Ea BIS- Fundamental Accounting Principles ‘Tanta University Vaile Analy Faculty of Commerce bean Ais Accounting Department Kpesinal) pos Fundamental Accounting Principles Business Information Systems Final Examination, January, 2020 Time Allowed: Three Hour Total Marks: 50 Question 1 (120 Minutes, 40 Marks) Answer each of the followin; Provided answer sheet 1 ig multiple-choice questions by selecting and shading the best answer in the Each of the following accounts is closed to Income Summary except a. Expenses, b. Owner's Drawings, c. Revenues. d. All of these are closed to Income Summary. 2. The operating cycle of a merchandiser is a. always one year in length. b. generally longer than it is for a service company. ©, about the same as for a service company, . generally shorter than itis for a service company 3. The income summary account a. isa permanent account. b. appears on the balance sheet. ©. appears on the income statement. 4. is atemporary account. 4. A credit sale of $3,600 is made on July 15, terms 3/10, 1/30, on which a return of $100 is granted on July 18. ‘What amount is received as payment in full on July 24? a. $3,395 b. $3,492 c. $3,392 d $3,600 5. Allof the following are contra revenue accounts except a. sales revenue, b. sales allowances. c. sales discounts, 4. sales retums. 6. The collection of a $1,400 account after the 2 percent discount period will result ina a. debit to Cash for $1,372. b. debit to Accounts Receivable for $1,400. c. debit to Cash for $1,400. debit to Sales Discounts for $28, 7. Net sales is sales revenue less a. sales discounts. b. sales returns. c. sales returns and allowances. . sales discounts and sales returns and allowances, es 8 A compound journal entry involves. a, two accounts. . three accounts. ¢. three or more accounts, 4. four or more accounts.i | BIS- Fundamental Accounting Principles 9. Yomna Company uses a perpetual inventory system made a purchase of merchandise on credit from Yara Corporation on August 3, for $7,000, terms 2/10, n/45. On August 10, Yomna makes the appropriate payment to Yara. The entry on August 10 for Yomna na Company i is a, Accounts Payable... 7,000 Cash 7,000 b. Accounts Payable .. 6,860 6,860 7,000 140 6,860 7,000 140 6,860 10. Rehab Company reported the following balances at June 30, 2019: Sales Revenue $16,500 Sales Retums and Allowances 800 Sales Discounts 200 Cost of Goods Sold 7,100 ‘Net sales for the month is, a. $7,300 b. $15,500. c. $15,700. 4. $16,500. 11. In preparing closing entries for a merchandising company, the Income Summary account will be credited for the balance of a. sales revenue. b. inventory. c. sales discounts. 4. freight-out. 12, A journal provides a. the balances for each accoun b. information about a transaction in several different places. c. alist of all accounts used in the business. d, achronological record of transactions. 13, A chart of accounts usually starts with a. asset accounts. b. expense accounts. c. liability accounts. 4. revenue accounts. 14, Income from operations appears on a. both a multiple-step and a single-step income statement. b. neither a muitiple-step nor a single-step income statement. c. asingle-step income statement. 4. amultiple-step income statement. 15. Yomna Company’s financial information is presented below. Sales Revenue $ _ 2277Cost of Goods Sold 510,000 Sales Returns and Allowances 40,000 Gross Profit mM Net Sal 850,000 The missing amounts above are: vs ‘$890,000 $340,000 $810,000 $340,000 $890,000 $300,000 $810,000 $380,000 eege‘Ei BIS- Fundamental Accounting Principles 16. Which statement about long-term investments is not true? a. They will be held for more than one year, b. They are not currently used in the operation of the business, c. They include investments in stock of other companies and land held for future use. d. They can never include cash accounts, 17, The income summary account a. isa permanent account. b. appears on the balance sheet, ©. appears on the income statement. 4. isa temporary account. 