ANNe wrt) 2010 ‘The quality of accounting information that 2. The principle that underlies an accountant’s provides users of financial statements with decision to make a provision for doubtful debts the assurance that the information is free of isthe principle of error and bias is, (A) conservation (A) consistency (B) revenue recognition (B) relevance (©) money measurement (©) verifabitity (D) historical cost (D) reliability Sylvia Inc. paid $18 000 for 3 000 ordinary shares with a par value of $2.50 each from JLP Ltd. The Journal entry to record this transaction in the books of JLP is, (A) Dr. Investment in JLP Ltd, $18.00 Cr. Cash $18.000 (B) Dr. Ordinary share capital 318000 Cr. Cash 18000 (C)__ Dr. Ordinary share capital $7500 Dr. Share premium $10500 Cr. Cash 318000 (D) Dr. Cash $18000 Cr. Ordinary share capital $7500 Cr. Share premium 810500 Seaview Ltd. signed a 15 per cent $400 000 note payable on July 1, 2004, Interest is payable annually on the anniversary date of the note. The company prepares accounts to December 31 of each year. ‘The journal entry to record the accrued interest on the loan at December 31, 2004 is (A) Dr Interest expense 30000 Cr. Cash 830.000 (B) Dr. Note payable 360000 Cr. Interest payable $60 000 (C) Dr. Interest expense 830000 Cr Interest payable 30000 (D) Dr. Interest expense 560.000 Cr. Interest payable 860000ao ‘The MAIN duty of the external auditor, from the point of view of the shareholders, is to (A) plan and perform the audit using statistical techniques (B) exercise accuracy in conducting the audit of financial statements (©) express an opinion on the reliability of the financial statements, (D) _adhereto generally accepted auditing standards ‘tems 7- 8 refer to the following information. One clerk is responsible for keeping inventory records and another for receiving and issuing inventory items. This is an example of (A) division of labour (B) segregation of duties (©) monitoringinventory levels (D) inventory valuation The Belmopan Company began operations on January 1,2006. The company has the following items included in the owners’ equity section of its balance sheet. Eight per cent preference shares $100 par value, 25 000 shares issued and outstanding Ordinary shares $3 par value, 50 000 shares issued and outstanding Share premium Total dividends declared and paid were: During 2006 3170000 During 2007 210.000 Assuming that the preference shares were non-cumulative, how much of the 2007 dividends would be distributed to the preference shareholders? (A) $2000 (B) — $100962 (©) $110526 (D) $200.00 $2,500 000 $8 450000 82250000 Assuming that the preference shares were cumulative, how much of the 2007 dividends would be distributed to the ordinary shareholders? (A) S$ 90 (B) $5192 (C) $9200 (D) $100010. 13 Which of the following would be used in a computerized accounting system? (A) (B) © @) Revenue journal Cash receipts journal Electronic invoice form Month-end postings to the general joumal ‘The historical cost principle states that (A) (B) (c) () assets should be recorded initially at cost and then adjusted as market value changes the private activities of the owner of 1 business activity should not be incorporated into the activities of the business transactions involving assets are recorded at their acquisition cost only transactions that are capable of ‘being expressed in monetary terms should be included in the accounting records uw 12. Generally accepted accounting principles may be described as (A) the guidelines that accountants use tosolve ethical dilemmas (B) __ truths derived from the laws of nature and statute (C)__ established by the department of inland revenue of a country (D) asset of rules that are recognized as, ‘a guide for financial reporting Which of the following is NOT a feature of 4 computerized accounting system? (A) The recording of business transactions is more efficient (B) Different principles are used from those in a manual accounting system, (©) It provides faster access to ‘accounting information and reports, (D) Both large and small companies can realise the benefits of such a system, Balmain Corporation sold 1 000 ordinary shares which were held as a temporary investment, ‘The shares were acquired six months ago at a cost of $90 a share. Balmain sold the shares for $80 a share. ‘What is the entry to record this sale? (A) (B) © (D) Cash Loss on sale of temporary investment ‘Temporary stock investments Cash Gain on sale of temporary investment ‘Temporary stock investments Cash ‘Temporary stock investments Temporary stock investments Loss on sale of temporary investment Cash 8 8 80000 10000 90.000 90.000 10000 80.000 80000 80.000 80000 10000 90.00014, 15. 16, ‘The MAIN objective of financial reporting is toprovide information (A) to government departments (B) __aboutthe profitability of the business (C) regarding sources and uses of cash (D) useful for making investment and lending decisions Included in the closing inventory valuation of ‘$65 000 are damaged goods which cost $800. It was determined that these goods can be sold for $480 if $115 is spent to repair them. What is the correct valuation of the closing inventory for the balance sheet? (A) $64 200 (B) $64565 (C) $64680 (D) $6500 ‘The conceptual framework of accounting, starts with a set of (A) objectives for financial reporting (B) assumptions about the accounting profession (©) __principtes for guiding accountants (D) conventions for recording financial information DBG Ltd, acquired for cash the business of Singer Inc. on June 22, 2004, at a price of $14 500000. The book value of the net assets at the time of the transaction was $11 000 000. Independent appraisers valued Singer’s net assets ata fair market value of $13 000 000. What amount should DBG debit in the ‘goodwill account? @ $s 0 (B) —$ 200000 (C) — $1500000 (D) $3500.00 18, 19. 