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									    CAPITAL UNIVERSITY OF ECONOMICS AND BUSINESS
      EXAMINGATION OF ACCOUNTING (BACHELOR DEGREE 01)

                       SCHOOL OF ACCOUNTING
   Date:                Class:                Name                    Marks:

I. Matching (10 marks):
Listed below are technical terms in accounting.
a. Ledger                                 f. Perpetual inventory system
b. Depreciation                           g. Transferability of ownership
c. Interim financial statements           h. Operational audit
d. Adjusting entries                      i. Consistency
e. Cost of goods sold                     j. Percentage-of-completion method
  Each of the following statements may describe one of these technical terms.
  For each statement, indicate the term described.

1. An investigation conducted for the purpose of evaluating the efficiency and
    effectiveness of a department or other subunit within an organization.
2. The cost to a merchandising company of the goods which it has sold to its
    customers during an accounting period.
3. An assumption that once a particular accounting method is adopted, it will
    not be changed from period to period
4. Entries made at the end of the period to achieve the goals of accrual
    accounting by recording revenue when it is earned and by recording expenses
    when the related good and services are used.
5. An accounting method used for long-term construction projects which
    recognizes revenue and profits in proportion to the work completed, based on
    an estimate of the portion of the project completed each accounting period.
6. An advantage of the corporate form of organization which explains the
    existence of the “stock market.”
7. The accounting record from which a trial balance is prepared.
8. Financial statements prepared for periods of less than one year (includes
    monthly and quarterly statements).
9. A system of accounting for merchandising transactions in which the
    Inventory and Cost of Goods sold accounts are always kept up-to-date.
10. The systematic allocation of the cost of long-lived asset, such as building or
    equipment, to expense over the useful life of the asset.

II. True and False (10 Marks)
1. Limited partners do not take an active role in the daily management of a
    partnership.
2. In accordance with realization principle, a construction company engaged in
    a three-month project recognizes no profit until the project has completed
    under that completed-construct method.
3. The concept of materiality requires that financial statements are accurate to
    the nearest dollar, but need not show cents.
4. Sell accounts receivable to a factor can help a company to increase its
    accounts receivable turnover.
5. Increasing net sales is enough to insure incasing profitability.
6. When a business is operating at a loss, the journal entry to close the Income
    Summary account will consist of a debit to that account and a credit to the
    owner’s capital account.
7. The dollar totals on the two sides of the balance sheet are always equal
    because these tow sides are merely two views of the same business property.
8. In comparison with a manual accounting system, a computer-based system
    should reduce greatly the need for internal control.
9. It is the concept of ethical conduct that prohibits a professional accountant
    from resolving issues based upon professional judgment.
10. Posting is the process of transferring debit and credit changes in account
    balances from the ledger to the journal.

III. Translate the following sentence into Chinese (30 marks)

1. Goodwill is the present value of future earnings in excess of a normal return
on net identifiable assets. It stems from such factors as a good reputation, loyal
customers, and superior management. Any business that has the ability to earn
significantly more than a normal rate of return actually has goodwill. But good
will is recorded in the accounts only if it is purchased by acquiring another
business at a price higher than the fair market value of its net identifiable assets.
Goodwill, like all intangible assets, should be amortized to expense over their
useful economic lives.
2. Another example of where a lease can usually be classified as a finance lease
occurs when the lease term is for a major part of the property’s economic life.
Standard-setters in several countries (for example, the United States and
Australia) have quantified this as being when the lease term is equal to or greater
than 75 percent of the remaining economic life of the leased property. “Lease
term” and “economic life” are defined in paragraph 3 of IAS 17. The economic
life relates to the estimated remaining life the leased property by one or more
users with no dependence on the lease term. The lease term means the period of
the lease.
IV. Transactions (30 marks)
1. Six events pertaining to financial assets are described below.
   a. Invested idle cash in marketable securities.
   b. Collected an account receivable.
   c. Sold marketable securities at a loss (proceeds from the sale were equal to the
   current market value reflected in the last balance sheet).
   d. Determined a particular account receivable to be uncollectable and wrote it
  off against the allowance for doubtful accounts,
  e. Received interest earned on an investment in marketable securities
  (company policy is to recognize interest as revenue when received).
  f. Made a “mark-to-market” adjustment increasing the balance in the
  Marketable Securities account to reflect a rise in the market value of securities
  owned.
  Indicate the effects of each transaction or adjusting entry upon the financial
  measurements in the four column headings listed below. Use the code letters, I
  for increasing, D for decrease, and NE for no effect.
2. H Company uses a periodic inventory system. The company’s records show the
beginning inventory of product no. T12 on January 1 and the purchase of this item
during the current year to be as follows:
 Jan. 1     Beginning inventory          900 units @ $10.00         9,000
 Feb.23     Purchase                   1,200 units @ $11.00       13,200
 Apr.20     Purchase                   3,000 units @ $11.20       33,600
 May.4      Purchase                   4,000 units @ $11.60       46,400
 Nov.30     Purchase                     900 units @ $13.00       11,700
            Total                      1,000 units              $113,900

A physical count indicates 1,600 units in inventory at year-end.
Instructions:
a. Determine the cost of the ending inventory, based upon each of the following
methods of inventory valuation.
(1) Average cost
(2) FIFO
(3) LIFO
b. Prepare an entry to record 5 units inventory loss shrinkage under the average
cost assumption.

