1. 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
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INSTRUCTIONS TO CANDIDATES
1. This test paper consists of TWENTY-FIVE (25) multiple-choice questions.
2. 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.
3. This is a close-book test. You are not allowed to bring in any materials other than pens,
pencils, erasers and calculators.
4. 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.
Name:
Matriculation Number:
For Examiners’ Use Only:
Marks
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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. Expense of $4,000
B. Other income of $4,000
C. Other income of $2,000
D. 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 CR
A. Cash Unearned Revenue
B. Cash Sales
C. Unearned Revenue Prepayment
D. Unearned Revenue Sales
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4. Which statement is correct?
A. Assets – Liabilities = Owners' Equity
B. Assets + Owners' Equity = Liabilities
C. Liabilities + Assets = Owners' Equity
D. 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. Every debit balance represents an expense.
B. Assets are represented by debit balances.
C. Liabilities are represented by debit balances.
D. 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 Company’s
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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