Module Exam Financial Accounting

Winter Term 20xy/xz

Mock Exam

General Guidelines:
The exam lasts 90 minutes.
The exam consists of 2 parts (90 points). All questions have to be answered completely.
Please write your last name, first name and Matrikel-Number on every page.
Please write on both sides of the pages. Do not open the staple and do not use own paper. If you
need additional paper, ask your lecturer/supervising staff.
Please leave a right margin of about 4 cm for correcting purposes, also on the rear page.
You may only use your pens and, if necessary, a non-programmable calculator and a book
dictionary. Electronic devices or any additional equipment and/or material are not permitted (e.g.
headphones, smartphones, smart watches, notes etc.)!

Good luck!
Sabine Katterbach

Last Name: _______________________ First Name: ______________________

Matrikel-Number: __________________ E-Mail Address: ___________________

Cell Phone:

Declaration of Your State of Health

I hereby declare that I feel physically capable to take part in the exam.

_______________________________________________________________________
Date Signature

Punktzahl/Points:

Note/Grade:

Signature Lecturer:
Name: __________________________ Matrikel-No.: _______________________ Page 1

PART I: MULTIPLE CHOICE QUESTIONS

(45 Points)

Please indicate the one correct answer with a cross:

Ch1: Introduction to Financial Statements:

1. All of the following are advantages for choosing a proprietorship for a business
except
a. a proprietorship is a simple form of business to set up.
b. a proprietorship gives the owner control of the business.
c. a proprietorship receives more favorable tax treatment.
d. transfer of ownership is easily achieved through stock sales.
(1 point)

2. Which of the following is not an advantage of the corporate form of business

organization?
a. No personal liability
b. Easy to transfer ownership
c. Favorable tax treatment
d. Easy to raise funds
(1 point)

3. Which of the following is the most appropriate and modern definition of

accounting?
a. The information system that identifies, records, and communicates the
economic events of an organization to interested users.
b. A means of collecting information.
c. The interconnected network of subsystems necessary to operate a
business.
d. Electronic collection, organization, and communication of vast amounts of
information.
(1 point)

4. Buying assets needed to operate a business is an example of a(n)

a. delivering activity.
b. financing activity.
c. investing activity.
d. operating activity.
(1 point)

5. Ending retained earnings for a period is equal to beginning

a. Retained earnings + Net income + Dividends
b. Retained earnings – Net income – Dividends
c. Retained earnings + Net income – Dividends
d. Retained earnings – Net income + Dividends
(1 point)
Name: __________________________ Matrikel-No.: _______________________ Page 2

6. The balance sheet

a. summarizes the changes in retained earnings for a specific period of time.
b. reports the changes in assets, liabilities, and stockholders’ equity over a
period of time.
c. reports the assets, liabilities, and stockholders’ equity at a specific date.
d. presents the revenues and expenses for a specific period of time.
(1 point)

Ch2: A Further Look at Financial Statements:

7. Use the following data to determine the total dollar amount of assets to be
classified as property, plant, and equipment.
Koonce Office Supplies
Balance Sheet
December 31, 2014

Cash $ 130,000 Accounts payable $ 140,000

Accounts receivable 100,000 Salaries and wages payable 20,000
Inventory 110,000 Mortgage payable 160,000
Prepaid insurance 60,000 Total liabilities $320,000
Stock investments 170,000
Land 180,000
Buildings $210,000 Common stock $240,000
Less: Accumulated Retained earnings 500,000
depreciation (40,000) 170,000 Total stockholders’ equity $740,000
Trademarks 140,000 Total liabilities and
Total assets $1,060,000 stockholders’ equity $1,060,000

a. $660,000
b. $350,000
c. $490,000
d. $390,000
(3 points)

8. Use the above data to calculate Koonce’s current ratio.

a. 2.13 : 1
b. 1.44 : 1
c. 2.86 : 1
d. 2.50 : 1
(4 points)

9. For 2014 Kuhlman Corporation reported net income of $28,000; net sales
$400,000; and average share outstanding 16,000. There were no preferred
dividends. What was the 2014 earnings per share?
a. $1.75
b. $0.57
c. $25.00
d. $0.07
(3 points)
Name: __________________________ Matrikel-No.: _______________________ Page 3

10. Net Working capital is calculated by taking

a. current assets plus current liabilities.
b. current assets minus current liabilities.
c. current assets divided by current liabilities.
d. current assets times current liabilities.
(1 point)

Ch3: The Accounting Information System:

11. If total liabilities decreased by $4,000, then

a. stockholders’ equity must have decreased by $4,000.
b. assets must have decreased by $4,000, or stockholders’ equity must have
increased by $4,000.
c. assets and stockholders’ equity each increased by $2,000.
d. assets must have increased by $4,000.
(1 point)

12. The receipt of cash in advance from a customer

a. increases assets and stockholders' equity.
b. increases assets and decreases stockholders' equity.
c. increases assets and liabilities.
d. none of these answer choices are correct.
(1 point)

13. Which accounts normally have credit balances?

a. Revenues, liabilities, and dividends
b. Revenues, liabilities, and assets
c. Revenues, liabilities, and retained earnings
d. Revenues, liabilities, and expenses
(1 point)

14. If a company issues common stock for $40,000 and uses $30,000 of the cash to
purchase a truck,
a. assets will be increased by $10,000.
b. equity will be reduced by $40,000.
c. assets will be increased by $40,000.
d. assets will be unchanged.
(2 points)

Ch4: Accrual Accounting Concepts:

