BUS 145 Assignment 2

Name:
Section:

Multiple Choice Questions

Table 11-1

A $10,000, 90-day, 12% note payable was issued on November 1, 2013.

1) Referring to Table 11-1, what is the amount of the accrued interest on December 31, 2013?
A) $394.52
B) $95.34
C) $101.92
D) $197.26

2) 30) Referring to Table 11-1, the entry on the maturity date would include a:
A) credit to Interest Payable for $98.63.
B) debit to Interest Expense for $98.63.
C) credit to Note Payable for $10,295.89.
D) credit to Cash for $10,000.

3) Lippman Company Ltd. collects 5% GST on sales. If sales are $963,000, the proper accounting
includes:
A) $101,115 credit to Sales.
B) $48,150 credit to GST Payable.
C) $48,150 debit to GST Recoverable.
D) $963,000 debit to Accounts Receivable.

Table 11-2

Lumas Company gives a $50,000, 180-day note payable to its bank at 9% on September 15, 2013 for a
cash loan. Lumas has a December 31 year end.

4) ) Refer to Table 11-2. The adjusting entry necessary at December 31, 2013, would be:
A)
Interest Expense 1,319.18
Interest Payable 1,319.18

B)
Note Payable 1,319.18
Interest Payable 1,319.18

C)
Interest Expense 1,319.18
Note Payable 1,319.18

D) no adjusting entry is necessary

BUS 145 Assignment 2

Table 11-3
Benny's Bagels operates in a province that has HST collected by the federal government at a rate of
12%. During the month of December 2013 Benny's Bagels purchased baking materials for $12,000;
bought a new oven for $15,000; paid salaries of $14,000; and, had cash sales of $35,000.

5) Refer to Table 11-3. What is the correct journal entry to record the payments made during
December that require HST?
A)
Inventory 12,000
Equipment 15,000
Salaries expense 14,000
HST recoverable 4,920
Cash 45,920

B)
Inventory 12,000
Equipment 15,000
HST recoverable 3,240
Cash 30,240

C)
Inventory 12,000
Equipment 15,000
HST payable 3,240
Cash 30,240

D)
Inventory 12,000
Equipment 15,000
Salaries expense 14,000
Cash 41,000

6) Franconia Sales offers warranties on all their electronic goods. Warranty expense is estimated at
2% of sales revenue. In 2013, Franconia had $500,000 of sales. In the same year, Franconia paid out
$7,500 of warranty payments. Which of the following is the entry needed to record the estimated
warranty expense?
A)
Estimated warranty payable 7,500
Cash 7,500

B)
Warranty expense 7,500
Estimated warranty payable 7,500

C)
Warranty expense 10,000
Estimated warranty payable 10,000
BUS 145 Assignment 2

D)
Warranty expense 10,000
Sales revenue 10,000

7) Tina Martin works as a cost accountant receiving $520 for a 40-hour work week. She is paid time
and one-half for anything over 40 hours. If Tina works 47 hours, her total pay is:
A) $611.00.
B) $520.00.
C) $656.50.
D) $567.00.

Table 11-4

Sandra Singh works as the manager for the Shmenge Brothers music store. She earns $1,200 a week
for a 40-hour week and time and a half for anything over 40 hours per week. During the first week of
the year, Sandra worked 46 hours. The income tax withholdings are 20% of gross earnings. Canada
Pension Plan deductions are 4.95% of gross earnings and Employment Insurance deductions are
1.83% of gross earnings. The worker's compensation premium is 1.6% of gross earnings. Ignore the
basic Canada Pension Plan exemption.

8) Refer to Table 11-4. What is the correct journal entry to record the salary expense?

