PRESTON TERMINAL y UNIVERSITY EXAMINATION Islamabad — Kohat ~ Peshawar —Lahore Na SS smudent Name: Reg. Nor Course Code: FA 3240 Course Tith Basic Accounting Program: BBA/BSCS Semester: Spring 2016 This is a three-hour examination and consists of problems only. ‘You may attempt not more than four problems. QI You recently invested $ 400,000 of your savings ina security issued by a large company, The security agreement pays you 12.5 % per year and has a maturity of five year from the day you purchased it. What is the {oral cash flow you expect to receive from this investment, if compounded quarterly, separated into the return on your investment? Q2 The balance sheer items for Khalid enterprises were as follows atthe close of b 8 on September 30, 2005: ‘Accounts Payable $ 16,200 Khalid Capital ...,..82 Accounts Receivable 11,260 Land ... 67,000 Building....... 84, 000 Notes Payable... 74,900 Cah. serseeteesnsennecsen ier en6 940 Salaries Payable... 8,900 Equipment and fixtures 44,500 Supplies. ..scoen 73000 During the next two days, the following transactions occurred jun-03, Khalid invested an adcltional $50,000 in business, The accounts payable were paid in ll ‘Jen. 06 Equipment was purchased at a cost of $9,000 to be paid within 10 days, Supplies were purchased for $2,500 cash from a restaurant supply center that was closing down. These supplies would have coe 83,0000 if purchased through normai channels, INSRTUCTIONS: 2. Prepare a balance sheet at January 01, 2001 Prepare balance sheet at fanuary 06,2006 and statement of cash lows for Jan 36, Classify the payment of Accounts Payable and the purchase of supplies as operating activities © Assume the note payable does not come due for several years, Is Khalid Enterprises ina stringer financial Position on January 067 Explain briefly 23 Environmental Solutions prepares financial statements and closes ts accounts athe end of each calendar year. ‘The following adjusted trial balance was prepared at December 31. 2014, ENVIRONMENTAL SOLUTIONS ‘Adjusted Trial Balance December 31,2014 Cash. . ro $ 42,750 Notes Receivable, . 12,740 Accounts Receivable... 65,090 Supplies, 3,300 Land, . 196,000 : Building... 126,000 Accumulated Depreciation: Building. $33,600 Office Equipment, : : 33,600 ‘Accumulated Depreciation: Office Equipment. 13,440 Notes Payable, ; 112,000 Accounts Payable. 22,680 Frank Capital : 230,300 rank Drawing... . 70,000 Consulting Fee earned... : 487,200 Advertsing Expenses. 31,500 Page 1 of3Q4 Insurance Expense 38,720 Utilities Expense, 15,040 Salaries Expense, : 245,280 ‘Supplies Expense... 9,640 Depreciation Expense: Building... 7 4,200 Depreciation Expense: Office Equipment 3,360 Total $899,220 INSTRUCTIONS: 2. Prepare an income statement and a statement of owner's equity forthe year ended December 31, 2014, ». Prepare a balance sheet (in report form) as of December 31, 2014, © What was the estimated useful life used by Environmental Solution in setting the depreciation. rate forthe building? Approximately how long has the company been using the building in its ‘operations. Show computation, Village Theater closes its accounts each month. At July 31, the trial balance and other information given were available for adjusting and closing the accounts, VILLAGE THEATER TRIAL BALANCE July 31, 2014 Cash $20,500 Prepaid film rental 31200 Land 175,000 Building 175,000 ‘Accumulated depreciation: building $10,500 Projection equipment 48,000 Accumulated deprecation: projection equipment 3,000 Notes payable 90,000 Accounts payable 4,400 ‘Uneamed admissions revenue (YMCA) 1,000 Li Trong, capital 114,500 Li Trong, drawing. ‘Admissions revenue Salaries expense Light and power expense 45,475 OTHER DATA, i, Film rental expense for July amounts to $.21,050. ii, The building is being depreciated over a period of 20 years (240 months). iii. The projection equipment is being depreciated over 5 years (60 months). iv. AtJuly31, accrued interest payable on the note payable amounts to $ 1,650, No entry has yet been ‘made to record interest expense for the month of July. v. Village Theater allows the local YMCA to bring children attending summer camp to the movies on ‘any weekday afternoon for a fixed fee of $500 per month. On May 28, the YMCA made a $1,500 advance payment covering the months of June, July and August, vi, Village Theater receives a percentage of the revenue earned by Tastie Corporation, the concessionaire ‘operating the snack bar. For snake bar sales in july, Tastie owes Village Theater $2,250, payable on ‘August 10. No entry has yet been made to record this revenue. vii. Salaries eamed by employees but not recorded or paid as of July 31 amount to $1,500, No entry has yet been made to record this lability and expense, INSTRUCTION: Prepare a 10-column worksheet utilizing the tral balance and adjusting data provided. Page 2 of 3as Q6 Concord products uses a perpetual inventory system. On January 1, the inventory account had a balance of $84,500. During the first few days of January the following transactions occurred: Jan 2 Purchased merchandize on account from Smith Company for $9,200. Jan 3 Sold merchandize for cash, $22,000. The cost ofthis merchandize was $14,300. INSTRUCTIONS: ‘a. Prepare journal entries to record these transactions under perpetual Inventory system. b. Compute the balance ofthe inventory account on January 3, ©. Prepare journal entries to record the two transactions, assuming that Concord Products uses the periodic inventory system, Public Image, a firm specializing in marketing and publicity services, uses the balance sheet approach to estimate uncollectible account expense. At year end an aging of the accounts receivable produced the following classification: Not yet due... + $ 400,000 1-30 days past due. : 175,000 31-60 days past due... : 75,500 61-90 days past due... sc. - 1 25,500 Over 90 days past due. 25,000 Total: (On the basis of the past experience, the company estimated the percentages probably uncollectables for the above five age groups to be as follows: Group 1, 2%, Group 2, 5% ?Group3, 15%, Group 4, 25% and Group 5, 55%. The allowance for Doubtful Accounts before adjustment at December 31' showed a credit balance of 59,100, INSTRUCTIONS: 8. Compute the estimated amount of un-collectable accounts based on the above classification by age groups. b. Prepare the adjusting entry needed to bring the Allowance for Doubtful Accounts to the proper amount, ©. Assume that on January 10 of the following year, Public Image learned that an account receivable that had originated on September 1 in the amount of $12,550 was worthless because of the bankruptcy of the customer, Cranston Manufacturing. Prepare the journal entry required on January 10 to write off this account. 4. The company is considering the adoption ofa policy whereby customers whose outstanding accounts become more than 60 days past due will be required to sign an interest bearing note for the full amount of their outstanding balance. What advantages would such a policy offer? Page 3 of 3