Name:
________________________________
Section _________________
Student #: _________________________________
Wilfrid Laurier University, School of Business and Economics
Introductory Financial Accounting
BU 127 (all sections)
Mid-Term Examination
Saturday, February 9, 2019
9:00 – 10:30 am, (90 minutes)
Number of pages: 7 including cover page
Important Instructions – Please Read Carefully
1. You should verify immediately that your examination paper is complete (7 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)
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. Make sure your name
and student number are on your exam 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 or the exam
booklets– 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:
Instructor
Michael Wynes
Section
J
Time
TU TH 1:00-2:20 pm
Class Location
LH3094
Michael Wynes
Kaleab Mamo
Kaleab Mamo
James Moore
Kainan Xiong
Joanna Andrejkow
James Moore
K
L
M
S1
S2
S3
OC2
TU TH 2:30-3:50 pm
TU TH 4:00- 5:20 pm
M W 4:00- 5:20 pm
T 7:00-9:50 pm
W 7:00-9:50 pm
TH 7:00-9:50 pm
Online section
LH3094
LH3094
LH1009
LH1011
LH1009
LH1011
Online section
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Questions 1-14
Question 15
Total
Marks
14
28
42
Student’s Score
Questions 1-14: 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. A Company owes you $500 on account due within 15 days. Which of the following amounts on
its statement of financial position would help you to determine the likelihood that you will be
paid in full and on time?
A. Cash and trade receivables.
B. Cash and property and equipment.
C. Cash and inventory.
D. Contributed capital and retained earnings.
2. The statement of changes in equity is dependent on the results from
A. the statement of cash flows.
B. the statement of financial position.
C. the statement of earnings.
D. a company's share capital.
3. If Brad Company owed Angelina Company $500, where would Brad Company reflect this?
A. Statement of financial position.
B. Income statement.
C. Statement of cash flows
D. Statement of changes in equity.
4. Brown Corporation reported the following amounts at the end of the first year of operations,
December 31, 2018: share capital $20,000; sales revenue $95,000; total assets $85,000, no
dividends, and total liabilities $35,000. What would shareholders' equity and total expenses be?
A. Shareholders' equity, $50,000 and expenses $65,000.
B. Shareholders' equity, $60,000 and expenses $75,000.
C. Shareholders' equity, $50,000 and expenses $40,000.
D. Shareholders' equity, $80,000 and expenses $85,000.
5. If the retained earnings account increases from the beginning of the year to the end of the year,
then
A. profit is greater than dividends.
B. a loss is less than dividends.
C. additional investments are less than reported losses.
D. dividends were paid.
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6. Which financial statement would indicate whether the company relies more on debt or
shareholders' equity to finance its assets?
A. Statement of cash flows.
B. Statement of changes in equity.
C. Statement of earnings.
D. Statement of financial position.
7. Which of the following defines shareholders' equity?
A. Probable debts or obligations of an entity as a result of past transactions which will be paid
with assets or services.
B. Assets plus liabilities.
C. Probable future economic benefits owned by an entity as a result of past transactions.
D. The financing provided by the owners and the operations of a business.
8. If total liabilities increased by $14,000 during a period of time and shareholders' equity
decreased by $6,000 during the same period, then the amount and direction (increase or
decrease) of the period's change in total assets is a(n)
A. $20,000 increase.
B. $8,000 decrease.
C. $8,000 increase.
D. $14,000 increase.
9. Which of the following costs is most likely to be the largest expense item on the statement of
earnings of a merchandising chain such as Walmart?
A. Wage, salary and benefits expense
B. Advertising
C. Cost of Sales
D. Income tax expense
10. Which of the following statements is true?
A. Debits increase assets and increase liabilities.
B. Credits decrease assets and decrease liabilities.
C. Credits decrease assets and increase liabilities.
D. Debits increase liabilities and decrease assets.
11. Prepaid expenses are
A. paid and recorded in an asset account before they are used or consumed.
B. paid and recorded in an asset account after they are used or consumed.
C. incurred but not yet paid or recorded.
D. incurred and already paid or recorded.
12. Ultra Realty received a cheque for $21,000 on July 1, which represents a 6-month advance
payment of rent on a building it rents to a client. Unearned Rental Revenue was credited for the
full $21,000. Financial statements will be prepared on July 31. Ultra Realty should make the
following adjusting entry on July 31:
A. debit Unearned Rental Revenue, $3,500; credit Rental Revenue, $3,500.
B. debit Rental Revenue, $3,500; credit Unearned Rental Revenue, $3,500.
C. debit Unearned Rental Revenue, $21,000; credit Rental Revenue, $21,000.
D. debit Cash, $3,500; credit Rental Revenue, $3,500.
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13. The Fastbank Motorcycle Company (FMC) receives a $10 million order from dealers wanting to buy
its most popular model on credit. No money changes hands. Due to excess demand, FMC cannot
supply the motorcycles until next quarter. How will these events affect the balance sheet?
