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Practice Midterm Exam.pdf

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Administrative Studies
ADMS 2500
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York University AP/Adms 2500.03 Introduction to Financial Accounting Practice Midterm Examination Time: 3.0 hours Questions: 50 Instructions: 1. This practice exam does not indicate in any way either topics stress ed or topics omitted from your actual midterm 2 exam coverage. Its sole purpose is to give you extra practice in writing computer graded multiple choice accounting exams. This is an actual exam from some previous year in a semester where there was only one midterm. This means the exam covered modules 1 to 12 inclusive and contained bookkeeping and theory questions which would not likely be appropriate in a two midterm environment. For instance, t his exam did not include coverage of the cash flow statement (module 13), Shareholders Equity (Module 12), Long Term Liabilities (Module 11) or time value of money (module 8) but did include coverage of module 14 Part 1 (accounting theory). It also contained a mini -bookkeeping case since there was no separate bookkeeping exam (midterm 1). This practice exam certainly contains more “easy” theor y questions than you would expect to see on Midterm 2. 2. Probably 50% of the difficulty of 2500 exams is simply exam stress, lack of practice in writing university level examinations and in particular inability to properly budget time. You will double the learning value of this exercise if you take the exam under strict exam conditions. This means a three hour single sitting with no exam aids such as friends or open books. While it is impossible not to peek at the exam as soon as it is posted to your website, you are not ready to actually take the exam until you have finished your study of module 13. 3. A solution will be posted the week before your midterm to check answers. 4. If you are someone who absolutely wants a career as a professional ac countant and demands nothing less than a A in this course, then get a study buddy in the course and make each other an additional practice exam…..the oldest adage in education is “practice makes perfect”. 1. The financial statement that provides information about fiscal performance on an accrual basis is the a) Income Statement b) Statement of Owner’s Equity c) Balance Sheet d) Cash Flow Statement e) None of the above 2. Which of the following is a liability? a) Warranty Expense b) Advances from customers c) Accumulated Depreciation d) Both (b) and (c) above e) None of the above 3. Which of the following account types are increased by credits and decreased by debits? a) Assets b) Liabilities c) Expenses d) Credit Accumulations e) None of the above 4. Which of these statements about debits and credits is correct? a) Credits always mean decreases b) Debits are always recorded on the left c) Debits increase shareholders’ equity d) Assets have normal credit balances e) None of the above Use the following information for Questions 5 – 8 According to its website (, the J.M. Smucker Company was founded in 1897 when the Company's namesake and founder sold his first product -- apple butter -- from the back of a horse-drawn wagon. Today, over a century later, the Company is the market leader in fruit spreads, peanut butter, shortening and oils, ice cream toppings, and health and natural foods beverages in North America under such icon brands as Smucker’s®, Jif® and Crisco®. The Report on Business in the Globe and Mail, February 22, 2005 reported the following: J.M. Smucker Co.’s fiscal third -quarter profit rose 15 per cent, despite charges, as its acquisition last year of International Multifoods boosted sales. The Orrville, Ohio, maker of jams, jellies and preserves reported prof it of $36.1-million (U.S.) for the quarter ended Jan. 31. Per -share profit declined 1.6 per cent to 61 cents due to more shares outstanding in the latest quarter. Sales grew 60 per cent to $550.2 - million. The units that were acquired from Multifoods con tributed $187.6-million to sales. 5. Based on the information given, Smucker’s year -end is most likely a) February 22 b) January 31 c) December 31 d) April 30 e) None of the above 6. Based on the information given, assuming all amounts were reported in US dollars and that there were no gains or losses, Smucker’s expenses for the reported third - quarter were a) $550.2-million U.S. b) $36.1-million U.S. c) $514.1-million U.S. d) $187-6-million U.S. e) None of the above 7. Based on the information given, Smucker’s profit for the second-quarter was a) approximately $36.1-million U.S. b) approximately $187.6-million U.S. c) approximately $31.4-million U.S. d) approximately $30.7-million U.S. e) None of the above 8. The latest audited financial statements, posted by Smucker’s on its website, include the following note: Revenue Recognition: The Company recognizes revenue when all of the following criteria have been met: a valid customer order with a fixed price has been received; the product has been shipped and title has transferred to the customer; there is no further significant obligation to assist in the resale of the product; and collectibility is reasonably assured. Based on the information given, Smucker’s revenue recognition policy is best characterized as a) An accrual basis b) A cash basis c) A fixed price basis d) An assured basis e) None of the above --------------------------------------- end of Smucker’s questions ---------------------------------- 9. Lola Run Corporation’s retained earnings decreased by $300,000 during the year. Also during the year, dividends totaling $475,000 were paid to shareholders. Kim Corporation’s net income for