ACCO 310 Financial Reporting I EXAM BANK -
QUESTIONS WITH SOLUTIONS 2025-2026
Concordia University
EXAM BANK - QUESTIONS WITH SOLUTIONS
Adjusting entries, Statement of comprehensive income, Statement of Financial Position, Statement of Cash Flows
Question 1 – Tailor Co.
Tailor Co. is a public company listed on Toronto Stock Exchange. The company is specialized in providing on-demand tailoring
services, but also has a factory for producing leather jackets which was opened 5 years ago by the CEO’s son, who is still currently
managing that division. The Board of Directors is very happy with the results of the Tailoring Services division, but the Leather
Jackets division has never managed to become profitable. As the company is preparing to re-negotiate their loan with the bank
and following pressures from their institutional investors, on March 31, 2015, the Board of Directors has decided to sell the
Leather Jackets division. The sale was concluded on September 5, 2015. At the end of the fiscal year on December 31, 2015, the
chief financial officer receives the following information from the controller.
Select balances at December 31, 2015/2014 after adjusting 2015 2014
Cash 66,500 6,100
Gross accounts receivable 19,500 15,000
Inventory 0 7,600
Buildings 40,000 100,000
Equipment 35,000 80,000
Accumulated depreciation - buildings 9,000 20,000
Allowance for doubtful accounts 200 0
Accumulated depreciation - equipment 13,000 30,000
Accounts payable 8,400 17,400
Long-term bank loan 60,000 80,000
, Long-term notes payable 5,000 0
Share capital 50,000 50,000
Service revenue (Tailoring Services division) 85,000 80,000
Salaries and wages expense (Tailoring Services division) 45,000 43,000
Advertising expense (Tailoring Services division) 600 1,000
Freight-out (Tailoring Services division) 500 450
Telecommunications expense (Tailoring Services division) 1,200 1,400
Interest expense 2,000 3,000
Dividend revenue 300 300
Supplies expense (Tailoring Services division) 2,500 2,300
Bad debt expense (Tailoring Services division) 200 250
Depreciation expense (on buildings and equipment for both divisions) 5,500 7,000
Net Sales revenue (Leather Jackets division) 30,000 50,000
Cost of goods sold (Leather Jackets division) 31,100 55,000
Loss on sale of equipment and building (Leather Jackets division) 6,500 0
The chief financial officer also knows the following information:
1
, (a) The retained earnings balance at January 1, 2015 was $11,300.
(b) The Leather Jackets division was sold for a price of $70,000 paid in cash and had the following situation of the assets:
December 31, At the time of
2014 sale 2015
Building 60,000 60,000
Accumulated depreciation on building 12,000 12,500
Equipment 50,000 50,000
Accumulated depreciation on equipment 20,000 21,000
(c) The company used long-term notes payable of $5,000 to acquire equipment for the Tailoring Services division.
(d) Dividends paid during the year amounted to $6,000, of which $1,000 for preferred shares. There are 35,000 common
shares outstanding.
(e) During the year, the company repaid in cash part of the long-term bank loan.
(f) The management decided to classify interest paid as financing activities, dividends paid as operating activities, and
dividends received as investing activities.
(g) Income tax rate is 50%. The total income tax expense for the year was paid before the fiscal year end.
He must be ready to discuss the performance and cash flows of the company with the bank representatives in only three days.
Required
1. Prepare a partial statement of comprehensive income for 2015 beginning with income from continuing operations.
2. Prepare a statement of cash flows using the indirect method.
3. How will the bank interpret the performance and cash flows of the company?
2
QUESTIONS WITH SOLUTIONS 2025-2026
Concordia University
EXAM BANK - QUESTIONS WITH SOLUTIONS
Adjusting entries, Statement of comprehensive income, Statement of Financial Position, Statement of Cash Flows
Question 1 – Tailor Co.
Tailor Co. is a public company listed on Toronto Stock Exchange. The company is specialized in providing on-demand tailoring
services, but also has a factory for producing leather jackets which was opened 5 years ago by the CEO’s son, who is still currently
managing that division. The Board of Directors is very happy with the results of the Tailoring Services division, but the Leather
Jackets division has never managed to become profitable. As the company is preparing to re-negotiate their loan with the bank
and following pressures from their institutional investors, on March 31, 2015, the Board of Directors has decided to sell the
Leather Jackets division. The sale was concluded on September 5, 2015. At the end of the fiscal year on December 31, 2015, the
chief financial officer receives the following information from the controller.
Select balances at December 31, 2015/2014 after adjusting 2015 2014
Cash 66,500 6,100
Gross accounts receivable 19,500 15,000
Inventory 0 7,600
Buildings 40,000 100,000
Equipment 35,000 80,000
Accumulated depreciation - buildings 9,000 20,000
Allowance for doubtful accounts 200 0
Accumulated depreciation - equipment 13,000 30,000
Accounts payable 8,400 17,400
Long-term bank loan 60,000 80,000
, Long-term notes payable 5,000 0
Share capital 50,000 50,000
Service revenue (Tailoring Services division) 85,000 80,000
Salaries and wages expense (Tailoring Services division) 45,000 43,000
Advertising expense (Tailoring Services division) 600 1,000
Freight-out (Tailoring Services division) 500 450
Telecommunications expense (Tailoring Services division) 1,200 1,400
Interest expense 2,000 3,000
Dividend revenue 300 300
Supplies expense (Tailoring Services division) 2,500 2,300
Bad debt expense (Tailoring Services division) 200 250
Depreciation expense (on buildings and equipment for both divisions) 5,500 7,000
Net Sales revenue (Leather Jackets division) 30,000 50,000
Cost of goods sold (Leather Jackets division) 31,100 55,000
Loss on sale of equipment and building (Leather Jackets division) 6,500 0
The chief financial officer also knows the following information:
1
, (a) The retained earnings balance at January 1, 2015 was $11,300.
(b) The Leather Jackets division was sold for a price of $70,000 paid in cash and had the following situation of the assets:
December 31, At the time of
2014 sale 2015
Building 60,000 60,000
Accumulated depreciation on building 12,000 12,500
Equipment 50,000 50,000
Accumulated depreciation on equipment 20,000 21,000
(c) The company used long-term notes payable of $5,000 to acquire equipment for the Tailoring Services division.
(d) Dividends paid during the year amounted to $6,000, of which $1,000 for preferred shares. There are 35,000 common
shares outstanding.
(e) During the year, the company repaid in cash part of the long-term bank loan.
(f) The management decided to classify interest paid as financing activities, dividends paid as operating activities, and
dividends received as investing activities.
(g) Income tax rate is 50%. The total income tax expense for the year was paid before the fiscal year end.
He must be ready to discuss the performance and cash flows of the company with the bank representatives in only three days.
Required
1. Prepare a partial statement of comprehensive income for 2015 beginning with income from continuing operations.
2. Prepare a statement of cash flows using the indirect method.
3. How will the bank interpret the performance and cash flows of the company?
2
