2010-paperI
Q.1. Select the best option/answer and fill in the appropriate box on the Answer Sheet. (20)
(i) Which of the following is an example of internal transaction?
(a) cash received from debtor (b) goods sold on credit (c) supplies consumed in the office
(d) salaries paid to employees (e) None of these
(ii) A Company’s reported opening balance of accumulated depreciation is Rs.150. The closing
balance of accumulated depreciation is Rs.125. The current year depreciation is Rs.175. The
depreciation on disposed assets is:
(a) Rs.150 (b) Rs.200 (c) Rs.250
(d) Rs.100 (e) None of these
(iii) Which of the following is an example of non-exchange transaction?
(a) goods lost by fire (b) electric charges paid (c) machinery purchased on credit
(d) carriage paid on furniture (e) None of these
(iv) A Company receives 40 % of monthly sales and 50% in the following month and rest is received
in third month. The sales for January are Rs. 20; February Rs. 30 and March Rs. 40. The
collection for March is:
(a) Rs.27 (b) Rs.30 (c) Rs.33
(d) Rs.36 (e) None of these
(v) The time limit for payment of dividend for a listed public limited company is:
(a) 30 days (b) 45 days (c) 60 days
(d) 90 days (e) None of these
(vi) The time limit for payment of dividend for an unlisted limited company is:
(a) 90 days (b) 60 days (c) 45 days
(d) 30 days (e) None of these
(vii) As per Companies Ordinance 1984 a listed public limited company is bound to prepare its
financial statements on:
(a) yearly basis (b) half-yearly basis (c) quarterly basis
(d) daily basis (e) None of these
(viii) As per Companies Ordinance 1984 loose tools are recorded under the head of:
(a) current assets (b) fixed assets (c) long-term investment
(d) long-term deposits (e) None of these
(ix) A Company reports stock velocity 30 days. Creditors’ velocity is 20 days. The debtors’ velocity is
15 days. The operating cycle of the company is:
(a) 25 days (b) 50 days (c) 45 days
(d) 65 days (e) None of these
(x) Left side of an account means the word debit is described as:
(a) noun (b) pronoun (c) verb
(d) adverb (e) None of these
(xi) A company reports stock velocity 30 days. The debtors’ velocity is 20 days. Creditors’ velocity is
25 days. The operating cash cycle of the company is:
(a) 75 days (b) 55 days (c) 50 days
(d) 25 days (e) None of these
(xii) In Pakistan a commercial bank can be formed and is registered under the:
(a) Companies Ordinance 1984 (b) Banking Companies Ordinance 1962
(c) State Bank of Pakistan Act 1956 (d) Modaraba Companies Ordinance 1980 (e) None of these
(xiii) In Pakistan a commercial bank prepares its annual accounts under the:
(a) Companies Ordinance 1984 (b) Banking Companies Ordinance 1962
(c) State Bank of Pakistan Act 1948 (d) Modaraba Companies Ordinance 1980 (e) None of these
(xiv) A Company pays income tax at the rate of 40%. The net income after tax is Rs. 24. The net
income before tax is:
(a) Rs.40 (b) Rs.80 (c) Rs.24
(d) Rs.16 (e) None of these
(xv) In Pakistn insurance company can be formed and is registered under the:
(a) Companies Ordinance 1984 (b) Banking Companies Ordinance 1962
(c) Insurance Ordinance 2000 (d) Modaraba Companies Ordinance 1980 (e) None of these
(xvi) The working of the insurance company is governed by the:
(a) Companies Ordinance 1984 (b) Banking Companies Ordinance 1962
(c) Insurance Ordinance 2000 (d) Modaraba Companies Ordinance 1980 (e) None of these
(xvii) Which of the following transactions would result in an increase in the current ratio?
