Sample Questions in Accounting/Auditing

8/11/2019 Sample Questions in Accounting/Auditing

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Accounting/Auditing Sample Test

Questions

Some state jobs require knowledge of accounting. Our questions of this type generallycover accounting terms, principles and procedures, accounting problems, journalizing,and auditing. Eamples of each type are shown below.

!. " credit to a revenue account#

!. decreases revenues.

$. increases equity.

%. decreases equity.

&. increases assets.

$. 'he function of internal control, from the viewpoint of the auditor is to#

!. provide some measure of assurance that errors and irregularities may be discoveredwith reasonable promptness.

$. assure that all records have been cross(checked and warranted as correct.

%. indicate that accounts have been checked and verified before certifying the agency)sfinancial position.

&. assure that accounts may be accepted upon oral presentation.

*se the following information to answer the net question#

+ook, ncorporated is a major department store in this area. -elow is a partial list ofaccounts used in the business.

"ccounts ayable

"ccounts +eceivable



"llowance for -ad /ebts

-ad /ebts Epense

0ash

0ash /ividends

0ommon Stock

nsurance Epense

nterest Epense

nterest ncome

nterest +eceivable

1otes ayable

repaid 'aes

urchases

urchase +eturns 2 "llowances

+etained Earnings 0ommon Stock

Sales

Sales +eturns 2 "llowances

'a Epense

'aes ayable

3uestion % is based on transactions which occurred during the current accounting period.n answering the question you should choose the correct journal entry for the transaction

listed. *se only the above listed accounts in formulating your journal entry.

'he company bought merchandise totaling 4566 on account#

%. !. debit "ccounts ayable7 credit 0ash.

$. debit urchases7 credit "ccounts ayable.



%. debit 0ash7 credit Sales.

&. debit "ccounts ayable7 credit urchases.

5. debit urchases7 credit 0ash.

&. 'he 8armon 0ar and 9oundry 0ompany was working on a contract calling for $!6railway cars, all of the same type. 'he price on these cars was fied in the contract at4$!,666 each. On /ecember %!, !::6, you find that the company had incurred costs of4$,;66,666 on this contract, that !<6 cars had been delivered to the purchaser, that $5were in the process of construction, and $5 were yet to be built. 'he $5 cars in processwere estimated by management to be about =6 percent complete. "ll costs were chargedto a single work order calling for the construction of $!6 cars. "t what value should the!<6 cars be costed in the statement of income>

!. 4$,666,666

$. 4$,566,666

%. 4$,&66,666

&. 4$,$66,666

Accounting/Auditing Sample Questions Answers

!. 'he correct answer is number $.

$. 'he correct answer is number !.

%. 'he correct answer is number $.

&. 'he correct answer is number %.

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1

UNIVERSITY OF ILLINOIS AT CHICAGO

SAMPLE FINANCIAL ACCOUNTING QUESTIONS

These questions ae inten!e! to "e o# e$ie% in natue an! &a' not

"e

the "est (e!i)to o# 'ou (e#o&an)e on the qua*i#i)ation

e+a&ination,



It is ston-*' e)o&&en!e! that 'ou e$ie% 'ou *e)tue note an!

ho&e%o. #o& 'ou #inan)ia* an! &ana-eia* )*asses as the &ain

)ouse

o# stu!',

This sa&(*e test %i** -i$e 'ou an in!i)ation o# ho% (e(ae! 'ou

&i-ht

"e,

Ans%es %i** "e -i$en out !uin- the AQE e$ie% session,

Than.s an! -oo! *u)./

0e(t, o# A))ountin-

MULTIPLE CHOICE

1, hi)h o# the #o**o%in- state&ents is FALSE 2

a, Co(oations !o&inate the U,S, e)ono&' "oth in shee nu&"e o#

"usiness o-ani3ations an! )onto* o# (i$ate esou)es,

", Non"usiness entities *a). an i!enti#ia"*e o%ne an! ae

o-ani3e!

(i&ai*' to se$e the nee!s o# so)iet' athe than ean a(o#it,

), The in)o&e o# )o(oations is ta+e! !ie)t*' to the "usiness

entit'

%hi*e the in)o&e o# so*e (o(ietoshi(s an! (atneshi(s is

ta+e!

to the o%nes4 not the "usiness entit',

!, Genea**' o%nes o# )o(oations ha$e (esona* esou)es at

is.

equa* to thei in$est&ent in the "usiness entit' %hi*e so*e

(o(ietos an! (atnes &a' "e (esona**' *ia"*e #o "usiness

!e"ts,

Cao*e Co(, e(ote! the #o**o%inite&s on its "a*an)e sheet at

the

en! o# the )uent 'ea, A** a))ounts ae *iste!, Use this

in#o&ation to ans%e the #o**o%in- set o# questions,

Cuent assets 5 664777 Cuent *ia"i*ities 5 874777

Po(et'4 (*ant 9 Lon-:te& !e"t 674777

equi(&ent 1;74777 Ca(ita* sto). 1774777

Othe assets <74777 Retaine! eanin-s 2

<, hat a&ount %i** Cao*e e(ot on its "a*an)e sheet #o Tota*

Lia"i*ities an! Sto).ho*!es= Equit'2

a, 5<664777

", 5>64777

), 51?74777

!, Cannot "e !ete&ine!

@, hi)h o# the #o**o%in- is NOT an assu&(tion &a!e in the

(e(aation o#

#inan)ia* state&ents2



a, Moneta' unit

", Goin- )on)en

), Ti&e (eio!

!, Le-a* entit'

The #o**o%in- set o# questions in)*u!es a))ounts t'(i)a**' #oun!

in the #inan)ia* state&ents o# *a-e )o(oations, Fo ea)h a))ount

*iste!4 i!enti#' the a))ount t'(e Asset4 Lia"i*it'4 O%nes= Equit'4

Re$enue4 o E+(ense,

8, Retaine! Eanin-s

a, Asset

", Lia"i*it'

), O%nes= Equit'

!, Re$enue

e, E+(ense

6, In$entoies

a, Asset

", Lia"i*it'

), O%nes= Equit'

!, Re$enue

e, E+(ense

>, Sa*es Co&&ission

a, Asset

", Lia"i*it'

), O%nes= Equit'

!, Re$enue

e, E+(ense

B, The qua*it' o# a))ountin- in#o&ation %hi)h a**o%s the !ata #o

the

#inan)ia* state&ents o# a "usiness entit' to "e )o&(ae! #o& one

a))ountin- (eio! to anothe is

a, )onsisten)',

", )o&(aa"i*it',

), $ei#ia"i*it',

!, neuta*it',

;, An a))ountant is un)etain a"out the "est esti&ate o# an a&ount#o a

"usiness tansa)tion, I# t%o a&ounts ae a"out equa**' *i.e*'4

the

a&ount *east *i.e*' to o$estate the assets an! in)o&e is

se*e)te!,

This is an e+a&(*e o# a((*'in- the qua*it' o#

a, )o&(aa"i*it',

", neuta*it',



), )onse$atis&,

!, &ateia*it',

?, Un!e )uent a))ountin- (in)i(*es4 in)o&e is &easue! as

a, the net )han-e in o%nes= equit' !uin- a (eio! a#te

a!ust&ent

#o in$est&ents an! %ith!a%a*s "' o%nes,

", the e+)ess o# e$enues o$e e+(enses !uin- a (eio!,

), the net )han-e in the etaine! eanin-s "a*an)e a#te

a!ust&ent

#o !i$i!en!s,

!, the e+)ess o# e$enues o$e e+(enses (*usD&inus )etain

a!ust&ents

equie! "' the FAS=s )o&(ehensi$e in)o&e )on)e(t,

17, Gi**es(ie4 In), is )on)ene! a"out its (o#ita"i*it' #o the

)uent

'ea4 sin)e its eanin-s ha$e !o((e! 17 sin)e *ast 'ea, hi)h

o#

the #o**o%in- )o&(aisons %ou*! "e the LEAST use#u* ine$a*uatin- the

!o( in Gi**es(ie=s (o#it &a-in2

a, Co&(aison o# Gi**es(ie=s )uent (o#it &a-in %ith the

in!ust'

a$ea-e #o the )uent 'ea

", Co&(aison o# Gi**es(ie=s )uent (o#it &a-in to its "u!-ete!

(o#it &a-in #o the )uent 'ea

), Co&(aison o# Gi**es(ie=s )uent (o#it &a-in %ith the (o#it

&a-ins #o &ao )o&(etitos #o the )uent 'ea

!, Co&(aison o# Gi**es(ie=s )uent (o#it &a-in %ith its (o#it

&a-in #o the (ast 6 'eas

11, Assu&e that 'ou %ant to !ete&ine the a&ount o# !i$i!en!s

!e)*ae! an!

(ai! "' a )o&(an', hi)h o# the #o**o%in- #inan)ia* state&ents

is the

"est sou)e o# this in#o&ation2

a, Retaine! Eanin-s State&ent

", State&ent o# Sto).ho*!es= Equit'

), Cash F*o% State&ent

!, In)o&e State&ent

Se*e)te! a))ounts that &i-ht a((ea on a !etai*e! &u*ti(*e:ste(

in)o&e state&ent #o a etai*e su)h as :Mat o a*:Mat ae (esente!

in

the #o**o%in- set o# questions, I!enti#' ho% ea)h a))ount %ou*!

"e

)*assi#ie! on the in)o&e state&ent,

1<, A!$etisin- E+(ense



a, O(eatin- Re$enue

", Cost o# Goo!s So*!

), Se**in- E+(enses

!, Genea* an! A!&inistati$e E+(enses

e, Othe Re$enues 9 E+(enses

1@, Stoe Mana-es= Sa*aies

a, O(eatin- Re$enue

", Cost o# Goo!s So*!

), Se**in- E+(enses

!, Genea* an! A!&inistati$e E+(enses

e, Othe Re$enues 9 E+(enses

Se*e)te! ite&s #o& the state&ent o# )ash #*o%s #o the Qua.e

Oats

Co&(an' ae (esente! in the #o**o%in- set o# questions, I!enti#'

ho%

ea)h ite& %ou*! "e )*assi#ie! on the state&ent o# )ash #*o%s,

18, Cash !i$i!en!s (ai!

a, O(eatin- A)ti$ities

", In$estin- A)ti$ities

), Finan)in- A)ti$ities

16, 0e)ease in)ease in in$entoies




1>, 0e)ease in)ease in ta!e a))ounts (a'a"*e




1B, Loss on !is(osition o# (o(et' an! equi(&ent




1;, hi)h o# the #o**o%in- a))ountin- (in)i(*es is "ein- a((*ie! %hena

#i& !e*a's e)o-nition o# a sa*e &a!e to a )usto&e %ho has

!e)*ae!

