Student ID: _____________________________
Date: ________________________
Section Time: ___________________________
Accounting 2610
Fall 2017
Exam 1
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You have 1 hour and 20 minutes to complete this exam.
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This exam is closed book and closed notes. You may use simple or business calculators.
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For problems that require calculations show your work. For all answer that require decimals,
please round to the nearest three decimal places.
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For questions that require a journal entry, you do not need to include a journal entry date,
number, or description.
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Provide your answers in the space provide (not on a separate sheet).
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Please check to make sure that you have 12 pages (they are numbered).
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Do not begin until instructed to do so.
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If a question is ambiguous, please raise your hand and I will clarify the question. If necessary,
write your assumptions on the exam along with your answer. You will receive credit provided
your assumptions are necessary and reasonable.
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You must turn in your exam packet before you leave, even if you don’t want to have it graded.
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Monitor your time and good luck!
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Relax . . . and begin.
2017 Exam #1
1. (2pts) On September 21, 2022, Bears Corp purchases a patent from Glennon Corp for $12,000
with cash. What is the journal entry(ies) that Glennon Corp records on September 21? Write
“NONE” if no journal entry is required.
EVERYONE GOT FULL CREDIT HERE.
2. (4pts) Broncos Corp has the following selected account balances on December 31, 2021. The
income statement accounts are for the 12-month period ending December 31, 2021.
Accrued Salaries
Sales Revenue
Administrative Expenses
Unearned Insurance Revenue
Salaries Expense
Cost of Goods Sold
Prepaid Advertising Expenses
Income Tax Expense
Accounts Receivable
$9,000
$143,000
$14,000
$2,400
$25,000
$77,700
$4,350
$2,200
$23,000
Broncos declares and pays dividends equal to $3,300 on September 22, 2021. Using the above
balances, answer the following questions.
a. What is gross profit equal to on December 31, 2021?
143000 – 77700 = 65300
b. What is net income equal to on December 31, 2021?
65300 – 14000 – 25000 – 2200 = 24100
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2017 Exam #1
3. (1pt) What is the name of the form that describes a major event of the company?
8-K
4. (1pt) Are the financial statements in the 10-Q audited or reviewed? Please write AUDITED or
REVIEWED below.
REVIEWED
5. (1pt) What is the name of the audit opinion that states the financial statements fairly present
the financial condition and performance of the company with exception to a limited number of
items in the financial statements deviating from US GAAP?
Qualified Opinion
6. (5pts) On November 1, 2019, Dolphins Corp purchases equipment for $7,500 from Jets Corp
using a note. The interest rate on the note is (annual) 4% and the loan matures in 4 years from
the date of purchase. Dolphins expects the equipment to last 9 years at which point the
equipment will have no value. Dolphins Corp depreciates the equipment evenly over the 9year period. Both Dolphins Corp and Jets Corp record adjusting journal entries on March 31,
June 30, September 30, and December 31. Assume that all interest is paid on March 31, June
30, September 30, and December 31. Use the above information to answer the following
information.
a. What is the journal entry(ies) recorded by Dolphins Corp on December 31, 2019?
Write “NONE” if no journal entry is required.
Depreciation Expense
Accumulated Depreciation
138.89
Interest expenses
Cash
50
138.89
50
b. What is the carrying value (i.e., net book value) of the equipment on December 31,
2022?
7500 – 2638.889 = 4861.111
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2017 Exam #1
7. (5pts) On October 31, 2018, Giants Corp sells 2,000 shares of its own stock to Manning Corp
in exchange for equipment valued at $42,000. The par value of the stock is $0.50 per share.
Giants Corp’s net income is equal to $33,000 and total revenues are equal to $343,000 for the
12-month period ending December 31, 2019. Use the above information to answer the
following information.
a. What is the journal entry(ies) recorded by Giants Corp on October 31, 2018? Write
“NONE” if no journal entry is required.
Equipment
Common Stock
Additional Paid in Capital
42,000
1,000
41,000
a. If Manning Corp gives cash of $42,000 instead of equipment, what is the journal
entry(ies) recorded by Manning Corp on October 31, 2018? Write “NONE” if no
journal entry is required.
Investments
Cash
42,000
42,000
8. (3pts) Packers Corp has the following purchases and sales of inventory during February 2020.
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The beginning inventory account balance is equal to $35,200.
On February 2, $40,000 of inventory is purchased.
On February 15, inventory is sold for $55,000 and the cost of the inventory is $43,300.
On February 19, inventory is sold for $10,000 and the cost of the inventory is $7,000.
On February 23, $32,800 of inventory is purchased.
Based on the above information, what is the ending inventory balance for February 2020?
