midterm 2013

Suggested solution -- ACCO 230 Midterm exam, May 2013
Question 1 -- Multiple-choice
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

c d c b d b a a a e 11.
12.
13.
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15.
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19.
20.

a a e b a c b d e c -1-

Suggested solution -- ACCO 230 Midterm exam, May 2013
Question 2
1-a.
NM Ltd.
Income Statement
For the Year Ended December 31, 2012
Sales revenue
Less: Sales returns and allowances
Net sales
Cost of goods sold
Gross profit

$210,000
6,000
204,000
77,000
127,000

Operating expenses
Salaries
Rent
Promotional and advertising Depreciation
Operating income

106,000
21,000

$38,000
34,000
20,000
14,000

Other income (expense)
Interest income
2,000
Interest expense
(3,000)
Income before income tax
Income tax expense
Net income

(1,000)
20,000
7,000
$13,000

-2-

Suggested solution -- ACCO 230 Midterm exam, May 2013
Question 2 -- 1-b.
NM Ltd.
Balance Sheet (partial)
As at December 31, 2012
ASSETS
Current assets
Cash
Trade receivables
Merchandise inventory
Prepaid rent
Total current assets

$10,000
11,000
45,000
24,000
90,000

Non-current assets
Equipment, at cost
Less: Accumulated depreciation
Book value
Total assets

$103,000
35,000
68,000
$158,000

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2. Closing journal entries
Sales
Interest income
Retained earnings

210,000
2,000
212,000

Retained earnings
199,000
Sales returns and allowances
Cost of goods sold
Salaries expense
Rent expense
Promotional and advertising expense
Depreciation expense
Interest expense
Income tax expense
-3-

6,000
77,000
38,000
34,000
20,000
14,000
3,000
7,000

Suggested solution -- ACCO 230 Midterm exam, May 2013
Question 2 -- 3.
Gross profit percentage = $127,000 / $204,000 = 62.3%.
The gross profit percentage is a basic measure of profitability for merchandising firms. It shows the percentage of profit earned on