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1. The document contains multiple choice questions about accounting concepts such as the double entry system, income statements, cash flow statements, financial ratios, and accounting equations.
2. Key topics assessed include recording transactions, types of financial statements, analysis of financing activities, calculation of liquidity and profitability ratios, and the basic accounting equation.
3. The questions test understanding of concepts like journal entries, accounting for distributions, inventory cost flow assumptions, and classification of items in the balance sheet.
1. The document contains multiple choice questions about accounting concepts such as the double entry system, income statements, cash flow statements, financial ratios, and accounting equations.
2. Key topics assessed include recording transactions, types of financial statements, analysis of financing activities, calculation of liquidity and profitability ratios, and the basic accounting equation.
3. The questions test understanding of concepts like journal entries, accounting for distributions, inventory cost flow assumptions, and classification of items in the balance sheet.
1. The document contains multiple choice questions about accounting concepts such as the double entry system, income statements, cash flow statements, financial ratios, and accounting equations.
2. Key topics assessed include recording transactions, types of financial statements, analysis of financing activities, calculation of liquidity and profitability ratios, and the basic accounting equation.
3. The questions test understanding of concepts like journal entries, accounting for distributions, inventory cost flow assumptions, and classification of items in the balance sheet.
The process of recording the economic effects of business transactions in a book of
original entry is knows as which of the following? Double entry system Debit Journalizing Posting
An entry that affects more than one accounts is knows as _____________. Journal entry Compound entry Adjusting entry e!ersing entry
"n which of the following form of "ncome #tatement$ the total of all e%penses is deducted from the total of all re!enues? &ultiple'step form Account orm eport form #ingle'step form
(hich one of the following statements is T)* regarding distributions to stockholders? The payment of di!idends is not directly related to the profits of a gi!en period #hareholders can indi!idually decide on their distributions To receive a corporate dividend! stoc" must #e o$ned on t%e date o declaration +orporate di!idends reduce contributed capital and therefore$ stockholders e,uity
All of the following are true regarding the financing acti!ity section of the ca sh flow statement *-+*PT.
/inancing acti!ities re,uire analysis of long'term liability and shareholders0 e,uity accounts The ability to issue large ,uantities of common shares usually signals in!estor confidence "n the future of the company *%cessi!e borrowing has been the downfall of many companies T%e declaration and payment o a large cas% dividend may signal an emergency
(hich of the following would 12T be the cash inflow for the business? #ale of land for cash "ssuance of long term bonds The sale of common stock &etirement o long term de#t
)nder which cost flow assumption$ the ending in!entory is composed of the earliest purchased &erchandise? FIF' 3"/2 A!erage cost #pecific identification $$$(vustudents(ning(com (hich of the following would affect the gross profit rate if sales remain constant? An increase in ad!ertising e%pense A decrease in depreciation e%pense An increase in cost o goods sold A decrease in insurance e%pense
(hich of the following is 12T an ad!antage of a #ole proprietorship? *asy to form and wind up Direct moti!ation 4etter control )imited lia#ility
(hich of the following is a type of preferred stock that entitles the holder to a fi%ed di!idend And$ in addition$ to the right to get any surplus profits after payment of agreed le!els of di!idends to holders of common stock? "n arrears preferred shares +all able preferred shares +umulati!e preferred shares *articipating preerred s%ares
" f a firm has s. 566 in in!entories$ a current ratio e,ual to 5.7$ and a ,uick ratio e,ual to 5.5$ (hat is the firm8s 1et (orking +apital? s. 6 s. 566 &s( 2++ s. 5$666
To financial analysts$ 9working capital9 means the same thing as which of the following? Total assets /i%ed assets +urrent assets Current assets minus current lia#ilities
(hich of the following could account for a company8s gross profit ratio increa sing from one Period to the ne%t?
