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SOUTHERN NEW HAMPSHIRE UNIVERSITY MBA 503 Financial Reporting and Analysis

Spring 2014 Examination # 1 USE SEPARATE SHEETS OF PAPER


20 POINTS
1) The Cytec Corporation had the following adjusted trial balance as of their year-end December 31, 2013. The company began operations on March 1, 2013. No dividends were declared or paid during the year. Income tax expense of 30% of net income was all paid during the year. Based on the information below, prepare a completed Income Statement, Balance Sheet and Statement of Stockholders Equity for the year ending December 31, 2013.

DR Cash Accounts Receivable Inventory Equipment Accounts Payable Salaries Payable Common Stock Additional Paid in Capital Retained Earnings Sales Revenue Cost of Goods Sold Salaries Expense Income Tax Expense $16,500 $7,550 $32,500 $60,500

CR

$25,000 $8,000 $10,000 $52,000 ???? $125,000 $60,000 $33,500 ???

20 POINTS

2) Below is a balance sheet that contains many errors and misclassifications. The accountant who prepared this statement was not very knowledgeable in basic accounting fundamentals. Many mistakes very made in the format prepared below. Using your Financial Accounting knowledge prepare a corrected balance sheet in the proper format. (Hint, Total Assets should be $137,000, net income for the year is $32,250)

Johnson and Sons Balance Sheet Year Ending December 31, 2013

Assets Cash Inventory Equipment Retained Earnings TOTAL Liabilities Amounts Owed to Suppliers Amounts Owed to Employees Note Owed to Bank Amounts Due from Customers Supplies on Hand Common Stock TOTAL

$35,000 $39,000 $38,000 $32,250 $144,250 $15,000 $2,750 $25,000 $10,000 $15,000 $62,000 $129,750

20 POINTS

3) The Giuiano Company is a relatively small manufacturer that produces yard maintenance equipment. They have been in business for four years. At December 31, 2012 (their fiscal year end), the general ledger reported total assets of $585,000 (Cash, $110,000; Equipment, $275,000; Buildings $200,000), total liabilities of $275,000 (Accounts Payable, $125,000; Note Payable, $150,000) and total stockholder equity of $310,000 (Common Stock, $1 par value shares $50,000, Additional Paid in Capital, $175,000; and Retained Earnings, $85,000). During 2014 the following transactions took place: a) Borrowed and received $50,000 cash from a local bank by signing a 10 year note b) Purchased Equipment for $45,000, paying $15,000 cash and owing the remainder within 60 days c) Issued an additional 10,000 shares ($1 par value) for $100,000 cash d) Purchase a new truck for $30,000, paying all in cash e) Loaned $25,000 cash to John Giuliano, the company president. The note term was 1 year with 6% interest f) Constructed a new wing onto their existing building. The cost of the addition was $30,000 which added to the overall cost of the building. Entire amount was paid in cash. g) Purchased $60,000 in long term investments, using cash to do so h) Return one of the pieces of equipment purchased in transaction B. The cost of the returned equipment was $5,000. A cash refund was issued to the Giuliano Co. i) A stockholder sold $10,000 of his capital stock to his best friend j) Declared and paid $40,000 in dividends during the year

REQUIRED:

Create T Accounts for each of the accounts listed in the introduction. Report the beginning balance of each account at 1/1/2013 and post each transaction (a to j) to the respective T accounts, creating new T accounts if needed. Show each transaction in the T account and the ending balance of each account at the end of the fiscal year (December 31, 2013). Please denote each transaction made in the respective T account with a reference to the transaction letter (a-j) and circle the ending balance of each account.

10 POINTS

4) XYZ Company started operations in 2013 with 2 stockholders as the owners. The stockholders acquired 20,000 shares of $5 par value common stock for $20 per share. During the first year the company the company earned total revenue of $250,000 and incurred total operating expenses of $185,000. The company also declared and paid $25,000 in dividends to the stockholders during the year. Prepare a Statement of Stockholders Equity for the year ending December 31, 2013 (fiscal year end).

10 POINTS

5) Smith Company was started in 2012 by 10 initial investors. Each investor contributed $10,000 cash into the business. In addition, a parcel of land was given to the company which had an assessed value of $250,000. Also given was equipment costing $75,000, supplies of $10,000 and a delivery truck with a fair market value of $27,500. In exchange for these assets, the stockholders received 10,000 shares of $10 par common stock. As the companys new accountant prepare the journal entry necessary to record this initial transaction. Remember to include an explanation as to the purpose of the journal entry made.

10 POINTS

6) The Fiscal Year of the Boston Red Sox runs from January 1 to December 31 of each year. During the early winter months the team collects season ticket revenue in advance of the new regular season which begins April 1st and continues through the end of September. The team will play 78 home games during 2014. In January and February, the team collected $120,000,000 in season tickets for the upcoming season. A) Prepare the journal entry to record the transaction above

B) How much unearned revenue will be remaining at the end of May, assuming they play 13 games each month from April to September (6 months)?

10 POINTS

7) Below is a listed of the current chart of accounts in Jones Corp. general ledger. Below that is a list of transactions that took place during the month. In the debit or credit columns place which account you would report in the appropriate journal entry (ie: if an increase in Cash took place, put an A in the debit column and put the corresponding credit(s) account referenced letter in that column: A) CASH B) ACCOUNTS RECEIVABLE C) BUILDING D) ACCOUNTS PAYABLE E) MORTGAGE PAYABLE F) COMMON STOCK G) ADDITIONAL PAID IN CAPITAL H) RETAINED EARNING I) SALES REVENUE J) SALARIES EXPENSE

DEBIT 1) Made cash sales 2) Purchased a Building, paying a portion in Cash and took out a mortgage for the remainder 3) Sold 2,000 shares of $5 par value common stock for $20 per share

CREDIT

4) Paid Dividends of $5,000 to stockholders

5) Paid employees for the current pay period In Cash