Examination for FUNDAMENTAL ACCoUNTING Part I Fill-In-The-Blanks(10*2=20 points) 1. The three common forms of business organizations are 2. The difference between the increases(including the beginning balance) and decreas recorded in an account is called the account 3. Assets= Liabilities Owner's Equity"is called the equation or balance sheet equation 4 An economic event that changes the financial position of an organization, and that often takes the form of an exchange of economic consideration between two parties, is called a business 5 The statement reports the changes in cash and cash equivalents over the reporting period 6 Those long-term assets that lack physical form and their benefits are uncertain are principle requires financial statements (including footnotes)to report all relevant information about the operations and financial position of the entity 8 Amounts in the Unadjusted Trial Balance columns are taken from account balances in 9 Comparative financial statements in which each amount is expressed as a percent of a base amount are called statements 10 Straight-line method of interest allocation is a method of amortization that allocates an equal amount of to each accounting period in the life of bonds Part II: True/False Questions(10*1.5=15 points) 1. External users of accounting information are not directly involved in running the organIzation
Examination for FUNDAMENTAL ACCOUNTING Part I: Fill-In-The-Blanks (10*2=20 points) 1. The three common forms of business organizations are _________, ____________and ____________. 2. The difference between the increases (including the beginning balance) and decreases recorded in an account is called the account ____________. 3. “Assets = Liabilities + Owner's Equity” is called the ____________ equation or balance sheet equation. 4 An economic event that changes the financial position of an organization, and that often takes the form of an exchange of economic consideration between two parties, is called a business ____________. 5 The statement of ____________ reports the changes in cash and cash equivalents over the reporting period. 6 Those long-term assets that lack physical form and their benefits are uncertain are called ____________ assets. 7 ____________ principle requires financial statements (including footnotes) to report all relevant information about the operations and financial position of the entity. 8 Amounts in the Unadjusted Trial Balance columns are taken from account balances in the ____________. 9 Comparative financial statements in which each amount is expressed as a percent of a base amount are called __________ statements. 10 Straight-line method of interest allocation is a method of amortization that allocates an equal amount of ________ to each accounting period in the life of bonds. Part II: True/False Questions (10*1.5= 15 points) 1. External users of accounting information are not directly involved in running the organization
2. Profit is determined by subtracting sales revenues from the total expenses of the firm. 3. Checks, invoices, and sales receipts are examples of source documents 4. An AIS( Accounting Inf ormation System) is part of the MIs(Management Information System) and collects and processes financial data for communication to users 5. Liabilities are probable future payments of assets or services that an entity is presently obligated to make as a result of past transactions or events 6. During the accounting period, the assets increased by $4,000 and the equity increased by $1,000. For the balance sheet equation to balance, the liabilities must increase by $5,000 7. The reversing entry for an adjusting entry that debited Accounts Receivable and credited fees earned would be a debit to fees earned and a credit to Accounts Receivable 8. A revenue expenditure benefits only the current period and should be charged to expenses of the current period. A capital expenditure has a benefit that extends beyond the end of the current period and should be charged to an asset 9. When a company records a credit sale, the acid-test ratio will increase 10. Data from one or more direct competitors of the company under analysis are usually preferred for developing standards for comparisons Part Il Multiple Choices(10*2.5=25 points) 1. The accounting specialty that deals with collecting and controlling the costs of producing a given product or service is called a)internal auditing b)bookkeeping c)cost accounting d)general accounting 2. Billy Gates, the owner of a Chinese restaurant, purchased a five-year insurance policy Recording the purchase of the policy requires a)an asset to be debited, a liability to be credited b)a liability to be debited, an asset to be credited c)one asset to be debited another asset to be credited d)withdrawals to be debited, an asset to be credited