"an.u(t)'4 unti* )ash is e)ei$e! #o& the )usto&e

a, Mat)hin-

", O"e)ti$it'

), Goin- )on)en

!, Conse$atis&,



1?, hi)h o# the #o**o%in- e)ono&i) e$ents !oes NOT esu*t in a

)o(oation in)uin- a *ia"i*it'2

a, The )o(oation "u's &e)han!ise on )e!it,

", The )o(oation !e)*aes a !i$i!en! to "e (ai! in t%o &onths,

), The )o(oation announ)es a (a' in)ease #o the #o**o%in- 'ea

#o

its hou*' (ai! %o.es,

!, The )o(oation se**s "on!s,

<7, hat e##e)ts !oes the (u)hase o# o##i)e equi(&ent on )e!it ha$e

on the a))ountin- equation2

a, Assets !e)ease an! o%nes= equit' !e)eases,

", Lia"i*ities in)ease an! o%nes= equit' !e)eases,

), Assets in)ease an! *ia"i*ities in)ease,

!, Assets !e)ease an! *ia"i*ities !e)ease,

<1, e' Co(, (u)hase! o##i)e su((*ies #o )ash, hat e##e)ts !oes

this tansa)tion ha$e on the a))ountin- equation2

a, Assets in)ease an! o%nes= equit' !e)eases,

", Assets in)ease an! assets !e)ease,

), Assets in)ease an! *ia"i*ities in)ease,

!, Assets !e)ease an! *ia"i*ities !e)ease,

Re)a** that the "asi) a))ountin- e)o!s in)*u!e a))ounts4

ouna*s4

*e!-es4 a )hat o# a))ounts4 an! a tia* "a*an)e, I!enti#' the

)oe)t te& #o ea)h state&ent in the #o**o%in- set o# questions,

<<, A *ist o# a** a))ounts an! thei "a*an)es %hi)h is use! to (o$e

the

equa*it' o# !e"its an! )e!its as o# a s(e)i#i) !ate

a, A))ount

", Genea* Jouna*

), Genea* Le!-e

!, Chat o# A))ounts

e, Tia* a*an)e

Re)a** that the "oo..ee(in- (o)ess in$o*$es a !ou"*e ent'

s'ste&4

!e"its4 )e!its4 ouna*i3in-4 an! (ostin-, I!enti#' the )oe)t

te& #o ea)h state&ent in the #o**o%in- set o# questions,

<@, The (o)ess o# tans#ein- a&ounts #o& a "oo. o# oi-ina* ent'

to

s(e)i#i) assets4 *ia"i*ities4 e$enues4 e+(enses4 an! o%nes=

equit'

a, 0ou"*e ent' s'ste&





Consi!e the a))ountin- equation #o&at "e*o% in ans%ein- the

questions %hi)h #o**o%

Assets Lia"i*ities O%nes= Equit' Re$enues : E+(enses

<B, hat ae the e##e)ts o# the O)to"e > tansa)tion2

a, Funitue an! Su((*ies E+(ense in)ease an! Cash !e)eases,

", Funitue4 Su((*ies E+(ense4 an! A))ounts Pa'a"*e in)eases,

), Funitue4 Su((*ies4 an! A))ounts Pa'a"*e in)ease,

!, A))ounts Pa'a"*e an! Cash !e)ease,

<;, Measue&ent o# the e)ono&i) e##e)ts on an entit' in$o*$es ea)h o#

the

#o**o%in- EKCEPT

a, Quanti#i)ation o# the e##e)ts

", I!enti#i)ation o# the atti"ute to "e &easue!

), Se*e)tion o# an a((o(iate unit o# &easue

!, Re)o!in- the e)ono&i) e##e)ts in the #inan)ia* state&ents

PAGE

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ACCOUNTING QUALIFICATION EKAMINATION

<?, The a))ua* "asis o# a))ountin-

a, e)o-ni3es e$enues %hen )ash is e)ei$e! an! e+(enses %hen

)ash is (ai!,

", e)o-ni3es e$enues %hen )ash is e)ei$e! an! e+(enses ae

in)ue!,

), e)o-ni3es e$enues %hen eane! an! e+(enses %hen in)ue!,

!, e)o-ni3es e$enues %hen eane! an! e+(enses %hen )ash is (ai!,

@7, Oa. Hi**s Go*# C*u" se**s season &e&"eshi(s #o 5>77 ea)h, Fo

1??64 67 season &e&"eshi(s %ee so*!, As o# Ma)h @14 1??64 51;4777 o#

season &e&"eshi( #ees ha! "een )o**e)te!, The -o*# season uns #o >

&onths statin- A(i* 14 1??6, hi)h o# the #o**o%in- state&ents is

FALSE 2

a, The in)o&e state&ent #o the (eio! en!in- Ma)h @14 1??64 %i**

in)*u!e -o*# &e&"eshi( e$enue o# 5:7:,

", The )ash #*o% state&ent #o the (eio! en!in- Ma)h @14 1??64%i**

in)*u!e )ash e)ei(ts #o& o(eatin- a)ti$ities o# 51;4777,

), The "a*an)e sheet at Ma)h @14 1??64 %i** in)*u!e a "a*an)e #o

a))ounts e)ei$a"*e o# 51<4777,

!, Go*# &e&"eshi( e$enue #o the (eio! en!in- Ma)h @14 1??64

e+)ee!s )ash e)ei(ts #o& -o*# &e&"eshi(s "' 51<4777,

@1, Je' Man!e se**s ne% )as an! eans a )o&&ission o# 5177 #o

ea)h



)a he se**s, 0uin- the &onth o# Se(te&"e4 1??64 Je' so*! 17

ne%

)as, Je' is (ai! "' the )a !ea*e on the 16th !a' o# the ne+t

&onth, Je' o(eates on the )ash "asis the )a !ea*e o(eates

on

the a))ua* "asis, hi)h o# the #o**o%in- state&ents is TRUE 2

a, Je' %ou*! ean )o&&ission e$enue o# 514777 in Se(te&"e,

", The )a !ea*e %ou*! e)o-ni3e )o&&ission e+(ense o# 514777 in

Se(te&"e,

), The )a !ea*e %ou*! e)o-ni3e )o&&ission e+(ense o# 514777 in

O)to"e,

!, Je' &ust e)o-ni3e e$enue in the sa&e &onth that the )a

!ea*e

e)o-ni3es e+(ense,

@<, hi)h o# the #o**o%in- is an e+a&(*e o# an a))ue! e+(ense2

a, a-es ha$e "een eane! "' e&(*o'ees4 "ut ha$e not "een (ai! at

the

en! o# the (eio!, ", Equi(&ent %hi)h %i** "ene#it se$ea* (eio!s has "een

(u)hase!,

), An insuan)e (o*i)' %hi)h e+(ies in a #utue (eio! has "een

a)quie!,

!, Su((*ies ae (u)hase! an! use! o$e se$ea* &onths,

PAGE

?




@@, hi)h o# the #o**o%in- is an e+a&(*e o# a !e#ee! e$enue2

a, Sa*es ae &a!e to )usto&es on )e!it,

", Inteest has "een eane! on a "an. !e(osit4 "ut has not "een

e)o!e!,

), Pa'&ents ae e)ei$e! )ontinuous*' thou-hout a (eio! #o

one:4

t%o:4 an! thee:'ea &a-a3ine su"s)i(tions,

!, Cash sa*es ae &a!e to )usto&es,

@8, I!enti#' the e)ono&i) e##e)ts o# e)o-ni3in- a))ue! %a-es e+(ense

at

the en! o# the a))ountin- (eio!,

a, Assets !e)ease an! o%nes= equit' !e)eases,

", Assets in)ease an! o%nes= equit' in)eases,

), Assets !e)ease an! *ia"i*ities !e)ease,

!, Lia"i*ities in)ease an! o%nes= equit' !e)eases,

Fo ea)h tansa)tion in the #o**o%in- set o# questions4 i!enti#'

%hi)h



t'(es o# a!ust&ent is equie!,

@6, The a&ount o# e$enue eane! #o& a!$an)e (a'&ents #o& )*ients

#o

se$i)es (o$i!e! is e)o!e!,

a, 0e#ee! e+(ense::)ash (ai! "e#oe e+(ense is in)ue!

", 0e#ee! e$enue::)ash e)ei$e! "e#oe e$enue is eane!

), A))ue! *ia"i*it'::e+(ense in)ue! "e#oe )ash is (ai!

!, A))ue! asset::e$enue eane! "e#oe )ash is e)ei$e!

@>, The )ost o# sa*aies eane! "' e&(*o'ees4 "ut not (ai! at the en!

o#

the a))ountin- (eio! is e)o!e!,

a, 0e#ee! e+(ense::)ash (ai! "e#oe e+(ense is in)ue!

", 0e#ee! e$enue::)ash e)ei$e! "e#oe e$enue is eane!

), A))ue! *ia"i*it'::e+(ense in)ue! "e#oe )ash is (ai!

!, A))ue! asset::e$enue eane! "e#oe )ash is e)ei$e!

@B, C*a&& Co(, (u)hase! su((*ies at a )ost o# 5<4677 !uin- 1??6,

At

Janua' 14 1??64 su((*ies on han! %ee 5@77, At 0e)e&"e @14

1??64

su((*ies on han! ae 5877, Su((*ies e+(ense #o 1??6 %i** "e

a, 5<4877

", 5<4;77

), 5<4177

!, 5<4677

PAGE

17




@;, hi)h o# the #o**o%in- ste(s in the a))ountin- )')*e is (e#o&e!

on*' at the en! o# the a))ountin- (eio!2

a, Co**e)tin- an! ana*'3in- in#o&ation #o& sou)e !o)u&ents

", Re)o!in- "usiness tansa)tions

), Postin- ouna* enties to a))ounts in the *e!-e

!, Re)o!inan! (ostin- a!ust&ents

@?, Fi$e &ao -ou(s o# a))ounts a((ea on a "a*an)e sheet o an

in)o&e

state&ent, hi)h o# these #i$e -ou(s o# a))ounts "e-in ea)h

a))ountin- (eio! %ith 3eo "a*an)es2

a, Assets4 *ia"i*ities4 an! o%nes= equit' a))ounts

", Re$enue an! e+(ense a))ounts

), A** #i$e o# these -ou(s o# a))ounts

!, None o# these #i$e -ou(s o# a))ounts



87, hist*e Co(, e(ote! e$enues o# 5>7747774 e+(enses o#

56>647774

!i$i!en!s o# 5<747774 an! "e-innin- etaine! eanin-s o# 5B74777,

The

en!in- etaine! eanin-s "a*an)e %i** "e

a, 5674777

", 5164777

), 51764777

!, 5;64777

81, I!enti#' %hi)h o# the #o**o%in- "usiness a)ti$ities e(esents a

)*osin- ent',

a, Su((*ies ae (u)hase! on )e!it4 5667,

", Su((*ies on han! at the en! o# the &onth ae !ete&ine! to "e

51;7,

), Su((*ies use! ae tans#ee! to an e+(ense a))ount,

!, The "a*an)e o# Su((*ies E+(ense is tans#ee! to the In)o&e

Su&&a' a))ount,

8<, On the &onin- o# June <B4 1??84 'ou (u)hase! a s%eate %hi)h

%as

oi-ina**' (i)e! at 51<7 in a sa*e #o 567 )ash, In the

a#tenoon4

'ou %ee o##ee! 5;7 #o it4 %hi)h 'ou %i** e)ei$e on Ju*' 14

1??8,

You ae )etain that 'ou %i** e)ei$e the &one', Fo the !a' o#

June

<B4 1??84 'ou net in)o&e an! in)ease in )ash #*o% es(e)ti$e*'

