NATIONAL

UNIVERSITY OF SINGAPORE


ACC1002 FINANCIAL ACCOUNTING/
ACC1701 ACCOUNTING FOR DECISION MAKERS
Semester 1, 2018/2019
Mock Mid-Term Test



Time Allowed: 1 Hour
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INSTRUCTIONS TO CANDIDATES

1. This test paper contains THIRTY (30) multiple-choice questions and comprises
EIGHT (8) printed pages.

2. Answer ALL questions by shading the letter that represents the best answer on the
computer scoring sheet. Shade in pencil.

3. This is a CLOSED BOOK test.

4. Students may use University-approved calculators and not any other electronic
devices.

5. Write your name and student matriculation number on both the question paper
and the computer scoring sheet. If you provide a wrong matriculation number, you
will receive zero mark for this test.

6. Submit both the question paper and computer scoring sheet at the end of the test.









Name:

Matriculation Number:


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1. What is the basic purpose of an external audit of financial statements?

A) Provide the reporting company with assurance that all assets are protected from
theft or embezzlement
B) Prepare financial statements for companies that do not have their own
accounting departments
C) Provide users of the financial statements with assurance that the statements are
reliable and are presented in conformity with generally accepted accounting
principles
D) Provide both the reporting company and the users of the statements with a
written guarantee that the statements are error-free

2. Before the balance sheet is prepared, this statement should be prepared:

A) Statement of changes in equity

B) Statement of cash flow
C) Statement of financial position
D) Both A and B

3. Which event represents revenue or expense recognized in the current period's

income statement?

A) Cash received from a client before the lawyer represents them in court
B) Inventory purchased by a retail store
C) Wage costs owed to employees who worked during the period
D) All of the above are examples of revenues or expenses recognized in the current
period

4. Which of the following transactions possibly caused a $11,000 increase in both total
assets and total liabilities?

A) Purchase for office equipment for $11,000 cash

B) Purchase of office equipment for $24,000, paying $13,000 cash and issuing a
note payable for the balance
C) Repayment of a $11,000 bank loan
D) Investment of $11,000 cash in the business by the owner

5. What is the objective of adjusting entries?

A) Prepare the revenue and expense accounts for recording transactions in the
next accounting period by bringing the balances to zero
B) Record certain revenue and expenses that are not properly measured in the
course of recording daily routine transactions
C) Correct errors made during the accounting period
D) Adjust retained earnings for net income and dividends
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6. On 1 July 2018, YS Fencing signed a two-year $50,000 note payable with 8% interest.
On due date, 1 July 2020, the principal and interest will be paid in full. Interest
expense should be reported on the income statement for the year ended 31
December 2018, to the amount of

A) $ 2,000
B) $ 4,000
C) $0
D) None of the above is correct

7. Which characteristic of internal control is rotating employees through various jobs?

A) Separation of duties
B) Assignment of responsibilities
C) Competent and reliable personnel
D) Proper authorization

8. An ending balance of $8,000 is shown on WQ Ballet's bank statement. Items

appearing in the bank reconciliation included: outstanding checks, $500; deposits in
transit, $1,000; bank service charges, $50; and QW Breakfast's check erroneously
charged against WQ Ballet's bank account by the bank, $250. The correct cash
balance at the end of the month should be reported as

A) $10,600
B) $8,750
C) $8,500
D) $8,250

9. PT Ltd had credit sales of $5.0 million for the year and there was no individually
significant accounts receivable. The accountant uses the aging of accounts
receivable method to estimate impairment loss and after preparing the aging
schedule, the estimate amounted to $48,000. Accounts receivable had a $450,000
balance and the allowance for impairment had a credit balance of $3,000 before
adjustment. What is the journal entry to record impairment loss?

A) A debit to the impairment loss account for $50,000 and a credit to accounts
receivable for $50,000
B) A debit to impairment loss for $45,000 and a credit to the allowance for
impairment for $45,000
C) A debit to impairment loss for $50,000 and a credit to the allowance for
impairment for $50,000
D) A debit to impairment loss for $47,000 and a credit to accounts receivable for
$47,000
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10. What does the allowance for impairment represent?

A) Cash set aside to make up for impairment losses

B) The amount of uncollectible accounts written off to date
C) The difference between total credit sales and collections on credit sales
D) The difference between the face value of accounts receivable and the net
realizable value of accounts receivable

11. X-basis Ltd reported the following amounts at the end of the first year of operations,
30 June 2018: share capital $100,000; sales revenue $400,000; total assets
$300,000; dividends $20,000; and total liabilities $160,000. Retained earnings and
total expenses would be

A) Retained earnings $40,000 and expenses $340,000

B) Retained earnings $60,000 and expenses $320,000
C) Retained earnings $140,000 and expenses $240,000
D) Retained earnings $160,000 and expenses $220,000

12. The reason a business's balance sheet cannot be used to precisely forecast what the
business may be sold for is that:

A) It identifies all the revenues and expenses of the business

B) Assets are generally listed on the balance sheet at their historical cost, not their
current value
C) It gives the results of operations for the current period
D) Some of the assets and liabilities on the balance sheet may actually be those of
another entity

13. JN Pte Ltd receives a $8,000 cash deposit from a customer on 4 May but will only
deliver the goods on 10 June. Which of the following statements is true?

