Mock Test (final exam)

Question 1: Classify each transaction as cash flows from operating activity,

investing activity, financing activity, or noncash activity
a. Purchase inventory for $2,000 on account -> Dr Inventory/Cr AP -> non-
cash
b. Direct issuance of common stock to purchase equipment cost $20,000 ->
Dr Equipment/Cr Share capital -> non-cash
c. Pay salaries for employee for $4,000 cash -> Dr SW exp/ Cr Cash ->
Operating
d. Conversion of $10,000 bonds payable into common stock -> non-cash
e. Issuance of common stock for $10,000 cash -> Dr Cash/ Cr Share capital
-> financing activities
f. Issuance of note payable to purchase inventory cost $10,000 -> Dr
Inventory/ Cr Note payable -> non-cash
g. Declare and pay cash dividends of $8,000 -> Dr dividend/ Cr Cash ->
financing activities
h. Sign a long-term note payable to borrow $2,000 cash from Bank of
America -> Dr Cash/ Cr Note payable -> financing activties
i. Receive dividends from stock invesment for $1,000 cash -> Dr cash/ Cr
Dividend revenue -> operating
j. Receive interest from bank saving account for $100 cash -> Dr cash/ Cr
Interest revenue -> operating
k. Purchase property for $30,000 cash -> Dr Property/ Cr Cash -> investing
l. Pay income tax $6,000 cash to the government -> Dr Income Tax Exp/ Cr
Cash -> Operating
m. Pay interest on note payable for $50 cash -> Dr Interest Exp/ Cr Cash ->
operating
n. Depreciation expense is $200 > Dr depreciation exp/ Cr Accumulated
depreciation -> non-cash
o. Purchase supplies for $4000 cash -> Dr supplies/ Cr Cash -> operating
p. An old equipment which had book value of $2,000 had been sold for
$5,000 cash-> Investing activities
q. Purchase a 5-year bond for $1,000 cash -> Dr Investment in bond/ Cr
Cash -> Investing activities
BE14.4

Mokena Ltd. reported net income of €2.0 million in 2020.

Depreciation for the year was €160,000, accounts receivable
increased €350,000, and accounts payable increased €280,000.
Compute net cash provided by operating activities using the
indirect method.

Net income 2,000,000

Depreciation expense 160,000

Increase in account receivable (350,000)

Increase in account payable 280,000

Net cash provided by operating activities ?

BE14.5

The net income for Lodi Ltd. for 2020 was £250,000. For 2020,
depreciation on plant assets was £65,000, and the company
incurred a gain on disposal of plant assets of £12,000. Compute
net cash provided by operating activities under the indirect
method.

Net income 250,000

Depreciation expense 65,000

Gain on disposal of plant assets of (12,000)

Net cash provided by operating activities = ?

BE14.6

The comparative statements of 昀椀nancial position for Sergipe SA

show these changes in non- cash current asset accounts:
accounts receivable increase R$80,000, prepaid expenses
decrease R$28,000, and inventories decrease R$30,000.
Compute net cash provided by operating activities using the
indirect method assuming that net income is R$250,000.

Net income is 250,000 - Accounts receivable increase 80,000 +

Prepaid expenses decrease 28,000 + Inventories decrease
30,000 = Net cash provided by operating activities ?

Accounting process
1. Journal entry
2. Post to ledger
3. Trial balance
4. Adjusting entry
5. Adjusted trial balance
6. Financial statements
7. Closing entry
8. Post closing trial balance

*Note: for opening balance: prepare balance sheet at the begining

Balance sheet
Date:
Monetary unit:
Assets Equity and liabilities
Non-current assets Equity
Current asset Liabilities
Non-current Liabilities
Currrent Liabilities
Balance sheet at the begining with missing amount:
Balance sheet
Date:
Monetary unit:
Assets (c ) Equity and liabilities (d)
Non-current assets 400,000 Liabilities (f)
Building 500,000 Account payable 50,000
Less: Accumulated (a) Salaries payable (g)
depreciation of building
Current asset (b) Interest payable 30,000
Inventory 120,000 Equity (e)
Account receivable 60,000 Share capital 200,000
Cash 50,000 RE 150,000

Question 2: Latvia opened Lava Company on June 1, 2021. Lava Company

completed the following merchandising transactions in the month of June.
Date Accounts Debit Credit
Jun 1 Cash 10,000
Share capital 10,000
Jun 2 No entry

