INSTRUTION TO STUDENTS:

This is a closed-book exam

Do not open this question paper until you are told to do so.
Write your name and student number in the space at the top of this page.
There are 4 parts in this paper. Students must answer all parts of this paper.
Stick your answers of part I on the answer sheet provided
Write your answers of part II, part III and part IV on the provided space of the paper.
Students are allowed to bring a non-programmed dictionary into the exam room
This examination makes up 40% of the total mark.

PART 1: Choose and blacken the best answer for each question on the provided answer sheet
(20 points)
1.

If the current balance of Accounts Receivable for WebSavvy is $27,000 and the Allowance for the
Doubtful Accounts is $2,400, what is the net realizable value of the receivables?
a. $22,600
b. $24,600
c. $29,400
d. $28,400

2.

When a customers account is identified as uncollectible using the allowance method, which of the
following is the correct entry to record the write-off?
a. debit to Account Receivable (customer name), credit to Allowance for Doubtful Accounts
b. debit to Allowance for Doubtful Accounts, credit to Account Receivable (customer name)
c. debit to Uncollectible Accounts Expense, credit to Account Receivable (customer name)
d. debit to Account Receivable (customer name), credit to Uncollectible Accounts Expense

3.

The method in which bad debts expense is not recognized until the period in which the debt proves
uncollectible is the:
a. allowance method.
b. aging method.
c. direct write-off method.
d. None of the above.

4.

The maturity value of a $1,500 promissory note, 6% interest due in 90 days is:
a. $1,520
b. $1,522.5
c. $1,518..5
d. $1,519.5

5.

On June 5, Apex Co. issued a $30,000, 8% 120-day note payable to Jones Co. Assume that the fiscal
year of Apex Co. ends June 30. What is the amount of interest revenue recognized by Jones in the
following year?
a. $633.33
b. $400.00
c. $333.33
d. $166.67

6.

The inventory system employing accounting records that continuously disclose the amount of inventory
is called
a. retail
b. periodic
c. physical
d. perpetual

7.

An overstatement of ending inventory in one period results in

a. no effect on net income of the next period
b. an overstatement of net income of the next period
c. an understatement of net income of the next period
d. an overstatement of the ending inventory of the next period

8.

Hearn Beverages sells a wide variety of soft drinks. Because of the way Hearn stores its inventory of
soda, the most recently purchased cases are usually the first sold. Given these circumstances, what
flow assumption must Hearn use?
a. LIFO.
b. FIFO.
c. Average cost
d. Any assumption its wishes

9.

Which of the following is an example of capital expenditure?

a. spending on raw materials

b. spending on factory equipment

c. spending on machine maintenance
d. spending on wages and salaries
10. The journal entry to record the sale or disposition of a depreciable plant asset always includes:

a.
b.
c.
d.

Recognition of a gain.
A debit to the Accumulated Depreciation account for the related accumulated depreciation.
Recognition of a loss.
A debit to the asset account for the book value of the asset.

11. The depreciation method that causes equal amounts of annual depreciation expense for a given asset is

the __________ method

a. straight-line
b. accelerated
c. double line
d. none of the above
12. A machine with a cost of $130,000 has an estimated residual value of $10,000 and an estimated useful

life of 4 years. What is the amount of depreciation for the second full year, using the double-declining
balance method?
a. $30,000
b. $31,500
c. $32,500
d. $65,000
13. All of the following items are included in the cost of acquiring a fixed asset, except:

a.
b.
c.
d.

freight costs
installation costs
insured theft
damage during unpacking and installation

14. ABC Corp. purchased a long-arm quilting machine on January with an original cost $50,000, its

estimated useful life is 5 years and the residual value is $5,000. What is the straight-line depreciation for
the first year?
a. $9,000
b. $10,500
c. $18,000
d. $15,000
15. An example of cash flows from financing activities is

a.
b.
c.
d.

receipt of cash from the sale of land

payment of debts
receipt of dividends
deduction for increase in Account Receivables

16. An example of cash flows from investing activities is

a.
b.
c.
d.

receipt of cash from the sale of land

payment of debts
payment of dividends
deduction for increase in Account Receivables

17. Which of the following transactions would increase the net cash flow from operating activities?

a.
b.
c.
d.

The collection of an account receivable from a customer.

