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Midterm

midterm2008S_sol.doc

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Department
Administration
Course Code
ADM2342
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All

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Mid-term Examination
ADM 2340
Financial Accounting
Summer 2008 X & Y
S O L U T I O N S
Time: 3 hours
Student Name: _________________________________
Student #: _____________________________________
Section:
X ____ Y ____
*READ CAREFULLY*
Instructions
1. This exam comprises XX pages, is 3 hours long, and is out of 100 marks. Allow an
average of 1.8 minutes per mark.
2. Follow instructions carefully for each question.
3. Show all supporting calculations clearly where required. Answers will not be
marked if they are written illegibly.
4. Non-programmable calculators are permitted, but you cannot share calculators.
5. Books and notes are not permitted.
6. Please do not ask the professor or the invigilator to explain or interpret questions.
State any assumptions you feel are necessary.
7. There is one page at the back of this exam for additional space, if required.
Q1 /35
Q2 /17
Q3 /6
Q4 /6
Q5 /6
TOTAL /70
Faculté / École de gestion
Faculty / School of Management
QUESTION NO. 1 - 50 marks
Circle the best answer for each of the following multiple-choice questions directly onto your
examination sheet. Only one answer will be accepted for each question. There is no penalty for
guessing. No account will be taken of any explanations provided.
Questions 1 to 20 are each worth one mark.
1. Recording an asset at what you paid for it instead of what you hope to be able to sell it for
is an example of which characteristic of accounting information?
a. Relevance
b. Timeliness
c. Neutrality
d. Consistency
2. The use of the same accounting method by a company over time is an example of:
a. Understandability
b. Verifiability
c. Consistency
d. Neutrality
3. Which of the following represents the cost of goods sold?
a. Beginning inventory + ending inventory – purchases
b. Beginning inventory + purchases – ending inventory
c. Purchases + ending inventory – beginning inventory
d. Purchases – beginning inventory – ending inventory
4. Which of the following is a revenue recognition criterion?
a. Recorded revenues and expenses are reliable.
b. Recorded revenues and expenses are probable.
c. There is reasonable assurance that recorded revenues and expenses will
ultimately be received or paid.
d. There is a high probability that recorded revenues and expenses will result in
related cash flows.
5. At the end of the accounting period, the recording of interest expense that has not been
paid yet on a loan outstanding during the period is an example of which of the following
accounting principles?
a. Matching concept
b. Revenue recognition
c. Historical cost
d. Cash basis of accounting
Note: I suggest both a. and b. are correct. Expenses are matched with revenue duly recognized.
The Hoskin text does roll this into “revenue recognition”, but in my lectures I have emphasized
matching expenses with revenue so I will have to accept both a. and b. as correct.
6. Under GAAP, equipment is valued at
a. historical cost
b. market value
c. current replacement cost
d. inflation adjusted historical cost
7. Which of the following sequences concerning the accounting cycle is correct?
a. Journalize, post, adjusting entries, financial statements
b. Transaction analysis, trial balance, post, adjusted trial balance
c. Post, adjusting entries, closing entries, financial statements
d. Adjusting entries, closing entries, adjusted trial balance, financial statements
8. Which of the following accounts normally has a credit balance?
a. Accumulated amortization
b. Accounts receivable
2
c. Dividends declared
d. Rent expense
9. The sale of merchandise to a customer partly for cash and partly on account would require
which of the following entries?
a. Dr. Accounts receivable, Dr. Cash, Cr. Sales revenue
b. Dr. Cash, Dr. Accounts payable, Cr. Sales revenue
c. Dr. Cash, Cr. Sales revenue
d. Dr. Accounts payable, Dr. Accounts receivable, Cr. Sales revenue
10. The purchase of land for a combination of cash and a 15-year note would require which of
the following entries?
a. Dr. Land, Dr. Cash, Cr. Long-term note payable
b. Dr. Land, Cr. Cash, Cr. Long-term note payable
c. Dr. Cash, Cr. Long-term note payable, Cr. Land
d. Dr. Land, Dr. Long-term note payable, Cr. Cash
11. Normal operating activities are divided into which two main groups?
a. Revenues and expenses
b. Operating and Non-Operating Revenues
c. Assets and Liabilities
d. Debits and Credits
12. When a firm has substantially completed the earnings process, a revenue is said to be:
a. Recognized
b. Earned
c. Realized
d. Realizable
13. Revenue is recognized at the time of collection under the:
a. Completed contract method
b. Point of sale method
c. Percentage of completion method
d. Instalment method
14. Which of the following would equal cash received from customers?
a. Sales plus increase in accounts receivable
b. Sales plus increase in accounts payable
c. Sales plus decrease in accounts receivable
d. Sales plus decrease in accounts payable
15. Which of the following would equal the purchases of inventory?
a. Inventory plus change in accounts payable
b. Cost of goods sold plus change in inventory
c. Purchases plus change in accounts payable
d. Inventory plus change in purchases
Questions 16 to2 35 are each worth two marks.
16. In 2008 Indec Ltd. earned gross revenues of $1,500,000 and had net income of $419,000.
During 2008, the company had 50,000 common shares outstanding and its average
shareholders equity was $2,620,000. Indec’s basic earnings per share for 2008 was:
a. $30.00
b. $8.38
c. $0.57
d. $0.16
17. If a company had $1,500 in inventory at the beginning of the month, made purchases of
$5,000 during the month, and at the end of the month had $1,200 in inventory still on
hand, the Cost of Goods Sold to be recorded on the Income Statement for the month
would be:
a. $6,500
b. $7,700
c. $5,300
d. $4,800
3

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Description
Facult cole de gestionFacultySchoolof ManagementMidterm ExaminationADM 2340Financial AccountingSummer 2008 XYS O L U T I O N STime3 hoursStudent Name StudentSectionXYREAD CAREFULLYInstructions1This exam comprises XX pages is 3 hours long and is out of 100 marksAllow an average of 18 minutes per mark2Follow instructions carefully for each question3Show all supporting calculations clearly where requiredAnswers will not be marked if they are written illegibly4Nonprogrammable calculators are permitted but you cannot share calculators5Books and notes are not permitted6Please do not ask the professor or the invigilator to explain or interpret questions State any assumptions you feel are necessary7There is one page at the back of this exam for additional space if requiredQ135Q217Q36Q46Q56TOTAL70
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