Jun 1. The owner invests $10,000 cash in exchange for common stock.
Dr Cash 10,000
Cr Share capital 10,000
Jun 2. Hire 3 new employees -> No entry
Jun. 3 Purchased inventory from Minco for $3,800, FOB shipping point, terms
1/10, n/30. The appropriate party also made a cash payment of $50 for freight
on this date.
FOB shipping point: buyer pays for shipping. Total cost of inventory = 3,850
Dr Inventory 3,800
Cr Accounts payable (Minco) 3,800
Dr Inventory 50
Cr Cash 50
Jun 6. Purchase an equipment for $5,000 cash
Dr Equipment 5,000
Cr Cash 5,000
Jun 12. Sold merchandise to Maxco for $4,200, FOB destination, terms 2/10,
n/30. The appropriate party also made a cash payment of $50 for freight on this
date. The inventory sold had a cost of $2,200.
FOB destination: seller pays for shipping
Dr Accounts receivable (Maxco) 4,200 Phải ghi tên người nợ
Cr Sales revenue 4,200
Dr COGS 2,200
Cr Inventory 2,200
Dr Delivery expense 50
Cr Cash 50
Jun 14. Grant Maxco $200 credit for low quality merchandise allowance
Dr Sales returns and allowance 200
Cr Accounts receivable (Maxco) 200
Jun 19. Receiving payment from Maxco in full, less discount if any.
Dr Cash 98%x4,000 = 3,920
Dr Sales discount 2%x4,000 = 80
Cr Accounts receivable (Maxco) 4,000
Jun 24. Paid Minco in full, less discount if any.
Dr Accounts payable (Minco) 3,800
Cr Cash 3,800
Jun 30. Depreciation expense (equipment) of the month is $100 annual: chia cho 12
tháng
Dr Depreciation expense 100
Cr Accumulated depreciation – Equipment 100
Jun 30. Accrued salaries and wages expense is $1,000
Dr Salaries and wages expense 1,000
Cr Salaries and wages payable 1,000
Jun 30. Paid $250 for utilities bill of June May: credit Account Payable
-> debit AP in June
Dr Utility expense 250
Cr Cash 250
*If: Paid $250 for utilities bill of May
Dr Account payable 250
Cr Cash 250
Jun 30 Declared and paid cash dividend for $200
Dr Dividends 200
Cr Cash 200

Instructions
(a) Journalize the June transactions using a perpetual inventory system
(b) Prepare closing entry
Retained Earning: đầu kì có thể âm có thể dương

Close Revenue to Income Summary

Dr Sales revenue 4,200
Cr Income summary 4,200
Close expense and contra revenue to income summary
Dr Income summary 3,880
Cr Depreciation expense 100
Cr Utilities expense 250
 Cr Delivery expense 50
Cr Salaries and Wages expenses 1,000
Cr COGS 2,200
Cr Sales Discount 80
Cr Sales Return and allowance 200
Close net income to retained earnings
Dr Income summary 320
Cr Retained earnings 320
Close dividends to retained earnings
Dr Retained earnings 200
Cr Dividends 200
*Net loss
Dr Retained earnings
Cr Income summary
(c) Prepare Multiple-step income statement of Lava company for June,
2021
Multiple-step income statement of Lava company
for June, 2021
Monetary unit: $
Sales revenue: 4,200
Less: Sales return and allowance 200 Không ghi less thì phải ghi
số âm
Less: Sales discount 80
Net sales: 3,920 Số trong ngoặc là số âm
(23)
Less: COGS 2,200
Gross profit : 1,720
Less: Operating expenses includes
Depreciation expense 100
Salaries and wages expense 1,000
Utility expense 250
 Delivery expense 50
Income from operation 320
Add: Other income 0
Less: Other expense 0
Net income 320

*Note:
Operating Revenues: sales revenue, service revenue
Operating expenses: Rent expense, Depreciation expense, Utilities expense,
Delivery expense, Supplies expense, Insurance expense, Salary expense…
Other incomes: Rent revenue, Interest revenue, Dividend revenue, Gain from
sale of PPE
Other expenses: Interest expense, Loss from sale of PPE

(d) Prepare Classified balance sheet of Lava company on June 30, 2021
Cash Share
capital
OB: 0 OB: 0
10,000 50 10,000
3,920 50 CB:
3,800 10,000
5,000
250
CB:
200
4,570

Inventor Accumulate
y d
depreciation
 – Equipment
OB: 0 OB: 0
3,850 2,200 100CB:
CB: 100
1,650

SW Retained
payable earnings
OB: 0 200 OB: 0
1,000 320
CB: CB: 120
1,000

Equipment
OB: 0
5,000
CB: 5,000

Classified balance sheet of Lava company on June 30, 2021.

Assets
Non-current assets 4,900
Equipment 5,000
Less: accumulated depreciation –Equipment 100
Current assets 6,220
Inventory 1,650
Cash 4,570
Total assets 11,120
Equity and liabilties
Equity 10,120
Share capital 10,000
RE 120
Liabilities
Non-current liabilities 0
Current liabilities 1,000
SW payable 1,000
Total Equity and liabilties 11,120

Retained earnings statement for June, 2021

RE opening 0
Add: Net income (or Deduct net loss) 320
Deduct: Dividend 200
RE closing 120

Question 3:

Periodic: record inventory when purchase but not determine COGS when
sale.

Make physical count of ending inventory at the end of accounting period

Beginning inventory + Purchase – Ending inventory = COGS

Step 1: Ending inventory

Step 2: COGS

*Note: Cost of Inventory purchase = Purchase price – Purchase return and

allowance – Purchase discount + Freight in

Unit cost of inventory purchase = Cost of Inventory purchase/ Units

Example: purchase 100 units for $1,000, FOB shipping point. Delivery fee is
$100.