(a) paid cash for a one-year insurance policy
(b) collected an account receivable
(c) used the allowance method to write-off an uncollectible account
(d) borrowed money by issuing a long-term note
(e) None of these
(xviii) A and B are partners with capital of Rs. 8000 and Rs. 6000 respectively. They admit C as partner
with 1/4 share in the profits of the firm. C brings Rs. 10000 as his share of capital. The share of
A’s goodwill is:
(a) 16000 (b) 8000 (c) 4000
(d) 2000 (e) None of these
(xix) A, B and C are partners in a partnership firm. The profit sharing ratio was 3:2:1. The goodwill of
the firm was valued at Rs.12000. They change their profit sharing ratio as 4:4:2. The value of gain
or loss of goodwill to A is:
(a) Gain Rs. 1200 (b) Loss Rs.1200 (c) Gain Rs.800
(d) Loss Rs.800 (e) None of these
(xx) A and B are the partners in a firm. They admit C into the firm. The new ratio is agreed to be 5:3:4.
A and B made equal sacrifice to accommodate C. The old ratio of B is:
(a) 14/24 (b) 15/24 (c) 9/24
(d) 10/24 (e) None of these
2010-paper II
Q.1. Select the best option/answer and fill in the appropriate box on the Answer Sheet. (20)
(i) Which of the following is a clearing account?
(a) manufacturing summary (b) manufacturing overhead (c) accumulated depreciation
(d) accounts payable (e) None of these
(ii) Which one is not a feature of process costing?
(a) classification of costs into fixed and variable (b) emergence of more than one product
(c) equivalent production (d) duration of work is long
(e) None of these
(iii) The process loss not allowed to affect the cost of goods units is:
(a) normal loss (b) standard loss (c) abnormal loss (d) material loss (e) None of these
(iv) Which stock control method concentrates efforts on selected items of inventory?
(a) Periodic inventory system (b) perpetual inventory system (c) inventory turnover ratio
(d) ABC analysis (e) None of these
(v) Continuous stock taking is a part of:
(a) Periodic inventory (b) annual stock taking (c) perpetual inventory
(d) ABC analysis (e) None of these
(vi) Agriculture, forestry, hunting and fishing is included in:
(a) Genetic industry (b) Extractive industry (c) Manufacturing industry
(d) Construction industry (e) None of these
(vii) The minimum number of directors in unlisted public limited company is:
(a) 5 (b) 10 (c) 3 (d) 7 (e) None of these
(viii) In Pakistan chamber of commerce and industry is registered with:
(a) Registrar of firms’ (b) registrar of companies’ (c) registrar of societies
(d) registrar of clubs (e) None of these
(ix) A co-operative society can be formed in Pakistan under Co-operative Societies Act:
(a) 1904 (b) 1912 (c) 1925 (d) 1942 (e) None of these
(x) Which of the following partnership can be formed for indefinite period?
(a) limited partnership (b) joint venture (c) partnership at will
(d) particular partnership (e) None of these
(xi) Repetition of client clerical routines such as footing and posting is called:
(a) vouching (b) reperformance (c) scanning (d) tracing (e) None of these
(xii) The direction of testing from the source document to the accounting record is called:
(a) vouching (b) sampling (c) tracing (d) verification (e) None of these
(xiii) Which of the following internal controls is usually studied and evaluated in detail?
(a) control over salesmen performance (b) control over machine idle time
(c) quality control over production (d) control over stores and pricing (e) None of these
(xiv) Which of the following liability of an auditor has occurred when auditor failed to study articles of
association and the directors paid dividend out of capital?
(a) negligence (b) misfeasance (c) libel (d) breach of contract (e) None of these
(xv) Visual examination of accounting record and schedules to identify unusual items or inconsistencies is
called:
(a) observation (b) scanning (c) inquiry (d) inspection (e) None of these
(xvi) Which of the following is revenue expenditure?
(a) cost of feasibility report (b) legal expenses of income tax appeal
(c) cost of issuance of additional capital (d) cost of preparation of partnership deed
(e) None of these
(xvii) Which of the following is not capital asset?