%ee

a, 5@7 an! 5@7

", 5B7 an! 5@7

), 57 an! 5:67

!, 5@7 an! :567

PAGE

11




8@, hat ae the e##e)ts on the a))ountin- equation o# a stoe %hen it

e)o!s &e)han!ise etune! "' )usto&es2

a, Assets an! o%nes= equit' !e)ease,

", Assets an! o%nes= equit' in)ease,

), Assets !e)ease an! *ia"i*ities in)ease,

!, O%nes= equit' !e)eases an! *ia"i*ities in)ease,

88, hat !oes the )e!it te& <D174 nD@7 &ean2



a, A < ta!e !is)ount )an "e ta.en i# 17 ite&s ae (u)hase!4 an!

the

#u** in$oi)e (i)e is !ue %ithin @7 !a's,

", A < )ash !is)ount )an "e ta.en i# the in$oi)e is (ai! %ithin

17 to

@7 !a's othe%ise4 the #u** in$oi)e (i)e is !ue a#te @7

!a's,

), A < !is)ount )an "e ta.en i# the in$oi)e is (ai! %ithin 17

!a's

the #u** in$oi)e (i)e is !ue %ithin @7 !a's,

!, A < (ena*t' %i** "e assesse! i# the in$oi)e is not (ai! %ithin

17

to @7 !a's,

86, Ma's Co(, so*! &e)han!ise to a )usto&e on )e!it, The in$oi)e

a&ount %as 5<4677 the in$oi)e !ate %as O)to"e 17 )e!it te&s

%ee

1D174 nD@7, hi)h o# the #o**o%in- state&ents is TRUE 2

a, The )usto&e )an ta.e a 5<6 !is)ount i# the in$oi)e is (ai! "'

O)to"e <7, ", The )usto&e shou*! (a' 5<48B6 i# the in$oi)e is (ai! "'

No$e&"e ?,

), The )usto&e &ust (a' a 5<6 (ena*t' i# (a'&ent is &a!e a#te

No$e&"e ?,

!, The )usto&e &ust (a' 5<46<6 i# (a'&ent is &a!e a#te O)to"e

<7,

Jin.s Co(, o##es a 17 quantit' !is)ount to )usto&es %ho

(u)hase

17 o &oe o# the sa&e (o!u)t, A*so4 Jin.s o##es )e!it te&s

o#

<D174 nD@7 to )e!it )usto&es, Ha'es Co(, (u)hase! 17 o##i)e

)hais %ith a *ist (i)e o# 5167 ea)h on Ju*' 64 1??6, Ans%e the

#o**o%in- questions "ase! on this in#o&ation,

8>, I# Ha'es (a's the in$oi)e #o its (u)hase on Ju*' 164 1??64 %hat

a&ount o# )ash &ust "e e&itte! to Jin.s2

a, 514677

", 514@67

), 5148B7

!, 514@<@

PAGE1<




Fo the #o**o%in- set o# questions4 use the in#o&ation "e*o%

#o& the



Pe' Co, 1??6 in)o&e state&ent

Pu)hases 5;64777

Tans(otation:In 14<77

In$ento'4 Janua' 14 1??6 1>4677

In$ento'4 0e)e&"e @14 1??6 1;4;77

Pu)hase Retuns 9 A**o%an)es 14877

8B, The a&ount Pe' %ou*! e(ot as its Cost o# Goo!s So*! in the

1??6

in)o&e state&ent is

a, 5;84;77

", 5;<4677

), 5;B4177

!, 51714@77

Fo the #o**o%in- set o# questions4 use the #a)ts (esente!

"e*o%,

Cao**4 In), (u)hase! &e)han!ise #o& Han.s Co(, on A(i* 64

1??6,

The sa*es (i)e o# the &e)han!ise %as 5@4777, The )e!it te&s

%ee

1D174 nD@7, The shi((inte&s %ee FO shi((in- (oint, Cao**

e)ei$e! the &e)han!ise on A(i* 174 1??6, Cao** (ai! the

a&ount

!ue on A(i* @74 1??6,

8;, I# Cao** uses the (eio!i) in$ento' s'ste& an! the -oss &etho!

o#

e)o!in- (u)hases4 %hat ae the e##e)ts on assets4 *ia"i*ities4

an!

o%nes= equit' %hen the &e)han!ise (u)hase on A(i* 64 1??64 is

e)o!e!2

Assets Lia"i*ities O%nes= Equit'

a, In)ease In)ease No e##e)t

", No e##e)t No e##e)t No e##e)t

), 0e)ease No e##e)t 0e)ease

!, No e##e)t In)ease 0e)ease

8?, Most annua* e(ots no% in)*u!e a Re(ot o# Mana-e&ent to the

sto).ho*!es, In this e(ot4 the -ou( i!enti#ie! as "ein-

(i&ai*' es(onsi"*e #o the (e(aation an! inte-it' o# the #inan)ia*

state&ents is

a, &ana-e&ent,

", the )o&(an'=s CPAs,

), the )o&(an'=s intena* au!it sta##,

!, the au!it )o&&ittee o# the )o&(an'=s oa! o# 0ie)tos,



PAGE

1@




Use the in#o&ation (esente! "e*o% to ans%e the #o**o%in- set

o#

questions,

Mani*a Co(, is a &e)han!isin- )o&(an' %hi)h uses the (eio!i)

in$ento' s'ste&, Se*e)te! a))ount "a*an)es ae *iste! "e*o%

Sa*es 5;674777

Pu)hases 8674777

In$ento' "e-innin- 864777

In$ento' en!in- 664777

O(eatin- E+(enses @<64777

In)o&e Ta+ E+(ense @64777 Retaine! Eanin-s "e-innin- B64777

0i$i!en!s 164777

67, Assu&e that Cost o# Goo!s So*! is 58674777, The en!in- "a*an)e o#

Retaine! Eanin-s #o Mani*a Co(, is

a, 51774777

", 5>74777

), 51164777

!, 51874777

The #o**o%in- set o# questions is "ase! on the tansa)tions

(esente!

"e*o%

O)t, @ Pu)hase! &e)han!ise on )e!it #o 564777,

16 So*! &e)han!ise on )e!it #o 5@4677 the )ost o# the

&e)han!ise %as 5<4777, The &e)han!ise %as shi((e! FO

!estination an! %as e)ei$e! "' the )usto&e on O)to"e

<7,

61, I# the PERIO0IC in$ento' s'ste& is use!4 %hat ae the e##e)ts

on the a))ountin- equation o# the &e)han!ise (u)hase on O)t, @2

a, Assets an! *ia"i*ities in)ease 564777,

", Lia"i*ities in)ease an! o%nes= equit' !e)eases 564777,

), Assets an! o%nes= equit' !e)ease 564777,

!, Lia"i*ities an! assets !e)ease 564777,

6<, I# the PERPETUAL in$ento' s'ste& is use!4 %hat ae the e##e)ts

on the a))ountin- equation o# the &e)han!ise (u)hase on O)t, @2



a, Lia"i*ities in)ease 564777 an! o%nes= equit' !e)eases

564777,

", Assets an! o%nes= equit' !e)ease 564777,

), Assets !e)ease 564777 an! o%nes= equit' in)eases 564777,

!, Assets an! *ia"i*ities in)ease 564777,

PAGE

18




6@, hi)h o# the #o**o%in- t'(es o# in$ento' %ou*! NOT "e use! "' a

&anu#a)tuin- "usiness2

a, Me)han!ise in$ento'

", Ra% &ateia*s in$ento'

), o. in (o)ess in$ento'

!, Finishe! -oo!s in$ento'

68, hi)h o# the #o**o%in- state&ents is FALSE 2

a, The )ost o# -oo!s a$ai*a"*e #o sa*e )onsists o# en!in-

in$ento' an! (u)hases,

", An eo in assi-nin- in$ento' )osts to the en!inin$ento'

"a*an)e a##e)ts the )ost o# -oo!s so*! #o the sa&e (eio!,

), En!inin$ento' )osts e(esent a&ounts to "e e)o-ni3e! as

e+(ense in #utue (eio!s %hen the in$ento' is so*!,

!, Cost o# -oo!s so*! e(esents e+(ie! in$ento' )osts,

66, A))ountin- theo' an! (a)ti)e !i##e in the teat&ent o# so&e

)osts o# a)quiin- in$ento', Ea)h o# the #o**o%in- )osts shou*! "e

in)*u!e! in in$ento' )ost in theo' EKCEPT

a, 0e*i$e' e+(ense

", Stoa-e )osts

), E+)ise an! sa*es ta+es

!, Insuan)e !uin- tansit on &e)han!ise (u)hase!

6>, hi)h in$ento' )ostin- &etho! assi-ns the sa&e )ost to a** units

%hethe the' ae so*! o *e#t in en!inin$ento'2

a, LIFO

", FIFO

), A$ea-e )ost

!, S(e)i#i):i!enti#i)ation

PAGE

16






Use the !ata "e*o% to ans%e the #o**o%in- set o# questions,

Assu&e that the )o&(an' uses the PERIO0IC in$ento' &etho!,

Ma' 1 On han!4 <7 units 58,77 ea)h 5 ;7

6 Pu)hase! 177 units 58,17 ea)h 817

18 Pu)hase! ;7 units 58,<7 ea)h @@>

:::

Tota* )ost o# -oo!s a$ai*a"*e #o sa*e 5 ;<>

@1 On han!4 @7 units

6B, I# the )o&(an' uses the FIFO in$ento' &etho!4 the a&ount assi-ne!

to

the Ma' @1 in$ento' %ou*! "e

a, 51<1

", 51<@,?7

), 51<6 !, 51<>

Use the !ata "e*o% to ans%e the #o**o%in- set o# questions,

Assu&e that the )o&(an' uses the PERIO0IC in$ento' &etho!,

Au- 1 On han!4 67 units 5<,67 ea)h 5 1<6

6 Pu)hase! 177 units 5<,86 ea)h <86

18 Pu)hase! 67 units 5<,@> ea)h 11;

:::

Tota* )ost o# -oo!s a$ai*a"*e #o sa*e 5 8;;

@1 On han!4 >7 units

6;, I# the )o&(an' uses the LIFO in$ento' &etho!4 the a&ount assi-ne!

to

the Au-ust @1 in$ento' %ou*! "e

a, 518<,67

", 5181,>7

), 518?,67

!, 518<,67

6?, A &ao a!$anta-e o# the %ei-hte!:a$ea-e &etho! o# in$ento'

)ostin-

is that

a, )ost #*o%s )oes(on! %ith the (h'si)a* #*o% o# &e)han!ise,

", e)ent )osts ae assi-ne! to the en!inin$ento' "a*an)e,

), it is si&(*e to a((*',

!, it &at)hes )uent )osts %ith e$enues,

PAGE

1>






>7, Fae**4 In), has "een in "usiness #o <7 'eas, 0uin- that ti&e

the

)o&(an' has )onsistent*' use! the LIFO in$ento' )ostin- &etho!,

A*so4 )ost (i)es #o &e)han!ise ha$e in)ease! )onsistent*' o$e

the

<7 'eas, I# the )o&(an' has &aintaine! o in)ease! its

in$ento'

*e$e* quantit' o$e the <7 'eas4 %hi)h o# the #o**o%in-

state&ents

is TRUE 2

a, The en!inin$ento' #i-ue e(ote! on the "a*an)e sheet &a'

"e

si-ni#i)ant*' *o%e than its )uent $a*ue,

", Fae** %i** ha$e (ai! &oe in)o&e ta+es o$e the (ast <7 'eas

than it %ou*! ha$e i# it ha! use! the FIFO &etho!, ), Fae**=s tota* net in)o&e #o the (ast <7 'eas is -eate

than it

%ou*! ha$e e(ote! usin- anothe in$ento' &etho!,

!, The )o&(an' %i** ha$e to )ontinue usin- the LIFO &etho!

in!e#inite*' "e)ause o# -enea**' a))e(te! a))ountin- stan!a!s

an!

