An-Najah national university

Accounting department
First semester 2024/2025
Accounting principle 1 - 10861111

Midterm exam – 35% Date: 24. Dec .2024

Student number: Class time:

Student name: Exam time: 1.5 hours

Question 1 (11 points): Choose the correct answer and fill your answers in the table (USE CAPITAL
LETTERS)

1. The accounting includes three activities (in order)

A. Identification, communication, recording.
B. Recording, identification, communication.
C. Economic entity, recording, communication.
D. Identification, recording, communication.

2. The accountant of Sanad company made the following error: a $400 credit posting to Accounts
receivable was made to account payable. Thus:
A. The trial balance will balance.
B. The trial balance will not balance, the debit column will be larger than the Credit column by
400.
C. The trial balance will not balance, the credit column will be larger than the debit column by
400.
D. The Trial balance will not balance, the credit column will be larger than the debit column by
800.

3. The balance sheet is a statement that reports

A. Revenues and expenses for a specific period of time.
B. Assets, liabilities and equity at a specific date.
C. Changes in retained earnings for a specific period of time.
D. Sources and uses of cash for a specific period of time.

4. Managerial accounting provides reports for external users like managers.

A. True
B. False

5. Journalizing is the process of recording entries.

A. True.
B. False.

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6. The accountant of XYZ company made the following error: A 200 purchase of equipment on
account was posted to equipment twice. Thus:
A. The trial balance will balance.
B. The trial balance will not balance, the debit column will be larger than the credit column by
200
C. The trial balance will not balance, the credit column will be larger than the debit column by
200.
D. The Trial balance will not balance, the credit column will be larger than the debit column by
400.

7. The Fair value principle states Assets should be initially recorded at cost and adjusted when the
fair value changes.
A. True
B. False

8. The economic entity assumption states that the entity and its owners are the same.
A. True
B. False

9. Which of the following statements is True regarding the corporation:

A. Ownership is divided into transferable shares.
B. It has limited life.
C. Each shareholder has unlimited liability towards the company’s debts.
D. the business is not considered as a separate legal entity under the jurisdiction of corporation
law.

10. A Chart of accounts contains all the company’s accounts and their balances.
A. True.
B. False.

11. In 2023, Hadara co. received $92,000 cash from customers. Of that amount $12,000 were
related to services provided in 2022. In addition, Hadara provided $5,000 services on account in
2023. Thus, revenue for 2023 would be:
A. According to cash basis $92,000; According to accrual basis $85,000.
B. According to cash basis $85,000; According to accrual basis $92,000.
C. According to cash basis $80,000; According to accrual basis $85,000.
D. According to cash basis $92,000; According to accrual basis $80,000.

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Question 2 (10 points): you are given the following information regarding sbitany company

Year 2022 Year 2023

Beginning of the year

Assets 35,000 ??

Liability 10,000 15,000

Equity (A) ??

End of the year

Assets (B) 66,000

Liability 15,000 6,000

Equity (C) 60,000

Changes during the year

Assets 15,000 ??

Liability 5,000 ??

Equity (D) ??

Additional investments - 5,000

Revenue - 124,000

Expense - (E)

Dividends - 4,000

Required:

A. Find the missing amounts

B. Calculate the net income for the year 2023
C. Prepare the Retained earnings statement for the year 2023 (assume RE on dec.31.2022 equals
2,000)

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Question 3 (5 points): The trial balance of Azziza co. on 30.Sep.2024 reported the following: Prepaid
insurance expense: 2,400, supplies: 1,900, Equipment: 38,000, Accumulated depreciation – equipment :
8,000, unearned revenue: 12,000.

If you knew that:

A. The insurance policy covers one year starting from 1.Sep.2024

B. On 30.sep.2024, supplies on hand was $900.
C. The equipment depreciates $600 annually.
D. on 30.sep.2024, $2000 of unearned revenue remained unearned.

Required:

A. If you knew that Azziza Company prepares quarterly financial statement. Record the adjusting
entries on 30.sep.2024
B. Calculate the book value of equipment that will appear in Azziza co. balance sheet on
30.sep.2024

Question 4 (9 points): Paltel company had the following transactions during November.2024.

November 1. Shareholders invested $10,000 in exchange for ordinary shares

November 10. The company purchased $1,790 supplies on account from sha’ban co.

November 15. The company provided $25,000 services and received 40% of the amount in cash. The
balance remained on account.

November 20. The company paid salaries and wages expense for November $16,000.

November 25. The company paid sha’ban $500 of the balance due

November 29. The company received $5,000 from customers who were billed in November 15.

November 30. The company declared and paid dividends $2,000.

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Required:

A. Journalize the previous transactions in Paltel books.

B. If you knew that the account receivable balance on Oct.31.2024 was $9,100. Post the previous
transactions to The account receivable account. (use standard column account)

An-Najah national university

Accounting department
First semester 2024/2025
Accounting principle 1 - 10861111

Midterm exam – 35% Date: 24. Dec .2024

Student number: Class time:

Student name: Exam time: 1.5 hours

Question 1 Answers

Item Answer Item Answer

1 D 7 A

2 A 8 B

3 B 9 A

4 B 10 B

5 A 11 A

6 B

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 Question 2.A Answers

A B C D E

25,000 50,000 35,000 10,000 100,000

Question 2.B Answer

Net income = REV - EXP

= 24,000

Question 2.C answer

Retained earnings statement

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RE (Beg) 2,000
Add: NI 24,000
LESS: div (4,000)
RE (End) 22,000

Question 3.A answer

Adjusting entries

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30.Sep. Dr Ins exp 200
Cr prepaid ins exp 200

Dr supplies exp 1,000

Cr supplies 1,000

Dr Dep exp 150

Cr Acc-Dep- equip. 150

Dr unearned rev 10,000

Cr service rev 10,000

Question 3.B answer

Book value = Cost - acc dep

= 29,850

Question 4.A answer

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 Journal

Nov 1. Dr cash 10,000

Cr S.C.O 10,000

Nov 10. Dr supplies 1,790

Cr acc pay 1,790

Nov 15. Dr cash 10,000

Dr acc rec 15,000
Cr service rev 25,000

Nov 20. Dr S & W exp 16,000

Cr cash 16,000

Nov 29. Dr acc pay 500

Cr cash 500

Nov 29. Dr cash 5,000

Cr acc rec 5,000

Nov 30. Dr Div 2,000

Cr cash 2,000

Question 4.B answer

Posting
Acc rec

Date Explanation ref Dr Cr Balance

Beg bal 9,100 Dr

Nov 20 15,000 24,100 Dr

Nov 25 5,000 19,100 Dr