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1. This mock test paper contains THIRTY multiple-choice questions (MCQs)

and comprises 8 (EIGHT) printed pages.

2. This is a CLOSED BOOK test and should ideally be attempted in a

simulated test environment within 1 hour.

3. Students may use University-approved calculators and not any other

electronic devices.
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1. At the end of last year, the company's assets totaled $860,000 and its liabilities
totaled $740,000. During the current year, the company's total assets increased
by $58,000 and its total liabilities decreased by $24,000. At the end of the current
year, stockholders’ equity was:

(A) $202,000.
(B) $120,000.
(C) $34,000.
(D) $178,000.

2. Cool Tours had beginning equity of $72,000; revenues of $90,000, expenses of

$65,000, and dividends of $9,000. Calculate the ending net assets.

(A) $88,000.
(B) $25,000.
(C) $97,000.
(D) $38,000.

3. Assuming a parcel of land that was originally acquired for $85,000 is offered for
sale at $150,000, is assessed for tax purposes at $95,000 and is recognized by
its purchasers as easily being worth $140,000, is sold for $137,000.

The land should be recorded in the purchaser's books at:

(A) $95,000.
(B) $137,000.
(C) $138,500.
(D) $140,000.

4. One might infer from a debit balance in Allowance for Doubtful Accounts that:

(A) a posting error has been made.

(B) bad debt expense has been over estimated.
(C) more has been written off than estimated.
(D) aging of accounts receivable is being used.

5. The accountant for Prestige Printing forgot to make the following two adjustments
at the end of 2016:
(i) The entry to record $2,000 of depreciation.
(ii) The entry to record the portion of fees received in advance which has now
been earned: $2,000.

As a result of these two omissions:

(A) net income for Prestige Printing for 2016 is overstated.

(B) net income for Prestige Printing for 2016 is understated.
(C) assets of Prestige Printing are overstated at 31 December 2016.
(D) liabilities of Prestige Printing are understated at 31 December 2016.
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6. On June 30 of the current year, the assets and liabilities of Phoenix, Inc. are as
follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650;
Equipment, $12,000; Accounts Payable, $9,300. What is the amount of equity as
at July 1 of the current year?

(A) $8,300
(B) $13,050
(C) $20,500
(D) $31,100

7. On April 30, Holden Company had an Accounts Receivable balance of $18,000.

During the month of May, total credits to Accounts Receivable were $52,000 from
customer payments. The May 31 Accounts Receivable balance was $13,000.
What was the amount of credit sales during May?

(A) $5,000.
(B) $47,000.
(C) $52,000.
(D) $57,000.

8. The following transactions occurred during July:

1. Received $900 cash for services provided to a customer during July.
2. Issued shares for $2,200 cash.
3. Received $750 from a customer in partial payment of his account receivable
which arose from sales in June.
4. Provided services to a customer on credit, $375.
5. Borrowed $6,000 from the bank by signing a promissory note.
6. Received $1,250 cash from a customer for services to be rendered next year.

What was the amount of revenue for July?

(A) $900.
(B) $1,275.
(C) $2,525.
(D) $3,275.

9. On January 1 of the current year, Bob's Lawn Care Service reported equity
totaling $122,500. During the current year, total revenues were $96,000 while
total expenses were $85,500. Also, during the current year Bob withdrew $20,000
from the company. No other changes in equity occurred during the year. If, on
December 31 of the current year, total assets are $196,000, the change in equity
during the year was:

(A) A decrease of $9,500.

(B) An increase of $9,500.
(C) An increase of $30,500.
(D) A decrease of $30,500.
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10. At the beginning of the current year, Taunton Company's total assets were
$248,000 and its total liabilities were $175,000. During the year, the company
reported total revenues of $93,000, total expenses of $76,000 and dividends of
$5,000. There were no other changes in equity during the year and total assets at
the end of the year were $260,000. Taunton Company's debt ratio at the end of
the current year is:

(A) 67.3%.
(B) 32.7%.
(C) 48.6%.
(D) Cannot be determined from the information provided.

11. A $130 credit to Office Equipment was credited to Fees Earned by mistake. By
what amounts are the accounts under- or overstated as a result of this error?

(A) Office Equipment, understated $130; Fees Earned, overstated $130.

(B) Office Equipment, understated $260; Fees Earned, overstated $130.
(C) Office Equipment, overstated $130; Fees Earned, overstated $130.
(D) Office Equipment, overstated $130; Fees Earned, understated $130.

12. A company's ledger accounts and their end-of-period balances before closing
entries are posted are shown below. What amount will be posted to retained
earnings in the process of closing the Income Summary account? (Assume all
accounts have normal balances.)
Dividends $ 9,600
Revenue 29,000
Rent expense 3,600
Salaries expense 7,200
Insurance expense 920
Depreciation expense-Equipment 500
Accu depreciation-Equipment 1,500

(A) $16,780 debit.

(B) $7,180 credit.
(C) $16,780 credit.
(D) $18,280 credit.

13. A company plans to decrease a $200 petty cash fund to $75. The current balance
in the account includes $45 petty cash payment in receipts and $165 in currency.
The entry to reduce the fund will include a:

(A) Debit to Cash Short and Over for $10.

(B) Debit to Cash for $90.
(C) Debit to Miscellaneous Expenses for $35.
(D) Credit to Petty Cash for $165.

