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accounting exam (1).docx
1. Question One :
Create your own company describing the nature of the company and what it provides
(should be providing services and assume it is a sole proprietorship).
Show in details the accounting cycle (journalizing in general journal, posting in general
ledger and preparing financial statements taking into consideration the following:
• Transaction to start with not less than 25 transactions (including at least one
unearned and one prepaid transactions)
• Use the coding for the accounts used
• During the adjusting period please make sure you have covered all six categories
discussed in class
• Make sure to show the method used to calculate the depreciation highlighting over
the reason on choosing this specific method
• Assume you are using the allowance method in estimating the uncollected accounts
for Accounts receivables.
2. Answer:
Sherif consultant group provides engineering consulting services. During
January 2019, the following transactions occurred:
Jan. 1 Owner capital 50,000$ and a new computer costing 20,500 $ to start the business.
Jan. 2 Office supplies were purchased on account for 4,000$.
Jan. 3 Rent building for 2 years for 500$ for a month on account.
Jan. 4 Sherif consultant group obtained a 12% 5-year loan of 20,000$ from the bank.
Jan. 5 Paid 2,750$ the utility bills on account.
Jan. 6 Paid the 3,000$ in Accounts Payable from the purchase of office supplies on Jan. 2.
Jan. 7 Consulting services completed in January were billed to clients SODIC at 18,300$.
Jan. 8 Sherif consultant group received 5,500$ from SODIC, a client, as payment on account.
Jan. 9 Sherif withdrew 6,000$ of cash for personal use.
Jan. 10 Purchased inventory (papers & files) on credit terms of 1/10 net 30. FOB shipping point, for
3,000$. Freight charges on the purchase were 150$.
Jan. 11 Stock 800$ of supplies at end of month on account
Jan. 12 Sold consultant services (papers & files) on credit terms 3/20 net 30, for 4,000$. The cost of
the services sold was 2,500$.
Jan. 13 Paid the amount owed on account for the Jan. 10 inventory purchase.
Jan. 14 Received merchandise that was returned as defective, originally sold for 500$ on Jan. 12. The
original cost of the supplies returned was 275$.
Jan. 15 Received payment on account for the Jan. 12 sale less the appropriate sales discount.
Jan. 16 Paid 2,750$ in account payable for the utility bill on Jan. 5.
Jan. 17 Paid 1,000$ income taxes on account.
Jan. 18 Paid 2,000$ for advertising in the newspaper on the account.
Jan. 19 Paid 100$ office cleaning on cash.
Jan. 20 Paid 2,000$ in account payable for the advertising on Jan. 18.
Jan. 21 Paid 800$ in account payable for the supplies on Jan. 11.
Jan. 22 Palm Hills paid 10,000$ in advance for consulting services on cash.
Jan. 23 Paid 500$ in account payable for the Rent on Jan. 3.
Jan. 24 Paid 3,000$ for 1 year insurance policy on cash.
3. Jan. 25 Paid 1,000$ in account payable for income taxes on Jan. 17.
15. Question Two:
Reineman Supply Company uses a periodic inventory system. During September, the
following transactions and events occurred.
Sept.3 Purchased 90 backpacks at $25 each from Zuzu Company, terms 2/10, n/30.
Sept.6Received credit of $150 for the return of 6 backpacks purchased on Sept. 3 that were
defective.
Sept.9 Sold 15 backpacks for $42 each to Bailey Books, terms 2/10, n/30.
Sept.13 Paid Zuzu Company in full.
Sept.19 Received payments from Bailey Books.
Instructions
Journalize the September transactions for Reineman Supply Company.
17. Question three:
Seif Company sells many products. chairs is one of its popular items. Below is an analysis of
the inventory purchases and sales of chairs for the month of April. Seif’s Company uses the
periodic inventory system. Ending Inventory is determined to be 150 unit.
