ACCT2110

Unit 4 Exam (Chapters 10, 11, 12, 13)

Date: Thursday May2,

Time: 10:30am-12:20pm
Location: G108
This is a CLOSED BOOK exam. You CANNOT use your own laptops.

All cellphones should be silenced or switched off and kept inside

your bags. There should be no cell phones on the desk. Anyone seen
using a phone during the exam will have their exams cancelled. If
you need to use the restroom please leave your phone in the
classroom.
If you notice anyone using their phones during the exam please
report it to me.

To prepare for the exam focus on the open ended problem Examples in the
study guide.

Chapter 10:
Record the proceeds of a notes payable and accrue the interest expense (loan
proceeds are received on a date other than the beginning of the year and the
interest is paid at year end).
Record payroll entries
Record sale of bonds at face value and record interest expense.

Chapter 11:
Record entries for stock issuances (common, preferred, treasury).
Record entries for dividends declared and paid. Determine the number of shares
outstanding on the record date.
Prepare the stockholders’ equity section of the balance sheet.

Chapter 12:
Determine cash inflows and cash outflows and determine the appropriate section for
presentation of items on the statement of cash flows.
Prepare the Net Cash Provided (or Used) by Operating Activities section of the
statement of cash flows using the indirect method.
Q1. AP Hive Company borrows $90,000 on July 1 from the bank by signing a
$90,000, 7%, 1-year note payable. Prepare the journal entries to record (a) the
proceeds of the note and (b) accrued interest at December 31, assuming adjusting
entries are made only at the end of the year.
Compute and record sales taxes payable.

(a) July 1 Cash90,000

Notes Payable........................................ 90,000

(b) Dec. 31 Interest Expense..................................3,150

Interest Payable
($90,000  7%  6/12)...................... 3,150

Q2. Data for Betsy Strand are presented in BE10.5. Prepare the employer’s journal
entries to record (a) Betsy’s pay for the period and (b) the payment of Betsy’s
wages. Use January 15 for the end of the pay period and the payment date.
Prepare entries for payroll taxes.

Jan. 15 Salaries and Wages Expense...............808.00

FICA Taxes Payable ($808  7.65%)..... 61.81

Federal Income Taxes Payable.............. 95.00
Salaries and Wages Payable................. 651.19

Jan. 15 Salaries and Wages Payable................651.19

Cash...................................................... 651.19

Q3. Clooney Corporation issued 3,000 7%, 5-year, $1,000 bonds dated January 1,
2025, at face value. Interest is paid each January 1.
Prepare the journal entry to record the sale of these bonds on January 1, 2025.
Prepare the adjusting journal entry on December 31, 2025, to record interest
expense.
Prepare the journal entry on January 1, 2026, to record interest paid.

Prepare journal entry for redemption of bonds.

Q4.

2025
(a) Jan. 1 Cash......................................3,000,000
Bonds Payable
(3,000  $1,000)..........................3,000,000

(b) Dec. 31 Interest Expense............................ 210,000

Interest Payable
($3,000,000  7%)............... 210,000
(Int. exp. = Face value of bond  stated int. rate)
($210,000 = $3,000,000  7%)

2026
(c) Jan. 1 Interest Payable................210,000
Cash......................................... 210,000

Q5.

2022
(a) Aug. 1 Cash 600,000
Bonds Payable 600,000

(b) Dec. 31 Interest Expense 17,500

Interest Payable
($600,000 X 7% X 5/12)
17,500
(Interest expense = Face value of bond X stated interest rate X 5/12)
2023
(c) Aug. 1 Interest Expense
 ($600,000 X 7% X 7/12) 24,500
Interest Payable 17,500
Cash ($600,000 X 7% X 12/12)
42,000
(Interest expense = Face value of bond X stated interest rate X Fraction of yr.
outstanding)
($24,500 = $600,000 x 7% x 7/12)

Q6.

July 1, 2022
Cash 50,000
Notes Payable 50,000

November 1, 2022
Cash 60,000
Notes Payable 60,000

December 31, 2022

Interest Expense…($50,000 x 8% x 6/12) 2,000
Interest Payable 2,000
Interest Expense…($60,000 x 6% x 2/12) 600
Interest Payable 600

Q7. AP Sagan Co. had these transactions during the current period.
June 12 Issued 80,000 shares of $1 par value common stock for cash of
$300,000.
July11 Issued 3,000 shares of $100 par value preferred stock for cash at $106 per
share.
Nov. 28 Purchased 2,000 shares of treasury stock for $9,000.
Instructions
Prepare the journal entries for the Sagan Co. transactions.
Journalize issuance of common and preferred stock and purchase of treasury stock.
June 12Cash .........................................................300,000
Common Stock (80,000 × $1)............... 80,000
Paid-in Capital in Excess of Par
Value—Common Stock.........................
220,000

July 11Cash (3,000 × $106)................................................ 318,000

Preferred Stock (3,000 × $100).............
300,000
Paid-in Capital in Excess of Par
Value—Preferred Stock
(3,000 × $6)......................................... 18,000

Nov.28 Treasury Stock ...................................................... 9,000

Cash...................................................... 9,000

(Pref. stk. = No. of shs. issued × Par value per sh.)