the year was: a) $175,000 b) $475,000 c) $300,000 d) $650,000 e) none of the above 10. Using the following information: Long-term Assets $400,000 Current Assets $50,000 Long-term Liabilities $100,000 Common Shares $110,000 Shareholder’s Equity $180,000 the balance of the Current Liabilities is a) $60,000 b) $170,000 c) $240,000 d) $100,000 e) none of the above 11. Choose the phrase that best completes the follo wing idea: Businesses ask that accountants compute profit in arbitrary, short time periods. Tricky but doable - provided we are willing to accept that financial statement preparation involves ________________________________. a) cash basis accounting b) tax considerations c) market value computations d) making estimates e) none of the above 12. Choose the phrase that best completes the following sentence: Enterprises need ____________________________ in place so they choose appropriate GAAP and so their Boards hear, and react appropriately, to concerns of the CFO (chief financial officer) and other accountants hired by management to prepare and audit financial statements. a) strong bookkeeping practices b) corporate governance practices c) auditors d) securities commissions e) none of the above 13. The balance in all assets accounts combined is $200,000 on December 1. During December, the following transactions took place: Purchase of $20,000 of inventory for cash Purchase of $30,000 of machinery on account Paid accounts payable of $40,000 with cash The combined December 31 balance in the asset accounts is a) $230,000 b) $160,000 c) $190,000 d) $210,000 e) none of the above Use the following information for Questions 14 - 20 (You may remove this page from this booklet if it makes your work easier). HighAction supplies quality crew and camera crane services to the film and TV industry. Customers are charged $500 per day for the crane alone and $2,000 per day when the crane is equipped with a Power Pod 2000, a system of controls to th e camera head used for sophisticated tilt, pan and roll effects.Crane technician services are provided to customers for $50 per hour. HighAction pays its crane technicians $25 per hour. HighAction acquired itstused, one and only giraffe camera crane and Power Pod 2000 system on January 1 from a television studio in exchange fora 12%,$180,000 note payable due in two years. It expects it will be able to rent the equipment to customers for 5 years before it becomes totally obsolete and is scrapped. HighAction’s accounting records for January, its first month of operation are summarized as follows: Cash Receipts: Invested by owner, Pan Zoom $5,000 Cash collected for equipment rentals $23,540 Cash collected for crane technician services $4,280 Cash received in advance for a February crane booking $1,500 (no technician services required for on the booking) Cash Disbursements: Cheque #1 – p it eAtifrnaynd $1,000 February rent for the place at which the equipment was kept when not at a filming location Cheque #2 – paid to ProtectIt Insurance – the premium for $2,000 24 months effective January 1st th Cheque #3 – paid to TowIt on January 15 for transporting $500 the crane to filming locations for the first half of January Cheque #4 – Pan Zoom’s withdrawal from the business on $6,000 th January 25 Other Information: 1. The Receiver General is owed the GST included in equipment rentals and crane technician services fees was $1,820 (7% of $22,000 and $4,000 respectively). Ignore the GST on purchases and on the advance for a February crane booking. 2. TowIt is owed $700 for transporting the crane to filming locations for the last half of January. 3. The bank statement shows a balance of $30,800: cheque #4 did not clear in January and the bank charged service charges of $20 for January. st 14. HighAction should report Current Liabilities on its January 31 BlnceSheet totaling a) $1,820 b) $2,520 c) $4,320 d) more than $6,000 but less than $100,000 e) none of the above st 15. HighAction should report Cash on its January 31 Balance Sheet of a) $36,800 b) $30,800 c) $24,820 d) $24,800 e) none of the above 16. HighAction should report on its Income Statement for January, Revenue, net of GST of a) $29,320 b) $27,820 c) $27,500 d) $26,000 e) none of the above 17. If HighAction were to record an insurance expense of $2,000 for January a) the trial balance would not balance b) the company would be adopting an accrual basis of accounting c) the company would be creating a reserve it could draw on to inflate earnings in future accounting periods d) its assets would be understated and its expenses overstated e) none of the above 18. If HighAction were to engage an accountant to set -up an accounting system, and the st accountant did so at January 31 , HighAction’s chart of accounts would a) show debits equal to credits b) include an Income Tax Expense account c) have more than 10 accounts d) be prepared by the holder of its Note Payable e) none of the above 19. On its January 31 stBalance Sheet, HighAction should report the equipment with a net value of a) $180,000 b) $181,800 c) $177,000 d) $178,770 e) none of the above 20. On its January 31 stBalance Sheet, High Action would report Owner’s Equity with a a) debit balance b) credit balance c) as Shareholder’s Equity d) as Due to the Note Payable holder e) none of the above ---------------------------------------- end of HighAction questions -------------------------------------- 21. Luca Pacioli, the mathematician, a scholar who is sometimes called the ‘father of accounting’ a) suggested the cash flow statement as part of annu al financial statements b) began the first Society of Professional Accountants c) wrote about double -entry bookkeeping in the 1500s d
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