#e!ea* in)o&e ta+ u*es,

>1, Assu&e that a )o&(an' %hi)h uses the LIFO in$ento' &etho! is

#a)e!

%ith the (ossi"i*it' o# a LIFO *iqui!ation #o the )uent (eio!,

A*so assu&e that &e)han!ise )ost (i)es ha$e in)ease! sin)e the

LIFO

&etho! %as a!o(te!, I# the )o&(an' !oes not (u)hase a!!itiona*

&e)han!ise "e#oe 'ea:en!4 a** o# the #o**o%in- e##e)ts %i**

o))u

as a esu*t o# a LIFO *iqui!ation EKCEPT

a, Re(ote! eanin-s #o the )uent (eio! %i** "e hi-he,

", In)o&e ta+es #o the )uent (eio! %i** "e hi-he,

), Cost o# -oo!s so*! #o the )uent (eio! %i** "e hi-he,

!, Goss &a-in #o the )uent (eio! %i** "e hi-he,

><, Man' &e)han!ise )o&(anies e(ot the !i##een)e "et%een thei

in$ento' un!e the LIFO an! FIFO &etho!s in the #ootnotes to the

#inan)ia* state&ents, Assu&e that a )o&(an' e(ote! an en!in-

in$ento' o# 5> &i**ion in its "a*an)e sheet #o 1??6, A*so4assu&e

that the )o&(an' in!i)ate! that the en!inin$ento' #o 1??6

%ou*!

ha$e "een 5B,6 &i**ion4 an! that this !i##een)e ha! in)ease! "'

58774777 !uin- 1??6, hi)h o# the #o**o%in- state&ents e-a!in-

this situation %ou*! "e FALSE 2

a, The )o&(an' has a LIFO ese$e o# 51,6 &i**ion at the en! o#

1??6,



", In)o&e "e#oe ta+es %as 58774777 *o%e in 1??6 "e)ause the

)o&(an'

use! LIFO athe than FIFO,

), In)o&e ta+es (ai! !uin- 1??6 %ee hi-he "e)ause the )o&(an'

use!

LIFO athe than FIFO,

!, The )o&(an'=s LIFO ese$e in)ease! 58774777 !uin- 1??6,

PAGE

1B




>@, hi)h o# the #o**o%in- state&ents e-a!in- the (o(u*ait' o#

in$ento' )ostin- &etho!s an! in$ento' s'ste&s is FALSE 2

a, FIFO an! LIFO )ontinue to "e the t%o &ost )o&&on*' use!

in$ento' )ostin- &etho!s,

", The a"i*it' to )o&(utei3e the in$ento' s'ste& to!a' has

esu*te!

in an in)ease in the use o# the (eio!i) s'ste&,

), Man' )o&(anies use one in$ento' &etho!4 su)h as LIFO4 #o

)etain

in$ento' ite&s an! anothe &etho! #o othe in$ento' ite&s,

!, An' o# the )o&&on in$ento' )ostin- &etho!s !is)usse! in the

te+t

)an "e use! %ith eithe the (eio!i) o (e(etua* in$ento'

s'ste&s,

>8, hen the &a.et $a*ue o# in$ento' ite&s has !e)*ine! "e*o% thei

)ost4 &an' )o&(anies a((*' %hi)h o# the #o**o%inin$ento'

&etho!s2

a, Lo%e:o#:)ost:o:&a.et &etho!

", LIFO &etho!

), Retai* &etho!

!, Goss (o#it &etho!

>6, The #o**o%inin#o&ation %as ta.en #o& the o(eatin- a)ti$it'

se)tion o# the 1??6 state&ent o# )ash #*o%s #o Hais Co(,

A!!itions to net in)o&e

Chan-e in a))ounts (a'a"*e 5?4777

0e!u)tions #o& net in)o&e

Chan-e in in$entoies 64777

ase! on the in#o&ation (o$i!e!4 %hi)h o# the #o**o%in-

)on)*usions

is INCORRECT 2

a, A))ounts (a'a"*e in)ease! 5?4777 in 1??6,

", In$entoies in)ease! 564777 in 1??6,



), The in!ie)t &etho! %as use! to (e(ae the o(eatin- se)tion

o#

the )ash #*o% state&ent,

!, Cash (a'&ents o# &e)han!ise e+)ee!e! )ost o# -oo!s so*! "'

584777,

>>, hi)h in$ento' )ostin- &etho!s %i** 'ie*! the sa&e esu*ts #o

en!inin$ento' an! )ost o# -oo!s so*! un!e "oth the (eio!i)

an!

(e(etua* in$ento' s'ste&s2

a, A$ea-e:)ost

", LIFO

), FIFO

!, A** o# the a"o$e

PAGE

1;




The #o**o%in- set o# questions is "ase! on the !ata (esente!

"e*o%,

Assu&e that the )o&(an' uses the PERPETUAL in$ento' s'ste& ,

Fe", 1 On han!4 <77 units at 56,77 ea)h 5 14777

; Pu)hase! 877 units at 56,16 ea)h <47>7

16 So*! 677 units

<< Pu)hase! 877 units at 56,<7 ea)h <47;7

<; On han!4 677 units

>B, I# the LIFO &etho! is use!4 %hat is the a&ount assi-ne! to )ost o#

-oo!s so*! #o the units so*! on Fe"ua' 162

a, 5<46?6

", 5<46>7

), 5<4667

!, 5<46B7

>;, I# the &o$in-:a$ea-e &etho! is use!4 %hat is the a&ount assi-ne!

to

the en!inin$ento' on Fe"ua' <;2

a, 5<46?6

", 5<46;7

), 5<46B7

!, 5<46?7

Use the in#o&ation "e*o% to ans%e the #o**o%in- set o#

questions,



Ves(e Co(, "e-an the &onth o# A(i* %ith a )ash "a*an)e o#

5<14777,

0uin- A(i* the )o&(an' eane! (o#its o# 5164777, The #o**o%in-

&e)han!ise sa*es an! (u)hases an! e*ate! )ash e)ei(ts an! )ash

(a'&ents o))ue! !uin- A(i*

Pu)hase! &e)han!ise at a )ost o# 58;4777 on )e!it,

Ma!e (a'&ents to )e!itos #o &e)han!ise (u)hases o#

56>4777,

So*! &e)han!ise %ith a )ost o# 5@>4777 on )e!it #o 5>74777,

Co**e)te! 5674777 #o& )e!it )usto&es,

>?, hat is the )ost o# -oo!s so*! e+(ense #o A(i*2

a, 584777

", 51<4777

), 5184777

!, 5<84777

PAGE

1?




B7, hat is the )ash #*o% e##e)t o# the tansa)tions !es)i"e! a"o$e

on

Ves(e=s )ash "a*an)e at the en! o# A(i*2

a, The )ash "a*an)e %i** in)ease 5<4777,

", The )ash "a*an)e %i** !e)ease 5>4777,

), The )ash "a*an)e %i** in)ease 5<84777,

!, The )ash "a*an)e %i** in)ease 5164777,

Use the in#o&ation (esente! "e*o% to ans%e the #o**o%in- set

o#

questions,

Ca*os Co(, se**s a sin-*e (o!u)t4 %i!-ets4 %hi)h it (u)hases

#o&

se$ea* !i##eent &anu#a)tues, 0uin- the &onth o# O)to"e the

a)ti$it' #o %i!-ets is as #o**o%s

O)t, 1 a*an)e ;77 units at 51<,77Dunit 5 ?4>77

6 Pu)hase <4777 units at 51<,67Dunit <64777

11 So*! <4677 units at 5<6,77Dunit

18 Pu)hase <4<77 units at 51@,77Dunit <;4>77

<< So*! 14677 units at 5<6,77Dunit

@1 a*an)e 14777 units



B1, I# Ca*os uses the FIFO &etho! an! the PERPETUAL in$ento'

s'ste&4

%i** the a&ount assi-ne! to the en!inin$ento' at O)to"e @1 "e

the

sa&e4 &oe4 o *ess than the a&ount assi-ne! un!e the PERIO0IC

in$ento' s'ste&2

a, The sa&e a&ount is assi-ne! to en!inin$ento' un!e "oth the

(eio!i) an! (e(etua* in$ento' s'ste&s,

", A hi-he a&ount is assi-ne! to en!inin$ento' un!e the

(e(etua*

in$ento' s'ste&,

), A s&a**e a&ount is assi-ne! to en!inin$ento' un!e the

(e(etua* in$ento' s'ste&,

B<, Jenn' 0e(at&ent Stoe uses a (eio!i) in$ento' s'ste&, hat is

the

i&(a)t on the #inan)ia* state&ents o# an o$estate&ent o# en!in-

in$ento'2

a, Cuent 'ea=s net in)o&e %i** "e o$estate!, ", Ne+t 'ea=s net in)o&e %i** "e o$estate!,

), Ne+t 'ea=s en!inin$ento' %i** "e o$estate!

!, Ne+t 'ea=s en!inin$ento' %i** "e un!estate!,

PAGE

<7




B@, Fo**o%in- a (eio! o# stee(*' isin- (i)es4 a )o&(an' has a!o(te!

a

ne% &etho! o# (o!u)tion )a**e! ust:in:ti&e %hi)h has esu*te! in

a

!a&ati) e!u)tion in in$entoies, The e##e)t o# this on e(ote!

eanin-s an! in$ento' tuno$e in the 'ea the )han-e ta.es (*a)e

is

a, in)ease eanin-s4 !e)ease in$ento' tuno$e

", in)ease eanin-s4 in)ease in$ento' tuno$e

), !e)ease eanin-s4 !e)ease in$ento' tuno$e

!, !e)ease eanin-s4 in)ease in$ento' tuno$e

B8, The (i&a' eason that "usinesses &a' in$est in shot:te&

in$est&ents is that

a, the' ae t'in- to )onto* the a)ti$ities o# othe )o&(anies,

", the' ae s(e)u*atin- in the a((e)iation in $a*ue o# the

se)uities,

), the' ae in$estin- e+)ess )ash unti* it is nee!e! *ate #o

"usiness o(eations,

!, the' ae *en!in- &one' to )o&(anies %hi)h )annot o"tain "an.

