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COMM 217 MIDTERM 2022 CONCORDIA UNIVERSITY JMSB, Exams of Financial Accounting

Concordia UniversityFinancial Accounting

COMM 217 MIDTERM 2022 CONCORDIA UNIVERSITY JMSB

Typology: Exams

2021/2022

Available from 10/16/2024

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CONCORDIA UNIVERSITY FINANCIAL ACCOUNTING
DEPARTMENT OF ACCOUNTANCY COMM 217 ALL SECTIONS
MID-TERM EXAM (REGULAR) - DURATION: 2.5 HOURS
WINTER 2022
Instructions (very important):
1. All questions must be answered in a word document (.doc or .docx). You may answer the
questions in any order you prefer, make sure to identify the question you are answering. You
should name the file as follows: Familyname_Firstname_StudentID#. Answers to multiple-
choice questions are submitted automatically on COLE.
2. Write your name and Student ID on top of the first page of the document carrying your
answers.
3. If an answer to a question requires calculations, show the details to earn the allocated marks,
except for multiple-choice questions which are marked as correct or incorrect, regardless of
showing detailed calculations. Omit narrative explanations for journal entries.
4. Abbreviating any names (for example: account names, headings, subheadings, totals,
subtotals, etc.) may be subject to mark deduction.
5. This is a closed book examination. However, a silent hand-held (not graphical or
programmable) calculator and one standard language or digital dictionary are permitted.
GOOD LUCK!
Exam Breakdown:
Question
Topic
Total
Marks
A
Preparation of Statement of Earnings
12
B
Effect of Adjustments on Specific Accounts
23
C
Accounting for Inventory and Cost of Sales
8
D
Multiple-Choice Questions
42
Total
85
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Download COMM 217 MIDTERM 2022 CONCORDIA UNIVERSITY JMSB and more Exams Financial Accounting in PDF only on Docsity!

CONCORDIA UNIVERSITY FINANCIAL ACCOUNTING

DEPARTMENT OF ACCOUNTANCY COMM 217 ALL SECTIONS

MID-TERM EXAM (REGULAR) - DURATION: 2.5 HOURS

WINTER 2022

Instructions (very important) :

  1. All questions must be answered in a word document (.doc or .docx). You may answer the questions in any order you prefer, make sure to identify the question you are answering. You should name the file as follows: Familyname_Firstname_StudentID#. Answers to multiple- choice questions are submitted automatically on COLE.
  2. Write your name and Student ID on top of the first page of the document carrying your answers.
  3. If an answer to a question requires calculations, show the details to earn the allocated marks, except for multiple-choice questions which are marked as correct or incorrect, regardless of showing detailed calculations. Omit narrative explanations for journal entries.
  4. Abbreviating any names (for example: account names, headings, subheadings, totals, subtotals, etc.) may be subject to mark deduction.
  5. This is a closed book examination. However, a silent hand-held (not graphical or programmable) calculator and one standard language or digital dictionary are permitted. GOOD LUCK! Exam Breakdown: Question Topic Total Marks A Preparation of Statement of Earnings 12 B Effect of Adjustments on Specific Accounts 23 C Accounting for Inventory and Cost of Sales 8 D Multiple-Choice Questions 42 Total 85

Question A – Preparation of Financial Statements ( 12 marks; 20 minutes) Papa John's International Inc. operates and franchises pizza delivery and carryout restaurants worldwide. The following is a condensed alphabetical list of accounts and amounts reported in its financial statements for 2021. The accounts have normal debit or credit balances and their balances are rounded to the nearest million dollars. The company’s fiscal year ends on December 31. Account Title Balance Accounts payable……………………. $ 37 Accounts receivable…………………. 109 Accrued liabilities ………………….. 175 Allowance for doubtful accounts……. 7 Bad debt expense …………………… 11 Cash and equivalents ……………….. 107 Credit card discounts ……………….. 23 Cost of sales ………………………… 1, Deferred revenue (current) …………. 33 Depreciation expense………………... 50 General and administrative expenses .. 204 Goodwill ……………………………. 81 Income tax expense ………………… 15 Income tax payable …………………. 10 Interest expense …………………….. 17 Inventories ………………………….. 30 Investment income…………………... 2 Long-term debt………………… …… 166 Other non-current assets ……………. 120 Other non-current liabilities…………. 112 Prepaid expenses…………………….. 43 Property, plant, and equipment, net …. 355 Sales revenue ………………………. 1, Shareholders’ equity ………………… 232 Short-term borrowings ……………… 47 Required:

  1. Prepare a multiple-step (classified) statement of earnings for the year ended December 31. ( 9 marks)
  2. Compute the values of two ratios that are based on information reported in the statement of earnings that you prepared and interpret the results. (3 marks)

f) The company determined at December 31, 2021 that an account receivable of $2,500 must be written off as uncollectible because the customer that owed this amount declared bankruptcy. In addition, analysis of the remaining accounts receivable resulted in an amount of $7,000 that is potentially uncollectible in the future. g) Salaries of $2,000 were earned by employees in the last two days of December 2021 but not yet paid. The employees were paid on the next pay date, January 1 3, 2022. Required:

  1. Identify the accounts that are affected by each of the events a) through g) above and the amount of the adjustment. Use the following format to provide your answers. The answer to transaction a) is provided as an example. (1 3 marks) Transaction Account debited Account credited Amount a) Depreciation expense Accumulated depreciation 1 5,60 0 b) Etc.
  2. Prepare in good form the assets section only of a classified statement of financial position as at December 31, 2021. ( 10 marks)

