Arab Academy for Science, Technology & Maritime Transport

Professional Postgraduate Master’s in Business Administration MBA

Accounting & Financial Reporting- ACC913

(Final Exam)

Presented by:

Name: Sally Mamdouh Mohamed Saleh

Group: 1V ID: 21120573

Supervised by:
Dr. Yasmeen Said

Semester: Fall 2021

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 Total Score: 90

Question (1) Answers:

Select a letter to indicate your answer for each of the following questions:

1) Each of the following accounts is closed to Income Summary except

a) Expenses.
b) Owner’s Drawings.
c) Revenues.
d) All of these are closed to Income Summary.

2) The income summary account

a) is a permanent account.
b) appears on the statement of financial position.
c) appears on the income statement.
d) is a temporary account.

3) The difference between the cost of a depreciable asset and its accumulated depreciation is
referred to as the:
a) market value of the asset
b) book value of the asset
c) blue value of the asset
d) depreciated difference of the
asset e)
4) A post-closing trial balance will show
a) only permanent account balances.
b) only temporary account balances.
c) zero balances for all accounts.
d) the amount of net income (or loss) for the period

5) Two categories of expenses for merchandising companies are

a) cost of goods sold and financing expenses.
b) operating expenses and financing expenses.
c) cost of goods sold and operating expenses.
d) sales and cost of goods sold.

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6) The declining-balance method of depreciation produces:
a) a decreasing depreciation expense each period
b) an increasing depreciation expense each period
c) a declining percentage rate each period
d) a constant amount of depreciation expense each period

7) Depreciation:
a) is a process of asset valuation during the period of ownership by a company.
b) applies to land, land improvements, buildings, and equipment.
c) is accumulated and reported as a contra-asset on the statement of financial position.
d) is recognized as a way to accumulate cash for the eventual replacement of assets.

8) An adjusting entry
a) affects two statement of financial position.
b) affects two income statement accounts.
c) affects a statement of financial position account and an income statement account.
d) is always a compound entry.

9) Expenses incurred but not yet paid or recorded are called

a) prepaid expenses.
b) accrued expenses.
c) interim expenses.
d) unearned expenses.

10) Accrued revenues are

a) cash received and a liability recorded before services are performed.
b) revenue for services performed and recorded as liabilities before they are received.
c) revenue for services performed but not yet received in cash or recorded.
d) revenue for services performed and already received in cash and recorded.

11) Which of the following statements related to the adjusted trial balance is
incorrect?
a) It shows the balances of all accounts at the end of the accounting period.
b) It is prepared before adjusting entries have been made.
c) It proves the equality of the total debit balances and the total credit balances in the ledger.
d) Financial statements can be prepared directly from the adjusted trial balance.

12) Which of the following expressions is incorrect?

a) Gross profit – operating expenses = net income
b) Sales – cost of goods sold – operating expenses = net income
c) Net income + operating expenses = gross profit
d) Operating expenses – cost of goods sold = gross profit

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 Question (2) Answers:-
1. Prepare the closing entries at December 31, 2020.

Bray Company
Closing Entries
On December 31st, 2020
Account Title
Date Debit Credit
“Closing Entries”
December 31st ,2020 Service Revenue 61,000 61,000
Income Summary
Income Summary 50,700
Advertising expense 9,000
Supplies expense 4,000
Depreciation expense 5,600
Insurance expense 3,500
Salaries expense 28,000
Interest expense 600
Income Summary 10,300
Owner’s Capital 10,300
Owner’s Capital 7,600
Owner’s Drawings 7,600

2. Post to owner’s capital and income summary accounts.

Owner’s Capital Income Summary

Debit Credit Debit Credit
Dec 31,2020 7,600 Dec 31,2020 13,000 Dec 31,2020 50,700 Dec 31,2020 61,000
Dec 31,2020 10,300

Dec 31,2020 15,700 Dec 31,2020 10,300

Follow

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 Bray Company
Post-Closing
At end of December 2020

Accounts Debit Credit

Cash $5,300
Accounts Receivables $10,800
Supplies $1,500
Prepaid insurance $2,000
Equipment $27,000
Accumulated depreciation- Equipment $5,600
Notes payable $15,000
Accounts payable $6,100
Salaries and wages payable $3,600
Interest payable $600
Owner’s capital $15,700
$46,600 $46,600

End Of Question 2 …

Question (3) Answers

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Instructions: Prepare the adjusting entries for Savanah Business at August 31, 2020.

