Question 1 (10 marks), 1 mark each

1 b 6 b
2 d 7 a
3 d 8 b
4 b 9 c
5 b 10 d

Question 2 (15 marks)

Part 1 (10 marks)

Cash Flow Probability Expected Cash

Year
Estimate Assessment Flow

2023 1,900 x 30% = 570 (1 mark)

4,100 x 45% = 1,845 (1 mark)

7,800 x 25% = 1,950 (1 mark)

4,365

2024 2,800 x 20% = 560 (1 mark)

5,000 x 50% = 2,500 (1 mark)

6,700 x 30% = 2,010 (1 mark)

5,070

Expected Cash
Year PV Factor i-5% Present Value
Flow

2023 4,365 x 0.95238 (n=1, i=5%) = 4,157.14 (2 marks)

2024 5,070 x 0.90703 (n=2, i=5%) = 4,598.64 (2 marks)

Total 8,755.78
Part 2 (5 marks)
a) (2 marks, 1 mark for each item) Software sale, consulting services
b) (1 mark) 234,000 × (6/36)= 3,900
C) (2 marks, 1 mark for each amount)
sales revenue of 162,000 is recognized at the delivery of the software
service revenue of 12,000 = 72,000 × (6/36), is recognized for 6 months
 total revenue in 2023 = 174,000

Question 3 (16 marks)

Part 1 (5 marks)

Sales Revenue 7,257,000 (1 mark)

COGS 5,712,000 (1 mark)

Gross profit 1,545,000
Selling and Adm. Expense 437,000 (1 mark)
Operating income 1,108,000
Gains on the disposal of equipment 25,300 (1 mark)
Net income 1,133,300

Other comprehensive income

Unrealized holding gains 5,400 (1 mark)
Comprehensive income 1,138,700

Part 2 (11 marks)

Revenue $ 389,400 (2 marks)

Expenses:
Salaries and Wages Expense ______________132,500 (2 marks)
Insurance Expense ______________________ 34,600 (2 marks)
Depreciation Expense _____________________21,800 (1 mark)
Interest Expense _____________________ 18,000 (2 marks)
Income Tax Expense ___________________ 54,300 (2 marks)
Total expenses 261,200

Net income/(Losses) $ ___128,200

Calculations:

Revenue=365,000 + (48,000 − 23,600) =389,400

Salaries and Wages Expense=142,000 + (12,000 − 21,500) =132,500

Insurance Expense=37,500 − 6,800 + 3,900=34,600

Depreciation Expense=86,600 − 64,800=21,800

Interest Expense=22,500 + (1,900 – 6,400) =18,000

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Income Tax Expense=61,000 + 12,200 – 18,900=54,300

Question 4 (16 marks)

Item 1 (4 Marks); 2 marks for each set of JEs: ½ for each account name, ½ for each amount
January 1:

Supplies 4,840
Cash 4,840

December 31

Supplies Expense 2,600

Supplies 2,600

Item 2: (4 Marks); 2 marks for each set of JEs: ½ for each account name, ½ for each amount
August 1:

Prepaid Insurance 7,080

Cash 7,080

December 31:

Insurance Expense 2,950

Prepaid Insurance 2,950

Item 3: (4 Marks); 2 marks for each set of JEs: ½ for each account name, ½ for each amount
November 15:

Cash 1,410
Service Revenue 1,410

December 31:
Service Revenue 470
Unearned Revenue 470

Item 4: (4 Marks); 2 marks for each set of JEs: ½ for each account name, ½ for each amount
Dec. 1:
Cash 1,300
Rent Revenue 1,300

December 31,
Rent Revenue 650
Unearned Rent Revenue 650

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Question 5 (14 Marks)

Cash flows from operating activities:

Net income 56,000 (1 mark)

Adjustments:

Deprecation Exp* 17,000 (2 marks)

Increase in AR (35,000) (1 mark)
Decrease in Inv. 45,100 (1 mark)
Increase in prepaid insurance (2,000) (1 mark)
Increase in AP 15,900 (1 mark)
Increase in S&W payable 4,500 (1 mark)
Decrease in income tax payable (2,000) (1 mark) 43,500

Net cash provided (used) by operating activities: 99,500 00

Cash flows from investing activities:

Purchase of equipment (30,000) (1 mark)

Net cash provided (used) by investing activities: (30,000) 00

Cash flows from financing activities:

Cash dividends paid** (40,500) (2 marks)

Payment of mortgage payable (14,000) (1 mark)
Common shares issued 20,000 (1 mark)

Net cash provided (used) by financing activities: (34,500)

The net change in cash 35,000 0

0
* 65,000 – 48,000 = 17,000
** 88,500 – 73,000 - 56,000 = (40,500)

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