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IFA Exam Practice End Term 1
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UU Introduction to Finance and Accounting - Exam Practice - Questions End Term 1
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FINAL TEST FINANCIAL ACCOUNTING AND EXTERNAL ACCOUNTABILITYDate : Monday, 21th of January 2019
Time : 13.30 – 16.30 pm.
UTRECHT UNIVERSITY SCHOOL Venue : Beatrix Building, Floor 7.
OF ECONOMICS
Name :
Student number :
Major :
Preliminary instructions:
• This test of Introduction to Financial Accounting contains 20 pages and consists of 25 multiple choice
questions accounting for 50 marks and 4 open problems for 50 marks adding up to a total of 100 marks and.
• Give answers and all calculations to the open problems within the boundaries given underneath the problem.
• The chosen answers of the Multiple-Choice questions must be checked on the corresponding tick box on the
Multiple Choice form sheet. Check clearly the version number of your test and the other information,
especially your student ID, requested on the Multiple Choice form sheet!
• All questions are stated in English and you can answer the questions in any preferred order.
• One is allowed to leave the room from 14.00 pm on.
• The use of unannotated dictionaries - not containing personal notes or comments - is allowed.
• All numbers are displayed in the US-decimal system: (.) for decimals and (,) as thousand separator.
• The answers on all questions must be based on the assumption of Accrual Accounting, unless explicitly stated
otherwise! To answer a question use the names of the accounts which are given for each problem.
• Graphical or programmable calculators are strictly FORBIDDEN. Only plain calculators are allowed.
Having on your table during the exam a graphical or programmable calculator will be considered as a
fraudulent act and can lead to a declaration of nullification of the test result and being barred from the retake.
• Mobile telephones are also forbidden. They must be switched off and kept in your bag beyond physical reach.
• Disclosure date of the grade of this final test as well as the definitive grade for the entire course is on Monday,
4th of February 2019 from 9.30 on the Blackboard pages of this course.
• The mark of this test makes up 75% and the mark for the oral presentation 25% of the course grade.
• Communication about the course grade by telephone and by email is not possible.
• Review and inspection of this test is scheduled on Thursday, February 7 from 11.00 - 12.30 pm.
Venue and more information will be announced on BlackBoard.
• You can request a photocopy of your answers at the Student Desk up and until four weeks after publication of
the results. After the announcement of the exam results in OSIRIS you have four weeks within which to lodge
an appeal against your grade.
• On the last page you find a formula SHEET with some financial accounting formulas.
2019 Utrecht University School of Economics
All rights reserved. No part of this examination may be reproduced or transmitted in any form by any electronic or mechanical means (including photocopying, recording or
information storage and retrieval) without the prior written permission of the Utrecht University School of Economics.
Final test Financial Accounting and External Accountability 2019 Page 1 of 20
,Question 1 [2 ptn.]
What happens on the Balance Sheet when a company purchases a building for $ 95,000 financing it by
paying cash $25,000 and signing a note payable for $70,000?
a. Both total assets and total liabilities will decrease by $25,000
b. Total assets will increase by $25,000 and total liabilities will increase by $25,000
c. Both total assets and total liabilities will increase by $70,000
d. Both total assets and total liabilities will increase by $95,000
Correct alternative c.
Asset Building will go up with $95,000 and cash will go down with$25,000 Δ assets $70,000↑ and Liabilities (Note Payable)
$70,000↑
Question 2 [2 ptn.]
How is the journal entry to record the acquisition of land and a building financed with the issuance of
common stock (shares)?
a. The account Share Capital is debited and the account Land and Building is credited
b. The account Share Capital is credited and the account Land and Building is debited
c. The account Share Capital is credited and the account Land and Building is credited
d. The account Share Capital is debited and the account Land and Building is debited
Correct alternative b.
Account Land & Building is an asset and increases debited and Account Share capital is an Equity account and increases by
issuing shares credited
Question 3 [2 ptn.]
A business acquires a building for $108,000 and finances the acquisition with a $65,700 mortgage payable
and an issuance of $42,300 of ordinary shares. What is impact of this transaction on the Balance sheet?
a. Total assets will decrease by $65,700
b. Shareholders’ Equity will increase by $108,000
c. Assets will increase by $65,700
d. Shareholders’ Equity will increase by $42,300
Correct alternative d.
The acquisition of a building increases assets with $108,000, the issuance of shares increases Shareholders ‘Equity with $42,300
and the mortgage payable increase long term liabilities with $65,700.
Final test Financial Accounting and External Accountability 2019 Page 2 of 20
, Question 4 [2 ptn.]
Denise Kelly began a cleaning supplies business in January 20 20X8. Kelly prepares monthly financial
statements and uses the accrual basis of accounting.
The following transactions are Kelly Company's only activities during January through April:
Jan. 14 Bought cleaning supplies on account for $28, with payment to the supplier due in 90 days.
Feb. 3 Performed a job on account for Jodi Jetson for $35, collectible from Jetson in 30 days. Used up all
the cleaning supplies purchased on Jan. 14.
Mar. 16 Collected the $35 receivable from Jetson.
Apr. 22 Paid the $28 owed to the supplier from the January 14 transaction.
If Kelly Company uses the accrual basis of accounting, in what month will Kelly report Revenue and in which
month will she report Expense of the transactions listed above?
Revenue Expense
a. March February
b. February February
c. March April
d. February April
Correct alternative b.
Transaction January 14 increases account Supplies (asset) and the account Accounts Payable by $28,00
Transaction February 3 increases account Revenues (job performed) and Accounts Receivable by $35,00 and Supplies expense
(used) as Expense and decreases Supplies (inventory) by $28,00
Transaction March 16 increases account Cash and decreases Accounts Receivable by $35,00
Transaction April 22 decreases account Cash and Accounts Payable by $28,00
Question 5 [2 ptn.]
The manager of a supermarket sells bottles of orange juice for $2.20 per bottle and this selling price is
constant over the year. Every 3 months the manager orders new bottles of orange juice from the supplier.
This purchase price decreases every quarter of a year with $0.05 per bottle. After one year the manager
composes the Balance sheet and the Income Statement. He applies the FIFO-accounting system for the
inventory in the financial statements. After a year the supermarket has bottles of orange juice in ending
inventory.
Which of the following statements about the Gross Profit on the Income Statement and ending Inventory
on the Balance sheet is correct compared to the situation the purchase price would remain constant over
the 12 months?
a. The decreasing purchase price leads to a lower value of the ending inventory and a lower
Gross Profit.
b. The decreasing purchase price leads to a lower value of the ending inventory and a higher
Gross Profit.
c. The decreasing purchase price leads to a higher value of the ending inventory and a higher
Gross Profit.
d. The decreasing purchase price leads to a higher value of the ending inventory and a lower
Gross Profit.
e. The decreasing purchase price leads to the same value of the ending inventory, but a lower
Gross Profit.
Correct alternative is b.
Decreasing price under FIFO means that the ending inventory on the Balance Sheet is valued at the purchase price of the latest
orders with the lowest purchase price. The Cost of bottles sold are valued at higher purchase prices from the early purchases with
higher price and is as Gross Profit is higher..
Final test Financial Accounting and External Accountability 2019 Page 3 of 20
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