FIN621 - Mid Term Past Papers (Including Spring 2010)

Mid Term Papers
Financial Statement Analysis
FIN621
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FIN621 Mid Term Papers
MIDTERM EXAMINATION
Spring 2010
FIN621- Financial Statement Analysis
Question No: 1 ( Marks: 1 ) - Please choose one

How much duration does an accounting period usually have?
► Three months
► Two years
► One year
► Five years

Balance Sheet and Accounting Cycle are based on which of the following?
► Adjusting entries
► Closing entries
► Financial position
► Accounting Equation

Which of the following is the next step after the preparation of trial balance?
► Adjusted trial balance

► Financial statements
► Closing entries

Which of the following errors are identified during the preparation of trial
balance?
► Recording transactions in the wrong account

► Duplication of a transaction in the accounting records
► Posting only the debit portion of a particular journal entry
► Recording the wrong amount for a transaction to both the accounts
Collected and Composed by Bilal Farooq (bilal.zaheem@gmail.com)

Which of the following is NOT an advantage of the Trial Balance?
► It ensures that the all accounts have identical debits and credits
► It ensures that the balance of each ledger account has been computed correctly
► The debit and the credit columns of trial balance have been added up correctly
► All the transactions have been recorded and nothing has been omitted

Cost of a building is Rs. 90,000 and its estimated useful life is 30 years. What will
be the depreciation expense of this building for one month by using straight line
depreciation method?
► Rs. 600
► Rs. 250
► Rs. 300
► Rs. 500

Retained earnings change over time because of several factors. Which of the
following factors would explain an INCREASE in retained earnings?
► Net Income
► Dividends payment
► Investment by the stockholders
► Net Loss

At the end of the fiscal year, Accounts Receivable has a balance of Rs. 100,000 and
Allowance for Doubtful Accounts has a balance of Rs. 7,000. The expected net
realizable value of the accounts receivable is:
► Rs. 7,000
► Rs. 93,000
► Rs. 100,000
► Rs. 107,000

Which of the following regarding retained earnings is FALSE?
► Retained earnings represent earnings not distributed to stockholders

► Retained earnings is increased by net income and decreased by a net loss
► Retained earnings are a component of stockholders’ equity on the balance sheet
► Retained earnings are an asset on the balance sheet

Which of the following would be considered a cash-flow item from a "financing"
activity?
► A cash outflow to the government for taxes

► A cash outflow to repurchase the firm's own common stock
► A cash outflow to lenders as interest
► A cash outflow to purchase bonds issued by another company

'Equity dividends' shown in the cash flow statement will comprise:
► All company dividends paid during the year

► All dividends paid to voting shares in the year
► All dividends paid and proposed in the year relating to voting shares
► All proposed dividends in the year relating to voting shares

Which of the following activities convert the income statement items from the
accrual basis of accounting to cash?
► Operating activities
► Investing activities
► Financing activities
► Non cash activities

The balance sheet reported a beginning balance of Rs. 20,000 in Accounts
Receivable and an ending balance of Rs. 15,000. The income statement reported
Sales Revenue of Rs. 200,000. Using this information, compute cash collected from
customers.

► Rs. 205,000
► Rs. 215,000
► Rs. 195,000
► Rs. 200,000

Which of the following would be considered as cash flow from investing activities?
► Proceeds from issuance of long-term debt

► Expenditure for sale of plant and equipment
► Payments to suppliers
► Receipts from sale of goods or services

When cash flow statement is prepared by using indirect method, which part of it is
different from the direct method?
► Cash flow from investing activities

► Cash flow from financing activities
► Cash flow from operating activities
► All parts are same in both methods

The cash flow from financing activities shows the cash effects of which of the
following?
► Income statement items

► Long term assets items
► Long term liability & stockholder’s equity
► Long term liability and long term assets

Which of the following must be included in a company's summary of significant
accounting policies in the notes to the financial statements?
► Description of current year equity transactions

► Summary of long-term debt outstanding
► Schedule of fixed assets
► Revenue recognition policies