18. After closing ent are posted, the balance in the owner's capital account in the ledger will be equal to a. the beginning owner's capital reported on the owner's equity statement. b. the amount of the owner’s capital reported on the balance sheet. ©. zero. 4. the net income for the period. 19. The following items are taken from the financial statements of the Abu-Musa Freight Service for the year ending December 31, 2019: Accounts payable $ 19,000 Accounts receivable 13,000 Accumulated depreciation ~ equipment 26,000 Advertising expense 21,200 Cash 15,000 ‘Owner's capital (1/1/19) 104,000 ‘Owner's drawings 11,000 Depreciation expense 12,000 Insurance expense 3,800 Note payable, due 6/30/2020 72,000 Prepaid insurance (12-month policy) 7,200 Rent expense 16,000 Salaries and wages expense 32,000 Service revenue 135,000 Supplies 5,000 Supplies expense 6,000 Equipment 210,000 What are total long-term liabilities at December 31, 2019? a. $0 b. $72,000 ©. $91,000 4. $93,000 20. Each of the following accounts is closed to Income Summary except a. Expenses. b. Owner's Drawings. c. Revenues. d. Al of these are closed to Income Summary. 21, Sales revenue less cost of goods sold is called a. gross profit. b. net profit. ©. netincome. 4. marginal ineome. 22, A post-closing trial balance will show a. zero balances for all accounts. b. zero balances for balance sheet accounts, ©. only balance sheet accounts, 4. only income statement accounts,ma BIS- Fundamental Accounting Principles ‘The income statement for the year 2019 of Tanta Motors Co. contains the following information: Revenues $73,000 Expenses: Salaries and Wages Expense $43,000 Rent Expense 12,000 Advertising Expense 11,000 Supplies Expense 6,000 Utilities Expense 3,500 Insurance Expense 4,000 Total expenses 19.500 Net income (loss) £16500) Use the above information to solve questions (23-26) 23. The entry to close the revenue account includes a debit to Income Summary for $6,500, b. credit to Income Summary for $6,500. c. debit to Revenues for $73,000, d. credit to Revenues for $73,000. 24. The entry to close the expense accounts includes a a, debit to Income Summary for $6,500. b. credit to Income Summary for $6,500. ©. debit to Income Summary for $79,500. d. debit to Utilities Expense for $3,500. 25, After the revenue and expense accounts have been closed, the balance in Income Summary will be a $0. b. adebit balance of $6,500. ©. acredit balance of $6,500. dd. acredit balance of $73,000. 26. The entry to close Income Summary to Owner’s Capital includes a, adebit to Revenue for $73,000. b. credits to Expenses totalling $79,500, ©. accredit to Income Summary for $6,500. d, a credit to Owner’s Capital for $6,500. 27. At January 1, 2016, Tanta Motors reported owner's equity of $50,000. Owner drawings for the year totalled $13,000. At December 31, 2016, the company will report owner's equity of a. $19,500. b. $30,500. ©. $37,000. d. $43,500. the physica! count of Bader Company inventory had a cost of $4,380 at year end and the unadjusted balance in Inventory was $4,600, Bader will have to make the following entry: 28. a. Cost of Goods Sol 220 Inventory 220 b. Inventory 0 Cost of Goods Sold. 20 « 220 220 4 4,600 4,600 29. Which of the following is in accordance with a. Accrual-basis accounting b. Cash-basis accounting ¢, Both accrual-basis and cash-basis accounting d. Neither accrual-basis nor cash-basis accounting generally accepted accounting principles?i> | BIS- Fundamental Accounting Principles 30. 31. 32. 33. 34, 35. 36. 37. 38. Adjusting entries are required a. yearly. b. quarterly. ©. monthly. 4. every time financial statements are prepared. Which one of the following is an optional step in the accounting cycle of a business enterprise? a. Analyze business transactions b. Prepare a worksheet ©. Prepare a trial balance 4. Post to the ledger accounts The post-closing trial balance contains only a. income statement accounts. b. balance sheet accounts, ©. balance sheet and income statement accounts, 4, income statement, balance sheet, and owner's equity statement accounts. Which of the following statements is true? a, Debits increase assets and increase liabilities b. Credits decrease assets and decrease liabilities. ©. Credits decrease assets and increase liabilities. 