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INTERNATIONAL COLLEGE OF THE CAYMAN ISLANDS

BE 311- WINTER 2015 - MIDTERM EXAM
Problem One: 25 point

Chicago Consultingioup initially records prepaid items as assets and unearned

items as liabilities. Selected account balances at the end of the 2014 and 2013
follow. Accrued expenses and revenues are adjusted only at year-end.

Prepaid Rent .................

Salaries and Wages Payable.....
Unearned Consulting Fees ......
Interest Receivable.............

Adjusted balances,
December 31, 2014

Adjusted balances
December 31, 2013
$3,100
4,300
11,400
800

$ 3,7 00 .
5,700
7,800
1,900

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During 2014, Chicago Consulting Group paid $12,000 for rent and $30,000 fo
wages and salaries. It received $9f,000 in c.or con ul fees and $4, 500 a
-interest.
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Provide the entries that were made at December 31, 2014, to adjust the accounts
to the year-end balances as shown above.
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Problem Two: 50 points

Gary's TV had the folg accounts and amounts in its financial statements on
December 31, 2014. Assume all balance sheet items reflect account balances at
December 31, 2014, and that all income statement items reflect activities that occurred
during the year then ended. Assume also that all ofthe accounts listed have their normal
debit or credit balances.
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Interest expense .......... : ..

$
a. Common stock .............-::/....................
-Accumulated depreciation..........................
"-Notes payable (long-term) .........................
Rent expense ....................................
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9,000
20,000
6,000
22,000
18,000

Allowance for bad debts...........................

- Inventories......................................
- Prepaid expenses.................................
-Accounts receivable ..............................
--t-. Bonds payable...................................

3,000
180,000
30,000
51,000
33,000

Depreciation expense ......................... ...

Dividend revenue.................................
.. Investment securities..............................
-Land ..........................................
'>4Current portion oflong-term debt.....................

3,000
12,000
11,000
32,000
10,000

Sales discounts...................................
-Extraordinary gain (net ofincome taxes)...............
@etained earnings ................................
-Cash ...........................................
)( Long-term lease obligations.........................

10,000
55,000
225,000
25,000
15,000

Miscellaneous selling expenses ......................

Loss from discontinued operations (net oftaxes).........
Cost ofgoods sold ................................
-Equipment ......................................
--- Income tax expense ...............................

16,000
69,000
345,000
18,000
60,000

)(.Accounts payable .................................

Sales returns and allowances.........................
Office supplies expense ............................
Bad debt expense..................................
Sales revenue ....................................

13,000
17,000
2,000
8,000
585,000

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Problem Four: 25 points

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Following are comparative balance sheets for Miae1, Inc., at December 31 2013
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December 31, 2014:
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Assets:
Cash................................
$ 42,000
$ 37,000
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64,000
53,000
81,000
94,000
$187,000
$184,000
166,000
152,000
(24,000)
(21,000)
$329,000
$315,000

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Stockholders' Equity:

Common stock, no par value, 80,000 shares authorizd,

60,000 and 56,000 shares issued, respectively........
Retained earnings:
Beginning balance ................................
Net income for the year ...........................
Dividends for the year............................

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Ending balance..... ............................
Total stockholders' equity................... . .....
Totai liabilities and stockholders' equity..............

$104,000

$ 96,000

$ 64,000
""j6,000
.10,000)
$ 90,000
$194:iOOO
$329,000

$ 43,000
29,000
(8,000)
$ 642000
$160:1000
$315 2000

Required:

Prepare a Statement of Cash Flows for Michael, Inc., for the year ended December 31,
2014, using the indirect method.
(You may assume that the change in each balance sheet amount is due to a single event.
For example, the change in the amount of plant and equipment is not the result of both a
purchase and sale of equipment.)

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