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Saturday, November 6, 2010

Fin621 Mid term Solved Paper 2009

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 building's life

        As depreciation is recorded, stockholders' equity is reduced

        As depreciation is recorded, total assets are reduced

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

 Retained earnings change over time because of several factors. Which of the following factors would explain anINCREASE 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

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

 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

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.

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 Syste

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 Goods Sold Rs.50, 000.

        Rs. 170,000

        Rs. 120,000

        Rs. 130,000

        Rs. 180,000

   

Question No: 40    ( Marks: 1 )    - Please choose one

 Which of the following question is NOT addressed by cash flow statement?

        How much cash was generated by the company's operations?

        Why is such a profitable company able to pay only small dividends?

        How much was spent for the new plants and equipment?

        How profitable the company's current assets are?

   

Question No: 41    ( Marks: 5 )

 On 15, 2001, ABC Company sold 1,000 printers to another company. Immediately prior to this sale, the perpetual inventory records of the company for the printers included the following cost layers.

 

Purchase date

Quantity

Unit Cost

Total Cost

Dec. 12, 2000

600

Rs. 9.25

Rs. 5,550

Jan. 9, 2001

900

Rs. 9.50

8,550

Total on hand

1,500

 

Rs. 14,100

Instructions:

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

 

Answer:

a.      FIFO               (2.5)                  DR            CR

                                                      Rs.              Rs.           

Cost of Printers Sold A/C

9350

 

Printers Inventory A/C

 

9350

 

b.      LIFO               (2.5)                 DR                  CR

                                                            Rs.                   Rs.

Cost of Printers Sold A/C

9475

 

Printers Inventory A/C

 

9475

 

   

Question No: 42    (Marks: 5)

 Hill Company adjusts its accounts at the end of each month. Prepare the adjusting entries required at December 31 based on the following information.

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

 

                                                                               DR         CR             

General Entry

Rs

Rs

Interest Expense A/C

1050

 

Interest Payable A/C

 

1050

                 

                                         

 

 

 

b.      Depreciation of the office equipment is based on an estimated life of five years. The balance in the office equipment account is Rs. 24,000; no change has occurred in the account during the year.

General Entry

Rs

Rs

Depreciation of Office Equip. A/C

 

 

 

 

 

 

 

 

 

 

c Interest revenue earned on US government bonds during December amounts to Rs. 750. This accrued interest revenue has not been recorded or received as of December 3

General Entry

Rs

Rs

Interest Receivable on Bonds A/C

750

 

Interest Income on Bonds A/C

 

750

 

 

 

 

d.      On December 31, an agreement was signed to lease a truck for 12 months beginning January 1 at a rate of 35 cents per mile. Usage is expected to be 2,000 miles per month, and the contract specifies a minimum payment equivalent to 18,000 miles a year.

General Entry

Rs

Rs

 

 

 

 

 

 

           

 

 

 

 

 

e.The company's policy is to pay all employees up-to-date each Friday. Since December 31 fell on Monday, there was a liability to employees at December 31 for one day's pay amounting to Rs. 2,800.

General Entry

Rs

Rs

Salary Expense A/C

2800

 

Salary Payable A/C

 

2800