Which one of the following is NOT an inventory costing method?
► FIFO cost method

► Weighted-average cost method
► Specific unit cost method
► LIFO cost method

In a perpetual inventory system, which of the following would be debited when
inventory is sold on account?
► Cost of goods sold

► Merchandise inventory
► Sales
► Both Accounts receivable & cost of goods sold

Which of the following would affect the gross profit rate if sales remain constant?
► An increase in advertising expense

► A decrease in depreciation expense
► An increase in cost of goods sold
► A decrease in insurance expense

Which of the following statements best describes the nature of depreciation?
► Regular reduction of asset value to correspond to the decline in market value

as the asset ages
► A process of correlating the book value of an asset with its gradual decline in
physical efficiency
► Allocation of the cost in a manner that will ensure that plant and equipment
items are not carried on the balance sheet at amounts in excess of net realizable
value
► Allocation of the cost of a plant asset to the periods in which benefits are
received

Warner Corporation reported net income in excess of its net cash flow from
operations. A possible explanation of this difference is:
► Depreciation expense
► Non operating gains
► A decrease in income tax rates
► A decrease in accounts receivable over the period

Which of the following transaction have an effect on expense account?
► Purchase of office equipment on credit

► Payment on accounts payable
► Repayment of principle of bank loan
► Payment of wages

The supplies account has a balance of Rs. 1,500 at year end. The actual amount of
supplies in hand at the end of period is Rs. 400. The necessary adjusting entry is:
► Debit Supplies on Hand Rs. 1100; Credit Supplies Expense Rs. 1100
► Debit Supplies Expense Rs. 400; Credit Supplies on Hand Rs. 400
► Debit Supplies Expense Rs. 1100; Credit Supplies on Hand Rs. 1100
► Debit Supplies on Hand Rs. 400; Credit Supplies Expense Rs. 400

The balance of the Unearned Rent Account for Jones Co. as on Dec 31 is Rs.1, 200.
If Jones Co. failed to record the adjusting entry for Rs.600 of rent earned during
December, the effect on the Balance Sheet and Income Statement for December will
be:
► Assets understated by Rs.600; net income overstated by Rs.600

► Liabilities overstated by Rs.600; net income understated by Rs.600
► Liabilities understated by Rs.600; net income understated by Rs.600
► Liabilities overstated by Rs.600; net income overstated by Rs.600

A business has purchased machinery on credit, what will be its journal entry?

► Cash - (Debit); Machinery - (Credit)
► Machinery - (Debit) ; Accounts payable - (Credit)
► Accounts payable - (Debit) ; Machinery - (Credit)
► Machinery - (Debit) ;Cash - (Credit)

Closing entries result in net income being calculated in the income summary
account and then transferred to which of the following account?
► Revenue account
► Common Stock account
► Dividends account
► Owner's Capital account

Assuming that net purchases cost Rs 250,000 during the year. The closing
inventory was of Rs 4,000, and opening inventory was of Rs 30,000, how much was
the cost of goods sold?
► Rs. 276, 000

► Rs. 280,000
► Rs. 254,000
► Rs. 246,000
Question No: 29 ( Marks: 3 )

Assume that net income was Rs. 200,000, depreciation expense was Rs. 10,000,
accounts receivable increased by Rs. 15,000, and accounts payable increased by Rs.
5,000. Calculate the cash flow from operating activities.
A. Net Cash Flow from Operating Activities 200000Rs.

Explain how the adoptions of FIFO method rather than LIFO will tend to raise or
lower the quality of a company’s earnings? Assume the continuance of the
inflation.
A. During Inflation, FIFO shows less expense on income statement and higher
inventory valuation on balance sheet and values ending inventory at current cost,
whereas LIFO shows higher expenses on income statement and lower inventory
valuation on balance sheet.