(a) shares of a company (b) jewellery (c) coin (d) copy rights (e) None of these
(xviii) Ground rent is an income from:
(a) agriculture (b) salary (c) business (d) other sources (e) None of these
(xix) Which of the following is admissible expenditure in respect of income from business?
(a) fines and penalties (b) income tax (c) excise duty
(d) cost of permanent sign-board (e) None of these
(xx) Which one of the following is an agricultural income?
(a) income from poultry farm (b) income from cultivation of rice
(c) income from sale of water for irrigation (d) royalty income from mines (e) None of these
PaperI-2011
Q.1. Select the best option/answer and fill in the appropriate box on the Answer Sheet. (1 x 20=20)
(i) According to the rules of debit and credit for balance sheet accounts:
(a) Increases in asset, liability, and owner’s equity accounts are recorded by debits.
(b) Decreases in asset and liability accounts are recorded by credits.
(c) Increases in asset and owner’s equity accounts are recorded by debits.
(d) Decreases in liability and owner’s equity accounts are recorded by debits.
(e) None of these
(ii) On March 31, the ledger for Majid House Cleaning consists of the following:
Cleaning equipment ………. Rs.27,800 Accounts receivable …………. Rs.21,000
Accounts Payable ……………. 15,700 Cash …………………………………. 6,900
M. Poppins, capital …………… 20,000 Salaries payable ………………….. 9,600
Office Equipment ……………. 2,000 Cleaning supplies ………………… 2,600
Automobile ……………………… 7,500 Notes Payable …………………….. 22,500
(a) Rs. 67,800
(b) Rs. 93,100
(c) Rs. 25,300
(d) Rs. 65,300
(e) None of these
(iii) The balance in the owner’s capital account of ABC Company at the beginning of the year was Rs.65,000. During
the year, the company earned revenue at Rs.430,000 and incurred expenses of Rs.360,000; the owner withdrew
Rs. 50,000 in assets, and the balance of Cash account increased by Rs.10,000. At year-end, the company’s net
income and the year-end balance in the owner’s capital account were, respectively:
(a) Rs.20,000 and Rs.95,000
(b) Rs.70,000 and Rs.95,000
(c) Rs.60,000 and Rs.75,000
(d) Rs.70,000 and Rs.85,000
(e) None of these
Q) Use the following information in questions (iv) and (v).
Accounts appearing in the trial balance of Eastside Plumbing at May 31 are listed below in alphabetical order:
Accounts payable ……………….
Accounts receivable ………….…
Accumulated Depreciation:
Equipment………… ……………
Advertising expense ………….…
Cash …………………………..…
Rs.2,450
3,100
8,100
150
2,900
Equipment …………………
J.T. Golden, capital …….…
J.T. Golden, drawing …..…
Other expenses ……………
Service revenue…………...
Supplies expense …………
Rs.16,200
11,000
2,100
900
4,800
1,000
No adjusting entry has yet been made to record depreciation expense of Rs. 270 for the month of May.
(iv) The balance of XYZ Company capital account appearing in the May 31 balance sheet should be:
(a) Rs. 11,650
(b) Rs. 8,630
(c) Rs. 11,380
(d)None of these
(v) In an after-closing trial balance prepared at May 31, the total of credit column will be:
(a) Rs. 26,620
(b) Rs. 22,200
(c) Rs. 13,830
(d)None of these
(vi) Before month-end adjustments are made, the January 31 trial balance of Hanan Excursions contains revenue of
Rs. 9,300 and expenses of Rs. 5,780. Adjustments are necessary for following items:
 Portion of prepaid rent applicable to January, Rs. 900
 Depreciation for January, Rs. 480
 Portion of fees collected in advance earned in January, Rs. 1,100
 Fees earned in January not yet billed to customers, Rs. 650
Net Income for Hanan Excursions’ January income statement is:
(a) Rs. 3,520
(b) Rs. 5,690
(c) Rs. 2,590
(d)None of these
(vii) On December 31, Elite Property Management made an adjustment entry to record Rs. 300 management fees
earned but not yet billed to Hayat’s, a client. This entry was reversed on January 1. On January 15, Hayat’s paid
Elite Rs. 1,200, of which Rs. 900 was applicable to the period January 1 through January 15. The Journal Entry
made by Elite to record receipt of the Rs. 1,200 on January 15 includes:
(a) A credit to Management Fees Earned of Rs. 1,200
(b)A credit to Accounts Receivable of Rs. 300
(c) A debit to Management Fees Earned of Rs. 300
(d)A credit to Management Fees Earned of Rs. 900.
