FIN621 - Mid Term Past Papers (Including Spring 2010)

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FIN621 Mid Term Papers

Collected and Composed by Bilal Farooq ([email protected])

MIDTERM EXAMINATION Spring 2010

FIN621- Financial Statement Analysis

Question No: 1 ( Marks: 1 ) - Please choose one

How much duration does an accounting period usually have?

► Three months► Two years► One year ► Five years


Balance Sheet and Accounting Cycle are based on which of the following?

► Adjusting entries► Closing entries► Financial position► Accounting Equation


Which of the following is the next step after the preparation of trial balance?

► Adjusted trial balance► Financial statements ► Adjusting entries► Closing entries


Which of the following errors are identified during the preparation of trialbalance?

► Recording transactions in the wrong account► Duplication of a transaction in the accounting records► Posting only the debit portion of a particular journal entry ► Recording the wrong amount for a transaction to both the accounts






Which of the following is NOT an advantage of the Trial Balance?

► It ensures that the all accounts have identical debits and credits► It ensures that the balance of each ledger account has been computed correctly► The debit and the credit columns of trial balance have been added up correctly

► All the transactions have been recorded and nothing has been omitted

Question No: 6 ( Marks: 1 ) - Please choose oneCost of a building is Rs. 90,000 and its estimated useful life is 30 years. What willbe the depreciation expense of this building for one month by using straight linedepreciation method?

► Rs. 600► Rs. 250

► Rs. 300► Rs. 500

Question No: 7 ( Marks: 1 ) - Please choose oneRetained earnings change over time because of several factors. Which of thefollowing factors would explain an INCREASE in retained earnings?

► Net Income► Dividends payment► Investment by the stockholders ► Net Loss

Question No: 8 ( Marks: 1 ) - Please choose oneAt the end of the fiscal year, Accounts Receivable has a balance of Rs. 100,000 andAllowance for Doubtful Accounts has a balance of Rs. 7,000. The expected netrealizable value of the accounts receivable is:

► Rs. 7,000► Rs. 93,000

► Rs. 100,000► Rs. 107,000






Which of the following regarding retained earnings is FALSE?

► Retained earnings represent earnings not distributed to stockholders► Retained earnings is increased by net income and decreased by a net loss► Retained earnings are a component of stockholders’ equity on the balance sheet

► Retained earnings are an asset on the balance sheet

Question No: 10 ( Marks: 1 ) - Please choose oneWhich of the following would be considered a cash-flow item from a "financing"activity?

► A cash outflow to the government for taxes► A cash outflow to repurchase the firm's own common stock ► A cash outflow to lenders as interest

► A cash outflow to purchase bonds issued by another company

Question No: 11 ( Marks: 1 ) - Please choose one'Equity dividends' shown in the cash flow statement will comprise:

► All company dividends paid during the year► All dividends paid to voting shares in the year ► All dividends paid and proposed in the year relating to voting shares► All proposed dividends in the year relating to voting shares

Question No: 12 ( Marks: 1 ) - Please choose oneWhich of the following activities convert the income statement items from theaccrual basis of accounting to cash?

► Operating activities► Investing activities► Financing activities ► Non cash activities


The balance sheet reported a beginning balance of Rs. 20,000 in AccountsReceivable and an ending balance of Rs. 15,000. The income statement reportedSales Revenue of Rs. 200,000. Using this information, compute cash collected fromcustomers.






Which one of the following is NOT an inventory costing method?

► FIFO cost method► Weighted-average cost method

► Specific unit cost method ► LIFO cost method


In a perpetual inventory system, which of the following would be debited wheninventory is sold on account?

► Cost of goods sold ► Merchandise inventory

► Sales► Both Accounts receivable & cost of goods sold


Which of the following would affect the gross profit rate if sales remain constant?

► An increase in advertising expense► A decrease in depreciation expense► An increase in cost of goods sold ► A decrease in insurance expense


Which of the following statements best describes the nature of depreciation?

