1

1) .
Purchasers of merchandise may be dissatisfied with the quality of goods purchased on account, and
return the goods to the seller with an indication that payment will not be forthcoming. In such case, the
document prepared by the purchaser is called:
A) a debit note
B) a credit note.
C) a receiving report.
D) an invoice
E) --
Answer (a)
You marked the answer as b) and it is WRONG.
2) Which of the following items should be expensed as incurred?
A) Broker's fees on the purchase of a long-lived asset.
B) Repair of damage occurring during installation of new equipment.
C) Freight charges on the purchase of equipment.
D) Normal installation fees on the purchase of equipment.
E) --
Answer (b)
You marked the answer as b) and it is CORRECT
3) If the indirect approach for the statement of cash flows is presented, which of the following items
should be subtracted from accrual basis net income to derive cash flow from operating activities?
A) Gains on the sale of long-term investments

B) Losses on the sale of long-term investments
C) Depreciation expense
D) Amortization expense
E) --
Answer (a)
You marked the answer as a) and it is CORRECT
4) The appropriate journal entry to record machinery depreciation of $1,000 is:
A) Depreciation Expense 1,000 Accumulated Depreciation 1,000
B) Depreciation Expense 1,000 Machine 1,000
C) Accumulated Depreciation 1,000 Depreciation Expense 1,000
D) Accumulated Depreciation 1,000 Machine 1,000
E) --
Answer (a)
5) . Which of the following is considered as extraordinary by the accounting profession?
A) Write-down or write-off of receivables, inventory, and intangible assets.
B) Gains and losses from the sale or abandonment of equipment used in a business.
C) Effects of a strike, including those against competitors and major suppliers.
D) Flood damage from unusually heavy rains in a normally dry environment.

E) --
Answer (d)
You marked the answer as d) and it is CORRECT
6) Company A bought 70% of the equity share capital of Company B for £150,000, when the fair value of
Company B was £100,000. What is the value of the goodwill arising on this acquisition?
A) £ 80,000
B) £ 50,000
C) £1,50,000
D) £ 35,000
E) --
Answer (a)
7) Dixon Corporation reported 20X1 accrual basis net income of $50,000. Relevant information to adjust
accrual basis income to cash basis income follows.
Depreciation expense $12,000
Loss on the sale of land 16,000
Increase in accounts receivable 8,000
Decrease in merchandise inventory 4,000
Increase in accounts payable 3,000
Increase in taxes payable 2,000
How much is net cash provided by operating activities?
A) $47,000
B) $49,000
C) $51,000
D) $79,000
E) -----
Answer (d)
8) Jackson Corporation has 500,000 shares of common stock outstanding. On April 10, the board of
directors declared a $0.60 per share cash dividend, to be paid to stockholders of record on April 25. The
dividend was distributed on June 6. The proper journal entry to record on June 6 is:
A) Dividends Expense 300,000 Cash 300,000
B) Dividends Payable 300,000 Cash 300,000
C) Retained Earnings 300,000 Cash 300,000
D) Dividends Payable 300,000 Retained Earnings 300,000
E) ---
Answer (b)
9) A graph is set up with "depreciation expense" on the vertical axis and "time" on the horizontal axis.
Assuming linear relationships, how would the lines for straight-line and sum-of-the-years'-digits
depreciation expense, respectively, be drawn on this graph?
A) Vertically and sloping down to the right.
B) Vertically and sloping up to the right.
C) Horizontally and sloping down to the right.
D) Horizontally and sloping up to the right.
E) --
Answer (c)
You marked the answer as c) and it is CORRECT
10) . If net profit before taxation and interest was £95,000, depreciation for the year was £17,000, stock
has decreased during the year by £7,000, debtors have increased by £11,000 and creditors have
decreased by £4,000, what is the overall cash flow from operating activities?
A) £ 104,000
B) £112,000
C) £98,000
D) £ 134,000
E) --
Answer (a)
11) Russell Merchandising uses the perpetual inventory system. Which of the following statements is
correct?
A) When Russell records a sale, it should also debit inventory.
B) When Russell records a sale, it should also credit inventory.
C) When Russell records a sale, it should also credit cost of goods sold.
D) When Russell records a sale, it should also debit cost of goods available for sale.
E) --
Answer (b)
12) The definition of cash as used in Cash Flow Statements includes:
A) Only cash balances.
B) only bank balances.

