MID-SEMESTER MOCK EXAM
1st Semester 2024
ACCT1101 FINANCIAL ACCOUNTING
SECTION A: MULTIPLECHOICE QUESTIONS
ANSWER ALL QUESTIONS - EACH QUESTION IS WORTH ONE (1) MARK.
In this Mock Exam we have included forty (40) multiple-choice questions for revision practice.
The Mid-Semester Exam will have thirty-five (35) multiple-choice questions in Section A.
A1. Select the correct order in which the stepsin the decision making process occur.
1. Choose a course of action
2. Establish goals
3. Gather available information
4. Evaluate the consequences of the various alternatives
(a) 1, 2, 3, 4
(b) 2, 4, 3, 1
(c) 2, 3, 4, 1
(d) 4, 3, 2, 1
(e) 3, 1, 2, 4
A2. How many of the following are differences between management and financial accounting?
✓ Types of reportsproduced
✓ Frequency ofreports
✓ Theformat of reports
✓ The users ofreports
(a) None
(b) One
(c) Two
(d) Three
(e) Four
A3. General-purpose reports provide information mainly for the use of which of the following parties?
Internal decision makers External decisionmakers
(a) Yes Yes
(b) Yes No
(c) No Yes
(d) No No
(e) Unable to be determined from the information provided
A4. Of the major steps in the accounting process, which is most concerned with the classification and summarisation of financial data?
(a) Identification
(b) Measurement
(c) Recording
(d) Communication
(e) Translation
A5. Assume you are examining a financialstatement headed ‘As at the 30th June 2024. The heading indicates the statement that is being looked at is the:
(a) BalanceSheet
(b) IncomeStatement
(c) Profit and LossStatement
(d) Statement of Changesin Equity
(e) Cash FlowStatement
A6. Which of the following expressions of the accounting equation is correct?
(a) Assets + Liabilities = Equity
(b) Liabilities = Assets + Equity
(c) Assets = Liabilities + Equity
(d) Assets = Equity – Liabilities
(e) Equity= Liabilities – Assets
A7. SilverwareCompanyLtd reportsthe following balance sheet information for 2024:
1 January 2024 31 December 2024
Assets $600 000 $700 000
Liabilities $120 000 $140 000
Assuming the capital contribution made by the owners during 2024 was $30 000 and Drawings were $120 000, the Net Profit for 2024 must have been as follows:
(a) $120 000
(b) $140 000
(c) $160 000
(d) $170 000
(e) $180 0004
A8. In order to prepare financial information for interested parties, Chambers Co Ltd divides the economic activity of the firm into three-month segments and prepares financial statements at the end of each segment. Which accounting assumption is Chambers Co Ltd applying?
(a) Economic substance
(b) Materiality
(c) Accounting entity
(d) Going concern
(e) Accounting period
A9. PD Elliott is an osteopath who is operating as a sole proprietor. In January, 2024 he purchased for $540 some new furniture for his waiting room. The purchase is made on credit. (Assume there is no GST on the transaction.) The effect of this transaction on the accounting equation is an:
(a) Increase in the asset furniture $540, increase in the liability accounts payable $540
(b) Increase in the asset furniture $540, decrease in the asset accountsreceivable $540
(c) Increase in the assetfurniture $540, increase in equity $540
(d) Increase in the asset furniture $540, increase in the asset accountsreceivable $540
(e) Increase in a liability $540, decrease in equity $540
A10. A chart of accountsis:
(a) A planning device used by management to anticipate information flowsthrough the accounting system
(b) A list of accountsreceivable
(c) A chartshowing the organisationalstructure of the firm
(d) A plan of the ledger listing account titles and their related numbers
(e) A list of the names and account numbers of all the firms we owe money to
A11. A credit entry is made to:
(a) Decrease an asset, increase a liability, and decrease equity
(b) Increase an asset, decrease a liability, and decrease equity
(c) Decrease an asset, decrease a liability, and increase equity
(d) Increase an asset, decrease a liability, and decrease income
(e) Decrease an expense, increase income, and increase equity5
A12. If a sole proprietor who owns an electrical store takes home a DVD player from the showroom for his own personal use, this would be considered to be:
(a) An expense because an asset has been given away
(b) An increase in equity and a decrease in assets because the proprietor now ownsthe DVD player
(c) A decrease in assets and a decrease in equity because by taking the DVD playerthe owner has made a drawing from the business
(d) An increase in assets and an increase in equity
(e) There would be no effect because the proprietor owns all the stock of the business
A13. Equipment is purchased on credit for $16 000 (plus 10% GST). The general journal entry to record thistransaction is:
Debit Credit
(a) Equipment $16 000
Accounts Payable $16 000
(b) Equipment $14 545
GST Outlays $1 455
Accounts Payable $16 000
(c) Equity $16 000
GST Outlays $1 600
Accounts Payable $17 600
(d) Equipment $17 600
GST Outlays $1 600
Accounts Payable $16 000
(e) Equipment $16 000
GST Outlays $1 600
Accounts Payable $17 600
A14. During 2024 the Coin Factory paid out $656 000 in wages from its bank account. At year-end 2024 wages owing but unpaid were $38 400. The business uses accrualaccounting. How much would be reported as wages expense for 2024 in the income statement of the Coin Factory?
