NATIONAL UNIVERSITY OF SINGAPORE

NUS BUSINESS SCHOOL

DEPARTMENT OF ACCOUNTING
ACC1002X FINANCIAL ACCOUNTING
AY 2010/2011 SEMESTER 2
MID-TERM TEST
Tuesday 1 March 2011
Time Allowed: 1 hour
________________________________________________________________________
INSTRUCTIONS TO CANDIDATES
1.

This test paper consists of TWENTY-FIVE (25) multiple-choice questions.

2.

Answer ALL questions by shading the letter representing the best answer on the
computer scoring sheet using pencils. If you just mark your answers on this question
paper, your answers will not be graded.

3.

This is a close-book test. You are not allowed to bring in any materials other than pens,
pencils, erasers and calculators.

4.

Make sure you write your name and your matriculation number below on both this
question paper and the computer scoring sheet which must be submitted at the end of the
test. If you provide us with a wrong matriculation number, you will receive zero for this
test.

Name:
Matriculation Number:

For Examiners Use Only:

Total

Marks
/ 25

-2ACC1002X
__________________________________________________________________________

MCQ (1 mark per question, total 25 marks)

1. Which of the following is not a user of internal accounting information?

A. Store manager.
B. Chief executive officer.
C. Creditor.
D. Chief financial officer.

2. If cash increases during a year, it must mean that:

A. There was positive net income on the income statement.
B. Retained earnings increased.
C. The net worth of a company increased.
D. None of the three statements above must necessarily be true.

3. The objectives of an accounting system include all of the following

except:
A. Interpret and record the effects of business transactions.
B. Classify the effects of transactions to facilitate the preparation of
reports.
C. Summarize and communicate information to decision makers.
D. Dictate the specific types of business transactions that the enterprise
may engage in.
4. Generally accepted accounting principles are the "ground rules" used in
the preparation of:
A. Income tax returns.
B. All accounting reports.
C. Reports to federal and state regulatory agencies.
D. Financial statements.

-3ACC1002X
__________________________________________________________________________

5. The auditor's report on the published financial statements of a large

corporation should be viewed as:
A. The opinion of independent experts as to the overall fairness of the
statements.
B. The opinion of the corporation's chief accountant as to the overall
fairness of the statements.
C. A guarantee by a firm of certified public accountants that the
statements are accurate.
D. A guarantee by the Financial Statements Insurance Board that the
statements do not overstate assets or net income.

6. During the current year, the assets of Quality Stairs increased by

$175,000 and the liabilities decreased by $15,000. If the owners' equity
in the business is $475,000 at the end of the year, the owners' equity at
the beginning of the year must have been:
A. $335,000.
B. $285,000.
C. $665,000.
D. $615,000.

7. If $9,600 cash and a $31,000 note payable are given in exchange for
some office machines to be used in a business:
A. Total assets are increased.
B. Total liabilities are decreased.
C. Total assets are decreased.
D. The owners' equity is increased.

8. A transaction caused a $60,000 increase in both assets and total

liabilities. This transaction could have been which of the following?
A. Purchase for office equipment for $60,000 cash.
B. Purchase of office equipment for $120,000, paying $60,000 cash and
issuing a note payable for the balance.
C. Repayment of a $60,000 bank loan.
D. Investment of $60,000 cash in the business by the owner.
/

-4ACC1002X
__________________________________________________________________________

9. Thirty percent of the total assets of Shanahan Corporation have been

financed through borrowing. The total liabilities of the company are
$600,000. What is the amount of owners' equity?
A. $180,000.
B. $2,000,000.
C. $1,400,000.
D. $2,600,000.

10. A strong statement of cash flows indicates that significant cash is being
generated from:
A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Effective tax planning.

Use the following to answer questions 11-13:

Montauk Oil Co. reports these account balances at December 31, 2010

On January 2, 2011, Montauk Oil collected $50,000 of its accounts

receivable and paid $20,000 of its accounts payable.

-5ACC1002X
__________________________________________________________________________

11. In a trial balance prepared at December 31, 2010 the total of the debit
column is:
A. $1,540,000.
B. $780,000.
C. $1,020,000.
D. $700,000.

12. In a trial balance prepared at January 3, 2011, the total of the debit
column is:
A. $760,000.
B. $1,570,000.
C. $780,000.
D. $830,000.

