Intro to Financial Accounting (BU 127) - WLU; Final Exam | Complete questions and answers Latest updated 2026.

Intro to Financial Accounting (BU 127) - WLU; Final Exam | Complete questions and answers Latest updated 2026. Course no: BUI27 Name: Title: Imtroduction to Financial Accounting 1LD. #: Professor(s): Banks, D Silva, Isiaka, Mactavish, Moore, Scallen, Young Section: Number of pages: I4 (including cover page) Length of examination: 2.5 hours Examination aids allowed: Calculator (non ~programmable) The doors of the examination room will be opened approximately 10 minutes before the start of the examination. Candidates will be permitted to enter the examination room quietly up to one half hour after the scheduled start of the exam. Candidates arriving late will not be allowed any extra time. Candidates must not begin the examination or attempt to read the examination questions until instructed lo do so **THE UNIVERSITY IS NOT RESPONSIBLE FOR THE LOSS OF VALUABLES BROUGHT INTO THE EXAM LOCATIONS OR CLASSROOMS WHERE XAMS ARE BEING WRITTEN. Candidates once having entered. may not leave the exam room before completing and submitting the exam unless accompanied by a Proctor. Candidates are not permitted to submit their examination and leave the examination room until 1 hour after the examination has begun, and in no case before their attendance has been taken. In no case may a candidate leave the room temporarily, for any reason, until 30 minutes ajter the start of the examination. In order that remaining candidates are not disrupted, candidates must remain seated and may not leave the examination room during the last 15 minutes of the examination session At the close of the examination period. candidates must stop writing immediately. The Presiding Officer may seize the papers of candidates who fail to observe this requirement, and a penalty may be imposed at the discretion of the instructor Candidates must submit all their work, according 1o the instructions of the Presiding Officer. including all materials and a copy of the examination paper with their name and student 1D number written on it. Unused examination booklets may not be taken from the examination room. A candidate who leaves before the exanunation is over must hand in all completed and attempted work, notes made during the exam, and a copy of the examination paper with their name and student 1D mumber on it Talk or any form of communication between candidates is absolutely forbidden. No information of any kind is to be written on the question paper or on scrap paper for the purpose of assisting other candidates. Responses to questions must not be done in an exaggerated way or in a manner that will involve transmission of information to others. Candidates must remain seated during the examination period. A candidate needing to speak to the proctor (e.g. to ask for additional supplies or to request permission to leave the examination room Jor any reason) should so indicate by raising his or her hand. Questions concerning possible errors, ambiguities or omissions in the examination paper must be directed to the proctor who will investigate them through the proper channels. The proctor is not permitted to answer questions other than those concerming the examination paper Candidates must not use or attemp! to use any improper source of information. No candidates for an examination may bring into the examination room any books, notes or other material containing information periaining to the examination unless the examiner has given instructions that such material will be allowed and this instruction is specified on the examination paper. Any item brought into the examination room is subject to inspection. No briefcases, backpacks or other bags and carriers may be brought to the desk site where the candidate is writing the examination. These bags should be left outside the examination room. If books, notes etc. cannot be left outside the examination room, they must be put at the front of the examination room in a place designated by the proctor before a candidate takes a seat. Candidates are advised not to bring valuables to the examination room. No electronic or communication devices will be allowed in the examination room, including cell phones, smartphones, pagers, ete. Cell phones will be taken away if found and an Irregularity notice willbe filed with the Integrity Office. Caleulators are not allowed unless specified by the instructor and indicated on the examination paper: Only non-programmable calculators without lids, authorized by the instructor, will be allowed. It is the candidare’s responsibility to ascertain whether the use of calculators is permitted, and. if it is, whether any restrictions are imposed on the nypes of calculators that may be brought to the examination No pencil cases are allowed on the desks. Translation dictionaries (¢.g. English- French) or other dictionaries. (thesawrus, defimitions, technical) are not allowed unless specified by the instructor and indicated on the examination paper. Electronic dictionaries are never allowed. Except for bottled water (with label removed), ne food or drink is allowed in the examination room. Candidates with health problems that warrant relaxation of this regulation should provide medical documentation to the presiding officer prior to the beginning of the examination. Such students should restrict themselves to those items and packaging that will least distract other examinees. Candidates are expected to write their examinations in an honest and straightforward manner. Where there are reasonable grounds jor believing a violation of exam protoceol has occurred, the candidate will be subject to the disciplinary procedures and sanctions acconding to the University Calendar. Only currently registered students will be permitied to write the final exam Examinations conducted at Wilfrid Laurier University will be bound by WLU regulations, regardless of where the candidate is registered. dpproned by Semave ( Okt 2722003) Updased Jamwary 2014 Marks Student’s Score Questions 1-22 22 ~ Question 23 8 Question 24 10Question Z5 2 Question 26 14 Question 27 16 Total 82Part A, Question 1: Multiple-Choice (22 marks) (cach question is worth 1 mark) Instructions: To answer cach of the following questions, clearly mark the letter of your answer An_pencil scantron on the card provided, and circle the letter on the exam paper. Ratio formulas can be found on the last page of this cxam. 1. When the amount of a contingent liability can be estimated and its likelihood is possible but not probable, the company should: A. include a description in the footnotes to the f 1 nancial statements. B. record the amount of the liability times the probability of its occurrence. C. record the hability and estimated amount of the loss on the statement of f 1 nancial position. D. omit the information about the contingent liability from its f 1 nancial statements and footnotes. 2. When a company encounters a contingent liability that is remote in likelihood, the company should: A. include a description in the foot notes to the f i nancial statements. B. record the amount of the liability times the probability of its occurrence. C. record the hability and estimated amount of the loss on the statement of f 1 nancial position. D. omit the information about the contingent liability from its f 1 nancial statements and footnotes. 3. If a company's gross salaries are $12,000, and it withholds $1,800 for income taxes and $800 for Employment Insurance and other deductions, the journal entry to record the employees’ pay should include a: A. debit to Salaries Expense for $9,400. B. debit to Salaries Payable for $9.400. C. credit to Salaries Payable for $12,000. D. credit to Cash for $9,400. 4. A company receives $95 for merchandise sold to a consumer, of which S5 is for sales tax. The $5 of sales tax: A. increases sales revenue. B. increases current hiabilities. C. increases selling expenses. D. none of the answers are acceptable. 5. If the market rate of interest is 6%, a $10,000, 10-year bond with a stated annual interest rate of 8% would issue at an amount: A. less than face value (discount). B. equal to the face value (par). C. greater than face value (premium). D. that cannot be determined. 6. Under the cost principle: A. only reasonable and necessary costs of acquiring an asset should be recorded as a cost of the asset. B. costs of preparing an asset for use should never be recorded as part of the cost of the asset. assel. D. only the actual purchase price of the asset is recorded as the cost of the asset. 7. The Gulp convenience store chain buys new soda machines for $450,000 and pays $50,000 for installation. One-half of the total cost is paid in cash: the other half is f i nanced. How should the company record this transaction? A. Debit cash for $250,000, debit notes payable for $250,000, and credit equipment for $500,000. B. Debit equipment for $500,000, credit cash for $250,000, and credit notes payable for $250,000. C. Debit cash for $250,000, debit notes payable for $250,000 credit equipment for $450,000, and credit expenses for $50.000. D. Debit equipment for $450,000, debit expenses for $50,000, credit cash for $250,000, and credit notes payable for $250,000.8. Ordinary repairs and maintenance always: A. are part of the asset cost of equipment and facilities. B. are recorded as expenses. C. are recorded as habilities. D. improve the asset beyond the current accounting period.9. Which of the following statements most appropriately describes the purpose of depreciation of a long-lived tangible asset? A. To indicate how the asset has physically deteriorated. B. To show that the asset will eventually and gradually become obsolete. C. To record that the asset's market value declines over time. D. To match the cost of the asset to the period in which it generates revenue. 