Solution to Sample midterm 2011

Solution to Sample midterm 2011 - Commerce 353 Intermediate...

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Commerce 353 Intermediate Financial Accounting I 2011 – Term 2 Professor Jenny Zhang Sample Midterm Exam _____________________________________________________________________________ _ Time: 80 minutes (7:00pm – 8:20pm) Maximum Marks: 60 *** Please answer all questions in the space provided. *** This is a closed book exam - only pens/pencils and calculators are permitted. A dictionary is permissible with prior approval of the instructor. For essay questions, clear and logical point form is acceptable. _____________________________________________________________________________ _ ††† Please Think before you write! ††† _____________________________________________________________________________ _ Question # Max Marks Obtained 1 10 2 10 3 10 4 10 5 10 6 10 Total 60 A
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Section: 201 202 203 (circle) Student ID#: _____________ Name: ________________ Question 1: Multiple choice (2 marks each; 10 marks total; suggested time – 10 minutes) Select the letter of the best answer and write your answers in the boxes at the bottom of the page. 1. Useful financial statements have several qualitative characteristics. Which of the following lists best identifies these characteristics? a) Relevance, understandability, and comparability. b) Faithful representation, neutrality, and accrual basis. c) Completeness, reliability, and financial capital maintenance. d) Understandability, reliability, and historical cost. 2. Which of the following statements is a fundamental result of adverse selection? a) Firms will not release information unless the benefits of disclosure exceed a cost threshold. b) It is more costly for a low-type firm to signal than for a high-type firm. c) Failure to disclose information required by GAAP leads to lawsuits, higher cost of capital, and loss of manager reputation. d) If investors know the firm has the information but the firm does not disclose it, they will fear the worst. 3. Which of the following statements most correctly reflects the concept of moral hazard in companies? a) Moral hazard reflects the fact that the owner of a firm and its manager possess different information about the cash flow potential of the firm. b)
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This note was uploaded on 02/21/2011 for the course COMM 353 taught by Professor Jennyzhang during the Winter '10 term at UBC.

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Solution to Sample midterm 2011 - Commerce 353 Intermediate...

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