(e) None of these
(viii) Pisces Market presently has current assets totaling Rs. 300,000 and a current ratio of 2.5 to 1. Compute the
current ratio immediately after Pisces pays Rs. 30,000 of its accounts payable
(a) 3 to 1
(b) 3.33 to 1
(c) 2.2 to 1
(d) 2.25 to 1
(e) None of these
(ix) Ahsan Brothers, a retail store, purchased 100 television sets from Lucky Electronics on account at a cost of Rs.
200 each. Lucky offers credit terms of 2/10, n/30. Ahsan Brothers determines that 10 of these television sets are
defective and returns them to Lucky for full credit. In recording this return, Ahsan Brother will:
(a) Debit Sales Returns and Allowances
(b)Debit Accounts Payable, Rs. 1,960
(c) Debit Cost of Goods Sold, Rs. 1,960
(d) Credit Inventory, Rs. 2000
(e) None of these
(x) Which of the following is NOT an accurate statement?
(a) Expressing the various items in the income statement as a percentage of net sales illustrates the use of
component percentages.
(b) An increase in the market price of bonds causes the yield rate to decline.
(c) A high debt ratio is viewed favorably by long-term creditors as long as the number times interest earned is at
least 1.
(d) In measuring the Rupee or percentage change in quarterly sales or earnings, it is appropriate to compare the
results of the current quarter with those of the same quarter in the preceding year.
(e) None of these
(xi) Which of the following actions will improve the “quality” of earnings, even though the total amount of earnings
may not increase?
(a) Increasing the uncollectable accounts expense from 1% to 2% of net credit sales to reflect current conditions
(b) Switching from an accelerated method to the straight-line method for depreciating assets
(c) Changing from LIFO to the FIFO method of inventory valuation during a period of rising prices
(d) Lengthening the estimated useful lives of depreciable assets
(e) None of these
(xii) Ahmad Corporation’s net income was Rs. 400,000 in 1993 and Rs.160,000 in 1994. What percentage increase in
net income must Ahmad achieve in 1995 to offset the decline in profits in 1994?
(a) 60%
(b) 150%
(c) 600%
(d) 67%
(e) None of these
(xiii) Of the following situations, which would be considered the most favorable for the common stockholders?
(a) The company stops paying dividends on its cumulative preferred stock, the price-earnings ratio of common stock
is low
(b) Equity ratio is high; return on assets exceeds the cost of borrowing
(c) Book value per share of common stock is substantially higher than market value per share; return on common
stockholder’s equity is less than the rate of interest paid to creditors
(d) Equity ratio is low; return on assets exceeds the cost of borrowing
(e) None of these
(xiv) During 1994, Bilal Corporation had sales of Rs. 4,000,000, all on credit. Accounts receivable averaged Rs. 400,000
and inventory levels averaged Rs. 250,000 throughout the year. If Bilal’s gross profit rate during 1994 was 25% of
net sales, which of the following statements are correct? (Assume 360 days in a year.)
(a) Bilal “turns over” its accounts receivable more times per year than it turns over its average inventory.
(b) Bilal collects the amount of its average accounts receivable in about 36 to 37 days.
