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Administrative Studies
ADMS 2500
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York University 1. Assets = Liabilities + Owner's Equity is known as: (a) The income statement equation AK/ADMS 2500.03 (b) The balance sheet, or accounting, equation Introduction to Financial Accounting (c) The historical cost principle Midterm Examination - Version B (d) The fundamental equity April 1, 2001 (e) None of the above Name: 2. Financial accounting is essentially (a) Prospective, because it deals primarily Student Number: with projections of information of prime importance to investors Time: 3 hours Questions: 50 (b) Retrospective, because it deals primarily with historical information, or events that have already happened Instructions: (c) Introspective, because it provides management with 1. Record your name and student number and answer all all the data needed for the efficient operation of the questions on the computer mark sense sheets provided. firm (d) All of the above 2. Calculators are the only aid allowed. 3. The exam is three hours in length and will run from approximately 7:00 pm to 10:00 pm. Budget your time wisely. 3. A letter from a company's president summarizing activities 4. It is prudent practice to transfer your answers to the grading of the past year and assessing the firm's prospects for the sheet after each question, and to proof your transfers. coming year, is typically included in the company's  The proctors will announce when there are 10 minutes (a) Financial Statements remaining and any answers not transferred should be (b) Annual Report recorded at this time. (c) Audit Report  No one is to leave their seats in the last 10 minutes. (d) Tax Returns  When time is called, the proctors will go down the (e) None of the above rows collecting your answer sheets and this exam paper. They will not wait and they will not accept your sheet once they have passed. Any violation of 4. A proprietorship is this protocol will result in a grade of zero recorded (a) A separate legal entity subject to income tax for the exam. (b) An entity with more than one owners 5. You are reminded that cheating is a serious offense (c) An entity with an unlimited life which can result in expulsion from the university. (d) None of the above 1 Use the following information for Questions 5 to 15 5. Based on Stay Fit's T-accounts, on July 1, 2000 the fair market value of the weights was (You may remove this page from the booklet if it makes your work (a) $1,000 easier.) (b) $500 U. Ken Flexit owns and operates a personal fitness training business, (c) $0 Stay Fit. Stay Fit began operations on July 1, 2000 when U. Ken (d) none of the above Flexit, contributed $1,000 and his set of weights to the business. The T-accounts that represent Stay Fit's first month of operations are presented below. In the T-accounts that follow, amounts with a 6. Based on Stay Fit's T-accounts, Wages Expense has reference number in brackets are transactions: the amount at the a normal bottom of the account shown without a reference number in the balance of the account on July 31, 2000. (a) Debit balance (b) Credit balance (c) Positive balance (d) None of the above Cash Owner’s Equity (1) 1,000 1,500 (1) 7. Based on Stay Fit's T-accounts, Transaction (5) 250 (3) 1,500 (5) 400 records (6) 600 (a) collection from customers 300 (7) (b) revenue 1,450 (c) payment of an insurance premium (d) none of the above Weights Accounts Payable (1) 500 600 (2) 500 (3) 250 350 8. Based on Stay Fit's T-accounts, the balance representing the amount owed to suppliers at July 31 is Revenue Wage Expense (a) a debit of $350 750 (4) (7) 300 600 (6) 300 (b) a credit of $350 1350 (c) a credit of $1,500 (d) a debit of $300 Accumulated Depreciation Accounts Receivable (e) none of the above 25 (9) (4) 750 400 (5) 25 350 Insurance Expense Depreciation Expense (2) 600 (9) 25 600 25 2 9. Based on Stay Fit's T-accounts, if the weights are depreciated 13. Based on Stay Fit’s T-accounts, if a withdrawal by U. at the same rate for their useful life, U. Ken Flexit expects they Ken Flexit for personal expenses had not been recorded will be useful for (a) Owner’s Equity is overstated and Cash is overstated (a) 20 months (b) Wage Expenses are overstated and Cash is overstated (b) 12 months (c) Accounts Payable are understated and Cash is (c) 24 months overstated (d) none of the above (d) Revenue is overstated and Owner’s Equity is understated (e) None of the above 10. Based on Stay Fit's T-accounts, the cash paid for insurance in July is (a) $600 14. Based on Stay Fit’s T-accounts, if the Insurance (b) $250 Coverage purchased is for one year, then (a) Insurance Expense is understated and Accounts (c) $350 (d) $300 Payable is understated (e) None of the above (b) Liabilities are overstated and Cash is overstated (c) Current Assets are understated and Insurance Expense is overstated 11. Based on Stay Fit’s