20. Having ONE person responsible for ordering, paying for and receiving goods (A) isanexample of segregation of duties (B) is a good example of how to safeguard the company’s assets (©) results in greater organizational efficiency (D) increases the potential for errors and fraud Which of the following statements is NOT true regarding ordinary shares or preference shares? (A) Ordinary shares are the most basic and common type of shares, (B) _Allcompanies issue ordinary shares. (C) With preference shares the amount of dividend is generally specified and increases every year. (D) With preference shares the holders have prigrity over ordinary shareholders in dividend and assets, distribution. ‘Which of the following are shareholders NOT entitled to do? (A) Vote on certain matters concerning the company at the annual meeting (B) Share residually in the company’s assets upon liquidation © Acquire inventory of the company at cost () Acquire more shares of subsequent issues of shares24 22. 23, Which of the following are characteristics of aprivately owned corporation? I. Shares are owned by family members. Il. Shares are sold to the public. ML The company can have many shareholders. IV. Shares are not sold to the public. (A) Land IV only (B) Land only (©) Wand It only (D) 1, Hand If only ‘A statutory company is an entity that has been established by an Act of Parliament and is owned by the (A) Board of Directors (B) Employees © State (©) Company ‘An event that is classified on the income statement as an extraordinary item should be (A) unusual in nature, infrequent and ‘material in amount (8) uiusual in nature, infrequent and immaterial in amount (©) infiequent and material in amount but not unusual (D) unusual in nature, material in amount ‘butnot infrequent Notes to the financial statement provide detailed explanations of selected items on the financial statement. This is an example of which principle? (A) Objectivity (B) Business entity (C) Substance over form (D) — Fulldisclosure 25. 26. 21. The Rampaul Company estimated at January 1, 2005, that its income before taxes for the year ended December 31,2005, would be $5 500 000. The Rampaul Company's tax rate for the year is 42 per cent. The company made quarterly tax payments on April 30, June 30, September 30 and December 15. The actual income for the year ended December 31, 2005, was $5700 000. ‘The amount of income tax payable at December 31,2005, is A so (B) —$ 84000 (© $100000 (D) —-$144000 ‘The following information relates to the ‘business of Sand Sloners. Net assets on January 01, 2008 Capital introduced during the year Drawings by the owner Net assets at December 31,2008 318 000| ‘What was the profit (Net income) earned in 2008? (A) $58000 (B) $3100 (© $27000 (@) $6000 Donita Company received net proceeds of $84,000 on the sale ofan investment that cost $79 000. This transaction will result in reporting in the income statement a (A) oss of $5 000 under ‘Other expenses and losses” (B) loss of $5 000 under ‘Operating expenses’ (©) gain of $5.000 under ‘Other revenues and gains’ (D) gain of $5 000 under ‘Operating revenues’28. 29. 30. 31, The purchase of treasuring stock by a corporation will reduce the (A) numberof shares issued (B) total amount of stockholders” equity (C) authorized number of shares, (D) total of retained earnings Items 29 - 30 refer to the following information. Niger Inc. secured a $540 000 12 per cent oan, on March 1,2008. The loan is payable in three annual instalments of $180 000, plus interest. The company’s year end is June 30. The first paymentis to be made on March 1,209. ‘The income statement for the year ending June 30,2008, would include interest expense of (A) 821600 (B) $2500 (©) $61200 () $6480 The balance sheet as at June 30, 2008, would indicate a current liability related to the loan of (A) $180000 (B) $201 600 (©) $228600 (D) —$244800 Will Smith, a new partner, is admitted to the Labell and Ross Partnership under the bonus ‘method, He contributes cash of $20 000, and ‘equipment with a market value of $30 000 in exchange for a 20% ownership interest in the new partnership. The capital of the existing partnership is $130 000. Labell and Ross share profits and losses ata ratio 80:20, respectively. What is Smith’s capital balance? (A) $30000 (B) — $32500 (©) $36000 (D) $5000 22. 33. 34. 36. Asingle step Income Statement shows (A) Revenue and Expenses (B) Revenue and Cost of Sales (©) Gross Income and Expenses (D) Revenue, Cost of Sales, Expenses ‘The balance sheet of a sole trader shows net, identifiable assets of $750 000, with a fair ‘market value of $600 000, A limited company purchases the sole trader’s business for $1 200 000, by issuing new shares. Atwhat value should the net identifiable assets be recorded on the books of the limited company? (A) $ 450000 (B) —$ 600000 (©) $ 750000 (PD) $1200000 An accounting firm provides $6 500 of acounting and tax services for a customer. ‘The customer pays $2,000 and agrees to pay the balance in two weeks. How should this transaction be recorded? Debit Credit ss (A) Cash 2000 Services Revenue 2.000 (B) Services Revenue 2.000 Cash 2000 (©) Cash, 2.000 Services Revenue 4500 Accounts Receivable 6500 (@) Cash 2000 Accounts Receivable 4500 Services Revenue 6500 Property and equipment are classified in the Balance sheet as (A) Current Assets (B) Intangible Assets (©) Non-Current Assets (D) Owner's Equity36. 