(c) Bilal’s operating cycle is 66 days
(d) The quality of Bilal’s working capital would improve if the company could reduce its inventory and receivables
turnover rates
(e) All of these
(xv) On April 1, 1993, XYZ Construction paid Rs. 10,000 for equipment with an estimated useful life of 10 years and a
residual value of Rs. 2000. The company uses the double-declining balance method of depreciation and applies
the half-year convention to fractional periods. In 1994, the amount of depreciation expense to be recognized on
this equipment is:
(a) Rs. 1,600
(b) Rs. 1,440
(c) Rs. 1,280
(d)None of these
(xvi) Delta Company sold a plant asset that originally had cost Rs. 50,000 for Rs. 22,000 cash. If Delta correctly reports
a Rs. 5000 gain on this sale, the accumulated depreciation on the asset at the date of sale must have been:
(a) Rs. 33,000
(b) Rs. 28,000
(c) Rs. 23,000
(d)None of these
(xvii) In which of the following situations would Aashi Industries include goodwill in its balance sheet?
(a) The fair market value of Aashi’s net identifiable assets amounts to Rs. 2,000,000. Normal earnings for this
industry are 15% of net identifiable assets. Aashi’s net income for the past five years has averaged Rs. 390,000.
(b) Aashi spent Rs. 800,000 during the current year for research and development for a new product which
promises to generate substantial revenue for at least 10 years.
(c) Aashi acquired Star Electronics at a price in excess of the fair market value of Star’s net identifiable assets.
(d) A buyer wishing to purchase Aashi’s entire operation has offered a price in excess of the fair market value of
Aashi’s net identifiable assets.
(e) None of these
(xviii) When a partnership is formed,
(a) A written partnership agreement, signed by all partners, must be filed in the state in which the partnership is
formed.
(b) Each partner may bind the business to contracts and may withdraw an unlimited amount of assets from the
partnership, unless these rights are limited in the partnership contract.
(c) Each members of the partnership is entitled to participate equally in the earnings of and management of the
partnership, unless the partnership is a limited partnership.
(d) The partnership must file an income tax return and pay income taxes on its net income.
(e) None of these
(xix) Omar and Rizwan have capital account balances of Rs. 80,000 and Rs. 100,000, respectively, at the beginning of
1994. Their partnership agreement provides for interest on beginning capital account balances, 10%; salaries to
Omar, Rs. 30,000, and to Rizwan, Rs. 24,000; residual profit or loss dividend 60% to Omar and 40% to Rizwan.
Partnership net income for 1994 is Rs. 62,000. Neither partner made any additional investment in the
partnership during 1992, but Omar withdrew Rs. 1,500 monthly and Rizwan withdrew Rs. 1,000 monthly
throughout 1994. The partnership balance sheet at December 31, 1994, should include:
(a) Capital, Omar, Rs. 94,000
(b) Capital, Omar, Rs. 112,000
(c) Capital, Rizwan, Rs. 30,000
(d) Total partner’s equity, Rs. 242,000
(e) None of these
(xx) When a partnership is liquidated:
(a) Any cash distribution to partners is allocated according to the profit and loss sharing ratios
(b) Cash distributed to each partner in an amount equal to his or her capital account balance prior to the sale of
partnership assets.
(c) Any gain or loss on disposal of partnership assets is divided among the partners according to their relative
capital account balances.
(d) A partner who maintained a credit balance in his or her capital account prior to liquidation may end up owing
cash to the partnership if partnership assets are sold at a loss.
(e) None of these.
2011 paperII
Q.1. Select the best option/answer and fill in the appropriate box on the Answer Sheet. (1 x 20=20)
(i) In a manufacturing company, the costs debited to the Work in Process Inventory account represent:
a. Direct materials used, direct labour, and manufacturing overhead.
b. Cost of finished goods manufactured.
c. Period costs and product costs.
d. None of these.
(ii) The Work in Process Inventory account had a beginning account had a beginning balance of Rs. 4,200 on
February 1. During February, the cost of direct materials used was Rs. 29,000 and direct labour cost applied to
production was Rs. 3000. Overhead is applied at the rate of Rs. 20 per direct labour hour. During February, 180
direct labour hours were used in the production process. If the cost finished goods manufactured was Rs.