A)
Salary expense - regular 1,200.00
Income tax payable 240.00
CPP payable 59.40
EI payable 21.96
Cash 878.64
Salary expense - overtime 270.00
Cash 270.00

B)
Salary expense 1,470.00
Income tax payable 294.00
CPP payable 72.77
EI payable 26.90
Cash 1,076.33

C)
Salary expense 1,470.00
Income tax payable 294.00
CPP payable 72.77
EI payable 26.90
Worker's compensation payable 23.52
Cash 1,052.81

D)
Salary expense 1,470.00
Income tax payable 294.00
CPP payable 72.77
BUS 145 Assignment 2

EI payable 37.66
Cash 1,065.57

9) Refer to Table 11-4. What is the amount of the CPP deduction if the basic exemption is included in
the calculation?
A) $0
B) $72.77
C) $76.11
D) $69.43

10) Refer to Table 11-4. What is the correct journal entry to record the employer's share of the
withholdings?
A)
Employee benefits expense 123.19
CPP payable 72.77
EI payable 26.90
Worker's compensation payable 23.52

B)
Employee benefits expense 133.95
CPP payable 72.77
EI payable 37.66
Worker's compensation payable 23.52

C)
Employee benefits expense 99.67
CPP payable 72.77
EI payable 26.90

D)
Employee benefits expense 110.43
CPP payable 72.77
EI payable 37.66

Chapter 13

Q1. MCQ: circle the correct Answer

Table 13-1

The shareholders' equity section of the balance sheet of Cresco Corporation follows:

Contributed capital:
Preferred shares, cumulative, $3.50, 4,000 shares outstanding,
liquidation value $56 per share $210,000
Common shares, 20,000 shares outstanding 397,500
Retained earnings 138,250

Note: There are two years dividends in arrears on the preferred shares, including the current year.
BUS 145 Assignment 2

1. Refer to Table 13-1. The book value per share for preferred shares is:
A) $52.50
B) $56.00
C) $63.00
D) $59.50

2.) Refer to Table 13-1. The book value per share for common shares is:
A) $19.88
B) $24.69
C) $26.79
D) $25.39

Table 13-2

The following information is available for Jansen Corporation for the current year:

Net income $156,000

Preferred dividends 24,000
Interest expense 17,500
Beginning of year:
Total assets 850,000
Total liabilities 375,000
Total common shareholders' equity 395,000

End of year:
Total assets 930,000
Total liabilities 405,000
Total common shareholders' equity 435,000

3. Refer to Table 13-2. The return on assets for Jansen Corporation was:
A) 19.5%
B) 18.7%
C) 17.5%
D) 16.8%

4) Refer to Table 13-2. The return on equity for Jansen Corporation was:
A) 30.3%
B) 31.8%
C) 35.9%
D) 37.6%

5. The rate of return on total assets and the rate of return on common shareholders' equity are used to
evaluate the:
A) profitability of the business.
B) liquidity of the business.
BUS 145 Assignment 2

C) ability to pay current liabilities with current assets.

D) cash flow of the business.

Q2. The article of incorporation authorize Gingrich Solution Ltd. To issue 100,000 $2.00 preferred
shares and $ 250,000 common shares. In its first year, Gingrich Solutions Ltd. completed the
following selected transactions:

2014
Jan.2 Paid incorporation costs of $2500 and legal fees of $6000 to organize as a corporation.
6 Issued 20,000 common shares for equipment with a market value of $175,000.
12 Issued 100 preferred shares to acquire software with a market value of $19,500.
22 Issued 5,000 common shares for $7.00 cash per share.

Required
1. Record the transactions in the general Journal.
2. Prepare the shareholders’ equity section of Gingrich Solutions Ltd. Balance sheet at Dec31,
2014. The ending retained Earnings balance is $60,000

Answer:

Date Description Debit Credit

BUS 145 Assignment 2

Chapter 15

Q1. Multiple choice Question

1. Bonds that are backed only by the good faith of the borrower are referred to as:
A) mortgage bonds
B) debenture bonds
C) serial bonds
D) registered bonds

2. Kuhnapfel Corporation issues $1,000,000, 8%, five-year bonds at face value. The total interest
expense over the life of the bonds is:
A) $400,000
B) $800,000
C) $600,000
D) $80,000

3. $1,000 bond quoted at 104.375 is selling for:

A) $1,043.80
B) $1,040.38
C) $1,043.75
D) $1,004.80

4. Jackson Corporation issues $400,000, 10%, five-year bonds at 97. The total interest expense over the
life of the bonds is:
A) $188,000
B) $212,000
C) $200,000
D) $40,000

