AMERICAN INTERNATIONAL UNIVERSITY – BANGLADESH

Faculty of Business Administration

Department of Accounting
Undergraduate Program
BBA 1101: Principles of Accounting (Sections: B, H, B22 & B36)
Mock Test-3; Fall 2023– 2024
Total Marks: 60; Time: 2 hours
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Student Name : Section:
Student ID : Proctor’s Signature:
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Instructions:
• There are two parts of this question paper, Parts -A and B.
• Answer Part A and Part -B on the question paper.
• Write your name, section and ID on the question paper and answer script.
• Marks of each question are indicated separately.
• Calculator (any type) is allowed.
• Use of mobile phone as calculator is strictly prohibited.
• At the end of examination, return the question paper to the invigilator.
• Sharing of calculator or any other material with other students is Not Allowed.
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PART – A
[Marks: 10]
Multiple Choice Questions: Darken (●) the circle that corresponds to the correct answer.
1. Which of the following is an external user of American International University-Bangladesh?
O Management O Faculty members O Office staff O Students
2.: During 2020, Bruske Company’s assets decreased $50,000 and its liabilities decreased $50,000. Its
owner’s equity therefore
O increased $50,000. O decreased $100,000. O decreased $50,000. O did not change
3. Which of these items would be accounted for as an expense?
O Buying a car O Purchase of land O Repayment of loan O Payment of salary
4. Accounts that normally have credit balances are:
O assets, expenses and revenues O assets, expenses, owner’s capital
O revenues, liabilities and owner’s capital O assets, owner’s drawings, expenses
5. Find out the example of asset?
O Drawings O A/C payable O Land O Rent revenue
6. Which of the following events will not be recorded?
O Hired an employee O Supplies purchased on credit
O Investment by owner O Withdraw cash for personal use
7. The investment of cash by the owner:
O Increases revenues O Increases equity O Decreases expenses O Decreases assets
8. Which of the following is an example of contra asset account?
O Land O Prepaid insurance O Sales O Accumulated depreciation
9. Adjusting entries always affects:
O an expense account and a revenue account O an asset account and a liability account
O an income statement a/c and a balance sheet a/c O an asset and a revenue account
10. Unearned service revenue is:
O Asset O Capital O Revenue O Liability

PART – B
[PROBLEM SOLVING]
(Answer any FIVE questions)
[Marks: 50]
Question No 1:
(a) What is the basic accounting equation?(i) Define the terms assets, liabilities, and owner’s equity. (ii) What
items affect owner’s equity? Identify the steps in the accounting cycle and discuss the role of accounting records
in an organization.
(b) At the beginning of the year, Ortiz Company had total assets of $900,000 and total liabilities of $440,000.
Answer the following questions. (i) If total assets decreased $100,000 during the year and total liabilities
increased $80,000 during the year, what is the amount of owner’s equity at the end of the year? (ii) During the
year, total liabilities decreased $100,000 and owner’s equity increased $200,000. What is the amount of total
assets at the end of the year? (iii) If total assets increased $50,000 during the year and owner’s equity increased
$60,000 during the year, what is the amount of total liabilities at the end of the year? [4+6=10 Marks]

Question No 2:

(a) “A company’s net income appears directly on the income state ment and the owner’s equity statement,
and it is included indirectly in the company’s balance sheet.” Do you agree? Explain.

(b) Presented below is selected information related to Kirby Company at December 31, 2020. Kirby
reports financial information monthly.Accounts Payable $ 3,000 Salaries and Wages Expense $16,500;
Cash 6,500 Notes Payable 25,000; Advertising Expense 6,000 Rent Expense 10,500; Service Revenue 53,500
Accounts Receivable 13,500; Equipment 29,000 Owner’s Drawings 7,500.

Required:

i. Determine the total assets of Kirby Company at December 31, 2020.

ii. Determine the net income that Kirby Company reported for December 2020.

iii. Determine the owner’s equity of Kirby Company at December 31, 2020. [3+7=10 Marks]

Question No.3:
Nillma’s Payroll Services Company entered into the following transactions during May 2020.

a. Purchased computers for $35,000 from Bytes of Data on account.

b. Paid $8,000 cash for May rent on storage space.

c. Received $32,000 cash from customers for contracts billed in April.

d. Performed payroll services for Magic Construction Company for $4,500 cash.
e. Paid Northern Ohio Power Co. $18,000 cash for energy usage in May.

f. Alma invested an additional $25,000 in the business.

g. Paid Bytes of Data for the computers purchased in (a) above.

h. Incurred advertising expense for May of $8,000 on account.

