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SATA TECHNOLOGY &BUSINESS COLLEGE (STBC)
UNDERGRADUATE/DEGREE PROGRAM
DEPARTMENT OF ACCOUNTING & FINANCE
FINAL EXAM FOR SECOND YEAR REGULAR STUDENTS
INSTRUCTOR: MESELE A. Time Allowed: 2:00hrs
Exam Date: 24/05/2015 E.C Max. Weight: 50%
Course Title: Principles of Accounting –II Entry Year: 2014
Course No: ACFN222 Academic year: 2015
Program: Regular
Name: ________________________________________ ID. No _____________Section______
INSTRACTION
 Your answer must be clear, specific and relevant
 Cheating will result incomplete cancellation of your marks
 Check the exam has III parts and 4 pages
Part One: True or False Questions (1PTS)
1. The members of a limited liability company have limited liability, like shareholders of a
corporation, and they are taxed like corporate shareholders.
2. Because of mutual agency, the act of any partner is binding on all other partners.
3. In Ethiopia nowadays, the first Birr 600 of the earnings of an employee is free from income tax.
4. Outstanding stock Issued stock that is held by stockholders and has not been bought back by the
corporation.
5. Employee is expected to pay or contribute 7% of their basic (monthly) salary $ employer is
also expected to contribute towards the same fund 11% of the basic salary of every temporary
employee of it.
6. Non Cumulative Preferred shareholders are paid both current and prior year dividends before
common shareholders receive any dividends
7. When a new partner is admitted by purchasing an interest from one or more of the existing
partners, the total assets and the total owners’ equity of the partnership are not affected.
8. A corporation has perpetual existence in that its continuous existence is not dissolved by the
death on retirements of any of its members.
9. Similar to partners in a partnership, stockholders of a corporation have unlimited liability.
10. The relative lack of government regulation is an advantage of the corporate form of business.
Part Two: Multiple Choice Questions (1.5PTS)
1. The time period for classifying a liability as current is one year or the operating cycle,
whichever is:
A. Longer. B. Probable. C. Shorter. D. Possible.
2. RS Company borrowed $70,000 on December 1 on a 6-month, 6% note. At December 31:

A. Neither the note payable nor the interest payable is a current liability.
B. The note payable is a current liability, but the interest payable is not.
C. The interest payable is a current liability but the note payable is not.
D. both the note payable and the interest payable are current liabilities
3. Maggie Sharrer Company borrows $88,500 on September 1, 2012, from Sandwich State Bank
by signing an $88,500, 12%, one-year note. What is the accrued interest at December 31,
2012?
A. $2,655. B. $4,425. C. $3,540. D. $10,620.
4. In the liquidation of a partnership, it is necessary to (1) distribute cash to the partners, (2) sell
noncash assets, (3) allocate any gain or loss on realization to the partners, and (4) pay
liabilities. These steps should be performed in the following order:
A. (2), (3), (4), (1). C. (2), (3), (1), (4).
B. (3), (2), (1), (4). D. (3), (2), (4), (1).
5. The NBC Company reports net income of $60,000. If partners N, B, and C have an income
ratio of 50%, 30%, and 20%, respectively, C’s share of the net income is:
A. $30,000. B. $18,000. C. $12,000. D. No correct answer
6. Using the data in (5) above, what is B’s share of net income if the percentages are applicable
after each partner receives a $10,000 salary allowance?
A. $12,000. B. $19,000. C. $20,000. D. $21,000.
7. Upon formation of a partnership, each partner’s initial investment of assets should be recorded
at their:
A. Book values. C. Cost.

B. Fair values. D. appraised values
8. Which of the following is not a characteristic of a partnership?

A. Double Taxable entity. C. Co-ownership of property.
B. Mutual agency. D. Limited life.
9. The advantages of a partnership do not include:
A. Ease of formation. C. Freedom from government regulation.
B. Unlimited liability. D. Ease of decision making.
10. ________ is the work performed by an employee beyond the regular working hours or days.
A. Overtime work C. Basic salary
B. Allowance D. Bonus
11. __________ an organization owned by two or more parties for the purpose of profit generation
A. Corporation B. Partnership C. Sole proprietorship D. None
12. The two basic sources of corporate capital are
A. Paid-in capital and retained earnings C. Stock and bonds
B. Common stock and preferred stock D. Retained earnings and dividends
13. Which of the following is a disadvantage of the corporate form of organization?
A. Limited liability C. Ability to raise capital
B. Owner is separate from management D. Continuous life
14. Which of the following is not a major advantage of a corporation?
A. Separate legal existence. C. Government regulations.
B. Continuous life. D. Transferable ownership rights
15. A monthly sum paid to an employee for bearing a particular office responsibility, head of a
particular department or division.
A. Desert allowance C. Hardship allowance

B. Position allowance D. House allowance
16. Preferred stock may have priority over common stock except in:
A. Dividends. C. Cumulative dividend features.
B. Assets in the event of liquidation. D. Voting
17. Which one of the following are the rights of shareholders of the corporation
A. The right to vote B. Pre emotive right
C. The right to participate in the earnings of the corporation

D. The right to share in the distribution of assets up on liquidation
E. All
Part THREE: Work Out Questions: (25 Points).
1. Assume XYZ Co. the following data were taken from the records of one of the organization
that pays payroll to its employees according to Ethiopian payroll system for the month of
December 30, 2005.
Serial Name of employees Basic Salary Transportation Overtime hours Duration of Over time
no Allowances Worked
01 Enyat adem Br.5,000 Br. 200 5 hours 10:00 P.M to 6:00 A.M
02 John ayele 8,500 2500 10 hours Public Holiday
03 Aberash abebe 10,600 2200 7 hours After 10:00 P.M
04 Adugna worku 4,600 450 5 hours Before 10:00 P.M
Additional information
I. All employees are expected to work for 160 hours per month.
II. All employees are permanent except John ayele.
III.The Allowance of Enyat adem and John ayele are non- taxable.
IV. All employees contribute 10% of their basis salary to credit association.
Required:
A. Compute the over time, Gross Earnings, employment income tax, pension contribution, Total
deductions and net pay of each employee (10 Points).
B. Prepare the payroll register/ sheet (5 Points).
2. In January31, 2015, Melat, Blen and Rekike: agreed to liquidate their partnership named MBR
Partnership. The income sharing ration is 2:3:5, respectively. After discontinuing the ordinary
business operations of their partnership and closing the accounts, the following summary of the
general ledger is prepared:
Cash 13,000 Liabilities 20,000

Non Cash Assets 62,000 Melat, Capital 22,000
Total asset 75,000 Belen, Capital 22,000
Rekike, Capital 11,000
Total liability & owner equity 75,000
1. All of the liabilities are paid at one time. Assuming that the non-cash assets are sold: Br
80,000, Br 30,000 (5 Points).
2. Journalize the entries to record (5 Points).

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SATA TECHNOLOGY &BUSINESS COLLEGE (STBC)

2. RS Company borrowed $70,000 on December 1 on a 6-month, 6% note. At December 31:

A. $30,000. B. $18,000. C. $12,000. D. No correct answer

A. $12,000. B. $19,000. C. $20,000. D. $21,000.

A. Book values. C. Cost.

8. Which of the following is not a characteristic of a partnership?

A. Desert allowance C. Hardship allowance

A. The right to vote B. Pre emotive right

C. The right to participate in the earnings of the corporation

Cash 13,000 Liabilities 20,000

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