34,100, compute the balance in the Work in Process Inventory account at the end of February.
a. Rs. 9,900
b. Rs. 1,500
c. Rs. 2,100
d. Rs. 5,700
e. None of these
(iii) The purpose of an overhead application is to:
a. Assign an appropriate portion of indirect manufacturing costs to each product manufactured.
b. Determine the type and amount of costs to be debited to the Manufacturing Overhead account.
c. Charge the Work in Process Inventory account with the appropriate amount of direct manufacturing costs.
d. Allocate manufacturing overhead to expense in production to the number of units manufactured during the
period.
e. None of these
(iv) If Gurgson, Inc uses a job order cost system, each of the following is true, EXCEPT:
a. Individual job cost sheets accumulate all manufacturing costs applicable to each job, and together constitute a
subsidiary ledger for the Work in Process Inventory account.
b. Direct labour cost applicable to individual jobs is recorded when paid by a debit to Work in Process Inventory
and a credit to Cash, as well as by entering the amount on the job cost sheets.
c. The amount of direct materials used in individual jobs is recorded by debiting the Work in Process Inventory
account and crediting the Materials Inventory account, as well as by entering the amount used on job cost
sheets.
d. The manufacturing overhead applied to each job is transferred from the Manufacturing Overhead account to
the Work in Process Inventory account, as well as entered on the individual job cost sheets.
e. None of these
(v) When a job cost system is in use, underapplied overhead:
a. Represents the cost of manufacturing overhead that relates to unfinished jobs.
b. Is indicated by a credit balance remaining at year-end in the Manufacturing Overhead account.
c. Is closed out at year-end into the Cost of Goods Sold account if the amount is not material.
d. Results when actual overhead costs incurred during a year are less than the amounts applied to individual jobs.
e. None of these.
(vi) Shabbir Manufacturing has operations that involve three processing departments: Assembly, Painting, and
Packaging. Debits to the Work in Process Inventory: Painting Department account could involve a credit to any
of the following, EXCEPT:
a. Work in Process Inventory: Packaging Department
b. Direct Labour
c. Manufacturing Overhead
d. Work in Process Inventory: Assembly Department
e. None of these
(vii) When actual overhead costs incurred are charged to processing departments each month:
a. The cost of infrequent items, such as a major plant refurbishing, is spread uniformly over all units produced
throughout the year
b. Under or overapplied overhead may occur, but it is treated in the same as when an overhead application rate is
used.
c. It is no longer necessary to compute the equivalent final units of production for individual departments.
d. The monthly per-unit cost of producing a product will vary from fluctuations in the level of production when a
significant portion of overhead cost is fixed.
e. None of these.
(viii) When a business is organized as corporation:
a. Stockholders are liable for the debts of the business only in proportion to their percentage ownership of capital
stock.
b. Stockholders do not have to pay personal income taxes on dividends received, because the corporation is
subject to income taxes on its earnings.
c. Fluctuations in the market value of outstanding shares of capital stock do not affect the amount of stockholders’
equity shown in the balance sheet.
d. Each stockholder has the right to bind the corporation to contracts and to make other managerial decisions.
e. None of these.
(ix) Which of the following is NOT a characteristic of common stock of a large, publicly owned corporation?
a. The shares may be transferred from one investor to another without disrupting the continuity of business
operations.
b. Voting rights in the election of the board of directors
c. A cumulative right to receive dividends
d. After issuance, the market value of the stock is unrelated to its par value.
e. None of these.
