BU127 Midterm Exam Questions and Answers Latest Update 2025-2026
How to calculate net income - Answers Revenue - expenses
Records inventory values at their current replacement value - Answers Neither periodic or
perpetual inventory systems
Is useful in identifying inventory shrinkage due to theft, waste or other causes. - Answers
Perpetual inventory system
Does not record changes in inventory at the time of each sale - Answers Periodic inventory
system
The inventory account is updated at the time of each sale - Answers Perceptual inventory
system
Inventory never needs to be counted - Answers Neither periodic or perpetual inventory systems
Calculates cost of sales only at the end of the accounting period after inventory has been
counted - Answers Periodic inventory system
Requires two entries at the time of sale - Answers Perceptual inventory system
Uses a purchases account - Answers Periodic inventory system
The common characteristic possessed by all assets is - Answers future economic benefit
Notes payable - Answers Statement of financial position
Accounts receivable - Answers Statement of financial position
Revenue - Answers Statement of income
Dividends declared - Answers Statement of Changes in equity
Intangibles - Answers Statement of financial position
Repayment of long term debt - Answers Statement of cash flows
The statement of financial position and statement of changes in equity are related because: -
Answers the ending amount on the statement of the changes in equity is reported on the
statement of financial position
Decrease in share capital - Answers debit
decrease in bank loan payable - Answers debit
decrease in equipment - Answers credit
, decrease in accounts receivable - Answers credit
increase in inventory - Answers debit
increase in accounts payable - Answers credit
increase in deferred revenue - Answers credit
increase in cash - Answers debit
Overstatement of ending inventory at December 31, 2020 - Answers Overstatement of reported
income/profit for the year ended December 31, 2020
Understatement of ending inventory by the same amount at January 1,2020 and December 31,
2020 - Answers No effect on reported income/profit for the year ended December 31, 2020
Overstatement of opening inventory at January 1, 2019 - Answers No effect on reported
income/profit for the year ended December 31, 2020
Overstatement of opening inventory at January 1, 2020 - Answers Understatement of reported
income/profit for the year ended December 31, 2020
Collection of a $1600 accounts receivable - Answers has no effect on total assets
Retained earnings at the end of the period is equal to - Answers Retained earnings at the
beginning of the period plus net earnings minus dividends
For wine dealer question: How much would be shown on the statement of financial position as
inventory at the end of the year - Answers use lower value and multiply by the number of units
for each, then add all three values together
Bank reconciliation cheque question: Calculate the amount of outstanding cheques at the end
of September 2020 - Answers Amount of outstanding cheques at the end of September 2020 =
Amount of outstanding cheques + written checks amount - cleared cheques
Bank reconciliation cheque question: What is the adjusted bank balance at the end of the month?
- Answers The ending balance is equal to the balance per bank - outstanding cheques +
outstanding deposits- bank error
Which financial statement would reveal whether the company relies more on debt or
shareholders equity to finance its assets? - Answers Statement of financial position
Shareholders equity can be described as claims of - Answers owners on total assets
How to calculate retained earnings at the end of the year? (can manipulate this equation if
needed) - Answers Ending retained earnings = Beginning retained earnings + net income -
Dividends
How to calculate net income - Answers Revenue - expenses
Records inventory values at their current replacement value - Answers Neither periodic or
perpetual inventory systems
Is useful in identifying inventory shrinkage due to theft, waste or other causes. - Answers
Perpetual inventory system
Does not record changes in inventory at the time of each sale - Answers Periodic inventory
system
The inventory account is updated at the time of each sale - Answers Perceptual inventory
system
Inventory never needs to be counted - Answers Neither periodic or perpetual inventory systems
Calculates cost of sales only at the end of the accounting period after inventory has been
counted - Answers Periodic inventory system
Requires two entries at the time of sale - Answers Perceptual inventory system
Uses a purchases account - Answers Periodic inventory system
The common characteristic possessed by all assets is - Answers future economic benefit
Notes payable - Answers Statement of financial position
Accounts receivable - Answers Statement of financial position
Revenue - Answers Statement of income
Dividends declared - Answers Statement of Changes in equity
Intangibles - Answers Statement of financial position
Repayment of long term debt - Answers Statement of cash flows
The statement of financial position and statement of changes in equity are related because: -
Answers the ending amount on the statement of the changes in equity is reported on the
statement of financial position
Decrease in share capital - Answers debit
decrease in bank loan payable - Answers debit
decrease in equipment - Answers credit
, decrease in accounts receivable - Answers credit
increase in inventory - Answers debit
increase in accounts payable - Answers credit
increase in deferred revenue - Answers credit
increase in cash - Answers debit
Overstatement of ending inventory at December 31, 2020 - Answers Overstatement of reported
income/profit for the year ended December 31, 2020
Understatement of ending inventory by the same amount at January 1,2020 and December 31,
2020 - Answers No effect on reported income/profit for the year ended December 31, 2020
Overstatement of opening inventory at January 1, 2019 - Answers No effect on reported
income/profit for the year ended December 31, 2020
Overstatement of opening inventory at January 1, 2020 - Answers Understatement of reported
income/profit for the year ended December 31, 2020
Collection of a $1600 accounts receivable - Answers has no effect on total assets
Retained earnings at the end of the period is equal to - Answers Retained earnings at the
beginning of the period plus net earnings minus dividends
For wine dealer question: How much would be shown on the statement of financial position as
inventory at the end of the year - Answers use lower value and multiply by the number of units
for each, then add all three values together
Bank reconciliation cheque question: Calculate the amount of outstanding cheques at the end
of September 2020 - Answers Amount of outstanding cheques at the end of September 2020 =
Amount of outstanding cheques + written checks amount - cleared cheques
Bank reconciliation cheque question: What is the adjusted bank balance at the end of the month?
- Answers The ending balance is equal to the balance per bank - outstanding cheques +
outstanding deposits- bank error
Which financial statement would reveal whether the company relies more on debt or
shareholders equity to finance its assets? - Answers Statement of financial position
Shareholders equity can be described as claims of - Answers owners on total assets
How to calculate retained earnings at the end of the year? (can manipulate this equation if
needed) - Answers Ending retained earnings = Beginning retained earnings + net income -
Dividends
