B6001 – Financial Accounting
Spring 2024
Professors Lisa Yao Liu
B6001 – Financial Accounting
MIDTERM EXAMINATION
Spring 2024
Solution
, Page 2 of 24
Question 1 (Transactions | 60 points)
The BalanceUp Company started its operations many years ago. The balance sheet for
December 31, 2022, showed the following account balances, in dollars (there were no other
accounts listed):
Cash and Cash Equivalents 920; Short-term Debt 820; Dividend payable 60; Accumulated
depreciation 280; Inventory 380; Retained earnings 278; Accounts receivable 450; PP&E, gross
1,550; Accounts payable 280; Wages payable 113; Rent payable 180; Advances from customers
25; Long-term Investments 120; Paid in capital (?)
During 2023, the following transactions occurred:
1. The BalanceUp Company fulfilled its obligations related to all existing Advances received
from customers. Additionally, credit sales for the year amounted to $440, while cash sales
totaled $1350. The total cost of goods sold (COGS) for the year was $490.
2. Inventory purchases amounted to $230, all on credit, while payments to suppliers totaled
$145.
3. The BalanceUp Company issued 20 shares of common stock for $500 in total. Note that
common stock is part of paid in capital.
4. A dividend of $170 was declared during 2023. By December 31, 2023, the Dividend payable
account balance was $40.
5. The employees of The BalanceUp Company earned $6 each month in wages. In total, $42 in
wages were paid in 2023.
6. Depreciation expenses for the year amounted to $165.
7. The BalanceUp Company incurred $40 of interest on its Short-Term Debt in 2023, which
remained unpaid.
8. Rent expense totaled $15 per month in 2023, with total rent payments amounting to $390.
9. The BalanceUp Company sold a machine originally costing $430, with accumulated
depreciation of $220, for $120.
10. The BalanceUp company paid $160 in cash for advertising that will be aired next year.
, Page 3 of 24
Required:
a. What was the value of Paid in Capital for 2022?
b. Record all the transactions that occurred during 2023 (you may use the accounting
equation method or journal entries).
c. Prepare an income statement for the year ending December 31, 2023.
d. Prepare a balance sheet for December 31, 2023.
Spring 2024
Professors Lisa Yao Liu
B6001 – Financial Accounting
MIDTERM EXAMINATION
Spring 2024
Solution
, Page 2 of 24
Question 1 (Transactions | 60 points)
The BalanceUp Company started its operations many years ago. The balance sheet for
December 31, 2022, showed the following account balances, in dollars (there were no other
accounts listed):
Cash and Cash Equivalents 920; Short-term Debt 820; Dividend payable 60; Accumulated
depreciation 280; Inventory 380; Retained earnings 278; Accounts receivable 450; PP&E, gross
1,550; Accounts payable 280; Wages payable 113; Rent payable 180; Advances from customers
25; Long-term Investments 120; Paid in capital (?)
During 2023, the following transactions occurred:
1. The BalanceUp Company fulfilled its obligations related to all existing Advances received
from customers. Additionally, credit sales for the year amounted to $440, while cash sales
totaled $1350. The total cost of goods sold (COGS) for the year was $490.
2. Inventory purchases amounted to $230, all on credit, while payments to suppliers totaled
$145.
3. The BalanceUp Company issued 20 shares of common stock for $500 in total. Note that
common stock is part of paid in capital.
4. A dividend of $170 was declared during 2023. By December 31, 2023, the Dividend payable
account balance was $40.
5. The employees of The BalanceUp Company earned $6 each month in wages. In total, $42 in
wages were paid in 2023.
6. Depreciation expenses for the year amounted to $165.
7. The BalanceUp Company incurred $40 of interest on its Short-Term Debt in 2023, which
remained unpaid.
8. Rent expense totaled $15 per month in 2023, with total rent payments amounting to $390.
9. The BalanceUp Company sold a machine originally costing $430, with accumulated
depreciation of $220, for $120.
10. The BalanceUp company paid $160 in cash for advertising that will be aired next year.
, Page 3 of 24
Required:
a. What was the value of Paid in Capital for 2022?
b. Record all the transactions that occurred during 2023 (you may use the accounting
equation method or journal entries).
c. Prepare an income statement for the year ending December 31, 2023.
d. Prepare a balance sheet for December 31, 2023.
