Accounting Exam Uc3M

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UNIVERSIDAD CARLOS III DE MADRID Accounting I Mid-term exam March 2012 Name: NIU Group:

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. There is only one correct answer. Grading system: correct answer = 1 point; incorrect answer = -0,33 points; no answer = 0 points.

1. Which of the following statements is FALSE? a. A proprietorship is a distinct and separate entity from the proprietor from an accounting viewpoint. b. The stable monetary unit concept means that the type of currency used for the financial statements is not expected to change. c. The objectivity principle of accounting ensures that accounting records and statements are based on the most reliable data available. d. The going-concern concept of accounting holds that the entity will remain in operation for the foreseeable future. 2. All of the following are characteristics of useful accounting information, EXCEPT: a. informative b. reliable c. consistent d. relevant 3. A company paid off $45,000 of its account payable in cash. What would be the

effects of this transaction on the accounting equation? a. Assets, $45,000 increase; Liabilities, no effect; Equity, $45,000 increase. b. Assets, $45,000 decrease; Liabilities, $45,000 decrease; Equity, no effect. c. Assets, $45,000 increase; Liabilities, $45,000 decrease; Equity, no effect. d. Assets, no effect; Liabilities, $45,000 decrease; Equity, $45,000 increase.

4. A company purchased a new machine for $15,000 by trading in an old machine which had a recorded net cost and value of $3,000. They also paid cash of $2000, and signed a note of the remaining balance. The journal entry to record this transaction will NOT include: a. debit Equipment $15,000 b. credit Cash $2,000 c. credit Equipment $3,000 d. debit Account Payable $10,000. -----------------------------------------Million Company----------------------------------------Each of the following transactions for Million Company requires an adjusting entry, which if omitted, will overstate or understate assets, liabilities, owner’s equity, revenues, expenses, or net income. I. Depreciation for office furniture needs to be recorded for December. The annual depreciation amount is $1,440. II. Revenues accrued at the end of December, but not recorded total $450. III. Wages accrued but not paid at the end of December total $800. 5. If omitted transaction I the effect would be as follows a. assets would be understated by $120 b. liabilities would be overstated by $120 c. expenses would be understated by $120 d. net income would be understated by $120 6. If omitted transaction II, the effect would be as follows: a. assets would be understated by $450 b. liabilities wouldn’t be affected c. net income would be understated by $450 d. all the above is true 7. If omitted transaction III, the effect would be as follows: a. assets would be overstated by $800 b. net income would not be affected c. expenses would be overstated by $800 d. none of the above is true -------------------------------End of Million Company-------------------------------------

8. Which of the following errors will become apparent when drawing up a trial balance? a. a credit purchase was completely omitted from the accounting records b. a credit sale was recorded as a cash sale c. the payment of wages was debited to the Rent account instead of the Wages account d. a cash sale was recorded correctly in the Sales account and credited in the Bank account 9. On December 1, 2005, Debbie’s Plantscape receives $2,400 in advance for an agreement to care, in equal monthly efforts, for a client’s office plants during the months of December, January, and February. As of December 31, 2005, Debbie’s Plantscape would have: a. a $1,600 liability to its client under accrual accounting, or have a $2,400 liability to its client under cash-basis accounting b. recognized $800 revenue under accrual accounting, or have recognized $2,400 revenue under...
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