ACC 1100 Sample Final Exam
QUESTION ONE
Selected 2021 balances of GNT Industries were made available as below:
Accumulated other comprehensive income (loss), January 1
($12,000)
Common shares, January 1, 80,000 issued and outstanding
$320,000
Cost of goods sold
$350,000
Long-term debt
$125,000
Other comprehensive income
$16,000
Other operating expenses
$339,500
Preferred shares, January 1, $2, 6,000 issued and outstanding
$80,000
Retained earnings, January 1
$206,000
Revenues
$1,440,000
On March 31, 2021, GNT declared and distributed a 3% stock dividend, which resulted in the
distribution of common shares with a market value of $34,320. On September 30, 2021, GNT spent
$2.6 per share to repurchase and cancel 8,500 common shares. On December 20, 2021, GNT declared
and paid a total cash dividends of $50,000. There is no dividend in arrears as at January 1, 2021. For the
year ended December 31, 2021, GNT reported $650,000 net income.
Required
1. Determine the balance of each shareholders equity account as at December 31, 2021 for GNT
Industries. Clearly present calculations for numbers that are not given.
2. Determine the respective amount of cash dividends paid to preferred shares and common shares
during 2021. Clearly present calculations for numbers that are not given.
1
ACC 1100 Sample Final Exam
QUESTION TWO
For each of the following INDEPENDENT cases, prepare any journal entry necessary on the
underlined date.
1. Peter Limited purchased Machine C on January 1, 2018 for $420,000, estimating its useful life to
be 20 years and its residual value to be $20,000. Peter uses the double-diminishing-balance
method for depreciation purposes. It is now December 31, 2019 and Peter has not recorded any
depreciation expense for the year.
2. Laura Corp. purchased Machine A and Machine B from a vendor on December 31, 2020 for
$210,000 and $140,000 respectively. Installation of both machines occurred on December 31,
2020. Laura paid installation costs of $2,000 for Machine A. During installation, accidental
damage occurred to Machine B that required repairs costing $5,000. Laura signed a $250,000
note payable to the machine vendor and paid the balance of the purchase price and other
expenditures in cash.
3. Starr, Incorporated purchased Machine D on January 1, 2020 for $280,000 (estimated residual
value = $12,000). Starr uses the units-of-production method for depreciation purposes and
estimates that Machine D has a total capacity of 100,000 units. On September 30, 2020, Starr
sold Machine D for $250,000. By this date, Machine D had produced 9,000 units in total. On
September 30, Starr had not yet recorded any depreciation expense for the year.
2
ACC 1100 Sample Final Exam
QUESTION THREE
Journalize the following passive investment transactions for Arthur Brothers Wholesale Inc. Assume
that Arthur Brothers uses Fair Value Through Profit and Loss, or FVTPL, for investments of this type.
a.
June 1, 2018: Purchased 800 common shares of CIBC at $80 per share, with the intent of holding
the shares for the indefinite future.
b.
September 15, 2018: Received cash dividend of $0.25 per share on the CIBC investment.
c.
December 31, 2018: At year-end, adjusted the investment account to current fair value of $75 per
share.
d.
February 14, 2019: Sold 400 common shares of CIBC for the market price of $82 per share.
3
ACC 1100 Sample Final Exam
QUESTION FOUR
Comparative financial data of ABC Inc. appears below.
ABC Inc.
Statement of Financial Position
As at December 31st
Assets
2020
2019
Cash
$ 39,500
$ 18,850
Accounts receivable
38,050
16,250
Merchandise inventory
48,675
51,475
Prepaid operating expenses
1,500
9,350
Long-term investments
52,500
47,250
Capital (fixed) assets (net)
108,450
100,250
$ 288,675
$ 243,425
Liabilities and Shareholders' Equity
Accounts payable
$ 38,650
$ 32,925
Bonds payable
40,125
62,350
Common shares
100,000
85,000
Retained earnings
109,900
63,150
$ 288,675
$ 243,425
ABC Inc.