14. During the month of September, Norris Industries issued a check in the amount
of $845 to a supplier on account. The check cleared the bank during September.
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The disbursement was recorded incorrectly as $854. The journal entry to correct
this mistake when discovered will include:

(A) A debit to Accounts Payable for $854.

(B) A credit to Cash for $854.
(C) A credit to Cash for $9.
(D) A credit to Accounts Payable for $9.

15. A company borrowed $10,000 by signing a 180-day promissory note at 11%. The
maturity value of the note is:

(A) $12,050
(B) $12,275
(C) $10,550
(D) $12,825

16. A company had net sales of $600,000, total sales of $750,000, and an average
accounts receivable of $75,000. Its accounts receivable turnover equals:

(A) 36.5
(B) 45.625
(C) 10.00
(D) 8.00

17. If the credit balance of the Allowance for Doubtful Accounts account exceeds the
amount of a bad debt being written off, the entry to record the write-off against
the allowance account results in:

(A) An increase in the expenses of the current period.

(B) A reduction in current assets.
(C) A reduction in equity.
(D) No effect on the expenses of the current period.

18. On December 31 of the current year, a company's unadjusted trial balance

included the following: Accounts Receivable, debit balance of $97,250; Allowance
for Doubtful Accounts, credit balance of $951. What amount should be debited to
Bad Debts Expense, assuming 6% of outstanding accounts receivable at the end
of the current year will be uncollectible?

(A) $951.
(B) $3,992.
(C) $4,884.
(D) $5,835.

19. Teller purchased merchandise from TechCom on October 17 of the current year
and TechCom accepted Teller's $4,800, 90-day, 10% note. What entry should
TechCom make on December 31, to record the accrued interest on the note?
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(A) Debit Cash $400; credit Notes Receivable $400.
(B) Debit Cash $100; credit Notes Receivable $100.
(C) Debit Interest Receivable $400; credit Interest Revenue $400.
(D) Debit Interest Receivable $100; credit Interest Revenue $100.

20. Calco accepts all major bank credit cards, including First Bank's, which assesses
a 3.5% charge on sales for using its card. On May 25, Calco had $4,800 in First
Bank Card credit sales. What entry should Calco make on May 25 to record the

(A) Debit Accounts Receivable $4,800; credit Sales $4,800.

(B) Debit Cash $4,632; debit Credit Card Expense $168; credit Sales $4,800.
(C) Debit Cash $4,800; credit Sales $4,800.
(D) Debit Cash $4,968; credit Credit Card Expense $168; credit Sales $4,800.

21. Flash reported net profit of $17,500 for the past year. At the beginning of the year
the company had $200,000 in assets and $50,000 in liabilities. By the end of the
year, assets had increased to $300,000 and liabilities were $75,000. Calculate its
return on assets at the end of the year:

(A) 5.83%
(B) 7.0%
(C) 5.0%
(D) 8.75%

22. Marian Mosely is the owner of Mosely Accounting Services. Which accounting
principle requires Marian to keep her personal financial information separate from
the financial information of Mosely Accounting Services?

(A) Monetary unit assumption.

(B) Going-concern assumption.
(C) Cost principle.
(D) Business entity assumption.

23. Which of the following accounts would probably contain a smaller dollar amount
on the adjusted trial balance than on the unadjusted trial balance?

(A) Office Supplies.

(B) Cash.
(C) Accumulated Depreciation.
(D) Wages Expense.

24. Under the allowance method, when a year-end adjustment is made for estimated
bad debts,

(A) net income is unchanged.

(B) total liabilities increase.
(C) total assets increased.
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(D) total expenses is changed.

25. The Casino Inc. has a current ratio of 9 and net current assets of $800,000. The
amount of current liabilities is:

(A) $100,000.
(B) $88,889.
(C) $900,000.
(D) not determinable.

26. A negative bank balance should be presented on the balance sheet as a(n)

(A) contra asset.

(B) asset with a negative balance.
(C) liability.
(D) reduction in the shareholders’ equity.

27. The Yaoyao Frozen Yogurt Company had a cash balance of $962 on 1 August.
On 31 August, there is a deposit in transit of $87. The 31 August bank statement
contained the following information:

Bank statement balance: $1,089

NSF cheque: 16
Bank service charge 7
Credit memorandum on notes collection 68

Yaoyao also had outstanding cheques of $169 and cancelled cheques of $500.
What is Yaoyao’s adjusted Cash Balance on 31 August?

(A) $1,007.
(B) $1,039.
(C) $507.
(D) $539.

28. In this month’s bank reconciliation, a cheque outstanding on last month’s

reconciliation but has since been presented at the bank should be:

(A) ignored.
(B) added to the book balance of cash.
(C) deducted from the book balance of cash.
(D) deducted from the bank statement balance of cash.

29. When a depositor receives a bank statement indicating a “NSF cheque”, he

(A) debit sales revenue.
(B) record the amount as an expense of the current period.
(C) credit a special receivable for the amount of the cheque.
(D) credit the cash account for the amount of the cheque.
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30. Linetech Company’s bank statement showed an ending balance of $8,000. Items
appearing in the bank reconciliation included: outstanding cheques, $500;
deposits in transit, $1,000; bank service charges, $50; and Driver Company’s
cheque erroneously charged to Linetech’s bank account by the bank, $250. The
adjusted cash balance at the end of the month should be reported as

(A) $8,750.
(B) $8,700.
(C) $8,500.
(D) $8,250.