► Regular reduction of asset value to correspond to the decline in market valueas the asset ages ► A process of correlating the book value of an asset with its gradual decline inphysical efficiency► Allocation of the cost in a manner that will ensure that plant and equipment

items are not carried on the balance sheet at amounts in excess of net realizablevalue► Allocation of the cost of a plant asset to the periods in which benefits arereceived






Warner Corporation reported net income in excess of its net cash flow fromoperations. A possible explanation of this difference is:

► Depreciation expense► Non operating gains

► A decrease in income tax rates► A decrease in accounts receivable over the period

Question No: 23 ( Marks: 1 ) - Please choose oneWhich of the following transaction have an effect on expense account?

► Purchase of office equipment on credit► Payment on accounts payable ► Repayment of principle of bank loan

► Payment of wages

Question No: 24 ( Marks: 1 ) - Please choose oneThe supplies account has a balance of Rs. 1,500 at year end. The actual amount ofsupplies in hand at the end of period is Rs. 400. The necessary adjusting entry is:

► Debit Supplies on Hand Rs. 1100; Credit Supplies Expense Rs. 1100 ► Debit Supplies Expense Rs. 400; Credit Supplies on Hand Rs. 400► Debit Supplies Expense Rs. 1100; Credit Supplies on Hand Rs. 1100► Debit Supplies on Hand Rs. 400; Credit Supplies Expense Rs. 400

Question No: 25 ( Marks: 1 ) - Please choose oneThe balance of the Unearned Rent Account for Jones Co. as on Dec 31 is Rs.1, 200.If Jones Co. failed to record the adjusting entry for Rs.600 of rent earned duringDecember, the effect on the Balance Sheet and Income Statement for December willbe:

► Assets understated by Rs.600; net income overstated by Rs.600► Liabilities overstated by Rs.600; net income understated by Rs.600

► Liabilities understated by Rs.600; net income understated by Rs.600► Liabilities overstated by Rs.600; net income overstated by Rs.600


A business has purchased machinery on credit, what will be its journal entry?





► Cash - (Debit); Machinery - (Credit)► Machinery - (Debit) ; Accounts payable - (Credit) ► Accounts payable - (Debit) ; Machinery - (Credit)► Machinery - (Debit) ;Cash - (Credit)

Question No: 27 ( Marks: 1 ) - Please choose oneClosing entries result in net income being calculated in the income summaryaccount and then transferred to which of the following account?

► Revenue account ► Common Stock account► Dividends account► Owner's Capital account

Question No: 28 ( Marks: 1 ) - Please choose oneAssuming that net purchases cost Rs 250,000 during the year. The closinginventory was of Rs 4,000, and opening inventory was of Rs 30,000, how much wasthe cost of goods sold?

► Rs. 276, 000 ► Rs. 280,000► Rs. 254,000► Rs. 246,000

Question No: 29 ( Marks: 3 )Assume that net income was Rs. 200,000, depreciation expense was Rs. 10,000,accounts receivable increased by Rs. 15,000, and accounts payable increased by Rs.5,000. Calculate the cash flow from operating activities.

A. Net Cash Flow from Operating Activities 200000Rs.

Question No: 30 ( Marks: 3 )

Explain how the adoptions of FIFO method rather than LIFO will tend to raise or

lower the quality of a company’s earnings? Assume the continuance of theinflation.A. During Inflation, FIFO shows less expense on income statement and higherinventory valuation on balance sheet and values ending inventory at current cost,whereas LIFO shows higher expenses on income statement and lower inventoryvaluation on balance sheet.






Nestle Pakistan has two conflicting objectives. Management wants to report thehighest possible earnings to stockholders in the near future yet also wants tominimize the taxable income. Indicate the depreciation method that the companywill probably use in its financial statements and its federal income tax return.

Explain your answer with the reasons.

A. We will use fixed depreciation Method


Patterson Company reported net income for the current year of Rs. 666,000. Duringthe year the company’s accounts receivable increased by Rs. 50,000, inventorydecreased by Rs. 23,000, accounts payable decreased by Rs. 55,000, pre-paid

expenses increased by Rs. 35,000, and accrued expenses payable increased by Rs.14,000. Determine the amount of cash provided by or used for operating activitiesby the indirect method.

