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									       CAPITAL UNIVERSITY OF ECONOMICS AND BUSINESS
         EXAMINGATION OF ACCOUNTING (BACHELOR DEGREE 10 )

                                SCHOOL OF ACCOUNTING
      Date:                        Class:                    Name                            Marks:

I. Matching (10 marks):
Listed below are technical terms in accounting.
a. Materiality                                        f. Unlimited personal liability
b. Operating activities                               g. Dividends
c. General journal                                    h. General partners
d. Internal control structure                         i. Realization
e. Publicly owned corporation                         j. Earnings per share
    Each of the following statements may describe one of these technical terms.         For each statement,
    indicate the term described.
1. The classification in a statement of cash flows from which it is most important to generate positive
      cash flows.
2. Measures intended to make all asplects of a business operate according to management’s plans and
      policies.
3. An accounting concept that may justify departure from other accounting principles for purposes of
      convenience and economy.
4. A journal used in recording unusual types of transactions.
5. A corporation whose shares are traded on an organized stock exchange.
6. The primary disadvantage of sole proprietorships and general partnerships.
7. The accounting principle used in determining when revenue should be recognized in financial
statements.
8. A ratio that relates the total net income of a corporation to the holdings of individual stockholders.
9. The owners with managerial authority in a limited partnership.
10. Distribution of assets to the owners of a corporation.

I. Indicate true or false of the following sentences, use T for true F for false (10
points).
1. Errors may be further subdivided into the classifications of employee fraud and management
   fraud.
2. The classifications current assets and current liabilities are especially useful in evaluating the
   long-term liquidity of the business entity.
3. Creditors of unincorporated businesses often base their lending decisions upon the solvency of
   the owners, rather than the financial strength of the business entity.
4. The account entitled Cash Over and Short is debited with overages and credited with shortages.
5. The use of a flow assumption can not eliminates the need for separately identifying each unit
   sold and looking up its actual cost.
6. Inventory errors affect only current year.



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7. Plant and equipment items are often classified into the following groups: tangible plant assets,
    intangible assets and natural resources.
8. The basic purpose of depreciation is to achieve the matching principle.
9. The book value of a plant asset is its cost minus the related accumulated depreciation.
10. A loss contingency is a possible loss, stemming from future events, that will be resolved as to
    existence and amount by some future event.
III. Translate the following sentence into Chinese (30 marks)
      1. The basic objectives of cash management are:
      ①Provide accurate accounting for cash receipts, cash disbursements and cash balances.②
      Prevent or minimize losses from theft or fraud.③Anticipate the need for borrowing and assure
      the availability of adequate amounts of cash for conducting business operations.④Prevent
      unnecessarily large amounts of cash from sitting idle in bank accounts which produce no
      revenue.
      2.Current income tax regulations require taxpayers to use the direct write-off method in
      determining the uncollectible accounts expense used in computing taxable income. From a
      standpoint of accounting theory, the allowance method is better, because it enables expenses to
      be matched with the related revenue and thus provides a more logical measurement of net
      income. Therefore, most publicly owned companies use the allowance method in their financial
      statements.
IV. Transactions (20 marks)
Medical Equipment Corp. (MEC) sells x-ray machines and other medical equipment to hospitals. At
December 31, 1996, MEC’s inventory amounted to $480,000. During the first week in January 1997,
the company made only one purchase and one sale.
These transactions were as follows:
Jan.2 Purchased an x-ray machine and an ultra-sound scanner from Son-X. The total cost of these
machines was $60,000, terms 3/10, n/60.
Jan.6 Sold three different types of machines on account to Mercy Hospital. The total sales price
was $90,000, terms 5/10, n/90. The total cost of these three machines to MEC was $55,800.
MEC has a full-time accountant and a computer-based accounting system. It records sales at the
gross sales price and purchases at net cost, and maintains subsidiary ledgers for accounts receivable,
inventory, and accounts payable.
a. Prepare journal entries to record these transactions, assuming that MEC uses a perpetual
     inventory system.
b. Compute the balance in the Inventory controlling account at the close of business on Jan.6.
c. Prepare journal entries to record the two transactions assuming that MEC uses a periodic
     inventory system.
d. Compute the cost of goods sold for the first week of January assuming use of the periodic
     system. (Use your answer to part b as the ending inventory.)
e. Compute the gross profit margin on the January 6 sales transaction.