Statement of Income
For the year ended December 31, 2020
Sales revenue
$ 184,390
Expenses:
Cost of goods sold
$ 73,130
Operating expenses excluding depreciation
17,705
Depreciation expense
31,550
Income tax expense
9,640
Interest expense
2,865
Loss on sale of capital assets
2,750
137,640
Net income
$ 46,750
Additional information:
a.
During 2020, capital assets with an historical cost of $36,900 and accumulated
depreciation of $32,050 were sold for cash.
b.
Bonds matured and were paid off at face value for cash.
c.
Accounts payable represents amounts owing to suppliers of merchandise inventory only.
Required (show all of your calculations):
a)
Present in good form the 2020 statement of cash flows. Use the indirect method.
b)
Present operating section of statement of cash flows using the direct method.
4
ACC 1100 Sample Final Exam
QUESTION FIVE
For each of the following, circle the letter that corresponds with the best response. Marks are not
deducted for incorrect answers.
Using the following information for questions 1 – 5 (round all calculations to two decimal place).
Mano Inc. had the following activity with one of its inventory items during a current period.
Units
Unit Cost
Total Cost
Beginning inventory
Purchases:
June 1
June 15
Sales
June 8
June 30
1.
$2,000
160
210
28.00
30.00
4,480
6,300
100
280
$1,750.
$1,936.9.
$1,960.
$2,100.
None of the above.
Using a periodic inventory system and the average cost formula, the cost of goods sold for the
month of June was valued at:
a.
b.
c.
d.
e.
3.
$25.00
Using a perpetual inventory system and the FIFO cost formula, the ending inventory was:
a.
b.
c.
d.
e.
2.
80
$10,450.
$10,640.
$10,792.
$10,894.6.
None of the above.
Using a perpetual inventory system and the average cost formula, the cost of goods sold on June
8 was valued at:
a.
b.
c.
d.
e.
$2,500.
$2,650.
$2,700.
$2,800.
None of the above.
5
ACC 1100 Sample Final Exam
4.
Using a periodic inventory system and the FIFO cost formula, the cost of goods sold for the
month of June was valued at (assuming physical count indicate that there were 68 unites in
warehouse at end of June):
a.
b.
c.
d.
e.
5.
Using a perpetual inventory system and the average cost formula, the ending inventory was:
a.
b.
c.
d.
e.
6.
$1,960.
$2,016.
$2,030.
$2,100.
None of the above.
Southwest Information Systems incurred a major maintenance overhaul expense on a computer
system which is expected to increase the life of the system for an additional 8 years. The cost of
the overhaul should be:
a.
b.
c.
d.
e.
7.
$10,680.
$10,740.
$11,030.
$11,080.
None of the above.
Charged to expense.
Charged to other comprehensive income.
Charged to the asset account.
Charged to retained earnings.
None of the above.
Rickshaw Industries uses the allowance method of estimating doubtful accounts. At December
31, 1999, Rickshaw had accounts receivable of $870,000 and an allowance for uncollectible
accounts of $49,000. During 2000, Rickshaw wrote off accounts totalling $48,000 and collected
$1,300 on accounts which had been written of in 1999. An aging of accounts receivable indicates
that $51,400 is needed in the allowance for doubtful accounts as of December 31, 2000. The bad
debt expense for 2000 is:
a.
b.
c.
d.
e.
$51,400.
$48,000.
$51,700.
$49,100.
None of the above.
6
ACC 1100 Sample Final Exam
8.
Assume the following shares outstanding at December 31, 2017:
 Preferred shares, $3, cumulative, 1,000 shares outstanding with dividends in arrears for 2015,
2016, and 2017.
 Common shares, 2,000 shares outstanding.
No shares were issued or repurchased during 2018. Total dividends declared in 2018 amounted
to $30,000. The total amount of dividends to which common shareholders are entitled is:
a.
b.
c.
d.
e.
9.
Low-Tek Products reported a decline in market value of one of its non-strategic investments
under FVTOCI method. This would result in:
a.
b.
c.
d.
e.
10.
An unrealized loss charged to other comprehensive income.