A. Net Cash Flow from Operating Activities 663000Rs.

MIDTERM EXAMINATION Fall 2009

FIN621- Financial Statement Analysis (Session - 4)

Question No: 1 ( Marks: 1 ) - Please choose one Which of the following is the acronym for GAAP?

► Generally Adopted Accounting Principles► Generally Accepted Auditing Principles► Generally Accepted Accounting Principles ► Generally Adapted American Principles

Question No: 2 ( Marks: 1 ) - Please choose one After recording the transactions in journal, posting is made to which of thefollowing?





► Trial Balance► Financial Statements► Ledger ► After-closing Trial Balance

Question No: 3 ( Marks: 1 ) - Please choose one Which one of the following is the second step in the accounting cycle?

► Recording entries in the journal ► Analyzing the business transaction► Posting the entries to the ledger► Making the adjusting entries


Which of the following is the basic function of the Trial Balance?

► To prove the equality of debits and credits ► To check the balance of all assets► To prepare the balance sheet► To check the validity of accounts

Question No: 5 ( Marks: 1 ) - Please choose one Which of the following refers to the term “posting”?

► The system of giving numbers to the accounts► Transferring the debits and credits to ledger ► Transferring the debits and credits to journal► The recording of transactions

Question No: 6 ( Marks: 1 ) - Please choose one Which of the following results are summarized by the income statement of acompany?

► Operating results

► Economic results► Auditing results► Marketing results






Which of the following is an example of an accrual?

► Equipment purchased for use in the business► Book-keeping fees collected but not yet earned

► Six months’ rent paid in advance ► Interest earned but not yet received


Prepaid Expense is a(n) _________ account and has a _________ normal balance.

► Revenue, credit► Liability, credit ► Asset, debit

► Expense, debit

Question No: 9 ( Marks: 1 ) - Please choose one Company A owns a building. Which of the following statements regardingdepreciation is FALSE from an accounting perspective?

► As the market value of the building increases, depreciation shouldincrease

► Depreciation is an estimated expense to be recorded each period during the

building’s life ► As depreciation is recorded, stockholders’ equity is reduced ► As depreciation is recorded, total assets are reduced

Question No: 10 ( Marks: 1 ) - Please choose one Retained earnings change over time because of several factors. Which of thefollowing factors would explain an INCREASE in retained earnings?

► Net Income► Dividends payment

► Investment by the stockholders ► Net Loss

Question No: 11 ( Marks: 1 ) - Please choose one The revenue account “Fees Income” is closed by which of the following entry?





► Cash – Debit; Fees Income - Credit► Fees Income – Debit; Income Summary - Credit► Capital – Debit; Fees Income - Credit► Income Summary – Debit; Fees Income - Credit

Question No: 12 ( Marks: 1 ) - Please choose one Which of the following regarding retained earnings is FALSE?

► Retained earnings represent earnings not distributed to stockholders► Retained earnings is increased by net income and decreased by a net loss ► Retained earnings are a component of stockholders’ equity on the balance

sheet► Retained earnings are an asset on the balance sheet

Question No: 13 ( Marks: 1 ) - Please choose one Current assets are those assets which management intends to convert into cash orconsume within:

► The operating cycle ► One year► The longer of operating cycle or one year► The shorter of operating cycle or one year

Question No: 14 ( Marks: 1 ) - Please choose one Decision makers compare net income to net cash from operating activities. Tomake these amounts more comparable, the same accounts are included in each.The following accounts are used to compute both net income and net cash fromoperating activities EXCEPT:

► Interest expense► Dividend revenue ► Interest revenue► Dividends declared and paid

Question No: 15 ( Marks: 1 ) - Please choose one If the indirect approach for the statement of cash flows is used, which of thefollowing items should be subtracted from accrual basis net income to derive cashflow from operating activities?





