Sample Exam 1

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University of Idaho *

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315

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Accounting

Date

Apr 3, 2024

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pdf

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Uploaded by ProfessorMaskChinchilla21

1 By signing below, I affirm that I have not and will not provide or accept information about the contents of this exam to or from another student. I understand that if I engage in any form of academic dishonesty, I will receive a grade of F for this course and notation on my transcript. Name ____________________________ Signature ___________________________ Student ID# __________________________ ACCT 315, EXAM 1 Fall 2022 1. There are 8 pages in this exam including this cover sheet. Make sure you have all 8 pages. 2. This is 100 point exam and you have 120 minutes to complete it. Budget your time to maximize your points. 3. Answer all questions and present your work in an orderly fashion. 4. This exam is closed book. 5. You may use a calculator, but do not share calculators. 6. Do not communicate with any other student during the exam. 7. I reserve the right to decrease your exam by 5 points for every minute that you are late in returning the exam. Multiple Choice Questions (36 points) Comprehensive Problems (64 points) Total Points (100 points)

2 Part 1. Multiple Choice Questions (36 points, please circle your answers) 1. Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control a company's operations. A) True B) False 2. Users of financial accounting statements have both coinciding and conflicting needs for information of various types. A) True B) False 3. Which of the following will be of interest to investors in decision ‐ making? A) Assessing the company's ability to generate net cash inflows. B) Assessing management's ability to protect and enhance the capital providers' investments. C) Both assessing the company's ability to generate net cash inflows and assessing management's ability to protect and enhance the capital provider's investments. D) Assessing the company's ability to collect debts. 4. Relevance and faithful representation are the two fundamental qualities that make accounting information useful for decision making. A) True B) False 5. The objective of general ‐ purpose financial reporting is to provide financial information about a reporting entity to which of the following A) potential equity investors. B) potential lenders. C) present investors. D) All of these answers are correct. 6. What is meant by consistency when discussing financial accounting information? A) Information presented by a company applies the same accounting treatment to similar events, from period to period. B) Information is timely. C) Information is classified, characterized, and presented clearly and concisely. D) Information is verifiable. 7. Which of the following is an ingredient of faithful representation? A) Predictive value B) Materiality

3 C) Neutrality D) Confirmatory value 8. Nominal (temporary) accounts are revenue, expense, and dividend accounts and are periodically closed. A) True B) False 9. In general, debits refer to increases in account balances, and credits refer to decreases. A) True B) False 10. Which of the following is a real (permanent) account? A) Goodwill B) Service Revenue C) Accounts Receivable D) Both Goodwill and Accounts Receivable 11. Stockholders' equity is not affected by all A) cash receipts. B) dividends. C) revenues. D) expenses. 12. Which of the following statements is true about the accrual basis of accounting? A) The timing of cash receipts and disbursements is emphasized. B) A minimal amount of record keeping is required in accrual basis accounting compared to cash basis. C) This method is used less frequently by businesses than the cash method of accounting. D) Revenues are recognized in the period the performance obligation is satisfied, regardless of the time period the cash is received. 13. Companies should report the results of operations of a business component that will be disposed of separately from continuing operations. A) True B) False 14. The income statement reveals A) resources and equities of a firm at a point in time. B) resources and equities of a firm for a period of time. C) net earnings (net income) of a firm at a point in time. D) net earnings (net income) of a firm for a period of time.

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4 15. The balance sheet omits many items that are of financial value to the business but cannot be recorded objectively. A) True B) False 16. Collection of a loan is reported as an investing activity in the statement of cash flows. A) True B) False 17. Which of the following is a limitation of the balance sheet? A) Many items that are of financial value are omitted. B) Judgments and estimates are used. C) Current fair value is not always reported. D) All of these answer choices are correct. 18. The statement of cash flows provides answers to all of the following questions except A) where did the cash come from during the period? B) what was the cash used for during the period? C) what is the impact of inflation on the cash balance at the end of the year? D) what was the change in the cash balance during the period? Part 3. Comprehensive Problems (64 points) Problem 1 (14 points) Vandal Solutions Inc. was incorporated on January 1, 2022. The first ‐ year balance sheet and income statement information are provided below: 31 ‐ Dec ‐ 22 1 ‐ Jan ‐ 22 Assets Cash 47,500 0 Accounts Receivable 61,250 0 Land 16,250 0 Total 125,000 Liab and Shareholder Equity Accounts Payable 15,000 0 Common Stock 81,250 0 Retained earnings 28,750 0 Total 125,000 0

