Question 1
The account balances presented below are from the financial records of Montana Corporation as at
December 31, 2018. The accounts are presented in alphabetical order and the balances in the accounts
are normal balances.
Account title
Balance
Accounts payable
15,000
Accounts receivable
24,200
Accumulated depreciation—buildings
18,000
Accumulated depreciation—equipment
17,600
Buildings
82,000
Cash
21,900
Common shares
34,200
Depreciation expense
16,200
Dividends declared
Equipment
5,000
66,000
Income tax expense
6,000
Insurance expense
2,200
Interest expense
1,500
Interest revenue
500
Land
Loan payable, due 2021
Prepaid insurance
Rent expense
Retained earnings, January 1
156,000
15,000
$ 2,000
22,200
$221,000
Service revenue
213,900
Salaries expense
129,800
Salaries payable
3,000
Supplies
200
Supplies expense
1,000
Utilities expense
2,000
Additional information:
A. $5,000 of the bank loan payable is due to be repaid within the next year.
Required:
A. Calculate net income (loss) for the year.
B. Calculate the balance at year end in retained earnings at December 31, 2018
C. Prepare a classified statement of financial position at December 31, 2018.
A.
(3 Marks)
(3 Marks)
(14 Marks)
Present your calculation for net income (loss) here: (Please note you are not required
to prepare an Income Statement)
B.
Show your calculation of the retained earnings balance here:
C.
Present your classified statement of financial position here:
Question 2
Varadkar Medical Services Ltd has an August 31 year end, and prepares annual adjusting entries.
For each of the following situations prepare the necessary adjusting entries on August 31, 2017.
If no entry is required, clearly indicate by saying “No Entry”. Show all workings clearly.
1. On June 1, 2017, Varadkar Medical Services paid $3,600 for a one year insurance
policy beginning on that date and debited prepaid insurance on this date for this
transaction.
2. On September 1, 2016, Varadkar Medical Services acquired new office equipment
costing $25,000 and has an expected useful life of 5 years with a residual value of
zero.
3. On July 30, 2017 a client paid Varadkar Medical Services cash of $5,500 in advance for
future services. The company correctly debited cash and credited unearned revenue
for the receipt of this money. The services were provided on August 20 and as of
August 31 no further accounting entries have been made.
4. On April 1, 2017 Varadkar Medical Services took out a loan of $ 15,000 for a 9 month term
with interest accruing at 6%. The full amount of the loan plus all of the interest is required to
be repaid at the maturity date, 1 January 2018.
5. Varadkar Medical Services provided services for a client on August 31, 2017. Because
it was late in the evening when the job was finished, Varadkar Medical Services did not
process the invoice of $4,600 for these services until September 3, 2017. The client
paid $4,600 on 29 September.
6. Varadkar Medical Services had an opening balance in its Supplies account of $960. During the
year the company purchased $2,800 of supplies. It is estimated that the company had $410 of
supplies on hand on August 31 (year-end).
Question 3
Sherer Management Services commenced business operations on November 1, 2017.For each of the
transactions listed below, prepare journal entries the company will make. Select appropriate account
title for your entries. Please note explanations for journal entries are not required. If no entry is
required, clearly indicate by saying “No Entry Required”.
Nov 1 The company issued $50,000 of common shares for cash.
Nov. 1 Paid $3,200 to Montreal Holdings for rent for the month.
Nov. 2 Purchased computer equipment for $10,000, paying $3,000 in cash and signed a note for the
balance to be paid over 2 years.
Nov. 7 Provided consulting services to a client for $7,000 on account.
Nov. 8 Hired an office manager at a monthly salary rate of $4,000. The individual will start work on
November 13.
Nov. 15 Purchased office supplies for $975 on account.
Nov 18 Client from Nov. 7 paid $2,900 on their account
Nov. 25 Company received a $375 statement from The Utilities Co. for utility charges for the month of
November. Payment on this is due on December 15
Question 4
Indoors Inc. (“Indoors”) is a manufacturer of stylish sofas and uses the perpetual system for recording
their inventory.
Instructions:
a. For each of the following four events, prepare the necessary journal entry in the books of Indoors
as required.
b. Clearly indicate if no entry is required.
c. Show all calculations
1) Indoors sold $20,500 of sofas to Sofas-R-Us on account. The merchandise had cost Indoors $14,500.
The terms of the sale are 2/15, n/30 FOB destination. The goods were shipped on January 30, 2017
and received by Sofas-R-Us on February 3, 2017.
2) Freight costs of $1,575 were paid in cash on January 30, 2017.
3) On February 4, 2017 Sofas-R-Us returned one $1,700 sofa to Indoors (which had cost Indoors
$1,200) because they did not need it. Indoors returned the sofa to inventory.
4) On February 13, 2017 Sofas-R-Us paid Indoors the remaining balance in full.
5) Calculate the gross profit made by Indoors Inc. from this one sale to Sofas-R-Us
Question 5
PART A
You are provided with the following information for Great Disguises Ltd. which purchases face masks for
various events. All purchases are made for cash. The company uses the perpetual inventory system on
the FIFO (first-in-first-out) basis to account for the masks.
At September 30, 2017, the company had 200 masks in inventory at a cost of $8.25 per mask. In
preparation for the Halloween season, the following transactions occurred during the month of October
2017.
Date
Activity
Units
Cost/Selling Price
per unit
October 2
Purchases
1,500
$8.75
October 4
Sales
1,200
$19.50
October 13
Purchases
2,000
$8.85
October 24
Sales
2,300
$21.50
Required:
Calculate the Cost of goods sold and Ending inventory for the month of October using the FIFO method.
(5.5 marks)
PART B
Great Disguises Ltd. realized after the October 31, 2017 financial statements had been issued that it forgot
to count watches which were on consignment at another location. As a result, ending inventory of face
marks was understated by $4,000. Assume that this error has not been corrected.
State the impact (understated, overstated or no effect) of this error on each of Cost of Goods Sold and
Cash at October 31, 2017.
(1 mark)
Question 6
The following information was available to reconcile Surelock Homes’s book balance of Cash with its
bank statement balance as of October 31, 2017:

The unadjusted cash balance per the g/l on October 31, was $13,204. The balance per the bank
statement was $29,324

Cheques #296 for $1,333 and #307 for $12,744 were outstanding on the September 30 bank
reconciliation. Cheque #307 cleared the bank in October, but cheque #296 had not. It was also
found that cheque #315 for $892 and cheque #321 for $1,998, issued in October, had not
cleared the bank.

In comparing the cheques accompanying the bank statement that had cleared the bank with the
entries in the accounting records, it was found that cheque #320 for the October rent was
correctly written for $6,080, but was erroneously entered in the accounting records as $6,800.

The bank statement shows an EFT collection from a customer on his account for $21,900 less
the bank’s fee of $120. Surelock has not recorded this amount in its books.

A cheque in the amount of $3,202 from a customer, Jefferson Tyler deposited on October 4 was
returned by the bank as NSF. The bank has charged a$49 NSF fee on this.

The bank statement showed service charges for the month of $74.

The October 31 cash receipts, $7,278 were placed in the bank’s night depository after banking
hours on that date and this amount did not appear on the bank statement.
REQUIRED:
1.
Prepare a bank reconciliation for the company as of October 31, 2017.
(7 marks)
2.
Prepare the appropriate journal entries required from the reconciliation.
(3 marks)
1.
Prepare your bank reconciliation here
2 Record your journal entries here
Question 7
Part A (8 marks)
Fabio Enterprises has provided you with the following selected information with respect to its accounts
receivable on December 31, 2016 (its year end).
Days
outstanding
1-30 days
31-60 days
61-90 days
91 plus days
Total
Accounts receivable
balance
$ 120,000
82,000
38,000
20,000
$260,000
Estimated percentage
uncollectible
2%
8%
15%
25%
The unadjusted balance in the Allowance for Doubtful Accounts on December 31, 2016 is $ 2,150 debit.
Required:
1. Calculate the dollar amount of estimated uncollectible accounts receivable from the
above information.
(1 mark)
2. Prepare the required journal entry to set up the allowance for doubtful accounts on
December 31, 2016.
(2 marks)
3. In January 2017, it was determined that a customer owing $4,700 had declared
bankruptcy. Collection on this account is very unlikely and management has decided to
write off this account. Record the appropriate journal entry(ies) for this.
(2 marks)
4. On April 15, 2017, Management was able to collect $3,150 on an account previously
written off. Record the appropriate journal entry(ies) for this.
(3 marks)
Part B (5 marks)
On December 1, 2016 D.J. Financial Services lent $12,000 to Juniper Holdings on a 3 month note at 9%
interest. D.J. has a December 31, year-end. The terms of the note require principal and all interest to be
paid upon maturity of the note.
Record all the required journal entries that D.J. will make for this note, assuming that Juniper honoured
the note on maturity.
Part C (2 marks)
Presented below are selected ratios for The Swan Company for the most recent three years:
Receivables turnover
2017
8.2 times
2016
7.4 times
2015
6.7 times
Required:
1. Calculate the average collection period for each of the years.
2. Comment on the effectiveness of the company’s credit and collection policies.
(1 mark)
(1 mark)
Question 8
The following financial statements are presented for Snow Leopard Inc.:
WATERMARKSnow Leopard Inc.
Balance Sheet
At December 31
Assets
2017
Cash
Accounts receivable
Inventories
