AP/ADMS 2500.3.0
MIDTERM 1
SECTION A
Fall 2015
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Part 1 - Case #1: Ricky Rock Wrestling for Fun Questions 1 to 30 are
based on this case
Richard Brandt graduated from York University with his BAS although he spent
more time in the gym than in the classrooms and libraries. His parents and
grandparents were very proud and happy of this achievement. As a graduation
gift, Richard’s Grandparents gave him $50,000 to start his own business. So, on
September 1, 2015, Richard started a small business called “Ricky Rock Wrestling
for Fun”. “Ricky Rock” offers a party package designed for active kids, teen and
adults that want to learn and practice wrestling activities for fun by learning how
to perform headlocks, leg scissors and other tricks. As a student, he learn and
practiced Greco-Roman wrestling and built an impressive body. Now graduated
from university he has decided to continue with his passion of wrestling but added
a spin to make money. In one tournament in 2013 Richard meet Linda who was
competing for a US university team and she mentioned that she was working on
girls birthday parties focused on wrestling. In June 2015 Richard contacted Linda
and told her about his idea and Linda shared with him all documentation she has
prepared in these years including: brochure to be distributed to potential
customers, personal cards, party themes, parties activities, schedules and
agendas, etc. During August Richard has completed his business plan and was
ready to launch ‘Ricky Rock Wresting for Fun’ in the GTA. The following is a list of
transactions that occurred during the first month of operations:
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SECTION A
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September
Description
1
Opened a business bank account with the $50,000
received as a gift from the Grandparents
1
Signed 12 month commercial insurance contract
for any liability that might emerge from the
activity.
2
Purchase in cash costumes of famous wrestlers to
wear at parties. The costumes can last 2 years.
3
Paid in cash the set up of the web site. It expects
to last the whole life of this business.
4
Collected the brochures and presentation cards to
be used in promoting the business. One third is
paid in cash while the rest will be paid on October
5th.
5
First event organized and delivered. Birthday party
for a 5 years old boy. Received the payment in
cash.
6
Second event organized and delivered as part of a
series of activities organized by a charity to raise
funds. One third is paid in cash while the rest will
be paid by the Charity Organization on October
5th.
8
Labour day, no events, no work so Richard goes to
the gym and does a double routine (the rest of the
days he just does a simple routine of 2.5 hours).
12
Third event organized and delivered. Birthday
party for a 7 years old boy. Parents promise to pay
in a few days.
15
Pays first 2 months of insurance
19 & 20
Fourth event organized and delivered. Provided
one of the activities of a corporate team building
extravaganza weekend. The contract signed says
the payment will be effective in 30 days with a
cheque.
23
Paid the gym membership for September, October,
November and December
24
Telephone bill for $150 was received for the month
of September - payment due October 5th
26
Fifth event organized and delivered. Birthday party
for a 4 years old boy. Received payment in cash.
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Amount
$50,000
$600 per
month for 1
year
$600
$2,000
$300
$1,000
$3,000
$1,000
$1,200
$2,000
$2,000
$150
$1,000
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MIDTERM 1
26
29
30
30
30
SECTION A
Fall 2015
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One of the parents at the birthday party for a 4
years old boy hires him for his son’s birthday party
on October 10th. Received payment in cash.
Received the payment for the birthday party for
the 7 years old boy of September 12th
Richard pays to his parents a rent for using the car
for business purposes and to go and come back
from the gym.
Richard promised to pay on October 6th to his
parents the extra charge that comes in the
insurance premium of their cars for having him as
an additional driver (male under 25).
Additional information
Inventory of brochures and cards showed that two
thirds of them are still available (not used)
$1,000
$1000
$200
$800
$200
Prepare “T” Accounts in ACCRUAL Basis for this case using the following chart of
accounts and then answer the questions.
Revenues
Telephone Expense
Car Rent Expenses
Car Rent Insurance Expense
Costumes Expense
Brochures Expense
Gym Membership Expense
Insurance Expense
Advances From Customers
Owner’s Equity
Cash
Brochures
Accounts Receivables
Prepaid Insurance
Prepaid Gym Membership
Costumes
Accumulated Depreciation Costumes
Web Site (intangible asset)
Accounts Payable
Costumes Depreciation Expense
Telephone Payable
If you think that for some reason that an assumption is called for, then also state
it clearly on your exam paper (at the back of the pink scantron sheet).
It is estimated that you will need 30 minutes to prepare the T accounts, Income
statement and Balance Sheet
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MIDTERM 1
SECTION A
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Part 1: Questions on the Case #1 This Section Questions ONLY APPLIES
TO ACCURAL ACCOUNTING for the case for the date ending September
30th:
1)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Cash/Bank account (use only one account for all
cash/cheque transactions)
A) More than $49,000
B) $ 49,000
C) $ 48,900
D) $ 48,000
E) Less than $48,000
2)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Costumes account?
