Accounting 2017 U1 P1
Accounting 2017 U1 P1
Accounting 2017 U1 P1
ACCOUNTING
Unit 1— Paper 01
1 hour 30 minutes
1. This test consists of 45 items. You will have 1 hour and 30 minutes to answer them.
3. Do not be concerned that the answer sheet provides spaces for more answers than there are items
in this test.
4. Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item
you are about to answer and choose the correct answer.
5. On your answer sheet, find the number which corresponds to your item and shade the space
having the same letter as the answer you have chosen. Look at the sample item below.
Sample Item
The cost of an asset consumed in the generation of revenue is treated in the books as
Sample Answer
(A) a gain
(B) a liability
(C) an expense
(D) an allowance
the best ali''ver to this item is "an cxne:v so (C) has been shided.
6. If you want to change your answer, erase it completely before you fill in your new choice.
7. When you are told to begin, turn the page and work as quickly and as carefully as you can. If
you cannot answer an item. Lo on to the next one. You may return to that item later.
1. One of the MAIN purposes of financial 3. What would be the advantage (benefit) of
accounting is to having all countries adopt and follow the
same accounting standards?
(A) ensure that current assets can cover-
all expenses (A) Consistency
(B) account for all non-monetary items (B) Comparability
in financial statements (C) Absorbed preparation costs
(C) monitor the functions of the board (D) Eliminating the need for external
of directors of a company auditing
(D) provide useful information for
planning and decision-making
4. On 15 January 2017, R. Sammy's advertising agency collected $6 000 from clients who were
billed for jobs done in December 2016. Using the accrual basis of accounting, how should the
accounts be affected by the transactions on 15 January 2017?
5. The historical cost principle states that 8. The newly formed Daryl Inc. was billed
$8 000 by its attorneys for organizational
(A) transactions involving assets are costs. The attorneys agreed to accept
recorded at acquisition cost 6 000 shares of $1 par value common stock
(B) assets should be recorded initially at in full settlement of their bill. Shares of
cost and then adjusted as market Daryl Inc., being new, had no established
value changes market value. The amount to be credited
(C) the private activities of the owner to common stock in the books is
of a business should not be
incorporated into the activities (A) $ 0
of the business (B) $2 000
(D) only transactions that are capable (C) $6 000
of being expressed in monetary (D) $8 000
terms should be included in the
accounting records
Item 9 refers to the following statement.
10. A trial balance shows Supplies $3 500 and Supplies expense $0. If $500 of supplies is on hand
at the end of the period. the adjusting entry is
11. From the point of view ofthe shareholders, 13_ Two-thirds of an insurance policy has
the MAIN duty ofthe external auditor is to expired. The policy was acquired at a cost
of $5 700. The adjusting entry to record
(A) adhere to generally accepted the expired portion would involve a
auditing standards
(B) plan and perform the audit using (A) credit of5] 900 to prepaid insurance
statistical techniques (B) debit of$3 800 to prepaid insurance
(C) express an opinion on the reliability (C) debit of$1900 to insurance expense
of the financial statements (D) debit of$3800 to insurance expense
(D) exercise accuracy in conducting the
audit of fi nancial statements
14. In July 2016, a company decided to pay its
employees a bonus of 2% of its 2016 sales
12. Which representation of the fundamental revenue because of increased production.
accounting equation is INCORRECT? The bonus was paid on 31 January 2017,
and entered as an expense on that day.
(A) Assets — Liabilities = Owners' Which accounting principle was violated?
Equity
(B) Owners' Equity + Liabilities (A) Cost principle
Assets (B) Matching principle
(C) Assets -- Owners' Equity (C) Full disclosure principle
Liabilities (D) Going concern principle
(D) Liabilities f Assets - Owners"
Equity
15. Jazzy Company has the following 17. Which of the following features can be
information about its fixed assets. applied to both a public company and a
statutory corporation?
