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witlr liri Ar-s'ver Sheet-.frilure to do so may TESTCODECIz flS {S {O
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IVTAY/J"JNTE2OO7
FGRI?fi ?'F zClS7 144 Sgaetdre
Uniitr-PaPerOtr
90 rni-n.utes
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i IR.ECT I o N S C A.RE, [. n-Y
itE A D it E F. D t- i[-{o \,v i N G i,) Fn-J
ienered (A), (B), (C)' (D)- Read each item you are
E,acir i',em :r ttris resihas four suggesteci 3n5ra,eis
about to an ;u,er and decide which choice is best'
the space havirlg
On 1'our find the nunrber whicir coi-respotrds io your item and shade
ar :;wer slreet,
the sample item below-
ihe sairre lt iler as the anslver you have chosen' Look at
Sarn:lc Ite r:
-trr
i):r:-llc ccst is calcuiated bY
Sample Ansrver
( ) ,- aci ling direct factory expenses to cost of materials used
(rJ) ai !in! inciirect factory e;tpenses to cost of materials used @@@ @ r
used
i.ll) su ri.racting direct factory expenses to cost of materials
'r.o cost of ma^rerials used
1l-:) su rtracting indirect factor), expenses
-iitebesta isrvertothisitemis"addrngdirectfacioryexpensestocostofmaterialsused"'soansrver -r
space ( A) tas been blackeneC'
Ifyoucannct
\fu?rcnyouaretoiritobegu.r,nrmthepageand.vorkasquickiyandascarefullyasyoucan'
car-' cc'me baci< to the harder item later'
srlswer ar itenr. omit it and go on io the next cne. You
i'cu rnay ,io any rough work in this booklet' t
i-irjs iest L cnsists of 54 items. You wiil have 90 rninutes
to answer them'
! \j,*rurnay rsesilentnon-prograrrunablecalculatorstoansit'erquestions-
mS in
SpaceS formOre answers than there are tte
Do ir<lt be;olcemeci tirat the answer sheet piOV;des
t-his tesi.
i. '
i' A business should be accounted for 7. ABc corporation issued 2 {'00 ordinary, ' r rt
separately and distinctly from its owner or
shares of dtO par value at $12 cer share. In
olvners' This is knorvn as the recording the transaction. credir.; are recordeci
as
(zi) principle
objectiviry
(B) businessentityprinciple (A) ordinary share caprtal $20 000 and
('c) going concern principle
etained earnings s1 000
(D) revenue recognition principle (B) ordinary share capiial i;24 ggg
(C) ordinary share capitat $20 000 and
. share plemium $4 0()0
(D) ordinary share capiral $20 000 and
profit and loss $4 00 )
-'l On September l, 2006, CCC Inc. acquired a $20 000 face value, E per cent bo;r.1
of EC at 104. The bonds were dated NIay I -20A6, and will marure on,A.pril 3),
201 l, with interest payable each October 3 I and Aprii 30. whar enrry
si1ouia CCC
Inc. make to record the purchase of the bonds?
l'lie historit:rl cost principie siaies ihai I ti_ Which o[the followine staternenis is NOT
true?
iA) ass ts shorrid be recorded initialiy at
c rst and adjusted as market value (A) Bonus shares may be issued in iieu
c langes of dividends.
1F)) irar sactions should be recorCed at (B) Bonus share issues deplete surplus
tl eir initial cost cash resources-
{6. } the owner of' a business activitv (C) Bonus share issues do not aFfect the
s rould not be incoryorated inttr the voting rights of shareholders-
b rsiness activ;ry (D) Bonus share issues may resuli in
iD) onl iransactions that are capable of larger tota I dividentjs.
h:ing expressed in monetary terms
s iould be incltrded
A partrrer who a,ssurnes unlimited liabiliti' for
i-i,rodrvili is :lassitreC in iite balance sireet as
tiie debts of the partnership is lcrorvn as a
a cr frenl asset
(i\) limited partner
tLii proi erw- piant arrd equiprnent
(B) mutualpartner
r('l an i ;iangible assct
(C) participating partner
a ltr rg-term irivestment tD) general panner
^shle_y ivla tufact'-rring i-C. receiveci nei Which oi the following would NOT be
- il;
pct-rce€ds c S4l 000 rt:r the saie ot- au
classified as a temporary investmeni?
iii vestrneni U at cost $19 5i10. This transaction
:ii,,.uld be ir ported in the incrrnle staternent
a5a
)
ir\ Three-month treasury bill
(B) idle cash in a bank current accotjni
(C) Marketable equity securities
{A i los: ol' Si 50C uncier operaiing (D) IViarketable debt securities
e..iDerrses and iosses
i.l; loss of Sl 500 urrder operaiing
e. pertses
{C: eair of 52 500 uri,ier oiher reverues
ar d _eains
(D) gair ol- 52 i00 i-inier op'erating
rr venues
_L_
Accotttrts
13. During 2006, Grant Corporation had net sales of sB00 000.
r.c"i.,.ableaveragedSE0000andinventorylevelsaveraged$40000
cent of net sales
Grant's g.orr p.ofi, ratio during "006'was 25 per
What is Crant Corporation's inventory turnover for 2006?