3. The following transactions relating to notes payable were completed by Desktop
Graphics during the three months ended June 30.
Apr. 1 Bought office equipment for use in the business from Stylecraft, Inc., for
$39,000, making a $5,400 cash down payment and issuing a 1-year, 16% note
payable for the balance.
Apr. 16 Paid $15,000 cash and issued a 90-day, 8%, $27,000 note to Hall company
in settlement of open account payable in the amount of $42,000.
Apr. 25 Purchased office equipment from ADM Company for $52,200, issuing a
60-day, 9% note payable in settlement.
May 11 Borrowed $216,000 from Manufacturers Bank, issuing a 90-day, 17% note
payable as evidence of indebtedness.
June 15 Purchased merchandise on account from Texas Company, $54,000. ( The
company uses a perpetual inventory system.)
June 18 Issued a 60-day note bearing interest at 9% in settlement of the account
payable to Texas Company.
June 24 Paid the 60-day, 9% note due to ADM Company, which matured today.
a. Prepare journal entries (in general journal form) to record the listed
transactions.
b. Prepare adjusting entries to record the interest expense on notes payable
   through June 30. Assume adjusting entries are made at the end of each quarter;
   prepare one adjusting entry to record the accrued interest payable on the notes.
c. Compute the current liability for the quarter ended in June 30.

V. (10 marks)
Environmental Services is a weather forecasting service which provides
information to growers and dealers in perishable commodities. Its ledger account
balances at November 30 are as shown in the following list.

Accounts payable ...............$6,810          Land................................................$ 92,200
Accounts receivable .........…9,540             Notes payable……………………..115,000
Automobiles ...................... 21,500       Notes receivable……………………..2,400
Building............................ 104,300    Office furniture…………………… 10,820
Carly McKay, Capital.....149,930                Office supplies…………………………850
Cash.................................... 12,950 Property Taxes payable…………….2, 045
Computers..........................15,270       Salaries payable...…............................3,325
Computer software........... . 3,480            Technical library...…...........................3,800
Introductions:
a. Prepare a balance sheet. Include a subtotal for total liabilities.
b. Explain the difference in purpose between a trial balance and a balance sheet.

VI.(10 marks)
A recent balance sheet of Tootsie Roll Industries included the following items,
among others. (Dollar amounts are stated in thousands.)

Cash and cash equivalents..........................................                       $ 995
Investments (in marketable securities)........................                           87,947
Accounts receivable…………………………………                                                         12,889
Inventories...................................................................            24,845
Prepaid expanses.........................................................                  2,989
Retained earnings........................................................                 90,285
Notes payable to banks (due within one year)............                                      253
Accounts payable........................................................                    4,674
Dividends payable......................................................                       791
Accrued liabilities (short-term)..................................                         13,661
Income taxes payable.................................................                        3,119
Postretirement health care and life insurance
benefits (a long-liability)…………………………….                                                      3,976

The company also reported total assets of $222,478, total liabilities of $ 40,774
and a return on assets of 23.6%
a. Compute Tootsie Roll’s (1) quick assets, (2) current assets, and (3) current
liabilities
b. Compute Tootsie Roll’s (1) quick ratio, (2) current ratio; (3) working capital,
and (4) debt ratio. ( Round to one decimal place.)
       CAPITAL UNIVERSITY OF ECONOMICS AND BUSINESS
        EXAMINGATION OF ACCOUNTING (BACHELOR DEGREE 01)

                     SCHOOL OF ACCOUNTING

Marks Summary
 I      II    III          IV       V       VI           Total Marks



                                Answers sheet
Date:              Class:                    Name            No:
I.
1        2     3       4        5       6        7   8   9         10



II.
1        2     3       4        5       6        7   8   9         10



III.
1.




2.
IV. (30 marks)

      1. (10 marks)
  Transaction    Current Assets   Net income    Net cash flow   Net cash flow
                                               from operating     from any
                                                  activities       sources
           A
           B
           C
           D
           E
           F


2. (10 marks)
a.(1)



     (2)


     (3)


b.


3. (10 marks)
a. Apr. 1



Apr. 16


Apr. 25


May 11
June 15


June 18


June 24



b.




c.



