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ACC 70204 Accounting for Decision Making

Quiz:
Assessment Worth 20% of subject

20 August 2015
Instructions:
1. DO NOT open this test until instructed to do so.
2. There are 3 parts to this test. Attempt ALL parts.
3. For part A – multiple choice questions, select the BEST answer to each question. Answer all
twenty questions by circling the answer of your choice. If you change your mind, clearly
indicate your new choice by whiting out your original answer and circling your new choice. Do
NOT answer questions with multiple circles. Each correct answer is worth one mark for a total
of 20 marks. No penalty for an incorrect answer.
4. For part B – financial statements: to prepare the required financial statements in the space
provided. This section is worth a total of 16 marks.
5. For part C – adjusting entries: to prepare the adjusting journal entries for a company. This
section is worth a total of 14 marks.
6. Time Allowed: 90 Minutes. (No reading time)
7. The whole of this test paper will be collected at the end of the test. No part of this test is to be
taken by the student. Where part of the test paper is found MISSING, the student’s result will
be withheld subject to further investigation.

Name:________________________________

Student Number:__________________
Part A: Multiple Choice (20 marks)

1) The purpose of financial reports is to


a. provide information for decision making.
b. report profit.
c. pay tax to the Government.
d. report to the bank.

2) The accounting process includes which steps?


a. identifying, measuring, recording and communicating.
b. identifying, recording, communicating and justifying.
c. measuring, adjusting, recording and communicating.
d. measuring, evaluating, recording and communicating.

3) The common characteristic possessed by all assets is


a. long life.
b. great monetary value.
c. tangible nature.
d. future economic benefit.

4) Johnny’s Car Repairs had total assets of RM60,000 and total liabilities of RM40,000 at the
beginning of the year. During the year the business recorded RM100,000 in revenues,
RM55,000 in expenses, and dividends of RM10,000 were distributed. Equity at the end of
the year is
a. RM55,000.
b. RM35,000.
c. RM65,000.
d. RM45,000. (Assets – Liabilities = Equity at the beginning of the year + Revenues –
Expenses – Dividends)

5) The statement of financial position


a. summarises the changes in retained earnings for a specific period of time.
b. reports changes in assets, liabilities, and equity over a period of time.
c. reports assets, liabilities, and equity at a specific point in time.
d. presents revenues and expenses for a specific period of time.

6) The accounting principle which assumes that a business will remain in operation for the
foreseeable future is the
a. monetary principle.
b. accounting entity concept.
c. full disclosure principle.
d. going concern principle.
7) Two categories of expenses in all merchandising companies are:
a. cost of sales and financing expenses.
b. operating expenses and sales.
c. cost of sales and operating expenses.
d. sales and cost of sales.

8) The primary difference between a periodic and perpetual inventory system is that a periodic
system:
a. keeps a record showing the inventory on hand at all times.
b. provides better control over inventories.
c. records the cost of the sale on the date the sale is made.
d. determines the inventory on hand only at the end of the accounting period.

9) Sales revenues are usually considered earned when:


a. cash is received from credit sales.
b. an order is received.
c. goods are transferred from the seller to the buyer.
d. goods are invoiced to the customer.

10) The cost of land does not include


a. real estate brokers' commission.
b. annual rates and taxes.
c. cash price of property.
d. title fees.

11) The Dalton Sdn Bhd purchases a new delivery truck for RM20,000. The stamp and transfer
duty is RM500. The logo of the company is painted on the side of the truck for RM600. The
truck’s annual road tax is RM60. The truck undergoes safety testing for RM110. What does
Dalton record as the cost of the new truck?
a. RM21,270.
b. RM21,210.
c. RM20,500.
d. RM20,210.

12) The carrying amount of an asset is equal to the


a. the market value of the asset less its historical cost.
b. book value relied on by secondary markets.
c. replacement cost of the asset.
d. the cost of the asset less accumulated depreciation

13) A current liability is a liability that can reasonably be expected to be paid


a. within one year or within the operating cycle, whichever is the longer.
b. between 6 months and 18 months.
c. out of currently recognised revenues.
d. out of cash currently on hand.
14) Shareholders of a company may be reluctant to finance expansion through issuing more
equity because
a. leveraging with liabilities is always a better idea.
b. their earnings per share may decrease.
c. the price of the shares will automatically decrease.
d. dividends must be paid on a periodic basis.

15) Obligations for which the amount of the future sacrifice is so uncertain that it cannot be
measured reliably are classified as
a. warranties.
b. contingent liabilities.
c. provisions.
d. accruals.

16) Shareholders of a company directly elect


a. the chairman of the company.
b. the board of directors.
c. the treasurer of the company.
d. all of the employees of the company.

17) Which one of the following is not considered an advantage of the company form of
organisation?
a. limited liability of shareholders.
b. separate legal existence.
c. continuous life.
d. government regulation.

18) When a company issues new shares the impact on the accounting equation is to increase
a. equity and decrease assets.
b. equity and increase liabilities.
c. liabilities and increase assets.
d. assets and increase equity

19) The CEO of Pure Water Ltd used the company’s money to buy a car for his wife’s personal
use. The CEO has violated the
a. monetary principle.
b. accounting entity concept.
c. accounting period concept.
d. cost principle.

20) Using accrual accounting, expenses are recorded and reported only:
a. If they are paid before they are incurred
b. When they are incurred and paid at the same time
c. When they are incurred, whether or not cash is paid
d. If they are paid after they are incurred
Part B: Financial Statements (16 marks)

The balances of the accounts of VV Sdn Bhd for the year ended 31 December 2013 are as
follows:

Accounts payable RM 31,000 Dividends paid RM 80,000


Accounts receivable 14,000 Insurance expense 22,000
Buildings 600,000 Supplies 4,000
Cash 156,000 Accrued expenses payable 33,000
Revenues 157,000 Rent expense 24,000
Share capital 520,000 Salaries expense 100,000
Retained earnings (beginning) 259,000

Required:

Prepare an income statement, a statement of changes in equity, and a statement of financial


position for VV Sdn Bhd

Answer: Part B
Part C: Adjusting Entries (14 marks)

At 31 December 2013, the trial balance of Cash Sdn Bhd was as follows:

Cash Sdn Bhd


Unadjusted Trial Balance
As at 31 December 2013
Accounts Debit (RM) Credit (RM)
Cash 6,990
Accounts receivable 7,700
Prepaid rent 3,000
Office supplies 4,120
Office Equipment 12,400
Accumulated Depreciation – office equipment 2,900
Accounts payable 1,210
Unearned fees 1,820
Loan payable – due 2015 9,900
Paid-up capital 10,000
Dividend 3,000
Retained earnings 4,000
Fees revenue 61,080
Salaries expense 45,000
Rent expense 8,700
Total 90,910 90,910

Required:

Using the following information, prepare adjusting entries for Cash Sdn Bhd. Explanations are
not required for the journal entries. Use the following accounts, if necessary: Office supplies
expense, Depreciation expense, Salaries payable, Interest expense, Interest payable.

i) A physical count of office supplies on 31 December 2013 shows RM1,440 of


unused supplies on hand
ii) Depreciation of the office equipment this year amounted to RM1,800
iii) Half the amount in Unearned fees account had been earned by the end of the year
iv) The amount in the Prepaid rent account covered December and the next 2 months
v) Salaries expenses accrued for the last 1 week in December amounts to RM2,275
vi) Interest expense of RM500 for December has not been taken up
vii) Invoices representing RM3,000 of services performed during the month have not
been recorded as of 31 December.
Answer: Part C

General Journal Debit (RM) Credit (RM)


i

ii

iii

iv

vi

vii