Part 1 - Case: Sally's Ice Cream Parlour Sally Barnes a third

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York University AP/ADMS 2500.03 Introduction to Financial Accounting Midterm Examination #1 - Topic A Time: 3 hours Fall 2016 Questions: 50 Instructions: 1. Submit: Only the pink mark sense sheet will be collected: you may keep this midterm examination paper. Mark your answers on it for later reference. 2. Mark Sense Sheet: Record your name and student number and answer all questions on the computer mark sense sheet provided with an HB (soft lead) pencil. Bring several pencils in case one breaks. The computer will not recognize ink or hard lead pencils Test Form is 'A' and Code is your Section (in the left column) Fill in the bubbles for your name and student number in pencil (your phone number is not required). Leave the last column of the student number BLANK If you change an answer, use a high quality eraser to completely remove the previous mark. If the computer senses two answers to a question, only the first scanned will be recognized. 3. Exam Aids: Only calculators without alphanumeric programmable memories are allowed. It is strongly suggested you bring a couple of cheap 4 function calculators to the exam in case one fails. Be prepared to be challenged by invigilators if you bring a \"fancy\" calculator. Compact foreign language/English dictionaries may be used. However, these will be examined by invigilators. If there are any loose pages or handwriting in the dictionary, it will be seized and you will be charged with academic dishonesty. In 2500, invigilators answer no questions of interpretation. They will pass along questions regarding possible errors/typos/missing data to the head invigilator. If you believe a question contains an error and do not receive a response, make a detailed note at the back of your answer (pink) sheet. 4. Exam Strategy Careful budgeting of time on an accounting exam is essential. Bring a watch and check your progress regularly. Poor time management is the most common reason for poor exam performance in accounting. It is always a good idea to attempt the questions you deem easiest first. In an interrupted exam that is not restarted, your exam will be scored based on questions attempted. It is essential to transfer your answers to the grading sheet after each question in case the exam is interrupted by fire alarm. The last ten minutes of an exam should be devoted to double checking your transfers. What you submit is what is graded. If you have not transferred your answers to the mark sense sheet at the end of the exam, the invigilator will not wait. Your answer sheet will be seized and it will be graded based on whatever questions have choices filled in. Remember there is no penalty for guessing on a multiple choice computer graded exam. Submit a choice for every question. Also note that in 2500, the choice of None of the above does indeed represent a frequent correct choice to questions. ADMS2500 - Topic A - Fall 2016 1 5. Exam room regulations: All personal belongings should be placed either on the floor or at the front of the exam room. All items on your desk will be examined by invigilators Bring appropriate ID as proof of registration. You will be required to sign in and show appropriate documentation. No need to sign out from the exam, if a student has signed in but no exam is collected the mark to be reported is zero. Students without ID will be allowed to write the exam, but will be photographed and asked to submit registration and photo ID to the School of Administrative Studies the next day. No student may leave the exam in the first hour. No student may start the exam after an hour. Students requiring restroom visits must be accompanied by an invigilator. The proctors will announce when there are 15 minutes remaining and any answers not transferred should be recorded at this time. No one is to leave their seat in the last 15 minutes. When time is called, the proctors will go down the rows collecting your answer sheets, you can keep this exam paper for your records. They will not wait and they will not accept your sheet once they have passed. Any violation of this protocol will result in a grade of zero recorded for the exam. 6. Fire Alarms A frequent occurrence in York exams. In the event of a fire alarm, you are to leave your exam and answer sheet face down on your desk and immediately proceed outside with coats and all personal belongings. Print your surname on the back of the exam so you know which seat to return to. An invigilator will lead the group outside to a place of safety. There is to be no talking during the evacuation or outside. Most rooms are cleared within 30 minutes of the alarm so that exams can recommence. You will be told after this time whether to reenter the room and recommence the exam or to go home. 7. Academic Dishonesty You are reminded that cheating is a serious offense which can result in expulsion from university. Exams at York are held in regular classrooms, which may involve tiered seating. Consequently, neck exercises are not allowed during exams. First instance of wandering eyes has the student relocated to the front of the room or a verbal warning being made by the course director. Second instance results in seizure of paper. 8. Special Instructions This exam is divided into two parts. Part 1 is a minicase that is related to a series of questions based on the case. While an attempt has been to minimize the impact of carryforward errors in question design, some questions of necessity are related to multiple computations or previous questions, so an error potentially can have multi-mark impact. Part 2 are questions based on different and independent scenarios unrelated to the case of Part 1. 9. Reminder This is a reminder to submit the pink mark sense sheet only; this exam paper will not be collected. Ensure your name is on the pink mark sense sheet and that you have marked your answers in this paper so you can check your answers when the correct answers are published in the course website. If you have signed in but no scantron (pink) sheet is handed in, the mark obtained in the exam is a zero and the administrative process for academic dishonesty might be initiated. ADMS2500 - Topic A - Fall 2016 2 Part 1 - Case: Sally's Ice Cream Parlour Questions 1 to 45 are based on this case Sally Barnes a third year Accounting student finished her exams early from York University this year and went back home to Huntsville Ontario to look for a summer job. If Sally doesn't find a job in town she would have to work in the families Ice Cream factory, and outlet store. Barnes Ice Cream uses milk from Jersey cows which is the best for making ice cream from local farmers to manufacture fresh custom Ice Cream for Restaurants and specialty stores in Southern Ontario. Going back and living at home was so comforting and nice since Huntsville during the summer is a hot bed of all types of activities. She started walking down Main Street with her resume in hand looking and applying for a summer job. The town of Huntsville has over 20,000 plus residence and another 25,000 from the surrounding cottages. It is busy for three seasons a year with something going on every Friday, Saturday and Sunday. A lot has changed with the \"Huntsville Festival of the Arts\" running daily for the entire months of July and August to Labour Day week end. \"Concerts in the Park and on the Docks\" every Wednesday at noon and night, starting in May until the end of August, and her favorite growing up as child was Thursday Night movies in the Park all summer long. Sally walked into the corner Drug Store located on Main Street beside the Swing Bridge and the Park were all of the Summer activities happen, where she had her first Part time job when she was a high school student. Dr. Bob Wilder owns the drug store which has been in the family for over 80 years. In the early 1950's Bob's grandfather built a fully functional Ice Cream Parlor in the front half of the store with a counter and six ice cream parlor type stools. Dr. Wilder was talking to Ted Lee the local handyman about redesigning the store and wanted to make the Ice Cream Parlor smaller since it was seasonal, taking too much of his time managing the staff at the Ice Cream stand, handling different operational issues and taking up too much of the floor space in the store year round. It was perfect timing when Sally walked into the Drug Store. Sally overheard the conversation between Dr. Wilder and Ted about the redesigning of the Ice Cream parlor and the problems he had making it work. Sally was thinking out loud and said this sounded like a Business Case from her ADMS2500 course. She could purchase the Ice Cream, cups, spoons, cones, and other material from the family business, rent the floor space at the drug store, hire her own staff, and have different hours then the Drug Store so the business can be open for business when the activities in town are on. She approached both Dr. Wilder and Ted to bring up her idea. After hearing the details, Ted suggested that this can be done by placing a movable wall between the Drug Store and the Ice Cream Parlor section of the store, placing wheels on the Ice Cream freezers for scooping Ice Cream, by adding another door to the front of the store, and then placing the movable wall between the two doors and the wall where the Ice Cream Parlor is. Ted said that this design would allow one to go into either store when the other is not open, also by placing the wheels on the freezers then can be moved to the wall to sale Ice Products in the winter since Ice Cream Parlor would be open from the May 1st to October 31st. Sally called her mother about this business venture who congratulated her on a great idea. Mrs. Barnes suggested to Sally that the family Ice Cream business could supply Ice Cream products in the freezer under consignment for November to April since the freezers can move against the wall. ADMS2500 - Topic A - Fall 2016 3 The next day Sally met with Dr. Wilder to work out the details. The meeting was very productive and they agreed to the following: Dr. Wilder would pay for the design work, the movable wall, plumbing, doors, wheels on the freezer that is owned by Dr. Wilder, installation of signs to the store, and any other for the new Ice Cream Parlor. Sally will pay the first and last months of rent on May 1st and then on the first day of each month for that month to Dr. Wilder. The rent included the front of the store where the Ice Cream Parlour is and a small supply room for storage and to place another freezer for extra Ice Cream. A fee of 4% of monthly gross sales will be paid to Dr. Wilder for the cleaning of the Ice Cream Parlor area, electricity, water, internet, use of the Ice Cream freezers owned by the Drugstore, and garbage removal. This is to be paid on the first day of the month on last month's sales. All other expenses for the Parlor will be paid by Sally. Sally did the following: April 22-29, 2016 Ordered three signs from Huntsville Sign Company for the business, one to be placed over the counter that has the price list, a sandwich board sign will be placed outside when the store is open for business, the other to be placed on the outside of the building, these signs will be used all year round since Ice Cream will be sold in the Drug store on consignment from November to April. Purchase price of all signs $1,200, however the owner of Huntsville Sign Company was her uncle and sold it to her for less. The signs will last three years before needing replacement. To be paid in full upon delivery. Conducted interviews and hire students that will make $15.00 per hour, an assistant manager will make $19.00 an hour to work when Sally is not working. Since the students will be working less than 20 hours per week withhold taxes and other source deductions do not apply. The Ice Cream Parlour will be open seven days a week from May 1st to October 30th, payroll wage cost will be $475.00 per day from May 1st to September 6th. After September 6th the Ice Cream Palour will require only one person to operate and two people on the weekends. All students hired will start working May 1st. The employer will be paying 14% in benefits for each employee of their gross wage. These Benefits are payable 45 days after date on pay cheque. The employees first pay cheque will be dated May 14th for the first week of work (7 days) and every two weeks after that. Sally made arrangements with her parents for the purchase of supplies and ice cream. Since she is family, her father would give her next morning delivery before the Parlour opens, the deliveries will be paid in full 10 days after received. Her father suggested that for inventory keeping that all of the Ice Cream related inventory items can be kept together as one amount (the value of all the Ice Cream, Cones, spoons, and syrup be one lump sum). Barnes Ice Cream does this for the Factory store and makes inventory record keeping easier. May 1, 2016 Details of the rest of the case to be revealed during the exam on October 2nd ADMS2500 - Topic A - Fall 2016 4 Prepare journal entries and \"T\" Accounts in ACCRUAL Basis for this case using the following chart of accounts and then answer the questions. Chart of accounts to be revealed during the exam on October 2nd Students are asked to round numbers to fit 2 decimal places in all questions. When the answer obtained is not materially different from one of the stated alternatives, students are advised to select that alternative and not \"e) none of the above\". If you think that for some reason that an assumption is called for, then also state it clearly on your exam paper (at the back of the pink scantron sheet). It is estimated that you will need 60 minutes to prepare the T accounts, Income statement and Balance Sheet Part 1: Questions on the Case This Section Questions ONLY APPLIES TO ACCURAL ACCOUNTING for the case for the date ending May 31st: Sally's Ice Cream Parlour This section's questions are from the unadjusted Trial Balance Questions to be revealed during the exam on October 2nd This section's questions are from the adjusted Trial Balance or taken directly from the financial statements. Use ACCRUAL ACCOUNTING. Questions to be revealed during the exam on October 2nd This Section Question ONLY APPLIES TO CASH BASIS ACCOUNTING for Sally's Ice Cream Parlour, during the month of May, 2016. Prepare \"T\" Accounts in CASH Basis for this case using the following relevant accounts from the chart of accounts provided above and then answer the questions. It is estimated that you will need 30 minutes to prepare the T accounts, Income statement and Balance Sheet This section's questions are from the adjusted Trial Balance or taken directly from the financial statements. Use CASH ACCOUNTING. Questions to be revealed during the exam on October 2nd PART 2: INDEPENDENT QUESTIONS (the remaining questions are totally unrelated to the case of Part 1) This Section Question ONLY APPLIES TO the information provided in each question. They are not related to the case. Questions to be revealed during the exam on October 2nd End of exam ADMS2500 - Topic A - Fall 2016 5