NATIONAL CHENGCHI UNIVERSITY

DEPARTMENT OF ACCOUNTING

MANAGERIAL ACCOUNTING
MOCK EXAM

Time Allowed: 2.5 hours

________________________________________________________________________

INSTRUCTIONS TO CANDIDATES

1. Write your name and matric number in the space provided below.

2. This is a closed-book examination.

3. There is a total of 17 pages in this examination paper, consisting of two sections - Section
A and Section B.

4. Section A consists of 20 multi-choice questions (MCQs) worth 1 mark each. Answer

these MCQs ONLY in the answer box provided in the last page of the Section A.

5. Section B consists of 5 computational and short-answer questions worth a total of 80

marks. Answer these questions ONLY in the spaces after each question provided in this
booklet.

6. You must hand in this booklet before leaving the examination hall.

Name:
Matriculation Number:

For Examiners’ Use Only:

Marks
Section A / 20
Section B: Q1 / 12
Section B: Q2 / 10
Section B: Q3 / 14
Section B: Q4 / 18
Section B: Q5 / 26
Total / 100

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Section A: Multiple-choice questions (Total: 20 marks; 1 mark each)
Select the best answer for each question and provide your answers in the box at the end of this
section.

1. Which of the following is a characteristic of financial accounting information?

a. Its preparation requires judgment.

b. It is more about the future than it is about the past.
c. None of it is based on estimates, assumptions, and judgments.
d. Notes and explanations from management are not included.

2. The balance sheet item that represents the portion of owners' equity resulting from profitable
operation of the business is:

a. Accounts receivable.
b. Cash.
c. Capital stock.
d. Retained earnings.

3. Each year the accountant for Tang Dynasty Company adjusts the recorded value of each asset
to its market value. Using these market value figures on the balance sheet violates:

a. The accounting equation.

b. The stable-dollar assumption.
c. The business entity concept.
d. The cost principle.

4. On June 27, Long Life Services, Inc., performed extensive tests on lab specimens submitted
by several customers and sent invoices totaling $3,800, due in 30 days.

a. No revenue from rendering these services should be recorded until payment is

received.
b. This situation causes an increase in assets and in revenue in June, but has no effect on
owners' equity until payment is received.
c. Revenue is earned in June, but assets are not increased until payment is received.
d. Assets, revenue, and owners' equity are increased in June, regardless of when
payment is received.

5. Retained earnings at the end of a period::

a. Is equal to the balance in the Retained Earnings account in the adjusted trial balance
at the end of a period.
b. Is determined in the statement of retained earnings.
c. Is equal to retained earnings at the beginning of the period, plus net income (or minus
net loss) for the period.
d. Appears in the income statement for the period.

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6. If cash increases during a year, it must mean that:

a. There was net income on the income statement.

b. Retained earnings increased.
c. The net worth of a company increased.
d. None of the three statements above must necessarily be true.

7. Capital stock represents:

a. The amount invested in the business by stockholders when shares of stock were
initially issued by a corporation.
b. The owners' equity for a business organized as a corporation.
c. The owners' equity accumulated through profitable operations that has not been paid
out as dividends.
d. Price paid by the current owners to acquire shares of stock in the corporation,
regardless of whether they bought the shares directly from the corporation or from
another stockholder.

8. Which of the following transactions would cause a change in owners' equity?

a. Repayment of a bank loan.

b. Purchase of a delivery truck on credit.
c. Sale of land on credit for a price above cost.
d. Borrowing money from a bank.

(Question 9) The following data were taken from the records of Busyboy Company for the year
ending December 31, 2015:

01/01/15 12/31/15
Assets $11,550 ?
Liabilities 8,080 $10,865
Equity ? 6,765

9. Given the above information, assets on December 31, 2015, were

a. $17,630
b. $4,100
c. $18,060
d. $11,250

10. At the end of the current year, the owners' equity in Heyday Corp is $370,000. During the
year the assets of the business had increased by $78,000, and the liabilities had increased by
$128,000. Owners' equity at the beginning of the year must have been:

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 a. $420,000
b. $320,000
c. $576,000
d. $164,000

11. The following information was taken from the records of Lacoste Company for the period
ending December 31, 2015:

Advertising expense $1,200

Equipment 800
Accounts receivable 1,500
Notes payable 6,000
Retained earnings 8,420
Utilities expense 1,385
Revenues 4,620
Dividends 975
Interest receivable 125
Rent expense 655

