The Midterm exam that takes place today, looking for ADMS 3585, for 5Pm today
THE BOOK IS ATTACHED
There are also several files (as an example for the exam)
1. Coverage: Chapters 1, 2, 4, 5, 5A, 6, 6A, and 8
2. It consists of 20 Multiple Choice Questions (20 @ 1.5 = 30 points),
three problem/exercise type questions, one essay/case type question,
one major case analysis question (70 points) similar to homework or
3. About 60% of multiple choice questions are computational.
4. All exams are open-book, and a financial calculator is required.
5. The use of your cellular phone during the exam is prohibited and
must be turned off.
Q1 On December 31, 2020, Grando Company sells production equipment to Fargo Inc. for $50,000. Grando includes a one-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2020. Grando estimates the prices to be $48,800 for the equipment and $1,200 for the cost of warranty.
a. Are the sale of the equipment and the warranty separate performance obligations within the contract? Explain.
b. Prepare the journal entry to record this transaction on December 31, 2020. Ignore any related cost of goods sold entry.
c. Repeat the requirements for part (a), assuming that, in addition to the assurance warranty, Grando sold an extended warranty (service-type warranty) for an additional two years (2022-2023) for $800.
Q2 Salamander Limited makes the following errors during the current year. Each error is an independent case.
• 1.Ending inventory is overstated by $1,020, but purchases are recorded correctly.
• 2.Both ending inventory and a purchase on account are understated by the same amount. (Assume this purchase of $1,500 was recorded in the following year.)
• 3.Ending inventory is correct, but a purchase on account was not recorded. (Assume this purchase of $850 was recorded in the following year.)
Show the effect of each error on working capital, current ratio (assume that the current ratio is greater than 1), retained earnings, and net income for the current year and the following year.
(Multiple-Step and Single-Step)
Q1 Two accountants, Yuan Tsui and Sergio Aragon, are arguing about the merits of presenting an income statement in the multiple-step versus the single-step format. The discussion involves the following 2020 information for P. Bride Company (in thousands):
Administrative expenses Selling expenses
Officers’ salaries $ 4,900 Delivery $ 2,690
Depreciation of office furniture and equipment Sales commissions 7,980
3,960 Depreciation of sales equipment 6,480
Cost of goods sold 60,570 Sales revenue 96,500
Rental revenue 17,230 Interest expense 1,860
Common shares outstanding for 2020 total 30,550. Income tax for the year was $9,070.
a. Prepare an income statement for the year ended December 31, 2020, using the single-step format. Include calculation of EPS.
b. From the perspective of an investor who is interested in information about operating versus non-operating items and the various areas of the company’s operations, which format is preferred? Explain why.
(Preparation of Statement of Cash Flows)
Q2 A comparative statement of financial position for Carmichael Industries Inc. follows:
Carmichael Industries Inc.
Statement of Financial Position
December 31, 2020
Assets 2020 2019
Cash $ 21,000 $ 34,000
Accounts receivable 104,000 54,000
Inventory 220,000 189,000
Land 71,000 110,000
Equipment 260,000 200,000
Accumulated depreciation—equipment (69,000) (42,000)
Total $607,000 $545,000
Liabilities and Shareholders’ Equity
Accounts payable $ 52,000 $ 59,000
Bonds payable 150,000 200,000
Common shares 214,000 164,000
Retained earnings 191,000 122,000
Total $607,000 $545,000
• 1.Net income for the fiscal year ending December 31, 2020, was $129,000.
• 2.Cash dividends of $60,000 were declared and paid. Dividends paid are treated as financing activities.
• 3.Bonds payable amounting to $50,000 were retired through issuance of common shares.
• 4.Land was sold at a gain of $5,000.
• 5.No equipment was sold during the year.
a. Prepare a statement of cash flows using the indirect method along with any necessary note disclosure.
b. Comment in general on the results reported in the statement of cash flows.
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