Property plant & equipment
Accumulated depreciation
Total Assets
Liabilities & Shareholder's Equity
Accounts payable
Notes payable, due 2022
Common shares
Retained earnings
Total Liabilities & Shareholder's Equity
2016
$ 55,489
103,112
291,948
339,000
(40,856)
$ 748,693
$ 48,500
44,845
184,600
195,000
(52,000)
$ 420,945
$ 74,339
140,000
280,000
254,354
$ 748,693
$ 29,155
70,000
200,000
121,790
$ 420,945
Snow Leopard Inc.
Statement of Earnings
Year ended December 31, 2018
Revenues
Sales
Less: Sales returns and allowances
Expenses
Cost of goods sold
Operating expenses
Interest expense
$
$
500,500
5,750
494,750
165,050
83,070
3,940
Earnings from operations
Gain on sale of equipment
252,060
242,690
22,544
Earnings before income tax
Income tax expense
Net earnings
265,234
32,670
232,564
Additional Information:
$
1.
2.
3.
4.
Equipment costing $230,000 was purchased for cash during the year.
Operating expenses include $68,400 of depreciation expense.
Equipment costing $86,000 was sold for $29,000.
Dividends were declared and paid during the year.
Required:
Prepare in good format a Statement of Cash Flows for the year ended December 31, 2017,
using the indirect method
Question 9
PART A (11 Marks)
On January 1, 2016, Blue Jets Limited borrowed $1,500,000 from MBO Bank, signing a 10 year, 5% note
payable. The terms of the note require fixed principal repayments of $75,000 plus interest every 6 months,
starting 30 June, 2016, then December 31, 2016 etc. Blue Jets Limited has a December 31st year end.
Required:
a) Prepare an instalment payment schedule for the first 4 payments using the following table. (4 Marks)
Date
Cash payment
Interest Expense
Principal Reduction
Principal Balance
a) Using your answer from a) above, prepare the journal entry that Blue Jets Limited would record on
December 31, 2017.
(3 Marks)
b) Calculate the amount that would be presented as a Current Liability in the December 31, 2017
Statement of Financial Position.
(1 Mark)
c) If instead, the terms of the note require blended (principal plus interest at 5%), every six months
(June 30 and December 31) totaling $96,222, show the journal entry to be recorded for the
December 31, 2016 payment. SHOW ALL CALCULATIONS.
(3 Marks)
PART B (5 Marks)
On May 1, 2016 Bono Ltd. received its annual property tax statement for $8,400 from the City
of Calgary for the 2016 calendar year. The taxes had to be paid on June 30, 2016.
The required payment for the property taxes was made on June 30, 2016.
Prepare the required journal entries for May 1, June 30 and December 31, 2016.
May 1, 2016
June 30, 2016
December 31, 2016
Calculations:
Question 10
At its fiscal year end of December 31, 2015, Ragnarok Ltd. had the following partial Shareholders’
Equity;
Preferred Shares
$5 noncumulative 20,000 authorized, 10,000 issued
Common Shares
No par value, unlimited authorization, 240,000 issued
$250,000
$550,000
Part A (6 marks)
Provide the journal entries required for Ragnarok for the following transactions for 2016. If no entry is
required, clearly indicate this by stating “No Entry”.
On March 31, Ragnarok issued an additional 1,000, $5 preferred shares in return for a section of land
with a fair value of $30,000 (The preferred shares were trading at $3.10 per share).
On October 31, Ragnarok declared the annual cash dividend for the preferred shareholders of record on
November 15. The dividend was paid on November 30.
October 31
November 15
November 30
Part B (3 marks)
Ragnarok’s net income for 2016 was $2,680,000. Calculate the company’s earnings per share for 2016 to
