HANOI UNIVERSITY FACULTY OF MANAGEMENT AND TOURISM Accounting principles Mid-semester test BA-K06 - Tutorial 1&2 Student ID Number: Student’s Name: INSTRUCTIONS: Show all workings Students should attempt all questions TIME ALLOWED: 60 minutes writing and 5 minutes reading time Part A - Multiple choice (30 marks) There are 15 questions, each worth 1.5 marks. For each question, choose the best answer and circle the appropriate letter. 1. If the equipment account has a balance of $22,500 and its accumulated depreciation account has a balance of $14,000, the book value of equipment would be? a. $36,500 b. $22,500 c. $14,500 d. $8,500 2. Which of the following items represents an accrual? a. Prepaid insurance b. Wages payable c. Fees earned d. Accumulated depreciation 3. If the supplies account before adjustment on May 31, indicated a balance of $2,250 and supplies on hand at May 31 totaled $950, the adjusting entry would be a. Dr Supplies $950 c. Dr Supplies expense $950 Cr Supplies expense $950 Cr Supplies $950 b. Dr Supplies $1,300 d. Dr Supplies expense $1,300 Cr Supplies expense $1,300 Cr Supplies $1,300 4. The form listing the titles and balances of the accounts in the ledger on a given date is a. Income Statement b. Balance Sheet c. Statement of Owner’s equity d. Trial balance 5. A debit may signify a(n) a. Increase in an asset account b. Decrease in an asset account c. Increase in liability account d. Increase in owner’s equity account 6. Which of the following accounts would not be included in a post-closing trial balance? a. Fees earned b. Account payable c. Smith, capital d. Accumulated depreciation 7. What is meant by the credit term? a. The time between an entry being recorded in the sales journal and the sales ledger b. The time between an invoice being issued and the agreed payment date c. The time it takes for an invoice to reach a customer d. The time between an invoice being issued and the date on which payment is received 8. Which of the following items of expenditure would not be regarded as purchases for a restaurant? a. Potatoes b. Cooking oil c. Printing menus d. Flour 9. Decide whether the following statements are true or false (i) The trial balance is used to produce financial statements (ii) The trial balance is classed as one of the financial statements a. (i) True; (ii) True b. (i) True; (ii) False c. (i) False; (ii) True d. (i) False; (ii) False 10. If merchandise is sold on account to a customer for $1,000, terms FOB shipping point, 1/10, n/30 and the seller prepays $50 in transportation costs, the amount of discount for early payment would be? a. $0 b. $5 c. $10 d. $10.5 11. Which of the following errors would not be detected by trial balance? a. A transaction is debited to the right account but not credited to any account b. A transaction is posted to the right accounts by for wrong amount c. A transaction is recorded only on the credit side of the accounts d. One of the accounts has been balanced incorrectly 12. Which of the following account concepts states that costs should be allocated to the accounting period in which the revenue they help generate is recorded? a. Matching b. Consistency c. Accounting entity 2 d. Going concern 13. On a multiple step Income Statement, the excess of net sales over the cost of merchandise sold is called a. Operating income b. Income from operations c. Gross profit d. Net profit 14. Which of the following documents are used to record return of merchandised by a customer? a. An invoice b. A receipt c. A delivery note d. A credit memorandum 15. Which of the following accounts is not closed during the closing process at the end of the accounting period? a. Sales revenue b. Salary expense c. Income Summary d. Retained Earnings Part B: Questions and Problems Question 1: (40 marks) Danville Company – Worksheet – 31 December 20X8 Unadjusted Adjustments Adjusted Dr Cr Dr Re f Cr Dr Cr Cash 5,550 Accounts receivable 28,350 Prepaid insurance 7,200 Supplies 1,980 Land 112,500 Building 212,250 Acc deprn-Building 137,550 Equipment 135,300 Acc deprn-Equipment 97,950 Accounts payable 12,150 Unearned rent 6,750 Dave, Capital 201,000 Dave, Drawing 15,000 Fees earned 294,600 Salaries expense 143,370 Utilities expense 42,375 Advertising expense 22,800 Repairs expense 17,250 Miscellaneous expense 6,075 3 Total 750,000 750,000 Danville Company is a small editorial services company owned and operated by Dave Mayer. On December 31, 20X8, the end of the current year, Danville Company’s accounting clerk prepared the unadjusted trial balance shown at the previous page. The data needed to determine year-end adjustments are as follows: a. Unexpired insurance at December 31, $2,700 b. Supplies on hand at December 31, $480 c. Depreciation on building for the year, $1,600 d. Depreciation of equipment for the year, $4,400 e. Rent unearned at December 31, $3,250 f. Accrued salaries at December 31, $2,800 g. Fees earned but unbilled on December 31, $6,200 Required: (i) Prepare necessary adjusting entries as at 31 December, 20X8 (14 marks) (ii) Complete the worksheet on the previous page (26 marks) Questions 2: (25 marks) (i) The following were selected from transactions completed by Southmont. Prepare journal entries to record each transactions (including an explanation for each entry): (16 marks) Apr 3 Purchased merchandise on account from Mandell for $18,000, terms FOB destination, 2/10, n/30. Transportation cost of $250. (2 marks) Apr 6 Returned $3,500 of merchandise purchased from Mandell (2marks) Apr 11 Sold merchandise on account to Campo Co, $12,800 terms 1/10, n/30. Cost of merchandise sold $7,600 (3 marks) Apr 12 Paid Mandell on account (3 marks) Apr 15 Received merchandise returned by Campo from sale on Apr 11 $1,600. Cost of merchandise sold $950 (3 marks) Apr 20 Received cash on account from Campo (3 marks) (ii) Prepare extracted Income Statement to Gross profit for Southmont for Apr (6 marks) (iii) Southmont uses a perpetual inventory system. The company experienced a normal inventory loss of $4,300. What accounts would be debited and credited to record the adjustment for inventory loss at end of period (3 marks). Question 3 (5 marks) Explain why accounting standards are necessary. 4 . HANOI UNIVERSITY FACULTY OF MANAGEMENT AND TOURISM Accounting principles Mid-semester test BA-K06 - Tutorial 1&2 Student ID Number: Student’s. should be allocated to the accounting period in which the revenue they help generate is recorded? a. Matching b. Consistency c. Accounting entity 2 d. Going