Financial ratios
Statement of financial position
Statement of changes in equity
Notes to the financial statements
.21. By year's end, $25 000 worth of shares were issued at a premium of $50 000; profits for the year
were $61 800 and dividends paid $30 000. What would be the balances on the account above at
31 December 2016?
1. payment of dividends
II. revaluation of property, plant and equipment
III. buying and selling of shares
(A) 1 only
(B) 11 only
(C) I and II only
(D) I and III only
The partially completed Statement of Comprehensive Income of Jack's Ltd for the year ended
31 December 2016 showed the following data.
Selling and distribution expense 140 000 Net sales 460 000
Administrative expense 80 000 Interest revenue 45 000
Cost of goods sold 120 000 Interest expense 60 000
23. If a corporation tax rate of 30% is applied, the net income for the year will be
(A) $ 65 000
(B) $ 73 500
(C) $ 85 500
(D) $105 000
29. In December 2012, Emily and Emile are 32. In the preparation of fi nancial statements,
partners with capital balances of $200 000 accountants in practice must ensure that
and $120 000 respectively. They share
profit and losses in the ratio of 2:1. On this (A) only timely information on the
date, Kakum invests $100 000 for one-fifth reporting company is presented
interest in the new partnership. The partners (B) the interest of management of the
agree that goodwill will be recorded on the reporting company is preserved
date of admission of Kakum. Calculate (C) the interest of shareholders of the
the total goodwill after the admission of reporting company is preserved
Kakum. (D) true and fair information on the
reporting firm is provided to
(A) $ 80 000 decision-makers
(B) $ 90 000
(C) $ 120 000
(D) $ 200 000 33. During periods of inflation or deflation, the
historical cost model for financial reporting
is deficient because
30. Which of the following is a feature of a
co-operative? it uses numerous estimates for,
revenue and expense
(A) Separation of ownership and it recognizes revenues and expenses
control before they are usually realized
(B) Free transfer of shares comparative financial statements
(C) Unlimited liability are published only for the three
(D) Democratic control years prior to the report date
it adds and subtracts dollars
with different purchasing power
31. Which ofthe following statements is TRUE without adjusting for those
regarding information provided by financial differences
reporting?
35. On 31 December 2015, Ruby Jewels Inc. 38. Which of the following is the correct
was sued by an employee for wrongful
equation for the acid-test (quick) ratio?
dismissal. The company was advised that
the claim is 95% likely to succeed, and that Current assets
damages of $140 000 will be payable if the Total liabilities
claim does succeed. How should the matter
be treated in the financial statements for the
year ended 31 December 2015? Current assets — stock
Long-term liabilities
(A) The matter should be ignored.
(B) The matter should be disclosed by Current assets — inventory
a note. Current liabilities
(C) A provision should be made for
$140 000.
(D) Current assets — inventory
A provision should be made for
$133 000. Total liabilities
36. Which of the following statements relating 39. An example of a contingent liability is
to the liquidation of a firm is FALSE?
(A) outstanding lawsuits
A liquidator is appointed to sell all (B) any interest-bearing liability
the assets and pay the debts. (C) a bond which can be converted into
The receiver disposes of assets ordinary shares
in a commercially reasonable (D) the unrealized loss from the
manner. reduction in the market price of
After the receiver recovers the a long-term liability
money, the receiver takes over
management of the firm.
In a liquidation, the receiver Item 40 refers to the following information.
represents a secured creditor who
has appointed him. The Statement of Comprehensive Income
is provided for ABC for the year ended 30
June 2016.
37. Dominica Company reported net income of
$45 000, net sales of $650 000 and average Sales 300 000 100%
assets of $400 000 in 2016. What is the Cost of goods sold (110 000) 37%
company's percentage rcturn on assets for Administration ( 80 000) 27%
2016? Profit 110 000 37%
(A) 6.92
(B) 11.25 40. What analysis has been carried out above?
(C) 65.54
(D) 162.50 (A) Ratio
(B) Vertical
(C) 1 lorizontal
(D) Comparative
41. Property and equipment are classified in Items 44-45 refer to the following
the balance sheet as information.
42. The MAJOR disadvantage of traditional 44. What is the earnings per share (EPS)?
financial statements is the emphasis on
(A) $ 0.33
(A) relevance (B) $ 0.50
(B) historical cost (C) $ 2.14
(C) long-term growth (D) $ 2.67
(D) short-term profitability
END OF TEST
IF YOU FINISH BF FORE TIME IS CALLED. CHECK YOUR WORK ON TIT'S TEST.