(July 11: $300,000 = 3,000 × $100)

Q8. On January 1, Graves Corporation had 60,000 shares of no-par common stock
issued and outstanding. The stock has a stated value of $4 per share. During the
year, the following transactions occurred.
Apr.1 Issued 9,000 additional shares of common stock for $11 per share.
June 15 Declared a cash dividend of $1.50 per share to stockholders of record
on June 30.
July10 Paid the $1.50 cash dividend.
Dec.1 Issued 4,000 additional shares of common stock for $12 per share.
Dec15 Declared a cash dividend on outstanding shares of $1.60 per share to
stockholders of record on December 31.

Instructions
Prepare the entries, if any, on each of the three dates that involved dividends.
How are dividends and dividends payable reported in the financial statements
prepared at December 31?

(a) June 15 Cash Dividends (69,000* × $1.50)......... 103,500

Dividends Payable..........................
103,500
*60,000 shares + 9,000 shares

July 10 Dividends Payable.................................. 103,500

Cash................................................
103,500
 Dec. 15 Cash Dividends (73,000** × $1.60)116,800
Dividends Payable.......................... 116,800
**69,000 shares + 4,000 shares

(Cash div. = No. of shs. outstanding × div. per sh.)

[Dec. 15: $116,800 = (60,000 + 9,000 + 4,000) × $1.60]

(b) In the retained earnings statement, total dividends declared of

$220,300 will be deducted. In the balance sheet, Dividends Payable of
$116,800 will be
reported as a current liability.

Q9. AP Sudz Corporation has these accounts at December 31: Common Stock, $10
par, 5,000 shares issued, $50,000; Paid-in Capital in Excess of Par $22,000;
Retained Earnings $42,000; and Treasury Stock, 500 shares, $11,000. Prepare the
stockholders’ equity section of the balance sheet.
Evaluate a company’s dividend record.

Stockholders’ equity
Paid-in capital
Capital stock
Common stock, $10 par value, 5,000 shares
issued and 4,500 shares outstanding $ 50,000
Additional paid-in capital
Paid-in capital in excess of par value—
common stock 22,000
Total paid-in capital 72,000
Retained earnings 42,000
Total paid-in capital and retained earnings 114,000
Less: Treasury stock (500 shares) 11,000
Total stockholders’ equity $103,000

Q10. (LO 1), C Each of these items must be considered in preparing a statement of
cash flows for Irvin Co. for the year ended December 31, 2025. For each item, state
how it should be shown in the statement of cash flows for 2025.

Issued bonds for $200,000 cash.

Purchased equipment for $180,000 cash.
Sold land costing $20,000 for $20,000 cash.
Declared and paid a $50,000 cash dividend.

Classify items by activities.

(a) Cash inflow from financing activity, $200,000

(b) Cash outflow from investing activity, $180,000
(c) Cash inflow from investing activity, $20,000
(d) Cash outflow from financing activity, $50,000

Q11. The comparative balance sheets for Gale Company show these changes in
noncash current asset accounts: accounts receivable decreased $80,000, prepaid
expenses increased $28,000, and inventories increased $40,000. Compute net cash
provided by operating activities using the indirect method, assuming that net
income is $186,000.
Determine cash received from sale of equipment.

Cash flows from operating activities

Net income................................................
$186,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Decrease in accounts receivable............ $80,000)
Increase in prepaid expenses................. (28,000)
Increase in inventories........................... (40,000
12,000
Net cash provided by operating
activities.............................................. $198,000
(Adjustments to net income include decrease in noncash current assets (+); and increase in
noncash current assets (−))
($12,000 = $80,000 − $28,000 − $40,000)

Q12.
(a) Significant noncash (g) Operating activity
investing and (h) Significant noncash investing
financing activity and financing activity
(b) Investing activity (i) Investing activity
(c) Financing activity (j) Operating activity (loss);
(d) Operating activity investing
(e) Significant noncash (k) activity (cash proceeds from
investing and sale)
financing activity Financing activity
(f) Financing activity

Q13.
 MOAB CORPORATION
Statement of Cash Flows—Indirect Method
For the Year Ended December 31, 2022

Cash flows from operating activities

Net income $57,200
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense $41,000)
Decrease in accounts receivable 4,800)
Decrease in inventory 3,100)
Decrease in income taxes payable (3,900) )
Increase in accounts payable 5,700) 50,700)
Net cash provided by operating
activities
107,900)

Cash flows from investing activities

Sale of land 104,000
Purchase of land (81,000)
Net cash used by investing activities 23,000

Cash flows from financing activities

 Issuance of stock 160,000)
Payment of dividend (38,000))
Redemption of bonds (66,000)

Net cash provided by financing activities 56,000

Net increase in cash 186,900

Cash at beginning of period 24,000

)
Cash at end of period $210,900)