2. Profit is determined by subtracting sales revenues from the total expenses of the firm. 3. Checks, invoices, and sales receipts are examples of source documents. 4. An AIS (Accounting Information System) is part of the MIS (Management Information System) and collects and processes financial data for communication to users. 5. Liabilities are probable future payments of assets or services that an entity is presently obligated to make as a result of past transactions or events. 6. During the accounting period, the assets increased by $4,000 and the equity increased by $1,000. For the balance sheet equation to balance, the liabilities must increase by $5,000. 7. The reversing entry for an adjusting entry that debited Accounts Receivable and credited Fees Earned would be a debit to Fees Earned and a credit to Accounts Receivable. 8. A revenue expenditure benefits only the current period and should be charged to expenses of the current period. A capital expenditure has a benefit that extends beyond the end of the current period and should be charged to an asset. 9. When a company records a credit sale, the acid-test ratio will increase. 10. Data from one or more direct competitors of the company under analysis are usually preferred for developing standards for comparisons. Part III: Multiple Choices (10*2.5= 25 points) 1. The accounting specialty that deals with collecting and controlling the costs of producing a given product or service is called a) internal auditing b) bookkeeping c) cost accounting d) general accounting 2. Billy Gates, the owner of a Chinese restaurant, purchased a five-year insurance policy. Recording the purchase of the policy requires a) an asset to be debited, a liability to be credited b) a liability to be debited, an asset to be credited c) one asset to be debited, another asset to be credited d) withdrawals to be debited, an asset to be credited
3. Anne Wang received $8, 000 for some excavation work to be done when the weather permits. Anne foresees that it will be at least three weeks before he can start the job Recording the transaction requires a)an asset to be debited, a liability to be credited b)a liability to be debited an asset to be credited c)withdrawal to be debited, an asset to be credited d)an asset to be debited revenue to be credited 4. China Garden Restaurant hired a first-year accounting intern to oversee the cash-collection procedures. When the firm pays the student her weekly wage,the restaurant will a)increase an asset, increase a liability b)de c)increase an asset, increase owner's equity d)decrease an asset, decrease owner's equity 5. At the end of the Alice Water-pool Company's fiscal year, an adjusting entry was made for accrued salaries of $500. On the first day of the new year the adjusting entry was reversed. The salaries for one week, $1, 250, were paid on the first Friday. The entry to record paying the salaries expense for the week would be a a)Sal. Exp, dr, $750: Salaries Payable, dr, $500: Cash, cr, $1 b)SaL. Exp, dr, $500; Salaries Payable, dr, $750: Cash, cr, $1 c)Salaries Exp, dr, $1, 250: Cash, cr, $1, 250 dr, $1, 250: Salaries Payable 6. the subtotals of the income Statement columns of the work sheet are $3, 500 and $4, 900, respectively. If the subtotal of the Balance Sheet Debit column is $9, 600, then the subtotal of the balance sheet credit column should be a)s1,400 b)S11,000 c)s8,200 d)S6.800 7. To establish a petty cash fund for a department requires a journal entry that will a)debit Cash and credit Petty Cash b)debit Petty Cash and credit Cash c)debit Miscellaneous Expense and credit Cash d)debit Accounts Receivable and credit Petty Cash 8. Nina Company issues ten-year bonds with a par value of $100,000, 8% annual interest, were sold for $106,000 on September 30, when the market rate of interest was 7%. The issuer uses straight-line amortization of premium. The December 31, year-end adjusting entry for accrued interest will include a a)debit to Interest Payable for $2,000
