Student Nav Time: 70 minutes University of Guelph Department of Business AGEC*2220: Financial Accounting Mid-Term — Version 2 Winter 2007 Instructor: Professor R. Bates Instructions: 1. Answer ALL questions on the exam paper. 2. DO NOT SEPARATE PAGES 3. Ensure you have all six (6) questions. Question | Marks Available | _ Score [4 20 ¢ liseuee 20 [1D 3 15 IT 4 16 5 14 6 15 Total 100 4. Imaddivon to the capital stock issued in item 3, stock was sold for $40,000. ~ 5. Dividends of $600 were paid. Required Prepare a statement of cash flows for 2004 using the indirect method in the Operating Activities section of the statement. Include supplemental schedules to report any noncash investing and financing activities and to reconcile net income fo net cash provided by operating activitiesCes one BSS Ne 1s B2O9 hea Les Gan St ELAN Q599 de N Land 3a S00 MES ZO a Tre O09) SNe Stok Eyes - 7 Durdengs Fay (Cosy waa Hiss oOQuestion #2 (20 marks) Bluebird Bakery, a partnership that rents its bakery premises, had the following account balances at July 31, 2006. Prepare a balance sheet for the partnership by placing each account in the appropriate location in the balance sheet. From the balance sheet, calculate the partnership's working capital and working capital ratio. <® Bakery equipment cost Demand loan from bank c& Cod > DR Vrist ag Cash, Find Mee Recouts RecevdleQuestion #5 (14 marks) Palmer Industries prepares annual financial statements and adjusts its accounts only at the end of the year. The following information is available for the year ended December 31, 2004: a. Palmer purchased computer equipment two years ago for $15,000. The equipment has an estimated useful life of five years and an estimated salvage value of $250. b. The Office Supplies account had a balance of $3,600 on January 1, 2004. During 2004, Palmer added $17,600 to the account for purchases of office supplies during the year. A count of the supplies on hand at the end of December 2004 indicates a balance of $1,850 ©. On August 1, 2004, Palmer credited a liability account, Customer Deposits, for $24,000. This sum represents an amount that a customer paid in advance and that will be earned evenly by Palmer over a six-month period d. Palmer rented some office space on November 1, 2004, at a rate of $2,700 per month. On that date, Palmer debited Prepaid Rent for three months’ rent paid in advance e. Palmer took out a 120-day, 9%, $200,000 note on November 1, 2004, with interest and principal to be paid at maturity. {Palmer operates five days per week with an average daily payroll of $500. Palmer pays its employees every Thursday. December 31, 2004, is a Friday. Required 1. For each of the preceding situations, prepare in general journal form the appropriate adjusting entry to be recorded on December 31, 2004. 2. Assume that Palmer's accountant forgets to record the adjusting entries on December 31, 2004. Will net income for the year be understated or overstated? By what amount? (Ignore the effect of income taxes.) Do MR Cag \Sa0oQuestion #6 ( 15 marks) "I just don't understand it!” Dwight Benat had received his accountant's calculation of Dwight's business income, showing the accrual income for his first year in business. "If | made so much money, why don't | have that much in the bank?” Dwight operates Benat Supply, which provides stationery and office supplies to business customers. He has no store, just a small rented warehouse, and only one ‘employee. Here are the data he and his accountant used. Explain clearly to Dwight (1) how the accountant calculated the $51,890 income and (2) why there is only $10,940 on hand. Collected from customers during the year $158,800 Still owing from customers at the end of the year (collected next year) 16,000 — Paid for products to resell and for other expenses, including wages, during the year 140,000 Owing for products and other expenses at the end of the year (paid next year) 8,850 — Cost of unsold products on hand at the end of the year (all sold next year) 28,040 — ‘Amortization (depreciation) on equipment during the year 2,100 — Personal withdrawals by Dwight during the year 7,860 — ‘Show calculations for part marks: oa SATRA0 (1) What is the amount of accrual net income c y (2) What is the amount of cash on hand los ike) (3) Reconcile accrual income and cash on hand Use following page for calculationsa) 15 %OS* [C999 -19 0Q= VEFO=- TGS + WB OuGio= SI Fo We) 158 OS - FO CWO = TRO = 1OAnS D Sl 384A oo eee 3 HO -FPQG 9 ees ~