► Losses on the sale of long-term investments ► Depreciation expense► Amortization expense► Gains on the sale of long-term investments

Question No: 16 ( Marks: 1 ) - Please choose one The cash flow from financing activities shows:

► The cash outflow due to loan interest payments being made► The change in the level of bank balances in the period► The cash flow from share and loan issues and repayments► Cash dividends paid to shareholders


Which of the following transaction should be classified as a financing activity?

► Purchase of equipment► Purchase of treasury stock ► Sale of trademarks► Income tax refund

Question No: 18 ( Marks: 1 ) - Please choose one Cash flow relating to investing activities does NOT present the cash effects ofwhich of the following?

► Plant assets► Intangible assets ► Investments► Debt financing

Question No: 19 ( Marks: 1 ) - Please choose one The indirect method shows the reconciliation from net income to operating cashflows. Select the adjustment that is added during the reconciliation.

► A decrease in accrued liabilities

► A decrease in Salaries Payable► Payment of long-term debt► An increase in Accounts Payable





Question No: 20 ( Marks: 1 ) - Please choose one The indirect method shows the reconciliation from net income to operating cashflows. Select the adjustment that is subtracted during the reconciliation.

► Non-cash revenues (revenues earned but payment not yet received)reported on the income statement

► A decrease in Accounts Receivable or another non-cash current asset► Revenues earned and received in cash.► Non-cash expenses (expenses incurred but not paid) reported on the income

statement-one example is amortization expense.

Question No: 21 ( Marks: 1 ) - Please choose one Investing activities include all of the following EXCEPT:

► Payment of debt► Collection of loans► Making of loans► Sale of available for sale and held to maturity securities

Question No: 22 ( Marks: 1 ) - Please choose one If sales on an accrual basis are Rs. 500,000 and accounts receivables increased byRs. 30,000, the cash received from the customers would be:

► Rs. 500,000► Rs. 470,000► Rs. 530,000 ► Can not be found from the given information

Question No: 23 ( Marks: 1 ) - Please choose one Which of the following would NOT be the cash inflow for the business?

► Sale of land for cash

► Issuance of long term bonds► The sale of common stock► Retirement of long term debt

Question No: 24 ( Marks: 1 ) - Please choose one Which one of the following is NOT an inventory costing method?





► FIFO cost method► Weighted-average cost method► Specific unit cost method ► LIFO cost method

Question No: 25 ( Marks: 1 ) - Please choose one When merchandise is purchased in a periodic inventory system, its cost is debitedto ________ account.

► Inventory► Inventory expense► Purchases► Cost of goods sold

Question No: 26 ( Marks: 1 ) - Please choose one Office supplies are purchased on account. The company uses a perpetualinventory system. What is the correct journal entry for this purchase of officesupplies?

► Debit - Purchases; Credit - Cash► Debit - Merchandise Inventory; Credit - Cost of Goods Sold► Debit - Office Supplies; Credit - Accounts Payable ► Debit - Merchandise Inventory; Credit - Accounts Payable

Question No: 27 ( Marks: 1 ) - Please choose one An inventory error affects ___________ accounting periods.

► Only current► Two ► Three► Four

Question No: 28 ( Marks: 1 ) - Please choose one Equipment costing Rs. 3,000 with accumulated depreciation of Rs. 2,125 isexchanged for another asset with a fair value of Rs. 625. The exchange hascommercial substance. How much is the gain or loss on this transaction?

► A gain of Rs. 250 should be recognized► A loss of Rs. 250 should be recognized





► A loss of Rs. 500 should be recognized► No gain or loss should be recognized

Question No: 29 ( Marks: 1 ) - Please choose one Which of the following asset does NOT have a depreciation expense?

► Furniture► Building► Plant & equipment► Land

Question No: 30 ( Marks: 1 ) - Please choose one Which of the following is NOT an example of accelerated depreciation method?

► Straight-line method ► Sum-of-the-years digit method► Double-declining balance method► Modified Accelerated Cost Recovery System

Question No: 31 ( Marks: 1 ) - Please choose one Accelerated depreciation method is mostly used for ____________.

► Financial statements ► Assets valuation► Inventory valuation► Income tax returns

Question No: 32 ( Marks: 1 ) - Please choose one Which of the following is NOT an example of deferred item?

