Accounting 100 Question

Total points34/102

Full Name
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ID No
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1. Performing services on account will have the following effects on the components
of the basic accounting equation:
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A. Increase assets and decrease equity.

B. Increase assets and increase equity.
C. Increase assets and increase liabilities.

D. Increase liabilities and increase equity

Correct answer
B. Increase assets and increase equity.

2. Which of the following statements about an account is true?

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A. The right side of an account is the debit or increase side.

B. An account is an individual accounting record of increases and decreases in specific asset,
liability, and equity items.

C. There are separate accounts for specific assets and liabilities but only one account for equity
items.
D. The left side of an account is the credit or decrease side.

3. Kathy Siska earned a salary of $400 for the last week of September. She will be
paid on October 1. The adjusting entry for Kathy’s employer at September 30 is:
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A. No entry is required.
B. Debit to Salaries and Wages Expense and credit to Salaries and Wages Payable. 400
C. Debit to Salaries and Wages Expense and credit to cash. 400
D. Debit to Salaries and Wages Payable and credit to ash 400.

Correct answer
B. Debit to Salaries and Wages Expense and credit to Salaries and Wages Payable. 400

4. Which one of the following is incorrect statement about computerized accounting

system?
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A. Cannot be made for rectification of errors.

B. Entries of transactions can be saved and backed up
C. Instant trial balance is provided on daily basis
D. It is prepared at the end of the period, or quarter

5. A credit sale of $7,500 is made on June 13, terms 2/10, net/30. A return of $500 is
granted on June 16. The amount received as payment in full on June 23 is:
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A. $7,000.
B. $6,860.
C. $6,850.

D. $6,500.
Correct answer
B. $6,860.

6. The use of pre-numbered checks in disbursing cash is an application of the

principle of:
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A. Establishment of responsibility.
B. Segregation of duties.
C. Physical controls.
D. Documentation procedures.

7. In 2017, Roso Carlson Ltd. had net credit sales of $7,500,000. On January 1, 2017,
Allowance for Doubtful Accounts had a credit balance of $180,000. During 2017,
$300,000 of uncollectible accounts receivable were written-off. Experience indicates
that 3% of net credit sales become uncollectible. What should be the adjusted balance
of Allowance for Doubtful Accounts at December 31, 2017?
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A. $100,500.
B. $225,000.
C. $105,000.

D. $405,000.
Correct answer
B. $225,000.

8. Which one of the following is true about a General Partnership?

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A. Form of business partnership where there is no fixed term agreed for the duration of the
partnership.
B. Partnership in which some or all partners can exhibit elements of partnerships and
corporations.
C. Form of partnership under common law.
D. A partnership formed for a single transaction.

Correct answer
C. Form of partnership under common law.

9. In which sort of partnership does one accomplice has limitless risk and another
accomplice has a restricted obligation?
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A. Partnership at will
B. Particular Partnership
C. General Partnership
D. Limited Liability Partnership

Use the following data to answer question number 10 and 11

The following units of an inventory item were available for sale during the year:

Beginning inventory 10 units at Birr 55

First purchase 25 units at Birr 60

Second purchase 30 units at Birr 65

Third purchase 15 units at Birr 70

Assume the firm uses the periodic inventory system and during the year, 60 units of the
item were sold.

10. The value of ending inventory using FIFO is:

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A. Birr 1,250
B. Birr 1,350
C. Birr 1,375

D. Birr 1,150

11. What is the amount of cost of goods sold for the year according to the FIFO
method?
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A. Birr 1,750
B. Birr 3,675

C. Birr 3,900
D. Birr 5,050

12. Merchandise inventory at the end of the year was overstated. Which of the
following statements correctly states the effect of the error on net income, assets, and
owner's equity?
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A. Net income is overstated, assets are overstated, owner's equity is understated

B. Net income is overstated, assets are overstated, owner's equity is overstated
C. Net income is understated, assets are understated, owner's equity is understated
D. Net income is understated, assets are understated, owner's equity is overstated