10. Under what circumstance should a company record an asset impairment loss? A. When residual value is greater than the repairs and maintenance expenses needed to keep the asset. B. When net book value is less than the residual value of the asset. C. When accumulated depreciation equals the purchase cost of the asset. D. When net book value is greater than expected future cash f 1 ows for the asset. 11. How does an asset impairment loss impact a company's f 1 nancial statements? A. Raise expenses and lower both revenue and net income. B. Lower assets, shareholders' equity, and net income. C. Raise expenses and lower net income with no ef f ect on any other items. D. Raise liabilities and lower sharcholders' equity. 12. In recording the acquisition cost of an entire business: A. goodwill is recorded as the excess of cost over the fair market value of identif 1 able net assets. B. assets are recorded at the seller's book values. C. goodwill, if it exists, is never recorded. D. goodwill is recorded as the excess of cost over the book value of identif i able net assets. Questions 13-14 Use the Information Below In March, BetterBuy purchases six plasma TVs from Toshiba for $1.500 each (serial numbers through ). In April, the company purchases four more identical TVs from Toshiba for $1,450 each (serial numbers through ). In May, the company purchases f 1 ve more identical TVs for $1,600 each (serial numbers through ). In June, BetterBuy sells two of these TVs (serial numbers and ). 13. BetterBuy records $3.000 as the cost of goods sold. BetterBuy is using the: A. Specif 1 ¢ identif i cation method. B. LIFO method. C. FIFO method. D. Weighted average cost method. 14. If BetterBuy uses the weighted average method, its cost of goods sold will be: A. $2.900. B. $2,950. C. $3.040. D. $3,033.6 @ $1,500 = $9,000 4 @ $1,450 = $5,800 5 @ $1,600 = $8.000 $22, 800 Average cost per unit = 22,800/15 = $1,520 * 2 = $3.040 15. The following information was available to the accountant of Horton Company when preparing the monthly bank reconciliation: Outstanding cheques: #0643 for $502 #0651 for $43 Bank service charges $25 Deposits in transit $190 Interest received from bank $5 Customer cheque retured by bank as NSF $20 Cash balance per bank statement $975 Cash balance per books (prior to reconciliation) $660 The amount of cash that should appear on the statement of f 1 nancial position following completion of the reconciliation and adjustment of the accounting records is: A. $660. B. $640. C. $620. D. $305. Cash on balance sheet = Cash per bank + Deposits in transit - Outstanding cheques $975 + $190 - ($502 + $43) = $620 or, Cash on balance sheet = Cash per books + Interest received from bank - NSF checks - Bank service charges. $660 + 85 - $20 - §25 = $620 16. Deposits in transit: A. have been recorded by the company but not yet by the bank. B. have been recorded by the bank but not yet by the company. C. have not been recorded by the bank or the company. D. are customers' cheques that have not yet been received by the company.17. Which of the following situations would cause the balance per bank to be more than the balance per books? A. Deposits in transit. B. Service charges. C. Outstanding cheques. D. Cheques from customers returned as NSF. 18. When are ratios most useful for analysis? A. When used alone. B. When compared with historical ratios of the same company. C. When compared with ratios for other companies in the industry. D. When compared with both historical ratios of the same company and ratios for other companies in the industry. 19. The cash flow statement will not report the A. amount of cheques outstanding at the end of the period. B. sources of cash in the current period. C. uses of cash in the current period. D. change in the cash balance for the current period. 20. Which of the following transactions does not affect cash during a period? A. Write-off of an uncollectible account B. Collection of an accounts receivable C. Sale of common shares D. Redemption of bonds 21. At the end of 2013, Libby Company reported an ending balance for retained earnings of $50,000. During 2014, the company reported the following amounts: Dividends declared and paid, $30,000 and profit, $40,000. The 2014 statement of Retained Earnings should report an ending balance for retained earnings of which of the following? A. $60,000. B. $80,000. C. $90,000. D. $100,000. Calculation: $50,000 - $30,000 + $40,000 = $60,000 22. If a business declared and paid a $500 dividend, it would appear on which of the following? A. Income statement only. B. Statement of financial position only. C. Statement of changes in equity and the statement of cash flows. D. Statement of changes in equity only.Question 23 (8 marks) Hartangue Inc. began operations in November 2014 and sells goods to customers on credit. The following information relates to the fiscal year ended December 31, 2014: l. 3 3. Sales on credit to customers totalled S160,000. Collections from customers totalled $120.,000. Using the aging method, Hartangue Inc. determined that the necessary allowance for doubtful accounts at the end of December 31, 2014 should be $4,000. The following information relates to the fiscal year ended December 31, 2015: l. y & 3. 