Savanah Company
Adjusting Entries
At the Date of 31 August 2020

Account & Explanation

Date Debit Credit
“Adjusting Entries”
August 31st, 2020 Supplies Expense $900
Supplies $900
(Supplies have been used during the month)
Utilities Expense $250
Liability Expense $250
(Utilities expense incurred but not paid)
Insurance Expense $150
Prepaid Insurance $150
(Insurance policy Expense)
Unearned Revenue $1600
Service Revenue $1600
(Revenue has been earned at the end of the month)
Depreciation Expense- Equipment $190
Accumulated Depreciation - Expense $190
(Equipment Depreciation rate for August 2020)
Account Receivable $1,700
Service Revenue $1,700
(Revenue of services performed during the month)
Salaries Expense $1,104
Salaries Payable $1,104
(Salaries Expense for the month)

End Of Question 3 ….

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Question (4) Answers

Instructions: Journalize the September transactions for Reineman Supply Company.

Date Account & Explanation Debit Credit

September. 3rd Purchased backpacks $2,250

Account Payable $2,250
(To record 90 backpacks Purchased from Zuzu Company at $25
each)
September.6th Account Payable $150
Purchase return $150
(To record Credit Received for Return Defective Merchandise)
th
September.9 Account Receivable $630
Sales Revenue $630
(To Record 15 backpacks for $42 each Sold to Bailey Books)
th
September.13 Account Payable $2,100
$2,058
Cash
Purchase Discount $42
(To record full payment to Zuzu Company with discount,
terms 2/10, n/30)
th
September.19 Cash $617.4
Sales Discount $12.6
Account Receivable $630
(To record payment Received from Bailey Books with discount,
terms 2/10, n/30)

End Of Question 4…..

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Question (5) Answers
Instructions
(a) Using the FIFO assumption, calculate the amount charged to cost of goods sold for April.
(Show computations)
(b) Using the weighted average method, calculate the amount assigned to the inventory on hand
on April 30. (Show computations)
(c) Using the LIFO assumption, calculate the amount assigned to the inventory on hand on April
30. (Show computations)

(a) FIFO Assumption

The Cost of Ending Inventory

Units Unit’s cost Total Cost

100 * $ 65 = $ 6,500
50 $ 50 $ 2,750
$ 9,250
Amount Charged to Cost of Goods Sold

COGS - Ending
Inventory
$ 28,750-$ 9,250 = $ 19,500

(b) Weighted Average

Cost of goods sold (COGS) $28,750

Number of units 550
= $52.27

Weighted average Cost * Number of unites $5,2027*150 = $7,840

(a) LIFO Assumption

The Cost of Ending Inventory

Units Unit’s cost Total Cost

* =
150 $ 40 $ 6,000

End Of Question 5…

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Question (6) Answers

Required: Journalize the 2019 transactions for Margo Corporation.

Date Account & Explanation Debit Credit

Jane 7th , 2019 Cash (100,000 * $14) $1,400,000
Common Stocks (100,000*$5) $500,000
APIC C.S $900,000
(To record 100,000 shares of C.S Issued at $14 per share)

May 5th,2019 Operation Expenses $3,200

Common Stock (200*$5) $1,000
APIC C.S $2,000
(To record Attorneys expenses)
st
June 1 , 2019 Cash (10,000*$100) $1,000,000
Preferred Stock (10,000*$60) $600,000
APIC P.S $400,000
(To record 10,000 shares of P.S Issued at $100 per share)
th
July 4 , 2019 Building (10,000*$19) $ 190,000
Common Stock (10,000*$5) $50,000
APIC C.S $140,000
(To record 10,000 shares of C.S Issued in exchange for a
building. $19 per share)
st
September 1 , Treasury Stock (7,000*$ 20) $140,000
2019 Cash $140,000
(To record 7,000 shares C.S Purchased for the treasury at $20 per
share
October 2nd, Cash (2,000*$ 21) $42,000
2019 Treasury Stock (2,000 * $20) $40,000
APIC T. S $2,000
(To record 2,000 Sold shares of the treasury stock at $21 per share)
th
Oct 15 , 2019 Cash (3,000*$ 18) $ 54,000
APIC T. S $2,000
Retained Earnings $ 4,000
$60,000
Treasury Stock (3,000 * $20)
(To record 3,000 Sold shares of the treasury stock at $18 per share)
st
Nov 1 , 2019 Retained Earnings (110,200.00* $0.25) $27,550
Cash Dividends Payable $27,550
(To record the declaration of cash dividends)

December 1st, Cash Dividends Payable $27,550

2019 Cash $27,550
(To record the payment of cash dividends)

December 5th , Common stock dividends $35,160

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2019 Common stock dividends distribution $6,010
Additional paid in capital for common stock $29,150
(To record the declaration of 5% stock dividends)
th
December 30 , Common stock dividends distribution $1.500
2019 Common stock $1,500
(To record the declaration of 5% stock dividends)

End of Question 6…

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Question (7) Answers

Required: Prepare the stockholders' equity section at December 31, 2019.

