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INDIAN INSTITUTE OF MANAGEMENT CALCUTTA

D.H Road, Joka, Kolkata 700104


Academic Year 2013-14: Term I
Course: Corporate Financial Reporting

Quiz 1 (Total 30 points; Time 30 minutes)

Question 1: 15 points (should spend about 15 minutes)
The following business activities took place for a Merchandiser during a week.
i. Purchased office supplies on credit, Rs. 3,000; one-third was used during the week.A(2),
L(3), E(-1)
ii. Sold merchandise costing Rs. 25,000 on credit, at a profit of 60% of cost. A(15), E(15)
iii. Placed an order to purchase equipment Rs. 20,000.
iv. Collected cash from customers, Rs. 31,000.
v. Received electricity bill, Rs. 16,000.L(16), E(-16)
vi. Paid rent for next month, Rs. 20,000.
Using the information given above, answer the following questions:
1) During the week, total cash changed by Rs. _______________. (11,000)
2) During the week, total liabilities changed by Rs. __________________. (19,000)
3) During the week, total stockholders equity changed by Rs. _______________. (-2,000)
4) At the beginning of the week, the firm had office supplies inventory costing Rs. 12,000.At
the end of the week, office supplies inventory was Rs. ___________________. (14,000)
5) At the beginning of the week, the firm had total assets of Rs. 80,000. The firms total assets
at the end of the week were Rs. _______________________. (97,000)
6) The number of transactions in the above list is ____________. (five)
7) To record the transaction (vi), which account should be debited:
a) Rent Revenue
b) Prepaid Rent
c) Cash
d) Retained Earnings
e) Rent Expense
8) Which of the following is true, if transaction (v) is not recorded:
a) Expenses are understated.
b) Retained earnings are overstated.
c) Liabilities are understated.
d) All of the above.
e) None of the above.
9) To record supplies used during the week, what is the appropriate entry:
a) Closing Entry
b) Adjusting entry
c) Either (a) or (b)
d) Both (a) and (b)
e) No journal entry is required

10) Transaction (v) is an example of
a) Accrued Expense
b) Accrued Revenue
c) Unearned Revenue
d) Cash transaction
e) None of the above

Question 2: 10 points (should spend about 10 minutes)
Prepare trial balance using the ledger account balances provided below:

Trial Balance
Ledger Accounts Balance Debit Balance Credit Balance
1) Common Stock 70,000
2) Cash 85,000
3) Dividends Paid 20,000
4) Equipment 1,20,000
5) Interest Income 1,000
6) Loan Taken 50,000
7) Retained Earnings 30,000
8) Salaries Expense 54,000
9) Services Revenue 1,39,000
10) Stationary Used 11,000
Total 580,000

Trial Balance Solution Balance Debit Bal Credit Bal
Common Stock
70,000

70,000
Cash
85,000 85,000
Dividends Paid
20,000 20,000
Equipment
1,20,000 1,20,000
Interest Income
1,000

1,000
Loan Taken
50,000

50,000
Retained Earnings
30,000

30,000
Salaries Expense
54,000 54,000
Services Revenue
1,39,000

1,39,000
Stationary Used
11,000 11,000
Total
2,90,000 2,90,000


Question 1: 15 points (should spend about 5 minutes)
Conceptual questions
1) All of the following will affect retained earnings except
a. Expenses incurred
b. Dividends declared and paid
c. Revenues earned
d. Investments by owners
e. None of the above
2) Two of the major characteristics that make accounting information useful are
a. Relevance and Faithful representation
b. Verifiability and consistency
c. Comparability and flexibility
d. Understandability and consistency
e. None of the above
3) The convention of consistency refers to consistent use of accounting principles
a. among firms
b. across accounting periods
c. throughout the accounting periods.
d. within industries.
e. All of the above
4) Which of the following accounting conventions would an accountant most likely apply when
facing major uncertainties?
a. Cost-benefit
b. Conservatism
c. Materiality
d. Consistency
e. Going-concern
5) Which of the following is not an application of accrual accounting?
a. Recording advertising fees earned at the time the work is paid for
b. Adjusting unearned advertising fees to the proper balance at the end of the month
c. Recording advertising fees earned at the time service is performed
d. Recording telephone expense in the accounting period covered by the monthly bill