Purchases
Units Unit
Cost
3/1 Beginning inventory 150 $40
3/3 Purchase 50 $50
3/10 Purchase 250 $55
3/30 Purchase 100 $65
Instructions
(a) Using the FIFO assumption, calculate the amount charged to cost of goods sold for
April. (Show computations)
(b) Using the weighted average method, calculate the amount assigned to the inventory on
hand on April 30. (Show computations)
(c) Using the LIFO assumption, calculate the amount assigned to the inventory on hand on
April 30. (Show computations)
18. Answer:
Ending Inventory = 150 units
a) Using FIFO assumption:
COGS = (150 x 40) + (50 x 50) + (200 x 55)
= 6,000 + 2,500 + 11,000
=19,500
b) Using weight average method:
Total units = 550
Total cost = 28,750$
Average unit weight = 28,750$ / 550 = 52.27$ / Unit
COGS = 400 x 52.27 = 20,908$ Cost of
ending = 150 x 52.27 = 7,840.5$
c) Using LIFO assumption:
COGS = (100 x 65) + (250 x 55) + (50 x 50)
= 6,500 + 13,750 + 2,500
=22,750$
Cost of ending = 150 x40 = 6,000$
19. Question Four:
Assume that Swann Company uses a periodic inventory system and has these account
balances: Purchases $630,000; Purchase Returns and Allowances $25,000; Purchase Discounts
$11,000; and Freight-In $19,000; beginning inventory of $45,000; ending inventory of
$55,000; and net sales of $750,000.
Instructions:
Determine the:
a) cost of goods sold and
b) Gross profit (show computations)
21. Question Five:
Olio Corporation is authorized to issue 800,000 shares of $5 par value common stock, and
100,000 shares of 8%, $60 par value preferred stock. On January 1, 2019, the second year of
operations, the retained earnings balance was $75,000. During 2019, the company had the
following stock transactions.
Jan. 7 Issued 100,000 shares of common stock at $14 per share.
May. 5
Attorneys for the company accepted 200 shares of common stock as payment for
legal services rendered. The legal services are estimated to have a value of $3,200.
June 1 Issued 10,000 share of preferred a stock at $100 per share.
July 4
Issued 10,000 shares of common stock in exchange for a building. The building
was advertised for $200,000. Olio Corporation's common stock has been actively
traded on the stock exchange at $19 per share at the time of the exchange.
Sept. 1 Purchased 7,000 shares of common stock for the treasury at $20 per share.
Oct. 2 Sold 2,000 shares of the treasury stock at $21 per share.
Oct. 15 Sold 3,000 shares of the treasury stock at $18 per share.
Nov. 1
A cash dividend of $0.25 per share was declared to stockholders of
record on November 15.
Dec. 1 Paid the cash dividends.
Dec.5
A 5% stock dividends was declared. The market price at the
declaration date was $6 per share.
Dec. 30 Distributed the stock dividends shares.
Required: Journalize the 2019 transactions for Olio Corporation.
22. Answer:
General Journal
Date Account Title and Explanations
Amount ($)
Debit Credit
Jan. 7
Cash 1,400,000
Common Stock 500,000
Apic - C.S 900,000
May 5
Organization Exp. 3,200
Common Stock 1,000
Apic - C.S 2,200
June 1
Cash 1,000,000
Common Stock 600,000
Apic - C.S 400,000
July 4
Building 190,000
Common Stock 50,000
Apic - C.S 140,000
Sep. 1
Treasury Stock 140,000
Cash 140,000
Oct. 2
Cash 42,000
Common Stock 40,000
Apic - C.S 2,000
Oct. 15
Cash 54,000
Apic - C.S 2,000
Retained earning 4,000
Treasury Stock 60,000
Nov. 1
Retained earning 200,000
Dividens Pay. 200,000
Dec. 1
Dividens Pay. 200,000
Cash 200,000
Dec. 5
Retained earning 240,000
C.S Distruibutable 200,000
Apic - C.S 40,000
Dec. 30
C.S Distruibutable 200,000
Common Stock 200,000
Total 3,675,200 3,675,200
23. Question Six:
The following accounts appear in the ledger of Alico Corporation after the books
are closed at December 31, 2019.
Common Stock, $2 par value, 700,000 shares authorized, 400,000 shares
issued …………………………………………………………………………$800,000
Paid-in Capital in Excess of Par Value—Common Stock ………………….....650,000
Preferred Stock, $100 par value, 8%, 10,000 shares authorized; 2,000 shares
issued …………………………………………………………………………..200,000
Retained Earnings ……………………………………………………………..900,000
Treasury Stock (10,000 common shares) ………………………………………85,000
Paid-in Capital in Excess of Par Value—Preferred Stock …………………….310,000
Required: Prepare the stockholders' equity section at December 31, 2019.