C) Bank balances and bank overdrafts
D) cash in hand plus bank balances less bank overdrafts.
E) --
Answer (c)
You marked the answer as d) and it is WRONG.
13) Malcom's financial statements revealed uncollectible accounts expense of $8,000, accounts
receivable of $140,000, and allowance for uncollectible accounts of $12,000. The net realizable value of
Malcom's accounts receivable is:
A) $128,000
B) $132,000
C) $136,000
D) $152,000
E) --
Answer (a)
14) . Which of the following activities would generally be regarded as a financing activity in preparing a
statement of cash flows?
A) Dividend distribution
B) Proceeds from the sale of stocks of other firms
C) Loans made by the entity to other businesses
D) Employees' salaries and wages paid

E) --
Answer (a)
15) Which of the following would NOT improve the current ratio?
A) Borrow short term to finance additional fixed assets.
B) Issue long-term debt to buy inventory.
C) Sell common stock to reduce current liabilities.
D) Sell fixed assets to reduce accounts payable.
E) --
Answer (a)
16) Palo Alto Industries has a debt-to-equity ratio of 1.6 compared with the industry average of 1.4. This
means that the company
A) will not experience any difficulty with its creditors.
B) has less liquidity than other firms in the industry.
C) will be viewed as having high creditworthiness.
D) has greater than average financial risk when compared to other firms in its industry.
E) --
Answer (d)
17) What are the earnings per share (EPS) for a company that earned $100,000 last year in after-tax
profits, has 200,000 common shares outstanding and $1.2 million in retained earning at the year end?
A) $100,000
B) $6.00
C) $0.50
D) $6.50
E) --
Answer (c)
You marked the answer as c) and it is CORRECT
18) 27. What is the process called, where costs of an intangible asset are allocated over its useful life?
A) Depletion
B) Impairment
C) Depreciation
D) Amortization
E) --
Answer (d)
19) 28. The choice of inventory valuation methods has an impact on cash flow before tax.
A) True
B) False
C) -
D) -
E) -
Answer (b)
You marked the answer as a) and it is WRONG.
20) 30. The opening balance sheet for each financial year must correspond to the closing balance sheet
for the preceding financial year.
A) True
B) False
C) --
D) --
E) --
Answer (a)

1

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

1

Uploaded by

Copyright:

Available Formats

1) .

2) Which of the following items should be expensed as incurred?

A) Broker's fees on the purchase of a long-lived asset.

B) Repair of damage occurring during installation of new equipment.

C) Freight charges on the purchase of equipment.

D) Normal installation fees on the purchase of equipment.

A) Gains on the sale of long-term investments

4) The appropriate journal entry to record machinery depreciation of $1,000 is:

A) Depreciation Expense 1,000 Accumulated Depreciation 1,000

B) Depreciation Expense 1,000 Machine 1,000

C) Accumulated Depreciation 1,000 Depreciation Expense 1,000

D) Accumulated Depreciation 1,000 Machine 1,000

5) . Which of the following is considered as extraordinary by the accounting profession?

A) Write-down or write-off of receivables, inventory, and intangible assets.

C) Effects of a strike, including those against competitors and major suppliers.

D) Flood damage from unusually heavy rains in a normally dry environment.

A) Dividends Expense 300,000 Cash 300,000

B) Dividends Payable 300,000 Cash 300,000

C) Retained Earnings 300,000 Cash 300,000

D) Dividends Payable 300,000 Retained Earnings 300,000

A) Vertically and sloping down to the right.

B) Vertically and sloping up to the right.

C) Horizontally and sloping down to the right.

D) Horizontally and sloping up to the right.

A) When Russell records a sale, it should also debit inventory.

B) When Russell records a sale, it should also credit inventory.

12) The definition of cash as used in Cash Flow Statements includes:

A) Only cash balances.

B) only bank balances.

D) cash in hand plus bank balances less bank overdrafts.

B) Proceeds from the sale of stocks of other firms

C) Loans made by the entity to other businesses

D) Employees' salaries and wages paid

A) Borrow short term to finance additional fixed assets.

B) Issue long-term debt to buy inventory.

C) Sell common stock to reduce current liabilities.

D) Sell fixed assets to reduce accounts payable.

A) will not experience any difficulty with its creditors.

B) has less liquidity than other firms in the industry.

C) will be viewed as having high creditworthiness.

You might also like