AFM101 Final Fall 2010.pdf

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Accounting & Financial Management
AFM 101
Donna Psutka

Final Exam Fall 2010 Student Name Student ID Number Course Abbreviation and Number AFM 101 Course Title Introduction to Financial Accounting Section(s) 001, 002, 003, 004, 005, 006 Instructor(s) Shari Mann, Donna Psutka, Mindy Wolfe Date of Exam December 15, 2010 Time Period Start time: 9:00 End time: 11:30 Number of Exam Pages 28 (including this cover sheet) Additional Materials Allowed Cordless calculators may be used. The calculator must be standalone with no communication or data storage features. Both the examination paper and multiple choice card must be submitted. Marking Scheme: Question Score Question Score 1 (18 Marks) 6 (10 Marks) 2 (12 Marks) 7 (15 Marks) 3 (7 Marks) 8 (7 Marks) 4 (9 Marks) 9 (30 Marks) 5 (17 Marks) Total Score: 125 Marks Question 1 (18 marks) Answer the following independent questions: A) (4 Marks) Sun Microsystems, Inc. recorded credit sales of $11,575,000 for the fiscal year ending on December 31, 2009. In addition, the company allowed returns of $28,000 during the year that were originally purchased on credit. The accounts receivable balance on December 31, 2008 was $2,258,000 and the balance in the allowance for doubtful accounts was a $71,000 credit. During 2009, management wrote off $74,250 of accounts receivable as uncollectible. A review of prior years indicates that approximately two percent of net credit sales will not be collected. Prepare the adjusting entry required at December 31, 2009, or explain why no entry is required. B) (4 Marks) Abebooks uses the aging method to estimate bad debt expense. The accountant prepared the following aging for the accounts receivable at year end: Amount Bad Debt Rate Not yet due $ 689,000 1% 1-45 days past due 309,000 4% 46-120 days past due 98,000 12% More than 120 days past due 46,000 45% Total 1,142,000 The current balance in the Allowance for Doubtful Accounts is $1,750 (credit). Determine the amount and prepare the journal entry to record the bad debt expense for the year. C) (4 Marks) Open Text gathered information about ending inventory in order to prepare their financial statements for the year ended December 31, 2010. The company uses the FIFO method to determine inventory cost. Determine the inventory value that should be reported on the Balance Sheet for the year ended December 31, 2010 for Freeland Corporation. Item Quantity on hand Unit cost when Net Realizable Inventory Value acquired Value at Dec. 31 5900ESR 1,127 $354.00 $325 7200CPE 2,785 $289.00 $550 1004ASR 1,789 $329.00 $300 Total Inventory on Balance Sheet = D) (6 Marks) Roots purchased a piece of equipment on January 1, 2009, at a cost of $765,000. The equipment has an estimated useful life of 10 years and the company expects to use the machine for 33,000 hours. The salvage value is expected to be $50,000. Actual equipment use was 1,750 hours in 2009 and 3,500 in 2010. Calculate the amortization expense for 2010 and accumulated amortization at December 31, 2010, under each of the following methods. Amortization Expense for Accumulated Amortization at 2010 December 31, 2010 Straight-line method Units of production method Double declining balance method Question 2 (12 marks) Answer the following independent questions: A) (8 Marks) The records for Gehl Company show the following inventory transactions for the month of October 2008: Date Transactions Number of Units Unit Cost Selling Price Oct. 1 Beginning inventory 400 $30 Oct. 5 Sale 100 $50 Oct. 10 Purchase 300 $32 Oct. 14 Purchase 200 $33 Oct. 16 Sale 500 $50 Oct. 25 Sale 100 $52 The company is able to track each unit since it has a unique serial number. As a result, Gehl Company knows that 100 units of the ending inventory came from the October 10 purchase and the remaining units came from the beginning inventory. Gehl uses a periodic inventory system. Required: Complete the following table: Inventory Method Number of FIFO Weighted Specific Units Average Identification Cost of Goods Sold Ending Inventory
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