An increase in the cost of sales which has not been accompanied by an increase in the #elling price of goods sold An increase in t%e selling price o goods sold $%ic% %as not #een accompanied #y an Increase in t%e cost o sales A change in the mi% of goods sold so that lower profit margin goods take a greater Proportion of total sales A change in stock !aluation method at the year end which leads to a decrease in the +losing stock figure
1estle Pakistan 3imited is an e%ample of which of the following types of businesses? Manuacturing #er!ice &erchandise (hole seller
(hich of the following represents the long term debt paying ability of the co mpany as they 4ecome due? 3i,uidity ,olvency Profitability #tability (hich group of ratios relates the financial charges of a firm to its ability to ser!ice them? Debt ratios Coverage ratios Profitability ratios Acti!ity ratios $$$(vustudents(ning(com "n isolation$ which of the following is T)* about a financial ratio? )seless piece of information -seul piece o inormation )seful only for past performance )seful only for future predictions
:ow is the accounts recei!able turno!er ratio calculated? 1et credit sales ; A!erage total assets 1et credit sales ;2perating income Net credit sales .Average accounts receiva#les 1et credit sales ;+ost of goods sold
+ompany A makes an operating profit margin of < = on sales of s. 7.< million. +ompany 4 has sales that are 76= higher than +ompany A and achie!es an operating profit margin of >.<=. (hich company makes the highest operating profit? +ompany 4 Company A 4oth make the same operating profit 1ot possible to calculate
The DuPont Approach breaks down the earning power on shareholders8 e,uity ?2*@ as which of the following? Net proit margin / Total asset turnover / 01uity multiplier Total asset turno!er A Bross profit margin A Debt ratio Total asset turno!er A 1et profit margin Total asset turno!er A Bross profit margin A *,uity multiplier
(hich of the following statement best describes the operating profit margin? "t shows what portion of profits are being distributed to shareholders "t shows what return is being made on assets employed in the business It s%o$s %o$ $ell a company is controlling its costs! including over%eads "t shows how efficiently a company is turning profits into cash
eturn on #ales is also known as which of the following? Bross profit margin 'perating proit margin eturn on total assets eturn on in!estment
(hich of the following is 12T a profitability measure? Accounts receiva#le turnover ratio eturn on total assets eturn on sales Di!idend yield
(hich of the following is formula to measure the return on total assets? A!erage total assets by operating income A!erage total assets by net income 'perating income #y average total assets 1et income by a!erage total assets
(hich of the following is 12T part of additional paid'in'capital of the company? Preferred stocks +ommon stocks etained earnings 2ividends distri#uted
(hich of the following options indicate how ,uickly accounts recei!ables are c on!erted into cash? Accounts receiva#le turnover Days to collect accounts recei!able (orking capital Total assets turno!er
(hich one of the following statement indicates the "n!entory turno!er ratio? :ow ,uickly company prepared its in!entory :ow ,uickly company con!erts its in!entory into cash :ow ,uickly company purchases its in!entory 3o$ 1uic"ly company sells its inventory
Assume that a company has current assets of s. C6$666$ current liabilities of s. <$666 and prepaid e%penses of s. <$666. +alculate the ,uick ratio of the company? 1(45 5.D5 5.EC 6.<E
(hat will be the effect on the *P# of the company$ if it paid stock di!idend on common stock? Increase Decrease 1o effect +an not be found from the gi!en information
(hat will be the effect of appropriated retained earnings on the rate of return on stockholder8s e,uity? Increase Decrease 1o effect +an not be found from the gi!en information
(hich of the following is the basic purpose of an accounting system? De!elop financial statements in conformity BAAP *rovide as muc% useul inormation to decision ma"ers as possi#le ecord changes in the financial position of an entity &eet an organiFation8s need for accounting information as efficiently as possible
A complete set of financial statements for :artman +ompany$ at December > 5$ 5GGG$ would include each of the following$ *-+*PT.
