FIN621 Final Term Past Papers

FINAL TERM EXAMINATION · FIN621- Financial Statement Analysis (Session - 1) · : 90 min · Marks: 69

Q1. Which one of the following is NOT a type of adjusting entries? (1 marks)

1. Entries to record accrued revenues
2. Entries to record accrued expenses
3. Entries to distribute un-earned revenue
4. Entries to record revenues

Correct answer: Entries to record revenues

(Handout page 29)

Q2. Which one of the following statements is TRUE regarding distributions to stockholders? (1 marks)

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’ equity

Correct answer: To receive a corporate dividend, stock must be owned on the date of declaration

Q3. Cash flow relating to investing activities does NOT present the cash effects of which of the following? (1 marks)

1. Plant assets
2. Intangible assets
3. Investments
4. Debt financing

Correct answer: Intangible assets

Q4. Office supplies are purchased on account. The company uses a perpetual inventory system. What is the correct journal entry for this purchase of office supplies? (1 marks)

1. Debit - Purchases; Credit - Cash
2. Debit - Merchandise Inventory; Credit - Cost of Goods Sold
3. Debit - Office Supplies; Credit - Accounts Payable
4. Debit - Merchandise Inventory; Credit - Accounts Payable

Correct answer: Debit - Office Supplies; Credit - Accounts Payable

Q5. Which of the following is NOT true about the specific identification method? (1 marks)

1. It requires a very detailed physical count
2. This method allows management to easily manipulate ending inventory cost
3. This method is very hard to use on interchangeable goods
4. This results in an overstated inventory account during the period of inflation

Correct answer: This results in an overstated inventory account during the period of inflation

Q6. If sales revenues are Rs. 400,000, cost of goods sold is Rs. 310,000, and operating expenses are Rs. 60,000, what is the gross profit? (1 marks)

1. Rs. 30,000
2. Rs. 90,000
3. Rs. 340,000
4. Rs. 400,000

Correct answer: Rs. 90,000

G.P= SALES – C.O.G.S

= 400,000-310,000= 90,000

Q7. Which of the following statements best describes the nature of depreciation? (1 marks)

1. Regular reduction of asset value to correspond to the decline in market value as the asset ages
2. A process of correlating the book value of an asset with its gradual decline in physical efficiency
3. Allocation of the cost in a manner that will ensure that plant and equipment items are not carried on the balance sheet at amounts in excess of net realizable value
4. Allocation of the cost of a plant asset to the periods in which benefits are received

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