Sample- Final Exam_2013(1) - April 10th 2013 Commerce 353...

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April 10 th , 2013 Commerce 353 Practice Final Exam 150 minutes Question 1. Multiple Choice Questions (14 pts: 2 pts. each. 15 minutes) (1) Which statement is correct about financial instruments? a) A contract whose value changes according to an underlying market, requires little or no initial investment and is settled at a future date. b) A contract that gives the holder the residual interest in an entity after deducting all of its liabilities. c) Any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity. d) Any contract that entitles the holder to joint interest in an entity after deducting all of its liabilities. (2) If the gross margin percentage used in the gross margin method were overstated (for example, 28% instead of 25%), what would the effect be? a) Cost of goods sold would be overstated. b) Ending inventory would be understated. c) Ending inventory would be correctly stated, but beginning inventory would be incorrect. d) Ending inventory would be overstated. (3) Grey Company uses declining-balance amortization and Brown Company uses straight-line amortization. Both companies commenced operations on January 1, 2006 and acquired equipment on that date. If the 2 companies are identical in all respects except for the different amortization methods, which of the following statements is true? (4) Which is an exception to the rule: "test for impairment only if there are indicators for impairment"?
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(5) On December 29, 2007, Purple Limited received a $6,000 shipment of merchandise inventory. The merchandise was correctly included in the December 31, 2007 ending inventory, but was not recorded as a 2007 purchase. The invoice for the merchandise was received and processed on January 10, 2008, and the merchandise was incorrectly included in the 2008 purchases. Purple uses a periodic inventory system and has a December 31 year end. Which of the following statements about the errors is correct?
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