Correct answer
B. Net income is overstated, assets are overstated, owner's equity is overstated

13. When the amount of use of a fixed asset varies from year to year, the method of
determining depreciation expense that best matches allocation of cost with revenue is
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A. Declining-balance

B. Straight-line
C. Units-of-production
D. Sum of years digit
Correct answer
C. Units-of-production

14. A machine with a cost of Birr 75,000 has an estimated residual value of Birr
5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of
depreciation for the second full year, using the double declining-balance method?
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A. Birr 17,500
B. Birr 37,500
C. Birr 18,750

D. Birr 16,667

15. Assume the gross earnings of an employee are Br 6,000 & number of working
hours per month is 160 hours. In addition, his/ her basic salary, allowance & over time
working hours are: Br 4, 000, Br 1,500 & 10 hours respectively. When was the overtime
work done?
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A. Up to 10pm in the evening

B. 10pm up to 5am in the morning

C. On public holiday
D. Sunday/ Saturday
Correct answer
D. Sunday/ Saturday

16. Which of the following is correct about current liabilities, provision and
contingency
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A. Current obligations arising from past transactions and payable in assets or services in the
future.
B. With regard to Provision, it is possible that an outflow of resources embodying economic
benefits will be required to settle the obligation
C. Contingent liabilities are not recognized in the financial statements because they are a
probable obligation

D. All of the above

Correct answer
A. Current obligations arising from past transactions and payable in assets or services in the
future.

17. The objective of financial reporting places most emphasis on:

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A. Reporting to capital providers.

B. Reporting on stewardship.

C. Providing specific guidance related to specific needs

D. Providing information to individuals who are experts in the field.
Correct answer
A. Reporting to capital providers.

18. The market that maximizes the amount that would be received to sell the asset
and minimize the amount that would be paid to transfer the liability after considering
transaction costs and transport costs is
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A. Parent market
B. Principal, market
C. Most advantageous market

D. All of the above

19. If a machine whose original cost is 40,000 having accumulated depreciation

12,000, were sold for 34,000 then while preparing Cash Flow Statement its effect on
cash flow will be
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A. Cash flow from financing activities 34,000

B. Cash flow from financing activities 6,000

C. Cash flow from investing activities 34,000
D. Cash flow from investing activities 6,000
Correct answer
C. Cash flow from investing activities 34,000
20 Which of the following statements is true about inventory errors
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A. Understating beginning inventory understates cost of goods sold and understates net income
B. Understating ending inventory overstates cost of goods sold and overstates net income
C. Overstating ending inventory understates cost of goods sold and understates net income

D. Understating ending inventory overstates cost of goods sold and understates net income
E. All of the above
Correct answer
D. Understating ending inventory overstates cost of goods sold and understates net income

21. ELO Corporation purchased a patent for $180,000 on September 1, 2006. It had
a useful life of 10 years. On January 1, 2008, ELO spent $44,000 to successfully defend
the patent in a lawsuit. ELO feels that as of that date, the remaining useful life is 5
years. What amount should be reported for patent amortization expense for 2008?
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A. $41,200.

B. $40,000.
C. $37,600.
D. $31,200
Correct answer
B. $40,000.

22. Which is not an essential characteristic of property, plant and equipment?

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A. All property, plant and equipment are subject to depreciation.

B. Property, plant and equipment are tangible assets.
C. Property, plant and equipment are used in production or supply of goods and services, for
rental and administrative purposes in the normal course of business.

D. Property, plant and equipment are expected to be used over a period of more than one year.
Correct answer
A. All property, plant and equipment are subject to depreciation.

23. A company purchased land to be used as the site for the construction of a plant.
Timber was cut from the building site so that construction of the plant could begin. The
proceeds from the sale of the timber should be
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A. Classified as other income.

B. Netted against the costs to clear the land and expensed as incurred.
C. Deducted from the cost of the plant.
D. Deducted from the cost of the land.
Correct answer
C. Deducted from the cost of the plant.