4, Debits decrease liabilities and decrease assets. Accumulated Depreciation is a. an expense account, b. an owner’s equity account. c. aliability account. d. acontra asset account. Ona classified balance sheet, inventory is classified as a. an intangible asset. b. property, plant, and equipment. ©. acurrent asset. d. a long-term investment During August, 2019, Abu-Musa’s Supply Store generated revenues of $65,000. The company’s expenses were as follows: cost of goods sold of $33,000 and operating expenses of $7,000. The company also had rent revenue of $2,000 and a loss on the sale of a delivery truck of $3,000. ‘Abu-Musa’s operating income for the month of August, 2019 is a. $25,000. b. $27,000. ©. $24,000. d. $32,000. During February 2019, its first month of operations, the owner of Alex Co. invested cash of $50,000. Alex had cash revenues of $16,000 and paid expenses of $21,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 29? a. $5,000 credit b. $5,000 debit c. $45,000 debit d, $55,000 debit At January 31, 2020, the balance in Bigelow Inc,’s supplies account was $780. During February, Bigelow purchased supplies of $900 and used supplies of $1,150. At the end of February, the balance in the supplies account should be a. $530 debit. b. $1,030 debit. c. $530 credit. 4. $830 debit.i: | BIS- Fundamental Accounting Principles 39, Financial information is presented below: Operating Expenses $ 90,000 Sales Retums and Allowances 25,000 Sales Discounts 15,000 Sales 400,000 Cost of Goods Sold 212,400 Gross profit would be: a. $147,600. b. $57,600. ©, $270,000. . $187,600. 40. The following information is for Abu-MusaSupplies: ‘Abu-MusaSupplies Balance Sheet December 31, 2019 Cash $ 45,000 ‘Accounts Payable Prepaid Insurance 80,000 Salaries and Wages Payable Accounts Receivable 110,000 Mortgage Payable Inventory 140,000 Land Held for Investment 185,000 Land 250,000 Building $200,000 Less Accumulated ‘Owner's Capital 750,000 Depreciation (50,000) 150,000 Trademark 140,000 Total Liabilities and Total Assets $1.100,000 Owner's Equity £1.100,000 The total dollar amount of assets to be classified as current assets is a. $125,000. b. $235,000. c. $375,000. d. $560,000. 41. For the previous balance sheet, the total dollar amount of liabilities to be classified as current liabilities of Abu-MusaSupplies is a. $60,000. b. $140,000. ©. $200,000. d. $350,000. a $3,600 Question 2 (30 Minutes, 10 Marks) ‘On September 1, Abu-Musa Supply had an inventory of 15 backpacks at a cost of $20 each. The company uses a perpetual inventory system, During September, the following transactions and events occurred. Sept. 4 Purchased 70 backpacks at $20 each from Sony, terms 2/10, 1/30. Sept. 6 Received credit of $100 for the return of 5 backpacks purchased on Sept. 4 that were defective. Sept. 9 Sold 40 backpacks for $35 each to Yara Books, terms 2/10, 1/30. Sept. 13 Sold 15 backpacks for $35 each to Yomna Office Supply, terms 1/30. Sept. 14 Paid Sony in full, less discount. Instructions Journalize the September transactions for Abu-Musa Supply.‘Tanta University Vaile Zaaty Faculty of Commerce Blatt Aus Accounting Department Rathod pas Fundamental Accounting Principles Mid-Term Examination Time Allowed: One Hour Total Marks: 30 Question 1 (30 Minuets, 15 Marks) Answer each of the following multiple-choice questions by selecting and shading the best answer in the provided answer sheet 1. GAAP stands for a. Generally Accepted Auditing Procedures. b. Generally Accepted Accounting Principles. c. Generally Accepted Auditing Principles. d. Generally Accepted Accounting Procedures. 2. The economic entity assumption requires that the activities a. of different entities can be combined if all the entities are corporations. b. must be reported to the Securities and Exchange Commission. c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners, d, of an entity be kept separate from the activities of its owner 3. Revenues are a, the cost of assets consumed during the period. b, gross increases in owner's equity resulting from business activities. c. the cost of services used during the period. d. actual or expected cash outflows, 4. If an owner makes a withdrawal of cash from a proprietorship, then a, there has been a violation of accounting principles. b. owner's equity will increase. c. owner's equity will decrease. d. there will be a new liability showing the owner owes money to the business. 