An unrealized loss reported in the statement of income.
A realized loss charged to other comprehensive income.
A realized loss reported in the statement of income.
None of the above.
Which of the following is the least liquid asset.
a.
b.
c.
d.
e.
11.
$30,000.
$27,000.
$27,000.
$18,000.
None of the above.
Accounts receivable.
Prepaid Insurance.
Inventory.
Short-term Investments.
None of the above.
If a company declares and distributes a stock dividend what is the effect on its retained earnings
and earnings per share?
a.
b.
c.
d.
e.
Retained
earnings
Earnings
per share
unchanged
unchanged
decreased
decreased
decreased
unchanged
decreased
unchanged
decreased
increased
7
ACC 1100 Sample Final Exam
12.
Gamma Company has current assets of $300,000, and total assets of $800,000, a current ratio of
2 and a total debt to total asset ratio of 0.625. Gamma Company’s long-term liabilities are:
a.
b.
c.
d.
e.
13.
Advances in computer technology, including cheaper mass memory and optical scanning, is
causing more companies to change inventory methods and procedures from:
a.
b.
c.
d.
e.
14.
Average cost than FIFO.
FIFO than average cost.
Specific identification than average cost.
FIFO than specific identification.
None of the above.
H-Lo Sporting Goods and Fast Out Sports Outlet are identical in every respect except that Hi-Lo
uses FIFO and Fast Out uses average cost. Assuming merchandise costs are steadily increasing,
the current ratio and profit margin for Hi-Lo, compared to Fast Out would be:
a.
b.
c.
d.
e.
16.
Actual costing to standard costing.
Standard costing to actual costing.
Perpetual inventory to periodic inventory.
Periodic inventory to perpetual inventory.
None of the above.
In a period of declining prices, gross profit margin would be higher using:
a.
b.
c.
d.
e.
15.
$312,500.
$300,000.
$243,750.
$350,000.
None of the above.
Current Ratio
Higher
Lower
Lower
Higher
None of the above.
Profit Margin
Higher
Lower
Higher
Lower
The purpose of recording depreciation is to:
a.
b.
c.
d.
e.
Provide funds for the replacement of the asset.
Allocate the cost of the asset to the periods benefiting from its use.
Approximate the market value of the asset.
Reduce the asset to its estimated replacement cost.
None of the above.
8
ACC 1100 Sample Final Exam
17.
ABC Company repurchased and cancelled 1,000 of its common shares for $7,000. The original
issue price on the shares was $8 per share. Which accounts are affected by this transaction?
a.
b.
c.
d.
e.
18.
Boron Electronic’s cash flow statement shows positive operating cash flows, positive investing
cash flows, and negative financing cash flows. This could indicate that the company is:
a.
b.
c.
d.
e.
19.
Selling off investments in order to purchase equipment and retire debt.
Using cash from operations and selling investments in order to pay dividends.
Issuing debt securities and selling investments to provide operating cash flows.
Selling equipment and issuing share capital in order to retire debt.
None of the above.
Econ-o-ride, reported depreciation expense for one of its machines for the first three years of
$8,000, $4,800, $2,800. The method being used is most likely:
a.
b.
c.
d.
e.
20.
Common Shares decreases by $7,000
Cash decreases by $7,000
Investment in ABC Co. increases by $7,000
Cash decreases by $7,000
Common Shares decreases by $8,000
Gain on repurchase of shares increases by $1,000
Cash decreases by $7,000
Common Shares decreases by $8,000
Contributed surplus increases by $1,000
Cash decreases by $7,000
None of the above.
Straight-line.
Double-diminishing-balance.
Specific identification.
Units-of-production.
None of the above.
Graystoke Computing acquired an asset on January 1, 2017 and has been depreciating the asset
using straight-line depreciation and a 10 year life. In preparing its December 31, 2019 financial
statements, Graystoke has revised its estimates and now believes the total life will be only a total
of 8 years. Graystoke should:
a.
b.
c.
d.
e.
Charge 2019 expense for the amount of extra depreciation that would have been charged
in 2017 and 2018 had the shorter life been used.