A) $ 0
B) $ 300
C) $ 575
D) $ 600
E) None of the above is correct
3)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Costumes Expense Account?
A) $ 0
B) $ 300
C) $ 575
D) $ 600
E) None of the above is correct
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4)
SECTION A
Fall 2015
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At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Accounts Receivables?
A) $ 4,000
B) $ 5,000
C) $ 2,000
D) $ 3,000
E) None of the above is correct
5)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Prepaid Insurance?
A) $ 0
B) $ 600
C) $ 1,200
D) $ 7,200
E) None of the above is correct
6)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Car rent Expense?
A) $ 0
B) $ 100
C) $ 200
D) $ 400
E) None of the above is correct
7)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Insurance Expense?
A) $ 0
B) $ 600
C) $ 1,200
D) $ 7,200
E) None of the above is correct
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8)
SECTION A
Fall 2015
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At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Accounts Payable?
A) $ 200
B) $ 800
C) $ 1,000
D) $ 0
E) None of the above is correct
9)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Advances from Customers?
A) $ 3,000
B) $ 0
C) $ 2,000
D) $ 1,000
E) None of the above is correct
10)
At the end of the accounting period (Sep 30th, T account after AJE but
before preparing the Income Statement), what is the balance of
Owner's equity?
A) $ 50,000
B) $ 42,000
C) $ 49,000
D) $ 0
E) None of the above is correct
11)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Accumulated Depreciation Costumes?
A) $ 0
B) $ 25 Credit Balance
C) $ 25 Debit Balance
D) $ 25 Neutral balance
E) None of the above is correct
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12)
SECTION A
Fall 2015
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At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Revenues?
A) more than $9,000
B) Between $8,000 and $9,000
C) Between $6,000 and $7,999
D) Between $5,000 and $5,999
E) less than $5,000
13)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the Net income/Net Loss?
A) more than $5,800
B) Between $5,800 and 5,026
C) Between $5,025 and 3,901
D) Between $3,900 and $3,700
E) less than $3,700
14)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the total of Current Assets?
A) Less than $48,000
B) Between $48,000 and $48,999
C) Between $49,000 and $54,999
D) Between $55,000 and $55,500
E) More than $55,500
15)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the total of Assets?
A) More than $60,000
B) Between $57,000 and $60,000
C) Between $53,000 and $56,999
D) Between $50,000 and $52,999
E) Less than $50,000
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16)
SECTION A
Fall 2015
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At the end of the accounting period (Sep 30th, T account after AJE),
what is the total of Non Current Liabilities?
A) More than $10,000
B) Between $6,000 and $10,000
C) Between $2,000 and $5,999
D) Between $100 and $1,999
E) Less than $100
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This Section Question ONLY APPLIES TO CASH BASIS ACCOUNTING for
the case #1 for the date ending September 30:
Prepare “T” Accounts in CASH Basis for this case using the following chart of
accounts and then answer the questions.
Revenues
Expense on Web site
Car rent Expenses
Insurance Expense
Car Rent Insurance Expense
Brochures Expense
Costumes Expense
Gym Membership Expense
Telephone Expense
Cash
Owner’s Equity
Costumes Depreciation Expense
Advances From Customers
Accounts Payable
If you think that for some reason that an assumption is called for, then also state
it clearly on your exam paper (at the back of the pink scantron sheet).
It is estimated that you will need 30 minutes to prepare the T accounts, Income
statement and Balance Sheet
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SECTION A
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Part 1: Questions on the Case #1 This Section Questions ONLY APPLIES
TO CASH ACCOUNTING for the case for the date ending September 30th:
17)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Cash/Bank account (use only one account for all
cash/cheque transactions).
A) More than $50,000
B) $ 49,000
C) $ 48,900
D) $ 48,000
E) Less than $45,000
18)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Brochures?
A) $ 100
B) $ 150
C) $ 200
D) $ 300
E) None of the above is correct
19)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Accounts Receivables?
A) $ 4,000
B) $ 5,000
C) $ 2,000
D) $ 3,000
E) None of the above is correct
20)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Prepaid Insurance?
A) $ 0
B) $ 600
C) $ 1,200
D) $ 7,200
E) None of the above is correct
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21)
SECTION A
Fall 2015
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At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Car Rent Insurance Expense?
A) $ 0
B) $ 400
C) $ 800
D) $ 1,600
E) None of the above is correct
22)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Costumes Depreciation Expense?
A) $ 25
B) $ 575
C) $ 0
D) $ 600
E) None of the above is correct
23)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Gym Membership Expense?
A) $ 2,000
B) $ 1,500
C) $ 500
D) $ 0
E) None of the above is correct
24)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Accounts Payable?
