1. AMERICAN UNIVERSITY OF KUWAIT – SUMMER SEMESTER 2020 ONLINE ACCT201 TEST ONE Information. 1. This test has 8 questions worth 20 marks. There are 5 pages. Check that you have all 5 pages. 2. You may reference your textbook, and class notes during this test. Important Instructions. Before beginning the test, you must read and comply with the following. 1. AUK Code of Academic Integrity and Honesty. Upon admission to the American University of Kuwait, students agree to act responsibly in all areas of academic, personal, and social conduct and to take full responsibility for their individual and collective action. 2. In accordance with AUK policy I am specifically informing you, as course instructor that you are prohibited from, (a) working together with another student or individual during this test, (b) transferring materials, information, or answers to another student or individual during this test, (c) using any materials, information, or answers provided by another student or individual during this test. 3. You must complete this test and submit for grading within 2 hours of starting. You are on your honor not to violate AUK’s code of Academic Integrity and Honesty. You are on your honor to comply with points 2a, 2b, and 2c stated above There is more than one version of this test. Any test submitted with an answer or answers corresponding to a different version of the test will be graded 0/20 . 4. After completing the test in the assigned period, you must sign the declaration below stating that you complied with AUK’s code of conduct of academic integrity and honesty during this test, including points 2a, 2 b, and 2c stated above. Pleases PRINT and sign your name below stating that you complied with the code, including points 2a, 2b and 2c stated above, during this test. Then submit your signed statement with your test. I (PRINT NAME) ………………………………………….. …………….. STUDENT ID ……………………….. complied with AUK’s code of Academic Integrity and Honesty (SIGNATURE) …………………………………………………….. (DATE) ………………………………… AUK’S Code of Academic Integrity and Honesty is available at, https://www.auk.edu.kw/administration/uni_publications/catalog/2008_09/catalog0809_univ_policies_regulations.pdf 2. THE TEST STARTS ON THE NEXT PAGE. ATTEMPT ALL 8 QUESTIONS – TIME ALLOWED TWO HOURS. Concept Questions (½ mark each). Clearly select ONE answer Q1. Which of the following statements is untrue? A. B. C. D. E. Recognition requires that revenues be recorded when earned which is not necessarily when cash is received. An annual income statement summarizes revenues earned; less expenses incurred over the year. An annual balance sheet shows changes in a business's assets, liabilities, and equity during the year. Matching requires that financial transactions be reported in the period in which they occurred. The Business Entity Principle requires that each economic entity maintain separate records. Q2. Which of the following statements is untrue? A. B. C. D. Financial accounting focuses on meeting the needs of external users, the investors, and creditors. An organization is a group of individuals who come together to pursue a common set of goals and objectives. There are three common forms of business organization, proprietorship, partnership, and corporation. Corporations listed on stock exchanges are required to prepare annual financial statements but are not generally required to prepare interim financial statements every three months. E. The first three financial reports are statements of income, changes in equity, and financial position. Q3. Which of the following statements is true? A. XYZ Corp. makes a sale and the customer promises to pay in the future, so the customer has an Account Receivable. B. C. When XYZ Corp. pays 12 month’s rent to the Acme Realty in advance, then Acme should record Rent Revenue. When the total Debits equal the total Credits on a Trial Balance it proves that no mistakes have been made in journalizing the transactions and posting them to the ledger. D. When a transaction increases an asset or expense, then those asset and expense accounts are debited. All other accounts are credited when they increase. E. An account records increases and decreases in a specific asset, liability, or equity. Q4. A company's balance sheet shows: cash $22,000, accounts receivable $16,000, office equipment $5,000, and accounts payable $17,000. What is the amount of owner's equity? Show plausible calculations to get credit. Answer: Owner’s equity is $ ................................... TEST CONTINUED OVERLEAF 3. Q5. Maria Sanchez began business as Sanchez Law Firm on 01 November. Record the following November transactions by making entries directly to the T-accounts provided (4 marks). a) b) c) d) e) f) g) h) Sanchez invested $15,000 cash and a law library valued at $6,000. Purchased $7,500 of office equipment from Johnson Bros. on credit. Completed legal work for a client and received $1,500 cash in full payment. Paid Johnson Bros. $2,500 cash in partial settlement of the amount owed. Completed $4,000 of legal work for a client on credit. Paid $2,500 cash for the legal secretary's salary Received $3,500 cash as partial payment for the legal work completed for the client in (e). Sanchez withdrew $2,000 cash to pay herself a dividend. a Cash 15,000 Equipment Dividend A/R A/P Revenue Library Capital Salary X a a Q6. Refer to Q5 and prove that the Debits and Credits in the T account balances are equal. (2 marks). Dr. Cr. Cash Equipment Dividend A/R A/P Revenue Library Capital Salary Expense Total TEST CONTINUED OVERLEAF 4. Q7. Prepare journal entries to record the transactions that occurred during December when Leonard Travis started his Financial Services Business. It is not necessary to provide descriptions for each journal entry (5 marks). Date 1 2 3 8 12 13 19 23 28 30 Transaction Began Financial Service Business by investing $15,000 cash and office equipment worth $5,000. Purchased $1,200 of office equipment on credit. Paid annual insurance premium of $960. Purchased $300 of office supplies on credit Completed work for Acme Loan Co. on credit, $2,700. Completed work for a client and immediately received payment of $900 cash. Paid for the supplies purchased on Dec 8. Received $1,700 from Acme Loan for work completed on Dec. 12. Received $2,000 from client for services to be provided next year. Paid $175 for electricity used during Dec. Date 1 2 3 8 12 13 19 23 28 30 Journal Entry Dr. Cr. 5. Q8. Use the information given below to create the Income Statement, Statement of Changes in Owner’s Equity and Statement of Financial Position for Mikes Maintenance Company for the year ended Dec. 31 (7 marks). The balances for the accounts of Mike's Maintenance Co. for the year ended December 31 are as follows. Account A/P A/R Cash Supplies Building Supplies expense Mike’s Capital Revenue $ 7,000 6,500 10,500 1,200 125,000 21,500 118,700 174,500 Account Wages expense Rent expense $ 35,500 6,000 Land Unearned revenue 50,000 4,000 Mike’s Dividend 48,000 Income Statement Statement of Owner’s Equity Statement of Financial Position THIS IS THE LAST PAGE
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