Cost of Inventory purchase = 1,000 + 100 = 1,100

Unit cost of inventory purchase = 1,100 / 100 = 11

(a) Determine the cost of goods available for sale.

= Beginning inventory + Cost of goods purchase

= 150 units x $20 + (400 units x $23 + 250 units x $24 + 350 units x $26 + 100
units x $29)

= $30,200

Number of unit available for sale = 1,250 units

Number of units sold = 1,000 units
Ending inventory in units = 250 units

(b)Determine (1) the ending inventory, and (2) the cost of goods sold under
each of the assumed cost flow methods (FIFO, and average-cost) under a
periodic inventory system

Beginning inventory + Cost of goods purchase – Ending inventory =

COGS

(1) FIFO

Ending inventory = 100 units x $29 + 150 units x $26 = 6,800

COGS = Cost of goods available for sale - Ending inventory = $30,200 - $6,800
= $23,400
Inventory turnover = $23,400/ ((150 units x $20 + 6,800)/ 2) = 4.78 times

Days in inventory = 365/ 4.78 = 76.4 days

(2) Average-cost: Weighted average-cost

Average unit cost = $30,200/1,250 = $24.16

Ending inventory = 250 units x $24.16 = $6,040

COGS = Cost of goods available for sale - Ending inventory = $30,200 - $6,040
= $24,160

Inventory turnover = $24,160/ ((150 units x $20 + 6,040)/2) = 5.35 times

Days in inventory = 365/ 5.35 =68.22 days

Calculate:

Gross profit = Net Sales – COGS

Net sales = Sales revenue – Sales return and allowance – Sales discount

Gross profit rate = Gross profit/Net sales

Inventory turnover = COGS/Average inventory

Average inventory = (Begining inventory + Ending inventory)/2

Days in inventory = 365/ Inventory turnover

Question 4:

Perpetual: record inventory when purchase and determine COGS when

sale
Beginning inventory + Purchase – COGS = Ending inventory
Step1: COGS for each sale

Step 2: Ending inventory

Uni
t
FIFO Unit cost Total Current balance
Beginning inventory 150 20 3000 150x20 = 3000
Feb 2 sales 100 units 100 20 2000 50x20=1000
Mar. 15 purchase 400 units 50x20=1000
at $23 400 23 9200 400x23=9200
50 20
June 1 sale 200 units
150 23 4450 250 x 23 = 5750
July 20 purchase 250 units 250 x 23 = 5750
at $24 250 24 6000 250 x 24= 6000
250 23
Aug 5 sale 300 units
50 24 6950 200x24=4800
Sept. 4 purchase350 units at 200x24=4800
$26 350 26 9100 350 x 26 = 9100
200 24
Oct 10 sale 400 units
200 26 10000 150 x 26 = 3900
Dec. 2 purchase 100 units at 150 x 26 = 3900
$29 100 29 2900 100x29 = 2900

COGS= 23400 Ending 6800

Moving Average Unit Average Unit Current

-cost Unit cost Total unit price remaining balance
 Beginning
inventory 150 20 3000 20 150 3000
Feb 2 sale 100
units 100 20 2000 20 50 1000
Mar. 15
purchase 400
units at $23 400 23 9200 22.67 450 10200
June 1 sale 200
units 200 22.67 4534 22.67 250 5667.5
July 20 purchase
250 units at $24 250 24 6000 23.33 500 11667.5
Aug 5 sale 300
units 300 23.33 6999 23.33 200 4666
Sept. 4 purchase
350 units at $26 350 26 9100 25.03 550 13766
Oct 10 sale 400
units 400 25.03 10012 25.03 150 3754.5
Dec. 2 purchase
100 units at $29 100 29 2900 26.62 250 6654.5

COGS $23545.5 Ending $6654.5

Question 5: Lower-of-cost-or-NRV (net realizable value) -> MCQ

Net realizable value = expected selling price – cost to sell

Serebin Company applied FIFO to its inventory and got the following results for its ending
inventory.

Cameras: 100 units at a cost per unit of $65

DVD players: 150 units at a cost per unit of $75

iPods: 125 units at a cost per unit of $80

The NRV at year-end was cameras $71, DVD players $67, and iPods $78.

Determine the amount of ending inventory at lower-of-cost-or-market.

Item Unit Cost NRV Lower-cost-

NRV

Camera 100 65 71 65

DVD 150 75 67 67

Ipod 125 80 78 78

Camera: $65 x 100 units

DVD: $67 x 150 units

Ipod: $78 x 125 units

Total ending inventory at lower-cost-nrv = $26,300

Allowance for reducing inventory = 1450

Balance sheet
Inventory – at cost = 100 x 65 + 150 x 75 + 125 x 80 = 27,750
Less: Allowance for reduce inventory to LCM = 1,450
Equals to: Ending inventory at Lower-of-cost-or-NRV = 26,300

Chapter 6: MCQ in book