► Depreciation ► Accounts payable

► Unearned revenue► Prepaid insurance


Assets which have NO market value are called:





► Wasting assets ► Fictitious assets► Quick assets► Tangible assets

Question No: 34 ( Marks: 1 ) - Please choose one Which of the following accounts will be debited, when increased?

► Liabilities and expenses► Assets and equity ► Assets and expenses ► Equity and revenues


Which of the following provides the basis for the trial balance?

► Income statement► Statement of cash flow► Ledger ► Adjusting entries

Question No: 36 ( Marks: 1 ) - Please choose one The income statement of ABL shows other operating expenses of Rs. 30 million;prepaid insurance expense increased by Rs. 4 million; and accrued utilities payabledecreased by Rs. 7 million. How much did the company pay in other operatingexpenses?

► Rs. 41 million► Rs. 33 million► Rs. 27 million ► Rs. 19 million


From the given information, calculate the Cost of Goods Sold using the weighted-average cost method:Beginning inventory 10 units @ Rs. 10 eachOn January 20, purchased 10 units @ Rs. 20 eachOn January 30, purchased 5 units @ Rs. 30 each15 of the 25 units are sold





► Rs. 200► Rs. 270 ► Rs. 300► Rs. 350

Question No: 38 ( Marks: 1 ) - Please choose one Which of the following balances does the Contra-Asset account show typically?

► Credit ► Debit► Negative► Positive


Using the following information calculate Net Income: Sales Revenue Rs.200, 000,Loss on Sale of Equipment Rs.10, 000, Amortization Expense Rs.20, 000 and Cost ofGoods Sold Rs.50, 000.

► Rs. 170,000 ► Rs. 120,000► Rs. 130,000► Rs. 180,000

Question No: 40 ( Marks: 1 ) - Please choose one Which of the following question is NOT addressed by cash flow statement?

► How much cash was generated by the company’s operations? ► Why is such a profitable company able to pay only small dividends?► How much was spent for the new plants and equipment?► How profitable the company’s current assets are?

Question No: 41 ( Marks: 5 ) On 15, 2001, ABC Company sold 1,000 printers to another company. Immediately

prior to this sale, the perpetual inventory records of the company for the printersincluded the following cost layers.

Purchase date Quantity Unit Cost Total Cost

Dec. 12, 2000 600 Rs. 9.25 Rs. 5,550

Jan. 9, 2001 900 Rs. 9.50 8,550

Total on hand 1,500 Rs. 14,100





Instructions: Prepare a separate general entry to record the cost of printers, assuming that thecompany uses the following methods.

Answer: a. FIFO (2.5) DR CR

Rs. Rs.Cost of Printers Sold A/C 9350

Printers Inventory A/C 9350

b. LIFO (2.5) DR CR Rs. Rs.

Cost of Printers Sold A/C 9475

Printers Inventory A/C 9475

Question No: 42 (Marks: 5) Hill Company adjusts its accounts at the end of each month. Prepare the adjustingentries required at December 31 based on the following information.

a. A bank loan had been obtained on December 1. Accrued interest onthe loan at December 31 amounts to Rs. 1,050. No interest expense has yetbeen recorded.

Answer

DR CR

b. Depreciation of the office equipment is based on an estimated life offive years. The balance in the office equipment account is Rs. 24,000; nochange has occurred in the account during the year.

c. Interest revenue earned on US government bonds during Decemberamounts to Rs. 750. This accrued interest revenue has not been recorded orreceived as of December 31.

General Entry Rs Rs

Interest Expense A/C 1050Interest Payable A/C 1050

General Entry Rs Rs

Depreciation of Office Equip.A/C

General Entry Rs Rs





d. On December 31, an agreement was signed to lease a truck for 12

months beginning January 1 at a rate of 35 cents per mile. Usage is expectedto be 2,000 miles per month, and the contract specifies a minimum paymentequivalent to 18,000 miles a year.

e. The company’s policy is to pay all employees up-to-date each Friday.

Since December 31 fell on Monday, there was a liability to employees atDecember 31 for one day’s pay amounting to Rs. 2,800.