5. A bond issued with a maturity value of $200,000 and a carrying amount of $195,500 is paid off at
BUS 145 Assignment 2

98.5 and retired. The gain or loss on this transaction is:

A) $3,000 loss
B) $3,000 gain
C) $1,500 gain
D) $1,500 loss

6. Bonds with a maturity value of $100,000 and a carrying value of $104,000 are converted into
common shares. The entry will include a:
A) debit to Bonds Payable for $104,000
B) credit to Premium on Bonds Payable for $4,000
C) credit to Common Shares for $104,000
D) credit to Common Shares for $100,000

Q2. Central Corporation has an opportunity to acquire a company that produces one of the parts it
uses in its manufacturing process. After careful analysis, Central has decided to raise the necessary
capital for the acquisition by issuing $3,000,000 of 7.5%, 10-year bonds dated April 1, 2014, with
interest payments on October 1 and April 1. Assume the bonds are issued on June 1, 2014 at face
value plus accrued interest. Central's year end is December 31.

a) Prepare the entry to record the issuance of the bonds on June 1, 2014.
b) Prepare the entry on October 1, 2014, to record the interest payment.
c) Prepare the entry to record the accrued interest on December 31, 2014.
d) Prepare the April 1, 2015 entry to record the interest payment.

Answer: General Journal

Date Accounts Debit Credit
2014
a) June 1

b) Oct. 1

c) Dec. 31

2015
d) Apr. 1

Q3. Assume that the notes to Pemberton Ltd.’s financial statements reported the following data on
September 30, 2014:

NOTE E: LONG TERM DEBT

5 percent debentures due 2033, net of unamortized discount of $ 223,162
(effective interest rate of 6.0 percent) $1,776,838
Pemberton Ltd. amortizes the discount by the effective- interest method.
Required:
BUS 145 Assignment 2

1. Prepare an amortization table through September 30, 2016, for the 5 percent debentures.
Pemberton ltd pays interest annually on September 30.
2. Record the September 30, 2016, interest payment on the 5 percent debentures.

Pemberton Ltd.
Partial Amortization Table

D
B DISCOUNT
END OF ANNUAL A INTEREST C ACCOUNT E
INTEREST INTEREST EXPENSE DISCOUNT BALANCE BOND CARRYING
PERIOD PAYMENT AMORTIZATION AMOUNT
Sept. 30, 2014
Sept. 30, 2015
Sept. 30, 2016

General Journal
POST.
DATE ACCOUNT TITLES AND EXPLANATIONS REF. DEBIT CREDIT
2016
Sept. 30

Q4. Diteck Corporation is considering two plans for raising $3,000,000 to expand its operations into
the west. The first plan involves the sale of 6%, 10-year bonds that could be issued at face value, and
the second plan involves the sale of 50,000 common shares at $60 per share. Either alternative would
raise $3,000,000. Prior to any new financing, Diteck Corporation has net income of $850,000 and
200,000 common shares outstanding. Management believes the expansion will generate additional
income of $360,000 before interest and taxes. The income tax rate is 40%.

a) Calculate the earnings per share assuming:

1) the bonds are issued
2) the common shares are issued
b) Which plan should the corporation choose in order to expand its operations?

Diteck Corporation

PLAN B
PLAN A ISSUE
BORROW $3,000,000
$3,000,000 of COMMON
AT 6% SHARES
Net income after interest and income tax, before expansion
Project income before interest and income tax
Interest expense
BUS 145 Assignment 2

Project income before income tax

Income tax on new project
Project net income
Total company net income
Earnings per share including expansion
Plan A
Plan B

b)

Chapter 16

Q1. The following selected data for Ryder Corporation for the year ended December 31, 2014, are available to you for preparing
the cash flow statement:

Cost of goods sold $56,500 Sales revenue $97,300

Amortization expense 14,100 Interest revenue 4,100
Income tax expense 2,300 Dividend revenue 3,600
Other operating expenses 17,700 Salary expense 24,000
Loss on sale of investments 1,400 Interest expense 5,900
Gain on sale of property,
plant, and equipment 7,200

The cash account began the year with a balance of $15,000 and ended the year with a balance of $195,800.

