TJ's policy is to end each month with an ending inventory equal to 20% of the next month's projected sales.Each seat costs TJ?s $20.00 to purchase from the supplier. TJ?s pays for each purchase in the month afterthe purchase.

(2) Complete TJ?s purchases budget for the Third quarter of 2008.

(3) How much sales revenue and cost of goods sold expense should TJ?s show on its forecastedincome statement for the quarter?$________________ sales revenue $________________ cost of goods sold expense(4) How much should TJ?s show as accounts receivable on its forecasted balance sheet at the end ofthe quarter?$_________________(5) How much should TJ?s show as accounts payable on its forecasted balance sheet at the end of thequarter?$_________________(6) Suppose that during August, TJ?s actually sold 12,000 seats. How many seats will it have to buy inSeptember?__________________ seats

Name Lab Time________________________ Student ID#___________________________Lab Instructor: Acct 2036 Exam 1: Sample #1 (100 points; 75 minutes) Instructions: 1. Wait to open your exam until instructed to do so by a TA. 2. This exam consists of 9 pages. There should not be any blank pages. If you are missing a page, notify your TA before beginning this exam. Do not tear any pages out of this exam. 3. Allocate your time wisely--do troublesome items last. Show and label all your work on the exam in the space provided. We cannot give partial credit without seeing your work. 4. When you are finished, turn the exam in to your TA. At this time, have your Student ID ready so it can be checked. 1 Part 1. Cost-Volume-Profit (16 points). Be sure to show your work, partial credit may be given! Fearless Fred's Ski Rental Shop of Lake Tahoe (FF's Ski Rental) sells ski equipment packages which include a pair of skis, ski poles, and ski boots. FF's plans to charge customers $350 for each ski equipment package. FF's thinks it will have to pay a total of $300 for a set of skis, ski boots, and ski poles. FF's annual fixed costs total $50,000. Assume that FF's only sells equipment packages and not the separate components of those packages. a) What is FF's contribution margin? $______________ per package b) How many ski equipment packages must FF's sell in a year to break even? _______________ packages c) If FF's is able to sell one additional package (above the breakeven volume), what will its profit be? $______________ d) How many ski equipment packages must FF's sell in a year to earn a profit of 75,000? _______________ packages e) What will the profit or loss be if FF's sells 900 ski equipment packages? $_______________ profit or loss (circle one) f) FF's did not meet its profit goal last year and is considering spending an additional $10,000 a year on advertising, hoping this will increase sales. How many ski equipment packages will FF's have to sell to earn a target profit of $75,000? ________________ packages 2 PART 2 Budgeting (31 points) Tiger Joe's (TJ's) opened for business in on June 1, and sells stadium seats (portable cushioned seats) for football games for $30 each. Before football season began, TJ's expected to sell the following number of seats during the season: June 1,000 July 3,000 August 10,000 September 12,000 October 2,000 TJ's predicted that 20% of its customers will be cash customers and the other 80% will be credit customers. Credit customers pay for their purchases in the month following their purchases. (1) Complete the empty blanks in TJ's ' sales budget for the third quarter of 2008. SALES BUDGET Sales (in units) July Sale August Sale Sept. Sale Quarter 3,000 10,000 12,000 25,000 x Selling price per unit Total sales revenue Sales revenue from cash sales Sales revenue from credit sales Budgeted total sales revenue Expected cash collections: Collections from cash sales Collections from credit sales: From June credit sales From July credit sales From August credit sales Total cash collections from sales (this problem continues on next page) 3 x $30 x $30 x $30 x $30 $90,000 $300,000 $360,000 $750,000 TJ's policy is to end each month with an ending inventory equal to 20% of the next month's projected sales. Each seat costs TJ's $20.00 to purchase from the supplier. TJ's pays for each purchase in the month after the purchase. (2) Complete TJ's purchases budget for the Third quarter of 2008. PURCHASES BUDGET Sales (in units) July Sale August Sale Sept. Sale Quarter 3,000 10,000 12,000 25,000 Seats required: for sales for ending inventory Total seats bars required Beginning Inventory Purchases x Cost of 1 seat Cost of purchases Cash payments for purchases (3) How much sales revenue and cost of goods sold expense should TJ's show on its forecasted income statement for the quarter? $________________ sales revenue $________________ cost of goods sold expense (4) How much should TJ's show as accounts receivable on its forecasted balance sheet at the end of the quarter? $_________________ (5) How much should TJ's show as accounts payable on its forecasted balance sheet at the end of the quarter? $_________________ (6) Suppose that during August, TJ's actually sold 12,000 seats. How many seats will it have to buy in September? __________________ seats 4 PART 3 Transactions, adjustments, and closing entries (18 points) On January 1, 2008, Tom Taylor decided to open a T-shirt shop. During the first month of operation, Tom's Ts entered into the following transactions. Tom's uses the perpetual inventory system. Jan. 1 2 3 7 15 16 29 30 Tom deposited $80,000 of his own money into the company's bank account to start up the company Tom's Ts prepaid $48,000 rent for space to occupy for 2 years Tom's 4 Ts purchased 3,000 T-shirts on credit for $8 each. Tom's Ts made credit sales of 1,000 T-shirts for $18 each. Tom's Ts paid its only worker a salary of $1,100. Tom's Ts collected payments for of the T-shirts it sold on January 7. Tom withdrew $2,000 from the T-shirt shop. Used up one month of rent Required: Record the above transactions and adjustment in the equation below. You may not have to use all of the columns. ASSETS = LIABILITIES + OWNER'S EQUITY Net income Date Cash Accounts Rec. Inventory Office Supplies Prepaid Rent Accounts Pay. 5 Notes Pay Tom T. Capital Sales Rev. COGS Exp. Rent Exp. Salaries Exp. PART 4. Matching (8 points) The following is a list of the sections of the three major financial statements: Income Statement A. Revenues B. Expenses Balance Sheet C. Assets D. Liabilities E. Owner's equity Cash Flow Statement F. Cash flows from operating activities G. Cash flows from investing activities H. Cash flows from financing activities X. None of the above. Match each of the items below with the financial statement section where you would find the item by placing the appropriate letter in the blank next to the item. If you would not find the item in one of the financial statements, place an X in the blank. _____1. the amount of cash collected from customers during the year _____2. the amount of unpaid debt that the company has at the end of the year _____3. the cost of the unused supplies remaining in the company at the end of the year _____4. the cost of utilities that the company used during the year _____5. the amount of cash loans that the company received from the bank during the year _____6. the total selling prices of all the goods that the company sold during the year _____7. the cost to the company of the goods that it sold during the year _____8. the amount of cash the company paid for equipment this year 6 PART 5. Multiple Choice. (27 points) Choose the best answer for each question. Circle your answer and WRITE YOUR ANSWER IN THE BOX BEHIND THE QUESTION NUMBER BELOW: 1. 4. 7. 10. 13. 16. 2. 5. 8. 11. 14. 17. 3. 6. 9. 12. 15. 18. 1. Which of the following statements is true about companies in the United States? a. Corporations earn more combined revenue than companies with any other form of business organization b. More partnerships exist than any other form of business organization c. Sole proprietorships and partnerships combined earn more revenues than corporations d. More sole corporations exist than any other form of business organization 2. Toy Emporium has a fiscal year that begins May 1. The company's third quarter consists of which months? a. November, December, January b. August, September, October c. July, August, September d. May, June, July 3. Generally accepted accounting principles a. Are standardized worldwide b. Are nonbinding guidelines for accountants to use in fulfilling their responsibilities c. Must be followed in all accounting reports (both internal and external) d. Are agreed-upon principles that help external users understand the meaning of public companies' accounting information 4. The governmental organization responsible for overseeing the financial statements of publicly-owned companies and which also has the legal authority to establish accounting regulations for those companies is the a. American Institute of Certified Public Accountants (AICPA) b. General Accounting Office (GAO) c. American Accounting Association (AAA) d. Securities Exchange Commission (SEC) 5. Which of the following statements about audited financial statements is NOT true? a. The financial statements are the responsibility of the company's auditors b. Auditing is necessary to overcome potential bias of the company's managers c. Auditing provides assurance that the financial statements fairly represent the results of the activities of the company. d. All corporations that sell stock to the public must have their financial statements audited. 6. When the variable cost per unit decreases, the number of units that must be sold to breakeven: a. Decreases. b. Stays the same. c. Increases. d. The answer cannot be determined from the above information. 7 Use the chart below to answer questions 7 - 12: D $ C 2,200 1,800 B b 1,400 1,000 A a c 600 200 0 20 60 100 140 Volume 180 220 260 300 7. Line A represents a. Total variable costs b. Total fixed costs c. Total costs d. Total revenues. 10. Line D represents a. Total variable costs b. Total fixed costs c. Total costs d. Total revenues. 8. Line B represents a. Total variable costs b. Total fixed costs c. Total costs d. Total revenues. 11. The company should break even at which volume of sales: a. 60 units b. 100 units c. 140 units d. 600 units e. 1,400 units 9. Line C represents a. Total variable costs b. Total fixed costs c. Total costs d. Total revenues. 12. If the company sells 100 units, it should have a profit (loss) of a. $600 b. $200 c. $(600) d. $(200) e. $400 f. $(400) 8 13. The breakeven-point is the sales volume where: a. Variable costs equal variable revenues. b. Fixed costs equal total revenues. c. Total contribution margin equals fixed costs d. Total revenues equal variable costs. e. Total revenues equal total costs f. c and e are both correct. 14. Which of the following statements is true about business plans? a. A company should have a business plan only when it is starting up b. A company's business plan should be at least 200 pages long. c. A business plan is only necessary when a company is applying for a loan. d. A company should create or revise its business plan on a regular basis e. A business plan should be a broad summary of the major aspects of the company 15. Which of the following is not a source of data for the cash budget? a. The sales budget. b. The purchases budget. c. The budgeted income statement d. The general and administrative budget. 16. Which of the following budgets would NOT be useful in preparing a company's projected income statement? a. Sales budget b. Cash budget c. Selling expenses budget d. General and administrative expenses budget. 17. If a company plans to raise the selling price of its product, which of the following budget schedules would not be affected by this decision? (Assume that the price change will have no effect on the projected sales quantity.) a. Cash budget b. Projected income statement c. Purchases budget d. Sales budget e. Projected balance sheet 18. ABC Chewing Gum Inc. makes a sale on credit to a customer, and the customer will pay for the purchase two months from now. ABC records the expenses involved in making the sale in the same period as the sale, according to the: a. dual effect concept b. matching principle c. historical cost concept d. revenue recording concept 9