MIDTERM EXAMINATION

Fall 2009 FIN621- Financial Statement Analysis

Question No: 1 ( Marks: 1 ) - Please choose one How much duration does an accounting period usually have?

► Three months► Two years

► One year ► Five years

Question No: 2 ( Marks: 1 ) - Please choose one Which of the following statement shows the effects of cash inflows and outflows?

Interest Receivable on BondsA/C

750

Interest Income on Bonds A/C 750

General Entry Rs Rs

General Entry Rs Rs

Salary Expense A/C 2800

Salary Payable A/C 2800





► Balance Sheet► Statement of Owner’s Equity ► Income Statement► Statement of Cash Flows

Question No: 3 ( Marks: 1 ) - Please choose one To determine the balance of a particular account, one should refer to which of thefollowing?

► Ledger ► Source document► Chart of accounts► Journal

Question No: 4 ( Marks: 1 ) - Please choose one A business has purchased a building on credit, how it would be recorded in the

journal?

► Building - Credit; Accounts payable - Debit► Building - Debit; Notes payable -Credit ► Building - Debit; Owner’s equity- Credit► Building - Debit; Accounts payable - Credit

Question No: 5 ( Marks: 1 ) - Please choose one An entry that affects more than one accounts is knows as _____________.

► Journal entry ► Compound entry ► Adjusting entry ► Reversing entry

Question No: 6 ( Marks: 1 ) - Please choose one Which of the following is NOT true about the net income?

► It is a calculated figure and represents actual cash ► It can be distributed among holders of common stock as a dividend► It can be held by the firm as retained earnings► It is obtained by subtracting expenses from the revenues





Question No: 7 ( Marks: 1 ) - Please choose one What would be the adjusting entry to record depreciation if the estimated amountof depreciation on equipment for a period is Rs. 2,000?

► Depreciation expense - Debit; Equipment - Credit► Depreciation expense - Debit; Accumulated depreciation - Credit

► Equipment - Debit; Depreciation expense - Credit► Accumulated depreciation - Debit; Depreciation expense - Credit

Question No: 8 ( Marks: 1 ) - Please choose one The trial balance shows Supplies of Rs.1,350 and Supplies Expense of Rs.0. IfRs.600 of supplies are on hand at the end of the period, the adjusting entry wouldbe:

► Supplies, Rs. 600 - Debit; Supplies Expense, Rs. 600 - Credit

► Supplies, Rs. 750 - Debit; Supplies Expense, Rs. 750 - Credit► Supplies Expense, Rs. 750 - Debit; Supplies, Rs. 750 - Credit► Supplies Expense, Rs. 600 Debit; Supplies, Rs. 600 - Credit

Question No: 9 ( Marks: 1 ) - Please choose one Which of the following accounts would NOT be included in a post-closing trialbalance?

► Cash

► Accumulated depreciation ► Owner’s equity ► Fees earned

Question No: 10 ( Marks: 1 ) - Please choose one After the closing entries are posted to the ledger, each expense account will have?

► A debit balance► A negative balance► A credit balance

► A zero balance

Question No: 11 ( Marks: 1 ) - Please choose one Current assets are those assets which management intends to convert into cash orconsume within:





► The operating cycle► One year ► The longer of operating cycle or one year ► The shorter of operating cycle or one year

Question No: 12 ( Marks: 1 ) - Please choose one Which of the following is NOT the most common example of cash equivalents?

► Savings deposits► Certificates of Deposit (CDs)► Stocks of other companies ► Money market mutual funds


In preparing the statement of cash flows, how should non-cashinvesting/financing activities be reported?

► In the financing activities section of the statement of cash flows► In a separate schedule accompanying the statement of cash flows ► In the investing activities section of the statement of cash flows► Should not to be reported


Which of the following items are NOT added back to the net income figure(which is found on the Income Statement) to arrive at cash flows from operations?

► Depreciation ► Deferred tax ► Amortization ► Investments

Question No: 15 ( Marks: 1 ) - Please choose one Which of the following activities convert the income statement items from the

accrual basis of accounting to cash?

