QUESTION 1

Which of the following are overstated as a result of the failure to record an accrued liability?

a. Net income, current ratio and rate of return on debt.

b. Current ratio, acid-test ratio and rate of return on debt.

c. Net income, acid-test ratio and rate of return on debt.

d. Net income, current ratio and acid test ratio.

e. None of the above.

QUESTION 2

The beginning balance in the Warranty Payable account was $50,000. Sales were $900,000 and warranty costs were estimated at 7% of sales. During the year, $55,000 was paid to settle warranty claims. As a result of these transactions, what is the amount of warranty expense for the year and what is the ending balance in Warranty Payable?

Warranty Expense Warranty Payable

a. $50,000 $63,000

b. $63,000 $58,000

c. $55,000 $63,000

d. $113,000 $58,000

e. None of the above.

QUESTION 3

A company has a loss that can be estimated and has a reasonably possible chance of occurrence. What reporting does International Financial Reporting Standards require regarding this loss?

a. It should be put into a memo until the actual loss materializes.

b. It should be accrued and reported on thefinancial statements and reported in the notes to thefinancial statements.

c. It should be accrued and reported on the financial statements.

d. It should be reported in the notes to the financial statements.

e. None of the above.

QUESTION 4

A company has a loss that can be estimated, but the chance of it occurring is remote. What reporting does International Financial Reporting Standards require regarding this loss?

a. It should be put into a memo until the actual loss materializes.

b. It should be accrued and reported on thefinancial statements and reported in the notes to thefinancial statements.

c. It should be accrued and reported on the financial statements.

d. It should be reported in the notes to the financial statements.

e. None of the above.

QUESTION 5

A company has a probable contingent gain that can be reasonably estimated. What reporting does International Financial Reporting Standards require regarding this contingent gain?

a. It should be ignored until the actual gain materializes.

b. It should either be recorded on the financial statements or reported in the notes to the financial statements.

c. It should be accrued and reported in the financial statements.

d. It should be reported in the notes to the financial statements.

e. None of the above.

QUESTION 6

The following facts apply to Question 6 to Question 7.

On 1 January 20x1, Company DEF issued bonds with the following features:

-Face value of the bond is $200,000.

-Period to maturity is 10 years.

-Coupon rate is 8% per year.

-Effective interest rate at the date of bond issuance is 10%.

-The bonds pay interest annually on 31 December.

The bond's interest expense for the year ended 20x3 is closest to

a. $16,000.

b. $17,866.

c. $18,473.

d. $19,535.

e. None of the above.

QUESTION 7

The bond carrying value at 31 December 20x3 is closest to

a. $175,422.

b. $178,660.

c. $200,000.

d. $180,526

e. None of the above.

QUESTION 8

Golden Eagle Corporation issues 100 shares of $10 par value ordinary shares for $50 per share. This transaction will include a credit to Ordinary shares for:

a. $1,000 and a Gain on Issue of Ordinary shares for $4,000.

b. $1,000 and a credit to Retained Earnings for $4,000.

c. $1,000 and a credit to Paid-in Capital in Excess of Par for $4,000.

d. $5,000.

e. None of the above.

QUESTION 9

The purchase of treasury shares:

a. increases assets and decreases shareholders' equity.

b. decreases assets and decreases shareholders' equity.

c. decreases assets and increases shareholders' equity.

d. decreases assets and increases liabilities.

e. None of the above.

QUESTION 10

A company should recognize a gain on treasury shares:

a. when treasury shares is sold for more than the par value of the shares.

b. when treasury shares is purchased for less than the par value of the shares.

c. when treasury shares is sold for less than the par value of the shares.

d. in none of the above situations. No gain is recognized on treasury shares transactions.

e. None of the above.