A. Accounts Receivable will increase by $10 million this quarter and Inventories will decrease next
quarter.
B. Both Accounts Receivable and Accounts Payable will increase by $10 million this quarter.
C. Both Accounts Receivable and Shareholders' Equity will increase by $10 million this quarter.
D. These events will not impact the balance sheet this quarter.
14. During April, the Grass is Greener Company buys and pays for a six-month supply of fertilizer in
order to receive a bulk discount. The cost of fertilizer is recorded:
A. immediately as an expense.
B. as a liability, which will later be reduced as the fertilizer used.
C. partially as an expense and partially as a liability.
D. as an asset, which will later be reduced as the fertilizer is used.
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Question 15 (28 marks) – Answer in Blue or Black Ink in the Exam Booklet Provided
Make sure your name and student number are on your exam booklet.
Purple and Gold Consulting Inc. prepares quarterly financial statements (ie. every three months). Purple
and Gold Consulting Inc. had the following account balances at the beginning of January 2019:
Name
Balance January 1, 2019
Cash
Trade receivables
Contributed capital
Deferred revenue
Supplies inventory
Trade payables
Retained earnings
$ 31,200
4,800
4,700
3,200
1,500
6,900
22,700
Purple and Gold Consulting Inc. had the following transactions during the three months ended March
31, 2019
Jan. 1 Rented an office at a monthly rent of $900. Paid the landlord $5,400 representing six months
rent in advance for the period January 1 to June 30, 2019.
Jan. 1 Purchased office equipment for $30,000. Paid $10,000 cash and signed a note payable for
$20,000. The note payable bears interest at a rate of 6% per year. Interest is payable annually on
January 1. The note amount of $20,000 is payable on January 1, 2021.
Jan.15 Collected $4,800 cash from a customer for consulting services performed in December 2018.
Jan.30 Performed consulting services in the amount of $2,000 for Mr. Ken Jackson. Billed Mr. Jackson
for the total amount which will be paid in April.
Feb 15 Received $8,400 cash from a customer, Mr. Santi, as a deposit for consulting services to be
performed equally in March, April, May and June 2019. The consulting services were subsequently
performed as scheduled.
Feb. 20 Purchased supplies inventory for $3,600 on account. The amount is to be paid on April 20,
2019.
Feb.22 Paid trade payables of $6,900.
Feb 25 Performed consulting services for Ms. Laura Allan. Ms. Allan had paid for the services in
December 2018 by paying $3,200 in cash to Purple and Gold Consulting Inc.
Deleted: .
Mar. 1 Declared and paid a dividend to shareholders of $6,000.
Mar. 9 Performed consulting services for Mr. Shady and received full cash payment of $5,000.
Mar. 31 Paid $2,000 in cash to employees for wages earned during the three months ended Mar. 31,
2019. The employees earned a further $1,000 during that same time period ($3,000 total) that will be
paid to them in April 2019.
Mar. 31 Received a $600 accounting bill for accounting services received during the period Jan. 1 to
Mar. 31. The accounting bill will be paid in April.
Mar. 31 Counted supplies inventory and determined that there were $2,000 in supplies inventory
remaining.
Mar. 31 Recorded depreciation on the office equipment of $1000 and made other necessary quarter
end adjusting entries. Ignore income taxes.
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Question 15 (continued)
Required
Use the information provided to prepare:
1) Journal entries to record all transactions and all necessary quarter end adjusting journal entries.
You may use any reasonable account names. Ignore taxes.
2) T accounts for each account showing opening balances (if applicable), transactions and final
balances at March 31, 2019.
3) A Statement of Income for the three months ended March 31, 2019.
4) A classified Statement of Financial Position at March 31, 2019.
5) Closing journal entries for the three months ended March 31, 2019.
DO NOT ANSWER ON THIS EXAM – USE THE EXAM BOOKLET PROVIDED TO ANSWER THIS QUESTION
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