13. On January 3, 2011, total liabilities are:

A. $370,000.
B. $350,000.
C. $300,000.
D. $70,000.

14. Master Equipment has a $17,400 liability to Arrow Paint Co. When
Master Equipment makes a partial payment of $7,600 on this liability,
which of following is true about the journal entry made by Master to
record this transaction?
A. The Cash Paid Out account is credited $7,600
B. The liability account Accounts Payable is credited $9,800
C. The Cash account is debited $7,600.
D. The Accounts Payable account is debited $7,600.

-6ACC1002X
__________________________________________________________________________

15. On June 27, Healthy Life Services, Inc. performed extensive tests on
lab specimens submitted by several customers and sent invoices
totaling $5,200, due in 30 days.
A. No revenue from rendering these services should be recorded until
payment is received.
B. This situation causes an increase in assets and in revenue in June,
but has no effect on owners' equity until payment is received.
C. Revenue is earned in June, but assets are not increased until
payment is received.
D. Assets, revenue, and owners' equity are increased in June,
regardless of when payment is received.

16. Swordfish Co. earned $75,000 in 2009 and expects to receive 2/3 of
the amount in 2010 and the remainder in 2011. How much revenue
should they report in 2009?
A. $0
B. $25,000
C. $50,000
D. $75,000

17. Under accrual accounting, salaries earned by employees but not yet
paid should be expensed
A. In the period in which they are earned.
B. In the period in which they are paid.
C. In the period with the higher earnings.
D. In the period with the lower earnings.

-7ACC1002X
__________________________________________________________________________

18. On December 31, Louis Jeweler's made an adjusting entry to record

$4,200 accrued interest payable on its mortgage. On January 10, the
mortgage payment was made. This payment included interest charges
of $6,300, $2,100 of which were applicable to the period from January
1 through January 10. In recording this mortgage payment the
accountant should:
A. Debit Interest Expense $2,100 and debit Interest Payable $4,200.
B. Debit Interest Expense $6,300.
C. Debit Interest Payable $6,300.
D. Debit Interest Expense $2,100 and credit Interest Payable $4,200.

19. Before making month-end adjustments, net income of Cardinal

Company was $116,000 for March. Adjusting entries are necessary for
the following items:
Depreciation for the month of March: $2,300.
Interest accrued to March 31, on deposits in banks: $800.
Supplies used in March: $100.
Fees earned in March that had been collected in advance: $2,600.
After recording these adjustments, net income for March is:
A. $115,400.
B. $113,620.
C. $117,000.
D. $110,800.

-8ACC1002X
__________________________________________________________________________

20. Videobusters Inc. offered books of video rental coupons to its patrons
at $40 per book. Each book contained a certain number of coupons for
video rentals. During the current period 500 books were sold for
$20,000, and this amount was credited to Unearned Rental Revenue.
At the end of the period it was determined that $15,000 worth of book
coupons had been used by customers to rent videos. The appropriate
adjusting entry at the end of the period would be:
A. Debit Rental Revenue $5,000 and credit Unearned Rental Revenue
$5,000.
B. Debit Rental Revenue $15,000 and credit Unearned Rental
Revenue $15,000.
C. Debit Unearned Rental Revenue $5,000 and credit Rental Revenue
$5,000.
D. Debit Unearned Rental Revenue $15,000 and credit Rental
Revenue $15,000.

21. Which account appears on the After-Closing Trial Balance?

A. Service Revenue.
B. Unearned Revenue.
C. Dividends.
D. Retained Earnings, Beginning of Year.

22. Which statement is true regarding the Income Statement?

A. Losses do not appear on income statements.
B. Dividends reduce net income.
C. Both A and B are true.
D. Both A and B are false.

-9ACC1002X
__________________________________________________________________________

23. Merchandise was sold on credit for $10,000, terms 2/10, n/30. The
entry to record the cash collection should include a
A. debit Cash, $10,000, and credit Accounts Receivable, $10,000, if
collected within the discount period.
B. debit Cash, $10,000, and credit Accounts Receivable, $9,800, and
Sales Discount, $200, if collected within the discount period.
C. debit Cash, $10,000, and credit Accounts Receivable, $9,800, and
Sales Discount, $200, if collected after the discount period.
D. debit Cash, $10,000, and credit Accounts Receivable, $10,000, if
collected after the discount period.

24. The gross profit rate represents:

A. Total sales revenue.
B. The percentage change in net sales from the prior period.
C. The percentage of sales revenue remaining after providing for the
cost of the merchandise sold.
D. Net income stated as a percentage of total sales revenue.

25. Operating income excludes each of the following, except:

A. Interest expense.
B. Income taxes.
C. Depreciation.
D. Prepaid expenses.

- END OF PAPER -