Record a charge to retained earnings for the under depreciation in 2017 and 2018.
Adopt an accelerated depreciation method to catch up on the depreciation.
Allocate the book value as of January 1, 2019 over its remaining life.
None of the above.
9
ACC 1100 Sample Final Exam
21.
Grainsville Co. purchased a sorting machine on Jan. 1, 2016 for $15,000 with an expected
residual value of $4,000 in 5 years. Grainsville uses the double-diminishing method to record
depreciation. In 2017, Grainsville would record depreciation expense of:
a.
b.
c.
d.
e.
22.
Tickets Unlimited purchased 10 new computers to use in its offices for $4,000 each on January 1,
2016. The estimated residual value of each computer is $500 with an expected useful life of 5
years. The company uses the straight-line method of depreciation and has a December 31st year
end. On January 1, 2018, management realized that with new technological advances, the
computers are unlikely to have any residual value and will likely be disposed at the end of 2019.
What is the depreciation expense for 2018?
a.
b.
c.
d.
e.
23.
$8,000.
$8,667.
$10,000.
$13,000.
$20,000.
Company A uses accelerated depreciation and Company B uses straight-line depreciation. If the
two companies are identical in all other respects, Company A will report:
a.
b.
c.
d.
e.
24.
$1,400.
$2,160.
$3,600.
$6,000.
None of the above.
A higher asset turnover ratio.
A lower asset turnover ratio.
Identical asset turnover ratios.
Asset turnover rates are not affected by depreciation methods.
None of the above.
The Greenplanet Laboratories, Inc. equipment account, net of accumulated depreciation,
increased by $35,000 during 2016. During the year, Greenplanet sold equipment for $24,000
realizing a gain of $7,000. Depreciation expense for the year was $9,000. All other changes in
the equipment account came from cash purchases of equipment. Cash payments for equipment
totaled:
a.
b.
c.
d.
e.
$27,000.
$61,000.
$35,000.
$59,000.
None of the above.
10
ACC 1100 Sample Final Exam
25.
The Statement of Cash Flows of Grumby Limited revealed the following:
Positive cash flows from operating activities.
Negative cash flows from investing activities.
Positive cash flows from financing activities.
This pattern of cash flows most likely means that the company:
a.
b.
c.
d.
e.
26.
Is using cash generated from operations to buy long-term assets and to reduce its debt or
pay cash dividends.
Is using cash from operations and from the sale of capital assets to reduce its debt or pay
cash dividends.
Is using cash from operations and from borrowing or issuing shares to acquire capital
assets.
Is experiencing operating cash flow shortages and is repaying its debt or paying cash
dividends from cash generated from the sale of capital assets.
None of the above.
Wiggly Worm Company declared a 6% share dividend, when the market price of its common
share was $30 per share. Prior to the share dividend the company had 100,000 shares of common
shares outstanding with average issue price of $12 per share. The share dividend would result in
an increase in share capital of:
a.
b.
c.
d.
e.
$252,000.
$180,000.
$108,000.
$72,000.
None of the above
Using the following information for questions 27-28 (round all calculations to nearest dollar).
On July 1, 2020, Gamma Incorporation borrowed $800,000 from a credit union for a 5-year period at a
12% interest rate. The firm must make a fixed monthly loan payment of $17,678.
27.
What is the balance of loan payable at July 31, 2020?
a.
b.
c.
d.
e.
28.
$790,322 on debit.
$790,322 on credit.
$9,678 on debit.
$9,678 on credit.
None of the above
What is the balance of interest expense for the month of August 2020?
a.
b.
c.
d.
e.
$8,000 on debit.
$8,000 on credit.
$7,903 on debit.
$7,903 on credit.
