MIDTERM EXAMINAT ION

QUICK STUDENT GUIDE

Time allowed: 1 hour 30 minutes

Where: Offline in KBTU during Week 8 lecture slot. (Tuesday 08:00-10:30, Tuesday 11:00-12:30 and
Tuesday 14.00-15.30)
Room: 428, 461 and 444 (seating lists will be provided at the date of the exam)
Format: paper based
Weight: 20 points
Bonus points: Bonus points will be added to the total score. Total Attestation score is capped at 30 points,
any remaining bonus balance will be carried over to Endterm or Final exam.
Structure: 20 multiple choice questions + 4 open questions.
EACH Q UEST IO N MA Y B E E IT HER NARR AT IVE O R C AL CULAT I VE IN NAT UR E. T HIS MI X OF QUE ST IONS AND T HE
NAT URE O F O BJ ECT IVE T EST Q UE ST IO NS PE R S E ME AN T HAT SO ME QUE ST IONS W ILL T A KE LON G ER T O A NSW ER
T HAN O T HERS .
Q UEST IO NS FR O M I LO 1 – ILO 1 5 O F T H E S YL LA BUS . T HIS MEA NS T HAT , M ORE T H AN E VER , IT IS I MPORT A NT T HAT
CANDI DAT ES M AKE SU RE T HAT T HE Y CO VER T HE S Y LL ABU S W HEN PREPA R ING FOR T HE E XA M

PREPARAT ION TRACKING

Topic Status (Completed/To be done)
Chapter 9
ILO 13: Determine the cost of plant assets.
ILO 14: Distinguish between capital expenditures and revenue
expenditures.
ILO 15: Compute depreciation by the straight-line and declining-balance
methods.
Chapter 10
ILO 16: Define liabilities and distinguish between current and long-term
liabilities.
ILO 17: Account for notes payable and interest expense.
ILO 18: Describe the costs and the basic accounting activities relating
to payrolls.
ILO 19: Prepare an amortization table allocating payments between
interest and principal.
ILO 20: Describe corporate bonds and explain the tax advantage of
debt financing.
ILO 21: Account for bonds issued at a discount or premium.
EXAMPLES

Question structure will be identical to those we had in tutorials. Students are recommended to prepare based
on past tutorial slides, lecture notes and book chapters.

Sample questions:

1. What is the distinction between a capital expenditure and a revenue expenditure?

2. Identify the following expenditures as capital expenditures or revenue expenditures. Details will be
provided in the question.
3. If a capital expenditure is erroneously treated as a revenue expenditure, will the net income of the
current year be overstated or understated? Will this error have any effect on the net income reported
in future years? Explain.
4. Compute expenses and asset balances using Straight-Line and Declining-Balance Depreciation.
5. Disposal of Plant Asset gain or loss computation. Transaction recording.
6. Computing goodwill, commenting upon results.
7. Computing amortization of intangible assets.
8. Computation of the cost of intangible asset, identification of useful life.
9. Define liabilities. Distinguish between liabilities and owners’ equity.
10. Distinguish between current and long-term liabilities (including classification of the current portions of
long-term debt and of short-term liabilities expected to be refinanced on a long-term basis).
11. Account for notes payable when interest is stated separately.
12. Explain the nature of payroll liabilities including payroll taxes and other mandated costs.
13. Explain the purpose of an amortization table. Illustrate the preparation and use of such a table in the
context of an installment note payable.
14. Discuss the characteristics of corporate bonds including their tax advantages, and the basic journal
entries to record their issuance, payment of interest, and redemption.
15. Explain the nature of bonds issued at a discount or premium.
16. Introduce the concept of present value and its relationship to bond prices.
17. Distinguish between capital leases and operating leases and briefly explain their accounting
treatment.
18. Introduce other long-term liabilities including pensions, post-retirement benefits, and deferred taxes.
Describe the presentation of these items in the financial statements.
19. Describe the cash effects of transactions involving liabilities.
20. Explain the usefulness of the debt ratio with regards to leverage and the interest coverage ratio.
21. Explain the nature of estimated liabilities, loss contingencies, and commitments. Describe the
presentation of these items in financial statements.