24. On January 1, 2022, XYZ Co. sold 12% bonds with a face value of $800,000.
The bonds mature in five years, and interest is paid semiannually on June 30 and
December 31. The bonds were sold for $861,600 to yield 10%. Using the effective-
interest method of amortization, interest expense for 2022 is
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A. $80,000.
B. $85,914.

C. $86,160.
D. $96,000.

25. If bonds are issued between interest dates, the entry on the books of the issuing
corporation could include a
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A. Debit to Interest Payable.

B. Credit to Interest Receivable.

C. Credit to Interest Expense.
D. Credit to Unearned Interest.
Correct answer
C. Credit to Interest Expense.

26. Investments in debt securities should be recorded on the date of acquisition at

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A. Lower of cost or market.

B. Market value.
C. Market value plus brokerage fees and other costs incident to the purchase.
D. Face value plus brokerage fees and other costs incident to the purchase.
Correct answer
C. Market value plus brokerage fees and other costs incident to the purchase.

27. Tracy Co. owns 4,000 of the 10,000 outstanding shares of Penn Corp. common
stock. During 2013, Penn earns $360,000 and pays cash dividends of $120,000. If the
beginning balance in the investment account was $720,000, the balance at December
31, 2013 should be
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A. $720,000.
B. $816,000.

C. $864,000.
D. $960,000.

28. Deferred tax amounts that are related to specific assets or liabilities should be
classified as current or noncurrent based on
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A. Their expected reversal dates.

B. Their debit or credit balance.
C. The length of time the deferred tax amounts will generate future tax deferral benefits.
D. The classification of the related asset or liability.

29. In accounting for a long-term construction-type contract using the percentage-of

completion method, the gross profit recognized during the first year would be the
estimated total gross profit from the contract, multiplied by the percentage of the costs
incurred during the year to the
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A. Total costs incurred to date.

B. Total estimated cost.

C. Unbilled portion of the contract price.

D. Total contract price.

30. When preparing a statement of cash flows (indirect method), which of the
following is not an adjustment to reconcile net income to net cash provided by operating
activities?
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A. A change in interest payable

B. A change in dividends payable

C. A change in income taxes payable
D. All of these are adjustments.
Correct answer
B. A change in dividends payable

31. In relation to the supply of a service to a joint operation by one of the joint
operators, which of the following statement is correct?
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A. A joint operator cannot earn a profit on supplying services to itself

B. A joint operator is not able to recognize the service revenue or service cost for the services
supplied to the joint arrangement
C. A joint operator is entitled to recognize a profit from the supply of the service to itself
D. A joint operator can recognize 100% of the earned through the supply of service to the joint
operation.

Correct answer
B. A joint operator is not able to recognize the service revenue or service cost for the services
supplied to the joint arrangement

32. Joint Arrangement, provides that joint control exists where:

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A. One party alone has power to control the strategic operating decisions of the joint
arrangement
B. No one party may be appointed as the manager of the joint arrangement
C. No single party is in a position to control the activity unilaterally.

D. The decisions in areas essential to the goals of the joint arrangement do not require the
consent of the parties.

33. When resources are transferred to the branch from the home office, which of the
following occurs?
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A. Debit to Investment in Branch

B. Debit to the Home office
C. Credit to Asset by the branch

D. Debit to Liability by the Home office

Correct answer
B. Debit to the Home office
34 XY Company and Z Branch has 321,200 and 289,145 balances of Investment in
Z branch and Home office account. To reconcile the balances one of the reconciling
Item is

XY Company collected 42,000 birr from one of the Z branch customer for the amount it
owes to the branch. The branch did not record this fact. How would the branch record
this event?
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A. Debit Account receivable 42,000 and credit Home office 42,000

B. Debit investment in Z branch 42,000 and credit Cash 42,000
C. Debit Home office 42,000 and Credit Account receivable 42,000.
D. Credit Investment in Z branch 42,000 and Debit Home office 42,000.