Assuming that 3,450 shares of stock are outstanding, earnings per share is approximately:

a. $1.40
b. $0.40
c. $0.27
d. $0.23

(Question 12-14) During the month, Cosmopolitan Corporation had the following cash
transactions:

Cash collected from customers $ 356,500

Cash received from a loan 25,000
Cash paid for wages payable (6,550)
Cash paid for the purchase of a building (100,000)
Cash received for the issuance of new shares of stock 10,000
Cash received from sale of land 75,400
Cash paid for rent (3,300)
Cash paid for dividends (2,250)

12. Given the above information, compute cash flow from operating activities.

a. $346,650
b. $381,500
c. $256,500
d. $353,200

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13. Given the above information, compute cash flow from investing activities.

a. $7,750
b. ($7,750)
c. ($24,600)
d. $24,600

14. Given the above information, compute cash flow from financing activities

a. $65,000
b. $45,000
c. $35,000
d. $32,700

15. An analysis of cash records and account balances of Lobster, Inc., for 2015 is as follows:

Account balance Account balance on Cash received

on January 1, 2015 December 31, 2015 in 2015
Unearned rent $15,810 $12,600
Received for rent $62,200

Given the above information, the amount of rent revenue for 2015 is:

a. $58,990
b. $33,790
c. $90,610
d. $65,410

16. Which of the following would not be considered an adjusting entry?

a. A
b. B
c. C
d. D

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17. Recognizing revenue when it is earned and not when cash is received and expenses when the
related goods or services are used rather than when paid for is called:

a. Revenue recognition
b. Accrual accounting
c. Conservatism
d. Matching

18. Dan Lam, president of Hourglass, Inc, noticed a $9,000 debit to Accounts Payable in the
company's general ledger. This debit could correspond:

a. A $9,000 sale to a customer.

b. A purchase of equipment costing $9,000 on credit.
c. A payment of $9,000 to a supplier to settle a balance due.
d. The failure to pay this month's$9,000 utility bill on time.

19. Pola Bear Inc. purchased a building on January 1, 2015 for CHF700,000. The useful life of
the building is 10 years. What impact will the appropriate adjusting entry at December 31,
2015 have on its statement of financial position at December 31, 2015?

a. Increase Equity CHF70,000.

b. Increase Liabilities CHF70,000.
c. Decrease Assets CHF70,000.
d. Since the adjusting entry has offsetting debits and credits, there is no impact on the
statement of financial position.

20. The collection of an account receivable is recorded by a debit to Cash and a credit to
Accounts Payable. If this error is not corrected?

a. Total liabilities are understated.

b. Total assets are understated.
c. Total liabilities are overstated.
d. Owners’ equity is overstated.

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Section B: Short-answer and computational questions (Total: 80 marks)
Write your answers for each question ONLY in the spaces provided after each question in this
section. Be concise in your answers.

Question 1 (12 marks)

The following information was taken from the Tinchung Corporation's books:

Accounts receivable $78,400 Salaries expense $132,000

Interest expense 10,000 Accounts payable 40,000
Retained earnings 201,600 Supplies expense 36,800
Sales revenue 720,000 Utilities expense 2,400
Advertising expense 14,400 Rent expense 9,600
Cost of goods sold 250,000 Non-operating income 5,000

Required:

Prepare a statement of comprehensive income for the year ended December 31, 2013 (assume
that other comprehensive income is $1,000 and 10,000 shares of stock are outstanding) Income
tax rate 30%.

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Question 2 (10 marks)
The balance sheet was as follows for A&F on February 1, 2015:

A&F
Balance Sheet
February 1, 2015
Assets Liabilities and Owners’ Equity
Cash $ 6,000 Liabilities
Accounts receivable 6,300 Notes payable $ 60,000
Land 90,000 Accounts payable 11,000
Buildings 60,000 Total liabilities $ 71,000
Office equipment 45,000 Owners’ Equity
________ Capital stock $100,000
Retained earnings 36,300 $ 136,300
Total liabilities and
Total assets $ 207,300 Owner’s equity $207,300

During the first week of February, the following transactions occurred:

* The business received $3,500 of its accounts receivable.
* Additional capital stock was issued to Janet for $20,000 cash.
* Equipment was purchased on credit for $5,600
* The business paid off $3,000 of its accounts payable (No payment was made on the notes payable.)

