FIN621 Final Term 5 Solved Papers by Asad Munir

FIN621 Finalterm Papers…5 Papers Solved.. · By Asad Munir · FINALTERM EXAMINATION · Fall 2009 · FIN621- Financial Statement Analysis (Session - 1)

Q1. ( Marks: 1 )

Which of the following arrangement is used to maintain the accounts

1. Sequentialy
2. Alphabaticaly
3. Monthly
4. Orderly

Correct answer: Orderly

Orderly arrangement of Accounts is to be maintained.

Q2. ( Marks: 1 )

Which of the following represents the main step(s) of accounting cycle?

1. Recording the transactions
2. Classifying the transactions
3. Ordering, summarizing, counting the transactions
4. Recording, classifying, summarizing transactions

Correct answer: Recording, classifying, summarizing transactions

Q3. ( Marks: 1 )

Blankenship Company pays its employees every Friday for work rendered that week. The payroll is typically Rs.10,000 per week. Which of the following journal entries would Blankenship ordinarily record on the Friday payday?

1. Salary expense Rs. 10,000 - Debit; Salary payable Rs. 10,000 - Credit
2. Salary expense Rs. 10,000 - Debit; Cash Rs. 10,000 - Credit
3. Salary payable Rs. 10,000 - Debit; Cash Rs. 10,000 - Credit
4. Salary payable Rs. 10,000 - Debit; Salary expense Rs. 10,000 - Credit

Correct answer: Salary expense Rs. 10,000 - Debit; Cash Rs. 10,000 - Credit

Q4. ( Marks: 1 )

Retained earnings change over time because of several factors. Which of the following factors would explain an INCREASE in retained earnings?

1. Net Income
2. Dividends payment
3. Inves by the stockhldrrs
4. Net Loss

Correct answer: Net Income

Q5. ( Marks: 1 )

Which one of the following statements is TRUE regarding distributions to stockholders?

1. The payment of dividends is not directly related to the profits of a given period
2. Shareholders can individually decide on their distributions
3. To receive a corporate dividend, stock must be owned on the date of declaration
4. Corporate dividends reduce contributed capital and therefore, stockholders

Correct answer: The payment of dividends is not directly related to the profits of a given period

Q6. ( Marks: 1 )

Which of the following is the largest single expense of most merchandising firms?

1. Cost of goods sold
2. Rent Expense
3. Amortization Expense
4. Salaries Expense

Q7. ( Marks: 1 )

Which of the following is NOT the most common example of cash equivalents?

1. Savings deposits
2. Certificates of Deposit
3. Stocks of other companies
4. Money market mutual funds

Correct answer: Stocks of other companies

Q8. ( Marks: 1 )

The statement of cash flow does NOT assist investors, creditors and others in assessing:

1. The company’s ability to generate positive cash flows in future periods
2. The company’s ability to meet its obligations and to pay dividends
3. The company’s needs for external financing
4. The company’s ability to forecast future losses

Correct answer: The company’s ability to forecast future losses

Q9. ( Marks: 1 )

When using the perpetual inventory system, each time a sale is recorded the:

1. Inventory account is increased
2. Inventory account is decreased
3. Cost of Goods Sold account is decreased
4. Cost of goods available for sale decreases

Correct answer: Inventory account is decreased

Q10. ( Marks: 1 )

In perpetual inventory system, a return of defective merchandise is recorded by crediting

1. Purchases
2. Purchase Returns
3. Purchase Allowance
4. Merchandise Inventory

Correct answer: Merchandise Inventory

Q11. ( Marks: 1 )

Which factor would NOT affect the gross profit rate?

1. An increase in the cost of heating the store
2. An increase in the price of inventory items
3. An increase in the sale of luxury items
4. An increase in the use of “discount pricing” to sell merchandise

Correct answer: An increase in the cost of heating the store

Response B: An increase in the sale of luxury items would be likely to cause the gross profit rate to increase because the gross profit rate on luxury items tends to be higher than on non-luxury items. If more luxury items are sold, the overall gross profit rate should increase. Response C: An increase in the use of “discount pricing” would be likely to reduce the gross profit rate. Since the selling price of items would likely be lower and the cost of goods would not change, the gross profit rate would decrease. Response D: An increase in the price of inventory items would cause cost of goods sold to be higher and assuming sales prices were not increased at the same time, the gross profit rate would be lower.

Q12. ( Marks: 1 )

Assets which have NO market value are called:

1. Wasting assets
2. Fictitious assets
3. Quick assets
4. Tangible assets

Correct answer: Fictitious assets

Q13. ( Marks: 1 )

Audit opinions can NOT be classified as which of the following?

1. Adverse opinion
2. Unqualified opinion
3. Qualified opinion
4. Disagreement of opinion

Correct answer: Disagreement of opinion

Q14. ( Marks: 1 )

The audit is NOT a necessary requirement for which of the following companies?

1. Listed companies
2. Corporations
3. Sole proprietorship
4. Partnerships

Correct answer: Sole proprietorship

Q15. ( Marks: 1 )

Which of the following is NOT a part of the five-year summary of a company?

1. Net income/Loss
2. Total assets
3. Discontinued operations [page 103]
4. Net sales

Correct answer: Discontinued operations [page 103]