37. 38. 39. A franchise is an example of /an 40. (A) extraordinary asset (B) —_currentasset (C)_— wastingasset (D) intangible asset Liquidity is determined by the use of the (A) investmenttumover ratio (B) _acidtestratio (©) debtto equity ratio (D) caning per share Financial statements that are expressed 4y assuming. stable monetary unit are (A) current value financial statements (B) _fair-value financial statements (©) _ historical-dollar financial statements (D) general price level financial statements ‘Acontingency liability (A) isapotential liability thatdependson 42 a future event arising out of a past transaction (B) _canatways be calculated with great precision and always has.a definite amount recorded (C)__ is not of interest to readers of financial statements (D) must be disclosed in the body of the financial statements, including the expected dollar amount During periods of inflation or deflation, the historical cost model for financial reporting is deficient because (A) comparative financial statements are published only for the three years rior to the report date (B) it uses numerous estimates for revenue and expense (C)___itrecognizes revenues and expenses before they are usually realized (D) it adds and subtracts dottars with different purchasing power without adjusting for those differences An example of a contingent liability is, (A) abond which can be converted into ordinary shares (B) _anyinterest-bearing lability (©) theunrealized loss from the reduction in the market price ofa long-term liability. (D) a lawsuit being filed against the company In preparing a statement of cash flow which of the following transactions would be considered an investing activity? (A)__ Sale ofequipment at book value (B) Sale of merchandise on credit (C) Declaration ofa cash dividend () Issuance ofa note payable45. 43. The following information was extracted from the records of ABC company. Cost of goods sold for 2008 Inventories at December 31, 2007 Inventories at December 31, 2008 ‘The inventory tumover ratio in days for 2008 is (A 0 (B) 66 © B 0) 79 Which of the following statements is NOT an objective of financial reporting? (A) To provide information that will increase the value of the company (B) To provide information in assessing fature cash flows (©) Toprovide information that is useful for making investment and credit decisions (D) Toprovide information that identifies ‘what is owned, what is owed, and the ownership interest in the company fan event is unlikely to occur and the amount can be reasonably estimated, the related liability should (A) be disclosed in the notes to the financial statement (B) not be recognised or disclosed in the financial statement (C) be recognised in the financial statement (D) not be disclosed in the notes to the financial statement $3000 000 $ 550000 $ 650000 46. 47. 48, ‘The Mangoes-by-the-Sea Company had net credit sales of $8 800 000 and cost of goods sold of $6 600 000 for the year. The average inventory for the yearamounted to $2 640 000. What was the inventory turn- over ratio for the year? (A) 2times (B) 25times (©) 3.3times (D) —10times ‘The annual cash dividends paid per share expressed as a percentage of the market price per share is called (A) retum on shareholders’ equity (B) price earnings ratio (C) dividend yield (D) profit margin Which of the following is the CORRECT equation for the acid-test (Quick) ratio? Current assets ~ inventory “ Totalliability Current assets - inventory ®) Current liability Current assets © Total ability Current assets~ stock (D) Long-term liability49. 50. SI -10- Toevaluate short-term liquidity, which ofthe following ratios and statisties for analysis would be used? 1. Current ratio II. Accounts receivable ratio Il Pledged plant assets to secured creditor (A) Tonly (8) Mlonly (C) Land Ilonly (D) 1, Wand itt In assessing the solvency of a firm at a specific date, THREE useful ratios are (A) current ratio, quick ratio and defensive interval ratio (B) __debtratio, interest cover and debt to equity ratio (C) earings per share, profit margin ratio and return on assets ratio (D) inventory tumover ratio, accounts receivable ratio and accounts payable ratio Which of the following duties are typically performed by a receiver for a firm in receivership? I. Day-to-day management of the firm II, Payment of the liabilities of the firm IIL Collection of income accruing to the firm IV. Evaluation of capital investment ‘opportunities forthe firm (A) Land only (B) 1, Mand Iitonly (©) I Mand IV only (D) 1,1, MandIv 82. 53. 54. Which of the following is NOT a MAJOR disadvantage of traditional financial statements? (A) Their emphasis is on historical cost. (B) Their omission of transactions that are difficult to measure. (©) Their failure to account for the effects of inflation, (D) Their separation of the personal affairs of the owner(s) from those of the firm, Operating activities do NOT include (A) acquisition of long-term assets (B) cash payments for utilities expenses (C) cash receipts from the sale of goods (D) cash payments for inventory purchases Which of the following should NOT be disclosed in a summary of significant accounting policies? 1. Depreciation method used I. Minority interest claims TI. Valuation basis followed IV. Amount for cumulative effect of change in accounting principles (A) Land I only (B) Hand IV only (©) Land If only (D) HL Iland IV only IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THISTEST.