Download Examination for FUNDAMENTAL ACCOUNTING

Examination for FUNDAMENTAL ACCOUNTING
Part I: Fill-In-The-Blanks (10*2=20 points)
1. The three common forms of business organizations are _________, ____________and
____________.
2. The difference between the increases (including the beginning balance) and decreases
recorded in an account is called the account ____________.
3. “Assets = Liabilities + Owner's Equity” is called the ____________ equation or balance
sheet equation.
4 An economic event that changes the financial position of an organization, and that often
takes the form of an exchange of economic consideration between two parties, is
called a business ____________.
5 The statement of ____________ reports the changes in cash and cash equivalents over
the reporting period.
6 Those long-term assets that lack physical form and their benefits are uncertain are
called ____________ assets.
7 ____________ principle requires financial statements (including footnotes) to report all
relevant information about the operations and financial position of the entity.
8 Amounts in the Unadjusted Trial Balance columns are taken from account balances in
the ____________.
9 Comparative financial statements in which each amount is expressed as a percent of a
base amount are called __________ statements.
10 Straight-line method of interest allocation is a method of amortization that allocates an
equal amount of ________ to each accounting period in the life of bonds.
Part II: True/False Questions (10*1.5= 15 points)
1. External users of accounting information are not directly involved in running the
organization.
2. Profit is determined by subtracting sales revenues from the total expenses of the firm.
3. Checks, invoices, and sales receipts are examples of source documents.
4. An AIS (Accounting Information System) is part of the MIS (Management Information
System) and collects and processes financial data for communication to users.
5. Liabilities are probable future payments of assets or services that an entity is presently
obligated to make as a result of past transactions or events.
6. During the accounting period, the assets increased by $4,000 and the equity increased
by $1,000. For the balance sheet equation to balance, the liabilities must increase by
$5,000.
7. The reversing entry for an adjusting entry that debited Accounts Receivable and
credited Fees Earned would be a debit to Fees Earned and a credit to Accounts
Receivable.
8. A revenue expenditure benefits only the current period and should be charged to
expenses of the current period. A capital expenditure has a benefit that extends
beyond the end of the current period and should be charged to an asset.
9. When a company records a credit sale, the acid-test ratio will increase.
10. Data from one or more direct competitors of the company under analysis are usually
preferred for developing standards for comparisons.
Part III: Multiple Choices (10*2.5= 25 points)
1. The accounting specialty that deals with collecting and controlling the costs of
producing a given product or service is called
a) internal auditing
b) bookkeeping
c) cost accounting
d) general accounting
2. Billy Gates, the owner of a Chinese restaurant, purchased a five-year insurance policy.
Recording the purchase of the policy requires
a) an asset to be debited, a liability to be credited
b) a liability to be debited, an asset to be credited
c) one asset to be debited, another asset to be credited
d) withdrawals to be debited, an asset to be credited
3. Anne Wang received $8,000 for some excavation work to be done when the weather
permits. Anne foresees that it will be at least three weeks before he can start the job.
Recording the transaction requires
a) an asset to be debited, a liability to be credited
b) a liability to be debited, an asset to be credited
c) withdrawal to be debited, an asset to be credited
d) an asset to be debited, revenue to be credited
4. China Garden Restaurant hired a first-year accounting intern to oversee the
cash-collection procedures. When the firm pays the student her weekly wage, the
restaurant will
a) increase an asset, increase a liability
b) decrease an asset, decrease a liability
c) increase an asset, increase owner's equity
d) decrease an asset, decrease owner's equity
5. At the end of the Alice Water-pool Company’s fiscal year, an adjusting entry was made
for accrued salaries of $500. On the first day of the new year the adjusting entry was
reversed. The salaries for one week, $1,250, were paid on the first Friday. The entry to
record paying the salaries expense for the week would be a
a) Sal. Exp., dr., $750; Salaries Payable, dr., $500; Cash, cr., $1,250
b) Sal. Exp., dr., $500; Salaries Payable, dr., $750; Cash, cr., $1,250
c) Salaries Exp., dr., $1,250; Cash, cr., $1,250
d) Salaries Exp., dr., $1,250; Salaries Payable, cr., $1,250
6. The subtotals of the Income Statement columns of the work sheet are $3,500 and
$4,900, respectively. If the subtotal of the Balance Sheet Debit column is $9,600, then the
subtotal of the Balance Sheet Credit column should be
a) $1,400
b) $11,000
c) $8,200
d) $6,800
7. To establish a petty cash fund for a department requires a journal entry that will
a) debit Cash and credit Petty Cash
b) debit Petty Cash and credit Cash
c) debit Miscellaneous Expense and credit Cash
d) debit Accounts Receivable and credit Petty Cash
8. Nina Company issues ten-year bonds with a par value of $100,000, 8% annual interest,
were sold for $106,000 on September 30, when the market rate of interest was 7%. The
issuer uses straight-line amortization of premium. The December 31, year-end adjusting
entry for accrued interest will include a:
a) debit to Interest Payable for $2,000
b) credit to Interest Payable for $1,850
c) debit to Premium on Bonds Payable for $150
d) debit to Bond Interest Expense of $1,850
9. Here is information taken from the accounting books of Nikey Company: net sales were
$360,000, the cost of goods sold was $180,000, operating expenses were $120,000, the
ending balance of the Accounts Receivable account was $20,000. Now assume that the
merchandise turnover ratio was 12.75. Then Nikey’s profit margin was:
a) 16.67%
b) 20.0%
c) 40.0%
d) 33.3%
10. Which line is NOT correct?
a) Ratio: Current ratio; Type of measurement: Short-term liquidity
b) Ratio: Return on total assets; Type of measurement: Operating efficiency
c) Ratio: Dividend yield; Type of measurement: Capital structure
d) Ratio: Equity ratio; Type of measurement: Long-term risk and capital structure
Part IV: Problems (2*20 = 40 points)
1. The following is the information obtained from the financial reporting of Mille Company:
2001
Total liabilities
2000
1999
1998
$100,000 $150,000 $122,000
$80,000
Shareholders' equity
80,000
150,000
130,000
100,000
Net income
20,000
23,000
24,000
15,000
Assume that 50,000 Mille common shares have been outstanding since 1998.
Requirement:
Calculate the earnings per share in 2001 for Mille Company.
2. From the accounting books of Monte Cristo Co., you can find out the following
information:
The days' sales in inventory is 73.
The cost of goods sold is $720,000.
The net sales are $1,020,000.
The beginning inventory was $82,000.
Requirement:
What is the ending inventory?