Paper 1

MIDTERM EXAMINATION Spring 2009 FIN621- Financial Statement Analysis (Session - 1) 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 A business has purchased machinery on credit, what will be its effect on cash? Increase in cash Decrease in cash No effect on cash Cannot be determined from the given information Question No: 3 ( Marks: 1 ) - Please choose one Which of the following steps of accounting cycle keep on occurring throughout the period? Journalizing and posting the entries Making adjusting entries for the relevent accounts Analyzing and journalizing transactions as they occur Preparing financial statements Question No: 4 ( Marks: 1 ) - Please choose one Balance Sheet and Accounting Cycle are based on which of the following? Adjusting entries Closing entries Financial position Accounting Equation Question No: 5 ( Marks: 1 ) - Please choose one Transactions are entered in the ledger account after recording in which of the following? Trial Balance Balance Sheet Journal Financial Statements Question No: 6 ( Marks: 1 ) - Please choose one The process of recording the economic effects of business transactions in a book of original entry is knows as which of the following? Double entry system Debit Journalizing Posting Question No: 7 ( 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; Owners equity- Credit Building - Debit; Accounts payable - Credit Question No: 8 ( Marks: 1 ) - Please choose one 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 Question No: 9 ( Marks: 1 ) - Please choose one Which of the following is TRUE regarding the entry to recognize the depreciation expenses? It is an application of matching principle It is a closing entry Usually includes an offsetting credit either to cash or accounts payable It is done only at the end of financial year Question No: 10 ( Marks: 1 ) - Please choose one Which of the following expenses would normally be classified as Other or Nonoperating Expense on a Multiple-step Income Statement? Depreciation expense Interest expense Insurance expense Salaries expense Question No: 11 ( Marks: 1 ) - Please choose one Which one of the following would lead to the decrease in the owners equity? Purchasing a piece of land Paying dividends to shareholders Purchasing equipment on account Paying back the principal of a loan Question No: 12 ( Marks: 1 ) - Please choose one Which one the following is the purpose of closing entries? To transfer the results of operations to owner's equity To reduce the Capital account balance to zero To adjust the ledger account balances for providing complete and accurate figures To close all accounts in order to make the ledger ready for next accounting period Question No: 13 ( Marks: 1 ) - Please choose one Which of the following is the largest single expense of most merchandising firms? Cost of goods sold Rent Expense Amortization Expense Salaries Expense http://wps.prenhall.com/ca_ph_horngren_accounting_7/59/15164/3882016.cw/conten t/index.html Question No: 14 ( Marks: 1 ) - Please choose one The components of stockholders' equity on a balance sheet for a corporation are: Liabilities and Capital Stock Assets and Retained Earnings Assets and Liabilities Capital Stock and Retained Earnings Question No: 15 ( Marks: 1 ) - Please choose one When preparing a statement of cash flows under the indirect method, supplemental disclosure should be made for which of the following? Net cash consumed by operating activities Cash dividend distributions Cash paid for interest and taxes Cash paid for wages http://www.principlesofaccounting.com/questions%20%20%20multiple%20choice/chapter%2016%20-%20multiple%20choice.htm Question No: 16 ( 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: 17 ( Marks: 1 ) - Please choose one The balance sheet reported a beginning balance of Rs. 20,000 in Accounts Receivable and an ending balance of Rs. 15,000. The income statement reported Sales Revenue of Rs. 200,000. Using this information, compute cash collected from customers. Rs. 215,000 Rs. 195,000 Rs. 200,000 Rs. 205,000 Question No: 18 ( Marks: 1 ) - Please choose one Which of the following is NOT true about the specific identification method? It requires a very detailed physical count This method allows management to easily manipulate ending inventory cost This method is very hard to use on interchangeable goods This results in an overstated inventory account during the period of inflation Question No: 19 ( Marks: 1 ) - Please choose one

In a period of rising prices, all of the following statements regarding FIFO are true EXCEPT: The units purchased earlier in the accounting period are allocated to cost of goods sold Reported net income is generally higher The lower-priced unit costs are allocated to ending inventory Assumptions are used to allocate inventory costs between cost of goods sold and ending inventory Question No: 20 ( Marks: 1 ) - Please choose one What will be the gross margin if sales price of merchandise sold to customers is Rs. 10,000, beginning inventory is Rs. 1,000, inventory purchases are Rs. 4,000, and cost of inventory sold is Rs. 3,000? Rs. 2,000 Rs. 7,000 Rs. 5,000 Rs. 3000 Question No: 21 ( Marks: 1 ) - Please choose one In which of the following inventory pricing procedure, the oldest costs incurred rarely have an effect on the ending inventory valuation? FIFO LIFO Retail Weighted-average http://www.principlesofaccounting.com/questions%20%20%20multiple%20choice/chapter%208%20-%20multiple%20choice.htm Question No: 22 ( 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: 23 ( Marks: 1 ) - Please choose one Which of the following is an example of the contra-asset account? Depreciation expense Accumulated depreciation Unearned revenue Unrecorded revenue Question No: 24 ( 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: 25 ( Marks: 1 ) - Please choose one Which of the following is NOT an example of deferred item? Depreciation Accounts payable Unearned revenue Prepaid insurance
Some deferred items for which adjusting entries would be made include:

Prepaid insurance Prepaid rent Office supplies Depreciation Unearned revenue

Question No: 26 ( Marks: 1 ) - Please choose one Which of the following account will be credited, if land is purchased on credit? Cash Account Receivables Accounts Payable Notes Payable Question No: 27 ( Marks: 1 ) - Please choose one Which of the following provides the basis for the trial balance? Income statement Statement of cash flow Ledger Adjusting entries Question No: 28 ( Marks: 1 ) - Please choose one Which of the following would represent an increase in Owner's Equity? Increase in net income Increase in assets

