Atlas Business Technology College

Date of exam: January 20, 2024

School of Management and Accounting Time allowed: 3:00 hrs
Accounting and Finance Program Maximum marks: 50%
Final exam for the course Principles of
Fundamentals of Accounting -I

Name:____________________________________ ID No:________________ Section:_______

Part one: Multiple choices (1.2 pts each)

1. Which one of the following is referred to the book of original entry?
A. Ledger C. Chart of accounts
B. Journal D. Trial balance
2. Which one of the following is different from the other?
A. Cash C. Account receivable
B. Prepaid rent D. Unearned revenue
3. Post closing trial balance;
A. Contains balance sheet accounts
B. Prepared after closing the temporary accounts
C. Contains permanent accounts
D. Reports temporary accounts only
E. All except D
F. A and B
4. The party to check to whom the payment is to be made is called?
A. Maker B. Payer C. Payee D. Drawer
5. Cost of goods sold is determined only at the end of the accounting period in;
A. A perpetual inventory system.
B. A periodic inventory system.
C. Both a perpetual and a periodic inventory system.
D. Neither a perpetual nor a periodic inventory system.
6. The Merchandise Inventory account is used in each of the following except the entry to
record;
A. Goods purchased on account. C. Payment of freight on goods sold.
B. The return of goods purchased. D. Payment within the discount period.
7. Good News Company purchased merchandise on account from a Paper Company for
$88,000, terms 1/15, net 45. Good News Company returned $12,000 of the merchandise and
received full credit from Paper Company. How much cash will be recorded if the invoice is
paid with the discount period?
A. $75,240 C. $88,000
B. $76,000 D. $87,120

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8. The Good News Company sold merchandise to the Magazine Stand on account, $3,450,
terms 2/10,n/30. The cost of merchandise was $1,850. Good News Company issued a credit
memo to Magazine Stand for $900, cost of merchandise sold $600, Which of the following
will be included in the journal entry for the recording of the credit memo using the perpetual
inventory system?
A. Merchandise inventory $600 Dr, Cost of merchandise sold $600 Cr
B. Merchandise inventory $900 Dr, Cost of merchandise sold $900 Cr
C. Sales returns and allowances $600 Dr, Accounts receivable $600 Cr
D. Accounts receivable $900 Dr, Sales returns and allowances $900 Cr
9. Which one of the following is/are the importance of recording transactions initially in the
journal?
A. Ensure that all effects of a business transaction are recorded
B. Have in one place a complete information about a recorded transaction
C. Easily identify recording errors, and
D. Have an historical record of transactions.
E. All of the above
10. The inventory records of Good News Company indicate that $92,300 of merchandise should
be on hand at the end of the month. The physical inventory indicates that $89,900 is actually
on hand. The journal entry to adjust inventory shrinkage will include:
A. Merchandise Inventory $2,400 debit
B. no entry is needed
C. Cost of Merchandise Sold $2,400 debit
D. Merchandise Inventory $89,900 debit
11. The purchases returns and allowances account is considered
A. A liability account. C. A contra purchases account.
B. A contra revenue account. D. An asset account.
12. Under the periodic inventory system, merchandise inventory is adjusted to the physical
inventory
A. During the month.
B. As the inventory is sold.
C. At the time adjusting entries are being made.
D. During the time closing entries are prepared
13. Bryan Company purchased merchandise from Cates Company with freight terms of FOB
shipping point. The freight costs will be paid by the
A. Seller C. Transportation Company
B. Buyer D. Buyer and the seller

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14. Zach’s Market recorded the following events involving a recent purchase of merchandise:
Received goods for $50,000, terms 2/10, n/30.
Returned $1,000 of the shipment for credit.
Paid $250 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company’s merchandise inventory
A. Increased by $48,020. C. Increased by $48,265.
B. Increased by $49,250. D. Increased by $48,270
15. A credit sale of $800 is made on April 25, terms 2/10, n/30, on which a return of $50 is
granted on April 28. What amount is received as payment in full on May 4?
A. $735 C. $800
B. $784 D. $750
16. If a customer agrees to retain merchandise that is defective because the seller is willing to
reduce the selling price, this transaction is known as a sales
A. Discount. C. Contra asset.
B. Return. D. Allowance.