None of the above
11
ACC 1100 Sample Final Exam
Ratio Definitions for Exam
Profitability Ratios
Gross profit margin
Profit margin
Return on assets (ROA)
Return on equity (ROE)
Basic earnings per share
Asset turnover
Price-earnings ratio
Dividend yield
Gross profit
Sales
Net income
Sales
Net income
Average total assets
Net income*
Average common shareholders’ equity
Net income*
Average number of common shares
Sales
Average total assets
Market price per share*
Basic earnings per share
Dividend per share
Market price per share
Liquidity Ratios
Current assets
Current liabilities
Sales*
Average accounts receivable
Cost of goods sold
Average inventory
Current ratio
Receivable turnover
Inventory turnover
Solvency Ratios
Debt to total assets
Times interest earned
Total liabilities
Total assets
Net income + Interest expense + Income tax expense
Interest expense
Average items are calculated as (beginning balance + ending balance) / 2.
*This is a simplified version, which is different from the textbook.
*Closing market price per share at end of the fiscal year.
*Assume all sales are credit sales.
12
ACC 1100 Sample Final Exam
QUESTION ONE
Question One Required 1 Solution:
Step 1) Determine the ending balance of each equity account:
Common shares:
1/1/21:
80,000 shares outstanding
3/31/21:
2,400 added outstanding shares from stock dividends
9/30/21:
(8,500) shares cancelled, each at $4.30
12/31/21: 73,900 shares outstanding
$
$
320,000
34,320
(36,550)
317,770
9/30/21: Ave. issuing cost
= ($320,000 + $34,320) / (80,000 x 103%)
= $354,320 / 82,400
= $4.30
Contributed surplus:
1/1/21:
9/30/21:
8,500 shares
12/31/21:
$
($2.6 - $4.30) x 8,500 shares
$
Retained earnings:
1/1/21: Beginning balance
2021 net earnings
Dividends declared ($34,320 + $50,000)
12/31/21: Ending balance
$
$
Accumulated other comprehensive income:
1/1/21: Beginning balance
Other comprehensive income
12/31/21: Ending balance
$
$
Step 2): Shareholders' Equity Section at 12/31/21:
Common shares, 73,900 shares issued and outstanding
Preferred shares, $2, 6,000 issued and outstanding
Contributed surplus -- repurchase of common shares
Retained earnings
Accumulated other comprehensive income
Total Shareholders’ Equity
Question One Required 2 Solution:
Preferred cash dividends: ($2 x 6,000)
Common cash dividends: ($50,000 - $12,000)
$
206,000
650,000
(84,320)
771,680
(12,000)
16,000
4,000
317,770
80,000
14,450
771,680
4,000
$ 1,187,900
$ 12,000
$ 38,000
13
14,450
14,450
ACC 1100 Sample Final Exam
QUESTION TWO
1.
Dr. Depreciation Expense
Cr. Accumulated Depreciation
420,000* 2/20 = 42,000
(420,000-42,000)*2/20=37800
37,800
37,800
2.
Dr. Machinery A (210,000+2,000)
Dr. Machinery B
Dr. Repair Expense
Cr. Cash (357,000-250,000)
Cr. Notes payable
212,000
140,000
5,000
107,000
250,000
3.