35200 + 40,000 – 43300 – 7000 + 32800 = 57700
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2017 Exam #1
9. (1pt) TRUE or FALSE? Adjusting journal entries sometimes include the cash account. Please
write TRUE or FALSE below.
FALSE
10. (1pt) TRUE or FALSE? Asset accounts are listed by maturity on the balance sheet?
FALSE
11. (9pts) Jets Corp borrows $100,000 from Smith Corp on February 1, 2018. The interest rate on
the loan is 9% (annual). The note specifies that the principal and interest will be paid on the
date that the loan matures, which is on January 31, 2021. Adjusting journal entries are recorded
on March 31, June 30, September 30, and December 31. Assume that interest is not
compounded (i.e., interest is not earned on the interest). Use the above information to answer
the below questions.
a. What is the journal entry(ies) that Jets Corp records on March 30, 2018? Write
“NONE” if no journal entry is required.
Interest expense
Interest payable
1500
1500
b. What is the journal entry(ies) that Smith Corp records on January 31, 2021? Write
“NONE” if no journal entry is required.
Interest receivable
Interest revenue
Cash
750
750
27000
Interest receivable
Cash
27000
100000
Notes receivable
100000
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2017 Exam #1
12. (1pt) What is the name of the assumption in the FASB conceptual framework that states the
life of a company can be reported in shorter time periods (e.g., quarters)?
Time Period Assumption
13. (6pts) On March 1, 2019, 49er Corp pays $72,000 in cash to Seahawks Corp for advertising
services to be provided in the future. Seahawks Corp provides advertising services to 49er
Corp using the following schedule.
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Seahawks Corp provides 10% of the advertising services by March 31, 2019.
Seahawks Corp provides 30% of the advertising services between April 1, 2019 and
June 30, 2019.
Seahawks Corp provides 25% of the advertising services between July 1, 2019 and
September 30, 2019.
Seahawks Corp provides 35% of the advertising services between October 1, 2019 and
December 31, 2019.
Assume that adjusting journal entries are recorded on March 31, June 30, and September 30,
and December 31. Use the above information to answer the following questions.
a. What is the journal entry(ies) that Seahawks Corp records on March 1, 2019? Write
“NONE” if no journal entry is required.
Cash
72000
Unearned Advertising Revenues
72000
b. What is the journal entry(ies) that Seahawks Corp records on June 30, 2019? Write
“NONE” if no journal entry is required.
Unearned Advertising Revenues
Advertising Revenues
21600
21600
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2017 Exam #1
14. (1pt) TRUE or FALSE? The retained earnings balance on the adjusted trial balance is equal to
the balance of retained earnings found on the balance sheet. Please write TRUE or FALSE
below.
FALSE
15. (1pt) TRUE or FALSE? Credits equaling debits on the unadjusted trial balance suggests that
the journal entries were recorded correctly? Please write TRUE or FALSE below.
FALSE
16. (1pt) TRUE or FALSE? Trial balances are sometimes publicly disclosed? Please write TRUE
or FALSE below.
FALSE
17. (1pt) TRUE or FALSE? Private companies are required to provide their financial statements
to the SEC?
FALSE
18. (1pt) What organization is responsible for setting audit standards for independent auditors?
PCAOB or Public Company Accounting Oversight Board
19. (2pts) Raiders Corp declares dividends equal to $34,000 on December 15, 2017. Raiders Corp
pays the dividends on January 2, 2018. What is the journal entry(ies) recorded on December
15, 2017? Write “NONE” if no journal entry is required.
RETAINED EARNINGS
DIVIDENDS PAYABLE
34000
34000
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2017 Exam #1
20. (1pt) What is the name of the audit opinion that states the financial statements as a whole are
materially misstated and do not accurately reflect the financial performance or condition of the
company?
Adverse opinion
21. (9pts) Patriots Corp decides to purchase fire insurance from Amendola Corp on February 1,
2014 for $12,000. Patriots Corp pays Amendola Corp on February 1, 2014. The insurance is
provided evenly over the next 24 months. Assume that adjusting journal entries are recorded
on March 31, June 30, September 30, and December 31. Use the above information to answer
the following questions.
a. What is the journal entry(ies) that Patriots Corp records on March 31, 2014? Write
“NONE” if no journal entry is required.
Insurance expense
Prepaid Insurance expense
1000
1000
b. What is the journal entry(ies) that Patriots Corp records on February 1, 2014? Write
“NONE” if no journal entry is required.
Prepaid insurance expenses
Cash
12,000
12,000
c. If Patriots Corp does not pay for the insurance until the end of the 24 month insurance
period, what is the journal entry(ies) that Patriots Corp records on March 30, 2014?
Write “NONE” if no journal entry is required.
