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

• #accounting
• #past-paper
• #worked-solution
• #cash-flow-statement
• #accrued-income
• #variance-analysis
• #business-combination
• #goodwill
• #step-acquisition

1. Q1 — Full cycle with interest income, accrued utilities & a cash flow statement (40 pts)

   Summit Devices is incorporated on 1 January 2025. During its first year:

   1. 1 Jan — Founders contribute $500,000 cash for 500,000 common shares ($0.01 par). The company keeps its cash in a 4% p.a. interest-bearing account; interest is paid each 1 January for the prior year.
   2. 1 Jan — Buy equipment for $60,000; 5-year life, straight-line, no salvage.
   3. 1 Jan — Draw a $200,000 bank loan at 6% p.a. (bullet; interest paid each 1 January).
   4. Utilities: $2,000/month for Jan–Nov (each bill paid the following month); December is estimated at $3,000 (accrued, paid Jan 2026).
   5. Salaries are $84,000 for the year; December's $7,000 is unpaid at year-end.
   6. Services delivered total $180,000 (Net 30); $150,000 is collected by year-end.
   7. Corporate tax rate is 23%, paid the following year.

   Required: (a) the journal entries, (b) the Income Statement, (c) the Balance Sheet at 31 Dec 2025, and (d) a Statement of Cash Flows (indirect method) plus the current ratio and net margin.

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2. Q2 — Variance analysis (15 pts)

   Summit uses standard costing for its main material. The standard is 2 kg per unit at $5.00/kg. In the month it made 10,000 units and actually used 21,000 kg at $4.80/kg.

   Required: compute the material price variance and the material usage (quantity) variance, state whether each is favourable or unfavourable, reconcile them to the total variance, and explain what the pattern might mean.

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3. Q3 — Step acquisition: crossing to control (15 pts)

   On 1 January 2025, Summit already owns 25% of Delta Ltd, carried at $500,000 under the equity method. On 1 July 2025 Summit buys a further 50% for $1,200,000 cash, taking its stake to 75% and gaining control. At that date: the fair value of the original 25% stake is $600,000, Delta's identifiable net assets have a fair value of $1,800,000, and the fair value of the 25% non-controlling interest is $580,000.

   Required: compute the remeasurement gain on the old stake and the goodwill (full method), give the journal entry, and explain the treatment.

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

   For each statement, indicate True or False and give a one-line justification. (3 points each.)

   1. In the indirect-method cash flow statement, depreciation is added back to net income because it is a non-cash expense.
   2. An unfavourable material usage variance means the company used more material than the standard allowed.
   3. Interest earned on a bank deposit but not yet received is recorded as interest income and an interest receivable.
   4. Purchasing equipment for cash is classified as an operating activity in the cash flow statement.
   5. In a step acquisition, the previously held stake is remeasured to fair value when control is obtained, with any gain or loss going to profit or loss.
   6. A favourable price variance combined with an unfavourable usage variance can arise from buying cheaper, lower-quality materials.
   7. Issuing shares to investors for cash is a financing activity.
   8. A statement of cash flows has three sections: operating, investing and financing.
   9. An increase in accounts receivable during the year increases operating cash flow.
   10. Retained earnings appears as a line on the income statement.
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