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Final F09 Solution

This document contains the suggested solutions to the final exam for a financial accounting course. It includes multiple choice questions and problems involving accounting for equipment purchases and sales, cash flow statements, and bond issuance and interest calculations. The solutions provide detailed steps and journal entries to demonstrate the accounting treatment for various transactions.

Uploaded by

Wyatt Niblett-wilson
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
109 views5 pages

Final F09 Solution

This document contains the suggested solutions to the final exam for a financial accounting course. It includes multiple choice questions and problems involving accounting for equipment purchases and sales, cash flow statements, and bond issuance and interest calculations. The solutions provide detailed steps and journal entries to demonstrate the accounting treatment for various transactions.

Uploaded by

Wyatt Niblett-wilson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CONCORDIA UNIVERSITY FINANCIAL ACCOUNTING

DEPARTMENT OF ACCOUNTANCY COMM 217 ALL SECTIONS

SUGGESTED SOLUTION
FINAL EXAMINATION

Fall 2009

Question 1 (21 marks) Multiple-choice

(1.5 marks per correct answer)

1. b

2. a

3. c

4. b

5. a

6. a

7. d

8. a

9. c

10. d

11. d

12. c

13. c

14. c
Question 2 (16 marks)

Req. 1

Total market value of two machines = $240,000 + $160,000 = $400,000

Allocation of the purchase price:


Machine A $350,000 x (240,000/400,000) = $210,000
Machine B $350,000 x (160,000/400,000) = $140,000

Req. 2

Equipment/Machinery ($350,000 + $2,000 + $1,000) 353,000


Cash ($353,000 – $250,000 ) 103,000
Notes payable 250,000

Req. 3

Amortization of Machine A– 2009 = ($212,000 – 0) x 2/10 = $42,400

Amortization of Machine A– 2010 = ($212,000 – 42,400 ) x 2/10 = $33,920

Req. 4

Amortization rate per unit for Machine B = ($140,000 + $1,000 – $6,000 ) / 100,000
= $1.35

Accumulated amortization at September 30, 2009 = $1.35 x 9,000 units


= $12,150

Net book value at September 30, 2009 = $141,000 – 12,150 = $128,850

Loss on sale of equipment = $128,850 – $125,000 = $3850

Amortization Expense 12,150


Accumulated amortization 12,150

Cash 125,000
Accumulated amortization 12,150
Loss on sale of equipment 3,850
Equipment 141,000
Question 3 (21 marks)
RT Ltd.
Cash Flow Statement
For the Year ended December 31, 2009

Operating activities
Net income $1,110,000
Add (deduct) items not affecting cash :
Amortization expense 90,000
Gain on disposal of capital assets (60,000)
Increase in accounts receivable (30,000)
Decrease in merchandise inventory 15,000
Decrease in prepaid expenses 2,000
Increase in accounts payable 8,000
Decrease in income taxes payable (16,000)
Cash from operating activities $1,119,000

Investing activities
Acquisition of capital assets (950,000)
Disposal of capital assets (Note 1) 88,000
Cash used in investing activities (862,000)

Financing activities

Repayment of note payable (60,000)


Proceeds from issuance of common shares 60,000
Payment of dividends (Note 2) (350,000)
Cash used in financing activities (350,000)

Decrease in cash during 2009 (93,000)


Cash balance, December 31, 2008 113,000
Cash balance, December 31, 2009 $20,000
       

Note 1: $1,292,000+ $950,000 – $90,000 – $2,124,000 + $60,000 = $88,000.

Note 2: $1,018,000 + $1,110,000 – $1,778,000 = $350,000


Req. 2

(a) Cash collected from customers

Sales revenue – Increase in Accounts Receivable = $4,000,000 – $30,000 = $3,970,000.

(b) Cash paid to suppliers of merchandise inventory

Cost of Goods Sold = Sales – Gross Profit

COGS = $4,000,000 – $2,600,000 = $1,400,000

Purchases = EI + COGS – BI = $20,000 + $1,400,000 – $35,000 = $1,385,000

Payments = Beg. A/P + Purchases – Ending A/P = $39,000 + $1,385,000 – $47,000 = $1,377,000

QUESTION 4 (22 marks)

Part A

Accounts Payable $136,800 ($79,300 + 41,000 + 2,500 + 106,000 – 92,000 )

Loans Payable $40,000

Rent Payable $84,000 (2 x $42,000)

Unearned revenue $6,000 ($9,000 – $9,000 x 1/3)

Estimated Warranty Liability $68,000 ($47,000 + 22,000 – 1,000 )

Salaries/Wages Payable $3,600 ($1,200 x 3)

Current Portion of Notes Payable $5,000 (due Dec. 31, 2009)

Interest payable $105 ($40,000 x 6% x 16/365 )

OR $100 = (40,000 x 6% x 0.5/12 )


Part B

Req. 1

Early retirement of the “old bonds” (3 marks)

January 1, 2009:
Bonds payable 100,000
Loss on early redemption of bonds ($98,500 – $97,474) 1,026
Discount on bonds payable 2,526
Cash ($100,000 x 98.5%) 98,500

New bond issue (4 marks)

n = number of interest periods = 5 x 2 = 10


i = discount rate = 7% x ½ = 3.5%

PV of principal = $150,000 x 0.7089 = $106,335


PV of interest payments = $150,000 x 6% x ½ x 8.3166 = 37,425
Bond issue price: 143,760
Discount = 150,000 – 143,760 = 6,240

January 1, 2009:
Cash 143,760
Discount on bonds payable 6,240
Bonds payable 150,000

Req. 2

July 1, 2009 (effective–interest method)

Bond interest expense ($143,760 x 7% x ½ ) 5,032


Discount on bonds payable 532
Cash ($150,000 x 6% x ½) 4,500

December 31, 2009 (effective–interest method)

Bond interest expense [($143,760 + 532 ) x (7% x ½) ] 5,050


Discount on bonds payable 550
Bond interest payable 4,500
 
 

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