3. Anne Wang received $8,000 for some excavation work to be done when the weather permits. Anne foresees that it will be at least three weeks before he can start the job. Recording the transaction requires a) an asset to be debited, a liability to be credited b) a liability to be debited, an asset to be credited c) withdrawal to be debited, an asset to be credited d) an asset to be debited, revenue to be credited 4. China Garden Restaurant hired a first-year accounting intern to oversee the cash-collection procedures. When the firm pays the student her weekly wage, the restaurant will a) increase an asset, increase a liability b) decrease an asset, decrease a liability c) increase an asset, increase owner's equity d) decrease an asset, decrease owner's equity 5. At the end of the Alice Water-pool Company’s fiscal year, an adjusting entry was made for accrued salaries of $500. On the first day of the new year the adjusting entry was reversed. The salaries for one week, $1,250, were paid on the first Friday. The entry to record paying the salaries expense for the week would be a a) Sal. Exp., dr., $750; Salaries Payable, dr., $500; Cash, cr., $1,250 b) Sal. Exp., dr., $500; Salaries Payable, dr., $750; Cash, cr., $1,250 c) Salaries Exp., dr., $1,250; Cash, cr., $1,250 d) Salaries Exp., dr., $1,250; Salaries Payable, cr., $1,250 6. The subtotals of the Income Statement columns of the work sheet are $3,500 and $4,900, respectively. If the subtotal of the Balance Sheet Debit column is $9,600, then the subtotal of the Balance Sheet Credit column should be a) $1,400 b) $11,000 c) $8,200 d) $6,800 7. To establish a petty cash fund for a department requires a journal entry that will a) debit Cash and credit Petty Cash b) debit Petty Cash and credit Cash c) debit Miscellaneous Expense and credit Cash d) debit Accounts Receivable and credit Petty Cash 8. Nina Company issues ten-year bonds with a par value of $100,000, 8% annual interest, were sold for $106,000 on September 30, when the market rate of interest was 7%. The issuer uses straight-line amortization of premium. The December 31, year-end adjusting entry for accrued interest will include a: a) debit to Interest Payable for $2,000
b)credit to Interest Payable for $1, 850 c) debit to Premium on Bonds Payable for $150 d) debit to Bond Interest Expense of $1, 850 9. Here is inf ormation taken from the accounting books of Nikey Company: net sales were $360,000, the cost of goods sold was $180,000, operating expenses were $120,000, the ending balance of the Accounts Receivable account was $20,000. Now assume that the merchandise turnover ratio was 12.75. Then Nikey' s profit margin was a)16.67% b)20.0% c)40.0% d)333% 10. Which line is not correct? a)Ratio: Current ratio; Type of measurement: Short-term liquidity b)Ratio: Return on total assets; Type of measurement: Operating efficiency c)Ratio: Dividend yield; Type of measurement: Capital structure d)Ratio: Equity ratio; Type of measurement: Long-term risk and capital structure Part IV: Problems(2*20= 40 points) 1. The following is the information obtained from the financial reporting of Mille Company 2001 2000 1999 1998 Total liabilities s100,000$150000s122,000$80,000 Shareholders' equity80,000150,000130,000100,000 Net income 20,00023,00024,000 15,000 Assume that 50,000 Mille common shares have been outstanding since 1998 Requirement: Calculate the eamings per share in 2001 for Mille Company 2. From the accounting books of Monte Cristo Co., you can find out the following The days sales in inventory is 73 The cost of goods sold is $720,000 The net sales are $1, 020, 000 The beginning inventory was $82,000 Requirement: What is the ending inventory?
b) credit to Interest Payable for $1,850 c) debit to Premium on Bonds Payable for $150 d) debit to Bond Interest Expense of $1,850 9. Here is information taken from the accounting books of Nikey Company: net sales were $360,000, the cost of goods sold was $180,000, operating expenses were $120,000, the ending balance of the Accounts Receivable account was $20,000. Now assume that the merchandise turnover ratio was 12.75. Then Nikey’s profit margin was: a) 16.67% b) 20.0% c) 40.0% d) 33.3% 10. Which line is NOT correct? a) Ratio: Current ratio; Type of measurement: Short-term liquidity b) Ratio: Return on total assets; Type of measurement: Operating efficiency c) Ratio: Dividend yield; Type of measurement: Capital structure d) Ratio: Equity ratio; Type of measurement: Long-term risk and capital structure Part IV: Problems (2*20 = 40 points) 1. The following is the information obtained from the financial reporting of Mille Company: 2001 2000 1999 1998 Total liabilities $100,000 $150,000 $122,000 $80,000 Shareholders' equity 80,000 150,000 130,000 100,000 Net income 20,000 23,000 24,000 15,000 Assume that 50,000 Mille common shares have been outstanding since 1998. Requirement: Calculate the earnings per share in 2001 for Mille Company. 2. From the accounting books of Monte Cristo Co., you can find out the following information: The days' sales in inventory is 73. The cost of goods sold is $720,000. The net sales are $1,020,000. The beginning inventory was $82,000. Requirement: What is the ending inventory?