A) $ 300
B) $ 800
C) $ 1,100
D) $ 0
E) None of the above is correct
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25)
SECTION A
Fall 2015
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At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Owner's equity?
A) $ 50,000
B) $ 42,000
C) $ 49,000
D) $ 0
E) None of the above is correct
26)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the balance of Accumulated Depreciation Costumes?
A) $ 0
B) $ 25 Credit Balance
C) $ 25 Debit Balance
D) $ 25 Neutral balance
E) None of the above is correct
27)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the Net income/Net Loss?
A) more than $5,800
B) Between $4,126 and $ 5,800
C) Between $3,901 and $4,125
D) Between $3,900 and $3,700
E) less than $3,700
28)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the total of Current Assets?
A) Less than $49,000
B) Between $49,000 and $51,999
C) Between $52,000 and $52,999
D) Between $53,000 and $55,500
E) More than $55,500
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29)
SECTION A
Fall 2015
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At the end of the accounting period (Sep 30th, T account after AJE),
what is the total of Non Current Assets?
A) More than $3,000
B) $ 2,575
C) $ 2,000
D) $ 575
E) Less than $500
30)
At the end of the accounting period (Sep 30th, T account after AJE),
what is the total of Non Current Liabilities?
A) More than $10,000
B) Between $6,000 and $10,000
C) Between $2,000 and $5,999
D) Between $100 and $1,999
E) Less than $100
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PART 2: Case #2: Questions 31 to 42 are based on this case
During our first class in this course we have a complex example covering the
transactions of the first month of operations of Tops in Topiary Company
(President & founder: Edward Scissorhands). At the end of the example the
following financial statements were prepared:
TOPS IN TOPIARY - INCOME STATEMENT FOR the month of May
Revenue
$2,540
Expenses:
Rent Expense
$500
Advertising Expense
$500
Wages Expense
$200 $1,200
Net Income
$1,340
TOPS IN TOPIARY - STATEMENT OF OWNER'S EQUITY FOR the month of MAY
Owner's Equity at May 1
$0
plus: Investment
2,000
plus: Net Income
1,340
less: Withdrawals
0
Owner's Equity at May 31
$3,340
TOPS IN TOPIARY - BALANCE SHEET AS OF MAY 31
ASSETS
LIABILITES AND OWNER'S EQUITY
Current Assets:
Current Liabilities:
Cash
$1,380
Accounts Payable
$800
Accounts Receivable
$1,500
Advances from Customers
$200
Prepaid Rent
$ 500
Prepaid Advertising
$ 500
Supplies
$ 100 $3,980
Equipment
$ 360 Owner's Equity
$3,340
Total Assets
$4,340 Total Liabilities & OE
$4,340
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During June the following transactions occurred:
1) Paid the helper the $200 owed from works done in May (the amount owed
is in Accounts Payable).
2) Completed the job for which the customer paid $200 in May. Tops in
Topiary collected $1000 in cash once finished.
3) Paid $500 for the rent of July.
4) At the end of June notices that there are no supplies left. Makes a note to
buy some in July.
5) At the end of June notices that there are few flyers left (used for
advertising) worth $100 and decides to order some for July. Before ordering,
the printer (supplier of flyers) asks to be paid $500 of the amount owed for
the flyers done in May. Tops in Topiary pays $500.
6) In June collected in cash $3,000 for 3 jobs are done for a total of $4,200,
the rest is owed in account by the customers.
7) In June decided to start depreciating the equipment bought for $360 that
is expected to last for 3 years.
8) In June 23rd Edward Scissorhands withdrew some cash for personal
reasons ($3,000).
Prepare “T” Accounts in ACCRUAL Basis for this case and then answer the
questions.
If you think that for some reason that an assumption is called for, then also state
it clearly on your exam paper (at the back of the pink scantron sheet).
It is estimated that you will need 30 minutes to prepare the T accounts, Income
statement, Statement of Owner’s Equity and Balance Sheet
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Part 2: Questions on the Case #2 This Section Questions ONLY APPLIES
TO ACCURAL ACCOUNTING for the case for the date ending June 30th:
31)
At the end of the accounting period (June 30th, T account after AJE),
what is the balance of Cash/Bank account (use only one account for all
cash/cheque transactions)
A) More than $2,000
B) Between $1,600 and $2,000
C) Between $1,200 and $1,599
D) Between $800 and $1,199
E) Less than $800
32)
At the end of the accounting period (June 30th, T account after AJE),
what is the balance of Accounts Receivables?
A) More than $3,000
B) Between $2,000 and $3,000
C) Between $1,000 and $1,999
D) Between $500 and $999
E) Less than $500
33)
At the end of the accounting period (June 30th, T account after AJE),
what is the balance of Prepaid Rent?
A) $1,500
B) $1,000
C) $500
D) $0
E) None of the above is correct
34)
At the end of the accounting period (June 30th, T account after AJE),
what is the balance of Equipment?
