfinished work if you have extra time at the end. Breathe! Your brain needs oxygen. Lower your stress and increase your productivity by taking a few seconds to breathe deeply throughout the test or exam.
3 Question # 1 Adjusting Entries 20 marks 35 minutes The unadjusted trial balance of Isabel Ltd. at December 31, 2017 is as follows: Debit Credit Cash $ 10,850 Accounts receivable 56,500 Allowance for doubtful accounts $ 750 FV-NI investments 8,600 Inventory 58,000 Prepaid insurance 2,940 Prepaid rent 13,200 FV-OCI investments 14,000 Bond investment at amortized cost 18,000 Land 10,000 Equipment 104,000 Accumulated depreciation 18,000 Accounts payable 9,310 Bonds payable 50,000 Common shares 100,000 Retained earnings 103,260 Sales revenue 223,310 Rent revenue 10,200 Purchases 170,000 Purchase discounts 2,400 Freight-out 9,000 Freight-in 3,500
4 Debit Credit Salaries and wages expense 31,000 Interest expense 6,750 Miscellaneous expense 890 $517,230 $517,230 Additional information: 1. On November 1, 2017, Isabel received $10,200 rent from its lessee for a 12-month lease beginning on that date. This was credited to Rent Revenue. 2. Isabel estimates that 7% of the Accounts Receivable balances on December 31, 2017, will be uncollectible. On December 28, 2017, the bookkeeper incorrectly credited Sales Revenue for a receipt of $1,000 on account. This error had not yet been corrected on December 31. 3. After a physical count, inventory on hand at December 31, 2017, was $77,000. 4. Prepaid insurance contains the premium costs of two policies: Policy A, cost of $1,320, two-year term, taken out on April 1, 2017; Policy B, cost of $1,620, three-year term, taken out on September 1, 2017. 5. The regular rate of depreciation is 10% of cost per year. Acquisitions and retirements during a year are depreciated at half this rate. There were no retirements during the year. On December 31, 2016, the balance of Equipment was $90,000. 6. On April 1, 2017, Isabel issued at par value 50 $1,000, 11% bonds maturing on April 1, 2020. Interest is paid on April 1 and October 1. 7. On August 1, 2017, Isabel purchased at par value 18 $1,000, 12% Legume Inc. bonds, maturing on July 31, 2019. Interest is paid on July 31 and January 31. 8. On May 30, 2017, Isabel rented a warehouse for $1,100 per month and debited Prepaid Rent for an advance payment of $13,200. 9. Isabel’s FV-NI investments consist of shares with total market value of $9,400 as at December 31, 2017. 10. The FV-OCI investment is an investment of 500 shares in Hop Inc., with current market value of $25 per share as at December 31, 2017. Instructions (a) Prepare the year-end adjusting and correcting entries for December 31, 2017, using the information given. Record the adjusting entry for inventory using a Cost of Goods Sold account. (b) Indicate which of the adjusting entries could be reversed.
5 Question # 2 Income Statement 15 marks 30 minutes Frederick Corp. is a public company and has 100,000 common shares outstanding. In 2017, the company reported income from continuing operations before income tax of $2,710,000. Additional transactions not considered in the $2,710,000 are as follows: 1. In 2017, Frederick Corp. sold equipment for $140,000. The machine had originally cost $80,000 and had accumulated depreciation to date of $36,000. The gain or loss is considered ordinary. 2. The company discontinued operations of one of its subsidiaries during the current year at a loss of $290,000 before tax. Assume that this transaction meets the criteria for discontinued operations. The loss on operation of the discontinued subsidiary was $90,000 before tax. The loss from disposal of the subsidiary was $200,000 before tax. 3. The sum of $520,000 was received as a result of a lawsuit for a breached 2014 contract. Before the decision, legal counsel was uncertain about the outcome of the suit and had not established a receivable. 4. In 2017, the company reviewed its accounts receivable and determined that $54,000 of accounts receivable that had been carried for years appeared unlikely to be collected. No allowance for doubtful accounts was previously set up. 5. An internal audit discovered that amortization of intangible assets was understated by $35,000 (net of tax) in a prior period. The amount was charged against retained earnings. Instructions Analyze the above information and prepare an income statement for the year 2017, starting with income from continuing operations before income tax. Calculate earnings per share as it should be shown on the face of the income statement. (Assume a total effective tax rate of 25% on all items, unless otherwise indicated.) NOTE – To save time you may use short forms for the Account Names in all questions including financial statements. Proper Titles and Headings and Subtotals are required.
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