SAMPLE 3311 ENTRANCE EXAM

The "topical areas" noted beside each question on the following sample exam will be the same on the actual entrance exams, however specific questions will vary relating to the general topical area  (e.g., Question 16 will relate to inventory, etc.). 

For a solution to the sample exam -- click here!

Question 1 (Debit/Credit Concepts):

Jones Dairy purchased a new milking machine for $40,000 cash.  To record the transaction on Jones� books, you would:

a. debit an asset account and credit an asset account.
b. debit an asset account and credit a liability account.
c. debit an asset account and debit a liability account.
d. debit an asset account and credit owner�s equity.
e. credit a liability account and debit owner�s equity.

Question 2 (Debit/Credit Concepts):

Rent Expense typically would have:

a. a debit balance.
b. a credit balance.  
c. a zero balance.
d. no entries since expenses don�t go on the balance sheet.
e. an offset to plant assets.

Question 3 (Application of Debit/Credit Rules):

If the beginning balance in the Machinery account is $35,000, and if the ending balance in the Machinery account is $57,000, then:

a. $22,000 of machinery was sold.
b. $22,000 of machinery was purchased.
c. the market value of machinery was $57,000 at year-end.
d. the total dollar amount of machinery is $92,000.
e. purchases and sales of machinery cannot be determined from
     the information given.

Question 4 (Application of Debit/Credit Rules):

A double-entry system of accounting requires that each transaction or event be recorded:

a. as an increase or decrease to stockholders' equity.
b. in at least two different financial statements.
c. in at least two different accounts.
d. twice.
e. in two different types of accounts (e.g., an asset and a liability; an asset
    and a revenue, etc.).

 Question 5 (Accounting cycle):

The trial balance should be prepared:

a. Before any journal entries are made.
b. Before any entries are posted.
c. Before financial statements are prepared.
d. After financial statements are prepared.
e. After adjusting entries are made but before they are posted.

Question 6 (Accounting cycle):

At the end of an accounting period when accounts are ready to be closed, which of the following activities must be performed?

a. Make adjusting entries
b. Make closing entries
c. Prepare post closing trial balance
d. (b) and (c)
e. All of the above

Question 7 (Accounting cycle/adjusting entry):

The Prepaid Insurance account has an account balance of $3,000. At the end of an accounting period, the controller has decided that $2,000 of the balance has expired.  Which of the following adjusting entries should be made?

a. Prepaid Insurance                             2,000
            Insurance Expense                                 2,000
b. Insurance Expense                            2,000
            Prepaid Insurance                                   2,000
c. Prepaid Insurance                             1,000
            Insurance Expense                                 1,000
d. Insurance Expense                            1,000
            Prepaid Insurance                                   1,000
e. None of the above.

QUESTION 8 (Income Statement):

Gross profit is calculated by:

a. subtracting total expenses from total revenues.
b. subtracting cost of goods sold from net sales.
c. subtracting the ending inventory from cost of goods sold.
d. adding cost of goods sold to net sales.
e. adding cost of goods sold to net income.

QUESTION 9 (Income Statement):

The operating expense section of an income statement for a wholesaler would not include:

a. freight-out.
b. utilities expense.
c. cost of goods sold.
d. insurance expense.
e. office expense.

Question 10 (Form and Content of Balance Sheet):

Cramer Corp. reported the following for 2004: total assets, $90,000; total liabilities, $35,000; contributed capital (i.e., total paid in capital), $40,000.  Therefore, retained earnings was:

a. $5,000
b. $40,000
c. $20,000
d. $15,000
e. None of the above.

Question 11 (Form and Content of Balance Sheet):

Which of the following would not be considered a current asset?

a. Inventories
b. Prepaid expenses
c. Cash
d. Accounts receivable due in 6 months
e. All of the above are current assets.

Question 12 (Cash):

Which of the following would appropriately be included in the Cash account on a balance sheet?

a. Dishonored checks returned by the bank
b. Employee travel advances
c. Postage Stamps
d. Unrestricted foreign currency
e. All of the above are included in Cash.

