Practice Exam – Financial Accounting for IB/E&BE
Practice Exam 1 – Financial Accounting for IB/E&BE
Questions
Exercise 1
On the balance sheet as of December 31, 2014, Groningen Robotics Corporation reported its stockholders' equity as follows:
Preferred Stock, 9% noncumulative, 100 par value, 10,000
shares authorized, 5,000 shares issued and outstanding $500,000
Common Stock, $5 par value, 1,500,000 shares authorized,
600,000 shares issued and outstanding 3,000,000
Additional Paid-in Capital-Common Stock 1,250,000
Retained Earnings 2,967,000
Total stockholders' equity $7,717,000
During 2015, the following transactions occurred:
- Feb 12 - Issued 30,000 shares of its $5 par value common stock for $750,000 cash.
- Feb 22 - Purchased 5,000 shares of its own stock for $30 per share, the current market price.
- Feb 28 - Issued 10,000 shares of its $5 par value common stock in exchange for land and a building. The building is estimated to have a market value of $170,000. Market value of stock is $30. Management records land at market value of stock minus market value of building.
- March 9 - Sold 1,000 shares of treasury stock purchased on Feb 22 for $31 per share
- April 30 - Declared cash dividend for a full year to preferred stockholders and a stock dividend for common stockholders. Dividend to preferred stockholders is to be paid on June 30 2015 to shareholders of record on May 1, 2015. Declared & issued a 10 percent stock dividend (Market value of the stock was $35.00 on April 30 and $28.00 on June 30).
- May 1 - Sold 2,500 shares of treasury stock purchased on Feb 22 for $30 per share.
- May 1 - Date of Record
- May 7 - Sold 1,500 shares of treasury stock purchased on Feb 22 for $27 per share.
- June 30 - Distributed the dividend.
- September 1 - Declared a 2-for-1 stock split.
Question A
Record the above transactions by preparing the appropriate journal. Skip a line between the
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Practice Exam 2 – Financial Accounting for IB/E&BE
Questions
Exercise 1
The charts of accounts is added below. Use only these accounts in your answers. Please skip a line between the different journal entries.
The Board of Fossil Group, Texas (FGT), decided to a bond issue. On April 1, 2007 Fossil Group issued eight-year term, unsecured, convertible bonds with a face value of €30,000,000. In total 60,000 bonds of €500 were issued. The face interest rate is 5 per cent per year. Interest is payable semi-annually on March 31 and September 30. The bonds were issued for €32,029,500 implying a market interest rate of 4 per cent.
The effective interest method is used to amortize the premium at which the bonds were issued. Fossil’s accounting year ends on December 31. Please round off your answers to whole Euros.
Charts of accounts exercise 1
Account payable
Accounts receivable
Additional Paid-In Capital, Common Stock
Additional Paid-In Capital, Treasury Stock
Bonds Payable
Cash
Common Stock
Convertible Bonds Payable
Dividends
Dividends Payable
Dividends Receivable
Income Summary
Income Tax
Income Expense
Interest Payable
Interest Receivable
Interest Revenues
Retained Earnings
Treasury Stock
Unamortized Bond Discount
Unamortized Bond Premium
Question A
Prepare the journal entries to record:
- The issue of the bond on April 1, 2007.
- The first payment of the interest and the amortization of the premium on September 30, 2007.
- The accrual of interest and the amortization of the premium on December 31, 2007.
- The second payment of the interest and the amortization of the premium on March 31, 2008..
Date | Account | Debit | Credit |
Question B
Calculate the carrying amount or book value at which the bonds are reported in Fossil’s
balance sheet on March 31, 2015.
Question C
Calculate the total amount that is reported as interest expense (with respect to these bonds)
in Fossil’s Income Statement
Practice Exam 3 – Financial Accounting for IB/E&BE
Questions
Exercise 1
Internet company Gold is located in Groningen. Its business activities consists of the import and sale of Webcams, and Blended Learning Projects. Gold presents the balance sheet on January 1, 2014, the statement of cash receipts and expenditures during 2014 and some additional information as follows (in euro):
Buildings | 150,000 | Mortgage | 80,000 |
Inventory (webcams) | 44,000 | Interest Payable | |
Accounts receivable (webcams) | 17,000 | Salaries Payable | 3,000 |
Cash | 16,000 | Accounts payable (webcams) | 11,000 |
Unearned Revenues Blended Learning Projects | 23,000 | ||
Share Capital | 45,000 | ||
Share Premium | 45,000 | ||
Retained Earnings | |||
Receipts | Expenditures | ||
Accounts Receivable (webcams) | 301,000 | Repayment of Mortgage | |
Unearned Revenues Blenden Learning Projects | 172,000 | Interest Paid | |
Sale of Building | 145,000 | Salaries Paid | 230,000 |
Receipts from Issuing Shares | 25,000 | Accounts Payable (webcams) | 171,000 |
Dividends Paid | 12,000 | ||
Rent Paid | |||
Payment of the Lease Term | 8,000 |
Additional information:
- Interest on the mortgage is 6% per year. The yearly interest is paid in arrear, on September 1
- Gold sold the building on July 1, 2014. Depreciation expenses of the building in the first half-year of 2014 are € 7,500. The selling price of the building is € 145,000. Out of the sale revenues of this building, the mortgage on this building will be completely repaid on September 1, 2014. Gold will rent an office and pays every month € 2,500 rent. The starting date of the rent contract is August 1, 2014.
- The issue price of shares is 250% of their nominal values.
Gold will lease a truck
Start date lease contract Jan 2, 2014
Lease period 4 years
Type of lease capital lease
Present value of lease terms €26,496.00
Lease term €8,000.00
Interest 8%
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