Correct answer
B. Debit investment in Z branch 42,000 and credit Cash 42,000

35 Which one of the following condition is not considered as an example of a vesting

condition in share-based payment arrangement?
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A. The total shareholder return needs to meet a specified percentage increase over a specified
period.
B. The share price needs to increase by at least a specified percentage over a specified period
of time.
C. The entity needs to decrease its error rate in a certain area.

D. The employee is required to hold a share for a specific period of time after vesting date.
Correct answer
D. The employee is required to hold a share for a specific period of time after vesting date.

36 A taxable temporary difference is expected to lead to the payment of:

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A. Less tax in the Future and gives rise to a deferred tax asset
B. More tax in the future and gives rise to a deferred tax asset
C. Less tax in the future and gives rise to a deferred tax liability
D. More tax in the future an" gives rise to a "deferred" tax liability

37 The measurement of biological assets involved in agricultural activities should be

based on
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A. Fair value approach

B. Net realizable value

C. Historical cost
D. Replacement cost

38. Insurance contract can be, except one of this?

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A. Insurance against theft or damage

B. Credit-related guarantees
C. Insurance against product liability
D. Product warranties
Correct answer
B. Credit-related guarantees

39 Under which arrangement of business combination the one become survivor and the
other become dissolved or liquidated to cease existence as separate legal entity?
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A. Statutory merger

B. Statutory consolidation
C. Acquisition of common stock
D. Acquisition of asset
E. None of the above

40 In business combination through acquisition of net asset or common stock, the

excess of acquisition cost over current fair value of net asset acquired is:
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A. Allocated to identifiable assets and amortized over time

B. Allocated to goodwill account

C. Allocated to long term asset only
D. Treated as gain on bargain purchase
E. None of the above
Correct answer
B. Allocated to goodwill account
41. Which of the following statement is correct regarding consolidated balance sheet
for partially owned subsidiary on date of business combination under proprietary
theory?
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A. Consolidated asset is sum of fair market value of parent company’s asset and fair market
value of subsidiary company’s asset
B. Consolidated asset is sum of fair market value of parent company’s asset and carrying
amount of subsidiary company’s asset

C. Consolidated asset is sum of carrying amount of parent company’s asset and fair market
value of subsidiary company’s asset
D. Consolidated asset is sum of carrying amount of parent company’s asset and parent’s share
of fair market value of subsidiary company’s asset
E. All are correct
Correct answer
D. Consolidated asset is sum of carrying amount of parent company’s asset and parent’s share
of fair market value of subsidiary company’s asset

42 Companies controlled by another company are known as:

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A. Controlled companies

B. Branch companies
C. Subsidiaries
D. Constituent companies
Correct answer
C. Subsidiaries

43. Which of the following items should be eliminated when preparing consolidated
balance sheet or statement of financial position?
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A. Investment in subsidiary
B. Intra-company payables/receivables

C. Subsidiary company’s equity accounts

D. All of the above

44. Which of the following theory doesn’t recognize non-controlling interest (NCI) at
all?
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A. Parent company theory

B. Proprietary theory
C. Parent company extension theory
D. Entity theory
Correct answer
B. Proprietary theory

45 On December 15, 2021, an Ethiopian company purchased equipment on account

from USA Company for 10,000USD to be paid on January 15, 2022. Exchange rates
are as follows:

On December 15, 2021, 1USD=48ETB, On December 31, 2021, 1USD=50ETB, On

January 15, 2022, 1USD=49ETB

Assuming that the transaction is denominated in USD, what is balance exchange rate
gain or loss on December 31, 2021?
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A. Br 20,000 gain for Ethiopian company

B. Br 20,000 loss for Ethiopian company

C. Br 20,000 gain for USA company
D. Br 20,000 loss for USA company
E. None
Correct answer
B. Br 20,000 loss for Ethiopian company

46. How is non-controlling interest determined under Entity theory?

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A. By multiplying non-controlling percentage with carrying amount of net asset

B. By multiplying non-controlling percentage with investment implied to 100%
C. By multiplying non-controlling percentage with fair value of net asset

