Exam 1

Ithaca College

Exam ra,e:

Financial Accounting ACCT 22500 - Spring 2009 Exam #1:

Form A

100 point!"

ame: $$%ung &am$$$$$$$$$$ $$$$$$$$$$$$$$$$  I': $$$$$$$$$$$$$$$$$$$$$$$$$$$$$  Cla!! Time chec( one":

$$$$$)*F 9:00  $$$$$)*F 10:00  $$$$$)*F 11:00 11:00

DO NOT OPEN

until given instructions to do so  Instructions:  Instructions:

1. Remove Remove your your hat hat durin during g the exam and have have onl+ pencil! an, calculator!  available at your seat (note that cell phones are not permissible as calculators). 2. Turn Turn off all cell cell phones, phones, pagers, pagers, and other other electro electronic nic devices. devices. 3. n the the space space prov provide ided d above, above, !rit !ritee your your name and I' and chec" your cla!! time. #. $onf $onfir irm m that that you you hav havee . con!ecuti/el+ numere, page!  (including this cover page and the blan"  page at the end). %. Read Read all all inst instru ruct ctio ions ns careull+ . &. 'll multiple multiplechoice choice ans!er ans!erss must be mar"ed mar"ed in the the space provided provided next next to each uesti uestion. on. *. +ho! all computations (and label them !ell) to receive partial credit on nonmultiple choice uestions. . -ou -ou are reminded reminded of the $ollege $ollegess academic academic honesty policy policy reuirin reuiring g you to do your o!n !or" and not give or receive assistance assistance on this examination. /eep your eyes on your o!n !or" and your o!n test covered. 0. ring your your entire entire exam boo" (includ (including ing the blan" blan" page) and and the calculato calculatorr to the front front of the room room !hen you have completed the exam.

 Part 1: Account Cla!!iication! 13 point!" or each of the follo!ing accounts, complete the chart belo! by indicating (1) ho! the account is usually classified in the financial statements

$' 4 $urrent 'sset  6$' 4 6oncurrent 'sset $8 4 $urrent 8iability  6$8 4 6oncurrent 8iability +7 4 +toc"holders 7uity

5p Rev 4 5perating Revenue 5p 7xp 4 5perating 7xpense 5ther tem 4 5ther revenue or expense item

(2) an, !hether the account usually has a debit (9r) or credit ($r) balance.  

Cla!!iication CA CA C& C& SE 4p e/ 4p Exp or 4ther Item"

'eit or Cre,it 6alance 'r or Cr"

1. 6ote payable (due in 2: years)

C&

Cr

2. 8oss on sale of building

CA

Cr

3. $ost of goods sold

4p Exp

'r

#. +ervice revenue

4p ec

Cr

CA

'r

&. ;repaid insurance

CA

'r

*. $ontributed capital

SE

Cr

Account

%. 7uipment

 Part 2: 'einition! . point!" n the space provided, define the follo!ing terms

1. 9efine 'ssets goods and services that are measurable !ith probable economic benefits

2. 9efine Revenues inflo! of assets and

3. 9efine +eparate 7ntity 'ssumption 5perations bet!een the business must be completely separate from that of the managers and o!ners #. =enerally 'ccepted 'ccounting ;rincipals

 Part 3: Ca!h Flo7 Eect! 10 point!"

'ccording to its 2:: 1:/, +ysco $orporation ?is the largest 6orth 'merican distributor of food and related products primarily to the foodservice or @food  prepareda!ayfromhome industry,A providing ?products and related services to over #::,::: customers, including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers.A thaca $ollege is a customer. The $ompany reported the follo!ing activities for its fiscal year ending Bune 3:, 2::. ndicate !hether each of these items is a cash flo! from 1.) operating activities (5), investing activities (), or financing activities () an, 2.) the direction and amount of the effect on cash flo!s (C for increase or D for decrease). f the transactions has no effect on cash, !rite 67 (6o 7ffect). 95 65T 87'E7 '6- 5F 8'6/. ' sample is provided. 'uring i!cal +ear 8ul+ 1 200 to 8une 0200. (in millions)

 Sample

9elivered foods priced at G2*,::: to customers !ho  paid cash.

Location on Statemen t of Cash Flows

Direction and Amount of Eect on Cash

O

+ 27,000

1. ;urchased G1,&0: in ne! euipment, paying G1,%1& cash and signing a note due in six years for the rest.

I

(1516)

2. ;aid G*%: on Bune 1, 2::, for insurance for coverage until 'ugust 1, 2::.



(!5")

3. +old euipment for G#3, receiving G13 in cash !ith the remainder due from the buyers in &: days.

I

#1$

#. ;aid G,%:: for fuel for the delivery euipment.



(%5"")

%. ;aid dividends of G#0*.

F

(&'!)

 Part 4: Tran!action Anal+!i! )o,el 10 point!" EATI4S

-ears 7nded ebruary 2, 2::, ebruary 3, 2::*, and Banuary 2, 2::& In million! except per !hare amount!" Sale! Qerchandise costs, including advertising, !arehousing, and transportation, excluding items sho!n separately belo!   5perating, general and administrative   Rent 9epreciation and amortiIation   5perating ;rofit   nterest expense 7arnings before income tax expense   ncome tax expense  6et earnings  

 6et earnings per basic common share

 

En, o Exam

200 52 7ee(!" ? 025

200= 5 7ee(!" G &&,111

2005 52 7ee(!" G &:,%%3

?

59  12155  =33  15=  201  33  1.2  =3=  11.1 

G

%:,11% 11,30 � 1,2*2 2,23& # 1,*# &33 1,11%

G

#%,%&% 11,:2* &&1 1,2&% 2,:3% %1: 1,%2% %&* 0%

?