4alance sheet as of December >5$ 5GGG "ncome statement for the year ended December >5$ 5GGG ,tatement o pro6ected cas% lo$s or 2+++ 1otes containing additional information that is useful in interpreting the financ ial statements
(hich of the following e,uations properly represents a deri!ation of the fundamental accounting e,uation? Assets H liabilities I owner8s e,uity Assets I owner8s e,uity +ash I assets Assets 7 lia#ilities 8 o$ner9s e1uity
(hich of the following is T)* regarding etained *arnings? "ncreased by net income "ncreased by re!enues 2ecreased #y dividends declared Decreased by gains and losses
(hat are the effects of an adjusting entry on the financial statements? &atch re!enues and e%penditures "ncrease net income Increase t%e accuracy o #alance s%eet and income statement &atch re!enues and assets
The supplies account has a balance of s. 5$<66 at year end. The actual amount of supplies in hand at the end of period is s. J66. The necessary adjusting entry is.
Debit #upplies on :and s. 5566K +redit #upplies *%pense s. 5566 Debit #upplies *%pense s. J66K +redit #upplies on :and s. J66 2e#it ,upplies 0:pense &s( 11++; Credit ,upplies on 3and &s( 11++ Debit #upplies on :and s. J66K +redit #upplies *%pense s. J66
(hich of the following principle deals with the !aluation and recording of the assets at cost? *ntity Principle &atching Principle Cost *rinciple #table +urrency principle (hich of the following is the acronym for BAAP? Benerally Adopted Accounting Principles Benerally Accepted Auditing Principles <enerally Accepted Accounting *rinciples Benerally Adapted American Principles :ow much duration does an accounting period usually ha!e? Three months Two years 'ne year /i!e years To determine the balance of a particular account$ one should refer to which of the following? )edger #ource document +hart of accounts Journal As transactions and e!ents related to financial resources occur$ they are analyFed with respect to their effect on which of the following? /inancial position of the company Accounting cycle Trial #alance ?doubted@ 3i,uidity position of the company (hich of the following refers to the term LpostingM? The system of gi!ing numbers to the accounts Transerring t%e de#its and credits to ledger Transferring the debits and credits to journal The recording of transactions (hich of the following is the ne%t step after the preparation of trial balance? Adjusted trial balance /inancial statements Ad6usting entries +losing entries (hich of the following is T)* regarding the income statement? The income statement reports only re!enue for which cash was recei!ed at the point of sale The income statement reports the financial position of a business at a particular point in time T%e income statement is sometimes called t%e statement o operations The income statement reports re!enues$ e%penses and liabilities (hich of the following principle is used for recording an e%pense? Matc%ing *rinciple +ost Principle ealiFation Principle 2bjecti!ity Principle The net income reported on the income statement is s. G6$666. :owe!er$ adjusting entries ha!e not been made at the end of the period for supplies e%pense of s. 7$D66 and accrued salaries of s. 5$>66. 1et income$ as corrected$ would be. s. ED$>66 &s( =6!+++ s. EE$D66 s. G6$666 Prepaid *%pense is a?n@ _________ account and has a _________ normal balance. e!enue$ credit 3iability$ credit Asset! de#it *%pense$ debit +ompany A owns a building. (hich of the following statements regarding depreciation is /A3#* from an accounting perspecti!e? As the market !alue of the building increases$ depreciation should increase 2epreciation is an estimated e:pense to #e recorded eac% period during t%e #uilding>s lie As depreciation is recorded$ stockholders0 e,uity is reduced As depreciation is recorded$ total assets are reduced A firm paid s. E66$666 in di!idends o!er the last period. The beginning and ending retained earnings account balances were s. 56$566$666 and s. 57$<66$666 respecti!ely. Assuming a J6= a!erage ta% rate$ what was the firm8s net income ?net profit after ta%es@? s. <$>>>$>>> s. >$766$666 &s( 2!?++!+++@dou#tedA s. 5$C66$666 (hich of the following is the largest single e%pense of most merchandising firms? Cost o goods sold ent *%pense AmortiFation *%pense #alaries *%pense (hich of the following is 12T among the fi!e main kinds of current assets? +ash and e,ui!alents 2eerred income Accounts recei!able Prepaid e%penses (hen preparing a statement of cash flows under the indirect method$ supplemental disclosure should be made for which of the following? Net cas% consumed #y operating activities +ash di!idend distributions +ash paid for interest and ta%es +ash paid for wages (hich of the following items is included in the financing acti!ities section of the statement of cash flows? Cas% eects o transactions involving ma"ing and collecting loans +ash effects of ac,uiring and disposing of in!estments and property$ plant$ and e,uipment +ash effects of transactions obtaining resources from owners and pro!iding them with a return on their in!estment +ash effects of transactions that enter into the determination of net income A4+ +ompany has a cost of goods sold of s. <66$666. During the year the in!entory increased by s. 56$666 and accounts payable increased by s. 5<$666. The interest e%pense was s. 5<$666 for the year and di!idend of s. 55$666 were paid during the year. (hat would be the cash payments for the purchase of the merchandise. s. <6<$666 &s( 416!+++ s. JG6$666 s. JG<$666 (hich of the following arrangement is used to maintain the accounts? #e,uentialy Alphabaticaly &onthly 'rderly (hich of the following represents the main step?s@ of accounting cycle?