► Operating activities ► Investing activities ► Financing activities► Non cash activities





Question No: 16 ( Marks: 1 ) - Please choose one Which one of the following items is specifically included in the body of astatement of cash flows?

► Operating and non-operating cash flow information

► Conversion of debt to equity ► Acquiring an asset through a capital leases► Purchasing a building by giving a mortgage to the seller

Question No: 17 ( Marks: 1 ) - Please choose one ABC Company has a cost of goods sold of Rs. 500,000. During the year theinventory increased by Rs. 10,000 and accounts payable increased by Rs. 15,000.The interest expense was Rs. 15,000 for the year and dividend of Rs. 11,000 werepaid during the year. What would be the cash payments for the purchase of

the merchandise.

► Rs. 505,000 ► Rs. 516,000 ► Rs. 490,000 ► Rs. 495,000

Question No: 18 ( Marks: 1 ) - Please choose one The cash flow from investing activities shows the cash effects of which of the

following?

► Income statement items ► Long term assets items ► Long term liability & stockholder’s equity ► Long term liability and long term assets

Question No: 19 ( Marks: 1 ) - Please choose one Which of the following must be included in a company's summary of significantaccounting policies in the notes to the financial statements?

► Description of current year equity transactions ► Summary of long-term debt outstanding► Schedule of fixed assets ► Revenue recognition policies





Question No: 20 ( Marks: 1 ) - Please choose one Gross profit is:

► Excess of sales over cost of goods sold ► Sales less Purchases ► Cost of goods sold + Opening stock

► Net profit less expenses of the period

Question No: 21 ( Marks: 1 ) - Please choose one An inventory error affects ___________ accounting periods.

► Only current► Two ► Three ► Four

Question No: 22 ( Marks: 1 ) - Please choose one From the given data, calculate Cost of Goods Sold using the FIFO costing method:Beginning inventory is 10 units @ Rs. 10 each.On January 20, purchased 10 units @ Rs. 20 eachOn January 30, purchased 5 units @ Rs. 30 each15 of the 25 units are sold.

► Rs. 200 ► Rs. 150► Rs. 350► Rs. 450

Question No: 23 ( Marks: 1 ) - Please choose one Under which cost flow assumption, the ending inventory is composed of the mostrecently purchased merchandise?

► FIFO ► LIFO

► Average cost ► Specific identification

Question No: 24 ( Marks: 1 ) - Please choose one If sales revenues are Rs. 400,000, cost of goods sold is Rs. 310,000, and operatingexpenses are Rs. 60,000, what is the gross profit?





► Rs. 30,000► Rs. 90,000 ► Rs. 340,000► Rs. 400,000

Question No: 25 ( Marks: 1 ) - Please choose one Which cost flow assumption most closely matches the actual physical flow ofinventory in most retailing businesses?

► FIFO► LIFO► Average cost ► Specific identification

Question No: 26 ( Marks: 1 ) - Please choose one The sale of a depreciable asset resulting in a loss indicates that the proceeds fromthe sale were:

► Less than current market value

► Greater than cost► Greater than book value► Less than book value

Question No: 27 ( Marks: 1 ) - Please choose one The purpose of recording depreciation on productive assets is to:

► Reflect the decline in the market value of the assets each period► Reduce income when the company has an exceptionally profitable year► Be in conformity with the revenue recognition principle► Allocate the original cost of a productive asset to expense over its useful

life

Question No: 28 ( Marks: 1 ) - Please choose one Which depreciation method allocates an equal portion of depreciation expense toeach period of asset’s useful life?

► Straight-line method ► Double-declining balance method► Sum-of-the-year digit method





► Accelerated depreciation method

Question No: 29 ( Marks: 1 ) - Please choose one Which of the following is NOT an example of accelerated depreciation method?

► Straight-line method ► Sum-of-the-years digit method► Double-declining balance method► Modified Accelerated Cost Recovery System

Question No: 30 ( Marks: 1 ) - Please choose one The Drawing account is closed by which of the following entry?