A) $360
B) $350
C) $340
D) $0
E) None of the above is correct
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35)
SECTION A
Fall 2015
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At the end of the accounting period (June 30th, T account after AJE),
what is the balance of Accounts Payable?
A) $1,200
B) $800
C) $200
D) $100
E) None of the above is correct
36)
At the end of the accounting period (June 30th, T account after AJE),
what is the balance of Revenues?
A) $5,400
B) $5,200
C) $4,200
D) $4,000
E) None of the above is correct
37)
At the end of the accounting period (June 30th, T account after AJE),
what is the balance of Rent Expense?
A) $0
B) $250
C) $750
D) $1,000
E) None of the above is correct
38)
At the end of the accounting period (June 30th, T account after AJE),
what is the balance of Depreciation Expense?
A) 360
B) $20
C) $10
D) $0
E) None of the above is correct
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39)
SECTION A
Fall 2015
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At the end of the accounting period (June 30th, T account after AJE),
what is the Net income/Net Loss?
A) more than $5,000
B) Between $4,500 and $5,000
C) Between $4,000 and $4,499
D) Between $3,000 and $3,999
E) less than $3,000
40)
At the end of the accounting period (June 30th, T account after AJE),
what is the total of Non Current Assets?
A) Less than $100
B) Between $100 and $199
C) Between $200 and $299
D) Between $300 and $350
E) More than $350
41)
At the end of the accounting period (June 30th, T account after AJE),
what is the total of Non Current Liabilities?
A) Less than $100
B) Between $100 and $199
C) Between $200 and $299
D) Between $300 and $400
E) More than $400
42)
At the end of the accounting period (June 30th, T account after AJE),
what is the total of Owner's Equity including the Net Income/Net Loss
of the period?
A) Less than $2,000
B) Between $2,000 and $2,999
C) Between $3,000 and $4,499
D) Between $4,500 and $5,500
E) More than $5,500
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PART 3: INDEPENDENT QUESTIONS (the remaining questions are totally
unrelated to the cases of Parts 1 and 2)
This Section Question ONLY APPLIES TO the information provided in each
question. They are not related to the case.
Use the following information for questions 43 and 44.
The following amounts have been extracted from the accounts of Sell-It at
its yearend, December 31, 1999:
Sales
Cost of
Goods Sold
Inventory
Account
Payable
43)
$50,000
$43,000
$10,000
$ 8,000
The gross profit which Sell-it would report is
A) $50,000
B) $40,000
C) $7,000
D) $15,000
E) none of the above
44)
If an error were made computing Sell-its ending inventory and
inventory were understated by $2,000 then:
A) gross profit is understated by $2,000
B) liabilities are overstated by $2,000
C) net income is overstated by $2,000
D) none of the above
E) cannot be answered with the data provided.
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45)
SECTION A
Fall 2015
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A firm's gross profit on net sales is 30% The firm had net sales of
$400,000 and net cost of purchases of $250,000. If the beginning
inventory was $40,000, how much was the ending inventory?
A) $126,000
B) $60,000
C) $26,000
D) $40,000
E) none of the above
46)
Which of the following combinations of trial balance totals does not
indicate a transposition error?
A) $65,470 debit and $64,570 credit
B) $32,340 debit and $35,420 credit
C) $27,650 debit and $26,570 credit
D) $14,517 debit and $15,471 credit
E) none of the above
47)
On January 1, 2007, the ledger of Conglomo Corporation correctly
showed supplies inventory of $900. During 2007, supplies purchases
amounted to $6,000. A count (inventory) of supplies on hand at
December 31, 2007, showed $1,800. The 2007 income statement
should report supplies expense amounting to
A) $6,000
B) $1,800
C) $5,100
D) $6,900
E) None of the above is correct.
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48)
SECTION A
Fall 2015
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Which of the following describes adjusting entries?
A) they frequently change at least one income statement account
balance and one balance sheet account balance.
B) they usually are recorded as of the 15th day of the accounting
period.
C) they are primarily used to change account balances because of
accounting errors that have been made.
D) all of the statements are correct
E) None of the above is correct.
49)
Owner's withdrawals
A) Happens when an owner withdraws the right of other companies
to do business with the firm
B) Are a return of invested capital to the owner
C) Are an expense of doing business
D) Are not allowed
E) None of the above is correct.
50)
Which of the following defines liabilities?
A)
Probable debts or obligations of an entity as a result of future
transactions which will be paid with assets or services.
B) Probable debts or obligations of an entity as a result of past
transactions which will be paid with assets or services.
C) Possible debts or obligations of an entity as a result of past
transactions which will be paid with assets or services.
D) Possible debts or obligations of an entity as a result of future
transactions which will be paid with assets or services.
E) None of the above is correct.
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