BARRETT HODGSON UNIVERSITY

Departments of Management Science

Midterm Semester Examination – Fall 2019

COURSE TITLE: Financial Accounting & Corporate Reporting

COURSE CODE: ACC- 105

Class/Section: BBA -2 / BS (A&F) -1

Course Instructor: Zia Abbasi Time Allowed:
Date: 17.06.2020 Max Marks: 20 Marks
Student’s Name: ____________________ Reg. No: _____________

Question no.1: Total: 08 Marks

MCQ 1: In January 1998, Upstate Electric and Gas incurred significant costs to repair transmission
lines damaged by the most severe ice storm of the 20th century. These costs will be
reported on Up state’s 1998 income statement as:

a) Operating Expenses c) An adjustment in depreciation

b) An Extra-Ordinary Loss d) None of these

MCQ 2: Which of the following statements about the statement of retained earnings is false?

a) It covers the same time period as the income statement

b) It need not be prepared if a separate statement of stockholders' equity is
prepared.
c) It provides a link between the income statement and the balance sheet.
d) It shows whether a corporation has sufficient funds to pay a cash dividend.

MCQ 3: In the closing of the accounts at the end of the period, which of the following is closed
directly into the Retained Earnings account?

a) The Income Summary account

b) The Capital Stock account.
c) Revenue and expense accounts.
d) The Dividends Payable account.
MCQ 4: Which of the following best describes the relationship between revenue and retained
earnings?
a) Revenue increases net income, which in turn increases retained earnings.
b) Revenue represents a cash receipt; retained earnings is an element of
stockholders' equity.
c) Revenue represents the price of goods sold or services rendered; retained
earnings represents cash available for paying dividends.
d) Retained earnings is equal to revenue minus expenses.

MCQ 5: Which of the following transactions would increase the net cash flow from
operating activities?

a) The collection of an account receivable from a customer.

b) The issuance of capital stock for cash at a price above par.
c) The purchase of a delivery truck by issuing a note payable.
d) The sale of equipment for cash at a gain

MCQ 6: Warner Corporation reported net income in excess of its net cash flow from operations.
A possible explanation of this difference is:

a) Depreciation expense.
b) Non-operating gains
c) A decrease in income tax rates.
d) A decrease in accounts receivable over the period

MCQ 7: In a statement of cash flows, the acquisition (Purchase) of land by issuing capital stock:
a) Is not shown at all, since no cash was received or disbursed
b) Is shown as an investing activity
c) Is shown as a financing activity.
d) Is shown in a supplementary schedule as a non-cash investing & financing
transaction

MCQ 8: Financial statements are prepared:

a) Only for publicly owned business organizations

b) For corporations, but not for sole proprietorships or partnerships.
c) Primarily for the benefit of persons outside of the business organization
d) In either monetary or nonmonetary terms, depending upon the need of
the decision maker
Solution of Question 1:

MCQ 1: ___________________ MCQ 6: _____________________

MCQ 2: ___________________ MCQ 7: _____________________

MCQ 3: ___________________ MCQ 8: _____________________

MCQ 4: ___________________

MCQ 5: ___________________

Question no. 2: 08 Marks

The following is the comparative Balance Sheet of Sumeer Ltd. are reproduced below:

Debit Balance: Dec 31, 2014 Jan 01,2014

Cash 175,000 210,000
Prepaid Insurance 80,000 90,000
Account Receivable 350,000 320,000
Merchandise Inventory 325,000 350,000
Plant and Machinery 880,000 830,000

Credit Balance:
Paid-up Capital 1,200,000 1,130,000
Account Payable 180,000 200,000
Salaries Payable 60,000 50,000
Bond Payable 120,000 200,000
Retained Earnings 250,000 220,000

Additional Data:
1. Company declared Cash dividend Rs 40,000 and Stock dividend Rs 15,000 during the year
2. Machinery costing Rs 25,000 fully depreciated were sold at Rs 6,000
3. Company paid Bond payable amounting to Rs 16,000 during the year

Required:
Cash flow Statement

Question no. 3 04 Marks

Define the following terms:
a) Shareholder’s Equity
b) Treasury shares
c) Cash generated from Operating activities
d) Cash generated from Financing activities with example.