Q1.

Brown Corporation used the equity method to report the following transactions for the years
2013 and 2014:
2013
Feb. 2 Purchased 30% of the voting common shares of Salon Enterprises Inc. for $400,000.
This is a long-term investment giving Brown Corporation significant influence over
the operations of Salon Enterprises Inc.
Oct. 15 Received $5,000 cash dividends on Salon Enterprises Inc. common shares.
Dec. 31 Salon Enterprises Inc. reported total income of $250,000 for the year ended
December 31, 2013.
2014
Jun. 30 Salon Enterprises Inc. reported total income of $130,000 for the six months ended
June 30, 2014.
30 Sold one-half of the Salon Enterprises Inc. shares for $240,000.
Prepare journal entries to record the above transactions and show Investments in Balance Sheet
as on 31.12.14 if Fair value of Investments on that day was $250,000. 5 Marks

Q2. A company issued 10%, 10-year bonds with a par value of $1,000,000 on January 1, 2017 at
a selling price of $885,295, to yield the buyers a 12% return. The company uses the effective
interest amortization method. Interest is paid semiannually each June 30 and December 31.

1. Prepare the journal entry to record the first semiannual interest payment. 
2. Prepare an amortization table for the first two payment periods 3 Marks

Q3. An incomplete income statement and an incomplete comparative balance sheet of Wales
Corporation are presented below:
INCOME STTAEMENT FOR THE YEAR ENDED 31.12.2017
NET SALES $11,000,000
COGS ?
GROSS PROFIT ?
OPERATING EXPENSES 1,665,000
INCOME FROM OPERATIONS ?
INTEREST EXPENSE ?
INCOME BEFORE INCOME TAXES ?
INCOME TAX EXPENSE 560,000
NET INCOME ?

BALANCE SHEETS DECEMBER 31

ASSETS 2017 2016
CURRENT ASSETS
CASH $450,000 $375,000
A/R ? 950,000
INVENTORY ? 1,720,000
TOTAL CURRENT ASSETS ? 3,045,000
PLANT (NET) 4,620,00 3.955,000

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 0
TOTAL ASSETS ? $7,000,000
LIABILITIES AND SE
CURRENT LIABILITIES ? $ 825,000
LONG TERM NOTES PAYABLE ? 2,800,000
TOTAL LIABLITIES ? 3625000
COMMON SHARES, $ 1 PAR 3,000,00 3,000,000
0
RETAINED EARNINGS 400,000 375,000
TOTAL SAHREHOLDERS’ 3,400,00 3,375,000
EQUITY 0
TOTAL LIAB & SE ? $7,000,000
Additional Information:
1. Accounts receivable turnover ratio for 2017 is 10 times.
2. Profit margin is 14.5%
3. Return on assets (Net Income/Total assets) is 22%
4. Current ratio is 3:1
5. Inventory turnover ratio is 4.8 times.

Compute the missing information and show computations. 9

Q4. The Fibre Corporation engaged in the following transactions during 2016. Fibre uses a
perpetual inventory system:

Apr. 1 Purchased merchandise from a Mexican supplier at a cost of 100,000 pesos. The
exchange rate on this date was $0.18 per peso.
May 5 Paid for the merchandise. The exchange rate on this date was $0.16 per peso.
Jun. 10 Sold goods to a U.S. buyer at a selling price of $80,000 U.S. dollars. The exchange
rate on this date was $1.04 Canadian dollars for each U.S. dollar. Ignore the journal entry to
record cost of goods sold.
Jul. 30 Received payment from the U.S. buyer for the goods sold on June 10. The exchange
rate on this date was $1.02 Canadian dollars for each U.S. dollar.

Prepare the journal entries necessary to record each of the above transactions. 4Marks

Q5 As the accountant at O'Donnell Industries, you are responsible for preparing the cash flow
statement. You have decided to prepare the statement using the direct method and have gathered
the following data from the accounting records:

Payment of long-term debt $200,000

Collections on accounts receivable 210,600
Acquisition of equipment by issuing long-term note payable 85,000
Interest revenue 14,500
Credit sales 392,700
Loan collections 47,400
Cash received from sale of investments 36,100
Salary expense 103,800
Cash payments to purchase property, plant, and equipment 76,000
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 Cost of goods sold 417,300
Collection of interest revenue 13,700
Payment of cash dividends 48,500
Income tax expense and payments 39,200
Cash received from sale of property, plant, and equipment, including $6,900 loss 31,800
Cash receipt of dividend revenue 19,300
Payments of salaries 94,100
Amortization expense 72,400
Cash sales 203,900
Cash received from issuance of common shares 300,000
Loan to another company 75,000
Interest expense and payments 60,400
Bonds payable converted into common shares 250,000
Payments to suppliers 294,700
Cash balance: December 31, 2013 55,500
Cash balance: December 31, 2014 30,400

Prepare the cash flow statement for the year ended December 31, 2014, using the direct method.
7Marks

Q6

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 8 Marks
Q7. The following accounts have been taken from Buxton Corporation's general ledger as of
December 31, 2017. All data are shown before tax. The income tax rate is 40%.

Sales revenue $206,000

Interest revenue 13,000
Interest expense 7,000
Gain on sale of equipment 19,000
Cost of goods sold 99,000
Operating expenses 46,000
Loss on discontinued operations 20,000

Prepare a single-step income statement for the year ended December 31, 2017. 4 Marks