The purchase of a delivery truck by issuing a note payable.
The sale of equipment for cash at a gain.
None of the above

18. How does the quick ratio (acid-test ratio) differ from the current ratio?

a. it excludes Account Receivables (which can not turned into cash quickly)
b. it excludes the value of stocks (which can not turned into cash quickly)
c. it excludes merchandise inventory (which can not turned into cash quickly)

d. it does not differ from current ratio

19. A company's quick ratio:

a.
b.
c.
d.

Can never be larger than its current ratio at the same date
Indicates the length of time the company takes to pay its short-term creditors.
Indicates how quickly the company converts its current assets to cash
Is computed by dividing current assets by current liabilities, excluding accounts payable for
inventory purchases

20. Top Cat Co. has Total Current Assets of $200,000, Total Current Liabilities of $75,000, Inventories of

$50,000, Net sales of $770,000. The beginning balance of accounts receivable is $42,000, and the
ending balance of accounts receivable is $44,000. What is the Account Receivable Turnover for Top Cat?
a. $125,000
b. 2.7
c. 19.9
d. 17.9

PART 2 (20 points)

On January 27, 2002, Nilesome, Inc. sold 800 widgets for $40 each to Warren Supplies. Immediately prior to this
sale, Nilesomes perpetual inventory records for widgets included the following cost layers:
Purchase Date
Dec. 9, 2001.........................................................
Jan. 19, 2002........................................................
Total on hand......................................................

Quantity
500
1,000
1,500

Unit Cost
$30
33

Total Cost
$15,000
33,000
$48,000

a. Prepare a separate journal entry to record the cost of goods sold relating to the January 27 sale of 800
widgets, and calculate the amount of gross profit of Nilesome, assuming that Nilesome uses:
1. Average cost.
2. FIFO.
3. LIFO.

b. For financial reporting purposes, can the company use the valuation method that resulted in the lowest
cost of goods sold; and if, for tax purposes, it used the method that resulted in the highest cost of goods
sold? Explain.

PART 3 (30 points)

Moonglow, a Broadway Publicity firm, uses the balance sheet approach to estimate uncollectible accounts
expense. At year-end an aging of the accounts receivable produced the following classification:
Not yet due..................................................................................................
1-30 days past due.......................................................................................
31-60 days past due.....................................................................................
61-90 days past due.....................................................................................
Over 90 days past due..................................................................................
Total......................................................................................................

$400,000
150,000
60,000
20,000
50,000
$680,000

On the basis of past experience, the company estimated the percentages probably uncollectible for the above five
age groups to be as follows: Group 1, 1%; Group 2, 4%; Group 3, 10%; Group 4, 25%; and Group 5, 40%
The Allowance for Doubtful Accounts before adjustments at December 31 showed a credit balance of $6,600.
a. Compute the estimated amount of uncollectible accounts based on the above classification by age
groups.

b. Prepare the adjusting entry needed to bring the Allowance for Doubtful Accounts to the proper amount.

c. Assume that on January 15 of the following year, Moonglow learned that an account receivable that had
originated on September 1 in the amount of $2,400 was worthless because of the bankruptcy of the client,
May Flowers. Prepare the journal entry required on January 15 to write off this account.

d. The firm is considering the adoption of a policy whereby clients whose outstanding accounts become
more than 60 days past due will be required to sign an interest-bearing note for the full amount of their
outstanding balance. What advantages would such a policy offer?

PART 4 (30 points)

- write the correct amount on your answer sheet
- write all the journal entries for each case

ASSET

ORIGINAL
COST

#1
#2

15,675
8,210

ACCUMULATED
DEPRECIATION
through Dec 31, 2003
5,470
4,026

ADDITIONAL DEPRECIATION
IN 2004 TO DATE OF SALE
912
895

a. If asset #1 is sold for $10,000, what is the amount of gain or loss?

b. If asset #2 is sold for $2,500, what is the amount of gain or loss?

THE INTERNATIONAL UNIVERSITY (IU) VIETNAM NATIONAL UNIVERSITY HCMC

FINAL EXAMINATION
Date: ......................................
Duration: 120 minutes
Student ID: ..................................
Name:.........................................................
SUBJECT: Principles of Accounting
Proctor 1:

Proctor 2:

Examiner:
Signature:

..........................................
(Sign and write full name)

.......................................
(Sign and write full name)

Full name:

Score

......................................

ANSWER SHEET
Note:
a

Selected

Unselected

Reselected

Stick ONLY ONE answer for each question

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