Increase in accounts receivable Increase in cash Question No: 29 ( Marks: 1 ) - Please choose one If the supplies in hand at the end of January are totaled Rs. 200 and the supplies on hand account before adjustment is Rs. 450, what would be the adjustment at monthend? Reduce supplies on hand by Rs. 200; increase supplies expense by Rs. 200 Increase supplies on hand by Rs. 200; reduce supplies expense by Rs. 200 Increase supplies on hand by Rs. 250; reduce supplies expense by Rs. 250 Reduce supplies on hand by Rs. 250; increase supplies expense by Rs. 250 Question No: 30 ( Marks: 1 ) - Please choose one Which of the following account would NOT be closed to the income summary account at the end of a period? Rent expense Revenue earned Wages expense Accumulated depreciation

Paper 2
Mid term paper fin621
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 Balance Sheet and Accounting Cycle are based on which of the following? Adjusting entries Closing entries Financial position Accounting Equation Question No: 3 ( Marks: 1 ) - Please choose one Which of the following is the next step after the preparation of trial balance? Adjusted trial balance Financial statements Adjusting entries Closing entries Question No: 4 ( Marks: 1 ) - Please choose one Which of the following errors are identified during the preparation of trial balance? 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 Ref: Posting only the debit portion of a particular entry will cause debits to exceed credits -an error that will be revealed by a trial balance. The other errors do not cause out-of-balance conditions. Question No: 5 ( Marks: 1 ) - Please choose one 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 Reference Question No: 6 ( Marks: 1 ) - Please choose one Cost of a building is Rs. 90,000 and its estimated useful life is 30 years. What will be the depreciation expense of this building for one month by using straight line depreciation method? Rs. 600 Rs. 250 Rs. 300 Rs. 500 Calculation: 90000/30*1/12 = 250 Question No: 7 ( Marks: 1 ) - Please choose one Retained earnings change over time because of several factors. Which of the following 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 one At the end of the fiscal year, Accounts Receivable has a balance of Rs. 100,000 and Allowance for Doubtful Accounts has a balance of Rs. 7,000. The expected net realizable value of the accounts receivable is: Rs. 7,000 Rs. 93,000 Rs. 100,000 Rs. 107,000 Calculations: Opening accounts receivable - Allowances for doubtful debts 100,000 - 7000 = 93,000 Question No: 9 ( 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: 10 ( Marks: 1 ) - Please choose one Which 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 Reference 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 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: 13 ( Marks: 1 ) - Please choose one The balance sheet reported a beginning balance of Rs. 20,000 in Accounts Receivable and an ending balance of Rs. 15,000. The income statement reported Sales Revenue of Rs. 200,000. Using this information, compute cash collected from customers. Rs. 205,000 Rs. 215,000 Rs. 195,000 Rs. 200,000 Question No: 14 ( Marks: 1 ) - Please choose one Which of the following would be considered as cash flow from investing activities? Proceeds from issuance of long-term debt Expenditure for sale of plant and equipment Payments to suppliers Receipts from sale of goods or services Question No: 15 ( Marks: 1 ) - Please choose one When cash flow statement is prepared by using indirect method, which part of it is different from the direct method? Cash flow from investing activities Cash flow from financing activities Cash flow from operating activities All parts are same in both methods Question No: 16 ( Marks: 1 ) - Please choose one The cash flow from financing activities shows the cash effects of which of the following? Income statement items Long term assets items Long term liability & stockholders equity Long term liability and long term assets Reference Question No: 17 ( Marks: 1 ) - Please choose one Which of the following must be included in a company's summary of significant accounting 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 Reference Question No: 18 ( 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: 19 ( Marks: 1 ) - Please choose one In a perpetual inventory system, which of the following would be debited when inventory is sold on account? Cost of goods sold Merchandise inventory Sales Both Accounts receivable & cost of goods sold On May 6, 2010: Sold 200 units of merchandise at $50 per unit on credit. Under Perpetual inventory system 5/1/2010 Accounts Receivable Debit 10,000 Credit

Sales

10,000

5/1/2010 Debit Cost of goods sold 6,000 Credit

Merchandise inventory

6,000

Under perpetual inventory system, changes in merchandise inventory account are recorded after each transaction. Question No: 20 ( Marks: 1 ) - Please choose one 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 Question No: 21 ( Marks: 1 ) - Please choose one Which of the following statements best describes the nature of depreciation? Regular reduction of asset value to correspond to the decline in market value as the asset ages A process of correlating the book value of an asset with its gradual decline in physical 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 realizable value Allocation of the cost of a plant asset to the periods in which benefits are received Question No: 22 ( Marks: 1 ) - Please choose one Warner Corporation reported net income in excess of its net cash flow from operations. 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 Reference Question No: 23 ( Marks: 1 ) - Please choose one Which 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 one The supplies account has a balance of Rs. 1,500 at year end. The actual amount of supplies 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 one The 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 during December, the effect on the Balance Sheet and Income Statement for December will be: 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 Question No: 26 ( Marks: 1 ) - Please choose one 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 one Closing entries result in net income being calculated in the income summary account and then transferred to which of the following account? Revenue account Common Stock account Dividends account Owner's Capital account Reference Question No: 28 ( Marks: 1 ) - Please choose one Assuming that net purchases cost Rs 250,000 during the year. The closing inventory was of Rs 4,000, and opening inventory was of Rs 30,000, how much was the cost of goods sold? Rs. 276, 000 Rs. 280,000 Rs. 254,000 Rs. 246,000 Calculation: Opening inventory = 30,000 Add: Purchases = 250,000 Less: Closing inventory = 4,000 Cost of goods sold = 276,000

Paper 3
MIDTERM EXAMINATION Spring 2009 FIN621- Financial Statement Analysis (Session - 1) Question No: 1 ( Marks: 1 ) - Please choose one Which of the following is NOT a purpose of the accounting? To identify the financial transactions To organize the financial data into useful information To give information about the profitability of the company To measure the value of these information in terms of money Question No: 2 ( Marks: 1 ) - Please choose one

After recording the transactions in journal, posting is made to which of the following? Trial Balance Financial Statements Ledger After-closing Trial Balance Question No: 3 ( Marks: 1 ) - Please choose one Balance Sheet and Accounting Cycle are based on which of the following? Adjusting entries Closing entries Financial position Accounting Equation 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; Owners equity- Credit Building - Debit; Accounts payable - Credit Question No: 5 ( Marks: 1 ) - Please choose one Which of the following is an advantage of the Trial Balance? All transactions have been correctly analyzed and recorded in proper accounts All the transactions have been recorded and nothing has been omitted Preparation of final accounts is not possible without preparing trial balance first Each and every type of error is revealed by the Trial Balance Question No: 6 ( Marks: 1 ) - Please choose one Which of the following is NOT normally required for revenue to be recognized according 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: 7 ( Marks: 1 ) - Please choose one If the prepaid rent account before adjustment at the end of the month has a debit balance of Rs. 1,600, representing a payment made on the first day of the month, and if the monthly rent was Rs.800, the amount of prepaid rent that would appear on the balance sheet at the end of the month, after adjustment, is: Rs. 1,600 Rs. 400 Rs. 800 Rs. 2,400 Question No: 8 ( Marks: 1 ) - Please choose one The appropriate journal entry to record equipment depreciation expense would consist of a debit to Depreciation Expense and a credit to which of the following accounts? Equipment Accumulated Depreciation: Equipment Retained Earnings Cash Question No: 9 ( Marks: 1 ) - Please choose one Which one of the following type of entry is made to recognize depreciation expense? A reversing A closing entry An adjusting entry None of the given options Question No: 10 ( Marks: 1 ) - Please choose one Which of the following expenses would normally be classified as Other or Non-operating Expense on a Multiple-step Income Statement? Depreciation expense Salaries expense Interest expense Insurance expense Question No: 11 ( 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: 12 ( Marks: 1 ) - Please choose one The balance sheet allows investors to assess all of the following EXCEPT: The efficiency of the companys assets The liquidity and financial flexibility of the company The capital structure of the company The net realizable value of the company

Question No: 13

( Marks: 1 ) - Please choose one

If an asset is impaired, and future cash flows will not allow recovery of the recorded amount, then the firm should reduce the asset in the accounts. In addition to: The asset should be discarded Depreciation should cease A loss should be recognized An intangible asset should be recorded http://www.principlesofaccounting.com/questions%20%20%20multiple%20choice/chapter%2011%20-%20multiple%20choice.htm Question No: 14 ( Marks: 1 ) - Please choose one Decision makers compare net income to net cash from operating activities. To make these amounts more comparable, the same accounts are included in each. The following accounts are used to compute both net income and net cash from operating activities EXCEPT: Interest expense Dividend revenue Interest revenue Dividends declared and paid Question No: 15 ( 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 Reference Examples of cash or cash equivalents are treasury bills, money market funds, certificates of deposit, savings deposits, money market deposit accounts, etc. Question No: 16 ( Marks: 1 ) - Please choose one The income statement of ABL shows the operating expenses including depreciation of Rs. 300,000; the depreciation expense was of Rs. 40,000; the short term prepayments increase from Rs. 5000 to Rs. 8000; accrued liabilities decreased from Rs. 10,000 to Rs. 4000. Calculate the cash payments for the expenses. Rs. 331,000 Rs. 269,000 Rs. 251,000 Rs. 263,000 Question No: 17 ( Marks: 1 ) - Please choose one Which one of the following items is not generally used in preparing a statement of cash flows? Adjusted trial balance Comparative balance sheets Current income statement Additional information Question No: 18 ( Marks: 1 ) - Please choose one Which of the following section of cash flow statement shows the cash effects of those transactions reported in the income statement? Cash flow from investing activities Cash flow from financing activities Cash flow from operating activities All parts show effects of different transactions of income statement Question No: 19 ( Marks: 1 ) - Please choose one Notes to financial statements are beneficial in meeting the disclosure requirements of financial reporting. The note should not be used to: Describe principles and methods peculiar to the industry Correct an improper presentation in the financial statements Describe significant accounting policies Describe depreciation methods employed by the company Question No: 20 ( Marks: 1 ) - Please choose one Which of the following is CORRECT concerning financial statement disclosure of accounting policies? Disclosures should be limited to principles and methods peculiar to the industry in which the company operates Disclosure of accounting policies is an integral part of the financial statements The format and location of accounting policy disclosures are fixed by GAAP Disclosures should duplicate details disclosed elsewhere in the financial statements Question No: 21 ( Marks: 1 ) - Please choose one All of the following regarding perpetual inventory system are true EXCEPT It offers better inventory control than the periodic inventory system A physical inventory count is not necessary At the time of sale, the inventory account is credited At the time of sale, cost of goods sold is debited Question No: 22 ( Marks: 1 ) - Please choose one Under the periodic inventory system, which of the following is a correct closing entry? Debit - Income Summary; Credit - Sales Credit - Income Summary; Debit - Purchase Returns & Allowances Debit - Income Summary; Credit Merchandise Inventory Debit Purchases; Credit - Income Summary Question No: 23 ( Marks: 1 ) - Please choose one If we take goods for own use we should: Debit - Drawings Account: Credit - Purchases Account

Debit - Drawings Account: Credit - Stock Account Debit - Purchases Account: Credit - Drawings Account Debit - Sales Account: Credit - Stock Account Question No: 24 ( Marks: 1 ) - Please choose one An inventory error affects ___________ accounting periods. Only current Two Three Four Question No: 25 ( Marks: 1 ) - Please choose one From the given information, clculate the Cost of Goods Sold using the weightedaverage cost method: Beginning inventory 10 units @ Rs. 10 each On January 20, purchased 10 units @ Rs. 20 each On January 30, purchased 5 units @ Rs. 30 each 15 of the 25 units are sold Rs. 200 Rs. 270 Rs. 300 Rs. 350 Question No: 26 ( 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: 27 ( Marks: 1 ) - Please choose one Goodwill, patent, copyrights and trade mark are: Wasting assets Fictitious assets Intangible assets Tangible assets Question No: 28 ( Marks: 1 ) - Please choose one Which of the following is NOT affected by the adjusting entries? Balance sheet Income statement Work Sheet Ledger Question No: 29 ( Marks: 1 ) - Please choose one Which one of the following account has a normal debit balance? Revenue Capital Assets Liabilities Question No: 30 ( Marks: 1 ) - Please choose one The supplies account has a balance of Rs. 1,500 at year end. The actual amount of supplies 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

Paper 4
MIDTERM EXAMINATION Spring 2009 FIN621- Financial Statement Analysis (Session - 3) Question No: 1 ( Marks: 1 ) - Please choose one Which of the following statement shows the revenues and expenses of the business? Balance Sheet Income Statement Statement of Cash Flows Statement of Owners Equity Question No: 2 ( Marks: 1 ) - Please choose one Which of the following is the basic function of the Trial Balance? To check the validity of accounts To prove the equality of debits and credits To check the balance of all assets To prepare the balance sheet Question No: 3 ( 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: 4 ( Marks: 1 ) - Please choose one Which of the following represents the main step(s) of accounting cycle? Recording the transactions

Classifying the transactions Ordering, summarizing, counting the transactions Recording, classifying, summarizing transactions Question No: 5 ( Marks: 1 ) - Please choose one Which of the following principle is used for recording an expense? Matching Principle Cost Principle Realization Principle Objectivity Principle Question No: 6 ( Marks: 1 ) - Please choose one Blankenship Company pays its employees every Friday for work rendered that week. The payroll is typically Rs.10,000 per week. Which of the following journal entries would Blankenship ordinarily record on the Friday payday? Salary expense Rs. 10,000 - Debit; Salary payable Rs. 10,000 - Credit Salary expense Rs. 10,000 - Debit; Cash Rs. 10,000 - Credit Salary payable Rs. 10,000 - Debit; Cash Rs. 10,000 - Credit Salary payable Rs. 10,000 - Debit; Salary expense Rs. 10,000 - Credit Question No: 7 ( Marks: 1 ) - Please choose one The trial balance shows Supplies of Rs.1,350 and Supplies Expense of Rs.0. If Rs.600 of supplies are on hand at the end of the period, the adjusting entry would be: 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: 8 ( Marks: 1 ) - Please choose one Which one of the following type of entry is made to recognize depreciation expense? A reversing A closing entry An adjusting entry None of the given options Question No: 9 ( Marks: 1 ) - Please choose one In which of the following form of Income Statement, the total of all expenses is deducted from the total of all revenues? Multiple-step form Account form Report form Single-step form Question No: 10 ( Marks: 1 ) - Please choose one Closing entries result in net income being calculated in the income summary account and then transferred to which of the following account? Revenue account Common Stock account Dividends account Retained Earnings account Question No: 11 ( Marks: 1 ) - Please choose one ABC Company has Rs. 120,000 cash, Rs. 50,000 as accounts receivables, Rs. 10,000 as allowance for doubtful accounts, Rs. 30,000 as work in progress inventory, Rs. 45,000 as finished goods, Rs. 40,000 land purchased in the current year. Calculate the value of current assets. Rs. 275,000 Rs. 285000 Rs. 235,000 Rs. 210,000 Question No: 12 ( Marks: 1 ) - Please choose one If the indirect approach for the statement of cash flows is used, which of the following items should be subtracted from accrual basis net income to derive cash flow from operating activities? Gains on the sale of long-term investments Losses on the sale of long-term investments Depreciation expense Amortization expense Question No: 13 ( Marks: 1 ) - Please choose one 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: 14 ( Marks: 1 ) - Please choose one Which of the following items is included in the financing activities section of the statement of cash flows? Cash effects of transactions involving making and collecting loans Cash effects of acquiring and disposing of investments and property, plant, and equipment

Cash effects of transactions obtaining resources from owners and providing them with a return on their investment Cash effects of transactions that enter into the determination of net income Question No: 15 ( Marks: 1 ) - Please choose one Which one of the following items is not generally used in preparing a statement of cash flows? Adjusted trial balance Comparative balance sheets Current income statement Additional information Question No: 16 ( Marks: 1 ) - Please choose one Which of the following is added in the net income while preparing cash flow statement by indirect method? Increase in inventories Decrease in inventories Increase in prepaid expenses Decrease in accrued expenses payable Question No: 17 ( Marks: 1 ) - Please choose one When cash flow statement is prepared by using indirect method, which part of it is different from the direct method? Cash flow from investing activities Cash flow from financing activities Cash flow from operating activities All parts are same in both methods http://www.va-interactive.com/inbusiness/editorial/finance/ibt/cash_flow.html#background Question No: 18 ( Marks: 1 ) - Please choose one The cash flow from financing activities shows the cash effects of which of the following? Long term liability and long term assets Income statement items Long term assets items Long term liability & stockholders equity Question No: 19 ( 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: 20 ( Marks: 1 ) - Please choose one All of the following regarding perpetual inventory system are true EXCEPT It offers better inventory control than the periodic inventory system A physical inventory count is not necessary At the time of sale, the inventory account is credited At the time of sale, cost of goods sold is debited 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 each On January 30, purchased 5 units @ Rs. 30 each 15 of the 25 units are sold. Rs. 200 Rs. 150 Rs. 350 Rs. 450 Question No: 23 ( Marks: 1 ) - Please choose one Which cost flow assumption most closely matches the actual physical flow of inventory in most retailing businesses? FIFO LIFO Average cost Specific identification Question No: 24 ( Marks: 1 ) - Please choose one A statement of cash flows would be least useful in answering which of the following questions? What was the average balance in the Cash account during the period? Did operating activities result in a positive or negative net cash flow? How much cash was provided or used by financing activities during the period? Were cash dividends paid by the company more or less than the net cash flow from operations? Question No: 25 ( Marks: 1 ) - Please choose one Which of the following is NOT affected by the adjusting entries? Balance sheet

Income statement Work Sheet Ledger Question No: 26 ( Marks: 1 ) - Please choose one What will be the journal entry, if machinery is purchased on credit? Machinery A/c - Debit ; Accounts receivable - Credit Machinery A/c - Debit ; Accounts payable - Credit Machinery A/c - Debit ; cash A/c - Credit Accounts receivable - Credit; Accounts payable - Debit Question No: 27 ( Marks: 1 ) - Please choose one Which of the following should be the first step to locate an error in the trial balance? Re-calculate the balances of both sides Look for the correct location of the normal balances Verify figures transferred from the accounts to the trail balance Check foot notes and balances of financial statements http://books.google.com.pk/books?id=xWit8qTbbQ4C&pg=PA66&lpg=PA66&dq=should+be+ the+first+step+to+locate+an+error+in+the+trial+balance%3F&source=bl&ots=YTErxrjzPG&si g=fu4L8iSr7VcIMkGlSXnrlRGucXw&hl=en&ei=ng_jTMbJM4yqcYDjaQM&sa=X&oi=book_result&ct=result&resnum=4&ved=0CCsQ6AEwAw#v=onepage&q&f=fal se Question No: 28 ( Marks: 1 ) - Please choose one When a company should report the cost of an insurance policy as an expense? When the company first signs the policy When the company pays for the policy When the company receives the benefits from the policy over its period of coverage When the company receives payments form the insurance company for its insurance claims Question No: 29 ( Marks: 1 ) - Please choose one Newell Company debited Prepaid Insurance of Rs. 600 on July 1, 2003 for one-year fire insurance policy. If the company failures to make an adjusting entry on July 31 for the amount of insurance expired, would cause: Assets to be overstated by Rs. 600 and expenses to be understated by Rs. 600 Expenses to be overstated by Rs. 50 and assets to be understated by Rs. 50 Assets to be overstated by Rs. 50 and expenses to be understated by Rs. 50 Expenses to be overstated by Rs. 600 and assets to be understated by Rs. 600 Question No: 30 ( Marks: 1 ) - Please choose one Which of the following account would NOT be closed to the income summary account at the end of a period? Rent expense Revenue earned Wages expense Accumulated depreciation

Paper 5
Question No: 1 ( Marks: 1 ) - Please choose one Which of the following principle deals with the valuation and recording of the assets at cost? Entity Principle Matching Principle Cost Principle Stable Currency principle Question No: 2 ( 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: 3 ( Marks: 1 ) - Please choose one How much duration does an accounting period usually have? Three months Two years One year Five years Question No: 4 ( Marks: 1 ) - Please choose one To determine the balance of a particular account, one should refer to which of the following? Ledger Source document Chart of accounts Journal Question No: 5 ( Marks: 1 ) - Please choose one As transactions and events related to financial resources occur, they are analyzed with respect to their effect on which of the following?

 Financial position of the company Accounting cycle Trial balance Liquidity position of the company

Question No: 6 ( 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: 7 ( Marks: 1 ) - Please choose one Which of the following is the next step after the preparation of trial balance? Adjusted trial balance Financial statements Adjusting entries Closing entries Question No: 8 ( Marks: 1 ) - Please choose one Which of the following is TRUE regarding the income statement? The income statement reports only revenue for which cash was received at the point of sale The income statement reports the financial position of a business at a particular point in time The income statement is sometimes called the statement of operations The income statement reports revenues, expenses and liabilities

Question No: 9 ( Marks: 1 ) - Please choose one Which of the following principle is used for recording an expense? Matching Principle Cost Principle Realization Principle Objectivity Principle Question No: 10 ( Marks: 1 ) - Please choose one The net income reported on the income statement is Rs. 90,000. However, adjusting entries have not been made at the end of the period for supplies expense of Rs. 2,700 and accrued salaries of Rs. 1,300. Net income, as corrected, would be: Rs. 87,300 Rs. 86,000 Rs. 88,700 Rs. 90,000 Question No: 11 ( Marks: 1 ) - Please choose one Prepaid Expense is a(n) _________ account and has a _________ normal balance. Revenue, credit Liability, credit Asset, debit Expense, debit Question No: 12 ( Marks: 1 ) - Please choose one Company A owns a building. Which of the following statements regarding depreciation is FALSE from an accounting perspective? As the market value of the building increases, depreciation should increase Depreciation is an estimated expense to be recorded each period during the buildings life As depreciation is recorded, stockholders equity is reduced As depreciation is recorded, total assets are reduced Question No: 13 ( Marks: 1 ) - Please choose one A firm paid Rs. 800,000 in dividends over the last period. The beginning and ending retained earnings account balances were Rs. 10,100,000 and Rs. 12,500,000 respectively. Assuming a 40% average tax rate, what was the firm's net income (net profit after taxes)? Rs. 5,333,333 Rs. 3,200,000 Rs. 2,400,000 Rs. 1,600,000 The change in retained earnings was $2,400,000 ($12,500,000 - $10,100,000). Therefore, the net income was $3,200,000 ($2,400,000 + $800,000). http://wps.pearsoned.co.uk/ema_uk_he_wachowicz_fundfinman_12/26/6679/1709885.cw/cont ent/index.html Question No: 14 ( Marks: 1 ) - Please choose one Which of the following is the largest single expense of most merchandising firms? Cost of goods sold Rent Expense

 Amortization Expenses Salaries Expense http://wps.prenhall.com/ca_ph_horngren_accounting_7/59/15164/3882016.cw/content/index.h tml Question No: 15 ( Marks: 1 ) - Please choose one Which of the following is NOT among the five main kinds of current assets? Cash and equivalents Deferred income Accounts receivable Prepaid expenses Question No: 16 ( Marks: 1 ) - Please choose one When preparing a statement of cash flows under the indirect method, supplemental disclosure should be made for which of the following? Net cash consumed by operating activities Cash dividend distributions Cash paid for interest and taxes Cash paid for wages Question No: 17 ( Marks: 1 ) - Please choose one Which of the following items is included in the financing activities section of the statement of cash flows?

Cash effects of transactions involving making and collecting loans Cash effects of acquiring and disposing of investments and property, plant, and equipment Cash effects of transactions obtaining resources from owners and providing them with a return on their investment Cash effects of transactions that enter into the determination of net income Question No: 18 ( Marks: 1 ) - Please choose one ABC Company has a cost of goods sold of Rs. 500,000. During the year the inventory 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 were paid 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: 19 ( Marks: 1 ) - Please choose one The statement of cash flow does NOT assist investors, creditors and others in assessing: The companys ability to generate positive cash flows in future periods The companys ability to meet its obligations and to pay dividends The companys needs for external financing The companys ability to forecast future losses Question No: 20 ( Marks: 1 ) - Please choose one Notes to financial statements are beneficial in meeting the disclosure requirements of financial reporting. The note should not be used to: Correct an improper presentation in the financial statements Describe significant accounting policies Describe depreciation methods employed by the company Describe principles and methods peculiar to the industry Question No: 21 ( Marks: 1 ) - Please choose one egoistic When using the perpetual inventory system, each time a sale is recorded the: Inventory account is increased Inventory account is decreased Cost of Goods Sold account is decreased Cost of goods available for sale decreases Question No: 22 ( Marks: 1 ) - Please choose one Which of the following feature is shown by the income statement for a merchandising company? Gross profit Cost of goods sold A sales revenue section All of the given options Question No: 23 ( Marks: 1 ) - Please choose one In a period of rising prices, all of the following statements regarding LIFO are true EXCEPT: Net income is generally higher Ending inventory is generally undervalued It can be used to manipulate net income Most recent inventory costs are allocated to cost of goods sold Question No: 24 ( 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 each On January 30, purchased 5 units . Rs. 30 each 15 of the 25 units are sold. Rs. 200 Rs. 150 Rs. 350 Rs. 450 Question No: 25 ( Marks: 1 ) - Please choose one In which of the following inventory pricing procedure, the oldest costs incurred rarely have an effect on the ending inventory valuation? FIFO LIFO Retail Weighted-average Question No: 26 ( Marks: 1 ) - Please choose one If beginning inventory is Rs. 60,000, cost of goods purchased is Rs. 380,000, and ending inventory is Rs. 50,000, what is cost of goods sold under a periodic system? Rs. 390,000 Rs. 370,000 Rs. 330,000 Rs. 420,000 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 In which of the following situations, a company should NOT record any depreciation expense on asset described? Computer Airline is required by law to maintain its aircraft in as good as new condition Metro Advertising owns an office building that has been increasing in value each year Computer Sales Company has in inventory a new type of computers, designed never to obsolete None of the given option is right as depreciation is applied on all assets http://www.mcgrawhill.ca/college/meigs8/olc/olc/ab8_qqa10.html#Q10-1 Question No: 29 ( Marks: 1 ) - Please choose one Which of the following is NOT the part of annual report? Financial statements Auditors report Five year summary Future investments report Question No: 30 ( Marks: 1 ) - Please choose one In a statement of cash flows, the acquisition of land by issuing capital stock: Is not shown at all, since no cash was received or disbursed Is shown as an investing activity Is shown as a financing activity Is shown in a supplementary schedule as a non-cash investing and financing transaction http://highered.mcgraw-hill.com/novella/QuizProcessingServlet Question No: 31 ( Marks: 1 ) - Please choose one Which of the following would represent an increase in Owner's Equity? Increase in net income Increase in assets Increase in accounts receivable Increase in cash Question No: 32 ( Marks: 1 ) - Please choose one Which of the following steps of accounting cycle keep on occurring throughout the period? Journalizing and posting the entries Making adjusting entries for the relevent accounts Preparing Trial Balance Preparing financial statements Question No: 33 ( Marks: 1 ) - Please choose one Which one of the following items is NOT generally used in preparing a statement of cash flows? Adjusted trial balance Comparative balance sheets

 Current income statement Additional information Question No: 34 ( Marks: 1 ) - Please choose one Which of the following items does NOT result in an adjustment in the merchandise inventory account under a perpetual system? A return of merchandise inventory to the supplier Payment of freight costs for goods shipped to a customer Payment of freight costs for goods received from a supplier A purchase of merchandise http://www.google.com.pk/#sclient=psy&hl=en&q=does+NOT+result+in+an+adjustment+in+t he+merchandise+inventory+account+under+a+perpetual+system%3F+%E2%96%BA+A+retu rn+of+merchandise+inventory+to+the+supplier+%E2%96%BA+Payment+of+freight+costs+fo r+goods+shipped+to+a+customer+%E2%96%BA+Payment+of+freight+costs+for+goods+rec eived+from+a+supplier+%E2%96%BA+A+purchase+of+merchandise&aq=f&aqi=&aql=&oq=& gs_rfai=&pbx=1&fp=977d28a4874662a8 http://webcache.googleusercontent.com/search?q=cache:qBtmRjcH2MoJ:higheredbcs.wiley .com/legacy/college/kimmel/0470087447/self_study/ch05.rtf+Which+of+the+following+items+ does+NOT+result+in+an+adjustment+in+the+merchandise+inventory+account+under+a+per petual+system%3F&cd=2&hl=en&ct=clnk&gl=pk

Question No: 35 ( Marks: 1 ) - Please choose one From the given information, calculate the Cost of Goods Sold using the weighted-average cost method Beginning inventory 10 units . Rs. 10 each On January 20, purchased 10 units . Rs. 20 each On January 30, purchased 5 units . Rs. 30 each 15 of the 25 units are sold Rs. 200 Rs. 270 Rs. 300 Rs. 350 Question No: 36 ( Marks: 1 ) - Please choose one Which of the following is the most common item in adjusting entries of a merchandising business? Un-earned revenue Pre-paid expense Depreciation expense Accrued revenue Question No: 37 ( Marks: 1 ) - Please choose one Closing entries result in net income being calculated in the income summary account and then transferred to which of the following account? Revenue account Common Stock account Dividends account Owner's Capital account Question No: 38 ( 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: 39 ( Marks: 1 ) - Please choose one Which of the following question is NOT addressed by cash flow statement? How much cash was generated by the companys 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 companys current assets are? Question No: 40 ( Marks: 1 ) - Please choose one Which of the following statements is CORRECT regarding depreciation methods? Accumulated depreciation represents a fund being accumulated fro the replacement of assets The cost of a machine includes the cost of repairing damage to the machine during the installation process A company may use different depreciation methods in its financial statements and its income tax returns The use of an accelerated depreciation method causes an asset to wear out more quickly than does the straight line method

Paper 6
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? Balance Sheet Statement of Owners Equity Income Statement Statement of Cash Flows Question No: 3 ( Marks: 1 ) - Please choose one To determine the balance o f a particular account, one should refer to which o f the following ? 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; Owners 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 holder s 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 amount of depreciation on equipment for a period is Rs. 2, 000? Depreciation expense - Debit; Equipment - Cred it Depreciation expense - Debit; Accumulated depreciation - Credit Equip ment - Debit; Depreciation expense - Cred it Accumu lated depreciation - Debit; Depreciation expense - Credit Question No: 8 ( Marks: 1 ) - Please choose one The trial balance shows Supplies of Rs.1,350 and Supp lies Expense o f R s.0. If Rs.600 of supplies are on hand at the end of the period, the adjusting entry would be: 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 trial balance? Cash

Accumulated depreciation Owners 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 or consume within: The operating cycle One year The longer o f operating cycle or one year The shorter of operating cycle o r o ne 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 Question No: 13 ( Marks: 1 ) - Please choose one In preparing the statement of cash flows, how should non-cash investing/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 o f cash flows Should not to be reported
http://www.principlesofaccounting.com/questions%20%20%20multiple%20choice/chapter%2016%20-%20multiple%20choice.htm

Question No: 14 ( Marks: 1 ) - Please choose one 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 o f the following items is specifically included in the body of a statement 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 the inventory 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 were paid 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 o f which of the following? Income statement items Long term assets item s Long term liability & stockholders equity Long term liability and long term assets

Question No: 19 ( Marks: 1 ) - Please choose one Which o f the following must be included in a company's summary of significant accounting 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 http://books.google.com.pk/books?id=9xcfUxLUmr4C&pg=PA105 &dq=summary++of++significant+accounting+policies+in+the+not es+to+the+financial+statements&hl=en&ei=bJ7xTPPABYu9cd_o oYoK&sa=X&oi=book_result&ct=result&resnum=3&ved=0CDIQ6 AEwAg#v=onepage&q=summary%20%20of%20%20significant% 20accounting%20policies%20in%20the%20notes%20to%20the %20financial%20statements&f=false Question No: 20 ( Marks: 1 ) - Please choose one Gross profit is: Excess of sales over cost of goods sold Sales less Purchases Cost o f 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 metho d: Beginning inventory is 10 units @ Rs. 10 each. On January 20, purchased 10 units @ Rs. 20 each On January 30, purchased 5 units @ Rs. 30 each

15 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 most recently 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 operating expenses 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 of inventory 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 from the 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 to each period of assets 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 the balance 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 Question No: 34 ( Marks: 1 ) - Please choose one Accounting Cycle is a series of activities that begins with ___________ and ends with ___________. Closing of books, transactions Transaction, After closing Trial Balance Journal, ledger account Transactions, financial statements Question No: 35 ( 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

payable decreased by Rs. 7 million. How much did the company pay in other operating expenses? 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 Question No: 37 ( Marks: 1 ) - Please choose one Which of the following is NOT normally required for revenue to be recognized according 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 http://books.google.com.pk/books?id=WH95zMY5LEC&pg=PA159&dq=is+NOT+normally++required++for++re venue++to++be++recognized+according+to+the+revenue+princi ple+for+accrual+basis+accounting?&hl=en&ei=6LxTNWDCYuPcd3lmLoK&sa=X&oi=book_result&ct=result&resn um=3&ved=0CDAQ6AEwAg#v=onepage&q&f=false http://books.google.com.pk/books?id=fOAKexV5AtUC&pg=PA10 8&lpg=PA108&dq=is+NOT+normally++required++for++revenue+ +to++be++recognized+according+to+the+revenue+principle+for+ accrual+basis+accounting%3F+The+price+is+fixed+or+determin able+Services+have+been+performed+Cash+that+has+already+ +been+collected+Evidence+of+an+arrangement+for+customer+ payment+exists&source=bl&ots=uqShdAyc2K&sig=fy6Rh8BhBIP SrUGHYlWSDlgLF98&hl=en&ei=bqj8TJm3F4blrAehyZT_Bw&sa

=X&oi=book_result&ct=result&resnum=4&ved=0CCoQ6AEwAw# v=onepage&q&f=false

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 owners 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

Paper 7
MIDTERM EXAMINATION Spring 2010 FIN621- Financial Statement Analysis (Session - 3) Time: 60 min Marks: 44 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 Balance Sheet and Accounting Cycle are based on which of the following? Adjusting entries Closing entries Financial position Accounting Equation

Question No: 3 ( Marks: 1 ) - Please choose one Which of the following is the next step after the preparation of trial balance? Adjusted trial balance Financial statements Adjusting entries Closing entries

Question No: 4 ( Marks: 1 ) - Please choose one Which of the following errors are identified during the preparation of trial balance? 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

http://www.principlesofaccounting.com/questions%20%20%20multiple%20choice/chapter%202%20-%20multiple%20choice.htm Question No: 5 ( Marks: 1 ) - Please choose one 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 one Cost of a building is Rs. 90,000 and its estimated useful life is 30 years. What will be the depreciation expense of this building for one month by using straight line depreciation method? Rs. 600 Rs. 250 Rs. 300 Rs. 500 90000/30 = 3000 3000/12 = 250 Question No: 7 ( Marks: 1 ) - Please choose one Retained earnings change over time because of several factors. Which of the following 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 one At the end of the fiscal year, Accounts Receivable has a balance of Rs. 100,000 and Allowance for Doubtful Accounts has a balance of Rs. 7,000. The expected net realizable value of the accounts receivable is: Rs. 7,000 Rs. 93,000 Rs. 100,000 Rs. 107,000 A/C receivable = Less allowance doubetful

100000 7000 ______________ net realizable value a/c receivable 93000 Question No: 9 ( Marks: 1 ) - Please choose one Which of the following regarding retained earnings is FALSE? Retained stockholders earnings represent earnings not distributed to

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 one Which 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 http://wps.pearsoned.co.uk/ema_uk_he_wachowicz_fundfinman_12/26/667 9/1709885.cw/content/index.html 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 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: 13 ( Marks: 1 ) - Please choose one The balance sheet reported a beginning balance of Rs. 20,000 in Accounts Receivable and an ending balance of Rs. 15,000. The income statement reported Sales Revenue of Rs. 200,000. Using this information, compute cash collected from customers. Rs. 205,000 Rs. 215,000 Rs. 195,000 Rs. 200,000 sales 200000 beginning balance 20000 __________ total 220000 less ending 15000 _____________ cash received from customer = 205000 Question No: 14 ( Marks: 1 ) - Please choose one Which of the following would be considered as cash flow from investing activities? Proceeds from issuance of long-term debt Expenditure for sale of plant and equipment Payments to suppliers Receipts from sale of goods or services

CASH FLOW FROM INVESTING ACTIVITIES Principle repayment by borrowers (note the interest receipt on the loans cash includes in operating activities ) The sale of loan (receivable) made by the firm The sales of assets such as debt of equity securities of other firms (other than cash equivalent), and property, plant, and equipment Question No: 15 ( Marks: 1 ) - Please choose one When cash flow statement is prepared by using indirect method, which part of it is different from the direct method?

Cash flow from investing activities Cash flow from financing activities Cash flow from operating activities All parts are same in both methods Question No: 16 ( Marks: 1 ) - Please choose one The cash flow from financing activities shows the cash effects of which of the following? Income statement items Long term assets items Long term liability & stockholders equity Long term liability and long term assets

Question No: 17 ( Marks: 1 ) - Please choose one Which of the following must be included in a company's summary of significant accounting 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: 18 ( 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: 19 ( Marks: 1 ) - Please choose one In a perpetual inventory system, which of the following would be debited when inventory is sold on account? Cost of goods sold Merchandise inventory Sales Both Accounts receivable & cost of goods sold

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

Question No: 21 ( Marks: 1 ) - Please choose one Which of the following statements best describes the nature of depreciation? Regular reduction of asset value to correspond to the decline in market value as the asset ages A process of correlating the book value of an asset with its gradual decline in physical 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 realizable value

 Allocation of the cost of a plant asset to the periods in which benefits are received

Question No: 22 ( Marks: 1 ) - Please choose one Warner Corporation reported net income in excess of its net cash flow from operations. 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 one Which 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 one The supplies account has a balance of Rs. 1,500 at year end. The actual amount of supplies 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 one The 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 during December, the effect on the Balance Sheet and Income Statement for December will be: 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 Question No: 26 ( Marks: 1 ) - Please choose one 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 one Closing entries result in net income being calculated in the income summary account 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 one Assuming that net purchases cost Rs 250,000 during the year. The closing inventory was of Rs 4,000, and opening inventory was of Rs 30,000, how much was the cost of goods sold? Rs. 276, 000 Rs. 280,000 Rs. 254,000 Rs. 246,000

Paper 8
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 the following? 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

Question No: 4 ( Marks: 1 ) - Please choose one 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 a company? Operating results Economic results Auditing results Marketing results

Question No: 7 ( Marks: 1 ) - Please choose one 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

Question No: 8 ( Marks: 1 ) - Please choose one 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 regarding depreciation is FALSE from an accounting perspective? As the market value of the building increases, depreciation should increase Depreciation is an estimated expense to be recorded each period during the buildings 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 the following 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 or consume within: The operating cycle One year The longer of operating cycle or one year The shorter of operating cycle or one year http://www.principlesofaccounting.com/questions%20%20%20multiple%20choice/chapter%204%20-%20multiple%20choice.htm Question No: 14 ( Marks: 1 ) - Please choose one

Decision makers compare net income to net cash from operating activities. To make these amounts more comparable, the same accounts are included in each. The following accounts are used to compute both net income and net cash from operating activities EXCEPT:

Interest expense Dividend revenue Interest revenue Dividends declared and paid http://wps.prenhall.com/ca_ph_horngren_accounting_7/60/15481/3963284.c w/content/index.html Question No: 15 ( Marks: 1 ) - Please choose one If the indirect approach for the statement of cash flows is used, which of the following items should be subtracted from accrual basis net income to derive cash flow 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

Question No: 17 ( Marks: 1 ) - Please choose one 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 of which 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 cash flows. 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 http://wps.prenhall.com/ca_ph_horngren_accounting_7/60/15481/3963284.c w/content/index.html

Question No: 20 ( Marks: 1 ) - Please choose one The indirect method shows the reconciliation from net income to operating cash flows. 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. http://wps.prenhall.com/ca_ph_horngren_accounting_7/60/15481/3963284.c w/content/index.html 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 by Rs. 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 debited to ________ 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 perpetual inventory system. What is the correct journal entry for this purchase of office supplies? 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 is exchanged for another asset with a fair value of Rs. 625. The exchange has commercial 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

Question No: 33 ( Marks: 1 ) - Please choose one 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 Question No: 35 ( Marks: 1 ) - Please choose one 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 payable decreased by Rs. 7 million. How much did the company pay in other operating expenses? Rs. 41 million Rs. 33 million Rs. 27 million Rs. 19 million

Question No: 37 ( Marks: 1 ) - Please choose one From the given information, calculate the Cost of Goods Sold using the weighted-average cost method: Beginning inventory 10 units @ Rs. 10 each On January 20, purchased 10 units @ Rs. 20 each On January 30, purchased 5 units @ Rs. 30 each 15 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 Question No: 39 ( Marks: 1 ) - Please choose one 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 of GoodsSoldRs.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 companys 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 companys current assets are?