(a) $617 600
(b) $656 000
(c) $694 400
(d) $ 38 400
(e) None of the above6
A15. The Prepaid insurance account of Coco Black Club shows a balance of $900 (assume no GST applies) representing a payment on 1 July 2023 of a three-year insurance premium. The correct adjusting entry for Coco Black Club on 31 December 2023, at the end of the annual accounting period, is:
(a) Insurance Expense 150
Prepaid Insurance 150
(b) Insurance Expense 300
Prepaid Insurance 300
(c) Prepaid Insurance 150
Insurance Expense 150
(d) Insurance Expense 900
Prepaid Insurance 900
(e) None of the above
A16. Clear White Company purchased a machine for $75 000 on 1 January 2023 with an estimated life of 5 years and a residual value of zero. The straight-line method of depreciation is used. What is the carrying value of the machine on the 31 December 2024 in the balance sheet of Clear WhiteCompany? (Assume no GST applies)
(a) $75 000
(b) $60 000
(c) $45 000
(d) $30 000
(e) $15 000
A17. If a company has earned income which has not been received in cash at the end of the accounting period, an adjustmentshould be made which will:
(a) Debit an asset account andCredit an income account
(b) Debit an expense account and Credit an income account
(c) Debit an income account andCredit an asset account
(d) Debit an asset account and Credit an expense account
(e) Debit an income account and Credit an equity account7
A18. In which order do the following stepsin the accounting cycle occur?
1. Prepare financialstatements
2. Prepare reversingentries
3. Prepare adjustingentries
4. Prepare closingentries
5. Prepare an adjusted trial balance
(a) 1, 5, 3, 4,2
(b) 2, 3, 4, 1,5
(c) 4, 5, 3, 2,1
(d) 5, 3, 1, 2,4
(e) None of the above
A19. Income and expense accounts can be referred to as:
(a) Permanent accounts
(b) Real accounts
(c) Temporary accounts
(d) Deferred accounts
(e) Contra accounts
A20. The balance in the Profit and Loss Summary account before it is closed off represents:
(a) Totalincome
(b) Total expense
(c) Net profit (or net loss)
(d) Net profit (or net loss) less cash drawings
(e) Net profit (or net loss) plus cash drawings
A21. Which of the following statements relating to the Profit and Loss Summary Account is incorrect?
(a) The Profit and Loss Summary Account is a temporary account
(b) The balance in each income and expense account istransferred to the Profit and Loss SummaryAccount
(c) The balance in the Profit and Loss Summary Account is transferred to the owner’s Capitalaccount
(d) The Profit and Loss SummaryAccount is established to summarise the balances in the income and expense accounts
(e) None of the above statements are incorrect8
A22. Which of these statementsrelating to inventory is correct?