D. NCI is not recognized under entity theory

E. None of the above
Correct answer
B. By multiplying non-controlling percentage with investment implied to 100%

47. When costs can be traced to a particular cost object in an economically feasible
way, the cost is a:
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A. Direct cost

B. Indirect cost
C. Allocated cost
D. Budgeted cost

48. All of the following are classified as product cost except;

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A. Wage of machine operator

B. Salary of advertising staff

C. Property tax on production equipment

D. Insurance on factory machinery

49. The cost of lubricants used to grease a production machine in a manufacturing

company is an example of a(n):
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A. Period cost
B. Direct material cost.
C. Indirect material cost.

D. None of the above

50 The term that refers to costs incurred in the past that are not relevant to a decision
is:
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A. Marginal cost.
B. Indirect cost.
C. Period cost.
D. Sunk cost.

51 Which of the following differentiates job costing from process costing?

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A. Job costing is used when each unit of output is identical, & process costing deals with unique
products.

B. Job costing is used when each unit of output is identical and not produced in batches, and
process costing deals with unique products produced on large scale.
C. Process costing is used when each unit of output is identical, and job costing deals with
unique products not produced in batches.
D. Job costing is used by manufacturing industries, and process costing is used by service
industries.
Correct answer
C. Process costing is used when each unit of output is identical, and job costing deals with
unique products not produced in batches.

52. The method that allocates costs by explicitly including all the services rendered
among all support departments is the:
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A. Direct method

B. Reciprocal method
C. Step-down method
D. Sequential method
Correct answer
B. Reciprocal method

For Question no. 53& 54 use the following information

Axes Inc. in its assembly department has no work in process inventories during the
beginning of the month. The completed and transferred out quantity is 4000. The
Ending work in process inventory is 20% of started quantities. The end work in process
is completed with direct material cost 80% and with conversion costs 55%.

53. What was started quantities during the month

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A. 6,000

B. 8,000
C. 5,000
D. 3,200
Correct answer
C. 5,000

54. What is total equivalent unit for direct material cost and conversion costs?
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A. 800 and 550 respectively

B. 5,000 & 2,550 respectively
C. 4,800 and 5,760 respectively
D. 4,800 & 4,550 respectively

55 The cost of goods sold budget requires all of the following budgets EXCEPT:
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A. direct material cost budget

B. manufacturing overhead cost budget
C. distribution cost budget

D. direct manufacturing labour cost budget

(For Q.56 - 58)National cement has supplied the following data:

· Tons of cement produced and sold 220,000

· Sales revenue $924,000

· Variable manufacturing expense $297,000

· Fixed manufacturing expense $280,000

· Variable selling and administrative expense $165,000

· Fixed selling and administrative expense $82,000

· Net operating income $100,000

56. What is the company's unit contribution margin?

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A. $4.20
B. $0.45
C. $1.90

D. $2.10
Correct answer
D. $2.10

57 The company's contribution margin percentage is closest to:

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A. 40.0%

B. 50.0%
C. 60.0%
D. 10.7%
Correct answer
B. 50.0%

58. If the company increases its unit sales volume by 5% without increasing its fixed
expenses, then total net operating income should be closest to:
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A. $5,000
B. $123,100
C. $105,000
D. $102,500

Correct answer
B. $123,100

59 $1,000 unfavorable flexible-budget variance indicates that:

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A. the actual variable manufacturing overhead exceeded the flexible-budget amount by $1,000

B. the standard variable manufacturing overhead exceeded the flexible-budget amount by

$1,000
C. the flexible-budget amount exceeded actual variable manufacturing overhead by $1,000
D. the flexible-budget amount exceeded standard variable manufacturing overhead by $1,000

60. When machine-hours are used as a cost-allocation base, the item most likely to
contribute to an unfavorable variable overhead efficiency variance is:
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A. workers wastefully using variable overhead items

B. using more machine hours than budgeted

C. unused capacity
D. more units being produced than planned

61 A put option gives the seller

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A. the right to sell the underlying security
B. the obligation to sell the underlying security
C. the right to buy the underlying security

D. the obligation to buy the underlying security

Option 1
Correct answer
D. the obligation to buy the underlying security

62. Successful financial intermediaries have higher earnings on their investments

because they are better equipped than individuals to screen out good from bad risks,
thereby reducing losses due to
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A. Moral hazard.

