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Brock University Mid-Term Examination: Fall 2012 Course: ACTG 1P91, Sec. 04, 06, 08 Date of Examination: October 20, 2012 Time of Examination: 10:00-12:00 Number of Pages: 19 Number of Students: 210 Number of Hours: 2 Instructors: N. Chasse, G. Skrubbeltrang,

PLEASE NOTE THE FOLLOWING IMPORTANT INSTRUCTIONS No examination aids other than those specified are permitted. Only non-programmable calculators are allowed. Use or possession of unauthorized materials will automatically result in a grade of zero for this examination. Question 1 Multiple Choice 2 Income and retained earnings 3. Accounting Equation 4. Reporting Operating Results 5. Adjustments 6. Cash Control Time Allotted (minutes) 30 15 20 13 27 15 Maximum Marks 25 10 15 10 20 10 Marks Awarded

Total

120

90

NAME (Please print) ____________________ STUDENT ID NO.______________________ Section Number (please circle) : 04: Wed and Fri G. Skrubbeltrang 06: Thursday G. Skrubbeltrang 08: Mon and Wed N. Chasse

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Question 1 Multiple Choice (25 marks) Choose the one best answer for each of the following questions. Record your answers in the following table. ONLY THE TABLE WILL BE MARKED.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

C B C C D D D B C A C C A B D

B D D A D B B C

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Question 2 (10 marks) The following information pertains to Green Thumb, Inc. for the fiscal year ended December 31, 2011. Wages Expense Advertising and Promotion Expenses Interest Expense Accumulated Amortization Cash Other Expenses Sales Revenue Other Selling and Administrative Expenses 724,800 262,500 43,900 120,000 152,800 122,400 1,865,300 350,800

Required: a) Calculate net income for the year ended December 31, 2011. Sales Revenue 1,865,300 Less Wages Expense 724,800 Advertising and Promotion Expenses 262,500 Interest Expense 43,900 Other Expenses 122,400 Other Selling and Administrative Expenses 350,800 mark for each item (3 marks in total)

Net Income 360,900 1 mark b) Assuming the company had retained earnings of $162,000 as of January 1, 2011 and paid out $46,000 in dividends during the year, prepare its statement of retained earnings. Green Thumb Inc Statement of Retained Earnings 1 mark for company name and statement identfication December 31, 2011 1 mark for proper date Beginning R/E Add: Net Income Deduct: Dividends Ending R/E 162,000 1 mark 360,900 1 mark (46,000) 1 mark 476,900 1 mark

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Question 3 (15 marks)

Black Keys Incorporated, a company that specializes in repairing and tuning classical instruments, was incorporated as a private company on August 1, 2012. The companys accounts included the following at August 31, 2012: Accounts payable Building Cash Contributed capital Equipment $30,000 84,000 15,000 50,000 25,000 Land Equipment Retained Earnings Supplies $45,000 20,000 112,800 3,800

During the month of September, the company had the following activities: September 1: Dan Auerbach and Patrick Carney, co-founders and co-owners of the company each contributed $20,000 in cash and received 50 common shares of Black Keys Incorporated. September 5: Purchased and received $5,000 in supplies. The invoice is payable in 30 days. September 10: Received $8,000 cash from the Black Submarine Academy of Music as advance payment to provide services and repairs to all their classical instruments. The contract is for an eight month period and will begin in October, 2012. September 12: Paid $7,000 to reduce the amount owing to suppliers on account. September 15: Paid salaries, $4,500. September 22: Called in a plumber to fix the broken toilet. Paid $450 bill. September 30: Billed customers $7,700 for services performed during the month. One quarter was received in cash and the balance was billed on account.

Required: Using the table provided on the following page, show how each transaction for September affects the accounting equation. For each component of the equation, indicate the amount, if it increases (+) versus decreases (-); where is no effect, leave the space blank.