Nestle Pakistan has two conflicting objectives. Management wants to report the
highest possible earnings to stockholders in the near future yet also wants to
minimize the taxable income. Indicate the depreciation method that the company
will probably use in its financial statements and its federal income tax return.
Explain your answer with the reasons.
A. We will use fixed depreciation Method
Patterson Company reported net income for the current year of Rs. 666,000. During
the year the company’s accounts receivable increased by Rs. 50,000, inventory
decreased by Rs. 23,000, accounts payable decreased by Rs. 55,000, pre-paid
expenses increased by Rs. 35,000, and accrued expenses payable increased by Rs.
14,000. Determine the amount of cash provided by or used for operating activities
by the indirect method.
A. Net Cash Flow from Operating Activities 663000Rs.
MIDTERM EXAMINATION
Fall 2009
FIN621- Financial Statement Analysis (Session - 4)

Which of the following is the acronym for GAAP?
► Generally Adopted Accounting Principles

► Generally Accepted Auditing Principles
► Generally Accepted Accounting Principles
► Generally Adapted American Principles

After recording the transactions in journal, posting is made to which of the
following?

► Trial Balance
► Financial Statements
► Ledger
► After-closing Trial Balance

Which one of the following is the second step in the accounting cycle?
► Recording entries in the journal

► Analyzing the business transaction
► Posting the entries to the ledger
► Making the adjusting entries

Which of the following is the basic function of the Trial Balance?
► To prove the equality of debits and credits

► To check the balance of all assets
► To prepare the balance sheet
► To check the validity of accounts

Which of the following refers to the term “posting”?
► The system of giving numbers to the accounts

► Transferring the debits and credits to ledger
► Transferring the debits and credits to journal
► The recording of transactions

Which of the following results are summarized by the income statement of a
company?
► Operating results
► Economic results
► Auditing results
► Marketing results

Which of the following is an example of an accrual?
► Equipment purchased for use in the business

► Book-keeping fees collected but not yet earned
► Six months’ rent paid in advance
► Interest earned but not yet received

Prepaid Expense is a(n) _________ account and has a _________ normal balance.
► Revenue, credit
► Liability, credit
► Asset, debit
► Expense, debit

Company A owns a building. Which of the following statements regarding
depreciation is FALSE from an accounting perspective?
► As the market value of the building increases, depreciation should

increase
► Depreciation is an estimated expense to be recorded each period during the
building’s life
► As depreciation is recorded, stockholders’ equity is reduced
► As depreciation is recorded, total assets are reduced

Retained earnings change over time because of several factors. Which of the
following factors would explain an INCREASE in retained earnings?
► Net Income
► Dividends payment
► Investment by the stockholders
► Net Loss

The revenue account “Fees Income” is closed by which of the following entry?

► Cash – Debit; Fees Income - Credit
► Fees Income – Debit; Income Summary - Credit
► Capital – Debit; Fees Income - Credit
► Income Summary – Debit; Fees Income - Credit

Which of the following regarding retained earnings is FALSE?
► Retained earnings represent earnings not distributed to stockholders

► Retained earnings is increased by net income and decreased by a net loss
► Retained earnings are a component of stockholders’ equity on the balance
sheet
► Retained earnings are an asset on the balance sheet

Current assets are those assets which management intends to convert into cash or
consume within:
► The operating cycle

► One year
► The longer of operating cycle or one year
► The shorter of operating cycle or one year

Decision makers compare net income to net cash from operating activities. To
make these amounts more comparable, the same accounts are included in each.
The following accounts are used to compute both net income and net cash from
operating activities EXCEPT:
► Interest expense
► Dividend revenue
► Interest revenue
► Dividends declared and paid

If the indirect approach for the statement of cash flows is used, which of the
following items should be subtracted from accrual basis net income to derive cash
flow from operating activities?

