MGT120H 2007 Winter Test and Test Solution.pdf

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Elisa Zuliani

MGT120 H1S Financial Accounting IPart A15 marks 1 A company erroneously recorded a 459 cheque written in payment of an account as 495 The adjusting journal entry required to correct this would bea Accounts payable36 Cash36 b Cash36 Accounts payable36 c Cash36 Accounts receivable36 d No journal entry is required2 Assume the balance in Prepaid Insurance is 2500 but it should be 1500 The adjusting journal entry should include which of the followinga debit to prepaid insurance for 1000 b credit to insurance expense for 1000 c debit to insurance expense for 1000 d debit to insurance expense for 1500 3 Which of the following transactions will improve the debt ratioa the company issues shares to investors b the company uses cash to buy land c the company issues a note payable to buy machinery d the company repays mortgage payable 4 How will the recording of amortization effect the current ratio and debt ratioa current ratio increase and debt ratio increase b current ratio no change and debt ratio increase c current ratio decrease and debt ratio decrease d current ratio increase and debt ratio decrease 5 CompanyA owns a building Which of the following statements regarding amortization is false from an accounting perspectivea as the value of the building decreases over time we amortize it b amortization is an estimated expense to be recorded each period during the buildings life c as amortization is recorded shareholders equity is reduced d as amortization is recorded total assets are reduced 6 An adjusting journal entry to recognize accrued salaries payable would cause which of the followinga a decrease in assets and shareholders equity b a decrease in assets and liabilities c an increase in expenses liabilities and shareholders equity d an increase in expenses and liabilities and a decrease in shareholders equity7 A business firm pays weekly wages of 5000 on Friday for a fiveday week ending on that day If the fiscal period ends on Wednesday the adjusting entry isa debit wages expense 3000 credit Retained earnings b debit wages expense 3000 credit wages payable 3000 c debit retained earnings 3000 credit wages payable 3000 d debit wages payable 3000 credit wages expenses 30008 A cheque issued to a creditor in the amount of 26 was recorded in the journal as 260 In the bank reconciliation the correction would be recorded asa a deduction from the bank statement balance b an addition to the bank statement balance c a deduction from the ledger balance of cash d an addition to the ledger balance of cash9 Rogans company bank statement shows that a note receivable of 12000 and interest of 600 were collected by the bank on behalf of the depositor The entry required on the companys books isa debit cash credit interest income credit notes receivable2
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