Question 13 (Cash):

In preparing a typical bank reconciliation, how would outstanding checks be handled?

a. Added to "balance per bank."
b. Subtracted from "balance per bank."
c. As an adjustment that requires a general ledger adjustment.
d. They would be ignored.
e. They would be handled exactly like deposits in transit.

Question 14 (Receivables):

During 2004, ABC Company had $750,000 of net credit sales.  Accounts Receivable had a December 31, 2004, balance of $250,000.  No amounts have been added to the Allowance for Doubtful Accounts during 2004.  Before adjustment on December 31, 2004, the Allowance for Doubtful Accounts had a credit balance of $2,000.  ABC estimates that 3% of net credit sales will become uncollectible.  What will be the adjusted balance in Allowance for Doubtful Accounts at December 31?

a. $22,500
b. $20,500
c. $24,500
d. $7,500
e. $ 9,500

Question 15 (Receivables):

During 2004, Allied Associates had $750,000 of net credit sales.  Accounts Receivable had a December 31, 2004, balance of $250,000.  No amounts have been added to the Allowance for Doubtful Accounts during 2004.  Before adjustment on December 31, 2004, the Allowance for Doubtful Accounts had a credit balance of $2,000.  Allied estimates that 6% of receivables will become uncollectible.  What will be the adjusted balance in Allowance for Doubtful Accounts at December 31?

a. $43,000
b. $47,000
c. $45,000
d. $15,000
e. $17,000

Question 16 (Inventory):

Assume that Jones Company purchased $100 of inventory on credit. If Jones Company uses the Periodic Inventory system the journal entry to record this purchase would be:

a. Purchases                             100
            Accounts Payable                     100
b. Purchases                              100
            Cash                                           100
c. Inventory                                  100
            Accounts Payable                     100
d. Inventory                                  100
            Cash                                           100
e. Accounts Payable                 100
          Inventory                                       100

Question 17 (Inventory):

Adams Inc. started the year with merchandise inventory of $20 (4 widgets @ $5 each). During the year the following activity occurred:

If Adams uses the Periodic Inventory method (LIFO basis) the ending merchandise inventory will have a recorded value of: 

a. $32
b. $46
c. $50
d. $52
e. $54

Question 18 (Inventory):

Jones Company began the year with $100 of merchandise inventory. During the year Jones purchased inventory that cost $200 and also paid $15 of freight costs on the purchased inventory. At the end of the year Jones Company determined that the cost of its ending inventory was $50. Given these facts Jones should report cost of goods sold totaling:

a. $50
b. $200
c. $215
d. $250
e. $265 

Question 19 (Plant Assets):

An exchange of similar productive assets was completed between Company A and Company Z.  Prior to the exchange, Company A owned Asset A;  Company Z owned Asset Z.  Companies A and Z swapped Assets A and Z.  Company A also paid $44,000 cash to Company Z in the exchange.

 Additional information:  

In recording the exchange, Company A will report:

a.  a loss of $5,000
b.  a portion of a $5,000 loss
c.  a gain of $44,000
d.  a loss of $99,000
e.  neither a gain nor a loss

Question 20 (Plant Assets):

ZETO Company acquired a new construction crane.  The crane cost $1,000,000.  In addition, Zeto paid delivery cost of $50,000, setup and installation of $75,000, and truck repairs of $5,000 (it seems that during setup, a large beam was accidentally dropped on the hood of one of Zeto's trucks).

ZETO should record the crane in its accounting records at:

a.  $1,000,000
b.  $1,050,000
c.  $1,075,000
d.  $1,125,000
e.  $1,130,000

Question 21 (Plant Assets):

On July 1, 2003, PLEE Corporation purchased factory equipment for $50,000. Salvage value was estimated at $2,000.  The equipment will be depreciated over 10 years using the double-declining-balance method.  Counting the year of acquisition as one-half year, PLEE should record 2004 depreciation expense of:

a. $8,640
b. $9,000
c. $8,000
d. $10,000
e. None of the above.

Question 22 (Plant Assets):

Since 2001, TSAY Steel has replaced all its major manufacturing equipment and now has the following equipment recorded in the appropriate accounts.  TSAY uses a calendar year as its fiscal year.

A forge purchased January 1, 2000, for $100,000.  Ordinary and necessary installation costs were $20,000, and the forge has an estimated 5-year life with a salvage value of $10,000.