11 

G

1.%&

G

1.32

 Part 1: A,Ju!ting the ecor,! 0 point!" ;repare the adJusting Journal entry in good form for each of the follo!ing independent transactions of Bones $ompany. The company has a 9ecember 31 yearend. a.) 5n Qarch 1, 2::, the company loaned G3,::: to one of its employees on a t!oyear, 12 percent note. The principal plus interest are payable by the employee on Qarch 1, 2:1:. Account!

'eit

Cre,it

Intere!t e/enue 

G

2: G

> G

>

-ear ended 9ecember 31, 2::*

10

&

>

21

-ear ended 9ecember 31, 2::&

2%

#

>

10

1.

2.

Record the companys !riteoffs for 2:: (in millions)

'eit

Cre,it

'ssuming all sales !ere on credit, !hat amount of cash did Qattel collect from customers in 2::>

G

million

3. $ompute Qattels 6et ;rofit Qargin for the last three years. +ho! percentage to t!o decimal places.  6; 4 6 H 6+  %ear

#.

Computation

e!ult

2::

3:H%01

&.#2

2::*

&::H%0*:

1:.:%

2::&

%02H%&%:

1:.#

The industry average for net profit margin is 1:.2&.

's the years progresses, Qattel is not generating its revenues into net income as efficiently because it has had generated less revenue over time

. The follo!ing transactions !ere selected from the records of $alifano $ompany

5ct. 12 5ct. 1% 5ct. 22 5ct. 23 5ct. 3:

+old goods to Qs. 'lbinder, !ho charged the G3,::: purchase on her E+' credit card. E+' charges $alifano a 2 credit card fee. +old merchandise to Qs. 8uIIi for G%,::: on account, terms 3H1:, nH3:. Qs. 8uIIi returned G1,::: of items purchase on 5ct. 1% (they !ere the !rong siIe), and credit !as given to the customer. $ollected cash from Qs. 8uIIi from the 5ct. 1% purchase. $ollected cash from Qs. 'lbinder for the 5ct. 12 purchase.

'ssuming returns and any discounts are treated as contrarevenues, compute net !ale! based on these transactions by filling in the follo!ing schedule

+ales revenue

.000

+ales returns and allo!ances

1000

+ales discounts

1000

$redit card discounts  6et sales

=0 =930

$. At the en, o 200., the unadJusted trial balance of ird ndustries, nc., indicated G1*&,::: in 'ccounts Receivable, a credit balance of G12,1:: in 'llo!ance for 9oubtful 'ccounts, and +ales Revenue (all on credit) of G1#,3&:,:::. ased on prior experience, ird estimates a :.1 percent bad debt rate on credit sales. %ou mu!t !ho7 7ell-laele, computation! elo7 prolem" to recei/e partial cre,it a.



 b. +ho! !here and ho! 'ccounts Receivable !ill be reported on the 2:: balance sheet. *hich !ection o the cla!!iie, alance !heet 7ill it appearL

Go7 7ill the recei/ale! line e 7rittenL

9.

8ane 7nterprises uses the aging approach to estimate bad debt expense. 't the end of 2::, 8ane estimates that G3,0:: of the G2*:,::: in accounts receivable !ill li"ely be uncollectible. The allo!ance for doubtful accounts has a G2:: debit balance at yearend. %ou mu!t !ho7 7ell-laele, computation! elo7 prolem" to recei/e partial cre,it a.



 b. +ho! !here and ho! 'ccounts Receivable !ill be reported on the 2:: balance sheet. Go7 7ill recei/ale! line e 7rittenL

 Part 4: )ultiple Choice = point!" ;lace your ans!er in the space provided next to each uestion.  OOOO 1. '. $ontinuity principle . Qatching principle $. Pistorical cost principle 9. Revenue principle 7. $omparability principle

 OO O 2. 7ffective control of cash reuires that '. 5ne person handles the receipts and disbursements of cash. . $ash is deposited monthly in a ban". $. There is approval of cash payments. 9. ' reconciliation of the ban" balance !ith the cash balance is prepared t!ice a year. 7. 6one of the above is correct.

 OOOO 3. The closing process '. Results in transferring Retained 7arnings to 6et ncome. . 7stablished a Iero balance only in each of the temporary accounts to start accumulation in the next accounting period. $. 7stablished a Iero balance in all accounts to start accumulation in the next accounting period. 9. Reuires debiting expenses. 7. 6one of the above is correct.

 Part 5: Statement o Ca!h Flo7! 0 point!" Nse the follo!ing information for Rittenberg $ompany to prepare the 2:: statement of cash flo!s using the in,irect metho, (use the bottom of this page for your computations and the next page for your statement). The companys fiscal year ends on 9ecember 31 and all amounts are in thousands of dollars. 200.

200

Change

A!!et!   $ash 'ccounts receivable nventory ;roperty and euipment 'ccumulated depreciation Total assets

G# 1:& 1#2 *& (%::) G&*2

G32 3 1&1 #: (#&:) G&%&

GC1& C23 10 C3& (C#:) G 1&

&iailitie! M Sharehol,er!@ Euit+ 'ccounts payable nterest payable 6otes payable $ontributed capital Retained earnings Total liabilities S stoc"holders euity

G131 12 1:0 2&& 1%# G&*2

G13& 1: 12: 2%: 1#: G&%&

G % C2 11 C1& C1# G 1&

For the +ear en,e, +ales revenue $ost of goods sold =ross profit 5perating expenses