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Practice examples MCQs Accounting, REI

1. Which one of the following statements is correct?


a. Purchased land is accounted as an item of property, plant and equipment on a
companys balance sheet;
b. Purchased land is accounted as an item of property, plant and equipment on a
companys income statement;
c. Purchased land is accounted as an item of inventory on a companys balance sheet;
d. Purchased land is accounted for as either property, plant and equipment or inventory,
depending on its use within the company
2. Which one of the following combinations is true?
1) The balance sheet comprises items of assets, equity and liabilities; 2) the balance sheet
comprises items of assets, equity, liabilities, revenue and expenses; 3) the income statement
comprises items of minus assets, liabilities, and expenses; 4) the income statement comprises
items of revenues and expenses.
a. Only 1
b. 1 and 4
c. None of the above statements is correct
d. All four statements are correct
e. Only 4
3. The following items have been extracted from Exam Companys financial statements (all
amounts in thousands RON): merchandise 5,000 RON; buildings 12,000; write down of
merchandise 1,000; depreciation of buildings 2,000; revenue from selling merchandise 1,200;
provisions for customer guarantees 500; prepaid rent 600; long term bank loans 1.200 (only
long-term portion). VAT is collected at a rate of 24%. Here are some statements regarding the
companys balance sheet: 1) The Exam Companys assets amount at 14,000; 2) The Exam
Companys assets amount at 15,200; 3) The Exam Companys balance sheet shows an E heading
of 4.600; 4) The Exam Companys balance sheet shows a J heading of 12.900. Which one
combination of answers is correct?
a. 1, 3, and 4;
b. 3 and 4;
c. 2, 3 and 4;
d. All statements are correct.
4. Which of the following is correct?
a. 129 = 457 is the accounting entry to journalize the distribution of dividends to
shareholders;
b. 401 = 707 and 4426 is the accounting entry to journalize the selling of merchandise on
credit;
c. A companys 4426 account shows 3,000 RON; the same companys 4427 account shows
5,000 RON; its 4424 account shows 1,500 RON; the resulting VAT compensation finally
shows a 4423 account of 2,000 RON.
d. 212 and 4426 = 401 is the accounting entry to journalize the acquisition of a building on
credit

5. An entitys lawyers advise its management that pursuant a law suit it is involved in, it may
receive a compensation of 50,500 RON from one of its commercial partners, sometimes after
the end of the 2013 calendar year. It is now 31 December 2013, and the company is preparing
the financial statements. Which one of the following is correct?
a. Based on this information, the company records an asset (cash) and revenue in its
financial statements;
b. Based on this information, the company records only an asset in the form of cash, for
the entire amount, as the outcome of the law suit is almost sure;
c. Based on this information, the company does not record anything in its financial
statements as the outcome is not sure and the amount cannot be measured reliably;
d. Based on this information, the company only records revenue (not cash) because the
amount is only realizable.
6. Which one of the following statements is correct?
a. recording the interest accrued at the end of an accounting period is a consequence of
the matching principle;
b. the prudence principle forbids companies to record the profit potentially made on the
increase in the realizable value of inventories above cost;
c. the cut-off principle allows companies to record prepaid rent as an asset;
d. all of the above are correct.
7. Which one of the following entries is not possible according to Romanian accounting regulations
(OMFP 1802/2014)?
a. 121 = 5121
b. 5121=2676
c. 397=7814
d. 623 and 4426 = 401
8. A companys finished goods inventories were valued at 6,234 RON on December 30 2013. The
company sells on credit half of them on December 31 2013, for 3,443 RON, exclusive of VAT
24%. At the same date, it is estimated that the company can realize the remaining inventories
for 3,001 RON. Which one of the following is incorrect?
a. profit on this sale equals 326 RON;
b. assets resulting from these transactions are valued on the companys balance sheet
prepared as at December 31 2013 at 3,001 RON;
c. receivables from customers resulting from this sale equal 4,269.32 RON;
d. the 2013 income statement is affected by a write-down of 116 RON.
9. A companys management notes that their companys profit as at December 31 2013 is lower
than expected. They are considering various alternatives to increase their profits. Which one of
the following statements is correct?
a. a change from WAC to FIFO may be envisaged, to increase profits;
b. whatever their action, the companys reported profit will remain the same;
c. they cannot change at that time the reported profit as this is an amount that needs to
reflect truly and fairly the companys activities;
d. they cannot change WAC to FIFO to measure the exits of inventories because they need
to maintain the valuation method over the entire life of the company.