► Losses on the sale of long-term investments
► Depreciation expense
► Amortization expense
► Gains on the sale of long-term investments

The cash flow from financing activities shows:
► The cash outflow due to loan interest payments being made

► The change in the level of bank balances in the period
► The cash flow from share and loan issues and repayments
► Cash dividends paid to shareholders

Which of the following transaction should be classified as a financing activity?
► Purchase of equipment
► Purchase of treasury stock
► Sale of trademarks
► Income tax refund
Cash flow relating to investing activities does NOT present the cash effects of
which of the following?
► Plant assets
► Intangible assets
► Investments
► Debt financing

The indirect method shows the reconciliation from net income to operating cash
flows. Select the adjustment that is added during the reconciliation.
► A decrease in accrued liabilities

► A decrease in Salaries Payable
► Payment of long-term debt
► An increase in Accounts Payable

The indirect method shows the reconciliation from net income to operating cash
flows. Select the adjustment that is subtracted during the reconciliation.
► Non-cash revenues (revenues earned but payment not yet received)

reported on the income statement
► A decrease in Accounts Receivable or another non-cash current asset
► Revenues earned and received in cash.
► Non-cash expenses (expenses incurred but not paid) reported on the income
statement-one example is amortization expense.

Investing activities include all of the following EXCEPT:
► Payment of debt
► Collection of loans
► Making of loans
► Sale of available for sale and held to maturity securities

If sales on an accrual basis are Rs. 500,000 and accounts receivables increased by
Rs. 30,000, the cash received from the customers would be:
► Rs. 500,000
► Rs. 470,000
► Rs. 530,000
► Can not be found from the given information

Which of the following would NOT be the cash inflow for the business?
► Sale of land for cash

► Issuance of long term bonds
► The sale of common stock
► Retirement of long term debt

Which one of the following is NOT an inventory costing method?

► FIFO cost method
► Weighted-average cost method
► Specific unit cost method
► LIFO cost method

When merchandise is purchased in a periodic inventory system, its cost is debited
to ________ account.
► Inventory
► Inventory expense
► Purchases
► Cost of goods sold

Office supplies are purchased on account. The company uses a perpetual
inventory system. What is the correct journal entry for this purchase of office
supplies?
► Debit - Purchases; Credit - Cash

► Debit - Merchandise Inventory; Credit - Cost of Goods Sold
► Debit - Office Supplies; Credit - Accounts Payable
► Debit - Merchandise Inventory; Credit - Accounts Payable

An inventory error affects ___________ accounting periods.
► Only current
► Two
► Three
► Four

Equipment costing Rs. 3,000 with accumulated depreciation of Rs. 2,125 is
exchanged for another asset with a fair value of Rs. 625. The exchange has
commercial substance. How much is the gain or loss on this transaction?
► A gain of Rs. 250 should be recognized

► A loss of Rs. 250 should be recognized

► A loss of Rs. 500 should be recognized
► No gain or loss should be recognized

Which of the following asset does NOT have a depreciation expense?
► Furniture
► Building
► Plant & equipment
► Land

Which of the following is NOT an example of accelerated depreciation method?
► Straight-line method
► Sum-of-the-years digit method
► Double-declining balance method
► Modified Accelerated Cost Recovery System

Accelerated depreciation method is mostly used for ____________.
► Financial statements
► Assets valuation
► Inventory valuation
► Income tax returns

Which of the following is NOT an example of deferred item?
► Depreciation
► Accounts payable
► Unearned revenue
► Prepaid insurance

Assets which have NO market value are called:

► Wasting assets
► Fictitious assets
► Quick assets
► Tangible assets

Which of the following accounts will be debited, when increased?
► Liabilities and expenses

► Assets and equity
► Assets and expenses
► Equity and revenues

Which of the following provides the basis for the trial balance?
► Income statement
► Statement of cash flow
► Ledger

The income statement of ABL shows other operating expenses of Rs. 30 million;
prepaid insurance expense increased by Rs. 4 million; and accrued utilities payable
decreased by Rs. 7 million. How much did the company pay in other operating
expenses?
► Rs. 41 million
► Rs. 33 million
► Rs. 27 million
► Rs. 19 million

From the given information, calculate the Cost of Goods Sold using the weighted-
average cost method:
Beginning inventory 10 units @ Rs. 10 each
On January 20, purchased 10 units @ Rs. 20 each
15 of the 25 units are sold

► Rs. 200
► Rs. 270
► Rs. 300
► Rs. 350

Which of the following balances does the Contra-Asset account show typically?
► Credit
► Debit
► Negative
► Positive

Using the following information calculate Net Income: Sales Revenue Rs.200, 000,
Loss on Sale of Equipment Rs.10, 000, Amortization Expense Rs.20, 000 and Cost of
Goods Sold Rs.50, 000.
► Rs. 170,000
► Rs. 120,000
► Rs. 130,000
► Rs. 180,000

Which of the following question is NOT addressed by cash flow statement?
► How much cash was generated by the company’s operations?