V. (10 marks)
A balance sheet




                  Assets       Liabilities & Owner’s equity
                           Liabilities




                           Owner’s equity




b.
VI. (10 marks)
a. (1)




   (2)


   (3)




b. (1)

   (2)

   (3)

   (4)
Answers for exam (4) :

I.      (10 marks)
1          2         3      4         5        6       7      8         9      10
h          e         i      D         j        g       a      c         f      b


II. (10 marks)
1          2         3      4         5        6       7      8         9      10
T          T         F      T         F        F       T      F         F      T


III. (30 marks)
1. 商誉是净有形资产超过其正常报酬的未来收益的现值。产生商誉
的原因包括:良好的声誉、忠实的顾客群和优秀的管理。任何有能力
获得大量超过正常回报的收益的企业实际上就拥有商誉。      但是,商誉
只有在一个企业以高于另一个企业净有形资产的公允市场价值购买
它时,才在账簿中记录。和所有的无形资产一样,商誉的价值应在其
有用的经济寿命期间内摊销计入费用。
2. 另一种可将租赁归入融资租赁的情况是租赁期占资产使用寿命的
大部分。几个国家的准则制定者(比如美国和澳大利亚)已量化了这
一标准,将其表述为租期等于或超过 75%的资产剩余经济寿命。    “租
赁期”和“经济寿命”是在 IAS 17 第 3 段中定义的。经济寿命与租
赁期之间没有关系, 它是指一个或多个使用者估计的租赁财产的尚可
使用期间。租赁期是指资产租赁的时间。

IV. (30 marks)

      1. (10 marks)
     Transaction     Current Assets       Net income    Net cash flow   Net cash flow
                                                       from operating     from any
                                                          activities       sources
         A                NE                 NE              NE               D
         B                NE                 NE               I              NE
         C                D                  D               NE               I
         D                NE                 D               NE              NE
         E                 I                  I               I              NE
         F                 I                 NE              NE              NE
2. (10 marks)
a.(1) Average cost:
      Average cost = 113,900 ÷ 10,000 = 11.39
      Ending inventory cost = 11.39 × 1,600 = 18,224
      Cost of goods sold = 113,900 – 18,224 = 95,676
   (2) FIFO:
     Ending inventory cost = 900 × 13 + (1,600 – 900) × 11.60 = 19,820
     Cost of goods sold = 113,900 – 19,820 = 94,080
   (3) LIFO:
     Ending inventory cost = 900 × 10 + (1600 – 900) × 11 = 16,700
     Cost of goods sold = 113,900 – 16,700 = 97,200
b. 5 × 11.39 = 56.95
   DR. Cost of goods sold                                56.95
      CR. Inventory                                              56.95
3. (10 marks)
a.
   Apr. 1 DR. Office equipment                          39,000
             CR. Cash                                            5,400
                 Notes payable                                 33,600
Apr. 16 DR. Accounts payable                            42,000
            CR. Cash                                           15,000
             Notes payable                                     27,000
Apr. 25 DR. Office equipment                            52,200
             CR. Notes payable                                 52,200

May 11 DR. Cash                                        216,000
          CR. Notes payable                                 216,000

June 15 DR. Inventory                                   54,000
         CR. Accounts payable                                 54,000

June 18 DR. Accounts payable                           54,000
         CR. Notes payable                                      54,000

June 24 DR. Notes payable                              52,200
          Interest expense                                783
          CR. Cash                                              52,983

b. Interest payable = (33,600 × 3/12 × 16%) + (27,000 × 75/360 × 8%)
+ (216,000 × 50/360 × 17%) + (54,000 × 12/360 × 9%) = 1,344 + 450 +
5,100 + 162 = 7,056
June 31 DR. Interest expense                              7,056
             CR. Interest expense payable                       7,056
c. Total current liability = 33,600 + 27,000 + 216,000 + 54,000 + 7,056
= 337,656



V. (10 marks)
a
                          Environmental Service
                              Balance sheet
                           November, 30 19xx

                 Assets                    Liabilities & Owner’s equity
 Cash                      $ 12,950   Liabilities
 Notes receivable             2,400   Notes payable               $ 115,000
 Accounts receivable          9,540   Accounts payable                 6,810
 Land                        92,200   Salaries payable                 3,325
 Building                   10,4300   Property taxes payable           2,045
 Computers                   15,270   Total Liabilities           $ 127,180
 Computer software            3,480
 Technical library            3,800   Owner’s equity
 Office furniture            10,820   Carly Mckay, Capital          149,930
 Office supplies                850
 Automobiles                 21,500   Total liabilities &
 Total assets             $ 277,110   Owners’ equity               $277,110



b. The purpose of a trial balance is to proof the equality of debit and
credit balances and make a preparation for the formal statements.
The purpose of a balance sheet is to provide outsides and managers
of a business with the financial position of that business at a specific
date.


VI. (10 marks)
a. (1) Quick assets = Cash and cash equivalents + investment (in
   marketable securities) + Accounts receivable = 995 + 87,947 +
   12,889 = 101,831
   (2) Current assets = Quick assets + Inventory + Prepaid expenses
   = 101,831+ 24,845 + 2,989 = 129,665
   (3) Current liabilities = Notes payable to bank (Due in one year) +
   Accounts payable + Dividends payable + Accrued liabilities (short
   term) + income taxes payable = 253 + 4,674 + 791 + 13,661 + 3,119
   = 22,498
b. (1) Quick ratio = Quick assets ÷ Current liabilities = 101,831 ÷
   22,498 = 4.5
   (2) Current ratio = Current assets ÷ Current liabilities = 129,665 ÷
   22,498 = 5.8
   (3) Working capital = Current assets - Current liabilities = 129,665
   – 22,498 = 107,167
   (4) Debt ratio = 40,774 ÷ 222,478 = 18.3%

								
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