Accounts receivable decreased $ 13,600

Inventory increased 6,800
Prepaid expenses decreased 2,700
Accounts payable increased* 21,400
Salary payable increased 1,500
Accrued liabilities decreased 4,300
Income tax payable increased 800
Acquisition of property, plant, and equipment 46,000
Issuance of common shares 125,000
Cash received from sale of investments 35,000
Collection of loan principal 22,600
Payment of dividends 15,000
Purchased equipment by signing a note payable 20,000
Cash received from sale of Property, plant and equipment 31,700

* Accounts payable all relate to inventory purchases

Prepare the cash flow statement for Ryder Corporation for the year ended December 31, 2014, using the direct method, and
include a schedule of noncash investing and financing activities if necessary.
Ryder Corporation
Cash Flow Statement
For the Year Ended December 31, 2014
Cash flows from operating activities:
Receipts:
BUS 145 Assignment 2

Cash flows from investing activities:

Cash flows from financing activities:

Net increase in cash

Cash balance, December, 31, 2013
Cash balance, December 31, 2014

Q2. Using the following data, prepare the operating activities section of a cash flow statement for Richie Corporation for the
year ended December 31, 2014, using the indirect method.

Increase in salary payable $ 1,500

Decrease in accounts payable 2,000
Increase in accounts receivable 3,500
Net income 95,600
Decrease in inventory 5,800
Increase in prepaid expenses 1,200
Amortization expense-equipment 5,500
Amortization expense-buildings 7,500
Gain on sale of equipment 1,300
Loss on sale of patent 2,500

Answer: Richie Corporation

Partial Cash Flow Statement
For the Year Ended December 31, 2014

Cash flows from operating activities:

Net income
Add (subtract) items that affect net
income and cash flows differently:

Net cash inflow from operating activities $110,400

Q3. The Farmer Corporation engaged in the following transactions during 2014. Farmer uses a perpetual inventory system:

Mar. 31 Purchased merchandise from an Dutch supplier at a cost of 100,000 Euros. The exchange rate on this date was
$1.30 per Euro.
BUS 145 Assignment 2

Apr . 19 Paid for the merchandise. The exchange rate on this date was $1.32 per Euro.

May 11 Sold goods to a U.S. buyer at a selling price of $70,000 U.S. dollars. The exchange rate on this date was $1.02
Canadian dollars for each U.S. dollar. Ignore the journal entry to record cost of goods sold.

Jun. 15 Received payment from the U.S. buyer for the goods sold on June 10. The exchange rate on this date was $1.03
Canadian dollars for each U.S. dollar.

a) Prepare the journal entries necessary to record each of the above transactions.
Answer: a) General Journal
Date Accounts Debit Credit
Mar. 31

Apr. 19

May 11

Jun. 15

Q4. Table 1-1

The following are transactions in the purchase and sale of Straton Ltd. shares by Samuels Inc.

January 15, 2013 Purchased 2, 000 shares of Straton at $20.00 and paid $125 in brokerage fees
February 10, 2013 Received $1.00 dividend from Straton.
December 31, 2013 Straton reported net income of $6,000.
December 31, 2013 Market value of Straton shares $22.00.
June 30, 2014 Sold all shares of Straton for $21.00 per share.

Record the journal entries for the above transactions for Samuels Inc.

Refer to Table 1-1. Assume that the investment in Straton shares is classified as a long-term investment. Samuels exercises
significant influence over Straton by owning 30% of the outstanding shares. Assume that Straton earned no income from
January 1, 2014 to June 30, 2014, nor did it pay any dividends during that period.
Answer: General Journal
Date Accounts Debit Credit
2013
Jan. 15

Feb. 10

Dec. 31

2014
June 30
BUS 145 Assignment 2

Q5. The Farmer Corporation engaged in the following transactions during 2014. Farmer uses a perpetual inventory system:

Mar. 31 Purchased merchandise from an Dutch supplier at a cost of 100,000 Euros. The exchange rate
on this date was $1.30 per Euro.