Required:

Complete the balance sheet for A&F at February 28.

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Question 3 (14 marks)

Koh Brothers’ Travel adjusts its books each month and closes its books on December 31 each year.
The trial balance at January 31, 2015, before adjustments, follows:

Debit Credit
Cash ................................................................................ $ 3,300
Supplies .......................................................................... 2,700
Unexpired Insurance ...................................................... 6,300
Equipment ...................................................................... 36,000
Accumulated Depreciation: Equipment......................... $9,000
Unearned Admission Revenue....................................... 6,000
Capital Stock .................................................................. 7,500
Retained Earnings, January 1, 2015............................... 21,600
Admissions Revenue ...................................................... 13,800
Salaries Expense............................................................. 4,050
Utilities Expense ............................................................ 2,850
Rent Expense .................................................................. 2,700 ________
$57,900 $57,900
Required:

Please provide your answer in the blank for each sub-question below:
1 According to attendance records, $4,800 of the Unearned Admission Revenue has been earned in
January. Compute the balance in the following accounts after the proper adjustment is made.
Unearned Admission Revenue account balance $__________
Admission Revenue account balance $__________

2 At January 31, the amount of supplies still on hand was determined to be $675. What amount
should be reported in the January income statement for supplies expense? $__________

3 The equipment has an original useful life of eight years. Compute the book value of the equipment
at January 31 after the proper January adjustment is recorded. $__________

4 $900 is owed to employees for work since the last payday in January, to be paid the first week of
February. What is the effect on January net income if the accountant fails to make any January
31 adjustment for this item? January net income will be (overstated/understated) by $____
______.

5 On June 1, 2015, the park purchased a 12-month insurance policy. Give the adjusting entry to
record insurance coverage expiring in January. (Hint: The company adjusts its books monthly.)

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Question 4 (18 marks)

Bella Beauty Salon's unadjusted trial balance for the current year follows:

Bella Beauty Salon

Trial Balance
December 31
Cash................................ ................................ ............. $ 4,200
Prepaid insurance ................................ ......................... 1,480
Shop supplies ................................ ............................... 990
Shop equipment................................ ............................ 3,860
Accumulated depreciation–shop equipment .................. $ 770
Building ................................ ................................ ....... 57,500
Accumulated depreciation–building.............................. 3,840
Land................................ ................................ ............. 55,000
Unearned rent................................ ............................... 1,600
Long-term notes payable ................................ .............. 50,000
Common stock ................................ ............................. 10,000
Retained earnings ................................ ......................... 39,860
Rent earned ................................ ................................ .. 2,400
Fees earned ................................ ................................ .. 23,400
Wages expense ................................ ............................. 3,200
Utilities expense................................ ........................... 690
Property taxes expense ................................ ................. 600
Interest expense................................ ............................ 4,350 _______
Totals ................................ ................................ ........... $131,870 $131,870

Additional information:
a. An insurance policy examination showed $1,240 of expired insurance.
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments, and this $200 of accrued revenue was
unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The
employee was paid last week but has worked four days this week for which she has
not been paid.
h. Three months' property taxes, totaling $450, have accrued. This additional amount of
property taxes expense has not been recorded.
i. One month's interest on the note payable, $600, has accrued but is unrecorded.

Required:

Based on the above information, prepare the adjusting journal entries for Bella's Beauty
Salon.

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Question 5 (26 marks)

The following trial balance was prepared by a new employee.

Trial Balance
Temasek Company
For the Year Ended December 31, 2015

Credits Debits
Prepaid Expense $3,200
Cash $8,420
Loan Payable 64,800
Supplies 6,920
Advertising Expense 5,500
Capital Stock 92,200
Equipment 42,100
Notes Payable 202,800
Inventory 36,000
Wages Expense 70,000
Notes Receivable 13,400
Accounts Payable 13,250
Accounts Receivable 7,600
Rent Expense 9,880
Wages Payable 7,000
Furniture 21,500
Supplies Expenses 3,600
Sales Revenue 188,300
Buildings 226,000
Cost of Goods Sold 116,000
Property Tax Expense 2,750
Land 10,240
Retained Earnings 18,500
Utilities Expense 6,200
Unearned Revenue 2,460
Totals $688,220 $490400

Required:

Prepare the corrected company trial balance, assuming all accounts have “normal” balances
and the recorded amounts are correct.

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