4

©American College of the Middle East, 2020

Financial Accounting ACT 200

Spring Online Three - 2020 FTAP 5 (15%) Version 1 - Ch. 5 & 7

Name ____________________________________ ID______________________

Question 1 Problem Solving (42 points) Presented below is the information for Midler Company for the month ended December 31, 2019:

Cost of goods sold $1,200,000 Depreciation expense $32,000

Supplies expense 10,000 Sales discounts 15,000

Rent expense 30,000 Sales returns and allowances 50,000

Salaries and wages expense 200,000 Sales revenue 3,500,000

Interest expense 86,000

Required:

Prepare a multi step income statement for the month ended December 31, 2019.

Question 2 Essay Question (16 points) Mention two principles of internal control activities and illustrate your answer by examples.

Question 3 Indicate whether each statement is true or false (20 points – 5 points each)

a) Responsibility for record-keeping for an asset should be separate from physical

custody of that asset. True/False

b) Internal control is most effective when several people are responsible for a given task.

True/False

c) In order to prevent a transaction from being recorded more than once, a company

should maintain only one book of original entry. True/False

d) Firms use physical controls primarily to safeguard their assets. True/False

©American College of the Middle East, 2020

Question 4 (22 points) The following information is available for Scott Enterprises Ltd.: Freight In $ 20,000 Purchases 35,000 Purchase Returns and Allowances 10,000 Sales Revenue 120,000 Sales Discounts 8,000 Sales Returns & Allowances 2,000 Beginning Inventory 26,000 Ending Inventory 10,000 Required: Calculate cost of goods sold and gross profit. Show your calculations. Bonus question (10 points) On November 16, Stars Department Store sells merchandise on account. The selling price of the goods is $20,000, and the cost of goods sold was $12,000. Prepare journal entries for this transcation on the books of Stars Department Store.