24. Answer:
Stock holder’s section at 31 December 2019
Paid in capital
Preferred stock, 100$ par value, 8%, 10,000 shares authorized ; 2,000 shares issued
…………………………..………………….. 200,000$
Common stock, 2$ par value, 700,000 shares authorized ; 400,000 shares issued
………. 800,000$
Additional paid in capital
Paid in capital in excess of par value - preferred stock……………………………… 310,000$
Paid in capital in excess of par value - common stock………………………………. 650,000$
Retained earning……………………………………………………………………………………………….900,000$
Less treasury stocks (1,000 common stock)……………………………………………………….-85,000$
Total stock holder’s equity……………………………………………………………………………………2,775,000$
25. Question Seven:
Adham Corporation was organized on January 1, 2019. During its first year, the
corporation issued 40,000 shares of $50 par value preferred stock and 200,000 shares of $5
par value common stock. At December 31, the company declared the following cash
dividends:
December 2017 $80,000
December 2018 195,000
December 2019 300,000
Required:
1. Show the allocation of dividends to each class of stock, assuming that the
preferred stock is 9% and not cumulative.
2. Show the allocation of dividends to each class of stock, assuming that the
preferred stock is 10% and cumulative.
26. Answer:
1) 9% Not cumulative
9% x 50 = 4.5 x 40,000 = 180,000
Date Dividends P.S C.S
Dec. 2017 90,000 90,000 0
Dec. 2018 200,000 180,000 20,000
Dec. 2019 300,000 180,000 120,000
2) 10% Comulative
10% x 50 = 5 x 40,000 = 200,000
Date Dividents P.S C.S
Div InArrears
Dec. 2017 90,000 90,000 0 110,000
Dec. 2018 200,000 200,000 0 0,000
Dec. 2019 300,000 300,000 0 10,000
27. Question Eight:
On January 1, 2019, Western Manufacturing Corporation issued $3,000,000, 10%, 5-
year bonds dated January 1, 2019, at 104. The bonds pay semi-annual interest on January 1
and July 1.
The company uses the straight-line method of amortization and has a December 31, year end.
Instructions:
Prepare the journal entries to record the following:
1. The issuance of bonds on January 1, 2019.
2. The payment of interest and the discount (or premium) amortization on
July 1, 2019.
3. The accrual of interest and the discount (or premium) amortization on
December 31, 2019.
4. The payment of interest on January 1, 2020.
28. Answer:
General Journal
Date Account Title and Explanations
Amount ($)
Debit Credit
1 Jan. 2019
Cash 3,090,000
Bond Premium 90,000
Bond Pay. 3,000,000
1 July 2019
Interest Exp. 141,000
Bond Premium 9,000
Cash 150,000
31 Dec. 2019
Interest Exp. 141,000
Bond Premium 9,000
Interest Pay. 150,000
1 Jan. 2020
Interest Pay. 150,000
Cash 150,000
Total 3,540,000 3,540,000
29. Question Nine:
Ratio analysis case:
Select a corporation and get its financial statements, evaluate the firm’s performance using
the ratio analysis and briefly discuss your findings.
30. This is a case study for ratio analysis of the Sherif Steel
Company last 3 years.
1. Profit Statement
2018 2019 2020
Sales turnover 4.90 M$ 5.30 M$ 6.60 M$
Operating costs 4.17 M$ 4.43 M$ 5.82 M$
Operating profit before tax 0.73 M$ 0.87 M$ 0.78 M$
Taxation 0.24 M$ 0.30 M$ 0.27 M$
Profit after tax 0.49 M$ 0.57 M$ 0.51 M$
Dividends 0.12 M$ 0.16 M$ 0.16 M$
Retained profit 0.37 M$ 0.41 M$ 0.35 M$
Labour costs 0.93 M$ 0.98 M$ 1.25 M$
Distribution costs 0.44 M$ 0.49 M$ 0.61 M$
Administration costs 0.19 M$ 0.22 M$ 0.27 M$
2. Balance sheets
32. 3. Sherif Steel Company Ratios
Average ratios for production members 2020
% Return on capital employed
Asset turnover
Net profit margin
Current ratio
Acid test ratio
Debtors collection period
Gearing ratio
Labour cost % of sales
Operating cost % of sales
Distribution costs % of sales
Admin costs % of sales
26.0%
1.79 times
14.5%
1.5:1
1.03:1
83 days
32.0%
18.1%
85.5%
9.5%
4.5%
Capital and reserves 0.5 M$ 0.91 M$ 1.26 M$
Bank loans 2.21 M$ 2.21 M$ 2.21 M$
2.71 M$ 3.12 M$ 3.47 M$