Generally Accepted Accounting Principles and Sample Test Paper

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ACCY111 / SAMPLE TEST PAPER Q & A
MULTIPLE CHOICE QUESTIONS (Answers are on page no 16 onwards) Q. What is the primary objective of most businesses? a. To maximize profits b. To pay dividends to stockholders c. To provide a benefit to society d. To manufacture a quality product ANS:

Q. When a business borrows money, it incurs a(n) a. tax. b. liability. c. receivable. d. addtional equity. ANS: Q. When a product is sold, this cost is often called a. cost of goods sold. b. revenue. c. products. d. retained earnings. ANS: Q. The financial resources a business owns are called a. assets. b. liabilities. c. earnings. d. stockholders' equity. ANS:

Q. Rights to receive money from customers are a. liabilities. b. prepaid expenses. c. accounts receivable. d. accounts payable. ANS: Q. Which of the following is considered an asset? a. Accounts payable b. Prepaid expense c. Bad debt d. Stockholders' equity ANS:

Compiled by Manek. 2011.

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ACCY111 / SAMPLE TEST PAPER Q & A

Q. The role of accounting in business is best defined as a. an information system that provides reports to stakeholders about the economic activities and condition of a business. b. a method of forecasting the future profitability of a company. c. the policies, procedures, and strategies used in a business. d. transaction analysis. ANS: Q. Debts owed by a business are referred to as a. accounts receivable. b. equities. c. stockholders’ equity. d. liabilities. ANS:

Q. A summary of revenue and expenses for a specific period of time is a(n) a. income statement. b. balance sheet. c. statement of cash flows. d. retained earnings statement. ANS: Q. Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert’s net income for the month of September? Accounts Payable Capital Cash Equipment Fees Earned Miscellaneous Expense Rent Expense Retained Earnings Wages Expense a. b. c. d. $32,450 $27,450 $6,550 $18,150 $ 5,000 10,000 14,300 15,400 54,400 18,200 4,150 6,550 13,900

ANS:

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ACCY111 / SAMPLE TEST PAPER Q & A
Q. Browning, Inc. had revenues of $234,000, expenses of $175,000, and withdrawals of $30,000 during 2010. Which of the following statements is correct? a. Net income for 2010 totaled $29,000. b. Net income for 2010 totaled $59,000. c. Total retained earnings increased by $59,000 during 2010. d. Total retained earnings decreased by $30,000 during 2010. ANS: Q.A summary of changes in the earnings retained in the business for a specific period of time is a(n) a. income statement. b. balance sheet. c. statement of cash flows. d. retained earnings statement. ANS: Q. Heedy Company had the following account balances in 2010 and 2011, respectively. Assuming dividends / withdrawal of $20,000 were paid in 2011, how much was net income? Capital Stock Retained Earnings Total Stockholders’ Equity $62,000 $82,000 $272,000 $252,000 2011 $ 42,000 x $ 314,000 2010 $ 40,000 210,000 $ 250,000

a. b. c. d.

ANS: Q. A list of assets, liabilities, and owners' equity as of a specific date is a(n) a. income statement. b. balance sheet. c. statement of cash flows. d. retained earnings statement. ANS: Q. Which of the following is an appropriate representation of the accounting equation? a. Assets + liabilities = stockholders’ equity b. Assets = liabilities + stockholders’ equity c. Assets = liabilities d. Assets = liabilities + retained earnings ANS:

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ACCY111 / SAMPLE TEST PAPER Q & A

Q. Given the following list of accounts, calculate Total Assets: Accounts Receivable Capital Stock Cash Equipment Fees Earned Miscellaneous Expense Rent Expense Retained Earnings Wages Expense a. b. c. d. $84,100 $59,700 $46,250 $39,700 $ 5,000 20,000 19,300 15,400 44,400 18,200 4,150 6,550 13,900

ANS:

Q. Use the following information to determine Total Stockholders’ Equity: Total Assets Total Liabilities Total Stockholders’ Equity $ 50,000 $ 15,000 x

a. b....
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