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 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.

2. The accountant of Sanad company made the following error: a $400 credit posting to Accounts
receivable was omitted. 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 accounting includes three activities (in order)

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

4. Financial accounting provides reports for external users like investors.

A. True
B. False

5. Posting is the process of recording entries.

A. True.
B. False.

6. A Chart of accounts contains all the company’s accounts and their balances.
A. True.

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 B. False.

7. The accountant of XYZ company made the following error: A 200 purchase of equipment on
account was debited to supplies 200. 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.

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

9. The monetary unit assumption states that only financial transactions that can be measured in
money are recorded.
A. True
B. False

10. Which of the following statements is False regarding the corporation:

A. Ownership is divided into transferable shares.
B. It has unlimited life.
C. Each shareholder has unlimited liability towards the company’s debts.
D. A business is organized as a separate legal entity under the jurisdiction of corporation law.

11. In 2023, Hadara co. paid $94,000 cash for expense. Of that amount $12,000 were related to
expense incurred in 2022. In addition, Hadara incurred $5,000 expense on account in 2023.
Thus, Expense for 2023 would be:
A. According to cash basis $87,000; According to accrual basis $94,000.
B. According to cash basis $82,000; According to accrual basis $87,000.
C. According to cash basis $94,000; According to accrual basis $82,000.
D. According to cash basis $94,000; According to accrual basis $87,000.

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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 11,000 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 13,000 ??

Liability 4,000 ??

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
1,000)

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Question 3 (5 points): The trial balance of Azziza co. on 30. Sep.2024 reported the following: Prepaid
insurance expense: 4,800, supplies: 1,500, Equipment: 38,000, Accumulated depreciation – equipment:
8,000, unearned revenue: 10,000.

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 $720 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. The company purchased $1,300 supplies on account from sha’ban co.

November 10. Shareholders invested $8,000 in exchange for ordinary shares

November 15. The company paid salaries and wages expense for November $14,000.

November 20. The company provided $24,000 services and received 50% of the amount in cash. The
balance remained on account.

November 25. The company received $4,000 from customers who were billed in November 15.

November 29. The company paid sha’ban $600 of the balance due

November 30. The company declared and paid dividends $2,300.

Required:

A. Journalize the previous transactions in Paltel books.

B. If you knew that the account receivable balance on Oct.31.2024 was $8,100. Post the previous
transactions to The account receivable account. (use standard column account)

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 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 B 7 A

2 B 8 B

3 D 9 A

4 A 10 C

5 B 11 D

6 B

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 Question 2.A Answers

A B C D E

24,000 48,000 33,000 9,000 98,000

Question 2.B Answer

Net income = REV - EXP = 26,000

Question 2.C answer

Retained earnings statement

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RE (Beg) 1,000
Add: NI 26,000
LESS: div (4,000)
RE (End) 23,000

Question 3.A answer

Adjusting entries

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30.Sep. Dr Ins exp 400
Cr prepaid ins exp 400

Dr supplies exp 600

Cr supplies 600

Dr Dep exp 180

Cr Acc-Dep- equip. 180

Dr unearned rev 8,000

Cr service rev 8,000

Question 3.B answer

Book value = Cost - Acc dep equip

= 38,000 - 8,180 = 29,820

Question 4.A answer

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 Journal

Nov 1. Dr supplies 1,300

Cr acc pay 1,300

Nov 10. Dr cash 8,000

Cr S.C.O 8,000

Nov 15. Dr S & W exp 14,000

Cr cash 14,000

Nov 20. Dr cash 12,000

Dr acc rec 12,000
Cr service rev 24,000

Nov 25. Dr cash 4,000

Cr acc rec 4,000

Nov 29. Dr acc pay 600

Cr cash 600

Nov 30. Dr Div 2,300

Cr cash 2,300

Question 4.B answer

Posting
Acc rec

Date Explanation ref Dr Cr Balance

Beg bal 8,100 Dr

Nov 20 12,000 20,100 Dr

Nov 25 4,000 16,100 Dr