► Why is such a profitable company able to pay only small dividends?
► How much was spent for the new plants and equipment?
► How profitable the company’s current assets are?

On 15, 2001, ABC Company sold 1,000 printers to another company. Immediately
prior to this sale, the perpetual inventory records of the company for the printers
included the following cost layers.
Purchase date Quantity Unit Cost Total Cost

Dec. 12, 2000 600 Rs. 9.25 Rs. 5,550
Jan. 9, 2001 900 Rs. 9.50 8,550
Total on hand 1,500 Rs. 14,100

Instructions:
Prepare a separate general entry to record the cost of printers, assuming that the
company uses the following methods.
Answer:
a. FIFO (2.5) DR CR
Rs. Rs.
Cost of Printers Sold A/C 9350
Printers Inventory A/C 9350
b. LIFO (2.5) DR CR
Rs. Rs.
Cost of Printers Sold A/C 9475
Printers Inventory A/C 9475
Question No: 42 (Marks: 5)

Hill Company adjusts its accounts at the end of each month. Prepare the adjusting
entries required at December 31 based on the following information.
a. A bank loan had been obtained on December 1. Accrued interest on
the loan at December 31 amounts to Rs. 1,050. No interest expense has yet
been recorded.
Answer
DR CR
General Entry Rs Rs
Interest Expense A/C 1050
Interest Payable A/C 1050
b. Depreciation of the office equipment is based on an estimated life of

five years. The balance in the office equipment account is Rs. 24,000; no
change has occurred in the account during the year.
General Entry Rs Rs
Depreciation of Office Equip.
A/C
c. Interest revenue earned on US government bonds during December

amounts to Rs. 750. This accrued interest revenue has not been recorded or
received as of December 31.
General Entry Rs Rs

Interest Receivable on Bonds 750
A/C
Interest Income on Bonds A/C 750
d. On December 31, an agreement was signed to lease a truck for 12

months beginning January 1 at a rate of 35 cents per mile. Usage is expected
to be 2,000 miles per month, and the contract specifies a minimum payment
equivalent to 18,000 miles a year.
General Entry Rs Rs
e. The company’s policy is to pay all employees up-to-date each Friday.

Since December 31 fell on Monday, there was a liability to employees at
December 31 for one day’s pay amounting to Rs. 2,800.
General Entry Rs Rs
Salary Expense A/C 2800
Salary Payable A/C 2800
MIDTERM EXAMINATION
Fall 2009
FIN621- Financial Statement Analysis

How much duration does an accounting period usually have?
► Three months
► Two years
► One year
► Five years

Which of the following statement shows the effects of cash inflows and outflows?

► Balance Sheet
► Statement of Owner’s Equity
► Income Statement
► Statement of Cash Flows

To determine the balance of a particular account, one should refer to which of the
following?
► Ledger
► Source document
► Chart of accounts
► Journal

A business has purchased a building on credit, how it would be recorded in the
journal?
► Building - Credit; Accounts payable - Debit

► Building - Debit; Notes payable -Credit
► Building - Debit; Owner’s equity- Credit
► Building - Debit; Accounts payable - Credit

An entry that affects more than one accounts is knows as _____________.
► Journal entry
► Compound entry
► Adjusting entry
► Reversing entry

Which of the following is NOT true about the net income?
► It is a calculated figure and represents actual cash

► It can be distributed among holders of common stock as a dividend
► It can be held by the firm as retained earnings
► It is obtained by subtracting expenses from the revenues

