NATIONAL UNIVERSITY OF SINGAPORE NUS BUSINESS SCHOOL DEPARTMENT OF ACCOUNTING ACC1002X FINANCIAL ACCOUNTING MID-TERM PRACTICE TEST Saturday

2 October 2010 Time Allowed: 1 hour 15 minutes ________________________________________________________________________ INSTRUCTIONS TO CANDIDATES 1. 2. This test paper consists of TWENTY-FIVE (25) multiple-choice questions. Answer ALL questions by shading the letter representing the best answer on the computer scoring sheet using pencils. If you just mark on this question paper, your answers will not be marked. This is a close-book test. You are not allowed to bring in any materials other than pens, pencils, erasers and calculators. Make sure you write your name and your matriculation number below on both this question paper and the computer scoring sheet which must be submitted at the end of the test. If you provide us with a wrong matriculation number, you will receive zero for this test.

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Name: Matriculation Number:

For Examiners Use Only:

Total

Marks / 25

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MCQ (1 mark per question, total 25 marks)

1.

During the current year, liabilities of Hayden Travel decreased by $50,000, and owners' equity increased by $75,000 then. A. Assets at the end of the year total $125,000. B. Assets at the end of the year total $25,000. C. Assets increased during the year by $25,000. D. Assets decreased during the year by $125,000.

2.

An allowance of receivables of 2% is required. The Accounts Receivables balances for the period ended are $200,000. The beginning allowance of receivables brought forward from the previous period is $2,000. The movement in allowance is carried to the Income Statement as A. B. C. D. Expense of $4,000 Other income of $4,000 Other income of $2,000 Expense of $2,000

3.

A customer paid a deposit in advance for goods to be supplied at a later date. How should this be recorded in the seller's books? DR Cash Cash Unearned Revenue Unearned Revenue CR Unearned Revenue Sales Prepayment Sales

A. B. C. D.

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4.

Which statement is correct? A. B. C. D. Assets Liabilities = Owners' Equity Assets + Owners' Equity = Liabilities Liabilities + Assets = Owners' Equity Liabilities Owners' Equity = Assets

5.

Which of the following is not a liability of a business? A. Bank overdraft B. Accounts Payables C. Accumulated Depreciation Office Equipment D. Bank Loan

6.

Ethan's Trial Balance as at 31 October 2009 includes the following balances: $ Machinery at cost 85,800 Accumulated depreciation on machinery 21,750 Accounts Receivables 42,650 Allowance for Doubtful Accounts 1,570 Bank overdraft 6,470 Inventory at 1 November 2008 21,650 His inventory at 31 October 2009 is valued at $22,300. What value should be reported for current assets in Ethan's Balance Sheet as at 31 October 2009? A. $62,730 B. $69,850 C. $64,950 D. $63,380

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7.

A Trial Balance is made up of a list of debit balances and credit balances. Which of the following statements is correct? A. B. C. D. Every debit balance represents an expense. Assets are represented by debit balances. Liabilities are represented by debit balances. Income is included in the list of debit balances.

8.

Which of the following is generally not considered one of the general purpose financial statements issued by a corporation? A. Statement of financial position B. Balance sheet C. Income statement forecast for the coming year D. Statement of cash flows

9.

A balance sheet is designed to show the financial position of an entity: A. At December 31 of the current year. B. Over a period of time such as a year or quarter. C. At a single point in time. D. At January 1 of the coming year.

10.

Accounts payable and notes payable are: A. Always less than the amount of cash a business owns. B. Liabilities. C. Written promises to pay a certain amount, plus interest, at a definite future date. D. Debtors

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11.

The adjusting entry to recognize an unrecorded expense is necessary: A. When an expense is paid in advance. B. When an expense has been neither paid nor recorded as of the end of the accounting period. C. Whenever an expense remains unpaid at the end of an accounting period. D. Because the accountant is likely to forget to pay these unrecorded expenses.

12.

Before any month-end adjustments are made, the net income of Lawrence Company is $550,000. However, the following adjustments are necessary: office supplies used, $35,000; services performed for clients but not yet recorded or collected, $12,300; interest accrued on note payable to bank, $14,100. After adjusting entries are made for the items listed above, Lawrence Companys net income would be: A. $513,200. B. $488,600. C. $583,200. D. $541,400.

13.