4. Sales on credit to customers totalled $840.000. Collections from customers totalled $780,000. Write offs during 2015 totalled $9,000. There were no recoveries. Using the aging method, Hartangue Inc. determined that the necessary allowance for doubtful accounts at the end of December 31, 2015 should be $10,000. Required Provide journal entries to record the above transactions. Solution December 31, 2014 Trade receivables 160,000 (1/2 mark) Sales 160,000 (1/2 mark) Cash 120,000 (1/2 mark) Trade receivables 120,000 (1/2 mark) Bad debt expense 4,000 (1/2 mark) Allowance for doubtful accounts 4.000 (1/2 mark) December 31, 2015 Trade receivables 840,000 (1/2 mark) Sales 840,000 (1/2 mark) Cash 780,000 (1/2 mark) Trade receivables 780,000 (1/2 mark) Allowance for doubtful accounts 9,000 (1/2 mark) Trade receivables 9.000 (1/2 mark) Bad debt expense 15.000 (1 mark)Allowance for doubtful accounts 15,000 (1 mark) Question 24 (10 marks) Burke Company purchased equipment on January 1, 2013, at a cash cost of $13,400. The estimated residual value was $800 and the estimated useful life was 5 years. The company has a December 31 fiscal year end and uses straight-line depreciation. On May 31, 2015, the company sold the equipment for $6,900 cash. A. What was the depreciation expense amount per month? B. What was the amount of accumulated depreciation at May 31, 20157 C. Give the required journal entries on the date of disposal, May 31, 2015. (Assume depreciation has been recorded up to December 31, 2014, but no 2015 depreciation has yet been recorded). Solution A. ($13,400-800)/60 = $210.00 per month (2 marks) B. 210.00 x 29 months = $6,090 (2 marks) C. Depreciation expense (210.00 x 5) 1050 (1 mark) Accumulated depreciation 1050 (1 mark) Cash 6,900 (1 mark) Accumulated depreciation 6,090 (1 mark) Loss on disposal 410 (1 mark) Equipment 13,400 (1 mark)Question 25 (12 marks) On October 1, 2015 the Dream Team Corporation negotiated a 5-year bond with a maturity value of $10,000,000. The Dream Team Corporation has a December 31 fiscal year end. The bond will pay interest at a rate of 6.0% per annum payable March 31 and September 30 of each year. When the bond was issued, the market rate (bond yield) was 4%. NOTE: Present value tables can be found at the back of this exam (second last page) Required l. Calculate the proceeds received when the bond is issued. (4 marks) 2. Prepare the journal entry to record the issuance of the bond. (2 marks) 3. Using the effective interest rate method, prepare journal entries at December 31* , 2015 and March 31, 2016. (4 marks) 4. What would be the carrying value of the bond March 31, 20167 (2 marks) Solution 1. Principle 10,000,000 x 0.8203 = $8,203,000 (2 marks) Interest = 10,000,000x 3% x8.9826 = 2,694,780 (2 marks) Total = 8203000+269780 =$10,897,780 2. Cash 10,897,780 (1 mark) Premium on Bond Payable 897,780 (1/2 mark) Bonds Payable 10,000,000 (1/2 mark) 3. Dec. 31,2015 Interest expense (10,897,780 x 4%x3/12) 108,977.80 (1/2 mark) Premium on Bond Payable 41,022.20 (1/2 mark) Interest payable (10,000,000 x 6% x 3/12) 150,000.00 (1/2 mark) Mar. 31, 2016 Interest expense (10,897,780x4%x3/12) 108,977.80 (1/2 mark, carry forward) Interest payable 150,000.00 (1/2 mark, carry forward) Premium on Bond Payable 41,022.20 (1/2 mark, carry forward) Cash (10,000,000x6%x6/12) 300,000.00 (1 mark) 4. Carrying value at March 31, 2016 = $10,897,780 — 41,022.20 — 41,022.20 = 10,815,735.60 (2 marks, carry forward)Question 26 (14 marks) The following information, in millions of dollars, has been reported by Maple Mills Inc. on its year-end financial statements for the years ended December 31, 2014 and December 31, 2013: Statements of Financial Position Cash Trade Receivables Inventory Prepayments Equipment Accumulated Depreciation Total Assets Trade Payables Income Taxes Payable Long-term Notes Payable Contributed Capital Retained Earnings Total Liabilities & Shareholders' Equity Statement of Income Sales Cost of Sales Gross Profit Depreciation Expense Other Operating Expenses Income from Operations Gain on Sale of Equipment Income before Income Tax Income Tax Expense Net Income Additional Information: Old equipment was sold for cash during 2014. It had an original cost of $80, and accumulated depreciation of $56. Required Prepare a Statement of Cash Flow for Maple Mills Inc. for the year ended December 31, 2014 using the indirect method.