► Capital – Debit; Drawing - Credit

► Drawing – Debit; Capital - Credit ► Income Summary – Debit; Drawing - Crediting► Drawing – Debit; Income Summary – Crediting

Question No: 31 ( Marks: 1 ) - Please choose one Which of the following account would be classified as a current asset on thebalance sheet?

► Accumulated depreciation► Accounts receivable

► Office equipment► Land

Question No: 32 ( Marks: 1 ) - Please choose one An adjusting entry would NOT be required for which of the following account?

► Salaries ► Past due expense► Income tax expense

► Accounts receivable

Question No: 33 ( Marks: 1 ) - Please choose one Which of the following accounts will be debited, when increased?

► Liabilities and expenses





► Assets and equity► Assets and expenses ► Equity and revenues


Accounting Cycle is a series of activities that begins with ___________ and endswith ___________.

► Closing of books, transactions► Transaction, After closing Trial Balance► Journal, ledger account► Transactions, financial statements


The income statement of ABL shows other operating expenses of Rs. 30 million;prepaid insurance expense increased by Rs. 4 million; and accrued utilities payabledecreased by Rs. 7 million. How much did the company pay in other operatingexpenses?

► Rs. 41 million► Rs. 33 million ► Rs. 27 million► Rs. 19 million

Question No: 36 ( Marks: 1 ) - Please choose one The statement of cash flows does NOT report the:

► Sources of cash in the current period► Amount of checks outstanding at the end of the period ► Uses of cash in the current period► Change in the cash balance for the current period


Which of the following is NOT normally required for revenue to be recognizedaccording to the revenue principle for accrual basis accounting?

► The price is fixed or determinable► Services have been performed► Cash that has already been collected► Evidence of an arrangement for customer payment exists





Question No: 38 ( Marks: 1 ) - Please choose one Which of the following balances does the Contra-Asset account show typically?

► Credit ► Debit

► Negative► Positive

Question No: 39 ( Marks: 1 ) - Please choose one Which one of the following would lead to the decrease in the owner’s equity?

► Purchasing a piece of land► Paying dividends to shareholders ► Purchasing equipment on account► Paying back the principal of a loan

Question No: 40 ( Marks: 1 ) - Please choose one The users of a statement of cash flows are mostly interested in:

► Net cash flow from operating activities ► Net cash flow from investing activities► Net cash flow from financing activities► Net cash flow from non-cash transactions

Question No: 41 ( Marks: 5 ) Classify the following activities as cash flow from operating, investing andfinancing activities.

· Payments for repurchase of company shares· Collections on loan principal and sales of other firms' debt instruments· Tax payments· Expenditure for purchase of other firms' equity instruments· Payments to suppliers for goods and services

Answer: Payments for repurchase of company shares: Financing activities

Collections on loan principal and sales of other firms' debtinstruments: Investing activities.

Tax payments: Operating activities




Expenditure for purchase of other firms' equity instruments: Investing activities

Payments to suppliers for goods and services: Operating activities

Question No: 42 ( Marks: 5 ) Listed below in random order are the items to be included in the balance sheet ofthe Mystery Mountain Lodge at December 31, 2001:

Equipment Rs. 29,200 Buildings Rs. 450,000

Land 425,000 Owner’s capital ?

Accounts payable 54,800 Cash 21,400

Accounts receivable 10,600 Furnishings 58,700

Salaries payable 33,500 Snowmobiles 15,400

Interest payable 12,000 Notes payable 620,000Requirement: Prepare a Balance Sheet at December 31, 2001.

Mystery Mountain LodgeBalance Sheet as on December 31, 2001

Particulars Amount (Rs.)

Current Assets: Cash 21,400Accounts receivable 10,600

Snowmobiles 15,400Fixed Assets: Equipment 29,200Furnishings 58,700Buildings 450,000Land 425,000

1,010,300

Liabilities: Interest payable 12,000Salaries Payable 33,500

Accounts Payable 54,800Notes Payable 620,000Capital: Owner’s capital 290,000

1,010,300

FIN621 - Mid Term Past Papers (Including Spring 2010)

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