MINISTRY OF EDUCATION AND TRAINING INTRODUCTORY TO ACCOUNTING BANKING ACADEMY MID-TERM TEST Mode of study: Full time Allowed time: 60 minutes Question (30 marks): The adjusted trial balance of Full Moon Corporation appears below Using the information from the adjusted trial balance, you are to prepare for the month ending December 31: an income statement a retained earnings statement a balance sheet FULL MOON CORPORATION Adjusted Trial Balance December 31, 2021 Cash Accounts Receivable Supplies Equipment Accumulated Depreciation—Equipment Accounts Payable Unearned Service Revenue Common Stock Retained Earnings Dividends Service Revenue Supplies Expense Depreciation Expense Rent Expense Debit $ 2,900 2,200 1,800 16,000 $ 4,000 3,300 5,000 10,000 4,400 2,000 4,200 600 2,500 2,900 $30,900 Question (10 marks) : Entries for bad debt expense A trial balance before adjustment included the following: Debit $120,000 Accounts receivable Allowance for doubtful accounts Sales Sales returns and allowances Credit 1,000 $430,000 4,000 Give journal entries assuming that the estimate of uncollectible is determined by taking (1) 5% of gross accounts receivable and Credit $30,900 (2) 1% of net sales Problem (20 marks) : Matlock Corporation sells item A as part of its product line Information as to balances on hand, purchases, and sales of item A are given in the following table for the first six months of 2021 Quantities Unit Price Date Purchased Sold Balance of Purchase January — 400 $3.60 February 14 1,500 — 1,900 $3.90 March — 200 1,700 — April — 670 1030 — June 600 — 1,630 $4.25 Instructions (a) Compute the ending inventory at June 30 under the perpetual LIFO inventory pricing method (b) Compute the cost of goods sold for the first six months under the periodic FIFO inventory pricing method Problem (40 marks) : At December 31, 2020, Sun Corporation reported the following plant assets Land $ 9,000,000 Buildings $26,500,000 Less: Accumulated depreciation—buildings 11,900,000 14,600,000 Equipment 40,000,000 Less: Accumulated depreciation—equipment 4,000,000 36,000,000 During 2021, the following selected cash transactions occurred February 1: Purchased land for $3,200,000 March 1: Sold equipment that cost $600,000 when purchased on January 1, 2012 The equipment was sold for $190,000 April 1: Sold land for $1,600,000 The land cost $2,000,000 August 1: Purchased equipment for $1,500,000 Dec 31: Retired equipment that cost $1,200,000 when purchased on December 31, 2010 No salvage value was received Instructions (a) Journalize the transactions Sun Corporation uses straight-line depreciation for buildings and equipment The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value Update depreciation on assets disposed of at the time of sale or retirement (b) Record adjusting entries for depreciation for 2021 (c) Prepare the plant assets section of Sun Corporation’s balance sheet at December 31, Note: Closed book