Sample Final Exam A (mock) · Mock paper — built from course content · worked-solution

• #accounting
• #past-paper
• #worked-solution
• #journal-entries
• #balance-sheet
• #income-statement
• #ratio-analysis
• #safe
• #cap-table
• #business-combination
• #goodwill

1. Q1 — Full accounting cycle: journal entries, statements & ratios (40 pts)

   Meadowlark Inc. is incorporated on 1 January 2025. During its first year the following events occur (all amounts in $):

   1. 1 Jan — Founders contribute $200,000 cash for 200,000 common shares ($0.01 par).
   2. 1 Jan — Buy equipment for $12,000 cash; 4-year useful life, straight-line, no salvage.
   3. 1 Feb — Pay $18,000 for a 12-month insurance policy (coverage Feb 2025 – Jan 2026).
   4. 1 Mar — Draw a $100,000 bank loan at 6% p.a.; interest is paid each 1 January for the prior year, principal is a bullet due 2028.
   5. Office rent is $4,000/month, paid on the 1st of each month.
   6. Payroll is $10,000/month, accrued at each month-end and paid on the 5th of the following month.
   7. Services delivered in the year total $320,000 (invoiced Net 30); $280,000 is collected in cash by year-end, leaving the December invoice in receivables.
   8. Corporate tax rate is 23%, paid the following year.

   Required: (a) the headline journal entries, (b) the Income Statement for 2025, (c) the Balance Sheet at 31 Dec 2025, and (d) the current ratio, quick ratio, debt-to-equity, net profit margin and ROE.

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2. Q2 — SAFE conversion & cap table (15 pts)

   NimbusAI is founded with 500,000 common shares held by the founders.

   • A SAFE is signed with Investor A for $1,000,000, with an $8,000,000 valuation cap or a 20% discount (whichever is better for the investor).
   • Later, Investor B leads a priced round investing $4,000,000 at a $16,000,000 pre-money valuation, which triggers the SAFE conversion.

   Required: the SAFE conversion price and shares, Investor B's shares, and the resulting cap table with ownership percentages.

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3. Q3 — Business combination & goodwill (15 pts)

   On 1 July 2025, Orchard Corp acquires 80% of Pearl Ltd for $6,000,000 cash, obtaining control. At the acquisition date, Pearl's identifiable assets have a fair value of $7,000,000 and its liabilities a fair value of $2,000,000. The fair value of the 20% non-controlling interest is $1,400,000.

   Required: compute goodwill under both the full (fair-value) goodwill method and the partial (proportionate) method, give the acquisition journal entry, and explain how goodwill is treated after acquisition.

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4. Q4 — True/False with explanation (30 pts)

   For each of the following 10 statements, indicate whether it is True or False and give a one-line justification. (3 points each.)

   1. Under accrual accounting, revenue is recognised when cash is received.
   2. Depreciation is a non-cash expense: it reduces net income but does not directly reduce cash in the period it is recorded.
   3. A SAFE is recorded as equity on the balance sheet at the moment the cash is received.
   4. Under the equity method, a dividend received from an associate is recorded as dividend income in the P&L.
   5. Goodwill arising in a business combination is amortised over its useful life.
   6. When a SAFE has both a valuation cap and a discount, the investor converts at whichever gives them the lower price per share.
   7. No journal entry is recorded on the grant date of employee stock options; compensation expense is recognised over the vesting period.
   8. A company can report positive net income for a year while generating negative operating cash flow.
   9. The quick ratio is always greater than or equal to the current ratio.
   10. In a DCF valuation, a higher discount rate (WACC) increases the present value of the company.
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