Ⅰ. Identify true (T) or false (F) statements (12X1′=12′)
1. An income statement is a summary of the revenues and expenses of a business as of a specific date.
2. Accounting is thought to be the “language of business”because business information is communicated to stakeholders.
3. If a building is appraised for $90,000, offered for sale at $95,000, and the buyer pays $85,000 cash for it, the buyer would record the building at $90,000.
4. Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount, and have maturities of one year.
5. For good internal control over cash, all payments should be made from the petty cash, except for very large payments.
6. The aging method of determining bad debts expense is based on the knowledge that the longer a receivable is past due, the lower the likelihood of collection.
7. Land improvements are generally charged to the Land account.
8. Recording depreciation each period is an application of the matching principle.
9. The cost of an inventory item includes its invoice cost minus any discount, and plus any added or incidental costs necessary to put it in a place and condition for sale.
10. A consignor who has goods out on consignment with an agent should include the goods in ending inventory even
though they are not in the possession of the consignor.
11. Whether purchase costs are rising or falling, FIFO always will yield the highest gross profit and net income.
12. If the perpetual inventory system is used and a physical count disclosed a shortage, the cost of merchandise sold
should be debited and the merchandise inventory account credited.
Ⅱ. Insert “+” for increase and “-”for decrease in the appropriate columns below, based on double-entry bookkeeping rules (6X2′=12′)
Ⅲ. Translate the accounting terms from English to Chinese (No. 1-6) and from Chinese to English (No. 7-10) (10X2′=20′)
1. General journal
2. Accounting elements
3. Closing entries
4. CICPA
5. Net realizable value
6. Accrual-basis accounting
7. 非流动负债8. 历史成本9. 分类账10. 经营周期
Ⅳ. Short answer questions (3X6′=18′)
1. What is accounting?
2. What is depreciation of plant assets? What is the basic purpose of depreciation?
3. Identify the tools of financial statement analysis.
Ⅴ. Problem Solving (38′)
1. Analyze the effects of business transactions on the Accounting Equation. (2X5′=10′)
Transaction (1): paid a $6,500 premium on July 1 for one year’s insurance in advance.
Transaction (2): bought office equipment from Brown Company on account $2,800.
2. Prepare journal entries for the two transactions in No. 1 above-mentioned. (2X5′=10′)
3. Samuel Co. Ltd issued a $15,000, 6%, 9-month note payable. How much is the interest payment at maturity?
(Calculating process is required) (6′)
4. Assume the financial position data of Sue Company consist of the following items: (2X6′=12′)
Sue Company
Balance Sheet (Partial)
January 31, 2011
Required: Calculate its current ratio and acid-test ratio. Calculating steps are needed.