Name:
________________________________
Section _________________
Student #: _________________________________
Wilfrid Laurier University, School of Business and Economics
Introductory Financial Accounting
BU 127 (all sections)
Mid-Term Examination
Sunday, February 11, 2018
9:00 – 10:30 am, (90 minutes)
Number of pages: 6 including cover page
Important Instructions – Please Read Carefully
1. You should verify immediately that your examination paper is complete (10 pages).
2. Print your name, student number, and class section on the cover page.
3. You should have been provided with a Scantron card on which you will record
your answers to examination multiple choice questions 1 to 14 inclusive.
4. Please answer on the Scantron card in pencil only (preferably soft pencil).
Any answers that you change must be erased completely. If the scan picks up multiple
responses to a question you will receive a grade of zero on that question.
5. On the front of your Scantron card, ensure that you have printed the following:
a. Your Class (this is your class Section letter)
b. Your Name
6. On the back (the answer side) of your scanner card, ensure that you have
entered and coded the following:
a. Your nine-digit ID Number, left justified. (U of W students must fill in a ninedigit ID: your UW ID + 0)
b. Under Test Form, mark A.
7. You should answer problem-style question 15 in the exam answer booklet
provided. Answers should be in blue or black pen. If you need an extra exam
booklet, please ask an exam invigilator for an extra booklet.
8. Use of reference materials and receipt of assistance from other students will be
penalized. (At a minimum, you would likely receive a zero score on the exam and
other penalties might also be sought).
9. While you may use a calculator during the exam, a programmable calculator is not
allowed.
10. To ensure that all students have the same information, neither the instructors nor the
proctors will answer any questions during the examination period.
11. Please do not separate the pages of the examination paper – the entire
paper must be handed in.
Ensure that your Scantron card, exam paper and answer booklet(s) are handed
in.
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BU127 Section Listing:
Schedule of Classes
Instructor
Kaleab Mamo
Kaleab Mamo
James Moore
Kai Chen
David Scallen
Kai Chen
Kaleab Mamo
Kai Chen
James Moore
Section
H
J
K
L
M
N
S1
S2
S3
Time
M W 8:30-9:50 am
M W 10:00- 11:20 am
M W 11:30 am-12:50 pm
T R 11:30am-12:50 pm
T TH 1:00-2:20 pm
T R 2:30-3:50 pm
M W 5:30-6:50 pm
T TH 5:30-6:50 pm
W 7:00-9:50 pm
Class Location
LH1009
LH1009
LH1009
LH1011
LH1001
LH3094
LH1011
LH1011
LH1009
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Questions 1-14
Question 15
Total
Marks
14
28
42
Student’s Score
Question 1: Multiple-Choice (14 marks) (each question is worth 1 mark)
Instructions: To answer each of the following questions, clearly mark the letter of your answer
in pencil on the scantron card provided, and circle the letter on the exam paper:
1. Financing that individuals or institutions have provided to a company is:
A. always classified as liabilities.
B. classified as liabilities when provided by creditors and shareholders' equity when provided by owners.
C. always classified as shareholders' equity.
D. classified as shareholders' equity when provided by creditors and liabilities when provided by owners.
2. At the end of last year, the company's assets totalled $860,000 and its liabilities totalled $740,000.
During the current year, the company's total assets increased by $58,000 and its total liabilities
increased by $24,000. At the end of the current year:
A. shareholders' equity was $154,000.
B. shareholders' equity was $120,000.
C. shareholders' equity was $34,000.
D. shareholders' equity was $178,000.
3. The Whackem-Smackem Software Company sold $11 million of computer games in its first year of
operations. The company received payments of $7.5 million for these computer games. The company's
income statement would report:
A. sales revenue of $7.5 million.
B. accounts receivable of $3.5 million.
C. expenses of $3.5 million.
D. sales revenue of $11 million.
4. Every financial statement should have "who, what, and when" in its heading. These are:
A. the name of the person preparing the statement, the type of financial statement, and when the
financial statement was reported to the Stock Exchange.
B. the name of the person preparing the statement, the name of the company, and the date the
statement was prepared.
C. the name of the company, the type of financial statement, and the time period from which the data
were taken.
D. the name of the company, the purpose of the statement, and when the financial statement was
reported to the Canada Revenue Agency.
5. Which of the following are the two fundamental characteristics financial information must possess to
be judged useful to decision makers?