B. Adverse selection.
C. Bad luck.
D. Financial panics
Correct answer
B. Adverse selection.

63. At expiration, the value of an option is:

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A. Zero.
B. Greater than the intrinsic value.

C. Equal to the intrinsic value.

D. Less than the intrinsic value.
Correct answer
C. Equal to the intrinsic value.

64 The term structure of interest rates is

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A. The relationship among interest rates of different bonds with the same maturity.

B. The structure of how interest rates move over time.

C. The relationship among the term to maturity of different bonds.
D. The relationship among interest rates on bonds with different maturities.
Correct answer
D. The relationship among interest rates on bonds with different maturities.

65. A set of complex and closely connected instructions, practices, agents and
claims related to the financial aspects of the economy is:
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A. Financial market

B. Financial institution
C. Financial system
D. Mutual fund company
Correct answer
C. Financial system

66. Liquidity preference is preference for holding financial wealth in the form of
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A. Short-term, highly liquid assets.

B. Long-term illiquid assets.
C. Long-term illiquid bond.

D. Stock
Correct answer
A. Short-term, highly liquid assets.

67. If an auditor wants to substantiate Note receivable balance, which of the

following will be appropriate test procedure?
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A. Applying analytical procedures to Notes receivables

B. Vouching of related documents
C. Confirmation of selected notes receivable balances
D. Perform cut-off test notes receivable balances

Correct answer
C. Confirmation of selected notes receivable balances

68. In attributes sampling, what effect does an increase in the acceptable risk of
assessing control risk too low have on sample size?
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A. Decrease.
B. Increase.
C. Indeterminate

D. No effect
Correct answer
B. Increase.

69. Which of the following is true about test of control

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A. Audit sampling cannot be used to test the operating effectiveness of all controls.
B. The results of tests of controls are most frequently presented in terms of the rate of deviation
from performance of the prescribed control
C. A deviation from performance of a control does not necessarily indicate a misstatement of
the financial statements
D. All of the above

70. Which of the following manipulations would understate receivables on the

financial statements?
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A. Understatement of cash sales.

B. Closing the sales journal prior to year-end.
C. Closing the cash receipts journal prior to year-end.
D. Underestimating the allowance for doubtful accounts.

Correct answer
B. Closing the sales journal prior to year-end.

71 Tracing recorded sales transactions to the bills of lading provides evidence about
the:
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A. Completeness of sales transactions.

B. Collectability of sales transactions.

C. Occurrence of sales transactions.
D. Billing of all sales transaction
Correct answer
C. Occurrence of sales transactions.
72. Which of the following audit procedures is best for identifying unrecorded trade
accounts payable?
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A. Examining unusual relationships between monthly accounts payable balances and recorded
cash payments.
B. Reconciling vendors’ statements to the file of receiving reports to identify items received just
prior to the balance sheet date.
C. Reviewing cash disbursements recorded subsequent to the balance sheet date to deter mine
whether the related payables apply to the prior period.

D. Investigating payables recorded just prior to and just subsequent to the balance sheet date to
determine whether they are supported by receiving reports.
Correct answer
B. Reconciling vendors’ statements to the file of receiving reports to identify items received just
prior to the balance sheet date.

73. An auditor traced a sample of purchase orders and the related receiving reports
to the acquisitions journal and cash disbursements journal. The purpose of this
substantive test of transactions most likely was to
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A. Identify unusually large purchases that should be investigated further.

B. Verify that cash disbursements were for goods actually received.
C. Determine that purchases were properly recorded.

D. Test whether payments were for goods actually ordered.

Correct answer
B. Verify that cash disbursements were for goods actually received.