Required:

Indicate with the appropriate letter whether each of the transactions above results in:

i. an increase in assets and a decrease in assets.

ii. an increase in assets and an increase in owner’s equity.

iii. an increase in assets and an increase in liabilities.

iv. a decrease in assets and a decrease in owner’s equity.

v. a decrease in assets and a decrease in liabilities.

vi. an increase in liabilities and a decrease in owner’s equity.

vii. an increase in owner’s equity and a decrease in liabilities. [10 Marks]

Question No.4:
On April 1, 2022 Vince Morelli established Vince’s Travel Agency. The following transactions were
completed during the month.
April 1:Invested $35,000 cash to start the agency.
April 5:Paid $1,800 cash for April office rent.
April 8: Purchased office equipment for $15,000 cash.
April 12. Incurred $2,800 of advertising costs in the Chicago Tribune, on account.
April 15. Paid $3,800 cash for office supplies.
April 17. Earned $50,000 for services rendered: $10,000 cash is received from customers, and the balance of
$40,000 is billed to customers on account.
April 20. Withdrew $6,000 cash for personal use.
April 24. Paid Chicago Tribune $1,500 of the amount due in transaction (4).
April 28. Paid employees’ salaries $4,500.
April 30. Received $15,000 in cash from customers who have previously been billed in April 17.
Required:
Prepare a tabular summary of the transactions for the month of April 30, 2022. [10 Marks]

Question No 5:
On April 1, 2022 A. Khan established Sony Travel Agency. The following transactions were completed
during the month:
April 1 Invested Tk 70,000 cash to start the agency;
3 Paid Tk 5,000 cash for April office rent;
5 Purchased office equipment for Tk 35,000; cash paid Tk
15,000 and the balance of Tk 20,000 on account.
8 Incurred Tk 4,000 of advertisement costs on account;
11 Paid Tk 1600 for office supplies;
13 Earned Tk 27,500 for services rendered: Tk 10,000 cash is
 received from customers and the balance on account;
18 Withdrew Tk 200 cash for personal use;
22 Paid the advertising cost as in (April 8) above;
29 Paid employees’ salaries Tk 8,200;
30 Received Tk 5,000 in cash from credit customers.

Requirements: (Marks: 8+2=10)

(a) Journalize the above transactions in the books of Sony Travel Agency.
(b) Show the ledger accounts for Cash Accounts only. (You can use T format OR Standard format to
prepare ledger account)

Question No.6:
Wipeout started his own consulting firm, Total Wipeout Consultancy, on September 1, 2022. The trial
balance at September 30 is shown below.
Total Wipeout Consultancy
Trial Balance
September 30, 2022
Debit ($) Credit($)
Cash 8,150
Accounts Receivable 7,000
Supplies 3,000
Prepaid Insurance 2,400
Equipment 14,000
Accounts Payable 5,500
Unearned Service Revenue 5,900
Owner’s Capital 20,750
Service Revenue 7,400
Salaries and Wages Expense 3,000
Rent Expense 2,000
39,550 39,550
Other Data:
(a) Supplies on hand at September 30 are $750.
(b) The insurance policy is for two year.
(c) $2,800 of unearned service revenue has been earned at the end of the month.
(d) Salaries of $1,900 are accrued but unpaid at September 30.
(e) The equipment is being depreciated at $3,000 per year.
(f) Invoices representing $1,200 of services performed during the month have not been recorded as of
September 30.
Requirement: Prepare adjusting journal entries. (Marks 10)

Question No.7:
On June 1, 20122 Alexia Rios started Crazy Creations Co., a company that provides craft opportunities.
Following are the assets and liabilities of the company at June 30 and the revenues and expenses for the
month of June.
Cash $12,000 Notes payable $9,000
A/C Receivable 3,000 A/C Payable 1,200
Service Revenue 6,700 Supplies Expense 1,600
 Supplies 2,000 Gasoline Expense 100
Advertising Expense 500 Utilities expense 150
Equipment 10,000 Drawings 1,300
Capital 12,000 Rent Expense 100
Requirements: (Marks:2+ 3+2+3=10)
(i) Prepare a trial balance for the month of June 30, 2022.
(ii) Prepare an Income Statement for the month of June 30, 2022.
(iii) Prepare an Owners’ Equity Statement for the month of June 30, 2022.
(iv) Prepare a balance sheet for June 30, 2022.

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