ecording the transactions +lassifying the transactions 2rdering$ summariFing$ counting the transactions &ecording! classiying! summarizing transactions
4lankenship +ompany pays its employees e!ery /riday for work rendered that week. The payroll is typically s.56$666 per week. (hich of the following journal entries would 4lankenship ordinarily record on the /riday payday? #alary e%pense s. 56$666 ' DebitK #alary payable s. 56$666 ' +redit #alary e%pense s. 56$666 ' DebitK +ash s. 56$666 ' +redit #alary payable s. 56$666 ' DebitK +ash s. 56$666 ' +redit #alary payable s. 56$666 ' DebitK #alary e%pense s. 56$666 ' +redit etained earnings change o!er time because of se!eral factors. (hich of the following factors would e%plain an INC&0A,0 in retained earnings?
(hich one of the following statements is T&-0 regarding distributions to stockholders? The payment of di!idends is not directly related to the profits of a gi!en period #hareholders can indi!idually decide on their distributions To recei!e a corporate di!idend$ stock must be owned on the date of declaration Corporate dividends reduce contri#uted capital and t%ereore! stoc"%olders> e1uity
(hich of the following is N'T the most common e%ample of cash e,ui!alents? #a!ings deposits +ertificates of Deposit ?+Ds@ #tocks of other companies Money mar"et mutual unds
"n perpetual in!entory system$ a return of defecti!e merchandise is recorded by crediting __________. Purchases *urc%ase &eturns Purchase Allowance &erchandise "n!entory
(hich factor would N'T affect the gross profit rate? An increase in t%e cost o %eating t%e store An increase in the price of in!entory items An increase in the sale of lu%ury items An increase in the use of Ldiscount pricingM to sell merchandise Assets which ha!e N' market !alue are called. (asting assets Fictitious assets Nuick assets Tangible assets
Audit opinions can N'T be classified as which of the following? Ad!erse opinion )n,ualified opinion Nualified opinion 2isagreement o opinion
The audit is N'T a necessary re,uirement for which of the following companies? 3isted companies +orporations ,ole proprietors%ip Partnerships
(hich of the following is N'T a part of the fi!e'year summary of a company? 1et income;3oss Total assets 2iscontinued operations 1et sales
(hich of the following is N'T a feature of preferred shares? 2istri#utive +allable "n arrears +umulati!e
(hich of the following is a type of preferred stock that entitles the holder to a fi%ed di!idend and$ in addition$ to the right to get any surplus profits after payment of agreed le!els of di!idends to holders of common stock? In arrears preerred s%ares @dou#tedA +all able preferred shares +umulati!e preferred shares Participating preferred shares
(hich one of the following represents the !alue of shares in the market at any point of time? Par !alue Boo" value /ace !alue &arket !alue
(hich one of the following represents the !alue of shares ii!e balance sheets$ which of the following can N'T be found? The increasing items The decreasing items T%e unc%anged items The future profitable items
(hich of the following would N'T impro!e the current ratio? "ssue long'term debt to buy in!entory #ell common stock to reduce current liabilities #ell fi%ed assets to reduce accounts payable Borro$ s%ort term to inance additional i:ed assets @dou#tedA
A company e%periences a dramatic fall in its gross profit ratio. This could be the result of which of the following? An increase in competition in t%e company9s main product mar"et An increase in the incidence of bad debts An increase in o!erhead e%penses An increase in demand for the company8s products
