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Question umber-3 Part- A Marks 2
PRIDE FOREVER
BALACE SHEET AS JUE 30, 2010----.
Assets Liabilities and Owners EquityCash ............................... 12,000 Bank loan ............................. 40,000
Inventory ....................... 95,000 Owners EquityOther assets ................... 13,000 Owners equity.................. 80,000
Total assets ....................
120,000
Total liabilities and
owners equity ......................
120,000.The purpose of this problem is to test the equality of the basic accounting equation: assets equal liabilities
plus owners equity.
Problem -14 ( Part B) Marks 5 Zentech Company
The missing numbers are:
Year 1
Noncurrent assets ........................................ Rs410,976Noncurrent liabilities ................................... 240,518
Year 2
Current assets .............................................. 90,442Total assets .................................................. 288,456
Noncurrent liabilities ..................................( Answers can vary according to facultyannouncement in exam hall, benefit is to
be given to the students)
78,585
Year 3
Total assets .................................................. 247,135Current liabilities ......................................... 15,583Total liabilities and owners equity ............. 247,135
Year 4
Current assets .............................................. 69,090
Current liabilities ......................................... 17,539
The basic accounting equation is
Assets = Liabilities + Owners equity
Current assets + Noncurrent assets = Total assets
Current liabilities + Noncurrent liabilities = Total liabilities
Paid-in capital + Retained earnings = Owners equity.
Faculty explanation: - The additional paid-in capital account is a special account to record the
excess of capital received over par value in common share stock issuances. Simply use a
descriptive term, like paid-in capital, to describe capital received from stockholders.
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QUESTIO -15 (5 MARKS) STAPLE COMPAY
BALACE SHEET, JUE 30, ----.
Assets Liabilities
Cash .................................................... Rs 89,000 Accounts payable ......................... 241,000
Marketable securities .......................... 379,000 Taxes payable ............................... 125,000
Accounts receivable ........................... 505,000 Accrued expenses ......................... 107,000Inventories 513,000 Current liabilities.......................... 473,000
Current assets ................................ 1,486,000 Notes payable ............................... 200,000
Land .................................................... 230,000 Bonds payable .............................. 700,000Buildings ............................................ 1,120,000 Total liabilities ............................. 1,373,000
Accumulated depreciation .................. (538,000)
Equipment .......................................... 761,000 Owners EquityAccumulated depreciation .................. (386,000) Capital share stock ....................... 1,000,000
Investments......................................... 320,000 Retained earnings ....................... 620,000
Total assets ....................................
2,993,000
Total liabilitiesand owners equity ..................
2,993,000
Some students may want to test the notes payable as a current liability. Notes payable are usually debt
instruments longer than one year, but in the absence of any details listing them as a current liability isacceptable.
Question: 16 CASE (Part C)
( Marks 13 )
The explanation of these 11 transactions is:
1. Owners invest Rs20,000 of equity capital in Acme Consulting.2. Equipment costing Rs7,000 is purchased for Rs5,000 cash and an account payable of Rs2,000.3. Supplies inventory costing Rs1,000 is bought for cash.4. Salaries of Rs4,500 are paid in cash.5. Revenues of Rs10,000 are earned, of which Rs5,000 has been recovered in cash. The remaining
Rs5,000 is owed to the company by its customers.
6. Accounts payables of Rs1,500 are paid in cash.7. Customers pay Rs1,000 of the Rs5,000 they owe the company.8. Rent Expense of Rs750 is paid in cash.9. Utilities of Rs500 are paid in cash.10.A Rs200 travel expense has been incurred but not yet paid.11.Supplies inventory costing Rs200 are consumed.
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ACME COSULTIG
BALACE SHEET AS OF June 30, ----.
Assets Liabilities and Owners EquityCash ................................................ Rs12,75
0Accounts payable ........................... Rs 700
Accounts receivable ....................... 4,000Supplies inventory .......................... 800 ______
Current assets ........................... 17,550 Current liabilities ........................... 700Equipment ...................................... 7,000 Owners equity ............................... 23,850
Total assets .....................................
24,550Total liabilitiesand owners equity .........................
24,550
ACME COSULTIG
ICOME STATEMET June 1 - 30, ----.Revenues ........................................................... Rs10,000Expenses
Salaries ......................................................... 4,500Rent .............................................................. 750
Utilities ......................................................... 500Travel ........................................................... 200Supplies ........................................................ 200 6,150
Net income .............................................. Rs 3,850
ACME COSULTIG
CASH RECEIPTS AD DISBURSEMETS, June 1 - 30, ----.
ReceiptsOwners investment ...................................... Rs20,000Cash sales ..................................................... 5,000
Collection of accounts receivable ................. 1,000Total receipts ........................................... Rs26,000
DisbursementsEquipment purchase ..................................... Rs5,000Supplies purchase ......................................... 1,000
Salaries paid ................................................. 4,500Payments to vendors ..................................... 1,500Rent paid ...................................................... 750
Utilities paid ................................................. 500Total disbursements ................................. Rs13,250
Increase in cash ....................................... Rs12,750
The change in this cash account includes the owners investment, which is not an income statement item.The income statement includes revenues and expenses that have not yet been received in cash or paid incash. The cash paid to purchase the equipment is not reflected in the income statement.
This problem explains several important points that managers should understand. These are:
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a. Every transaction involves at least two accounts.b. Net income is not equivalent to the net change in the cash account during an accounting period.c. Cash is influenced by both balance sheet and income statement events.d. The basic accounting equation (Assets = Liabilities + Owners equity) can be used to capture,illustrate, and explain the accounting consequences of many (but not all) transactions and events that
involve a company.
The cash receipts - disbursements display is used since it would be premature to introduce the cash flow
statement display at this point i.e. mid-term exam.