I
I
Assets {.iabilities I
G{l ON TO
-ili : N 11.iT l,ji i,: i3
-.(rlr:Lrarri' re'itorteci net illcolne oi li The lollorvine inf.rrmatign iryaS a'''ailai:,le f'rr
-r'or
rt sales rf 5'f':(l C0{.}. artd e'./eraq.e iri ay'arc Cornorat ion 2(rCt.
:i4ij0 0()0 i'iir 2C)05 iL'hat is
.--Otttpi,nr'S LrSrCentag€ ie:Uin Crn Sale:, 5200 t)CC
t00:? Beginning invehtoT' $ 7i 0C0
Transpor-tatlon 6r,rt $ I 000 11
n l 'r-'urcirases $ 35 000
'., 1 ir .15 Sales.commissions $ lt) 000
i_
A:_ Znciing inventory S 3(.i tl00
iDr ir - s,,
\'ri hat u'as l"la]'aro Corporatioll':. ccitii ':: i
qcoCs sold for 2006?
.i\i Dc,:err.; ,er .l i . li)(.,o. rhe end c,f iis i'isca!
i ellr. iire: rcc0untiilq r(]cclrds of Bermuda (.q) $125000
Lqrl!l[:-lll\ itc,,.r,ecj 1i1 g flil i0u, i n s (B) sl 28 000
(c) $136 000
:-ales icre rue Si I 30 00(.). all on credit terms (D) S145 000
,,::. li1lr;r 3ncr. it r cioubtlul accoLlnts. balance on
.l z:ir ita' l l. 20C6. $7{)0 credit
ir- C cO l1 il tS eceivable. balance on December 18. Cln ii4a;- 25, 2006, Hindustan Cor-npan1' -s.rld
.ll.l0 15. $38 5()0 200 C00 gallons of coconut oil to l-evet
. Companv at $4.50 per gallon Cn i\4ay 3{t-
i;"'iiat il,-i rnr','.. ill Bernruda icrmpanl' record
li 2006. 150 000 gallons vsere delivered aiid the
as [riro deb expense for 2005 if the comPanv remaining 50 000 gallons 11's1g clsli"'qred on
itnl:teil :he exrlense to be i Per cent of
r:Si September 30- 2006- Payment terrns \vere:
lota! ;cc() rnts receivaL'le at December i !. 50 per cent due on l"lay 2-5. 2006. and the
:006'j balance due on SePtember 30' 2006-
Hindustan Compan1"5 ftscal vear end is J une
(A) 30. Hindustan Company uses the accrual
{Bi basis of accounting- Ho"v much retenue
:i;- 70ii snouid the company report in its Ilnanciai
| | tr Sr.l(){.1 siaternent for the period ending j une -1{}- 2000?
(A) $0
(B) $450 000
(c) s675 000
(D) $900 000
-6-
interest from a
|g. TIre Sherwin Companl, $911grved $7 500 21 |Q per cerlt
adj usting errtrics
local ban k on Septembe r I . 2005. wlr ich ths fel16\ 'ing
slrou|dbemadeonthebooksofSherwinatDecember3l.2005?
on January l, 2005, Irf ary Srnith purchased a $24 000 car, makin-q a $4 00{
20
,down payment and 6,e119rving the rest on a 4-year note at 8 per cent' Sh'
agrees to make annual pavments of $6 038'47 starting January
l' 2C06
The journal entry to record the payment on January l, 2006 is
On February l,
2005, Gordon Inc issued
:- intenral ci irtrois are uscd in a business to 20 000 ordinary shares for a iotal of
$i 000 000 and 4 000 preference shares ai
iA,1 eil rance the accuracy and reliabiliiy $30pershare. OnJuiy l5,2005.theremaimng
-''f its accouniing records and io I 00(l preference shares were issued at S40
rrevent fiaud each.