5 Revenues 206,250 Operation Expenses 169,125 Income before income tax 37,125 Income tax 8,250 Net income 28,875 (a) How much cash did Vandal Solutions receive from customers in 2022 (7 points)? A/R 0 206,250 145,000 61,250 Cash received: $145,000. (b) How much cash did Vandal Solutions pay for operating expense (7 points)? A/P 0 154,125 169,125 15,000 Cash paid for operation expense: $ 154, 125. Problem 2 (50 points) Mason Advertising was founded in January 2018. Presented below are adjusted and unadjusted trial balances as of December 31, 2021. MASON ADVERTISING Trial Balance December 31, 2021 Unadjusted Adjusted DR CR DR CR Cash $ 38,500 $ 38,500 Accounts Receivable 70,000 82,250 Supplies 29,400 10,500 Prepaid Insurance 11,725 8,750 Equipment 210,000 210,000 Accumulated Depreciation—Equipment $ 98,000 $115,500 Accounts Payable 17,500 17,500 Interest Payable ‐ 525

6 Notes Payable 17,500 17,500 Unearned Service Revenue 24,500 19,600 Salaries and Wages Payable ‐ 4,550 Common Stock 35,000 35,000 Retained Earnings 12,250 12,250 Service Revenue 205,100 222,250 Salaries and Wages Expense 35,000 39,550 Insurance Expense 2,975 Interest Expense 1,225 1,750 Depreciation Expense 17,500 Supplies Expense 18,900 Rent Expense 14,000 14,000 $ 409,850 $ 409,850 $ 444,675 $444,675 (a) Journalize the annual adjusting entries that were made (14 points). Debit Credit Dec 31 Accounts Receivable 12,250 Service Revenue 12,250 Dec 31 Unearned Service Revenue 4,900 Service Revenue 4,900 Dec 31 Supplies Expense 18,900 Supplies 18,900 Dec 31 Depreciation Expense 17,500 Accumulated Depreciation ‐ Equipment 17,500 Dec 31 Interest Expense 525 Interest Payable 525 Dec 31 Insurance Expense 2,975 Prepaid Insurance 2,975 Dec 31 Salaries and Wages Expense 4,550 Salaries and Wages Payable 4,550 (b) Prepare the following financial statements for December 31, 2021 (36 points).  an income statement (16 points)  a statement of retained earnings (4points)  and an unclassified balance sheet (16 points)

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7 Mason Advertising Income Statement For the Year Ended December 31, 2021 Revenues Service revenue $ 222,250 (2pts) Expenses Salaries and wages expense $ 39,550 (2pts) Supplies expense 18,900 (2pts) Depreciation expense 17,500 (2pts) Rent expense 14,000 (2pts) Insurance expense 2,975 (2pts) Interest expense 1,750 (2pts) Total expenses 94,675 Net income $ 127,575 (2pts) Mason Advertising Statement of Retained Earnings For the Year Ended December 31, 2021 Retained earnings, January 1 $ 12,250 (1pt) Add: Net income 127,575 (1pt) Retained earnings, December 31 $ 139,825 (2pts)

8 Mason Advertising Balance Sheet December 31, 2021 Assets Cash $ 38,500 (1pt) Accounts receivable 82,250 (1pt) Supplies 10,500 (1pt) Prepaid insurance 8,750 (1pt) Equipment $ 210,000 (.5pt) Less: Accumulated depreciation—equipment 115,500 (.5pt) 94,500 (1pt) Total assets $ 234,500 (.5pt) Liabilities and Stockholders’ Equity Liabilities Notes payable $ 17,500 (1pt) Accounts payable 17,500 (1pt) Unearned service revenue 19,600 (1pt) Salaries and wages payable 4,550 (1pt) Interest payable 525 (1pt) Total liabilities $ 59,675 (1pt) Stockholders’ equity Common stock 35,000 (1pt) Retained earnings 139,825 (1pt) 174,825 (1pt) Total liabilities and stockholders’ equity $ 234,500 (.5pt)