Depreciation rate per unit for Machine D = (280.000 – 12,000) / 100,000 = 2.68 per unit
Accumulated depreciation at September 30, 2011 = 2.68 x 9,000 units = 24,120
Net book value at September 30, 2011 = 280,000 – 24,120= 255,880
Loss on sale of equipment = 255,880-250,000 = 5,880
Dr. Depreciation Expense
Cr. Accumulated Depreciation
Dr. Cash
Dr. Accumulated Depreciation
Dr. Loss on Sale of Equipment
Cr. Equipment
24,120
24,120
250,000
24,120
5,880
280,000
QUESTION THREE
(a)
(b)
(c)
(d)
Dr. Investment ($80 × 800)
Cr. Cash
64,000
Dr. Cash ($0.25 × 800)
Cr. Dividend income
200
64,000
200
Dr. Unrealized loss on investment ({$80 - $75} × 800)
Cr. Investment
4,000
Dr. Cash ($82 × 800 × 400/800)
Cr. Gain on investment
Cr. Investment (64,000 – 4,000) × 400/800
32,800
14
4,000
2,800
30,000
ACC 1100 Sample Final Exam
QUESTION FOUR
(a)
Operating activities:
Net income
Adjustments to reconciled net income to cash:
Depreciation expense
Loss on sale of capital assets
Increase in accounts receivable
Decrease in merchandise inventory
Decrease in prepaid expense
Increase in accounts payable
Net cash provided by operating activities:
$46,750
$31,550
2,750
(21,800)
2,800
7,850
5,725
Investing activities:
Purchase of long-term investments
Sale of capital assets (36,900 – 32,050 – 2,750)
Purchase of new capital assets {108,450 – 100,250 +
31,550 + 36,900 –32,050}
Net cash used by investing activities
Financing activities:
Repayment of bonds
Issue of shares
Net cash used by financing activities
Net change in cash
Add: beginning cash balance
= Ending cash balance
28,875
$75,625
(5,250)
2,100
(44,600)
(47,750)
(22,225)
15,000
(7,225)
20,650
18,850
$39,500
(b)
Cash collected from customers
184,390 – (38,050 – 16,250)
162,590
Cash paid to suppliers
73,130 – (51,475 – 48,675) – (38,650 -32,925)
Cash paid for operating expense
17,705 – (9,350 -1,500)
Cash paid for income tax expense
Cash paid for interest expense
(64,605)
Net cash provided by operating activities
$75,625
(9,855)
(9,640)
(2,865)
15
ACC 1100 Sample Final Exam
QUESTION FIVE
1. d
11. d
2. c
12. d
3. c
13. d
4. b
14. a
5. b
15. a
6. c
16. b
7. d
17. d
8. d
18. b
9. a
19. b
10. b
20. d
21.
22.
23.
24.
25.
26.
27.
28.
c
d
a
b
c
b
b
c
Calculations
1. The value of ending inventory would consist entirely of the June 15 purchases under FIFO.
Ending inventory = [(80 + 160 +210) – (100 + 280)] × 30 = $2,100
2. Average cost per unit = (2,000 + 4,480 + 6,300)/(80 + 160 + 210) = $28.4
Cost of goods sold = (100 + 280) × $28.4 = $10,792
3. Average cost per unit (right before June 8) = (2,000 + 4,480)/(80 + 160) = $27
Cost of goods sold = 100 × $27 = $2,700
4. The value of ending inventory would consist entirely of the June 15 purchases under FIFO.
Cost of goods sold = goods available for sale – ending inventory
= (2,000 + 4,480 + 6,300) – (68 × 30) = S10,740
5. Average cost per unit (after June 8)=(2,000 + 4,480)/(80 + 160) = $27
Average cost per unit (after June 15)=[(80 + 160 - 100) × 27 + 6,300 ]/(80 + 160 -100 + 210) = $28.8
Ending inventory = [(80 + 160 +210) – (100 + 280)] × 28.8 = 2,016
7. $51,400 – (49,000 – 48,000 + 1,300) = $49,100
8. $30,000 - (4 years x 1,000 x $3) = $18,000 (preferred dividends for 2015, 2016, 2017
and 2018 must be paid before common dividends can be paid)
12. Total liabilities = $800,000 × 0.625 = $500,000;
Current liabilities = $300,000/2 = $150,000;
Long-term liabilities = $500,000 - $150,000 = $350,000
21. 2016 depreciation expense = 15,000 × (1/5 × 2) = $6,000;
2017 depreciation expense = (15,000 – 6,000) × 40% = $3,600
22. Annual depreciation expense = [(10 x 4,000) - (10 x 500)] ÷ 5 = 7,000
2018 depreciation expense = [40,000 - (2 x 7,000)] ÷ 2 = 13,000
24. $35,000 = Purchases – (24,000 – 7,000) – 9,000; Purchases = $61,000
26. 100,000 × 6% × $30 = $180,000
27. 800,000 – [17,678 – (800,000 × 12% × 1/12)] = $790,322
28. {800,000 – [17,678 – (800,000 × 12% × 1/12)]} × 12% × 1/12 = $7,903
16