1otes to financial statements are beneficial in meeting the disclosure re,uirements of financial reporting. The note should not be used to. +orrect an improper presentation in the financial statements 2escri#e signiicant accounting policies Describe depreciation methods employed by the company Describe principles and methods peculiar to the industry (hich of the following feature is shown by the income statement for a merchandising company? Bross profit Cost o goods sold A sales re!enue section All of the gi!en options "n a period of rising prices$ all of the following statements regarding 3"/2 are true *-+*PT. 1et income is generally higher 0nding inventory is generally undervalued?Doubted@ "t can be used to manipulate net income &ost recent in!entory costs are allocated to cost of goods sold /rom the gi!en data$ calculate +ost of Boods #old using the /"/2 costing method. 4eginning in!entory is 56 units . s. 56 each. 2n January 76$ purchased 56 units . s. 76 each 2n January >6$ purchased < units . s. >6 each 5< of the 7< units are sold. &s( 2++ s. 5<6 O s. ><6 s. J<6 "n which of the following in!entory pricing procedure$ the oldest costs incurred rarely ha!e an effect on the ending in!entory !aluation? /"/2 )IF' etail (eighted'a!erage "f beginning in!entory is s. C6$666$ cost of goods purchased is s. >E6$666$ and ending in!entory is s. <6$666$ what is cost of goods sold under a periodic system? &s( CD+!+++@ormula E opening F purc%ases 7 endingA s. >D6$666 s. >>6$666 s. J76$666 The purpose of recording depreciation on producti!e assets is to. eflect the decline in the market !alue of the assets each period educe income when the company has an e%ceptionally profitable year 4e in conformity with the re!enue recognition principle Allocate t%e original cost o a productive asset to e:pense over its useul lie "n which of the following situations$ a company should 12T record any depreciation e%pense on asset described? +omputer Airline is re,uired by law to maintain its aircraft in Las good as newM condition &etro Ad!ertising owns an office building that has been increasing in !alue each year +omputer #ales +ompany has in in!entory a new type of computers$ designed ne!er to obsolete None o t%e given option is rig%t as depreciation is applied on all assets (hich of the following is 12T the part of annual report? /inancial statements Auditor0s report /i!e year summary Future investments report "n a statement of cash flows$ the ac,uisition of land by issuing capital stock. "s not shown at all$ since no cash was recei!ed or disbursed "s shown as an in!esting acti!ity Is s%o$n as a inancing activity?Doubted@ "s shown in a supplementary schedule as a non'cash in!esting and financing transaction (hich of the following would represent an increase in 2wner8s *,uity? "ncrease in net income Increase in assets "ncrease in accounts recei!able "ncrease in cash (hich of the following steps of accounting cycle keep on occurring throughout the period? Journalizing and posting t%e entries &aking adjusting entries for the rele!ent accounts Preparing Trial 4alance Preparing financial statements (hich one of the following items is 12T generally used in preparing a statement of cash flows? Adjusted trial balance Comparative #alance s%eets@dou#tedA +urrent income statement Additional information /rom the gi!en information$ calculate the +ost of Boods #old using the weighted' a!erage cost method. 4eginning in!entory 56 units . s. 56 each 2n January 76$ purchased 56 units . s. 76 each 2n January >6$ purchased < units . s. >6 each 5< of the 7< units are sold s. 766 &s( 25+ s. >66 s. ><6 (hich of the following is the most common item in adjusting entries of a merchandising business? )n'earned re!enue Pre'paid e%pense 2epreciation e:pense Accrued re!enue +losing entries result in net income being calculated in the income summary account and then transferred to which of the following account? &evenue account +ommon #tock account Di!idends account 2wner8s +apital account (hich of the following ,uestion is 12T addressed by cash flow statement? :ow much cash was generated by the company0s operations? (hy is such a profitable company able to pay only small di!idends? :ow much was spent for the new plants and e,uipment? 