5. A balance sheet shows a. revenues, liabilities, and owner's equity. b. expenses, drawings, and owner's equity. c. revenues, expenses, and drawings. d, assets, liabilities, and owner's equity. 6. Uneatned revenue is classified as a. an asset account. “b. a revenue account. C. a contra-revenue account, d. a liability.7. The revenue recognition principle dictates that revenue should be recognized in the accounting records a. when cash is received. b. when it is earned. c. at the end of the month, - d. in the period that income taxes are paid. 8. The matching principle matches a. customers with businesses. b. expenses with revenues, c. assets with liabilities. d, creditors with businesses., 9. A debit: a, Always increases an account, b. Is the right-hand side of a T-account, c. Always decreases an account. d. Is the left-hand side of a T-account. 10. A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is a(n): a. Journal. . Account. c. Trial balance. 4. Chart of accounts. 11. If Assets are $250,000 and Owner's Equity is $150,000, what are the total Liabilities ? a $100,000. b. $700,000. c. $200,000. d, $400,000. 12. A ledger is: ‘a. A record containing increases and decreases in a specific asset, liability, equity, revenue, or ‘expense item. b. A collection of documents that describe transactions and events entering the accounting process. ¢. A list of all accounts with their debit balances at a point in time. d. A record containing all accounts and their balances used by a company. * 13, Which of the following statements is incorrect? a. The normal balance of accounts receivable is a debit. b. The normal balance of owner's withdrawals is a debit. c. The normal balance of unearned revenues is a credit. d. The normal balance of an expense account is a credit. 14, An account balance is: a. The total of the credit side of the account. : b. The total of the debit side of the account. : ©. The difference between the total debits and total credits for an account including the beginning balance, 4. Always a credit$10,000, and accounts payable is $4,500, owner's: 15. If cash is $8,000, accounts receivable is capital must equal which of the following? a $10,000. b. $22,500. c. $13,500. 4. $12,500, Question 2 (15 Minuets, 7 Marks) Journalize the following business transactions in general journal of Abu-Musa Company: Jan 1. The owner, Ahmad Abu-Musa, invests $30,000 in cash in starting @ real estate office operating as a sole proprietorship. Jan 2. Purchased $2400 of office supplies on credit Jan 3. Purchased office equipment for $7,500 on credit Jan 5. Paid $2700 in cash for the current month's rent. a Jan 7. Received a bill for $2500 for advertising for the current month. ° Question 3 (15 Minuets, 8 Marks) Based on the following trial balance for Abu- Musa Company, prepare the Income Statement, ‘Statement of Owner’s Equity, and Balance Sheet. ‘Abu-Musa Company Trial Balance December 31, 2015 Balance Account Title Debi Credit Cash $12,400 ‘Accounts receivable 400 Supplies 200 « Building 60,000 ¢ Accounts payable $100 Lisa, capital 70,000 Service revenue 4,600 Salary expense 1,200 Rent expense 500 Total $74,700 $74,200 Best Wishes‘Answer each of the following multiple-choice questions by selecting and shading the best answer in the provided answer sheet 1, The starting point of the accounting process is a. communicating information to users. b. identifying economic events. c. recording economic events. d. None of these answers are correct. 2. On August 13, 2020, Accounting Services Limited purchased office equipment for $1,700 and office supplies of $300 on account. Which of the following journal entries is recorded correctly and in the standard format? a, Equipment ssn 1,700 Account Payabl evs 2,000 Supplies 7 Ber 300) b. Equipment. 