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Question 3 (continued) Shareholders Equity +/+/+/+/+/+/+/-

Date SEP 1 SEP 5 SEP 10 SEP 12 SEP 15 SEP 22 SEP 30

ASSETS

= +/+/+/+/+/+/+/-

Liabilities

+ +/+/+/+/+/+/+/-

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Question 4 (10 marks) The following is a series of accounts for the Sprinkler Blowout Company, listed alphabetically and numbered for identification. Following the accounts is a series of transactions. For each transaction, indicate the account(s) that should be debited and credited by entering the appropriate account number(s) to the right of each transaction. If no journal entry is needed, write none after the transaction. Acct. # 1 2 3 4 5 6 7 8 Account Title Accounts payable Accounts receivable Advertising expense Building Cash Contributed capital Income taxes payable Insurance expense Acct. # 9 10 11 12 13 14 15 16 Account Title Land Note payable Prepaid insurance Service revenue Supplies Supplies expense Wages expense Wages payable Debit Credit

Transactions A. Performed services for customers this month for cash. B. Purchased on credit but did not use supplies this month. C. Purchased a building, paying part cash and signing a note for the rest. D. Paid insurance premium for coverage beginning next month. E. Booked blowouts to be done next month; didn't collect cash.

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Question 5 (20 marks) ABC Company's unadjusted trial balance includes the following account balances: UNADJUSTED TRIAL BALANCE Account Cash Accounts receivable Interest receivable Supplies Prepaid insurance Notes receivable Property and equipment Accumulated amortization Accounts payable Accrued liabilities Unearned revenue Notes payable Contributed capital Retained earnings Sales revenue Interest revenue Cost of service expense Supplies expense Amortization expense Wage expense Rent expense Insurance expense Totals Debit $ 68,900 116,300 1,300 138,600 8,700 50,000 277,800 Credit

$ 64,500 104,100 21,600 9,200 87,400 216,100 143,500 40,500 21,900 26,400 0 0 3,000 17,800 0 $708,800 $708,800

The following data are available to determine adjusting entries: A) $4,350 of prepaid insurance expired during the period. B) The company estimates amortization expense of $8,150 for the period. C) A count showed $85,700 of supplies on hand. D) Interest earned and receivable on the outstanding notes receivable is $260 for the period. Required: Prepare the adjusting journal entries that should be recorded in the table on the following page. Then, prepare an adjusted trial balance. (A blank page follows to record your answer.)

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Question 5 [This page left blank intentionally for journal entries] ID A ACCOUNT INSURANCE EXPENSE PREPAID INSURANCE DEBIT 4,350 4,350 CREDIT

AMORTIZATION EXPENSE ACCUMULATED AMORTIZATION

8,150 8,150

SUPPLIES EXPENSE SUPPLIES

52,900 52,900

INTEREST RECEIVABLE INTEREST REVENUE

260 260

1 mark for each line 8 marks in total

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Question 5 [This page left blank intentionally for Trial Balance]

Account Cash Accounts receivable Interest receivable Supplies Prepaid insurance Notes receivable Property and equipment Accumulated amortization Accounts payable Accrued liabilities Unearned revenue Notes payable Contributed capital Retained earnings Sales revenue Interest revenue Cost of service expense Supplies expense Amortization expense Wage expense Rent expense Insurance expense Totals mark for each line item (account and balance) 1 mark for proper totals that balance

ADJUSTED TRIAL BALANCE Debit Credit $ 68,900 116,300 1,560 85,700 4,350 50,000 277,800 $ 72,650 104,100 21,600 9,200 87,400 216,100 143,500 40,500 22,160 26,400 52,900 8,150 3,000 17,800 4,350 $717,210 $717,210

12 marks in total

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Question 6 (10 marks) On September 30, 2012 the Spooky Costume Companys general ledger reported a balance in the cash account of $12,125.42. The balance as of September 30, 2012 in the bank statement was $9,547.21. After reviewing the bank statement against the company records, the accounting clerk determined the following information The September 30th deposit of $6,972.89 does not appear on the September bank statement; it was posted by the bank on October 1st. The bank collected a note receivable for Spooky Costume for $2,000. Interest earned on the account totaled $305.77 Outstanding cheques totaled $4,815.68 Bank service charges for September were $75.00. A cheque from a customer, M. Myers, totaling $2,651.77 was returned marked NSF

Required: Prepare the bank reconciliation for Spook Costume Company at September 30, 2012.