3o$ proita#le t%e company>s current assets areG (hich of the following statements is +2*+T regarding depreciation methods? Accumulated depreciation represents a fund being accumulated fro the replacement of assets The cost of a machine includes the cost of repairing damage to the machine during the installation process A company may use dierent depreciation met%ods in its inancial statements and its income ta: returns The use of an accelerated depreciation method causes an asset to wear out more quickly than does the straight line method $$$(vustudents(ning(com
5. (hich one of the following is a temporary account? a. +ash b. Accounts ecei!ables c( Insurance 0:pense d. Accounts payable
7. The term used for the difference between fair !alue of a company and the purchase price is. a. Trade &ark b. &arket Palue c( <ood Hill d. Purchase Price
>. /inancial statement ?s@ that has all temporary accounts is. a. 4alance #heet b. "ncome #tatement c. +ash /low #tatement d( ,tatement o '$ner>s 01uity
J. The accounting cycle runs in the se,uence a( Analyze! 6ournalize! post! ad6ust! and prepare statements! close b. Post$ journaliFe$ analyFe$ prepare statements$ close$ adjust c. Prepare statements$ journaliFe$ post$ adjust$ close$ analyFe d. JournaliFe$ post$ close$ prepare statements$ adjust$ analyFe
<. After all the closing entries ha!e been posted$ what will be the balance of the income summary account? a. A debit if a net income has occurred b. A debit if a net loss has occurred c. A credit if a net loss has occurred d. Qero
C. (hich one is T)* about Post'+losing trial balance? a( Be prepared #eore closing entries are posted to t%e ledger b. +ontain both income statement and balance sheet accounts c. +ontain only balance sheet accounts d. +ontain only income statement accounts
D. e!enue from ser!ices is classified as. a. "n!esting "nflow #( 'perating Inlo$ c. "n!esting 2utflow d. 2perating 2utflow
E. "f the cost of a building is s. G6$ 666 and its estimated useful life is >6 years. The depreciation e%pense for one month is. a. s. C66 #( &s( 24+ c. s. >66 d. s. <66
G. The supplies on hand account ha!e a balance of s. 5<66 at year end. The actual amount of supplies on hand at the end of period is s. J66. The necessary adjusting entry is. a. Dr. #upplies on :and s. 5566 +r. #upplies *%pense s. 5566 b. Dr. #upplies *%pense s. J66 +r. #upplies on :and s. J66 c( 2r( ,upplies 0:pense &s( 11++ Cr( ,upplies on 3and &s( 11++ d. Dr. #upplies on :and s. J66 +r. #upplies *%pense s. J66
56. "f a company has e!enue s. I J<$666$ *%penses were s. I >D$<66$ 2wner0s withdrawals I s. 56$666. +alculate the amount of net income or net loss of the company. a. Profit of R 5<$ 66 b. 3oss of R 7<$ 66 c( *roit o I 24! ++ d. 3oss of R7<$666
:ow much duration does an accounting period usually ha!e? Three months Two years 'ne year /i!e years (hich of the following statement shows the effects of cash inflows and outflows? 4alance #heet #tatement of 2wner0s *,uity "ncome #tatement ,tatement o Cas% Flo$s To determine the balance of a particular account$ one should refer to which of the following? )edger #ource document +hart of accounts Journal E ? A business has purchased a building on credit$ how it would be recorded in the journal? 