Apr . 19 Paid for the merchandise. The exchange rate on this date was $1.32 per Euro.

May 11 Sold goods to a U.S. buyer at a selling price of $70,000 U.S. dollars. The exchange rate on this date
was $1.02 Canadian dollars for each U.S. dollar. Ignore the journal entry to record cost of goods sold.

Jun. 15 Received payment from the U.S. buyer for the goods sold on June 10. The exchange rate on this
date was $1.03 Canadian dollars for each U.S. dollar.

a) Prepare the journal entries necessary to record each of the above transactions.

Answer: a) General Journal

Date Accounts Debit Credit
Mar. 31

Apr. 19

May 11

Jun. 15

Chapter 17

Q1. Multiple Choice Question

1. The distribution of a stock dividend would appear in the:

A) operating activities section
B) financing activities section
C) investing activities section
D) It would not appear on the cash flow statement.

2. When calculating trend percentages, all percentages shown are relative to:
A) the immediately preceding year
B) the current year
C) the base year
D) an average index calculated for all the years shown

3. Olivera Company provides the following data for the year 2013:

Sales revenue $400,000

Sales returns and allowances $1,200
Sales discounts $800
Cost of goods sold $255,000
Operating expenses $95,000
Income tax expense $9,000
BUS 145 Assignment 2

Refer to Table 18-1. On a vertical analysis, what percentage would be shown for cost of goods sold?
A) 59.4%
B) 61.0%
C) 63.4%
D) 64.1%

4. Refer to Table 18-1. On a vertical analysis, what percentage would be shown for gross margin?
A) 35.9%
B) 35.6%
C) 56.1%
D) 44.1%

5. Pinto Corporation reported sales of $895,000 and its accounts receivable balance increased $13,500
during the same period. Cash collections from customers for the period were:
A) $13,500
B) $895,000
C) $908,500
D) $881,500

Q2. Table 18-2

La Rue Company reported the following data:

INCOME STATEMENT
2014
Sales* $ 279,355
Cost of goods sold 167,400
Gross margin 111,955
Operating expenses:
Sales and marketing expense 31,750
General and administrative expense 49,687
Research and development expense 15,000
Other operating expense 7,882
Total operating expenses 104,319
Operating income 7,636
Interest expense 3,580
Income tax expense 1,419
Net income (loss) $ 2,637

* All sales are on account.

BALANCE SHEET
2014 2013
Assets
Current assets:
Cash $ 11,837 $ 7,200
Accounts receivable, net 15,600 16,800
Inventory 38,000 31,000
Total current assets 65,437 55,000
Property, plant and equipment, net 195,000 168,000
Other long-term assets 15,000 27,100
Total assets $275,437 $250,100
Liabilities
Current liabilities:
Accounts payable $ 8,500 $ 7,300
Other current liabilities 1,400 3,900
BUS 145 Assignment 2

Total current liabilities 9,900 11,200

Long-term notes payable 54,000 30,000
Total liabilities $ 63,900 $ 41,200
Shareholders' Equity
Preferred shares (1,000 outstanding) $ 30,000 $ 30,000
Common shares (20,000 outstanding Dec. 31, 2014 ) 100,000 80,000
Contributed surplus 31,000 31,000
Retained earnings 50,537 67,900
Total shareholders' equity $211,537 $208,900
Total liabilities and shareholders' equity $275,437 $250,100

Other information:
1. The market price of the company's shares on December 31, 2014 was $0.62
2. A $2 per share dividend was paid on the preferred shares.
3. 4,000 common shares were issued on July 1, 2014.
4. An $18,000 dividend was paid on the common shares on November 15, 2014

Refer to Table above. Determine the results for the following ratios for 2014:

1. Current ratio=

2. Inventory turnover=

3. Quick ratio=

4. Accounts-receivable turnover=

5. Debt ratio=

6. Times-interest-earned ratio=

7. Earnings per share=

8. Price/earnings ratio for common shares =

 BUS 145 Assignment 2

.
BUS 145 Assignment 2

Working Note: