Section a multiple choice questions (60 marks=20*3 marks)

7,900


Section B
Task 1 (30 marks)
Data Republic Co., Inc. was organized on October 1, 2022. Quarterly financial statements are prepared. The unadjusted and adjusted trial balances as of December 31 are shown below.

	Unadjusted		Adjusted
	Dr	Cr	Dr	Cr
Cash at Bank	50 000		50 000
Accounts Receivable	13 400		28 500
Inventory	14000		11200
Prepaid insurance	800		200
Equipment	78 000		78 000
Accumulated depreciation -Equipment		0		1 950
Notes Payable		15 000		15 000
Accounts Payable		5 800		5 800
Salaries and Wages Payable		0		7 500
Interest Payable		0		400
Unearned Service Revenue		21 400		18 200
Share Capital-Ordinary		118 000		118 000
Dividends	1 000		1 000
Sales Revenue		18 500		33 600
Cost of Goods Sold	14 300		17 100
Service Revenue		3 200		6 400
Salaries and Wages Expense	8 000		15 500
Insurance Expense	0		600
Depreciation Expense			1 950
Utilities Expense	2 400		2 400
Interest Expense			400
Total:	181 900	181 900	206 850	206 850

Instructions: (a) Journalize the adjusting entries that were made.
(b) Prepare an income statement for the 3 months ending December 31 and a statement of financial position at December 31.

	Solutions:
a)		Dr	Cr
1.	Accounts Receivable	15100
	Sales Revenue		15100
2.	Insurance Expense	600
	Prepaid Insurance		600
3.	Depreciation Expense	1950
	Accumulated Depreciation -Equipment		1950
4.	Salaries and Wages	7500
	Salaries and Wages Payable		7500
5.	Interest Expense	400
	Interest Payable		400
6.	Unearned Service Revenue	3200
	ServiceRevenue		3200
7.	COGS	2800
	Inventory		2800

Task 2 (10 marks)
The income statement for the year ended December 31, 2022, for Sunny Cloud Company contains the following condensed information.
Sunny Cloud Company Income Statement
For the Year Ended December 31, 2022

Sales revenue	3 728 000
Operating expenses (excluding depreciation)	1 246 800
Depreciation expense	253 000	1 499 800
Income before income taxes	2 228 200
Income tax expense	334 230
Net income	1 893 970

Included in operating expenses is a $15,000 loss resulting from the sale of machinery for $145,000 cash. New machinery was purchased at a cost of $300,000.

The following balances are reported on Sunny Cloud’s comparative statements of financial position at December 31.
Sunny Cloud Company Comparative Statements of Financial Position (partial)

	2 021	2022
Inventory	258 000	249 400
Accounts receivable	354 200	415 300
Cash	562 000	2 464 670
Accounts payable	110 400	88 600

Income tax expense of $334,230 represents the amount paid in 2022. Dividends declared and paid in 2022 totaled $30,000.
Instructions:
Prepare the statement of cash flows using the indirect method.
Solution:
Sunny Cloud Company Statement of Cash Flows—Indirect Method
For the Year Ended December 31, 2022

Cash flows from operating activities
Net income	1 893 970
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	253 000
Loss on disposal of plant assets	15 000
Increase in accounts receivable	-61 100
Decrease in inventory	8 600
Decrease in accounts payable	-21 800
Net cash provided by operating activities	2 087 670
Cash flows from investing activities
Disposal of plant assets	145 000
Purchase of machinery	-300 000
Net cash used by investing activities	-155 000
Cash flows from financing activities
Payment of cash dividends	-30 000
Net increase in cash	1 902 670
Cash at beginning of period	562 000
Cash at end of period	2 464 670