(a) It can be referred to asstock orstock in trade
(b) It is classified as a current asset in the balance sheet
(c) It makes up a significant portion of a retailer’s assets
(d) It is a very active asset, continually being acquired,sold and replaced
(e) All of the statements are correct
A23. The primary purpose ofsettlement discountsisto:
(a) Convince the customerto buy the goods on credit
(b) Facilitate the quoting of pricesto different customer groups
(c) Reduce the invoice price of the goods
(d) Encourage the customer to settle their account early
(e) Increase salesvolume
A24. The entry to record the return of goods to a supplier under the perpetual inventory system is:
(a) Debit Inventory;Credit PurchasesReturns,Credit GST outlays
(b) Debit Accounts Payable; Credit Purchases,Credit GST outlays
(c) Debit Inventory; Debit GST outlays,Credit Accounts Payable
(d) DebitCost of Goods Sold; Credit Purchases
(e) Debit Accounts Payable;Credit Inventory,Credit GST outlays
A25. Simone’s Boutique Traders sold goods to Ms. Girlfinkle for $3300 (including 10% GST.) A few days later, Ms. Girlfinkle paid her account within the discount period and received a settlement discount of 2%. The entry required in Simone’s books to record the payment from Ms. Girlfinkle is:
(a) Debit bank $3234, Debit discount allowed $60, Debit GST collections $6; Credit accounts receivable$3300
b) Debit bank $3234, Debit discount allowed $66; Credit accounts receivable $3300
(c) Debit bank $3240, Debit discount allowed $60; Credit accounts receivable $3,300
(d) Debit bank $3234, Debit discount allowed $66, Debit GST collections $6; Credit accounts receivable $3306
(e) None of the above9
A26. Assuming the use of the perpetual inventory method, which of the following entries would be a closing entry at the end of the accounting period?
(a) Debit Inventory; Credit Profit and Loss Summary
(b) Debit Profit and Loss Summary; Credit Inventory
(c) Debit Profit and Loss Summary;Credit Purchases
(d) Debit Profit and Loss Summary;Credit Cost of Goods Sold
(e) DebitCost of Goods Sold; Credit Purchases
A27. Which statement about control accountsis not correct?
(a) They provide summarised data
(b) They follow the normalrules of debit and credit
(c) They appear in the subsidiary ledger
(d) They appear in the trial balance
(e) None of the above, that is, allstatements are correct
A28. Details of amounts owed to individualsuppliers are found in the:
(a) Accounts payable subsidiary ledger
(b) Accounts payable control account
(c) Accountsreceivable control account
(d) General ledger
(e) Accountsreceivable subsidiary ledger
A29. Columnsfor GST Collections could be found in which two special journals?
(a) Cash Receipts and CashPayments
(b) Cash Receipts and Sales
(c) Sales and Purchases
(d) Cash Receipts and Purchases
(e) Purchases and Cash Payments
A30. A credit of $580,000, was posted to the Accounts Payable Control account on the last day of the month. From which special journal would this posting most likely have come?
(a) CashReceipts
(b) Cash Payments
(c) Purchases
(d) Sales
(e) GeneralJournal10
A31. How many of the following are advantages offered by the use of computers in accounting?
• Faster responsetime
• Errorreduction
• A greater range of reports
• Lower capitaloutlays
• Easier datastorage
(a) One
(b) Two
(c) Three
(d) Four
(e) Five
A32. Under the Perpetual inventory system what is the entry for the credit purchase of 10 electric guitars at $250 per guitar (plus 10% GST.)
(a) Debit Inventory $2750;Credit Accounts Payable $2500 Credit GST Outlays $250
(b) Debit Inventory $2500, Debit GST Outlays $250;Credit Accounts Payable $2750
(c) Debit Inventory $2750; Credit Accounts Payable $2750
(d) Debit Accounts Payable $2750;Credit Inventory $2500,Credit GST Outlays $250
(e) Debit Purchases $2750;Credit Accounts Payable $2750
A33. The major purpose of a post-closing trial balance isto:
(a) Prepare the financialstatements
(b) Determine if any adjusting entries have been omitted
(c) Test for equality of debits and creditsin the general ledger to ensure the opening position is correct forthe next period
(d) Make sure that all post-closing account balances are equal to the pre-closing account balances
(e) All of the above11
A34. The balance on the 30th June, 2023 of the Salaries Expense account is $1200. Which of the following is the correct closing general journal entry that will be made in the accounts of thecompany?
Debit Credit
$ $
(a) Cash 1 200
Salaries Expense 1 200
(b) Salaries Expense 1 200
Profit andLoss Summary 1 200
(c) Salaries Expense 1 200
Cash 1 200
(d) Profit andLoss Summary 1 200
Salaries Expense 1 200
(e) Capital 1 200
Salaries Expense 1 200
A35. On 20 June, 2024 VIP Ltd repaired AAA Ltd’s computer and charged a total of $660 cash (including 10% GST). The general journal entry to record the transaction is:
Debit Credit
$ $
(a) Cash at Bank 660
GST Collections 60
Income from repairs 600
(b) Cash at Bank 600
GST Collections 60
Income from repairs 660
(c) Cash at Bank 660
GST Outlays 60
Income from repairs 600
(d) Cash at Bank 660
Income from repairs 660
(e) Income from repairs 660
Cash at Bank 660
A36. Which of the following statementsrelating to reversing entriesis correct?