*oans,



B6, hat ae the e##e)ts on the a))ountin- equation o# in$estin- )ash

in

shot:te& in$est&ents2

a, Assets an! o%nes= equit' in)ease,

", No e##e)t::assets in)ease an! !e)ease "' the sa&e a&ount,

), Assets an! *ia"i*ities in)ease,

!, O%nes= equit' in)eases an! *ia"i*ities !e)ease,

B>, The a))ountant #o Haiett Co(, %as (e(ain- a "an.

e)on)i*iation

as o# A(i* @74 1??6 the #o**o%inite&s %ee i!enti#ie!

Haiett=s "oo. "a*an)e 5 1>4<77

Eo "' Haiett in e)o!in- a )usto&e=s

)he). the a&ount %as e)o!e! in )ash

e)ei(ts as 5167 the )oe)t a&ount o#

5617 %as e)o!e! "' the "an. as a !e(osit

Outstan!in- )he).s 14177

Inteest eane! on )he).in- a))ount 67

Custo&e=s NSF )he). etune! "' the "an. 677

Haiett=s a!uste! )ash "a*an)e at A(i* @74 1??64 is

a, 51>4<67

", 5184>67

), 51>4117

!, 5164;?7

PAGE

<1




BB, hat is the !istin-uishin- )haa)teisti) "et%een a))ounts

e)ei$a"*e an! notes e)ei$a"*e2

a, A))ounts e)ei$a"*e esu*t #o& )e!it sa*es4 %hi*e notes

e)ei$a"*e esu*t #o& *oans an! sa*es o# assets othe than

&e)han!ise in$ento',

", A))ounts e)ei$a"*e equie (a'&ent o# inteest i# not (ai!

%ithin

the usua* )e!it te&s,

), Notes e)ei$a"*e esu*t #o& a %itten (o&ise to (a' %ithin a

s(e)i#ie! (eio! o# ti&e, !, Notes e)ei$a"*e esu*t #o& )e!it sa*e tansa)tions #o

se$i)e

)o&(anies4 %hi*e a))ounts e)ei$a"*e esu*t #o& )e!it sa*es

tansa)tions #o &e)han!isin- )o&(anies,

B;, e!o). Co(, uses the a**o%an)e &etho! to a))ount #o "a! !e"ts,

hat ae the e##e)ts on the a))ountin- equation o# the ent' to

e)o!

the %ite:o## o# a )usto&e=s a))ount "a*an)e2



a, No e##e)t::assets in)ease an! !e)ease "' the sa&e a&ount,

", Assets an! *ia"i*ities !e)ease,

), Assets an! o%nes= equit' !e)ease,

!, O%nes= equit' !e)eases an! *ia"i*ities in)ease,

The #o**o%in- questions ae "ase! on the !ata (esente! "e*o% #o

Taant Co(, #o the 'ea en!e! 0e)e&"e @14 1??6

Sa*es 177 on )e!it 514<774777

Sa*es Retuns <64777

A))ounts Re)ei$a"*e 0e)e&"e @14 1??6 1;74777

A**o%an)e #o 0ou"t#u* A))ounts "e#oe

a!ust&ent at 0e)e&"e @14 1??6 )e!it

"a*an)e 14177

Esti&ate! a&ount o# un)o**e)ti"*e a))ounts

"ase! on an a-in- ana*'sis 1@4777

B?, I# Taant esti&ates its "a! !e"ts at 1 o# net )e!it sa*es4 %hat a&ount %i** "e e(ote! as "a! !e"ts #o 1??62

a, 51@4777

", 51<4777

), 5114B67

!, 5174>67

PAGE

<<




;7, I# Taant uses the (e)enta-e o# sa*es &etho! to esti&ate its "a!

!e"ts4 %hat %i** "e the "a*an)e in the A**o%an)e #o 0ou"t#u*

A))ounts

a#te the a!ust&ent #o "a! !e"ts2

a, 5184177

", 5174>67

), 5114B67

!, 51<4;67

;1, I# Taant uses the a-in- a((oa)h to esti&ate its "a! !e"ts4 %hat

%i** "e the net ea*i3a"*e $a*ue o# its a))ounts e)ei$a"*e a#tethe

a!ust&ent #o "a! !e"ts2

a, 51;74777

", 51>B4777

), 51?14?77

!, 51>;4177



The #o**o%in- set o# questions is "ase! on the situation

!es)i"e!

"e*o%,

Mun)hen Co(, esti&ates "a! !e"t e+(ense usin- the (e)enta-e o#

sa*es

a((oa)h, At the en! o# 1??6 the )o&(an' e)o!e! an a!ust&ent

#o

51;4777 o# "a! !e"t e+(ense, In ea*' 1??> the' %ote o## a

)usto&e=s

a))ount #o 5>77,

;<, hat ae the e##e)ts on the a))ountin- equation o# the a!ust&ent

#o

"a! !e"t e+(ense at the en! o# 1??62

a, No e##e)t::assets in)ease an! !e)ease "' the sa&e a&ount,

", Assets an! o%nes= equit' !e)ease,

), Assets an! *ia"i*ities in)ease,

!, Lia"i*ities in)ease an! o%nes= equit' !e)ease,

;@, Feis Co(, e(ote! Net Sa*es a** on )e!it o# 514;774777 an!

Cost

o# Goo!s So*! o# 514<774777 #o 1??6, Its "e-innin- "a*an)e o#

A))ounts Re)ei$a"*e %as 51864777, The A))ounts Re)ei$a"*e "a*an)e

in)ease! "' 5174777 !uin- 1??6, hat is Feis= A))ounts

Re)ei$a"*e

Tuno$e ate #o 1??62 Roun! 'ou ans%e to t%o !e)i&a*

(*a)es,

a, 1<,81

", ;,77

), ;,<;

!, 1<,77

PAGE

<@




;8, The (at' to a (o&isso' note that a-ees to e(a' &one' at the

&atuit' !ate o# the note is )a**e! the

a, &a.e o# the note, ", (a'ee o# the note

), e)i(ient o# the note,

!, *en!e,

The #o**o%in- set o# questions is "ase! on the in#o&ation

(esente!

"e*o%,



Hou-hton Co&(an' so*! &e)han!ise to Peninsu*a Co(, on No$e&"e

14

1??64 #o 5;4777, Hou-hton a))e(te! a (o&isso' note #o&

Peninsu*a

#o 5;4777, The note has a te& o# ?7 !a's an! a state! inteest

ate

o# ?, Hou-hton=s a))ountin- (eio! en!s on 0e)e&"e @14 1??6,

;6, hat a&ount shou*! Hou-hton e)o-ni3e as inteest e$enue on

0e)e&"e

@14 1??62

a, 5 :7:

", 5 1;7

), 5 1<7

!, 5 >7

;>, hat a&ount shou*! Hou-hton e)o-ni3e as inteest e$enue on the

&atuit' !ate o# the note2

a, 5 :7:

", 5 1;7

), 5 1<7

!, 5 >7

;B, The #a)e a&ount o# a))ounts e)ei$a"*e #o Co&(an' A is 5674777,

It is

esti&ate! that < o# these %i** (o$e un)o**e)ti"*e4 that

)usto&es

%i** ta.e a!$anta-e o# )ash !is)ounts o# 514777 an! that sa*es o#

5<4777 %i** "e etune!, The net ea*i3a"*e $a*ue o# a))ounts

e)ei$a"*e is

a, 5674777

", 58?4777

), 58;4777

!, 58>4777

PAGE

<8




;;, hi)h o# the #o**o%inte&s is NOT )o&&on*' use! on the "a*an)e

sheet #o a )o&(an'=s tan-i"*e o(eatin- assets2

a, P*ant Assets

", Po(et'4 P*ant an! Equi(&ent

), Othe Assets

!, Fi+e! Assets



;?, Ho% shou*! intan-i"*e assets "e !is)*ose! on the "a*an)e sheet2

,

a, Net o# the )osts a*ea!' a&oti3e!

", At )ost %ith the a&ount o# a))u&u*ate! a&oti3ation e(ote! in

a se(aate a))ount

), Eithe a o " is a))e(ta"*e

!, None o# the a"o$e

?7, hi)h o# the #o**o%in- #a)tos is NOT e*ate! to the !e)*ine in

the

use#u*ness o# (*ant an! equi(&ent assets an! thee#oe !oes not

nee!

to "e )onsi!ee! in se*e)tin- an a((o(iate !e(e)iation &etho!2

a, Ph'si)a* !eteioation

", O"so*es)en)e

), Re(ai an! &aintenan)e (o*i)ies

!, Cuent e(*a)e&ent )ost


(esente!

"e*o%,

etts4 In),4 (u)hase! )o&(ute equi(&ent at a )ost o# 5184677,

The

equi(&ent has an esti&ate! esi!ua* $a*ue o# 5<4677 an! an

esti&ate!

*i#e o# 8 'eas4 o 174777 hous o# o(eation, The equi(&ent %as

(u)hase! at the "e-innin- o# 1??6 a #u** 'ea=s !e(e)iation

e+(ense

is to "e e)o!e! #o 1??6, At the en! o# #ou 'eas4 it is

e+(e)te!

that the equi(&ent %i** "e e(*a)e! at an esti&ate! )ost o#

51>4777,

?1, I# etts uses the su&:o#:'eas:!i-its !e(e)iation &etho!4 %hat

a&ount

%i** "e e)o!e! as !e(e)iation e+(ense #o 1??62

a, 5@4777

", 584;77

), 564;77

!, 5>4777

PAGE

<6







(esente!

"e*o%,

Ru--*e=s4 In), (u)hase! a ne% !e*i$e' tu). at the "e-innin- o#

1??6, The tu). has a )ost o# 5@@47774 an esti&ate! *i#e o# 6

'eas4

an! an esti&ate! esi!ua* $a*ue o# 5>4777, A #u** 'ea=s

!e(e)iation

e+(ense is to "e e)o!e! in 1??6, The tu). %as !i$en 164777

&i*es

!uin- 1??6 the nu&"e o# e+(e)te! &i*es o$e 6 'eas is ;74777,

?<, A#te the tu). is !e(e)iate! #o 6 'eas4 an! "e#oe it is

e(*a)e!4

the "oo. $a*ue o# the tu). %i** "e

a, 5 :7:

", 5<B4777

), 5@@4777 !, 5>4777

?@, Po-essi$e Co(, uses (*ant assets %hi)h ae su"e)t to a(i!

!e)eases in $a*ue !ue to o"so*es)en)e an! (h'si)a* !eteioation,

hi)h o# the #o**o%in- !e(e)iation &etho!s is &ost a((o(iate to

&easue the !e)*ine in the use#u*ness o# the )o&(an'=s assets2

a, Units o# (o!u)tion

", Stai-ht:*ine

), Su&:o#:'eas:!i-its

!, 0ou"*e:!e)*inin-:"a*an)e

PAGE

<>





(esente!