Of the following adjusting entries, which one results in an increase in liabilities and the recognition of an expense at the end of an accounting period? A. The entry to accrue salaries owed to employees at the end of the period. B. The entry to record revenue earned but not yet collected or recorded. C. The entry to record earned portion of rent previously received in advance from a tenant. D. The entry to write off a portion of unexpired insurance.

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14.

The CPA firm auditing Indian Company found that net income had been overstated. Which of the following errors could be the cause? A. Failure to make an adjusting entry to record revenue which had been earned but not yet billed to customers. B. No entry made to record purchase of land for cash on the last day of the year. C. Failure to record payment of an account payable on the last day of the year. D. Failure to record depreciation expense for the period.

Use the following data for questions 15 and 16. At the end of the month the unadjusted trial balance of Four Star Company included the following accounts: Debit Credit Sales (75% represent credit sales) ............... $1,280,000 Accounts Receivable .................................... $875,000 Allowance for Doubtful Accounts .................. $10,750

15.

If the income statement method of estimating uncollectible accounts expense is followed, and uncollectible accounts expense is estimated to be 2% of net credit sales, the net realizable value of Four Star accounts receivable at the end of the month is: A. $855,800. B. $845,050. C. $19,200. D. $1,250,050.

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16.

If Four Star uses the balance sheet approach in estimating uncollectible accounts, and aging the accounts receivable indicates the estimated uncollectible portion to be $24,000, the uncollectible accounts expense for the month is: A. $24,000. B. $10,750. C. $34,750. D. $13,250.

17.

Financial accounting information is characterized by all of the following except: A. It is factual, so it does not require judgment to prepare. B. It results from inexact and approximate measures. C. It is historical in nature. D. It is enhanced by management's explanation.

18.

During the current year, the assets of Fragrant Spice increased by $183,000 and the liabilities decreased by $13,000. If the owners' equity in the business is $468,000 at the end of the year, the owners' equity at the beginning of the year must have been: A. $272,000. B. $638,000. C. $298,000. D. $664,000.

19.

Ethan Electronics sold and delivered modems to Beatrice Computers for $663,000 to be paid by Beatrice in three equal instalments over the next three months. The journal entry made by Beatrice Computers to record the last of the three instalment payments will include: A. A debit of $221,000 to Modem Expense. B. A debit of $221,000 to Accounts Payable. C. A debit of $221,000 to Accounts Receivable. D. A debit of $221,000 to Cash.
/

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20.

Ben Elliot, president of Varsity Publishing, noticed a $6,300 debit to Accounts Payable in the company's books. This debit could correspond to: A. The failure to pay this month's $6,300 utility bill on time. B. A payment of $6,300 to a supplier to settle a balance due. C. A purchase of equipment costing $6,300 on credit. D. A $6,300 sale to a customer.

21.

Dolphin Co. received $5,100 in fees during 2009, 2/3 of which was earned in 2010, the rest was earned when received. The company should report which of the following amounts as income in 2009? A. $5,100. B. $0. C. $1,700. D. $3,400.

22.

Beans and Things, Inc. is a newly opened company. Sales for the period are $283,000, expenses are $216,000 and unpaid dividends declared are $23,000. Retained earnings at the end of the period: A. Will have a debit balance of $67,000. B. Will have a credit balance of $67,000. C. Will have a debit balance of $44,000. D. Will have a credit balance of $44,000.

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23.

The accountant for Perfect Painting forgot the following two adjustments at the end of 2010: (a) The entry to record depreciation: $3,000. (b) The entry to record the portion of fees received in advance which have now been earned: $3,000. As a result of these two omissions: A. Net income for Perfect Painting for 2010 is overstated. B. Net income for Perfect Painting for 2010 is understated. C. Assets of Perfect Painting are overstated at December 31, 2010. D. Liabilities of Perfect Painting are understated at December 31, 2010.

24.

Only two adjustments appear in the adjustments column of a worksheet for Wycliff Publications: one to record $800 depreciation of office equipment, and the other to record the use of $560 of office supplies. If the Trial Balance column totals are $15,380, what are the totals of the Adjusted Trial Balance columns? A. $16,740 B. $15,140. C. $16,180. D. $15,860.

25.

Assuming a 365 days year, Gore Industries calculated an average of 56 days to collect its account receivable in 2007. During 2007, Gore's accounts receivable turnover rate: A. Was approximately 0.19. B. Was equal to 56 times its average accounts receivable. C. Was approximately 6.52. D. Can't be determined from this information alone.

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