(a) They reverse the effect of credit transactions
(b) They reverse the effects of closing entries
(c) They reverse the effects of errors
(d) They reverse the effects of certain adjusting entries
(e) They reverse only prepaid expenses and unearned income entries
A37. Which of the following is a fundamental qualitative characteristic of accounting information?
(a) Relevance
(b) Verifiability
(c) Comparability
(d) Timeliness
(e) Consistency
A38. Which of these should be classified as an administrative expense in the income statement of aretailer?
(a) Depreciation on the Sales Manager'smotor vehicle
(b) Depreciation on office furniture and equipment
(c) Discount allowed
(d) Interest on BankOverdraft
(e) Freight Outwardcosts
A39. SalesReturns and Allowancesis what type of account?
(a) Income
(b) Contra to salesrevenue
(c) Liability
(d) Contra to anasset
(e) Expense
A40. On 1st July 2024, the Indigo Ltd rented out part of its property and collected $9000 in advance for a nine-month period. The receipt was credited to a liability account. At 31 December 2024, Indigo Ltd's year-end, which of the following adjusting journal entriesshould be made?
(a) DR Cash $6000; CR Rent Income $6000
(b) DR Rent Income $3000; CR Unearned Rent Income $3000
(c) DR UnearnedRent Income $6000; CR Rent Income $6000
(d) DR RentReceivable $6000; CRRent Income $6000
(e) DR UnearnedRent Income $3000; CR Rent Income $300014
SECTION B: Comprised of 10 Multiple Choice Questions worth 1 mark each.
The 10 multiple choice questions in this Section in your Mid-Semester Exam will be based on an entity’s Unadjusted Trial Balance figures upon which both Adjusting Journal entries & Closing Journal entries have to be recorded in the accounts of the business.
The standard of difficulty of these questions will be similar to that found in various Questions that involve an Unadjusted Trial Balance such as those covered in both the Lecture Week 5 Example & Lecture Week 6 Example in the Lecture Handouts which can be found on LMS.
You can also look at Tutorial Questions – Exercise 4.2 & Problems 4.19 & 4.27 and Practical Problems 4.16, 4.22 & 4.29 for Adjusting Entries; & Tutorial Questions - Exercise 5.12 & Problem 5.21 and Practical Problems 5.17, 5.24 & 5.28 for Closing Entries, from the current textbook “Financial Accounting” (2024) by Hoggett et al. (12
thEdition).
SECTION C: Comprised of 5 Multiple Choice Questions worth 1 mark each.
The 5 multiple choice questions in this Section in your Mid-Semester Exam will be based on information similar to the following Question, pertaining to the recording of transactions of a retailer.
The following information relates to Colorado Ltd.
Colorado Ltd sells handheld video games for $50 each (plus 10% GST). It buys the games for $30 each (plus 10% GST). On 1 September 2024, 40 games are in inventory. Colorado Ltd completed the following transactions during the month of September, 2024:
Sept. 1 Sold 10 games for cash.
2 Paid the supplier for 20 games purchased on 6 August. Terms: 2/10, n/30.
4 Purchased 25 games on account. Terms: 2/10,n/30.
5 A customer returned 4 of the games sold on 1 September and received a cash refund. The games were not defective in any way.
8 Paid $30 in freight charges on 4 September purchase.
10 Returned 5 of the games purchased on 4 September for credit.
12 Sold 20 games on account. Credit terms: 2/10, n/30.
14 Paid the supplier the amount due on the 4 September purchase.
23 A customer returned 5 games sold on 12 September and included a cheque for the amount due on the other 15 games. The games were not defective and were returned toinventory.
24 Purchased 30 games on credit. Terms: 2/10,n/30.
29 Paid the supplier for the 24 September purchase.
A physical inventory count taken on 30 September, 2024 by Colorado Ltd found that a total of 61 games were still on hand.
Required :
A. Prepare general journal entries to record the transactions assuming that a Perpetual Inventory system is used by Colorado Ltd. The business is registered for GST purposes.
B. Assuming that Colorado Ltd completes the closing process at the end of each period, prepare journal entries to close the accounts on 30 September, 2024.