Accounting & Auditing Paper 2007 - 1

Accounting & Auditing Paper 2007 - 1

1. 2007 Which of the following best describes the nature of an asset?

a) Something with a ready market value
b) An economic resource, which will provide some future benefits, owned by a business.
c) The amount of the owner’s investment in a business
d) None of these

2. A balance sheet is prepared to find out financial position of a firm?

a) For a specified period
b) On a particular date
c) At the time of sale of business
d) None of these

3. The preparation of work sheet?

a) Constitutes creation of a formal financial statement
b) Eliminates the need for entering adjusting entries in the journal
c) Provides the information needed for journalizing adjusting andclosing entries
d) None of these

4. Assets would be overstated if necessary adjusting entry wasomitted for?

a) Expired Insurance
b) Accrued Salaries
c) Accrued Interest Earned
d) None of these

5. The book value of the depreciable asset is best defined as?

a) The un-depreciated cost of the asset
b) The price that the asset would fetch if offered for sale
c) Accumulated depreciation of the asset since acquisition
d) None of these

6. Which of the following is not an intangible asset?

a) A patent
b) A trademark
c) An investment in marketable securities
d) None of these

7. A company has current ratio of 2 to 1 at the end of year 1.Which one of the following transactions will increase this ratio?

a) Sales of bonds payable at a discount
b) Declaration of a 20% cash dividend
c) Collection of a large account receivable
d) None of these

8. Which of the following is not an acceptable inventory method?

a) Lower of cost or market
b) Sales value
c) Specific identification
d) None of these

9. which of the following amounts appears in both the incomestatement and balance sheet?

a) Net Income
b) Accumulated depreciation
c) Dividends
d) None of these

10. If sales increase by 10% from year 1 to 2 and cost of goodssold increases only 6%, the gross profit on sales will increase by?
a) 4%
b) 10%
c) 6%
d) None of these

11. Both the accounts for depreciation expense and accumulateddepreciation?

a) Are closed at the end of the period
b) Appear in the Adjusted Trial Balance Columns of the worksheet
c) Appear in the Trial Balance Columns of the worksheet
d) None of these

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