What would be the adjusting entry to record depreciation if the estimated amount
of depreciation on equipment for a period is Rs. 2,000?
► Depreciation expense - Debit; Equipment - Credit

► Depreciation expense - Debit; Accumulated depreciation - Credit
► Equipment - Debit; Depreciation expense - Credit
► Accumulated depreciation - Debit; Depreciation expense - Credit

The trial balance shows Supplies of Rs.1,350 and Supplies Expense of Rs.0. If
Rs.600 of supplies are on hand at the end of the period, the adjusting entry would
be:
► Supplies, Rs. 600 - Debit; Supplies Expense, Rs. 600 - Credit

► Supplies, Rs. 750 - Debit; Supplies Expense, Rs. 750 - Credit
► Supplies Expense, Rs. 750 - Debit; Supplies, Rs. 750 - Credit
► Supplies Expense, Rs. 600 Debit; Supplies, Rs. 600 - Credit

Which of the following accounts would NOT be included in a post-closing trial
balance?
► Cash
► Accumulated depreciation
► Owner’s equity
► Fees earned

After the closing entries are posted to the ledger, each expense account will have?
► A debit balance
► A negative balance
► A credit balance
► A zero balance

Current assets are those assets which management intends to convert into cash or
consume within:

► The operating cycle
► One year
► The longer of operating cycle or one year
► The shorter of operating cycle or one year

Which of the following is NOT the most common example of cash equivalents?
► Savings deposits
► Certificates of Deposit (CDs)
► Stocks of other companies
► Money market mutual funds

In preparing the statement of cash flows, how should non-cash
investing/financing activities be reported?
► In the financing activities section of the statement of cash flows

► In a separate schedule accompanying the statement of cash flows
► In the investing activities section of the statement of cash flows
► Should not to be reported

Which of the following items are NOT added back to the net income figure
(which is found on the Income Statement) to arrive at cash flows from operations?
► Depreciation
► Deferred tax
► Amortization
► Investments

Which of the following activities convert the income statement items from the
accrual basis of accounting to cash?
► Operating activities
► Investing activities
► Financing activities
► Non cash activities

Which one of the following items is specifically included in the body of a
statement of cash flows?
► Operating and non-operating cash flow information

► Conversion of debt to equity
► Acquiring an asset through a capital leases
► Purchasing a building by giving a mortgage to the seller

ABC Company has a cost of goods sold of Rs. 500,000. During the year the
inventory increased by Rs. 10,000 and accounts payable increased by Rs. 15,000.
The interest expense was Rs. 15,000 for the year and dividend of Rs. 11,000 were
paid during the year. What would be the cash payments for the purchase of
the merchandise.
► Rs. 505,000
► Rs. 516,000
► Rs. 490,000
► Rs. 495,000

The cash flow from investing activities shows the cash effects of which of the
following?
► Income statement items

► Long term assets items
► Long term liability & stockholder’s equity
► Long term liability and long term assets

Which of the following must be included in a company's summary of significant
accounting policies in the notes to the financial statements?
► Description of current year equity transactions

► Summary of long-term debt outstanding
► Schedule of fixed assets
► Revenue recognition policies

Gross profit is:
► Excess of sales over cost of goods sold

► Sales less Purchases
► Cost of goods sold + Opening stock
► Net profit less expenses of the period

An inventory error affects ___________ accounting periods.
► Only current
► Two
► Three
► Four

From the given data, calculate Cost of Goods Sold using the FIFO costing method:
Beginning inventory is 10 units @ Rs. 10 each.
15 of the 25 units are sold.
► Rs. 200
► Rs. 150
► Rs. 350
► Rs. 450

Under which cost flow assumption, the ending inventory is composed of the most
recently purchased merchandise?
► FIFO
► LIFO
► Average cost
► Specific identification

If sales revenues are Rs. 400,000, cost of goods sold is Rs. 310,000, and operating
expenses are Rs. 60,000, what is the gross profit?