V. (20 marks)
Forum Broadcasting was organized in May19- to operate as a local television station. The account
titles and numbers used by the sole proprietorship are:
Cash…………………………….….11                                Telecasting equipment……………..24


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Accounts receivable………………..15                      Film library………………………..25
Supplies……………………………19                              Notes payable………………….…..31
Land………………………………..21                               Accounts payable………………….32
Building……………………………22                              Daniel Chung capital……………….51
Transmitter………………………..23
The transactions for May 19-, were as follows:
May 1 Daniel Chung deposited $350,000 cash in a bank checking account in the name of the
business, Forum Broadcasting.
May 3 The new company purchased the land, buildings, and telecasting equipment previously
used by a local television station which had gone brankrupt. The total purchase price was
$325,000, of which $120,000 was attributable to the land, $95,000 to the building, and the
remainder to the telecasting equipment. The terms of the purchase required a cash payment of
$200,000 and the issuance of a note payable for the balance; the note payable is due in 3 years.
May 5 Purchased a transmitter at a cost of $225,000 from AC Mfg.Co., making a cash down
payment of $75,000. The balance, in the form of a note payable, was to be paid in monthly
installments, of $12,500, beginning May 15. (Interest expense is to be ignored.)
May 9 Purchased a film library at a cost of $50,000 from Modern Film Productions, making a
down payment of $15,000 cash, with the balance on account payable in 30 days.
May 12 Bought supplies costing $3,190, paying cash.
May 15 Paid $12,500 to AC Mfg.Co. as the first monthly payment on the note payable created
on May 5. (Interest expense is to be ignored.)
May 25 Sold part of the film library to City College; cost was $8,900 and the selling price also
was $8,900. City College agreed to pay the full amount in 30 days.
a. Prepare journal entries for the month of May.
b. Prepare a trial balance at May 31, 19-.
c. Prepare a balance sheet at May 31,19-

VI. (10marks)
Early this summer, Crystal Car Wash purchased new “brushless” car washing equipment for all 10
of its car washes. The following information refers to the purchase and installation of this
equipment.
1. The list price of the brushless equipment was $7,200 for the equipment needed at each car
    wash. Because Crystal Car Wash purchased 10 sets of equipment at one time, it was given a
    special “package price” of $63,000 for all of the equipment. Crystal paid $23,000 of this
    amount in cash (no cash discount was allowed) and issued a 90-day, 8% note payable for the
    remaining $40,000. Crystal paid this note promptly at its maturity date, along with $800 in
    accrued interest charges.
2. In addition to the amounts described above, Crystal paid sales taxes of $3,780 at the date of
    purchase.
3. Freight charges for delivery of the equipment totaled $3,320.
4. Crystal paid a contractor $2,250 per location to install the equipment at six of Crystal’s car
    washes. Management was able to find a less expensive contractor who installed the equipment
    in the remaining four car washes at a cost of $1,900 per location.
5. During installation, one of the new machines was accidentally damaged by an employee of


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   Crystal Car Wash. The cost to repair this damage, $914, was paid by Crystal.
6. As soon as the machines were installed, Crystal Car Wash paid $5,700 for a series of radio
   commercials advertising the fact that it now uses brushless equipment in all of its car washes.
    a. Briefly indicate the accounting treatment that should be accorded to any items that you
       do not regard as part of the cost of the equipment.
    b. Prepare a list of the expenditures that should be included in the cost of the equipment.
       (Determine the total cost of the equipment at all 10 locations; do not attempt to separate
       costs by location.)
    c. Prepare a journal entry at the end of the current year to record depreciation on this
       equipment. Crystal depreciates this equipment by the straight-line method over an
       estimated useful life of 10 years, assumes zero salvage value, and applies the half-year
       convention.




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

                           SCHOOL OF ACCOUNTING
      Date:                 Class:                    Name                        Marks:

Summary of Marks
    I       II             III       IV       V        VI        VII       VIII       IX        X


                                     Answers Sheet

I.        (10 marks)


     1          2      3         4        5       6          7         8          9        10




II.      (10 marks)


     1          2      3         4        5       6          7         8          9        10




III. (30 marks)

1. (15 marks)




2. (15 marks)




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IV. (20 marks)
a.(6 marks)
a   Jan. 2


b   Jan.6


c   Jan.6


b.(4 marks)




c.(4 marks)
Date             Debit   Credit
Jan. 2

Jan.6



d.(4 marks)




e.(2 marks)




V. (20 marks)
a. (7 marks)
a   May 1

b   May 3




c   May 5

d   May 9

e   May 12

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f   May 15

g   May 25



b. (6 marks)
                            Forum Broadcasting
                               Trial Balance
                               May 31, 1997
Cash
Accounts receivable
Supplies
Land
Building
Film library
Transmitter
Telecasting equipment
Notes payable
Accounts payable
Daniel Chung, Capital
Total


c. .(7marks)


                            Forum Broadcasting
                               Balance Sheet
                               May 31, 1997

                   Assets               Liabilities & Owners’ Equity
Cash                                    Liabilities:
Accounts receivable                     Notes payable
Supplies                                Accounts payable
Land                                    Total liabilities
Building                                Owner’s equity:
Film library                            Daniel Chung, Capital
Transmitter
Telecasting equipment
total                                   Total




