Exam 1- Sample Exam Solutions

8/10/2019 Exam 1- Sample Exam Solutions

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Problem 2 ,ultiple:step income statement (1/ points)

Presented below is information related to 6regg ompan .

etained earnings# !ecember "1# $%%" ' 7/%#%%%5ales 1#7%%#%%%

5elling and administrati e e penses $&%#%%%;urricane loss (pre:ta ) on plant (e traordinar item) $/%#%%%ash di idends declared on common stock ""#7%%ost of goods sold


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!i idends paid ($%#%%%)2arned surplus 1$"#%%%

T=TA@ 2C0-T>"&"#%%%

T=TA@ @-A9-@-T-25 A*! 2C0-T>'1#$"/#%%%


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*ote 1. The reser e for contingencies has been created b charges to earned surplusand has been established to pro ide a cushion for future uncertainties.

*ote $. The in entor account includes onl items ph sicall present at the main plantand warehouse. -tems located at the compan Ds branch sales office amountingto '$/#%%% are e cluded since the compan has consistentl followed this

procedure for man ears.Solution Problem. Balance Sheet Format

1. The heading should be as of a specific date rather than for a period of time.

$. eser e for !epreciation is poor terminolog E the title Accumulated !epreciation ismore appropriate.

". @and and buildings should be segregated into two accounts. The Accumulated!epreciation account should onl be reported for the buildings.

&. Plant site held for future use should be shown in the -n estments section.

/. urrent assets should be shown on the balance sheet first in most situationsEcurrent assets are listed usuall in order of li3uidit E factor supplies should beshown as a current asset.

7. Treasur stock is not an asset# but a contra account to stockholdersD e3uit in mostsituations.

+. *otes recei able should be reported as a current asset or an in estment.

8. The deferred charge items should be reclassified as follows in most situationsB

Ad ances to salespersons?current assetPrepaid rent?current asseteturnable containers?current asset


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Problem 4 alculation of net income from the change in stockholdersD e3uit (/ points)

Presented below are changes -n the account balances of Ping ompan during the ear#e cept for retained earnings.

-ncrease-ncrease

(!ecrease)(!ecrease)ash '$/#%%% Accounts pa able '"/#%%%

Accounts recei able (net) (1"#%%%) 9onds pa able ($%#%%%)-n entor /$#%%% ommon stock +$#%%%Plant Assets (net) /+#%%% Paid:in capital 17#%%%

The onl entries in etained 2arnings were for net income and a di idend declaration of '$%#%%%.

ompute the net income for the current ear.

Computation of net income

hange in assets ('1"%%% G '1"#%%%) '1$1#%%% -ncreasehange in liabilities ('"/#%%% G '$%#%%%) 1/#%%% -ncreasehange in stockholdersD e3uit 1%7#%%% -ncrease

AddB !i idend declared $%#%%%@essB -n estment b stockholders (88#%%%)

*et income ' "8#%%%


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Problem 5 -ncome statement relationships (7 points)

Fill in the appropriate blanks for each of the independent situations below. ompan A ompan 9

ompan

5ales (a) 'HHHHHHH '"&"#&%%9eginning in entor /$#7%% (d) HHHHHHH *et purchases 1

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Exam 1- Sample Exam Solutions