A. Relevance and faithful representation
B. Truthful and clarity
C. Complete and relevant
D. Elaborate and faithful representation
6. Which of the following are elements to be measure and reported?
A. Assets, liabilities, shareholders equity, revenues, expenses, dividends
B. Unit of measure, separate entity, going concern, time period
C. Cost, revenue recognition, matching, full disclosure
D. Cost-benefit, materiality, industry practices
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7. The effects of net income and its distribution on the financial position of the company is reported in:
A. Balance sheet
B. Income statement
C. Statement of retained earnings
D. Statement of cash flows
8. Which of the following equations is correct?
A. net income - expenses = revenues
B. ending retained earnings - beginning retained earnings = net income - dividends
C. asset = liabilities - shareholders equity
D. none of the choices are correct
9. The Sweet Smell of Success Fragrance Company borrowed $60,000 from the bank and used all of the
money to re-design its new store. Sweet Smell's balance sheet would show this as:
A. $60,000 under Furnishings & Equipment and $60,000 under Notes Payable.
B. $60,000 under Supplies and $60,000 under Accounts Payable.
C. $60,000 under Prepaid Expenses and $60,000 under Accrued Liabilities.
D. $60,000 under Other Assets and $60,000 under Other Liabilities.
10. If a company is paid $20,000 on accounts receivable and uses the money to pay $20,000 on accounts
payable then:
A. assets would increase by $20,000 while liabilities would decrease by $20,000.
B. liabilities would decrease by $20,000 while shareholders' equity would increase by $20,000.
C. Both assets and liabilities would decrease by $20,000.
D. Both assets and shareholders' equity would decrease by $20,000.
11. Your company's president donates a large amount of her own money to charity and receives
significant publicity that includes the company's name. How would the benefits of this publicity appear
on the statement of financial position?
A. It would appear as a current asset.
B. It would appear as a liability.
C. It would appear as a long-term asset.
D. It would not appear on the statement of financial position.
12. When dealing with claims on company assets,:
A. owners take precedence over creditors.
B. creditors take precedence over owners.
C. owners and creditors are treated equally.
D. All of the choices are possible; it depends on the situation.
13. Sparkling Pools provides $1,000 of pool maintenance services during July and collects payment in
August. The company performs $1,600 of pool maintenance services during July that were paid for in
June. The company accepts an order to perform $500 of pool maintenance services in August and will be
paid in the same month. Revenue should be credited for:
A. $1,600 in June, $1,000 in July, and $500 in August.
B. $1,600 in June, $0 in July, and $1,500 in August.
C. $0 in June, $1,600 in July, and $1,500 in August.
D. $0 in June, $2,600 in July, and $500 in August.
14. Which of the following statements is true?
A. When operating income is positive, revenue is greater than expenses.
B. When net income is negative, retained earnings decrease, all other things being equal.
C. When net income is positive, Shareholders' equity increases, all other things being equal.
D. All of the answers are acceptable.
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Question 15 (28 marks) – Answer in Blue or Black Ink in the Exam Booklet Provided
Hawks Tutoring Inc. prepares monthly financial statements. Hawks Tutoring Inc. had the following
account balances at the beginning of January 2018:
Name
Balance Jan. 1, 2018
Cash
$ 51,200
Trade receivables
2,800
Contributed capital
4,700
Deferred revenue
2,200
Supplies
2,500
Trade payables
1,900
Startup loan payable (due March 2020)
9,900
Retained earnings
37,800
The startup loan is interest free.
The following transactions occurred during the month of January 2018
Jan. 1 Received $3,600 cash from a customer as a deposit for tutoring services that were scheduled to
be performed equally in January, February, March and April 2018. The services were subsequently
performed as scheduled.
Jan. 1 Purchased computer equipment for $60,000. Paid $40,000 cash and signed a note payable for
$20,000. The note payable bears interest at a rate of 6% per year. The note amount plus interest is
payable on January 1, 2019.
Jan. 1 Paid insurance of $4,800. The insurance payment covers the six month period Jan 1-June 30,
2018.
Jan 3
Collected $2,800 cash from a customer for tutoring services performed in December 2017.
Jan 5
Received $10,000 cash and issued shares in the company.
Jan. 6 Purchased supplies for $1,300 on credit. The supplier will be paid in February 2018.
Jan. 12 Paid trade payables of $1,900.
Jan 14 Performed tutoring services and received full cash payment of $3,000.
Jan 20 Performed tutoring services for Ms. Laura Allan. Ms. Allan had paid for the services in
November 2017 by paying $2,200 in cash to Hawks Tutoring Services.
Jan 25 Performed tutoring services in the amount of $2,000 for Mr. John Young. Mr. Young agreed to
pay Hawks Tutoring Services Inc. in February 2018.
Jan 31 Paid $1,500 in cash to employees for wages earned during the month.
Jan 31 Received a $500 accounting bill for accounting services received in January. The accounting bill
will be paid in March 2018.
Jan. 31 Counted supplies and determined that there were $1,000 in supplies remaining.
Jan. 31 Recorded depreciation on the computer equipment of $1000 and made other necessary month
end adjusting entries.
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Question 15 (continued)
Required
Use the information provided to prepare:
1) Journal entries to record all transactions and all necessary month end adjusting journal entries.
You may use any reasonable account names. Ignore income taxes.
2) T accounts for each account showing opening balances (if applicable), transactions and final
balances at January 31, 2018.
3) A formal Statement of Earnings for the month ended January 31, 2018.
4) A classified Statement of Financial Position at January 31, 2018.
5) Closing journal entries for the month ended January 31, 2018.
DO NOT ANSWER ON THIS EXAM – USE THE EXAM BOOKLET PROVIDED TO ANSWER THIS QUESTION
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