2 decimal places.
In 2015, Ragnarok’s Earnings Per Share was $9.10 per share. Comment on the company’s performance
in 2016 compared to 2015.
Part C (7 marks)
Provide the journal entries required for Ragnarok for the following transactions for 2017. If no entry is
required, clearly indicate this by stating “No Entry”.
On January 1, Ragnarok declared a 2 for 1 stock split for its common shares. On this date, the shares
were trading for $23 per share.
Subsequent to the stock split on January 1, 2017, on May 1, 2017, the company declared a 10% stock
dividend for its common shares, to the shareholders of record on May 10. The dividend was distributed
on May 31. The share price was $15 on May 1, $16 on May 10 and $20 on May 31.
May 1
May 10
May 31
Question 11
On September 30, 2016, Totem Builders Ltd. purchased a new truck for $150,000 from a dealership in
Toronto, and paid $2,000 to bring the truck to Totem’s head office in Calgary. In addition to this, Totem
incurred $18,000 for the required modifications to make the truck ready for its intended use. The
estimated useful life of the truck is 5 years or 300,000 km. and a residual value of $50,000. The company
has a December 31 year-end.
Required:
a) Record the journal entry for the purchase of the new truck
(2 marks)
b) The company uses the double diminishing method to record depreciation. Record the appropriate
journal entries for depreciation for 2016 and 2017. Show all calculations.
(3 marks)
c) On July 1, 2018, the company sold the truck for $80,000 cash. Record the required journal entry(ies)
for the sale of the truck
.
(7 marks)
d) On December 31, 2017 management tested the truck for impairment. The truck’s recoverable value
was $60,000. Record the journal entry for any possible impairment loss, assuming that the company
uses double diminishing balance method.
(3 marks)
Question 12
On November 1, 2016, The Raven Company converted an overdue account receivable balance of
$10,000 from Gemco, into a 5 month 6% note receivable. The terms of the note require Gemco to
payback the principal and interest, on the date of maturity of the note. Raven’s year-end is
December 31.
Required:
1. Record the appropriate journal entry that Raven would make on the date of the
conversion of the account receivable to a note receivable.
2. Record the journal entry(ies) (if any) that Raven would make in 2016 relating to the note
receivable from Gemco.
3. Record the appropriate journal entry(ies) that Raven would make, assuming that Gemco
honours the terms of the note and pays on the maturity date.
4. Record the appropriate journal entry(ies), that Raven would make, assuming that
Gemco does not honour the note on maturity date but that collection on the amount
that Gemco owes is still likely.
5. Record the appropriate journal entry(ies) that Raven would make, assuming that Gemco
does not honour the note on maturity date and that any collection on this note is
deemed to be very unlikely.
Question 13
Presented below is selected financial information for Global Enterprises Inc.
Accounts receivable
Inventory
Net sales
Cost of goods sold
2017
$56,950
17,470
298,980
166,200
2016
$52,430
18,910
246,300
152,900
2015
$50,910
26,400
269,450
148,600
Required:
1.
Calculate Global Enterprises’ days in inventory for 2017 and 2016.
2017
2016
Comment on Global Enterprises’ effectiveness in managing its inventory
2.
Calculate Global Enterprises’ average collection period for 2017 and 2016
2017
2016
Comment on Global Enterprises’ in managing their accounts receivable