QUESTION 11

The Floristan Company has 50,000 preference shares outstanding, with annual dividends paid at the rate of $2 per share. Floristan also has 100,000 ordinary shares outstanding. If the Floristan Company declares a $150,000 dividend, each outstanding ordinary shares would receive:

a. $1.50.

b. $1.00.

c. $0.50.

d. $2.00.

e. None of the above.

QUESTION 12

In year 20x4, the net cash provided by operating activities in company DEF was $8,000,000. For 20x4, depreciation expense was $3,800,000, total current assets (other than cash. decreased by $1,000,000, and total current liabilities decreased by $300,000. Based on the preceding information, what is company DEF's 20x4 net income?

a. $2,900,000

b. $3,500,000

c. $7,900,000

d. $11,900,000

e. None of the above.

QUESTION 13

The following data is provided for year ended 31 December 20x1. Net income for year ended 31 December 20x1 was $210,000. During 20x1, current receivables and prepaid expenses increased by $10,000 and $2,000, respectively. During 20x1, current payables decreased by $8,000. Under the indirect method, the cash flows from operating activities would be:

a. $190,000.

b. $206,000.

c. $230,000.

d. $214,000.

e. None of the above.

QUESTION 14

Company NAVU sold an equipment with a net book value of $31,000 for $27,000 cash. The indirect method statement of cash flows will reflect:

a. an addition of $27,000 in the investing activities section and an addition of $4,000 in the operating activities section.

b. an addition of $27,000 in the investing activities section and a deduction of $4,000 in the operating activities section.

c. an addition of $31,000 in the investing activities section and an addition of $4,000 in the operating activities section.

d. an addition of $31,000 in the investing activities section and a deduction of $4,000 in the operating activities section.

e. None of the above.

QUESTION 15

Return on assets (ROA) :

a. Will increase as long as operating profit margin increases.

b. Will decrease as long as asset turnover decreases.

c. Is not useful in helping analysts isolate achieved cost reductions.

d. Is useful in helping analysts isolate efficiency gains in asset management.

e. None of the above.

QUESTION 16

Increasing the average age of property, plant, and equipment on hand:

a. Increases the return on assets and increases the return on common equity.

b. Increases the return on assets and has no effect on the return on common equity.

c. Decreases the return on assets and decreases the return on common equity.

d. Has no effect on either the return on assets or the return on common equity.

e. None of the above.

QUESTION 17

Which of the following would best explain a decrease in a company's inventory turnover (defined as cost of goods sold divided by average inventories?

a. The company installed a new inventory management system, allowing more efficient inventory management.

b. Due to problems with obsolescent inventory last year, the company wrote o a large amount of its inventory at the beginning of the period.

c. The company installed a new inventory management system but experienced some operational difficulties resulting in duplicate orders being placed with suppliers.

d. All the above statements are correct.

e. None of the above.

QUESTION 18

Which of the following would best explain an increase in receivables turnover (defined as revenue divided by accounts receivables. ?

a. The company adopted new credit policies last year and began offering credit to customers with weak credit histories.

b. The company had wrote off a large amount of its receivables in which no prior provision for bad debts had been made.

c. To match the terms offered by its closest competitor, the company adopted new payment terms now requiring net payment within 90 days rather than 20 days, which had been its previous requirement.

d. All the above statements are correct.

e. None of the above.

QUESTION 19

Company MICK has total current assets equal to $80,000 and working capital of $20,000. Company SWAN has the same amount of working capital, but it has total current assets of $300,000. The company with the better current ratio:

a. is SWAN.

b. is MICK.

c. is the same for both companies.

d. cannot be determined from the information given.

e. None of the above.

QUESTION 20

All other things being equal, which of the following actions will achieve a company's wish to increase its total liabilities to total assets ratio?

I. Repurchase ordinary shares.

II. Pay more ordinary dividends.

III. Sell accounts receivable at face value.

IV. Perform a "2 for 1" share split for its ordinary shares.

a. I, II, and III

b. I and II

c. I and IV

d. I, II, and IV

e. None of the above

Thank you so much for your help!