17. Which one of the following item/s is/are to be reported by the credit memorandum?
A. Note collected by bank E. All of the above
B. Bank service charge F. A and C only
C. Interest earned G. B and D only
D. NSF check
18. The credit terms offered to a customer by a business firm are 2/10, n/30, which means that;
A. The customer must pay the bill within 10 days.
B. The customer can deduct a 2% discount if the bill is paid between the 10th and 30 th day
from the invoice date.
C. The customer can deduct a 2% discount if the bill is paid within 10 days of the invoice
date.
D. Two sales returns can be made within 10 days of the invoice date and no returns
thereafter.
19. Which one of the following error is detected by the preparation of trial balance?
A. Failure to journalize and/or post a transaction
B. Journalizing and/or posting the same transaction more than once
C. Posting a debit entry as a credit or vice versa
D. Journalizing and/or posting a transaction correctly but in or to the wrong account
E. Journalizing and/or posting erroneous but equal dollar amounts of debits and credits
F. All except C
20. Baden Shoe Store has a beginning merchandise inventory of $30,000. During the period,
purchases were $140,000; purchase returns, $4,000; and freight-in $10,000. A physical count
of inventory at the end of the period revealed that $20,000 was still on hand. The cost of
goods available for sale was
A. $164,000. B. $156,000.

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 C. $176,000. D. $184,000.
21. Concerning internal control, which one of the following statement/s is/are correct?
A) Broadly speaking, internal control is only necessary in large organizations.
B) The purposes of internal control are to check the accuracy of accounting data, safeguard
assets against theft, promote efficiency of operations and ensure that management’s
policies are being followed.
C) Once an internal control has been established, it should be effective as long as policies are
being followed.
D) An example of internal control is having one employee count the day’s cash receipts and
compare the total with the total of the cash register tapes.
22. Journal entries based on the bank reconciliation are required for;
A) Additions to the bank balance according to the depositor’s records.
B) Deductions from the bank balance according to the depositor’s record.
C) Both A and B
D) Neither A nor B
23. Of the following one is to be deducted from the depositor’s balance while preparing the bank
reconciliation?
A. Outstanding check C. Note receivable collected by bank
B. Deposit in transit D. Notes payable paid by bank

24. While replenishing the petty cash fund, how much cash is to be withdrawn from the bank?
A. By the total amount of petty cash fund
B. By the total amount of expense paid from the petty cash fund
C. By the amount of original petty cash amount minus amount of cash left on hand after the
payment of expenses
D. All are possible
25. Which one of the following item is not considered as cash?

A. Coins C. Money deposited in a bank

B. Currency D. Post dated check

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 Part two: Work out questions (25 pts)
Q1. The trial balance of ABC company at July 31, 1991, the end of the current fiscal year, and
the data needed to determine yearend adjustments are as follows;
ABC Company
Trial balance
July 31, 1991
Cash 7,790
Laundry supplies 4,750
Prepaid insurance 2,825
Laundry equipment 85,600
Accumulated depreciation 55,700
Accounts payable 4,950
Ana perez, capital 30,900
Ana perez, drawing 18,000
Laundry revenue 76,900
Wages expense 24,500
Rent expense 15,575
Utilities expense 8,500
Miscellaneous expense 910
168,450 168,450
Adjustment data;
a. Inventory of laundry supplies at July 31, birr 1,840.
b. Insurance premiums expired during the year, birr 1,500.
c. Depreciation on equipment during the year, 5,720.
d. Wages accrued but not paid at July 31, birr 850.
Instruction:
i. Record the necessary adjusting journal entries (2 pts)
ii. Prepare the adjusted trial balance (3 pts)
iii. Prepare the necessary closing entries (3 pts)
iv. Prepare post closing trial balance (3 pts)

Q2. The following selected transactions were completed during February between Cary company
and Lynn inc.
Feb.3. Cary company sold merchandise on account to Lynn inc , birr 15,000 terms FOB
destination, 2/15, n/eom.

