Question #: 1

Louise Company reported the following income statement information for Year 1 and Year 2:

Year 1 Year 2
Sales $410,000 $550,000
Cost of goods sold:
Beginning inventory $132,000 $144,000
Cost of purchases 273,000 302,000
Cost of goods available for 405,000 446,000
sale
Ending inventory 144,000 152,000
Cost of goods sold 261,000 294,000
Gross profit $149,000 $256,000

The beginning inventory balance for Year 1 is correct. The ending inventory balance for Year 2 is also correct.
However, the ending inventory figure for Year 1 was overstated by $20,000. Given this information, the correct
gross profit figures for Year 1 and Year 2 would be:

A. $129,000 for Year 1 and $256,000 for Year 2.

B. $281,000 for Year 1 and $274,000 for Year 2.
C. $129,000 for Year 1 and $276,000 for Year 2.
D. $169,000 for Year 1 and $236,000 for Year 2.
E. $169,000 for Year 1 and $276,000 for Year 2.

Question #: 2

Marble Company purchased a machine costing $120,000, terms 1/10, n/30. The machine was shipped FOB
shipping point and freight charges were $2,000. The machine requires special mounting and wiring connections
costing $10,000. When installing the machine, $1,300 in damages occurred. Materials costing $1,500 are used in
testing and adjusting the machine to produce a satisfactory product. Compute the cost recorded for this machine
assuming Marble paid within the discount period.

A. $131,100
B. $134,800
C. $132,300
D. $133,600
E. $130,300
Question #: 3

Prior to June 1, a company has never had any treasury share transactions. A company repurchased 100 shares of its
ordinary shares on June 1 for $5,000. On July 1, it reissued 50 of these shares at $52 per share. On August 1, it
reissued the remaining treasury shares at $49 per share. What is the balance in the Share Premium-Treasury Shares
account on August 2?

A. $5,050
B. $2,600
C. $100
D. $50
E. $0

Question #: 4

The accountant for Robinson Company is preparing the company's statement of cash flows for the fiscal year just
ended. The following information is available:

Retained earnings balance at the beginning of $156,000

the year
Cash dividends declared for the year $46,000
Proceeds from the sale of equipment $81,000
Gain on the sale of equipment $7,000
Cash dividends payable at the beginning of $18,000
the year
Cash dividends payable at the end of the year $40,000
Net profit for the year $92,000

The amount of cash dividends paid during the year would be:

A. $70,000
B. $46,000
C. $22,000
D. $39,000
E. $24,000
Question #: 5

Wilson Engineering purchased a depreciable asset costing $45,000 on January 1, Year 1. The asset is estimated to
have a residual value of $5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the asset
is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include:

A. A credit to cash for $20,000.

B. A debit to accumulated depreciation for $22,500.
C. A debit to loss on sale for $10,000.
D. A credit to loss on sale for $10,000.
E. A debit to gain on sale for $2,500.

Question #: 6

A company's warehouse was destroyed by a tornado on March 15. The following information was the only
information that was salvaged:

1. Inventory, beginning: $28,000

2. Purchases for the period: $17,000
3. Sales for the period: $55,000
4. Sales returns for the period: $700

The company's average gross profit ratio is 35%. What is the estimated cost of the lost inventory?

A. $9,705.
B. $25,995.
C. $29,250.
D. $44,000
E. $45,000

Question #: 7

Merchandise with an invoice price of $2,000 was purchased on October 3, terms 1/15, n/60. The company uses the
net method to record purchases. The entry to record the cash payment of this purchase obligation on October 17 is:

A. Debit Accounts Payable $1,980; credit Cash $1,980.

B. Debit Accounts Payable $2,000; credit Cash $2,000.
C. Debit Accounts Payable $1,980; credit Discounts Lost $20; credit Cash $2,000.
D. Debit Accounts Payable $2,000; credit Merchandise Inventory $20; credit Cash $1,980.
E. Debit Accounts Payable $2,000; credit Merchandise Inventory $40; credit Cash $1,960.
Question #: 8

Sebring Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $140,000 was sold
for its carrying amount in Year 2. The following selected information is available for Sebring Company from its
comparative statements of financial position. Compute the cash received from the sale of the equipment.

December 31 Year 2 Year 1

Equipment $610,000 $750,000
Accumulated Depreciation- 428,000 500,000
Equipment

A. $72,000
B. $68,000
C. $28,000
D. $40,000
E. $36,000

Question #: 9

Thelma Company reported cost of goods sold for Year 1 and Year 2 as follows:

Year 1 Year 2
Beginning inventory $ 120,000 $ 130,000
Cost of goods purchased 250,000 275,000
Cost of goods available for 370,000 405,000
sale
Ending inventory 130,000 135,000
Cost of goods sold $ 240,000 $ 270,000

Thelma Company made two errors: 1) ending inventory at the end of Year 1 was understated by $15,000 and 2)
ending inventory at the end of Year 2 was overstated by $6,000. Given this information, the correct cost of goods
sold figure for Year 2 would be:

A. $291,000
B. $276,000
C. $264,000
D. $285,000
E. $249,000
Question #: 10

Weston is preparing the company's statement of cash flows for the fiscal year just ended. Using the following
information, determine the amount of cash flows from financing activities. Management wishes to maximize cash
flows from operating activities.

Profit before tax 190,000

Gain on the sale of equipment 12,300
Proceeds from the sale of 92,300
equipment
Depreciation expense –equipment 50,000
Payment of bonds at maturity 100,000
Purchase of land 200,000
Issuance of ordinary shares 300,000
Increase in merchandise inventory 35,400
Decrease in accounts receivable 28,800
Increase in accounts payable 23,700
Payment of cash dividends 32,000
Payment of income tax 8,000

A. ($168,000).
B. $200,000.
C. $168,000.
D. ($191,700).
E. $191,700.

(Solution key on next page)

SOLUTION KEY

1. C
2. C
3. D
4. E
5. B
6. A
7. A
8. C
9. A
10. C