(x) Tri-State Electric is a profitable utility company that has increased its dividend to common stockholders every
year for 62 consecutive years. Which of the following is least likely to affect the market place of the company’s
preferred stock?
a. The company’s earnings are expected to increase significantly over the next several years.
b. An increase in long-term interest rates
c. The annual dividend paid to preferred shareholders
d. Whether or not the preferred stock carries a conversion privilege.
e. None of these
(xi) The primary purpose of showing special types of events separately in the income statement is to:
a. Increase earnings per share.
b. Assist users of the income statement in evaluating the profitability of normal, ongoing operations.
c. Minimize the income taxes paid on the results of ongoing operations

d. Prevent unusual losses from recurring
e. None of these
(xii) Which of the following situations would NOT be presented in a separate section of the current year’s income
statement of Zeeshan Corporation? During the current year:
a. Zeeshan’s Peshawar headquarters are destroyed by a flood.
b. Zeeshan sells its entire juvenile furniture operations and concentrates upon its remaining children’s clothing
segment.
c. Zeeshan changes from the straight-line method of depreciation to the double declining balance method
d. Zeeshan’s accountant discovers that the entire price paid several years ago to purchase company offices in
Islamabad had been charged to Land account; consequently, no depreciation has ever been taken on these
buildings.
e. None of these
(xiii) When a corporation has outstanding both common and preferred stock:
a. Primary and fully diluted earnings per share and reported only if the preferred stock is cumulative
b. Earnings per share are reported for each type of stock outstanding.
c. Earnings per share may be computed without regard to the amount of dividends declared on common stock
d. Earnings per share may be computed without regard to the amount of the annual preferred dividends.
e. None of these
(xiv) The statement of retained earnings:
a. Need to be prepared if a separate statement of stockholder’s equity accompanies the financial statements.
b. Indicates the amount of cash available for the payment of dividends
c. Includes prior period adjustments and cash dividends, but not stock dividends.
d. Shows revenues, expenses and dividends for the accounting period.
e. None of these
(xv) On December 10, 2008, Star Corporation reacquired 2,000 of its own Rs 5 par stock at a price of Rs 60 per share.
In 2009, 500 of the treasury shares are reissued at a price of Rs. 70 per share. Which of the following statements
is correct?
a. The treasury stock purchased is recorded at cost and is shown in Star’s December 31, 2008, balance sheet as an
asset.
b. The two treasury stock transactions result in an overall reduction in Star’s stockholder’s equity of Rs. 85,000
c. Star recognizes a gain of Rs. 10 per share on the reissuance of the 500 treasury shares in 2009.
d. Star’s stockholder’s equity was increased by Rs. 110,000 when the treasury stock was acquired.
e. None of these
(xvi) J.Q. Corporation was organized with authorization to issue 100,000 shares of Re. 1 par value common stock.
Forty thousand shares were issued to Hassan Mir, the company’s founder, at a price of Rs. 5 per share. No other
shares have yet been issued.
a. J.Q. owns 40% of the stockholder’s equity of the corporation.
b. The corporation should recognize a Rs. 160,000 gain on the issuance of the shares.
c. If the balance sheet includes retained earnings of Rs. 50,000, total paid-in capital amounts to Rs. 250,000
d. In the balance sheet, the Additional Paid-in Capital account will have a Rs. 160,000 balance, regardless of the
profits earned or losses incurred since the corporation was organized.
e. None of these
(xvii) Which ratio best measures a company’s success in earning net income for its owners?
a. Profit Margin
b. Return on common stockholders’ equity
c. Price earnings ratio
d. Dividend yield
e. None of these
(xviii) Which of the following is true for an installment note requiring a series of equal total cash payments?
a. Payments consist of increasing interest and decreasing principal
b. Payments consist of changing amounts of principal but constant interest
c. Payments consist of decreasing interest and increasing principal
d. None of these
(xix) How does a stock dividend impact assets and retained earnings?
a. Stock dividends does not transfer assets to stockholders
b. Stock dividend requires an amount of contributed capital to be transferred to retained earning account
c. Stock dividend does transfer assets to stockholders
d. None of these
(xx) Which of the following is least useful as a basis for comparison when analyzing ratios?
a. Company results from a different economic setting
b. Standards from past experience
c. Rule of Thumb Standards
d. Industry Wages
e. None of these