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Unformatted text preview: EFA1D08 ©CGA-Canada, 2008 Page 1 of 10 CGA-CANADA FINANCIAL ACCOUNTING FUNDAMENTALS [FA1] EXAMINATION December 2008 Marks Time: 3 Hours Note: Narratives for journal entries are not required. 18 Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 1 1 / 2 marks each a. What does the income statement report? 1) The financial position of a business at a point in time 2) The changes in a business’s owners’ equity over a period of time 3) The revenues earned less the expenses incurred by a business over a period of time 4) The sources and uses of a business’s cash over a period of time b. Smithers Ltd. purchased land for $200,000 cash and recorded the land on its balance sheet at $200,000. Two months later, Smithers was offered $250,000 for the land but did not sell it. However, Smithers did increase the valuation of the land on its balance sheet to $250,000. Which generally accepted accounting principle has been violated in this situation? 1) Monetary unit principle 2) Going-concern principle 3) Cost principle 4) Business entity principle c. What is a key disadvantage of the sole proprietorship form of business organization? 1) Unlimited life 2) Unlimited liability of the owner 3) Limited liability of shareholders 4) Separate legal entity d. What type of account is prepaid insurance? 1) Asset 2) Liability 3) Revenue 4) Expense Continued... EFA1D08 ©CGA-Canada, 2008 Page 2 of 10 e. What is the balance in the following unearned rent revenue account? Unearned Rent Revenue Debit Credit 1,000 1,000 12,000 1,000 1) $ 9,000 debit 2) $ 9,000 credit 3) $14,000 credit 4) $15,000 credit f. A bookkeeper forgot to post an entry to record $14,000 of consulting services performed on account. What is the effect of this error on the trial balance and on the relevant account balances? 1) The debit side of the trial balance would be $14,000 higher than the credit side of the trial balance, accounts receivable would be understated by $14,000, and consulting services revenue would be understated by $14,000. 2) The credit side of the trial balance would be $14,000 higher than the debit side of the trial balance, accounts receivable would be understated by $14,000, and consulting services revenue would be understated by $14,000. 3) The debit side of the trial balance would be equal to the credit side of the trial balance, accounts receivable would be overstated by $14,000, and consulting services revenue would be overstated by $14,000....
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This note was uploaded on 06/10/2011 for the course ACCT 1204 taught by Professor Chang during the Spring '11 term at Nanjing University.
- Spring '11
- Financial Accounting