Midterm Review Questions for Accounting 5001
ACCT5001 Sem 2, 2012
Solutions to Mid-Semester Quiz Practice Questions
1
SOLUTIONS TO MID-SEMESTER QUIZ SAMPLE QUESTIONS
Multiple-Choice 1. b is not a primary objective of financial reporting. It may be part of an objective of internal controls instead. none will cause the trial balance not to balance, even though mistakes have occurred this is an internal allocation transaction that does not involve an external party (all the other transactions involve an external party) both accounts receivable (asset), and Service revenue (equity) increase here There is no cash involved in this transaction accrual accounting recognizes revenue when earned and expenses when incurred in earning that revenue (irrespective of when cash is received or paid) adjustments are usually involve prepayments or accruals. If expense is recognized when cash is paid, there is no need to adjust as there is no prepayment or accrual involved. This involves reducing the liability ‘subscriptions received in advance (liability decrease) and recognizing it as subscription revenue (equity increase) Beginning retained earnings $70,000 + profit ($600,000 - $565,000) – dividends $20,000 = $ ending retained earnings $85,000 If depreciation is not recorded, the contra asset accumulated depreciation will not increase to reduce the written down cost of the asset by $5,500 and depreciation expense will not be recorded to reduce profit (and therefore equity) by $5,500
2. d.
3. c
4. b
5. c
6. d
7. d
8. d
9. c
ACCT5001 Sem 2, 2012
Solutions to Mid-Semester Quiz Practice Questions
2
Discussion/Narrative (Note: the following is a suggested answer. Other answers may be acceptable depending on the accuracy of statements made and how convincing the argument is.) Suggested answer 1 Total 4 marks, so we are looking for four main points in the time available
a) Revenue is recognised when it is satisfies the definition of revenue and the revenue recognition criteria,
Solutions to Mid-Semester Quiz Practice Questions
1
SOLUTIONS TO MID-SEMESTER QUIZ SAMPLE QUESTIONS
Multiple-Choice 1. b is not a primary objective of financial reporting. It may be part of an objective of internal controls instead. none will cause the trial balance not to balance, even though mistakes have occurred this is an internal allocation transaction that does not involve an external party (all the other transactions involve an external party) both accounts receivable (asset), and Service revenue (equity) increase here There is no cash involved in this transaction accrual accounting recognizes revenue when earned and expenses when incurred in earning that revenue (irrespective of when cash is received or paid) adjustments are usually involve prepayments or accruals. If expense is recognized when cash is paid, there is no need to adjust as there is no prepayment or accrual involved. This involves reducing the liability ‘subscriptions received in advance (liability decrease) and recognizing it as subscription revenue (equity increase) Beginning retained earnings $70,000 + profit ($600,000 - $565,000) – dividends $20,000 = $ ending retained earnings $85,000 If depreciation is not recorded, the contra asset accumulated depreciation will not increase to reduce the written down cost of the asset by $5,500 and depreciation expense will not be recorded to reduce profit (and therefore equity) by $5,500
2. d.
3. c
4. b
5. c
6. d
7. d
8. d
9. c
ACCT5001 Sem 2, 2012
Solutions to Mid-Semester Quiz Practice Questions
2
Discussion/Narrative (Note: the following is a suggested answer. Other answers may be acceptable depending on the accuracy of statements made and how convincing the argument is.) Suggested answer 1 Total 4 marks, so we are looking for four main points in the time available
a) Revenue is recognised when it is satisfies the definition of revenue and the revenue recognition criteria,