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 3. Cary company paid transportation cost of birr 300 for delivery of merchandise sold
Lynn inc on February 3.
10. Cary company sold merchandise on account to Lynn inc , birr 10,000 terms FOB
shipping point, n/eom.
12. Lynn inc returned merchandise purchased on account on February 10 from Cary
company, birr 2,000.
12. Lynn inc paid transportation charges of birr 700 on February 10 purchase from Cary
company.
18. Cary company sold merchandise on account to Lynn inc , birr 18,000 terms FOB
shipping point, 2/10, n/30. Cary company prepaid transportation costs of birr 1,500
which were added to the invoice.
18. Lynn inc paid Cary company on account for purchases of February 3.
28. Lynn inc paid Cary company on account for purchases of February 18.
28. Lynn inc paid Cary company on account for purchases of February 10.

Instruction: Journalize the February transactions for (1) Cary company and (2) Lynn inc. (9 pts)
Bank reconciliation
Q3. On May 31, 2007, ABC Company had a cash balance per books of $5,781.80. The bank
statement from Dashen bank on that date showed a balance of $6,804.60. A comparison of the
statement with the cash account revealed the following facts.
A. The statement included a debit memo of $40 for the printing of additional company
checks.
B. Cash sales of $836.15 on May 12 were deposited in the bank .The cash receipts journal
entry and the deposit slip were incorrectly made for $846.15. The bank credited ABC
Company for the correct balance.
C. Out standing checks at May 31 totaled $1,276.25 and deposits in transit were $936.15.
D. On May 18, the company issued Check No.1181 for $685 to Abebe, on account. The
check, which cleared the bank in May, was incorrectly journalized and posted by ABC
Company for $658.
E. A $2000 note receivable was collected by the bank for ABC Company on May31 plus
$80 interest. The bank charged a collection fee of $20. No interest has been accrued on
the note.
F. Included with the cancelled checks was a check issued by XYZ Company to Zelalem for
$600 that was incorrectly charged to ABC Company by the bank.
G. On May 31, the bank statement showed an NSF charged of $700 for a check issued by
Tamirat, a customer, to ABC Company on account.
INSTUCTIONS:
[A]. Prepare the bank reconciliation at May 31, 2007.
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 [B]. Prepare the necessary adjusting entries for ABC Company at May 31,2007.

Q4. ABC Company maintains a petty cash fund for small expenditures. The following
transactions occurred over a 2-month period:
July 1. Established petty cash fund by writing a check on Awash bank for $200.
15. Replenished the petty cash fund by writing a check for $195. On this date,
the fund consisted of $5 in cash and the following petty cash receipts:
Freight- in $94, postage expense $42.40, entertainment expense $44.60, and
miscellaneous expense $11.90.
31. Replenished the petty cash fund by writing a check for $192. At this date,
the fund consisted of $8 in cash and the following petty cash receipts:
Freight-in $82.10, charitable contributions expense $40, postage expense
$27.80, and miscellaneous expense $42.10.
Aug. 15. Replenished the petty cash fund by writing a check for $187. On this date,
the fund consisted of $13 in cash and the following petty cash receipts:
Freight-in $74.60, entertainment expense $43, postage expense $33, and
miscellaneous expense $37.
16. Increased the amount of the petty cash fund to $300 by writing a check for
$100.
31. Replenished the petty cash fund by writing a check for $283. On this date,
the fund consisted of $17 in cash and the following petty cash receipts:
Postage expense $140, travel expense $95.60, and freight-in $46.40.
Instructions:
Journalize the petty cash transactions.

FA-I Final Exam January, 20, 2024

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 Atlas Business College
Date of exam: January 20, 2024
School of Management and Accounting Time allowed: 3:00 hrs
Accounting and Finance Program Maximum marks: 50%
Final exam for the course Principles of
Fundamentals of Accounting I

Name:____________________________________ ID No:________________ Section:_______

Answer sheet
Part One: Answers for multiple choice questions (1.2 pts each)
1. 2. 3. 4. 5.
6. 7. 8. 9. 10.
11. 12. 13. 14. 15.
16. 17. 18. 19. 20.

21. 22. 23. 24. 25.

Part Two: Work out question (25 pts)

FA-I Final Exam January, 20, 2024