► Rs. 30,000
► Rs. 90,000
► Rs. 340,000
► Rs. 400,000

Which cost flow assumption most closely matches the actual physical flow of
inventory in most retailing businesses?
► FIFO
► LIFO
► Average cost
► Specific identification

The sale of a depreciable asset resulting in a loss indicates that the proceeds from
the sale were:
► Less than current market value

► Greater than cost
► Greater than book value
► Less than book value

The purpose of recording depreciation on productive assets is to:
► Reflect the decline in the market value of the assets each period
► Reduce income when the company has an exceptionally profitable year
► Be in conformity with the revenue recognition principle
► Allocate the original cost of a productive asset to expense over its useful
life

Which depreciation method allocates an equal portion of depreciation expense to
each period of asset’s useful life?
► Sum-of-the-year digit method

► Accelerated depreciation method

Which of the following is NOT an example of accelerated depreciation method?
► Sum-of-the-years digit method
► Modified Accelerated Cost Recovery System

The Drawing account is closed by which of the following entry?
► Capital – Debit; Drawing - Credit

► Drawing – Debit; Capital - Credit
► Income Summary – Debit; Drawing - Crediting
► Drawing – Debit; Income Summary – Crediting

Which of the following account would be classified as a current asset on the
balance sheet?
► Accumulated depreciation
► Accounts receivable
► Office equipment
► Land

An adjusting entry would NOT be required for which of the following account?
► Salaries
► Past due expense
► Income tax expense
► Accounts receivable

Which of the following accounts will be debited, when increased?
► Liabilities and expenses

► Assets and equity
► Assets and expenses
► Equity and revenues

Accounting Cycle is a series of activities that begins with ___________ and ends
with ___________.
► Closing of books, transactions

► Transaction, After closing Trial Balance
► Journal, ledger account
► Transactions, financial statements

The income statement of ABL shows other operating expenses of Rs. 30 million;
prepaid insurance expense increased by Rs. 4 million; and accrued utilities payable
decreased by Rs. 7 million. How much did the company pay in other operating
expenses?
► Rs. 41 million
► Rs. 33 million
► Rs. 27 million
► Rs. 19 million

The statement of cash flows does NOT report the:
► Sources of cash in the current period

► Amount of checks outstanding at the end of the period
► Uses of cash in the current period
► Change in the cash balance for the current period

Which of the following is NOT normally required for revenue to be recognized
according to the revenue principle for accrual basis accounting?
► The price is fixed or determinable

► Services have been performed
► Cash that has already been collected
► Evidence of an arrangement for customer payment exists

Which of the following balances does the Contra-Asset account show typically?
► Credit
► Debit
► Negative
► Positive

Which one of the following would lead to the decrease in the owner’s equity?
► Purchasing a piece of land

► Paying dividends to shareholders
► Purchasing equipment on account
► Paying back the principal of a loan

The users of a statement of cash flows are mostly interested in:
► Net cash flow from operating activities

► Net cash flow from investing activities
► Net cash flow from financing activities
► Net cash flow from non-cash transactions

Classify the following activities as cash flow from operating, investing and
financing activities.
· Payments for repurchase of company shares
· Collections on loan principal and sales of other firms' debt instruments
· Tax payments
· Expenditure for purchase of other firms' equity instruments
· Payments to suppliers for goods and services
Answer:
Payments for repurchase of company shares: Financing activities
Collections on loan principal and sales of other firms' debt

instruments: Investing activities.
Tax payments: Operating activities

Expenditure for purchase of other firms' equity instruments: Investing activities
Payments to suppliers for goods and services: Operating activities

Listed below in random order are the items to be included in the balance sheet of
the Mystery Mountain Lodge at December 31, 2001:
Equipment Rs. 29,200 Buildings Rs. 450,000

Land 425,000 Owner’s capital ?
Accounts payable 54,800 Cash 21,400
Accounts receivable 10,600 Furnishings 58,700
Salaries payable 33,500 Snowmobiles 15,400
Interest payable 12,000 Notes payable 620,000
Requirement:
Prepare a Balance Sheet at December 31, 2001.
Mystery Mountain Lodge

