BU127 MIDTERM EXAM QUESTIONS
AND CORRECT ANSWERS. VERIFIED
2025/2026.
How to calculate net income - ANS Revenue - expenses
Records inventory values at their current replacement value - ANS Neither periodic or
perpetual inventory systems
Is useful in identifying inventory shrinkage due to theft, waste or other causes. -
ANS Perpetual inventory system
Does not record changes in inventory at the time of each sale - ANS Periodic inventory
system
The inventory account is updated at the time of each sale - ANS Perceptual inventory system
Inventory never needs to be counted - ANS Neither periodic or perpetual inventory systems
Calculates cost of sales only at the end of the accounting period after inventory has been
counted - ANS Periodic inventory system
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Requires two entries at the time of sale - ANS Perceptual inventory system
Uses a purchases account - ANS Periodic inventory system
The common characteristic possessed by all assets is - ANS future economic benefit
Notes payable - ANS Statement of financial position
Accounts receivable - ANS Statement of financial position
Revenue - ANS Statement of income
Dividends declared - ANS Statement of Changes in equity
Intangibles - ANS Statement of financial position
Repayment of long term debt - ANS Statement of cash flows
The statement of financial position and statement of changes in equity are related because: -
ANS the ending amount on the statement of the changes in equity is reported on the
statement of financial position
Decrease in share capital - ANS debit
decrease in bank loan payable - ANS debit
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, decrease in equipment - ANS credit
decrease in accounts receivable - ANS credit
increase in inventory - ANS debit
increase in accounts payable - ANS credit
increase in deferred revenue - ANS credit
increase in cash - ANS debit
Overstatement of ending inventory at December 31, 2020 - ANS 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 - ANS No effect on reported income/profit for the year ended December 31, 2020
Overstatement of opening inventory at January 1, 2019 - ANS No effect on reported
income/profit for the year ended December 31, 2020
Overstatement of opening inventory at January 1, 2020 - ANS Understatement of reported
income/profit for the year ended December 31, 2020
Collection of a $1600 accounts receivable - ANS has no effect on total assets
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
AND CORRECT ANSWERS. VERIFIED
2025/2026.
How to calculate net income - ANS Revenue - expenses
Records inventory values at their current replacement value - ANS Neither periodic or
perpetual inventory systems
Is useful in identifying inventory shrinkage due to theft, waste or other causes. -
ANS Perpetual inventory system
Does not record changes in inventory at the time of each sale - ANS Periodic inventory
system
The inventory account is updated at the time of each sale - ANS Perceptual inventory system
Inventory never needs to be counted - ANS Neither periodic or perpetual inventory systems
Calculates cost of sales only at the end of the accounting period after inventory has been
counted - ANS Periodic inventory system
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Requires two entries at the time of sale - ANS Perceptual inventory system
Uses a purchases account - ANS Periodic inventory system
The common characteristic possessed by all assets is - ANS future economic benefit
Notes payable - ANS Statement of financial position
Accounts receivable - ANS Statement of financial position
Revenue - ANS Statement of income
Dividends declared - ANS Statement of Changes in equity
Intangibles - ANS Statement of financial position
Repayment of long term debt - ANS Statement of cash flows
The statement of financial position and statement of changes in equity are related because: -
ANS the ending amount on the statement of the changes in equity is reported on the
statement of financial position
Decrease in share capital - ANS debit
decrease in bank loan payable - ANS debit
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, decrease in equipment - ANS credit
decrease in accounts receivable - ANS credit
increase in inventory - ANS debit
increase in accounts payable - ANS credit
increase in deferred revenue - ANS credit
increase in cash - ANS debit
Overstatement of ending inventory at December 31, 2020 - ANS 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 - ANS No effect on reported income/profit for the year ended December 31, 2020
Overstatement of opening inventory at January 1, 2019 - ANS No effect on reported
income/profit for the year ended December 31, 2020
Overstatement of opening inventory at January 1, 2020 - ANS Understatement of reported
income/profit for the year ended December 31, 2020
Collection of a $1600 accounts receivable - ANS has no effect on total assets
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