T-accounts, a trial balance at the end of (d) None of the above the first month of operation would show total debits and total credits equal to (a) $3,200 (b) $2,275 15. Based on Stay Fit's T-accounts, Cash flow for investing (c) $3,225 activities for July is (d) None of the above (a) $0 (b) A cash outflow of $500 (c) A cash inflow of $1,000 12. Based on Stay Fit’s T-accounts, at July 31 Stay Fit expects to (d) A cash outflow of $1,000 collect from customers in the future for July sales (e) none of the above (a) $750 (b) $450 16. The opinions expressed by auditors in audit reports may (c) $1,500 (d) $350 include (e) None of the above (a) Reservations (b) Projections (c) Estimates (d) Documentation (e) None of the above 3 20. If land is offered for sale at $45,000, is assessed for 17. Fill in the blank: 'Accounting is the child of ____________, and the development of both is inexorably intertwined.' The property tax purposes at $20,000 and is purchased for word or phrase which best completes this sentence is $34,000, the land should be recorded in the purchaser’s books at (a) Legislation (b) professional associations (a) $34,000 (c) commerce (b) $20,000 (d) Canada Customs and Revenue Agency (c) $45,000 (d) $11,000 (e) none of the above (e) None of the above 18. Which of the following best describe what accountants 21. If the assets of a business increased by $24,000 during a need to know about accounting, spreadsheeting, and tax software period of time and the Owner’s Equity in the business (a) enough to purchase and install financial software for all their increased $4,000 during the same period, the liabilities of the business must have clients' businesses (b) enough to plan and supervise its use in preparation of (a) Increased $20,000 financial information (b) Decreased $28,000 (c) enough to program the changes clients require to their (c) Decreased $20,000 (d) Increased $28,000 accounting systems (d) accountants don't need to know anything about computers (e) None of the above st 22. If on June 1 , Max Steele Company paid $100 of its 19.The branch of the federal government which provides accounts payable in cash, the effect on Assets, Liabilities banking and cash management services to the federal and Owner’s Equity would be Assets Liabilities Owner’s Equity government is called (a) the Receiver General (a) $100 increase No effect $100 increase (b) the Federal Business Development Bank (b) $100 decrease $100 increase No effect (c) $100 decrease $100 increase $200 decrease (c) the Fed Bank (d) $100 decrease $100 decrease No effect (d) the Federal Security Commission (e) none of the above (e) None of the above 4 27. The following three steps: 23. Rent paid in May for use of premises in May, effects Step (1) Analyze and record transactions amounts reported on which of the following statements? (a) Balance Sheet Step (2) Prepare and record adjusting entries, reconcile to the underlying assets and liabilities and review information for (b) Income Statement reasonableness (c) Cash Flow Statement Step (3) Prepare financial statements (d) Both (a) and (c) (e) All of the above (a) are the only steps in manual accounting systems (b) are three of the four steps in the bookkeeping rotation (c) are the steps in computerized accounting systems 24. The form of business organization which generally (d) none of the above provides the most ready access to capital markets is (a) the sole proprietorship 28. The Chart of Accounts is (b) the partnership (a) a list of the account titles and account balances (c) the corporation (b) a graph of the profit picture in recent periods (d) the co-operative (c) a classified balance sheet with the current assets and (e) none of the above liabilities ordered alphabetically (d) a list of account titles and numbers, or alphanumeric codes, of all the accounts in the general ledger (e) none of the above 25. The initials 'IPO' stand for (a) initial public offering (b) incorporated performance options 29. Net Income for the partnership of Zebra and Grey was (c) integrated primary operation incorrectly stated as $500,000 for the year ended December (d) none of the above 31. You are called in as the accountant to determine the correct net income. After examination of the accounts, you find the following errors: 26. A 'source deduction' is (a) Goods and Service Tax (GST) At the end of the year: Overstated Understated (b) deductions of income tax, Canada Pension Plan Ending Inventory $20,000 Cost of Goods Sold $20,000 contributions and Employment Insurance premiums from amounts paid to employees Wages Payable $15,000 (c) cash discounts for prompt payment Wages Expense $15,000 (d) none of the above Accounts Receivable $10,000 Revenue $10,000 The correct amount of Net Income for the year ended December 31 is (a) $475,000 (b) $500,000 (c) $545,000 (d) $455,000 (e) none of the above 5 st 34. On January 1 , a company p
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