"e*o% #o a)o4 In),4 #o 1??6 an! 1??>, Assu&e that a)o uses

the

stai-ht:*ine !e(e)iation &etho!,

1??6 1??>

:::::::::: ::::::::::

Po(et'4 P*ant 9 Equi(&ent 5 B674777 5 ;774777

A))u&u*ate! 0e(e)iation @774777 @674777

0e(e)iation E+(ense 674777 674777

Net Sa*es <4<774777 <48774777

Tota* Assets 146774777 14B774777



?8, Usin- the !ata #o 1??>4 !ete&ine the a$ea-e a-e o# a)o=s

(o(et'4

(*ant 9 equi(&ent,

a, 1> 'eas

", ? 'eas

), 8; 'eas

!, B 'eas

?6, h' is !e(e)iation a!!e! to net in)o&e in the o(eatin- a)ti$it'

se)tion o# the state&ent o# )ash #*o%s %hen the in!ie)t &etho! is

use! to (e(ae the o(eatin- a)ti$it' se)tion2

a, 0e(e)iation is an a!!itiona* sou)e o# )ash %hi)h %as not

in)*u!e!

in net in)o&e,

", 0e(e)iation &ust "e e(ote! in the in$estin- a)ti$it' se)tion

a*on- %ith the assets "ein- !e(e)iate!,

), 0e(e)iation %as !e!u)te! in ai$in- at net in)o&e on the

a))ua*

"asis o# a))ountin- ho%e$e4 it !i! not equie the use o#)ash as

&ost othe e+(enses !o,

!, 0e(e)iation %as not in)*u!e! 'et in !ete&inin- net in)o&e #o

the

)uent (eio!,

?>, I# a )o&(an' &a.es a e$enue e+(en!itue in %hi)h a !e"t is

in)ue!4

%hat ae the e##e)ts o# this tansa)tion on the )o&(an'=s

#inan)ia*

state&ents2

a, Assets in)ease an! !e)ease "' the sa&e a&ount,

", E+(enses in)ease an! assets !e)ease,

), E+(enses in)ease an! *ia"i*ities in)ease,

!, Assets in)ease an! *ia"i*ities in)ease,

PAGE

<B




Use the #o**o%inin#o&ation to ans%e questions 118 thou-h11;,

On 0e)e&"e 14 1??84 Co&(an' K "ou-ht #o& Co&(an' Y *an! %ith a

%aehouse on it #o 5;774777, Co&(an' Y sho%e! the *an! an!

"ui*!in-s

on its "a*an)e sheet at 56774777, The #ai &a.et $a*ues o# the

*an!

an! "ui*!in-s at the ti&e o# (u)hase %ee 5B774777 an! 5@774777

es(e)ti$e*',



?B, A )o&(an' uses stai-ht:*ine !e(e)iation #o its "ui*!in-s4

assu&in-

a thit' 'ea *i#e an! 3eo esi!ua* $a*ue, The CEO (oints out

that

the "ui*!in-s *ast &u)h *on-e than @7 'eas4 o#ten >7 'eas4 an!

as.s

%hat the i&(a)t o# !e(e)iatin- "ui*!in-s o$e >7 'eas athe

than @7

'eas %ou*! ha$e on eanin-s (e shae an! !e"t:equit' atio, You

e(*' that

a, eanin-s (e shae %i** in)ease an! !e"t:equit' atio %i**

!e)ease,

", "oth eanin-s (e shae an! !e"t:equit' atio %i** !e)ease,

), "oth eanin-s (e shae an! !e"t:equit' atio %i** in)ease,

!, eanin-s (e shae %i** !e)ease an! !e"t:equit' atio %i**

in)ease,

?;, Cuent *ia"i*ities ae !e#ine! as those *ia"i*ities %hi)h %i** "e satis#ie!

a, %ithin 1 'ea o %ithin the o(eatin- )')*e %hi)he$e is

shote,

", %ithin 1 'ea o %ithin the o(eatin- )')*e %hi)he$e is

*on-e,

), %ithin 1 'ea,

!, "' the en! o# the o(eatin- )')*e,

??, I# a )o&(an' (u)hases 514777 %oth o# in$ento' %ith te&s o#

<D174

nD@7 an! (a's %ithin 17 !a's4 then the a&ount (ai! to the se**e

%ou*!

"e

a, 5?77

", 5;77

), 514777

!, 5?;7

177, An e+a&(*e o# a )uent *ia"i*it' that &ust "e a))ue! is

a, Ta+es Pa'a"*e,

", A))ounts Pa'a"*e,

), Cuent Matuit' o# Lon-:Te& 0e"t,

!, Re$enue Re)ei$e! in A!$an)e,

PAGE

<;






So*utions to the #o**o%in- (o"*e&s equie ti&e:$a*ue:o#:&one'

)a*)u*ations, Re#een)e to Ta"*es ?:1 thou-h ?:8 in the te+t is

ne)essa' to )o&(*ete the )a*)u*ations,

171, I# 'ou &ust )a*)u*ate the (esent $a*ue o# an a&ount at ;

)o&(oun!e!

quate*' #o < 'eas4 then the inteest #a)to use! in the

)a*)u*ation is

a, ; #o < (eio!s,

", < #o ; (eio!s,

), the inteest #a)to #o ; #o < 'eas !i$i!e! "' 8,

!, t%i)e that #o 1 (eio! at ;,

17<, The (esent $a*ue o# 5B67 at 17 )o&(oun!e! annua**' #o 17 'eas

is

a, 58>7

", 5<?7

), 514787 !, 5B4677

17@, Usin- the #utue $a*ue ta"*e4 a stu!ent #oun! that the #utue

$a*ue

a&ount o# 51 #o 6 'eas at an annua* inteest ate o# 17 is

1,>11,

The stu!ent a*so o"se$e! that the #utue $a*ue o# 51 #o 6 'eas

at

17 )o&(oun!e! se&iannua**' is 1,><?, This &eans that

a, the &oe o#ten the )o&(oun!in-4 the hi-he the #utue $a*ue,

", the stu!ent %as *oo.inin the %on- )o*u&n the se)on! a&ount

shou*! "e 1,>11D<,

), thee %as an eo in the ta"*e,

!, %hen inteest is )o&(oun!e! se&iannua**'4 &oe &one' &ust "e

!e(osite! to ha$e a !esie! en!in- "a*an)e,

178, The inteest #a)to #o the #utue $a*ue o# an annuit' is

a, the sa&e as #o the #utue $a*ue o# 514 &u*ti(*ie! "' the

nu&"e o#

!e(osits,

", the e)i(o)a* o# the #utue $a*ue o# 51,

), a )u&u*ati$e tota* o# the #utue $a*ue o# 51 #a)tos,

!, not !ete&ina"*e #o& the #utue $a*ue o# 51,

176, A )o&(an' has ust (u)hase! a &a)hine %ith a )ost o# 56747774 an! si-ne! a note a-eein- to (a' the &anu#a)tue equa* annua*

a&ounts o#

5B4B?7, I# the )uent ate o# inteest is ?4 ho% &an' equa*

annua*

(a'&ents %i** "e &a!e2

a, >

", ;

), 17



!, 1<

PAGE

<?




17>, A )o&(an'=s %ee.*' (a'o** a&ounts to 5164777 an! (a'!a' is e$e'

Fi!a', I# the (e$ious (a'!a' %as Janua' <> an! the a))ountin-

(eio! en!s on Janua' @14 %hat a&ount is the en!in- "a*an)e in

the

%a-es (a'a"*e a))ount2

a, 57

", 5164777

), 5174777

!, 5?4777

17B, hen "on!s ae so*! "' a )o&(an'4 the a))ountin- ent' sho%s

a, an in)ease in *ia"i*ities an! a !e)ease in o%nes= equit',

", an in)ease in *ia"i*ities an! an in)ease in o%nes= equit',

), an in)ease in assets an! an in)ease in *ia"i*ities,

!, an in)ease in assets an! an in)ease in o%nes= equit',

17;, on!s in the a&ount o# 5<64777 an! a *i#e o# 6 'eas %ee issue!

"'

the San)he3 Co&(an', I# the )ou(on ate is 8 an! inteest is

(ai!

annua**'4 %hat %ou*! "e the tota* a&ount o# inteest (ai! o$e the

*i#e o# the "on!s2

a, 5<4777

", 5@4777

), 584777

!, 564777

17?, I# 5674777 %oth o# "on!s !ue in ten 'eas is issue! %ith a

)ou(on

ate o# >4 (ai! se&iannua**'4 then at the en! o# the #ist

inteest

(eio! the "on! in$estos %i** e)ei$e

a, 5@4777

", 514677 ), 564777

!, 5<4677

117, A&oti3ation o# "on! !is)ount esu*ts in

a, a !e)ease o# "on! (a'a"*e,

", a !e)ease o# o%nes= equit',

), an in)ease o# o%nes= equit',

!, a !e)ease in the )ash a))ount,





Co&(an' ha! a$ai*a"*e 5<774777 #o !i$i!en!s4 ho% &u)h )ou*! it

(a' to

the )o&&on sto).ho*!es2

a, 5<74777

", 51874777

), 5;74777

!, 5>74777

PAGE

@1




116, I# a )o&(an' issues no:(a sto).4

a, the )o&(an' !oes not !istin-uish "et%een (a an! the se**in-

(i)e, ", *e-a**' it is sti** equie! to set a &ini&u& se**in- (i)e,

), the shaeho*!es &a' "e *ia"*e #o a!!itiona* (a'&ents in the

#utue,

!, *ia"i*ities ae in)ease! as a esu*t o# the tansa)tion,

11>, The "a*an)e o# the 51,67 (a Co&&on Sto). a))ount #o the

Potoo*a

Co&(an' %as 5864777 "e#oe its e)ent @:#o:1 sto). s(*it, The

&a.et

(i)e o# the sto). %as 5@7, hat o))ue! as a esu*t o# the

s(*it2

a, The "a*an)e in the etaine! eanin-s a))ount %as !e)ease!,

", The "a*an)e in the )o&&on sto). a))ount %as 5164777,

), The &a.et (i)e o# the sto). %as not a##e)te!,

!, The &a.et (i)e o# the sto). %as a((o+i&ate*' 517 (e shae,

The #o**o%in- questions ae "ase! on ite&s se*e)te! #o& the

a*an)e

Sheet o# a )o&(an' *i.e the SEARS CORPORATION, In!i)ate %hee

ea)h

ite& %ou*! "e e(ote! on the "a*an)e sheet,

11B, A))u&u*ate! eanin-s

a, In the sto).ho*!es= equit' se)tion

", In so&e othe "a*an)e sheet se)tion

), In a #inan)ia* state&ent othe than the "a*an)e sheet

11;, A))ue! e+(enses an! othe )uent *ia"i*ities

a, In the sto).ho*!es= equit' se)tion

", In so&e othe "a*an)e sheet se)tion

), In a #inan)ia* state&ent othe than the "a*an)e sheet





!, 51@74777

1<<, hi)h o# the #o**o%inite&s is o# &ost inteest to a shaeho*!e

o# a

)o(oation2

a, Cash #*o%

", Net in)o&e

), Goss (o#it

!, In)o&e ta+ e+(ense

PAGE

@@




1<@, hi)h o# the #o**o%in- !oes NOT qua*i#' as a !is)ontinue!o(eation2

a, A )o&(an' that has sa*es to etai* as %e** as %ho*esa*e

)usto&es

has !e)i!e! to !is)ontinue its sa*es to etai* )usto&es,

", A !e(at&ent stoe !is)ontinue! its sa*es o# sno%&o"i*es,

), A *a-e )o(oation has !e)i!e! to !is)ontinue sa*es in othe

)ounties,

!, A )eea* &anu#a)tue has so*! a to' )o&(an' that it o%ne!,

1<8, 0a&a-e )ause! "' %hi)h one o# the #o**o%in- situations %ou*! &ost

(o"a"*' "e )*assi#ie! as an e+tao!ina' ite&2

a, F*oo!s in the Mi!%esten U,S,

", A hui)ane in F*oi!a

), An eathqua.e in Ca*i#onia

!, A tona!o in Ne% Yo. Cit'