4uilding ' +reditK Accounts payable ' Debit Building 7 2e#it; Notes paya#le 7Credit 4uilding ' DebitK 2wner0s e,uity' +redit 4uilding ' DebitK Accounts payable ' +redit E 4 An entry that affects more than one accounts is knows as _____________. Journal entry +ompound entry Adjusting entry e!ersing entry E 6 (hich of the following is N'T true about the net income? It is a calculated igure and represents actual cas% "t can be distributed among holders of common stock as a di!idend "t can be held by the firm as retained earnings "t is obtained by subtracting e%penses from the re!enues E 5 (hat would be the adjusting entry to record depreciation if the estimated amount of depreciation on e,uipment for a period is s. 7$666? Depreciation e%pense ' DebitK *,uipment ' +redit 2epreciation e:pense 7 2e#it; Accumulated depreciation 7 Credit *,uipment ' DebitK Depreciation e%pense ' +redit Accumulated depreciation ' DebitK Depreciation e%pense ' +redit E = The trial balance shows #upplies of s.5$><6 and #upplies *%pense of s.6. "f s.C66 of supplies are on hand at the end of the period$ the adjusting entry would be. ,upplies! &s( 6++ 7 2e#it; ,upplies 0:pense! &s( 6++ 7 Credit #upplies$ s. D<6 ' DebitK #upplies *%pense$ s. D<6 ' +redit #upplies *%pense$ s. D<6 ' DebitK #upplies$ s. D<6 ' +redit #upplies *%pense$ s. C66 DebitK #upplies$ s. C66 ' +redit
E D (hich of the following accounts would N'T be included in a post'closing trial balance? +ash Accumulated depreciation '$ner>s e1uity /ees earned E 1+ After the closing entries are posted to the ledger$ each e%pense account will ha!e? A debit balance A negati!e balance A credit balance A zero #alance E 11 +urrent assets are those assets which management intends to con!ert into cash or consume within. The operating cycle 2ne year T%e longer o operating cycle or one year The shorter of operating cycle or one year E 12 (hich of the following is N'T the most common e%ample of cash e,ui!alents? #a!ings deposits +ertificates of Deposit ?+Ds@ ,toc"s o ot%er companies &oney market mutual funds E 1C "n preparing the statement of cash flows$ how should non'cash in!esting;financing acti!ities be reported? "n the financing acti!ities section of the statement of cash flows In a separate sc%edule accompanying t%e statement o cas% lo$s "n the in!esting acti!ities section of the statement of cash flows #houd not to be reported E 1? (hich of the following items are N'T added back to the net income figure ?which is found on the "ncome #tatement@ to arri!e at cash flows from operations? Depreciation Deferred ta% Amortization "n!estments E 14 (hich of the following acti!ities con!ert the income statement items from the accrual basis of accounting to cash? 2perating acti!ities "n!esting acti!ities /inancing acti!ities Non cas% activities E 16 (hich one of the following items is specifically included in the body of a statement of cash flows? 'perating and non7operating cas% lo$ inormation +on!ersion of debt to e,uity Ac,uiring an asset through a capital leases Purchasing a building by gi!ing a mortgage to the seller E 15 A4+ +ompany has a cost of goods sold of s. <66$666. During the year the in!entory increased by s. 56$666 and accounts payable increased by s. 5<$666. The interest e%pense was s. 5<$666 for the year and di!idend of s. 55$666 were paid during the year. (hat would be the cash payments for the purchase of the merchandise. s. <6<$666 &s( 416!+++ s. JG6$666 s. JG<$666 E 1= The cash flow from in!esting acti!ities shows the cash effects of which of the following? "ncome statement items )ong term assets items 3ong term liability S stockholder0s e,uity 3ong term liability and long term assets E 1D (hich of the following must be included in a company8s summary of significant accounting policies in the notes to the financial statements? Description of current year e,uity transactions #ummary of long'term debt outstanding ,c%edule o i:ed assets e!enue recognition policies E 2+ Bross profit is. 0:cess o sales over cost o goods sold #ales less Purchases +ost of goods sold H 2pening stock 1et profit less e%penses of the period E 21 An in!entory error affects ___________ accounting periods. 2nly current T$o Three /our E 22 /rom the gi!en data$ calculate +ost of Boods #old using the /"/2 costing method. 