Question C: Accounting for Inventory and Cost of Sales ( 8 marks; 15 minutes) The records of Storex Inc. showed the following information for one of its merchandise items for January 2022. January 1, 2022 Inventory, measured at FIFO = $228 (19 units x $12 per unit) Inventory, measured at weighted average cost = $190 (19 units x $10 per unit) Transactions during January 2022 Units Unit Cost Total Cost Purchase, January 9 25 15 $ Purchase, January 20 50 16 800 Sale, January 11 (at $38 per unit) 40 Sale, January 27 (at $39 per unit) 28 Storex Inc. uses a perpetual inventory system. Required: (Round your calculations to two decimal places)

  1. Compute the cost of ending inventory using the FIFO method. ( 2 marks)
  2. Compute the cost of the units sold on January 27 using the weighted average cost method. ( 4 marks)
  3. Compute the inventory turnover ratio under the weighted-average cost method and explain what this ratio measures. ( 2 marks) Question D: Multiple-Choice Questions: ( 42 marks; 21 questions, 2 marks each; 75 minutes) For each of the following multiple-choice questions, choose the letter that corresponds to the best answer. Your answers are saved automatically on COLE. You need not submit detailed calculations.
  4. Which of the following is not considered a qualitative characteristic of accounting information? A. predictive value B. neutrality C. accuracy D. faithful representation
  1. Selected accounts are shown below. Accounts payable Accounts receivable Cost of sales Dividends declared Inventory Retained earnings Sales revenue Wages expense Which of the above accounts are temporary accounts? A. Cost of sales, Inventory, Retained earnings B. Cost of sales, Inventory, Accounts payable, Accounts receivable C. Sales, Cost of sales, Wages expense, Dividends declared, Accounts payable, Accounts receivable. D. Sales, Cost of sales, Wages expense, Dividends declared E. Sales, Wages expense, Dividends declared
  2. The Deena Company’s records were partially destroyed in a fire at the end of its fiscal year. The company knows that 60 percent of all sales made during the year were on account. Furthermore, it was able to determine that accounts receivable has a balance of $46,000 at the beginning of the year and $55,000 at the end of the year. Cash collections from credit customers were $47 7 ,000 during the year based on the deposits made in the company’s account with the bank. What was the amount of sales revenue for the year? A. $810,0 00 B. $46 8 ,000 C. $48 6 ,000 D. $780,0 00
  3. Entries that transfer the balances of revenues, expenses and dividends declared accounts to the retained earnings account are called: A. opening entries. B. adjusting entries. C. closing entries. D. correcting entries. E. none of the other answers.
  4. The original acquisition cost of inventory that is sold to customers on account during the reporting period is called: A. sales revenue. B. accounts receivable. C. cost of sales. D. accounts payable. E. none of the other answers.
  1. The concept which requires the recording of expenses in the same time period as the related revenues is called: A. the matching concept. B. the entity concept. C. the periodicity concept. D. the revenue recognition concept. E. none of the other answers.
  2. Which of the following statements is true? A. Shareholders cannot also be creditors of a corporation in which they own shares. B. Shareholders become temporary creditors of a corporation (in which they own shares) when that corporation declares a dividend on those shares. C. Shareholders become temporary creditors of a corporation (in which they own shares) when they acquire shares of that corporation. D. Shareholders become temporary creditors of a corporation (in which they own shares) when that corporation borrows money from a financial institution.
  3. The Longview Company sold inventory on account for $400. The cost of the inventory sold was $300. A week later, the goods were returned and a full credit was given to the customer. The journal entry or entries made by The Longview Company to record the return of the goods sold should include: A. A debit to Cash for $400. B. A debit to Sales for $ 400 and a debit to Inventory for $ 300. C. A debit to Sales Discounts for $400 and a credit to Accounts Receivable for $400. D. A debit to Sales Returns and Allowances for $400 and a debit to Inventory for $ 300. E. A debit to Sales Returns and Allowances for $400 and a debit to Cost of Sales for $ 300.
  4. The account Allowance for Doubtful Accounts is considered A. an accounts receivable contra account. B. a current liability. C. a contra revenue account. D. a selling expense account.
  5. Under which cost flow assumption would the statement of earnings normally report outdated cost of sales? A. Weighted-average cost B. Specific identification C. FIFO D. None of the other answers
  1. The difference between gross sales and net sales may include: A. purchase returns B. sales returns C. purchase discounts D. cost of sales E. bad debt expense
  2. Which of the following statements appropriately describes attributes of perpetual and periodic inventory systems? A. Historically, a perpetual inventory system is less costly to maintain then a periodic one. B. Inventory shrinkage is just as easily determined under both the perpetual and periodic inventory system. C. The perpetual inventory system computes cost of sales as a residual amount. D. If a company has a December 31 year end, and operated under the periodic inventory system, it is possible that the balance in the inventory account on December 29 would remain unchanged from its January 1 balance, even though numerous sales have occurred during the year. E. Cost of sales can be determined at any time by both the perpetual and periodic inventory system without the need of a physical inventory count.
  3. Which of the following statements is false? A. All else equal, the higher the accounts receivable turnover, the better. B. All else equal, the lower the days to collect accounts receivable, the better. C. The accounts receivable turnover can vary significantly among industries. D. One can use accounts receivable turnover to calculate the days to collect accounts receivable. E. As a company grows, management expects and wants the accounts receivable turnover to decrease.