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VI. (10 marks)
a.   (2 marks) The expenditures of some items that should not included in the cost of the equipment
     are revenue expenditures which include:



 b. (5 marks)
Cost of the equipment includes:




c. (3 marks)
Compute Process:
Entry:




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         CAPITAL UNIVERSITY OF ECONOMICS AND BUSINESS
           EXAMINGATION OF ACCOUNTING (BACHELOR DEGREE 10)

                                SCHOOL OF ACCOUNTING
      Date:                      Class:              Name                    Marks:


                                   Answers for exam (10) :

I.        (10 marks)


     1          2           3       4       5    6          7   8           9       10

     b          d           a       c       e    f          i   j           h       g


II.      (10 marks)


     1          2           3       4       5    6          7   8           9       10

     F          F          T        F       F    F          T   T           T       F


III. (30 marks)

1. (15 marks)
  现金管理的基本目标:①对于现金收入、现金支出和现金余额进行正确的会
计处理。②防范偷盗或舞弊,减少偷盗或舞弊的损失。③预期借款的需要,确保
进行经营活动可获得充足的现金。④防止有大量不需要的现金在银行账户中闲置
不能产生收入。

2. (15 marks)
 现在所得税法规要求纳税人在计算应税所得额中确定坏帐费用时使用直接注
销法。从会计理论的观点看,备抵法更好,因为它使费用和相关的收入配比,因
此能更合理的计量净收益。所以,大多数公众控股公司在财务报表中使用备抵法。


IV. (20 marks)
a.(6marks)
a     Jan. 2        Inventory                                       58200
                         Accounts payable                                   58200


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b    Jan.6     Accounts receivable                                           90000
                       Sales                                                          90000
c    Jan.6     Cost of goods sold                                            55800
                       Inventory                                                      55800
b.(4marks)
The balance in the Inventory controlling account at the close of business on Jan. 6 is computed as
follows:
Inventory (as of December 31, 1996)          $480000
Add: purchases                               58200
Less: cost of goods sold                     55800
Inventory (as of Jan. 6, 1997)               $482400



Date                                            Debit               Credit
Jan. 2                 Purchases                58200
                       Accounts Payable                             58200
Jan.6                  Accounts Receivable      90000
                       Sales
The computation of cost of goods sold under the periodic inventory system:
Inventory (as of December 31, 1996)          $480000
Add: purchases                               58200
Less: inventory as of Jan. 7                 482400
Cost of goods sold                           $ 55800
Gross Profit Margin=(90000-55800)×100%=38%
                        90000
V. (20 marks)
a.(7 marks)
a    May 1     Cash                                                    350000
                       Daniel Chung, Capital                                         350000
b    May 3     Land                                                    120000
               Building                                                 95000
               Telecasting Equipment                                   110000

                      Cash                                                           200000
                      Notes Payable                                                  125000
c    May 5     Transmitter                                             225000
                     Cash                                                             75000
                     Notes Payable                                                   150000
d    May 9     Film Library                                              50000
                      Cash                                                            15000
                      Accounts Payable – Modern Film                                  35000
                                            Productions
e    May 12    Supplies                                                   3190
                      Cash                                                             3190

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f    May 15     Notes Payable                                           125000
                       Cash                                                          12500
g    May 25     Accounts Receivable                                         8900
                      Film Library                                                    8900


b.(6marks)

                                      Forum Broadcasting
                                         Trial Balance
                                         May 31, 1997
Cash                                                                44310
Accounts receivable                                                 8900
Supplies                                                            3190
Land                                                               120000
Building                                                            95000
Film library                                                        41100
Transmitter                                                        225000
Telecasting equipment                                              110000
Notes payable                                                               262500
Accounts payable                                                             35000
Daniel Chung, Capital                                                       350000
Total                                                              647500 647500


c.(7marks)
                                      Forum Broadcasting
                                         Balance Sheet
                                         May 31, 1997

                   Assets                           Liabilities & Owners’ Equity
Cash                                      $ 44310   Liabilities:
Accounts receivable                         8900    Notes payable                    $262500
Supplies                                    3190    Accounts payable                   35000
Land                                       120000   Total liabilities                 297500
Building                                    95000   Owner’s equity:
Film library                                41100   Daniel Chung, Capital             350000
Transmitter                                225000
Telecasting equipment                      110000
total                                      647500   Total                             647500


Ⅵ. (10 marks)
a. (2 marks)




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The expenditures of some items that should not included in the cost of the equipment are
revenue expenditures which include:
Cost to repair the damage                                                           $914
Advertising expense                                                                $5700


b. (5 marks)
Cost of the equipment includes:
Purchase price                                                                    $63000
Sales taxes                                                                         3780
Freight charges                                                                     3320
Installation cost $2250×6+$1900×4                                                  21100
Total cost                                                                        $91200
$91200 ÷10 ÷2 =$4560
Depreciation Expense                                            4560
Accumulated Depreciation                                                           4560




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