Alico Corporation
Balance Sheet (Partial)
At the date of December 31st, 2019
Stockholders’ Equity

Preferred Stock, $100 par value, 8%, 10,000 shares authorized: 2,000 shares
issued................................................................................................................... $200,000

Common Stock, $2 par value, 700,000 shares authorized, 400,000 shares

issued................................................................................................................. $800,000

Paid-in Capital in Excess of Par Value—Preferred Stock................................. $310,000

Paid-in Capital in Excess of Par Value—Common Stock.................................. $650,000

Retained Earnings............................................................................................... $900,000

Treasury Stock (10,000 common shares)............................................................ ($85,000)

_________________________________________________________________________

Total Stockholders’ Equity $ 2,775,000

End Of Question 7…

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 Question (8) :
Required: Analyze the overall financial situation from cross-sectional and time- series
viewpoints. Break your analysis into an evaluation of the firm’s internal liquidity, Debt and
profitability analysis. Then write a report that sheds light on the financial health of XYZ
Company.

1- Liquidity Ratios:
a. Current Ratio:
Current Assets / Current Liability $ 14,250 / $15,675 = 0.9

b. Quick Ratio:
(Querent Assets – Inventory) /Current liabilities ($14,250-$4,350)/$15,675 = 0.6

2- Financial Leverage Ratios:

 Dept Ratio:
Total liabilities / Total Assets $19,800 / $ 36,000 = 55%

 Time interest Ratio:

Operating Profit / Interest Expense $2,000/500 = 4

3- Profitability Ratios:
 Gross Profit Ratio:

Gross Profit / Total Sale Dollars $13,000/$100,000 = 0.13

 Operating Profit Ratio:

Operating profits Margin = Operating Profit / Total Revenue $2000/$100,000 = 0.02

 Net profit After Tax:

Net Profits Margin = Net Profit after tax / Total Revenue $900/ $100,000 = 0.009

 ROA:
Net Income / Total Assets $900 / $36,000 = 2.5%
 ROE:
Net income / Total Equity $900/ $16,200 = 5%
Follow

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 XYZ Company
Historical and Industry Average Ratios
Industry Actual Actual
Average 2008 2009
Current Ratio 1.3 1.0 0.9
Quick Ratio 0.8 0.75 0.6
Debt Ratio 64.7% 50% 55%
Time Interest earned
4.8 5.5 4
ratio
ROA 2.9% 2.0% 2.5%
ROE 8.2% 4.0% 5%

Financial Report:

 we first note that XYZ is slightly less liquid than the average firm in the industry,
with both a current ratio and a quick ratio that is lower than the industry average
which mean that, XYZ Company is facing a liquidity problem because its current
assets will not be able to cover its current liabilities.

 According to Dept ratios results, we note that XYZ dept ratio average is less than
the firms in the industry which mean that XYZ will be able to cover its total
liabilities by its total assets with 55%, and will has the advantages of having low
cost of finance & benefits from tax shield ,but this situation unfortunately might
lead to bankruptcy.

 According to interest ratio average , XYZ average is less than the firms in the
market which mean that the company may not able to cover its interest obligations.
this could be linked to the increase in debt ratio comparing with 2008 results.

 ROA average show that XYZ average is less than the firm average in the market,
which mean that the company able to generate profit to C.S less than the market.
 ROE average show that XYZ average is less than the firm average in the market,
which mean the company will not be able to increase the returns on shareholder’s
investments.

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Refer to XYZ historical average ratios we found the follow:

 Current and quick ratios results in 2009 is less than 2008 results which mean
that XYZ in 2009 is facing a liquidity problem which mean that the company have
to sell inventory in order to pay its short term liabilities and this is not a good
position for any company.

 According to Dept ratio average we found that the average in 2009 is higher than
2008 which mean that XYZ opportunity to cover its dept situation is better but still
having a problem with its fixed assets.
 The time interest earned ratio is low in 2009 this because of the dept to assets
ratio results.

 For 2009 the ROA ratio is 2.5%. The increase return on assets in 2009 reflects the
increase sales, reduce costs, and much higher net income for that year.

 For 2009, the return on equity “ROE” was 5%. One reason for the increased
return on equity was the increase in the net income. When analyzing the return on
equity ratio, the business owner also must take into consideration how much of the
firm is financed using debt and how much of the firm is financed using equity.

End of Question 8 …

Thank You …

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