KBTU Business School

Discipline: Financial statement analysis

Student’s ID:_______________

Mock mid-term examination.

Compiled by: __________________ K.Aktleuova

Approved by:
Dean of Business School_________________ Y.Mukashev

Examination instructions
1. Do not open this question paper until instructed by the Lecturer.
2. All books, materials, papers, notes, magazines, journals, bags, brief cases and other
materials must be placed in the designated area.
3. Candidates may not borrow anything from other candidates.
4. Taking to anyone other than the invigilator in the examination room is regarded as
cheating.
5. No questions may be asked after the examination is commenced.
6. All communications, in any form or looking at each other’s papers are strictly
prohibited and is regarded as cheating.
7. This question paper must not be removed from the examination hall.
8. Time allowed: 1 hours 40 minutes
9. Part 1 (8 marks – 40%) – creation of cash flow statement using direct and indirect
method
Part 2 (12 marks – 60%) – all 24 MCQ questions are compulsory
10. You must round the answer to the nearest two digits.
11. Cheating is an academic offence and will be investigated according to the University
procedures. Zero grade for the course will be awarded in case of cheating.

I have read and understood the examination rules, and I take the full responsibility of the
consequences of violating these rules.

Signature: ________________
Part 1. Creation of cash flow statements using direct and indirect methods–
40%.
Required: Create statement of cash flow using direct (15%) and indirect (25%) methods.
Part 2. Introduction to financial statements analysis, financial reporting
standards, inventory costing methods and understanding of income
statements - 60%. (Each question – 2.5 points). Total 24 questions.

Please fill the table below, otherwise your answers for part 3 will not be counted.
In student number, record your last 5 numbers from your ID. For example, your ID:
21B033456, need to take 33456 and fill the circles.
1. Accounting policies, methods, and estimates used in preparing financial statements are
most likely to be found in the:
A. auditor’s report.
B. management commentary.
C. notes to the financial statements.

2. Providing information about the performance and financial position of companies so that
users can make economic decisions best describes the role of:
A. auditing.
B. financial reporting.
C. financial statement analysis.

3. Information about management and director compensation are least likely to be found in
the:
A. auditor’s report.
B. proxy statement.
C. notes to the financial statements.

4. Which of the following best describes why the notes that accompany the financial
statements are required? The notes:
A. permit flexibility in statement preparation.
B. standardize financial reporting across companies.
C. provide information necessary to understand the financial statements.

5. According to the Conceptual Framework for Financial Reporting, which of the following
is not an enhancing qualitative characteristic of information in financial statements?
A. Accuracy.
B. Timeliness.
C. Comparability.

6. Which of the following elements of financial statements is most closely related to

measurement of financial position?
A. Equity.
B. Income.
C. Expenses.

7. An artists’ cooperative sells its artwork on a consignment basis through a local art gallery.
The cooperative should most likely recognize revenue when the art gallery:
A. sells the artwork.
B. remits payment for the artwork.
C. receives the artwork.

8. Which of the following is least likely to be an acceptable approach for accounting standard
setting bodies to use when developing accounting standards?
A. Revenue/expense-based
B. Objectives-oriented
C. Rules-based
9. A firm that prepares its financial statements according to US GAAP and uses a periodic
inventory system had the following transactions during the year:
Date Activity Tons (thousands) $ per Ton
Beginning inventory 1 600
February Purchase 5 650
May Sale 2 700
August Purchase 3 680
November Sale 4 750
The cost of sales (in thousands) is closest to:
A. $5,890 using weighted average.
B. $4,080 using LIFO.
C. $3,850 using FIFO

10. Selected year-end financial data for Mega Industries follows:

Net income $100 million
Tax rate 25 percent
Weighted average number of common shares outstanding 25 million
Convertible preferred shares* 10 million
Preferred dividend per share $1.00
* Each share is convertible into 0.5 shares of common stock.

The net difference between Mega’s reported basic EPS and its diluted EPS is closest to:
A. $0.74.
B. $0.27.
C. $0.37.