ACO01 Mock Exam 2015 1

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ACO01 – FINANCIAL ACCOUNTING
MOCK EXAM
Time: 90 minutes

PART 1. MULTIPLE CHOICE QUESTIONS (40 points)

This is a multiple choice part containing 20 questions. Each question is followed by THREE suggested answers – only one of which is correct. You will score 2 points for each correct answer. You will not lose any mark for wrong answers. You may attempt as many questions as you wish.

1. Which of the following items would most likely be classified as an operating activity?
A. Issuance of debt.
B. Acquisition of a competitor.
C. Sale of automobiles by an automobile dealer.

2. A company sells big screen televisions for $3,000 each. Each television has a two-year warranty that covers the replacement of defective parts. It is estimated that
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B. The ending book value of an asset will be the same regardless of which depreciation method is used.
C. Both the straight-line and declining balance method use depreciable cost in the calculation of annual depreciation expense.

14. Which of the following statements are not correct regarding bonds sold at a discount?
A. The carrying amount gets larger each year.
B. At maturity, the face value and carrying value will be equal.
C. The balance of Bonds Payable account will get larger each year.

15. Which of the following is true with regard to a 2-for-1 stock split of 100,000 shares of $14 par value common stock outstanding?
A. New par value is $7, total contributed capital increases, total retained earnings decreases, and total stockholders' equity decreases.
B. New par value is $7, total contributed capital does not change, total retained earnings do not change, and total stockholders' equity does not change.
C. New par value is $7, total contributed capital increases, total retained earnings decreases, and total stockholders' equity does not change.

16. Which of the following statements is correct?
A. Treasury stock receives cash dividends
B. Treasury stock must be sold for more than its cost
C. The purchase of treasury stock decreases total stockholders' equity

17. A bond traded at 971⁄2 means that
A. The bond trades at $975 per $1,000 bond.
B. The market rate of interest is below the contract rate of interest for the bond.
C. The bonds can

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