Balance Sheet as on December 31, 2001
Particulars Amount (Rs.)
Current Assets:
Cash 21,400
Accounts receivable 10,600
Snowmobiles 15,400
Fixed Assets:
Equipment 29,200
Furnishings 58,700
Buildings 450,000
Land 425,000
1,010,300
Liabilities:
Interest payable 12,000
Salaries Payable 33,500
Accounts Payable 54,800
Notes Payable 620,000
Capital:
Owner’s capital 290,000
1,010,300

FIN621 - Mid Term Past Papers (Including Spring 2010)

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FIN621 - Mid Term Past Papers (Including Spring 2010)

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Mid Term Papers

Financial Statement Analysis

Come and join me at Weblyceum

In Case of any Problem Contact Administrators

Bilal Farooq (bilal.zaheem@gmail.com)

Muhammad Afaaq (afaaq_tariq@yahoo.com)

Question No: 1 ( Marks: 1 ) - Please choose one

Question No: 2 ( Marks: 1 ) - Please choose one

Question No: 3 ( Marks: 1 ) - Please choose one

► Adjusted trial balance

Question No: 4 ( Marks: 1 ) - Please choose one

► Recording transactions in the wrong account

Collected and Composed by Bilal Farooq (bilal.zaheem@gmail.com)

Question No: 6 ( Marks: 1 ) - Please choose one

Question No: 7 ( Marks: 1 ) - Please choose one

Question No: 8 ( Marks: 1 ) - Please choose one

Collected and Composed by Bilal Farooq (bilal.zaheem@gmail.com)

► Retained earnings represent earnings not distributed to stockholders

Question No: 10 ( Marks: 1 ) - Please choose one

► A cash outflow to the government for taxes

Question No: 11 ( Marks: 1 ) - Please choose one

► All company dividends paid during the year

Question No: 12 ( Marks: 1 ) - Please choose one

Question No: 13 ( Marks: 1 ) - Please choose one

Collected and Composed by Bilal Farooq (bilal.zaheem@gmail.com)

Question No: 14 ( Marks: 1 ) - Please choose one

► Proceeds from issuance of long-term debt

Question No: 15 ( Marks: 1 ) - Please choose one

► Cash flow from investing activities

Question No: 16 ( Marks: 1 ) - Please choose one

► Income statement items

Question No: 17 ( Marks: 1 ) - Please choose one

► Description of current year equity transactions

Collected and Composed by Bilal Farooq (bilal.zaheem@gmail.com)

► FIFO cost method

Question No: 19 ( Marks: 1 ) - Please choose one

► Cost of goods sold

Question No: 20 ( Marks: 1 ) - Please choose one

► An increase in advertising expense

Question No: 21 ( Marks: 1 ) - Please choose one

► Regular reduction of asset value to correspond to the decline in market value

Collected and Composed by Bilal Farooq (bilal.zaheem@gmail.com)

Question No: 23 ( Marks: 1 ) - Please choose one

► Purchase of office equipment on credit

Question No: 24 ( Marks: 1 ) - Please choose one

Question No: 25 ( Marks: 1 ) - Please choose one

► Assets understated by Rs.600; net income overstated by Rs.600

Question No: 26 ( Marks: 1 ) - Please choose one

Collected and Composed by Bilal Farooq (bilal.zaheem@gmail.com)

Question No: 27 ( Marks: 1 ) - Please choose one

Question No: 28 ( Marks: 1 ) - Please choose one

► Rs. 276, 000

Question No: 29 ( Marks: 3 )

A. Net Cash Flow from Operating Activities 200000Rs.

Question No: 30 ( Marks: 3 )

Collected and Composed by Bilal Farooq (bilal.zaheem@gmail.com)

A. We will use fixed depreciation Method

Question No: 32 ( Marks: 5 )

A. Net Cash Flow from Operating Activities 663000Rs.

Question No: 1 ( Marks: 1 ) - Please choose one

► Generally Adopted Accounting Principles

Question No: 2 ( Marks: 1 ) - Please choose one

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Question No: 3 ( Marks: 1 ) - Please choose one