Accounting 101: Financial Accounting Midterm Exam, Study notes of Accounting

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Accounting 101

Introduction to Financial Accounting

Midterm Examination I

February 9, 2023

NAME: __ ____ NetID: SECTION (indicate your section): Section 7: 8:00 AM– 9:15 AM Section 8: 9:30 AM – 10:45 AM Section 9: 11:00 AM – 12:15 PM INSTRUCTIONS: (1) NO QUESTIONS. When in doubt, state your assumptions. (2) This exam is 15 pages long. Please make sure your copy of the exam is not missing any pages before you begin. (3) A calculator may be used during this exam. No other material or electronic device is allowed during the exam. (4) Write your answers in the space provided and show any supporting computations you make. Zero points will be given to any correct answer showing no supporting calculations. (5) Do not use any acronyms for account titles. Do not attach additional material. Round all your answers to nearest whole dollar value. (6) Failure to turn in your exam at the end of the exam period will result in a grade of zero on this exam. (7) Refer to Instruction #1 above when you feel the need to ask a question. On my honor, I have neither received nor provided unauthorized assistance on this exam. Unauthorized assistance includes sharing or discussing the exam content with students who have not taken the exam. I understand that violation of the Honor System will result in sanctions as severe as suspension or dismissal from the University. (sign your name)

Score: Question Possible Points Points Received 1 12 2 38 3 3 4 20 5 10 6 17 Total 100 Good Luck!

1. Russel’s Croissants has 10 employees who are paid $20 per hour. At December 30, 2024, each of Russel’s Croissants’ employees had worked 15 hours which had not been paid or recorded. Prior to adjustments, the company’s trial balance showed $310,550 in the wage expense account, all of which has been paid already. Russel’s Croissants has a fiscal year ending on December 31. If Russel’s Croissants makes the appropriate adjusting entry, which of the following is one part of the journal entry that will be made when the payment of wages is made in January? A. Debit Wages Expense for $3, B. Debit Wages Payable for $3, C. Credit Wages Payable for $310, D. Debit Cash for $3,
2. Anchor Corporation has provided the following information for its most recent year of operation: Revenues earned were $61,200, of which $6,400 were uncollected at the end of the year. Operating expenses incurred were $24,400, of which $5,200 were unpaid at the end of the year. Dividends declared were $7,600, of which $2,800 were unpaid at the end of the year. Income tax expense is $11,040, which will not be paid until April 15 next year. What is the amount of net income reported on Anchor's income statement? A. $18, B. $25, C. $29, D. None of the above

3. Which of the following journal entries causes an increase in assets? A. Accruing unrecorded interest expense not yet paid B. Recording the amount of expired prepaid insurance C. Accruing unrecorded interest revenue not yet received D. Recording sales revenue when a gift card was redeemed.
4. During 2022, Sigma Company earned service revenue amounting to $880,000, of which $685,000 was collected in cash; the balance will be collected in January, 2023. Also in 2022, there were collections of cash prior to the delivery of goods/services totaling $9,200. What amount should the 2022 income statement report for service revenue? A. $685, B. $880, C. $889, D. None of the above

1. Journalize each of the ten transactions listed above in the following table. If no journal entry is required, write “No Entry Required.” Note: these are journal entries recorded on each of the specific transaction dates above. Date Account Title Debit Credit Date Account Title Debit Credit

2. Record XYZ Inc’s adjusting entries for fiscal year 2022.

3. Record XYZ Inc’s closing entries for fiscal year 2022. Date Account Title Debit Credit

QUESTION 3: ACCOUNTING EQUATION (3 points)

The following information is from Hoya Company before closing entries Notes payable $ 28, Service fees earned 200, Supplies expense 42, Insurance expense 12, Miscellaneous expense 1, Common stock, January 1 35, Accounts payable 11, Dividends 3, Supplies $ 30, Cash 7, Advertising expense 9, Salaries expense 68, Rent expense 59, Retained earnings, January 1 17, Accounts receivable 8, Equipment 61, Hoya raised $10,000 cash through the issuance of additional common stock during the year. Hoya has a fiscal year ending on December 31. Based on the above information, what is the amount of retained earnings after closing entries are properly recorded? Answer:

QUESTION 5: EFFECTS OF ACCOUNTING ERRORS (10 points)

Soup Corp. plans to prepare its annual financial statements for fiscal year ending December 31,

2022. Record in the chart below whether each transaction for Soup Corp. overstates (O), understates (U) or correctly states (C) net income, total assets, total liabilities, or stockholders’ equity for fiscal year 2022. a. Soup Corp. failed to record that it provided $5,000 soup cooking service to a client on December 25, 2022. The client paid for the service in November of 2022. b. Soup Corp. recorded the purchase of soup-making machine for $10,000, by debiting machine for $10,000 and crediting accounts receivable for $10,000. c. Soup Corp. received $120,000 from investors in exchange for 10,000 shares of its $ par common stock on October 15, 2022. Soup Corp. debited cash for $120,000 and credited additional paid in capital for $120,000 to record this transaction. d. Soup Corp. owes its employees $10,000 in wages for the month of December 2022. Soup will pay the employees on January 16, 2023. Soup failed to record the wages owed in its accounting system. e. Soup Corp. received $20,000 on December 28, 2022 for soup to be delivered in January of 2023. Soup recorded the transaction by debiting cash for $20, 000 and crediting revenue for $20,000. Transaction Net Income Total Assets Total Liabilities Stockholders’ Equity a. b. c. d. e.

QUESTION 6: ACCOUNT CALCULATIONS (17 points)

NARDO Inc. is a magazine publisher located in Boston, MA. Assume NARDO Inc. only prepares annual financial statements, and the year-end for NARDO Inc. is December 31. Answer each of the following questions relating to NARDO Inc. a. NARDO Inc. has received cash subscriptions on April 1, 2023 in the amount of 3,860 for the next three years. Magazine delivery occurs monthly and started on April 1, 2023. Answer the following questions related to this subscription sale:

1. What amount of cash should be reported on the statement of cash flows for the year ended December 31, 2023? Answer:
2. What amount of subscriptions revenue should be reported on the income statement for the year ended December 31, 2023? Answer: