fin 621 solved

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FIN621 Total questions = 32 MCQs = 28 Two were of 3 marks each; two were of 5 marks each. Q. Classify the following activities as cash flow from operating \, investing and financing activities. Payments for repurchase of company shares Collection 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. Q. Valuation of stock, FIFO and LIFO methods. MIDTERM EXAMINATION Fall 2009 FIN621- Financial Statement Analysis (Session - 2) Ref No: 1034740 Time: 60 min Marks: 50 Student Info StudentID: MC070200674 Center: OPKST ExamDate: 12/22/2009 12:00:00 AM For Teacher's Use Only Q No. 1 2 3 4 5 6 7 8 Total Marks Q No. 9 10 11 12 13 14 15 16 Marks Q No. 17 18 19 20 21 22 23 24 Marks Q No. 25 26 27 28 29 30 31 32 Marks Q No. 33 34 35 36 37 38 39 40 Marks

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Page 1: FIN 621 Solved

FIN621Total questions = 32MCQs = 28Two were of 3 marks each; two were of 5 marks each.Q. Classify the following activities as cash flow from operating \, investing and financing activities.

        Payments for repurchase of company shares        Collection 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.

Q. Valuation of stock, FIFO and LIFO methods.MIDTERM EXAMINATION Fall 2009FIN621- Financial Statement Analysis (Session - 2) Ref No: 1034740 Time: 60 min Marks: 50Student InfoStudentID: MC070200674Center: OPKSTExamDate: 12/22/2009 12:00:00 AM

For Teacher's Use OnlyQ No. 1 2 3 4 5 6 7 8 TotalMarks Q No. 9 10 11 12 13 14 15 16 Marks Q No. 17 18 19 20 21 22 23 24 Marks Q No. 25 26 27 28 29 30 31 32 Marks Q No. 33 34 35 36 37 38 39 40 Marks Q No. 41 42 Marks

Question No: 1 ( Marks: 1 ) - Please choose oneWhich of the following principle deals with the valuation and recording of the assets at cost?

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► Entity Principle

► Matching Principle

► Cost Principle

► Stable Currency principle

Question No: 2 ( Marks: 1 ) - Please choose oneWhich 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 oneHow much duration does an accounting period usually have?

► Three months

► Two years

► One year

► Five years

Question No: 4 ( Marks: 1 ) - Please choose oneTo 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 oneAs transactions and events related to financial resources occur, they are analyzed with

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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 oneWhich 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 oneWhich 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 oneWhich 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

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Question No: 9 ( Marks: 1 ) - Please choose oneWhich 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 oneThe 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 onePrepaid 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 oneCompany 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

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► 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: 13 ( Marks: 1 ) - Please choose oneA 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

Question No: 14 ( Marks: 1 ) - Please choose oneWhich of the following is the largest single expense of most merchandising firms?► Cost of goods sold

► Rent Expense

► Amortization Expense

► Salaries Expense

Question No: 15 ( Marks: 1 ) - Please choose oneWhich 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 oneWhen preparing a statement of cash flows under the indirect method, supplemental

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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 oneWhich 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 oneABC 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 oneThe statement of cash flow does NOT assist investors, creditors and others in assessing:

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► The company’s ability to generate positive cash flows in future periods► The company’s ability to meet its obligations and to pay dividends► The company’s needs for external financing► The company’s ability to forecast future losses

Question No: 20 ( Marks: 1 ) - Please choose oneNotes 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 oneWhen 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 oneWhich 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

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Question No: 23 ( Marks: 1 ) - Please choose oneIn 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 oneFrom 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: 25 ( Marks: 1 ) - Please choose oneIn 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 oneIf 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?

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► Rs. 390,000

► Rs. 370,000

► Rs. 330,000

► Rs. 420,000

Question No: 27 ( Marks: 1 ) - Please choose oneThe 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 oneIn 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

Question No: 29 ( Marks: 1 ) - Please choose oneWhich of the following is NOT the part of annual report?

► Financial statements

► Auditor’s report

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► Five year summary

► Future investments report

Question No: 30 ( Marks: 1 ) - Please choose oneIn 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

Question No: 31 ( Marks: 1 ) - Please choose oneWhich 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 oneWhich of the following steps of accounting cycle keep on occuring 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 oneWhich one of the following items is NOT generally used in preparing a statement of cash flows?