1<6, hi)h o# the #o**o%in- %ou*! NOT "e )onsi!ee! an e+tao!ina'

ite&2

a, A -ain esu*tin- #o& e!e&(tion o# a )o&(an'=s "on!s

", The sa*e o# (at o# the "usiness at a *oss

), A *oss esu*tin- #o& the#t o# in$ento'

!, Co( !a&a-e esu*tin- #o& inse)t in#estation

1<>, hi)h o# the #o**o%in- state&ents e-a!in- eanin-s (e shae isTRUE 2

a, Pu"*i) )o&(anies ae equie! to sho% this atio on the "a*an)e

sheet,

", Pu"*i) )o&(anies &a' sho% this atio i# the' %ish to,

), The eanin-s (e shae atio is not e*e$ant to (o(ietoshi(s

o

(atneshi(s,

!, Eanin-s (e shae is )a*)u*ate! as net in)o&e !i$i!e! "' the



nu&"e o# shaes o# Co&&on Sto). outstan!in- at the en! o# the

'ea,

1<B, hi)h o# the #o**o%inite&s %ou*! NOT a((ea on the in)o&e

state&ent2

a, E+tao!ina' ite&

", 0is)ontinue! o(eations

), Pio (eio! a!ust&ent

!, Eanin-s (e shae

PAGE

@8




1<;, The Phono&ati) Co(oation is in the (o)ess o# (e(ain- its

State&ent o# Sto).ho*!es= Equit', The "e-innin- "a*an)e in the Co&&on Sto). a))ount4 56 (a4 is 5164777 an! the en!in- "a*an)e is

5<74777, The on*' tansa)tion a##e)tin- the a))ount %as an issue

o#

sto). !uin- the 'ea, Ho% &an' shaes %ee issue! "' Phono&ati)2

a, @4777 shaes

", 84777 shaes

), 14777 shaes

!, The nu&"e o# shaes )annot "e !ete&ine! %ithout a!!itiona*

in#o&ation,

1<?, A *oss #o& #ie !a&a-e o))ue! in the (*ant o# the I$' Co&(an',

The

a&ount %as 5<46774 net o# ta+, Assu&in- the )o&(an' uses the

in!ie)t

&etho!4 %hat is the e##e)t o# the *oss on the State&ent o# Cash

F*o%s2

a, An a&ount o# 5<4677 %i** "e !e!u)te! on the state&ent,

", An a&ount o# 5<4677 %i** "e a!!e! on the state&ent,

), The a&ount %i** not a##e)t the State&ent o# Cash F*o%s,

!, Not enou-h in#o&ation is -i$en to ans%e the question,

The #o**o%in- questions ae "ase! on the Finan)ia* State&ents o#

a

)o&(an' *i.e MOTOROLA, I!enti#' %hee ea)h ite& "e*o% %ou*!a((ea in

the Finan)ia* State&ents,

1@7, Eanin-s (e shae

a, In)o&e state&ent

", State&ent o# etaine! eanin-s

), a*an)e sheet

!, State&ent o# )ash #*o%s



1@1, Chan-e in a))ountin- (in)i(*e

a, In)o&e state&ent

", State&ent o# etaine! eanin-s

), a*an)e sheet

!, State&ent o# )ash #*o%s

1@<, hi)h o# the #o**o%in- is NOT a )uent e(otin- equie&ent

#o a

state&ent e(otin- )han-es in )ash o$e a (eio! o# ti&e2

a, This state&ent &ust )*assi#' )ash #*o%s into thee )ate-oies

o(eatin-4 in$estin-4 an! #inan)in- a)ti$ities,

", Cash equi$a*ents &ust "e )o&"ine! %ith )ash in (e(ain- this

state&ent,

), o.in- )a(ita* &a' "e use! as a su"stitute #o )ash in

(e(ain-

this state&ent,

!, The tit*e #o this state&ent is State&ent o# Cash F*o%s,

PAGE

@6




1@@, Cash #*o%s #o& issuin- an! e(u)hasin- sto). o issuin- an!

e(a'in-

etiin- !e"t ae )*assi#ie! as

a, o(eatin- a)ti$ities,

", in$estin- a)ti$ities,

), #inan)in- a)ti$ities,

1@8, hi)h "a*an)e sheet a))ounts ae a##e)te! "' in$estin- a)ti$ities2

a, Cuent assets an! )uent *ia"i*ities

", Non:)uent assets

), Non:)uent *ia"i*ities

!, Sto).ho*!es= equit'

1@6, hi)h &etho! o# (e(ain- the o(eatin- a)ti$ities se)tion o# a

state&ent o# )ash #*o%s a!usts net in)o&e to e&o$e the e##e)ts

o#

!e#ea*s an! a))ua*s #o e$enues an! e+(enses2

a, The !ie)t &etho!

", The in!ie)t &etho!

), oth the !ie)t an! in!ie)t &etho!s

!, Neithe the !ie)t &etho! no the in!ie)t &etho!

1@>, hi)h o# the #o**o%in- state&ents is FALSE 2

a, The &etho! o# (e(ain- the o(eatin- a)ti$ities se)tion o# a





), Finan)in- a)ti$it'

!, Non)ash in$estin- an! #inan)in- a)ti$it'

e, Not e(ote! on the state&ent o# )ash #*o%s

Fo the #o**o%in- set o# questions4 in!i)ate ho% ea)h tansa)tion

!es)i"e! %ou*! "e )*assi#ie! on a state&ent o# )ash #*o%s i# the

o(eatin- a)ti$ities se)tion is (e(ae! un!e the IN0IRECT

&etho! ,

187, 0e(e)iation e+(ense is e)o!e!,

a, O(eatin- a)ti$it'

", In$estin- a)ti$it'




181, Cash !i$i!en!s ae !e)*ae!4 "ut not (ai!,






18<, Sto). is issue! to etie a *on-:te& !e"t,






PAGE

@B




Use the equation (esente! "e*o% to ans%e the #o**o%in- set o#

questions,

Cash CL LTL CS RE : NCCA : LTA

%hee CL Cuent *ia"i*ities

LTL Lon-:te& *ia"i*ities

CS Co&&on sto).

RE Retaine! eanin-s

NCCA Non)ash )uent assets

LTA Lon-:te& assets



18@, hi)h o# the #o**o%in- o(eatin- a)ti$ities esu*ts in a )ash

out#*o%2

a, Pa'in- )e!itos #o &e)han!ise

", Co**e)tin- a))ounts e)ei$a"*e

), Ma.in- )ash sa*es

!, Re)ei$in- !e(osits e)o!e! as uneane! e$enue

188, hi)h o# the #o**o%in- a)ti$ities is &ost *i.e*' to ha$e a )ash

#*o%

e##e)t2

a, An in$est&ent in &one' &a.et #un!s

", 0e)*ain- )ash !i$i!en!s

), Reissuin- teasu' sto).

!, Issuin- sto). to a)quie a (atent

186, Ro&eo Co(, e(ote! the #o**o%inin#o&ation #o 1??8 an! 1??6,

A))ounts e)ei$a"*e4 0e)e&"e @14 1??8 5 >B4777

A))ounts e)ei$a"*e4 0e)e&"e @14 1??6 B@4777 Sa*es::1??6 ;864777

hat a&ount o# )ash %as )o**e)te! #o& )usto&es !uin- 1??62

a, 5;@?4777

", 5;614777

), 5;864777

PAGE

@;




18>, Out"a). Co(, e(ote! the #o**o%inin#o&ation #o 1??8 an!

1??6,

Inteest e)ei$a"*e4 0e)e&"e @14 1??8 5 14177

Inteest e)ei$a"*e4 0e)e&"e @14 1??6 >77

Inteest in)o&e::1??6 @4<77

hat a&ount o# )ash %as e)ei$e! #o inteest !uin- 1??62

a, 5@4B77

", 5<4B77 ), 5@4<77

!, 5@4;77

18B, 'sta* Co(, e(ote! the #o**o%inin#o&ation #o 1??8 an!

1??6,

A))ounts e)ei$a"*e4 0e)e&"e @14 1??8 5 884777

A))ounts e)ei$a"*e4 0e)e&"e @14 1??6 8?4777

Uneane! #ees4 0e)e&"e @14 1??8 B4777



Uneane! #ees4 0e)e&"e @14 1??6 @4777

Fees e$enue::1??6 @;>4777

hat a&ount o# )ash %as )o**e)te! #o& )usto&es !uin- 1??62

a, 5@BB4777

", 5@;B4777

), 5@;14777

!, 5@?14777

18;, Peot Co(, e(ote! the #o**o%inin#o&ation in its annua*

e(ot

#o 1??6,

Cash #*o%s #o& o(eatin- a)ti$ities 5 <>14777

A!!itions to (o(et'4 (*ant an! equi(&ent 11B4777

Po)ee!s #o& !is(osa*s o# (o(et'4 (*ant

an! equi(&ent 6B4777

Tota* (a'&ents e+(e)te! to etie *on-:te&

!e"t o$e the ne+t 6 'eas 1674777

hat is Peot=s )ash #*o% a!equa)' atio #o 1??62

a, >,B7

", 1,B8

), ;,B7

!, 8,;7

PAGE

@?




