COMM 311
Financial Accounting Practices, Principles & Concepts
Midterm Exam #2 Answer Key- Winter 2026
Instructions – Please Read Carefully:
1. You will have 90 minutes to complete the exam.
2. This exam consists of 13 pages (including the title page) and is out of 80
marks. The attached Time Value of Money Tables are 5 pages.
3. Calculators are permitted.
4. Books and notes are not permitted.
5. Follow instructions carefully for each question.
6. Label your responses and insert all answers in the pages or spaces
provided.
Question #1 /30
Question #2 /14
Question #3 /15
Question #4 /10
Question #5 /11
Total /80
1
, Exercises ( Marks)
Answer the following questions using the spaces provided. Show all your work and label responses clearly.
Ques on #1 (30 Marks):
NorthPine Apparel Ltd. manufactures athletic hoodies and reports under ASPE. The company’s year-end is
December 31, 2027 and financial data
Dec. 31, 2026 Dec. 31, 2027
Accounts receivable 78,000 ?
Allowance for doubtful accounts 6,900 ?
Total credit sales (on account) 625,000 590,000
Collections on A/R 480,000 445,000
2027 transactions and additional information
1. May 1, 2027: A customer’s outstanding account was settled when NorthPine accepted a $72,000 note
receivable, 8%, one-year, interest payable at maturity.
2. December 31, 2027 (new sale): NorthPine rendered services for $40,000 cash plus five equal payments
of $12,000 due each December 31 from 2028–2032. The appropriate discount rate is 10%. Although
the company follows ASPE, it opts to use the effective interest method.
3. Factoring (Dec. 31, 2027): NorthPine transferred $50,000 of accounts receivable to Prime Factor Co.
with recourse.
o Prime retains 4% for possible returns
o Finance charge is 5%
o Fair value of the recourse obligation is $6,500
o Prime will collect directly from customers
4. NorthPine wrote off $2,700 of accounts receivable during 2027.
5. At December 31, 2027, after recording all transactions above (but before any bad debt adjusting
entry), the aging analysis of accounts receivable is as follows:
Age Category Balance Estimated Uncollectible %
Current $60,800 2%
1–30 days past due 23,500 5%
31–60 days past due 10,500 12%
Over 60 days past due 3,500 30%
Required
(a) Prepare the 2027 journal entries for the transactions described above, including year-end adjusting entries.
Round to the nearest whole dollar.
(b) Determine the ending balances of Accounts Receivable and Allowance for Doubtful Accounts at December
31, 2027.
(c) Prepare the instalment note receivable schedule for the note described in #2, along with the journal entry
to record the first payment on December 31, 2028.
2
Financial Accounting Practices, Principles & Concepts
Midterm Exam #2 Answer Key- Winter 2026
Instructions – Please Read Carefully:
1. You will have 90 minutes to complete the exam.
2. This exam consists of 13 pages (including the title page) and is out of 80
marks. The attached Time Value of Money Tables are 5 pages.
3. Calculators are permitted.
4. Books and notes are not permitted.
5. Follow instructions carefully for each question.
6. Label your responses and insert all answers in the pages or spaces
provided.
Question #1 /30
Question #2 /14
Question #3 /15
Question #4 /10
Question #5 /11
Total /80
1
, Exercises ( Marks)
Answer the following questions using the spaces provided. Show all your work and label responses clearly.
Ques on #1 (30 Marks):
NorthPine Apparel Ltd. manufactures athletic hoodies and reports under ASPE. The company’s year-end is
December 31, 2027 and financial data
Dec. 31, 2026 Dec. 31, 2027
Accounts receivable 78,000 ?
Allowance for doubtful accounts 6,900 ?
Total credit sales (on account) 625,000 590,000
Collections on A/R 480,000 445,000
2027 transactions and additional information
1. May 1, 2027: A customer’s outstanding account was settled when NorthPine accepted a $72,000 note
receivable, 8%, one-year, interest payable at maturity.
2. December 31, 2027 (new sale): NorthPine rendered services for $40,000 cash plus five equal payments
of $12,000 due each December 31 from 2028–2032. The appropriate discount rate is 10%. Although
the company follows ASPE, it opts to use the effective interest method.
3. Factoring (Dec. 31, 2027): NorthPine transferred $50,000 of accounts receivable to Prime Factor Co.
with recourse.
o Prime retains 4% for possible returns
o Finance charge is 5%
o Fair value of the recourse obligation is $6,500
o Prime will collect directly from customers
4. NorthPine wrote off $2,700 of accounts receivable during 2027.
5. At December 31, 2027, after recording all transactions above (but before any bad debt adjusting
entry), the aging analysis of accounts receivable is as follows:
Age Category Balance Estimated Uncollectible %
Current $60,800 2%
1–30 days past due 23,500 5%
31–60 days past due 10,500 12%
Over 60 days past due 3,500 30%
Required
(a) Prepare the 2027 journal entries for the transactions described above, including year-end adjusting entries.
Round to the nearest whole dollar.
(b) Determine the ending balances of Accounts Receivable and Allowance for Doubtful Accounts at December
31, 2027.
(c) Prepare the instalment note receivable schedule for the note described in #2, along with the journal entry
to record the first payment on December 31, 2028.
2