4eginning in!entory is 56 units T s. 56 each. 2n January 76$ purchased 56 units T s. 76 each 2n January >6$ purchased < units T s. >6 each 5< of the 7< units are sold. &s( 2++ s. 5<6 s. ><6 s. J<6 E 2C )nder which cost flow assumption$ the ending in!entory is composed of the most recently purchased merchandise? FIF' 3"/2 A!erage cost #pecific identification E 2? "f sales re!enues are s. J66$666$ cost of goods sold is s. >56$666$ and operating e%penses are s. C6$666$ what is the gross profit? s. >6$666 &s( D+!+++ s. >J6$666 s. J66$666 E 24 (hich cost flow assumption most closely matches the actual physical flow of in!entory in most retailing businesses? /"/2 3"/2 Average cost #pecific identification E 26 The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were. )ess t%an current mar"et value Breater than cost Breater than book !alue 3ess than book !alue E 25 The purpose of recording depreciation on producti!e assets is to. eflect the decline in the market !alue of the assets each period educe income when the company has an e%ceptionally profitable year 4e in conformity with the re!enue recognition principle Allocate t%e original cost o a productive asset to e:pense over its useul lie E 2= (hich depreciation method allocates an e,ual portion of depreciation e%pense to each period of asset0s useful life? ,traig%t7line met%od Double'declining balance method #um'of'the'year digit method Accelerated depreciation method E 2 (hich of the following is N'T an e%ample of accelerated depreciation method? ,traig%t7line met%od #um'of'the'years digit method Double'declining balance method &odified Accelerated +ost eco!ery #ystem E C+ The Drawing account is closed by which of the following entry? +apital U DebitK Drawing ' +redit 2ra$ing J 2e#it; Capital 7 Credit "ncome #ummary U DebitK Drawing ' +rediting Drawing U DebitK "ncome #ummary ' +rediting E C1 (hich of the following account would be classified as a current asset on the balance sheet? Accumulated depreciation Accounts receiva#le 2ffice e,uipment 3and E C2 An adjusting entry would N'T be re,uired for which of the following account? ,alaries Past due e%pense "ncome ta% e%pense Accounts recei!able E CC (hich of the following accounts will be debited$ when increased? 3iabilities and e%penses Assets and e,uity Assets and e:penses *,uity and re!enues E C? Accounting +ycle is a series of acti!ities that begins with ___________ and ends with ___________. +losing of books$ transactions Transaction$ After closing Trial 4alance Journal$ ledger account Transactions! inancial statements E C4 The income statement of A43 shows other operating e%penses of s. >6 millionK prepaid insurance e%pense increased by s. J millionK and accrued utilities payable decreased by s. D million. :ow much did the company pay in other operating e%penses? s. J5 million &s( CC million s. 7D million s. 5G million E C6 The statement of cash flows does N'T report the. #ources of cash in the current period Amount o c%ec"s outstanding at t%e end o t%e period )ses of cash in the current period +hange in the cash balance for the current period E C5 (hich of the following is N'T normally re,uired for re!enue to be recogniFed according to the re!enue principle for accrual basis accounting? The price is fi%ed or determinable #er!ices ha!e been performed +ash that has already been collected 0vidence o an arrangement or customer payment e:ists E C= (hich of the following balances does the +ontra'Asset account show typically? Credit Debit 1egati!e Positi!e E CD (hich one of the following would lead to the decrease in the owner0s e,uity? Purchasing a piece of land *aying dividends to s%are%olders Purchasing e,uipment on account Paying back the principal of a loan E ?+ The users of a statement of cash flows are mostly interested in. Net cas% lo$ rom operating activities 1et cash flow from in!esting acti!ities 1et cash flow from financing acti!ities 1et cash flow from non'cash transactions