► Adjusted trial balance

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► Comparative balance sheets► Current income statement► Additional information

Question No: 34 ( Marks: 1 ) - Please choose oneWhich 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

Question No: 35 ( Marks: 1 ) - Please choose oneFrom 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: 36 ( Marks: 1 ) - Please choose oneWhich 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 oneClosing 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

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Question No: 38 ( Marks: 1 ) - Please choose oneThe 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 oneWhich 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: 40 ( Marks: 1 ) - Please choose oneWhich 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

Question No: 41 ( Marks: 5 ) Security Service Company adjusts its accounts at the end of the month. On November 30, adjusting entries are prepared to record:a. Depreciation expense for November b. Interest expense that has accrued during Novemberc. Revenue earned during November that has not yet been billed to customersd. Salaries, payable to company employees that have accrued since the last pay day in Novembere. The portion of the company’s prepaid insurance that has expired during NovemberRequirement:Indicate the effect of each of these adjusting entries on the major elements of the company’s income statements i.e. upon revenue, expenses, net income. Organize your answer in the table given below and use the symbols I for increase, D for decrease, and NE for no effect.

Adjusting entry Revenue Expenses Net incomea

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b c d e

Question No: 42 ( Marks: 5 ) Olympic Inc., had the following cash flows during the current year:

Cash received from customers Rs. 240,000Interest and dividend received 50,000Proceeds from the sale of the plant assets 330,000Cash paid to suppliers and employees 127,000Cash paid for the purchase of investments 45,000Cash paid for the purchase of treasury stock 36,000

Requirement:Determine the amount of net cash flow from operating activities by using the direct method.

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

 

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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 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 the following?

 

► Ledger

 

► Source document

 

► Chart of accounts

 

► Journal

 

Question No: 4    ( Marks: 1 )    - Please choose one

Page 15: FIN 621 Solved

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?

Page 16: FIN 621 Solved

 

► 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 amount of 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.  If Rs.600 of supplies are on hand at the end of the period, the adjusting entry would be:

Page 17: FIN 621 Solved

 

► 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

 

► Owner’s equity

 

► Fees earned

 

Question No: 10    ( Marks: 1 )    - Please choose one

 

Page 18: FIN 621 Solved

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 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?

 

Page 19: FIN 621 Solved

 

 

 

► 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 of cash flows

 

► Shoud not to be reported

 

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?

 

 

Page 20: FIN 621 Solved

 

 

► 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 a statement of cash flows?

 

 

 

 

Page 21: FIN 621 Solved

► 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 of which of the following?

► Income statement items

 

► Long term assets items

 

Page 22: FIN 621 Solved

► 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 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: 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

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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

 

Page 24: FIN 621 Solved

► 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

Page 25: FIN 621 Solved

 

► 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

Page 26: FIN 621 Solved

 

► 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 asset’s useful life?

 

► Straight-line method

 

► Double-declining balance method

 

► Sum-of-the-year digit method

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► 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

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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

 

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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:

 

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► 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

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?

 

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► 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 and financing 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' debt instruments: Investing activities.

Tax payments: Operating activities

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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 of the Mystery Mountain Lodge at December 31, 2001:

 

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

Land 425,000Owner’s capital ?

Accounts payable 54,800Cash 21,400

Accounts receivable 10,600Furnishings 58,700

Salaries payable 33,500Snowmobiles 15,400

Interest payable 12,000Notes payable 620,000

 

Requirement:

Prepare a Balance Sheet at December 31, 2001.

 

Mystery Mountain Lodge

Balance Sheet as on December 31, 2001

Particulars                                                                               Amount (Rs.)

Current Assets:

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Cash                                                                                              21,400

Accounts receivable                                                                      10,600

Snowmobiles                                                                                 15,400

Fixed Assets:

Equipment                                                                                      29,200

Furnishings                                                                                    58,700

Buildings                                                                                       450,000

Land                                                                                              425,000

1,010,300

Liabilities:

Interest payable                                                                              12,000

Salaries Payable                                                                             33,500

Accounts Payable                                                                           54,800

Notes Payable                                                                               620,000

Capital:

Owner’s capital                                                                               290,000

1,010,300