(3) Pr rduce correct financial statenents
ind derer employee dishonesty 24 . On July 15, 2005 the paid-in capital in excess
'eguartl
iC) sa the business assets and of par (share premium) account should be
:nhance iire accuracY and
e liability of accounting recorcis iAi debited with S20 000
tL)) es abiish responsibility and conduct (B) credited with S22 500
nclependent checks on emoioyee (C) debited.,vith $7 500
--erfornrance (D) credited rvith S 15 000
(B)
St 8 760
$24 440
(c) s 160 00c
(c) $29 640
(D) Sl80 000
(D) $34 840
sc
s 5000
$i0 000
srs 000
i',: S :)
( :, 'ahe MAiOR disadvantage oi' traditiorrai
X ltl'.) 0{-)(i
iL'i :B I [i(iO cO(r trnancial siatements is their emphasis orr
( i-)) :$4 2rJ0 00(i
(A) hisioricalcost
its) long-ierm growth
l;i oi', paringthe f inauciai staiernents fci' (C) short-ierm profltability
{ D)
Si l '-rcia CoinDanv. tire comDany s relevance
accQ' tltilnt- discovei-eci the Follt-r"'''iilI
I r' ll',r', at i,'rrr reeard i lt g crti':t i nq.e rrc ies :
ln a basket transaction on July 1 , 2005, Rogans Organs Inc acquired a parcel of lanci to:.ether
with a building for a total of $a50 000. Separately, the land had a fair market va ue of
$200 000 and the building had a fair market valuc of $400 000. In order to use the prr::e6y,
Iand improvements in the amount of $20 000 and renovations to the building at a cost c F$90
000 were incurred. The building was occupieci on September l, 2005.
39. The amount that should be recoi-ded in the 4'0. The amount that should be recrrrdcd in tne
lanci account is building account is
i;''i :' t) 40
dl {) L)n January 2'2001'the accounts of John D
(il) s s0 000 Taylor rvere destroyed by fire' His 2006
diary
((-') slE0000 showed ,1',. fellewing information relating to
The
i.l.) ) $210 0tl0 iris accounts receiveable and sales:
iiccounts receivable balance at January '
i
for the year
2006, was $65 220; credit sales
Sism' i,t,l invested 56CC ii(X) iil rriarketalrie iotaled S50 000 and total cash received
on
s.lur';.i"s in 2005' During 2007 tne mxiket accounts receivable was $44 000; three
securities tiuctualscl $strveci-r accounts receivable rvere writien tt[f
vltiue .rt- tl.rese as
value irt
Sl00 )0() and $60C 000 The market uncollectible totaling 57 50'
i tr'i-s
ihe ei tlof 200l was 5650 000 Sigma
balan .e sheet at Decernber i I ' 20(j7' shorri'j The amount that should appear in
the balance
sheet for accounts receivable ai
silow rnarketal-tle securitres as December
31, 2006 is
(/\) $ 5() 000
(3) si00000 {A) s49220
(c) s60() c00 (B) s59 470
(',)) Ssi'i CCO
{c) s70 470
iDi s7l ?20
al
7.
^"<
-i2
49 .[n preparing a statement ofcasir flows, which 52. A contineent gain which is unlikely to occur
of the following transactions would be willbe
considered an investing activitY?
(A) recorded in the balance sheet anci
(A) Sale of equiPment income Stateli:ent
(B) Sale of merchandise (B) disclosed by a rote in the financiai
(C) Declaration of a cash dividend statements
(D) Issuance of a note PaYable (C) recorded in the talance sheet but noi
in the income statemeni
(D) omifted from the financial statemenis
50. Wh ich of the fetlswing ,.p."s"nts th"
CORRECT orderof pa','ment in a iiquidation?
53. A receiver is appointed )y a conrpanv lo
(A) Unsecured creditors, preference
slrareholders. ordinaiY share- (A) place values r)n i'ssets ttr be liquidatec
holders (B) watch over tl e proceedings of
(B) Preference shareholders, ordinary liquidation
shareholders, unsecured cred itors (c) sell all assets ard pa;r all debts
(C) Preferenceshareholders,unsecured (D) sell assets again;t which a particulai
cred itors, orC inary s hareho lciers loan is secur< d
(D) Unsecured creditors, ordinar-v
shareholders, Preference share-
holders 54. In assessing the operati rg sticcess ci a flrin
fo:- a given period of- i nle. THF-EE ti::eiul
ratios are
{t Wirich of the following is NOT an objective
of financial reporting? (A) current ratia. qui.:'t rati,l anli
deflens ive int, :rual ratic
(A) To provide information that will (B) debt ratio. inter:si ccver and dei;i tc
increase the value of the comPanY equiry ratio
(B) To provide information in assessing (C) inventory iLtrn"ver i'3ti!r. scctrunts
future cash flows i'eceivable periri,J. accouilts
(C) To provide intbrmation that is useful payable peri, ii
for making investment and credit (D) earnings per shi ie. protit mai'gin an.l
decisions ieturn Lrn lls: 3is
(D) To provide information about the
resources of the fi rm and the
claims against those resources