A) Cash will be reported on the statement of cash flows for the month of June
B) Revenue will be recorded and reported on the income statement for May
C) A liability will be reported on the balance sheet at the end of May
D) None of the above is true

14. What is true about retained earnings on the adjusted trial balance?

A) It is stated at the period-end amount

B) It is stated at the period-beginning amount
C) It is adjusted for all revenues and expenses for the period
D) It is adjusted for the period's dividends
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15. On 1 June 2018 Jess Pte Ltd paid rent on the office building for 4 months. Monthly
rent is $3,000. The adjusting entry to record rent expense on 30 June 2018 will
include:

A) A debit to Prepaid Rent for $3,000

B) A credit to Prepaid Rent for $3,000
C) A credit to Prepaid Rent for $9,000
D) A debit to Prepaid Rent for $9,000

16. Belice Pte Ltd sells magazines and subscriptions are collected in advance. All
subscriptions are credited to the Subscriptions in Advance account, which had a
balance of $900,000 on 1 January 2018. Transactions for the year 2018 are as
follows:

Cash receipts from subscribers $1,150,000

Subscriptions income $800,000

What figure should the company report as the balance for subscriptions collected in
advance on its 31 December 2018 balance sheet?

A) $550,000
B) $1,050,000
C) $1,250,000
D) $1,150,000

17. Mr Lim, an accountant of DW Pte Ltd, records both cash receipts and cash
disbursements. This violates the separation of:

A) Operations from accounting

B) Custody of assets from accounting
C) Duties within the accounting function
D) Authorization of transactions from custody of assets

18. GKL has a petty cash fund of $400, which is replenished at each month-end. In a
surprise count of the petty cash fund on 10 April, 1) $80 in cash, and 2) tickets and
receipts for the following items were found in the petty cash box:

Taxi fare - $25

Courier services - $34
Pantry expenses - $11

What does this indicate?

A) $250 of petty cash has been invested in cash equivalents

B) There was $250 in cash disbursements made from the petty cash fund for the
first three months of the year
C) The petty cash expense recognized for the month of April is $250
D) There is $250 of petty cash that is missing and unaccounted for on 10 April
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19. Which of the following accounting principles best supports the use of the account,
allowance for impairment?

A) Matching principle
B) Exception principle
C) Revenue principle
D) Comparability principle

20. Vine Pte Ltd had current assets of $150,000 and current liabilities of $100,000 as at
30 June 2018. In July 2018, the company wrote-off the uncollectible account of AS
Lim of $5,000. What would be its current ratio immediately after the write-off? Vine
Pte Ltd uses the allowance method to account for bad debts.

A) 1.58
B) 1.55
C) 1.50
D) 1.45

21. What is the primary objective of generally accepted accounting principles?

A) Minimize the possibility of a business becoming insolvent

B) Provide a framework for financial reporting that is understood by both the
preparers and the users of financial statements
C) Ensure that financial statements include the type of information that is best
suited to every type of business decision
D) Eliminate the need for professional judgment in preparing financial statements

22. Which situation could cause investors to overpay for the acquisition of a company
from its existing owners?

A) Understated accounts payable and overstated inventory

B) Understated revenues and overstated expenses
C) Understated assets and overstated expenses
D) None of these would cause investors to overpay for the stock

23. What would happen if the credit amount of an entry to record the payment of salaries
was not posted?

A) Expenses would be understated

B) Assets would be overstated
C) Shareholders’ equity would be understated
D) Expenses would be overstated
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24. By preparing a trial balance, which of the following errors would be discovered?

A) The collection of an account receivable was recorded by a debit to the Land

account rather than to the Cash account
B) The collection of an account receivable for $319 was recorded by a $391 debit to
Cash and a $391 credit to Accounts Receivable
C) The collection of a $375 account receivable was not recorded at all
D) The collection of a $225 account receivable was recorded by a $225 debit to
Cash and a $225 debit to Accounts Receivable

25. Which of the following transactions would give rise to the largest amount recorded as
an expense of the current year?

A) $4,000 is paid in January for equipment with a useful life of four years
B) $1,800 is paid in January for a two-year fire insurance policy
C) $10,000 cash is withdrawn by the owner for personal use
D) $900 is paid to an attorney for legal services rendered during the current year

26. What is the result if the following two adjustments are omitted at the end of 2018?

(1) The entry to record depreciation: $5,000

(2) The entry to record the portion of fees received in advance which have now been
earned: $5,000

A) Net income for 2018 is overstated

B) Net income for 2018 is understated
C) Assets are overstated at December 31, 2018
D) Liabilities are understated at December 31, 2018

27. Assuming the bank had recorded a deposit of $50 as $150, the error would be shown
on a bank reconciliation as:

A) A deduction from the book balance of $100

B) An addition to the book balance of $100
C) A deduction from the bank balance of $100
D) An addition to the bank balance of $100

28. Which of the following is not an internal control mechanism over cash payments?

A) The practice of making small cash disbursements directly from the current day's
cash receipts
B) Establishing authority limits for signing cheques
C) The use of a petty cash fund
D) The practice of approving every expenditure before the cash disbursement is
made
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29. The following describe differences between the allowance method and the direct
write-off method of accounting for impairment, except:

A) One method requires the estimation of impairment and the other does not
B) One method conforms to GAAP and the other does not
C) One method reports net realizable value on the balance sheet and the other
does not
D) One method credits accounts receivable in the write-off entry and the other does
not

30. Which of the following would cause the receivable turnover ratio to increase?

A) Reducing the time it takes to collect our customer accounts

B) Increasing sales revenue at a faster rate than the rate of increase in accounts
receivable
C) Strengthening our credit and collection policies resulting in reduced receivables
while sales remain constant
D) All of the above cause the ratio to increase

- End of Paper -
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Answers:

1 C
2 A
3 C
4 B
5 B
6 A
7 C
8 B
9 B
10 D
11 A
12 B
13 C
14 B
15 B
16 C
17 C
18 D
19 A
20 C
21 B
22 A
23 B
24 D
25 A
26 C
27 C
28 A
29 D
30 D