74. In auditing accounts payable, an auditor’s procedures most likely will focus
primarily on management’s assertion of
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A. Existence

B. Completeness.
C. Realizable value
D. Valuation and allocation
Correct answer
B. Completeness.
75. The meaning of ‘public finance’ is perfectly clear, being money raised and spent
by the state: raised from taxes and spent on services in promoting the public interest,
particularly in terms of benefiting the poor.
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A. True
B. False

Option 1

76. ____________________ prepare the Federal Government fiscal budget, make

disbursements in accordance with the approved budget, and evaluate the utilization of
the budget.
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A. Ministry of Revenue
B. Ministry of Finance

C. The Attorney General

D. Accountable executive federal organs

77. Which of the following different?

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A. Employment income tax

B. Excise tax
C. Value added tax
D. Turnover tax

78. Category “A” taxpayers in Ethiopia_______________________ for business

income tax.
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A. Should file to the Tax Authority profit and loss statement (income statement) and Statement
of financial position at the end of the year.

B. Includes business which has an annual turnover of over Birr 500,000 but below Birr
1,000,000.
C. Neither balance sheet nor income statement is a requirement to this category.
D. Any other business having an annual turnover of less than Birr 500,000.

79. Which one of the following statement about fiscal policy is correct?
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A. Fiscal policy deals about the revenue and expenditure side of the government.

B. Fiscal policy is also called as budgetary policy

C. Coming to the expenditure side of the fiscal policy, we may note that conventionally a
distinction is made between developmental and non-developmental expenditure
D. All of the above
Correct answer
D. All of the above

80. The canon of___________________ is considered a very important guidance

rule when it comes to formulating the tax laws and procedures in a country?
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A. Certainty
B. Flexibility
C. Economy

D. Convenience
Correct answer
A. Certainty

81. Which of the following statements is False about the characteristics that
distinguish governmental and not for profit entities from for profit entities?
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A. Basis of Accounting
B. Governance
C. Double entry accounting system

D. Sources of financial reporting standards

E. Treatment of fixed assets and long term liability

82. Which of the following funds is likely to have the caption "long-term bonds
payable" in its fund balance sheet/statement of net position?
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A. Enterprise Fund
B. General Fund
C. Capital Projects Fund

D. Debt Service Fund

Option 1
Correct answer
A. Enterprise Fund

83. The IPSASs are designed to apply to public sector entities that meet all the
following criteria except:-
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A. Are responsible for delivery of services to benefit the public and/or to redistribute income and
Wealth
B. Mainly finance their activities, directly or indirectly, by means of taxes and/or transfer from
other level of government, social contributions, debt or fees
C. Do not have a primary objective to make profit
D. All of the above

E. None of the above

Correct answer
E. None of the above

84. Which of the following statements is False about the special revenue fund?
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A. SRF accounts for the proceeds from specific revenue sources other than expendable trusts
or major capital project
B. SRF is a fund established by a government to collect money that must be used for a specific
project
C. SRF is self-supporting fund that sells goods and services to the public for a fee
D. SRF is a fund that government entities use to record receipts of resources for certain
revenue sources whose use is restricted

E. All of the above

Correct answer
C. SRF is self-supporting fund that sells goods and services to the public for a fee

85. Which of the following statements is False about capital project fund?
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A. Capital project fund is used to account for financial resources intended for major capital
projects

B. A major source of funding for capital projects funds is tax

C. Capital projects funds exist only for the duration of the project for which they are created
D. Modified accrual basis of Accounting is applied in capital project fund
E. None of the above
Correct answer
B. A major source of funding for capital projects funds is tax
86. What is the role of debt service fund?
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A. DSF is used to account for the accumulation of resources for & the payment of general long
term debt principal & interest

B. DSF accounts for all of the general operating activities provided by a governmental unit
C. DSF is used to accounts for resources that are legally restricted, that only the earnings from
investing the money can be spent
D. DSF is a fund established by a government to collect money that must be used for a specific
project
E. DSF is used to account for financial resources intended for major capital projects
(Renovation), construction & Acquisition of capital asset
Option 1