Insurance expense
1000
Insurance payable or Accrued Insurance
1000
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2017 Exam #1
22. (2pts) On which financial statement or financial statements can you explicitly find the net
income figure?
INCOME STATEMENT
STATEMENT OF STOCKHOLDERS’ EQUITY
23. (1pt) What is the name of the assumption that states that business transactions are accounted
for separately from the transactions of the owners?
Separate entity assumption
24. (8pts) McNally Corp sells and delivers deflated footballs (inventory) to Brady Corp on June
11 for $52,000. This is the only sale that McNally Corp records during June. McNally Corp
purchases $33,000 of footballs from its suppliers during June. McNally Corp’s football
inventory balance on June 1 is equal to $22,000 and on June 30 is equal to $14,500. Brady
Corp pays McNally Corp for the footballs on July 15. Use the above information to answer the
following questions.
a. What is the journal entry(ies) that McNally Corp records on June 11? Write “NONE”
if no journal entry is required.
Accounts Receivable
Football Revenues
Cost of Goods Sold
Inventory
52000
52000
40500
40500
b. What is the journal entry(ies) that McNally Corp records on July 15? Write “NONE”
if no journal entry is required.
Cash
52000
Accounts Receivable
52000
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2017 Exam #1
25. (1pt) What is the name of the asset classification that includes all assets that are expected to be
turned into cash within one year?
CURRENT ASSETS
26. (2pts) What are the two fundamental qualities that financial accounting information should
have according to the FASB conceptual framework?
Relevance
Faithful representation (reliable)
27. (3pts) What are the names of the three sections on the statement of cash flows?
OPERATING, INVESTING, AND FINANCING
28. (4pts) Packers Corp has the following selected account balances on December 31, 2021.
Accrued Salaries
Sales Revenue
Administrative Expenses
Unearned Insurance Revenue
Retained Earnings
Prepaid Advertising Expenses
$9,000
$123,000
$14,000
$2,400
$65,000
$4,500
Record the closing entries using the above accounts.
Sales Revenue
Retained earnings
123000
Retained earnings
Administrative expenses
14000
123000
14000
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2017 Exam #1
29. Use the below income statement and balance sheet to answer the following questions.
RAIDERS CORP
BALANCE SHEET
RAIDERS CORP
INCOME STATEMENT
For the periods ending Dec 31, 2010 and Dec 31, 2011
For the 12 month period ending Dec 31, 2011
ASSETS
Current assets:
Cash
Accounts receivable
Prepaid Advertising Exp
Inventory
Total current assets
12/31/2011
12/31/2010
14,555
12,345
945
23,333
51,178
8,499
7,650
4,444
18,909
39,502
Land
Equipment
Accumulated depreciation
Total assets
34,536
124,555
(43,323)
166,946
45,777
124,555
(33,333)
176,501
LIABILITIES & EQUITY
Current liabilities:
Accounts payable
Wages payable
Dividends payable
Insurance payable
Total current liabilities
34,333
5,945
16,097
1,122
57,497
23,422
5,600
15,000
678
44,700
Notes payable
Total liabilities
33,290
90,787
55,454
100,154
Stockholders' equity
Common stock
Additional paid in capital
Retained earnings
Total stockholders' equity
Total liabilities and equity
1,000
30,000
45,159
76,159
166,946
1,000
30,000
45,347
76,347
176,501
Net sales revenue
Cost of goods sold
Gross profit
12/31/2011
436,700
321,321
115,379
Operating expenses:
Wages expense
Insurance expense
Depreciation expense
Total operating expenses
82,345
11,232
9,990
103,567
Income from operations
Income tax expense
Net income
11,812
2,000
9,812
Common stock outstanding on 12/31/2010 and 12/31/2011 is 30,000 and 45,000 shares, respectively.
a. What is the “return on assets” equal to on December 31, 2011?
9812 /((166946 + 176501)/2) = .057
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2017 Exam #1
b. What is the “asset turnover ratio” equal to on December 31, 2011?
436700 / /((166946 + 176501)/2) = 2.543
c. What is the “current ratio” equal to on December 31, 2011?
51178 / 57497 = .890
d. What is the “net profit margin” equal to on December 31, 2011?
9812 / 436700 = .022
e. What is the “gross profit percentage” equal to on December 31, 2011?
115379 / 436700 = .265
f. What is the total amount of dividends paid during the 12-month period ending
December 31, 2011?
8903
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2017 Exam #1
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Feedback (no points, but I appreciate your feedback)
Was the exam fair (i.e., did it cover topics addressed in the text, my slides, and/or the homework problems)?
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No,
the
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Was the exam difficult?
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No, it was
quite easy
Yes, the
exam was
fair
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Approximately how many hours did you spend studying for the exam? __________ hours
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