A grinding machine costing $45,000 purchased January 1, 2002.  The machine has an estimated 5-year life with a salvage value of $5,000.

A lathe purchased January 1, 2004 for $60,000.  The lathe has an estimated 5-year life and a salvage value of $7,000.

Using the straight-line depreciation method, TSAY�s 2004 depreciation expense is:

a. $45,000
b. $40,334
c. $40,600
d. $40,848
e. None of the above.

Question 23 (Current Liabilities, Accruals, Contingencies, Payroll):

Crenshaw Corporation sells widgets.  Each widget carries a multi-year warranty.  Crenshaw estimates the cost of warranty work to be 3% of current sales.  20X4 sales was $5 million and $30,000 was spent on warranty work during 20X4.  The balance in Estimated Warranty Liability at 12-31-X3 was $70,000.  What is the balance in Estimated Warranty Liability at 12-31-X4 and the balance in Warranty Expense for 20X4, respectively?

a. $150,000; $  30,000
b. $190,000; $  30,000
c. $190,000; $150,000
d. $120,000; $150,000
e. None of the above

Question 24 (Current Liabilities, Accruals, Contingencies, Payroll):

Calhoun Crockery sold merchandise; the total proceeds collected, including a 7% sales tax, amounted to $74,900.  What is the amount that should be recorded as a current liability?

a. $0
b. $4,900
c. $5,243
d. $7,000
e.  None of the above.

Question 25 (Bonds Payable):

On January 1, 2004 Graves Inc sold a $1,000,000, 8%, 10 year semi-annual bond to the public for $934,960 yielding 9%. Determine the interest expense Graves will report on June 30, 2004.

a. $40,000
b. $45,000
c. $37,398
d. $42,073
e. $74,797

Question 26 (Bonds Payable):

If a $100,000, 8%, 10 year semi-annual bond is sold to yield 9%. Assuming no transaction costs the cash proceeds will be:

a. less then the face value
b. equal to face value
c. greater then the face value
d. more than $180,000
e. exactly $109,000

Questions 27-30 (Stockholders' Equity):

The following data should be used in solving Questions 27, 28, 29 and 30.  Each of the questions is mutually exclusive of the other questions.

Alpha Corporation has the following Shareholders� Equity section of the Balance Sheet at  1/1/2004:

Questions 27 (Stockholders' Equity):

Assume Alpha sells 500 shares of Preferred Stock for $400 per share.  What will be the dollar amount of the increase to Preferred Stock, APIC- Preferred Stock, and Retained Earnings?

Questions 28 (Stockholders' Equity):

Assume Alpha reacquires share of their own Common Stock to hold in the Treasury.  They pay $ 30.00 per share.  With this purchase, the impact on Total Paid-in Capital and the total  Shareholders� Equity, respectively,  will be:

a. increase/increase
b. decrease/decrease
c. increase/decrease
d. decrease/increase
e. none/decrease

Questions 29 (Stockholders' Equity):

Assume Alpha�s Board of Directors declares a cash dividend to all Shareholders.  The Preferred Shareholders will receive their assured amount and the Common Shareholders will receive $ .10 per share.  What will be the total dollar amount of the dividend?

a. $110,000
b. $105,000
c. $15,000
d. $55,000
e.  insufficient information to solve

Questions 30 (Stockholders' Equity):

Assume that Alpha has Net Income for the year of $360,000.  What is the dollar amount of Earnings Per Share for Alpha for the year?

a. $ 6.86
b. $ 7.05
c. $ 7.00
d. $ 7.20
e.  insufficient information to solve

Question 31 (Statement of Cash Flows):

In the Statement of Cash Flows, an example of an investing activity would be:

a. Purchasing equipment for cash.
b. Buying inventory from a supplier on credit.
c. Selling stock to an investor for credit.
d. Repaying the principal on a bank loan.
e. None of the above.

Question 32 (Statement of Cash Flows):

Which of the following is not a required section of the Statement of Cash Flows:

a. Cash flow from operating activities.
b. Cash flow from the company�s major customers.
c. Cash flow from investing activities.
d. Cash flow from financing activities.
e. None of the above.