87. One of the following funds is odd?

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A. Pension and other employee benefit trust fund

B. Investment trust fund

C. Private purpose trust
D. Internal service fund
E. Agency funds
Correct answer
D. Internal service fund

88. One of the following statements is false regarding fiduciary funds?

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A. Account for assets held by a government unit in a trustee or agency capacity for individuals,
private organizations, other governmental units, and/or other funds.
B. Fiduciary find is about acting as an agent or a trustee for property of another
person/organization.
C. Can be used to support government programs
D. The accounting equation for fiduciary fund is “Fund Assets=Fund Liabilities”

E. Modified accrual basis of Accounting is applied in fiduciary funds

Correct answer
C. Can be used to support government programs

89. Which one of the following is correct about Ratio Analysis?

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A. It helps to provide information derived from financial statements useful for making projections
and estimates for the future.

B. It helps to indicate the areas of the business which need more attention.
C. It describes the significant relationship which exists between various items of a balance sheet
and Income statement.
D. It is possible to assess the profitability, solvency, and efficiency of an enterprise through the
technique of ratio analysis.
E. All
Correct answer
E. All

90. Which one of the following is not correct about annuities?

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A. An annuity is an equal amount of Birr payment for a specified number of years.

B. The annuity payments can occur at either the beginning or the end of period.
C. Annuities are streams of equal payments at unequal time intervals.
D. All

E. None
Correct answer
C. Annuities are streams of equal payments at unequal time intervals.

91. If total liability is 20 % of the total asset, and assuming the total equity is 2,100
Birr, how much will be the Debt to Equity ratio?
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A. 0.33
B. 0.20

C. 0.25
D. 0.63
E. None
Correct answer
C. 0.25

92. If a person deposits Birr 110,000 in the bank today, what will the money be worth
in 4 years at 9 % interest compounded annually?
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A. 208,754
B. 155,274
C. 163,333
D. 110,000

93. Which one of the following refers to the portion of the variability in return which is
caused by factors affecting all the firms in the industry?
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A. Unsystematic Risk

B. Diversifiable Risk
C. Systematic Risk
D. Firm-specific Risk
E. None
Correct answer
C. Systematic Risk

94. Assume Blue Company issues a Birr 10,000, 13 percent, 5-year bond whose net
proceeds are Birr 10,000. How much will be the Before-tax cost of debt?
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A. 5.78 %
B. 15.86 %

C. 8.80 %
D. 13.00 %
E. None
Correct answer
D. 13.00 %

95. To carry on business, a certain minimum level of working capital is necessary on

a continuous and uninterrupted basis. This minimum level working capital is called:
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A. Permanent working capital

B. Temporary working capital

C. Gross working capital
D. Net working capital
E. None

96. Which one of the following can be considered as determinant of working capital
management?
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A. Nature of Business

B. Length of Operating Cycle

C. Seasonality of Operations
D. Market Conditions
E. All
Correct answer
E. All

97. The investment in current assets is less under_________

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A. Relaxed Policy
B. Restricted Policy
C. Flexible policy
D. Moderate Policy

E. None
Correct answer
B. Restricted Policy

98. Holding cash balance in reserve for random and unforeseen fluctuations in
cash flows and to meet unpredictable obligations is
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A. Transaction Motive
B. Precautionary Motive
C. Speculative Motive

D. All
E. None
Correct answer
B. Precautionary Motive

99. A strategy that finances all fixed assets and a portion of permanent assets from
long-term sources is _____________.
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A. Matching Policy

B. Conservative Policy
C. Aggressive Policy
D. All
E. None
Correct answer
C. Aggressive Policy

100.Which one of the following can be considered as Determinant of Dividend Policy?

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A. Age of Company

B. Business sector of the company

C. Stability of Earnings
D. Magnitude of Earnings
E. All
Correct answer
C. Stability of Earnings