15. The revenue recognition principle dictates that revenue should be recognized in
the accounting records:
a. when cash is received.
b. when the performance obligation is satisfied.
c. at the end of the month.
d. in the period that income taxes are paid.
(1 point)
Name: __________________________ Matrikel-No.: _______________________ Page 4

16. Wang Company had the following transactions during 2013:

• Sales of $10,800 on account
• Collected $4,800 for services to be performed in 2014
• Paid $3,100 cash in salaries for 2013
• Purchased airline tickets for $600 in December for a trip to take place in
2014
What is Wang’s 2013 net income using accrual accounting?
a. $8,300
b. $13,100
c. $12,500
d. $7,700
(3 points)

17. The Vintage Laundry Company purchased $6,500 worth of laundry supplies on
June 2 and recorded the purchase as an asset. On June 30, an inventory of the
laundry supplies indicated only $1,000 on hand. The adjusting entry that should be
made by the company on June 30 is:
a. debit Supplies Expense, $1,000; credit Supplies, $1,000.
b. debit Supplies, $5,500; credit Supplies Expense, $5,500.
c. debit Supplies, $1,000; credit Supplies Expense, $1,000.
d. debit Supplies Expense, $5,500; credit Supplies, $5,500.
(3 points)

Ch5: Merchandising Operations and the Multiple-Step Income Statement:

18. Two categories of expenses in merchandising companies are

a. cost of goods sold and financing expenses.
b. operating expenses and financing expenses.
c. cost of goods sold and operating expenses.
d. other expenses and cost of goods sold.
(1 point)

19. Conway Company purchased merchandise inventory with an invoice price of

$9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Conway
Company pays within the discount period?
a. $9,000
b. $8,820
c. $8,100
d. $8,280
(3 points)

20. Multiple-step income statements show

a. gross profit but not income from operations.
b. neither gross profit nor income from operations.
c. both income from operations and gross profit.
d. income from operations but not gross profit.
(1 point)
Name: __________________________ Matrikel-No.: _______________________ Page 5

Ch6: Reporting and Analyzing Inventory:

21. Manufacturers usually classify inventory into all the following general categories
except:
a. work in process
b. finished goods
c. merchandise inventory
d. raw materials
(1 point)

22. In a period of rising prices, which of the following inventory methods generally
results in the lowest net income figure?
a. Average cost method
b. LIFO method
c. FIFO method
d. Need more information to answer
(1 point)

23. Baker Bakery Company just began business and made the following four inventory
purchases in June:
June 1 150 units $ 780
June 10 200 units 1,170
June 15 200 units 1,260
June 28 150 units 990
$4,200
A physical count of merchandise inventory on June 30 reveals that there are
210 units on hand. Using the FIFO inventory method, the amount allocated to
ending inventory for June is
a. $1,092
b. $1,131
c. $1,368
d. $1,386
(5 points)

Ch7: Fraud, Internal Control, and Cash:

24. Which of the following is not one of the main factors that contribute to fraudulent
activity?
a. Opportunity.
b. Incompatible duties.
c. Financial pressure.
d. Rationalization.
(1 point)

25. All of the following are items that would most likely be paid from a petty cash fund
except
a. postage due.
b. taxi fares.
c. administrative wages.
d. freight-out.
(1 point)
Name: __________________________ Matrikel-No.: _______________________ Page 6

26. A $200 petty cash fund has cash of $37 and receipts of $160. The journal entry to
replenish the account would include a
a. debit to Cash for $160.
b. credit to Petty Cash for $163.
c. debit to Cash Over and Short for $3.
d. credit to Cash for $160.
(2 points)
Name: __________________________ Matrikel-No.: _______________________ Page 7

PART II: CASE STUDY & MAIN QUESTIONS

(45 Points)

Perfectly Clean Inc.

On November 1, 2014, the following were the account balances of Perfectly Clean Inc.:
Debit Credit
Cash $ 2,700 Accumulated Depreciation – Equipment $ 500
Accounts Receivable 2,910 Accounts Payable 2,300
Supplies 1,120 Unearned Service Revenue 400
Equipment 9,380 Common Stock 10,000
Retained Earnings 3,000
16,200 16,200

During November, the following transactions were completed.

Date Description
Nov.10 Received $1,800 cash from customers in payment on account.
12 Received $3,700 cash for services performed in November.
17 Purchased supplies on account $1,300.
20 Paid creditors $2,500 of accounts payable due.
22 Paid November rent $480.
27 Performed services on account worth $900 and billed customers.
29 Received $750 from customers for services to be provided in the future.
30 Paid November salaries $1,600.

Question 1 (Ch3: The Accounting Information System & Ch4: Accrual

Accounting Concepts, 24 Points):
Journalize the November transactions. Please use the table for your solutions.

Date Account Titles Debit Credit

Name: __________________________ Matrikel-No.: _______________________ Page 8

Question 2 (Ch3: The Accounting Information System & Ch4: Accrual

Accounting Concepts, 9 Points):
Using a T-account, enter the beginning balance in the ledger account “Cash“ and post
the November transactions. Please use the provided T-account for your solution.

Question 3 (Ch4: Accrual Accounting Concepts, 12 Points):

Prepare the adjusting entries for November 30, 2014. Indicate the type of adjusting
entry. Please use the table for your solutions.

Adjustment data:
1. Accrued salaries payable are $480.
2. Depreciation for the month is $250.
3. Services were performed to satisfy $500 of unearned service revenue.

Type of
Accounts Debit Credit
Adjusting Entry
1.

2.

3.