1,700 Supplies 300 Accounts Payable c. Accounts Payable . Equipment 1,700 Supplies 300 d. Equipment ‘Supplies Accounts Payable. sn 2,000 3. The accounting process is correctly sequenced as a. identification, communication, recording. b. recording, communication, identification. c. identification, recording, communication, d. communication, recording, identification. 4. On July 7, 2020, Tanta Co. performed cash services of $1,900. The entry to record this transaction would include a, a debit to Service Revenue of $1,900. b. acredit to Accounts Receivable of $1,900. ¢. adebit to Cash of $1,900. d. acredit to Accounts Payable of $1,900. 5. The historical cost principle requires that when assets are acquired, they be recorded at a. appraisal value. b. cost. ¢. market price. 4. book value.6. GAAP stands for a, Generally Accepted Auditing Procedures. b. Generally Accepted Accounting Principles. Generally Accepted Auditing Principles. Generally Accepted Accounting Procedures. ae 7. The economic entity assumption requires that the activities a, of different entities can be combined if all the entities are corporations. b. must be reported to the IASB. ¢. ofa sole proprietorship cannot be distinguished from the personal economic events of its owners. d. ofan entity be kept separate from the activities of its owner. 8. Owner's equity is best depicted by the following: a. Assets = Liabilities. b. Liabilities + Assets, ©. Residual equity + Assets. d. Assets — Liabilities. 9. Alex Plumbers owner's equity at the beginning of August 2020 was $740,000. During the month, the company eamed net income of $175,000 and owner’s drawings were $80,000. At the end of August 2020, what is the balance in owner's equity? a. $660,000 b. $740,000 $820,000 d. $835,000 10, Owner's equity is increased by a. drawings. b. revenues, ©. expenses. 4. liabilities, 11. Which of the following events is not a business transaction? a. Investment of cash by the owner. b. Hired employees. . Incurred utility expenses for the month. d. Eamed revenue for services provided. 12. An income statement a. summarizes the changes in owner's equity for a specific period of time. b. reports the changes in assets, liabilities, and owner's equity over a period of time. ©. reports the assets, liabilities, and owner's equity at a specific date. d._ presents the revenues and expenses for a specific period of time. 13. A debit is not the normal balance for which of the following? a. Asset account b. Owner's Drawings account c. Expense account d. Owner's Capital account 14. Unearned revenues are received and recorded as liat ‘eamed and recorded as liabii eared but not yet received or recorded. ‘eamed and already received and recorded. epee15, Abu-Musa Company compiled the following financial information as of December 31, 2020: Revenues £340,000 ‘Owner’s Capital (1/1/20) 140,000 Equipment 80,000 Expenses 240,000 Cash 90,000 Owner's Drawings 20,000 Supplies 20,000 Accounts payable 40,000 Accounts receivable 70,000 Abu-Musa’s assets on December 31, 2020 are £190,000, £260,000, £360,000. £480,000. aeoe 16. The double-entry system requires that each transaction must be recorded a. inat least two different accounts. b. in two sets of books. ©. ina journal and in a ledger. d. first as a revenue and then as an expense. 17. Yomna Company showed the following balances at the end of its first year: Cash $ 4,000 Prepaid insurance 7,000 Accounts receivable 8,000 Accounts payable 4,000 Notes payable 7,000 Owner's Capital 3,000 Owner’s Drawings 2,000 Revenues 32,000 Expenses 25,000 What did Yomna Company show as total credits on its trial balance? a. $14,000 b. $46,000 ©. $44,000 4. $48,000 18. A balance sheet shows a revenues, liabilities, and owner's equity. b. expenses, drawings, and owner's equity. ©. revenues, expenses, and drawings. 4. assets, liabilities, and owner's equity. 19. The basic accounting equation cannot be restated as a. Assets — Liabilities = Owner's Equity. b. Assets ~ Owner's Equity = Liabilities. ¢. Owner's Equity + Liabilities = Assets, 4. Assets + Liabilities = Owner's Equity. 20. As of June 30, 2020, Abu-Musa What are the liabilities for Abu- a. $40,000 b. $60,000 ©. $100,000 4. $160,000 ‘Company has assets of $100,000 and owner's equity of $60,000. Musa Company as of June 30, 20207