Use the se*e)te! !ata #o& the #inan)ia* state&ents o# Ge)o

Co(, (esente! "e*o% to ans%e the #o**o%in- set o#

questions,

1??6 1??8

:::::::: ::::::::

A))ounts e)ei$a"*e 5 @74777 5 @64777

Me)han!ise in$ento' 6<4777 8;4777

Tota* assets <174777 1?74777

Net sa*es 6774777 8674777

Cost o# -oo!s so*! <;74777 <>14777

18?, hi)h o# the #o**o%in- %ou*! esu*t #o& a $eti)a* ana*'sis o#

the

"a*an)e sheet2

a, A))ounts e)ei$a"*e !e)ease! 564777 o 18,<? !uin- 1??6,

", Me)han!ise in$ento' in)ease! 584777 o B,>? !uin- 1??6,

), A))ounts e)ei$a"*e ae 16,77 o# tota* assets #o 1??6,



!, Me)han!ise in$ento' is <8,B> o# tota* assets #o 1??6,

167, hi)h o# the #o**o%in- esu*ts in a tota* !o**a &easue o#

*iqui!it'2

a, o.in- )a(ita*

", Cuent atio

), Cash #*o% #o& o(eations to )uent *ia"i*ities atio

!, A))ounts e)ei$a"*e tuno$e

PAGE

87




Use the se*e)te! !ata "e*o% #o& the #inan)ia* state&ents o#

Cosi)a Co(, to ans%e the #o**o%in- set o# questions,

1??6 1??8

:::::::: ::::::::

Cash 5 164777 5 <74777

A))ounts e)ei$a"*e @64777 @<4777

Me)han!ise in$ento' <;4777 <84777

Pe(ai! e+(enses @4777 <4777

:::::::: :::::::

Tota* )uent assets 5 ;14777 5 B;4777

Tota* )uent *ia"i*ities @74777 <>4777

Net sa*es 8<74777 @;74777

Cost o# -oo!s so*! <6<4777 <@;4777

Net )ash in#*o% #o& o(eatin-

a)ti$ities 8<4777 @>4777

161, The a))ounts e)ei$a"*e tuno$e #o 1??6 is

a, 11,8@ ti&es

", 11,B> ti&es

), 1<,77 ti&es

!, 1<,68 ti&es

16<, hi)h (o#ita"i*it' atio equies the use o# the eanin-s (e

shae

atio an! the )uent &a.et (i)e o# )o&&on sto). to "e)a*)u*ate!2

a, Retun on sto).ho*!es= equit'

", 0i$i!en! (a'out atio

), 0i$i!en! 'ie*! atio

!, Pi)e:eanin-s atio



PAGE

81




Pesente! "e*o% ae se*e)te! !ata #o& the #inan)ia*

state&ents o# Siou+ Co&(an' #o 1??6 an! 1??8, Use this

!ata4 an! the a!!itiona* in#o&ation (o$i!e!4 to ans%e the

#o**o%in- set o# questions,

1??6 1??8

:::::::: ::::::::

Tota* assets 5?674777 5;674777

Pe#ee! sto). 567 (a 1774777 1774777

Co&&on sto). 517 (a <674777 <774777

Pai!:in )a(ita* in e+)ess o#

(a::)o&&on sto). 1;74777 1<74777

Retaine! eanin-s 1174777 ;74777 Net sa*es ;774777 B774777

Cost o# -oo!s so*! 8?>4777 8<B4777

Inteest e+(ense ;4777 ;4777

Net in)o&e 8;4777 @<4777

Cash !i$i!en!s (ai! on (e#ee! sto). >4777 >4777

A!!itiona* in#o&ation

:::::::::::::::::::::::

a The in)o&e ta+ ate #o "oth 'eas %as 87,

" Tota* assets at the en! o# 1??@ %ee 5;774777,

) Tota* )o&&on sto).ho*!es= equit' at the en! o# 1??@ %as

5@B74777,

16@, hi)h o# the #o**o%in- state&ents is FALSE 2

a, The -oss (o#it atio in)ease! !uin- 1??6,

", The (o#it &a-in atio in)ease! !uin- 1??6,

), The )ost o# -oo!s so*! (e)enta-e !e)ease! !uin- 1??6,

!, ase! on the ten!s in (o#its an! )ost o# -oo!s so*!4 it

a((eas

that o(eatin- e+(enses !e)ease!,

168, hi)h o# the #o**o%in- atios is &ost *i.e*' to "e s(e)i#ie! in a

!e"t

)o$enant equiin- a!equate *iqui!it' to "e &aintaine!2

a, 0e"t:to:equit' atio ", qui). atio

), asset tuno$e atio

!, eanin-s (e shae

166, hi)h o# the #o**o%in- atios is i&&e!iate*' a##e)te! "' a sto).

e(u)hase2

a, Asset tuno$e atio

", !e"t:to:equit' atio



), -oss (o#it atio

!, in$ento' tuno$e atio

) 1??> "' Ha)out a)e 9 Co&(an', A** i-hts ese$e!,

Sample Questions:Examination No. #1

1. According to the FAS conceptual !ramewor" the process o! reporting an item in

the !inancial statements o! an entit$ is

". "llocation.

-. 8atching.

0. +ealization.

/. +ecognition

%. &n the hierarch$ o! generall$ accepted accounting principles A' (pinions ha)e

the same authorit$ as A&*'A

". Statements of osition.

-. ndustry "udit and "ccounting ?uides.

0. ssues apers.

/. "ccounting +esearch -ulletins.

+. (ne o! the elements o! a !inancial statement is comprehensi)e income.

*omprehensi)e income excludes changes in e,uit$ resulting !rom which o! the!ollowing-

". @oss from discontinued operations.

-. rior period error correction.

0. /ividends paid to stockholders.

/. *nrealized loss on investments in noncurrent marketable equity securities.

. nder Statements o! Financial Accounting *oncepts which o! the !ollowing

relates to 0oth rele)ance and relia0ilit$-

". 'imeliness.

-. 1eutrality.

0. 9eedback value.

/. 0onsistency.



. According to the FAS conceptual !ramewor" comprehensi)e income includes

which o! the !ollowing-

2ross margin (perating income

". 1o 1o

-. 1o Aes

0. Aes Aes

/. Aes 1o

3. 4eporting in)entor$ at the lower o! cost or mar"et is a departure !rom the

accounting principle o!

". Bistorical cost.

-. 0onsistency.0. 0onservatism.

/. 9ull disclosure.

;. 5artin *ompan$ had the !ollowing account 0alances !or the $ear ended

6ecem0er +1 177+:

&nterest expense. . . . . . . . . . . . . . . . . . . . . . . . 81%9999

oss on disposal

o! noncurrent in)estment . . . . . . . . . . . . . . . . .;9999

<ritedown o! plant and e,uipment to estimated reali=a0le )alue. . . . . . . . . . . . . . .39999

&n its income statement !or 177+ how much should 5artin report as total

extraordinar$ items-

". 46

-. 4!&6,666

0. 4!=6,666

/. 4$66,666

;. <hen a segment o! a 0usiness has 0een discontinued during the $ear the gain or

loss on disposal should



". -e an etraordinary item.

-. Eclude operating losses during the phase(out period.

0. nclude operating losses of the current period up to the measurement date.

/. -e net of applicable income taes.

7. 5ilton *o. 0egan operations on >anuar$ 1 17;7. (n >anuar$ 1 1771 5ilton

changed its in)entor$ method !rom &F( to F&F( !or 0oth !inancial and income tax

reporting. &! F&F( had 0een used in prior $ears 5ilton?s in)entories would ha)e

0een higher 0$ 839999 and 89999 at 6ecem0er 1 1771 and 1779 respecti)el$.

5ilton has a +9@ income tax rate. <hat amount should 5ilton report as the

cumulati)e e!!ect o! this accounting change in its income statement !or the $ear

ended 6ecem0er +1 1771-

". 46

-. 4!&,666

0. 4$=,666

/. 4&$,666

19. *or$ *ompan$ ac,uired some machiner$ on >anuar$ % 177%. *or$ was using

straightline depreciation with an estimated li!e o! !i!teen $ears with no sal)age

)alue !or this machiner$. (n >anuar$ % 177B *or$ estimated that the remained li!e

o! this machiner$ was six $ears with no sal)age )alue. Cow should this change 0e

accounted !or 0$ *or$>

". 8aking a prior period adjustment and changing to an accelerated depreciationmethod that will compensate for underdepreciation in prior years.

-. Estimating the effects of the change on each year)s net earnings, but maintainingthe method of depreciation as originally determined.

0. +evising future depreciation per year to equal the book value on Canuary $, !::;,divided by si.

/. +evising future depreciation per year to equal the original cost divided by si.

11. olte *orp. had the !ollowing in!re,uent gains during l7;7:

8%19999 on reac,uisition and retirement o! 0onds 8 B999 on repa$ment at maturit$ o! a longterm note denominated in a !oreign

currenc$ 8%9999 on sale o! a plant !acilit$ Dolte continues similar operations at another

location.



&n its 17;7 income statement what amount should olte report as total in!re,uent

gains which are not considered extraordinar$-

". 4&56,666

-. 4%!5,6660. 4$=5,666

/. 4$&6,666

1%. (n (cto0er 1 17 5ann *ompan$ appro)ed a !ormal plan to sell 5ill

6i)ision considered a segment o! the 0usiness. The sale will occur on 5arch +1

173. The di)ision had operating income o! 899999 !or the ,uarter ended

6ecem0er +1 17 0ut expects to incur an operating loss o! 8199999 !or the !irst

,uarter o! 173. 5ann also estimates that it will incur a loss o! 8B9999 on the sale

o! the di)ision?s assets. 5ann?s tax rate !or 17 is 9@. &n its income statement !or

the $ear ended 6ecem0er +1 17 how much should 5ann report as Goss ondiscontinued operationsG o! 5ill 6i)ision-

". 4$!6,666 loss.

-. 4!56,666 loss.

0. 4%56,666 loss.

/. 4566,666 gain.

1+. 6uring 17B 5oore *orp. had the !ollowing two classes o! stoc" issued and

outstanding !or the entire $ear:

H 199999 shares o! common stoc" 81 par. H 1999 shares o! @ pre!erred stoc" 8199 par con)erti0le share !or share into

common stoc".

5oore?s 17B net income was 8799999 and its income tax rate !or the $ear was

+9@. &n the computation o! 0asic earnings per share !or 17B the amount to 0e

used in the numerator is

". 4=:<,666

-. 4=:=,=66

0. 4:66,666

/. 4:6!,$66

1. The next two ,uestions are 0ased on the !ollowing data: &n!ormation relating to the capital structure o! 'ar"e *orporation is as !ollows:



6ecem0er 179 171

(utstanding shares o!: *ommon stoc" 79999 79999 're!erred stoc"

con)erti0le into +9999 shares o! common +9999 +9999 19@ con)erti0le 0onds

con)erti0le into %9999 shares o! common 81999999 81999999

/uring !:D! arke paid 4&5,666 dividends on the preferred stock. arke)s net incomefor !:D! was 4:=6,666 and the income ta rate was &6.

9or the year ended /ecember %!, !:D!, the basic earnings per share is

". 4!6.=:

-. 4!6.%:

0. 4 =.!;

/. 4 ;.;:

1. For the $ear ended 6ecem0er +1 171 the diluted earnings per share is:

". 4:.=$

-. 4=.$:0. 4;.;!

/. 4;.&%

/, /, 0, /, 0, ", ", /, ", 0, -, -, ", -, /

Documents

Sample Questions in Accounting/Auditing