COMM 293 Accounting Final Part II

January 11, 2021

COMM 293 Accounting Final Part II
Instructions
 You have 48 hours to complete and submit this part of your final exam
 There is 6 questions for 70% of your final exam
 The title page is a requirement
 You are supposed to answer the questions on your own
 Any reference to any kind of open sources will trigger the academic
consequences
 For all questions please show all your calculation, starting with the
formula, then – calculation, then – solution
 In calculations the signs as $, %, etc. should accompany the figures, e.g.
$40, 15%, 3.5 times
 Neither, Excel skills, nor writing style (APA or Chicago) will be awarded
any marks
 Please make sure that the submitted material fit into the pages
 Start answering each question from the new page
 Fit only ONE ANSWER –the table – to ONE PAGE
 No bonus marks will be awarded for the early submission
READ THE QUESTION CAREFULLY AND
ANSWER WHAT IS ASKED

Question I {15 marks}
Balloon production Corp. purchased equipment on March 1, 2018 for $70,000.
The company estimated the equipment would have a useful life of three years and
produce 12,000 units in three years, with a salvage value of $10,000.
During 2018, the equipment produced 4,900 units.
On November 30, 2019, the equipment was sold for $18,000 after producing 5,600
units that year.
Required
a. Record all the necessary transactions for the year ended December 2018 and
2019, using the following depreciation methods:
i. Straight line,
ii. Double-declining balance, and
iii. Units-of-production.
b. Complete the following schedule for each method of depreciation.
Round to the whole month.
Page 3 of 7
Question II {15 marks}
The December 31, 2020 equity section of Team Inc.`s balance sheet appears
below:
Team Inc.
Equity section of the balance sheet
December 31, 2020
Contributed capital
Preferred shares, $3.75 cumulative, 40,000 shares authorized and issued $ 1,660,000
Preferred shares, $10 non-cumulative, 8,000 shares authorized and issued 670,000
Common shares, 400,000 authorised and issued 1,750,000
Total contributed capital $ 4,080,000
Retained earnings 741,600
Total equity $ 4,821,600
All the shares were issued on January 01, 2018, when the corporation began
operations.
No dividends had been declared during the first two years of operations, 2018 and
2019.
During 2020, the cash dividends declared and paid totaled $613,300.
Required
1. In a table form calculate the amount of cash dividends paid during 2020 to
each of three classes of shares.
2. Assuming profit earned during 2020 was $1,250,000, determine the
December 31, 2019 balance in retaining earnings.
3. Prepare a statement of changes in equity for the year ended December 31,
2020.
Page 4 of 7
Question III {10 marks}
Trolley Corp. reported $1,445,710 of profit for 2020.
On November 02, 2020 it declared and paid the annual preferred dividends of
$155,000.
On January 01, 2020 Trolley had 80,000 and 240,000 outstanding preferred and
common shares, respectively.
The following transactions changed the number of shares outstanding during the
year:
Feb. 01 Declared and issued a 20% common share dividend
Apr. 30 Sold 135,000 common shares for cash
May 01 Sold 50,000 preferred shares for cash
Oct. 31 Sold 30,000 common shares for cash
Required
a. Calculate the amount of profit available for distribution to the common
shareholders
b. In a table calculate the weighted-average number of common shares for the
year
c. Calculate the earnings per share for the year
Page 5 of 7
Question IV {10 marks}
Kitten Investment corp. issued $700,000 of 6%, six-year bonds for $735,902 on
July 01, 2020, the day the bonds were dated.
The market interest rate was 5%.
Interest is paid semiannually beginning December 31, 2020.
Kitten uses the effective interest method to amortise bond discounts and premiums.
Required
Record:
a. The issuance of the bonds,
b. The first interest payment.
Page 6 of 7
Question V {10 marks}
Mount Corp. was organized on January 02, 2020. And issued 50,000 common
shares for $250,000 on that date.
The following investment transactions and events subsequently occurred:
2020
Jan. 12 Mount Corp. acquired 12,000 shares of Hill Ltd. At a cost of $250,000. The
investment represented 24% of Hill`s outstanding shares
Mar. 31 Hill Ltd. declared and paid a cash dividend of $1.00 per share
Dec. 31 Hill Ltd. announced that it`s profit for 2020 was $125,000
2021
Aud. 15 Hill Ltd. declared and paid a cash dividend of $.80 per share
Dec. 31 Hill Ltd. announced that it`s loss for 2021 was $95,000
2022
Jan. 06 Mount Corp. sold all of its investment in Hill Ltd. for $230,000
Assume that Mount Corp. has significant influence over Hill Ltd. with its 24% share.
Required
1. Present the entries to record the preceding transactions in Mount Corp.`s
books
2. Calculate the carrying value per share of Mount Corp.`s investment as
reflected in the investment account on January 01, 2022
Page 7 of 7
Question VI {10 marks}
Required
Use the following income statement and information about changes in non-cash
current assets and current liabilities to present the cash flows from operating
activities using the indirect method:
Earring Co.
Income statement
For year ended May 31, 2020
Sales $2,810
Cost of goods sold 1,419
Gross profit $1,391
Operating expenses
Depreciation expense $223
Other expenses 1,100
Total operating expenses $1,323
Loss on sale of long-term investment 89
Net income (Net loss) from operation $(21)
Income tax expense 0
Net income (Net loss) $(21)
Changes in current assets and current liability accounts during the year were as
follows:
Accounts receivable $63 decrease
Inventory 25 increase
Prepaid insurance 3 increase
Accounts payable 15 increase
Accrued liabilities 8 decrease
The end of the exam