Financial Accounting Past Paper PDF

**Section 1: Balance Sheets and Financial Disclosures (15 points)** **Question 1 (10 points):**\ Prepare a classified balance sheet for Johnson Company as of December 31, 2024, using the following information: - Cash: \$25,000 - Accounts Receivable (net): \$45,000 - Inventory: \$60,000 -...

**Section 1: Balance Sheets and Financial Disclosures (15 points)** **Question 1 (10 points):**\ Prepare a classified balance sheet for Johnson Company as of December 31, 2024, using the following information: - Cash: \$25,000 - Accounts Receivable (net): \$45,000 - Inventory: \$60,000 - Prepaid Rent: \$5,000 - Equipment: \$120,000 - Accumulated Depreciation: \$40,000 - Accounts Payable: \$30,000 - Notes Payable (due 2026): \$50,000 - Common Stock: \$80,000 - Retained Earnings: \$55,000 **Question 2 (5 points):**\ List and briefly describe **three examples of required financial disclosures** that accompany financial statements. **Section 2: Income Statement and Comprehensive Income (15 points)** **Question 3 (10 points):**\ Prepare a multi-step income statement for Dawson Corp. for the year ended December 31, 2024, using the following data: - Sales Revenue: \$450,000 - Cost of Goods Sold: \$300,000 - Selling Expenses: \$50,000 - Administrative Expenses: \$30,000 - Interest Expense: \$10,000 - Income Tax Expense: \$12,000 **Question 4 (5 points):**\ Explain the difference between **net income** and **comprehensive income**. Provide two examples of items included in comprehensive income that are excluded from net income. **Section 3: Statement of Cash Flows (10 points)** **Question 5:**\ Using the indirect method, prepare the operating activities section of the statement of cash flows for Morrow Co. using the following information: - Net Income: \$50,000 - Depreciation Expense: \$10,000 - Gain on Sale of Equipment: \$5,000 - Increase in Accounts Receivable: \$8,000 - Decrease in Inventory: \$4,000 - Increase in Accounts Payable: \$6,000 **Section 4: Revenue Recognition (15 points)** **Question 6 (10 points):**\ A company enters into a contract to sell a machine for \$200,000, including installation. The standalone selling price of the machine is \$180,000, and the installation is \$30,000. The machine is delivered, but installation is completed later. How much revenue should the company recognize upon delivery of the machine? Explain your reasoning. **Question 7 (5 points):**\ A company offers a loyalty program where customers earn points with every purchase. These points can be redeemed for discounts on future purchases. How should the company account for the loyalty points under revenue recognition standards? **Section 5: Cash and Receivables (10 points)** **Question 8:**\ A company has the following data related to receivables at year-end: - Accounts Receivable: \$80,000 - Allowance for Doubtful Accounts (credit balance before adjustment): \$2,000 - Estimated uncollectible accounts: 5% of accounts receivable. Prepare the adjusting journal entry for bad debts and calculate the adjusted Allowance for Doubtful Accounts balance. **Section 6: Inventories - Measurement (15 points)** **Question 9 (10 points):**\ A company uses the FIFO perpetual inventory system. The following transactions occur during the month: - Jan 1: Beginning Inventory: 10 units @ \$5 each - Jan 5: Purchase: 15 units @ \$6 each - Jan 10: Sale: 12 units - Jan 20: Purchase: 20 units @ \$7 each - Jan 25: Sale: 18 units Calculate the **COGS** and **Ending Inventory**. **Question 10 (5 points):**\ Define **net realizable value (NRV)** and explain how it is used in the lower-of-cost-or-NRV rule for inventory valuation. **Section 7: Inventories - Additional Issues (10 points)** **Question 11:**\ A company estimates its ending inventory using the gross profit method. The following data is available: - Beginning Inventory: \$40,000 - Purchases: \$80,000 - Sales: \$160,000 - Gross Profit Percentage: 25% Estimate the ending inventory. **Section 8: Current Liabilities and Contingencies (10 points)** **Question 12 (5 points):**\ On December 31, 2024, a company owes \$10,000 in wages earned by employees but not yet paid. Record the journal entry for this accrued liability. **Question 13 (5 points):**\ A company is involved in a lawsuit that is probable to result in a \$50,000 payment. How should the company account for this contingency? What disclosures are required if the payment is only reasonably possible? **Section 9: Bonus (Optional, 10 points)** A company signs a contract to build a custom bridge for \$1,000,000, with performance obligations satisfied over time. Costs incurred to date are \$400,000, and total estimated costs to complete are \$600,000. How much revenue should the company recognize to date?