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Accounting 12

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** Please note there is a Reading Booklet on our website www.surreyconnect.sd36.bc.ca Accounting 12 Substantive Assignment This assignment is worth 5% of the course work for Accounting 12. The following substantive assignment for Accounting 12 includes the following Prescribed Learning Outcomes from the BC Ministry of Education.  compare financial reporting used in single proprietorships, partnerships, and corporations  analyse financial statements  analyse statements of earnings for various businesses  draw conclusions based on differences between budgeted and actual transactions Directions: 1. Read the pages in the package. 2. Do the questions in the test package. 3. After completing the package submit via the drop box. 4. If you have any questions regarding the SA, please email me at: [email protected]

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Accounting 12 Substantive Assignment Name

Part One: True/False and Multiple Choice TRUE/FALSE: Write 'T' if the statement is true and 'F' if the statement is false.

1) The main difference between accounting for a partnership and for a sole proprietorship occurs in the current asset accounts. 2) A partnership is terminated upon the death of any one of its partners. 3) The liability of each partner is confined to her or his share of the partnership’s capital. 4) The profits of a partnership are subject to corporation income tax. 5) The "business" actions of one partner are binding to the business and to the other partners. 6) Limited partnerships are created to overcome the obstacles created by mutual agency. 7) To apportion the net income to partners, the salaries and interest (if any) are distributed first. 8) The accumulated capital of each partner is shown on the Statement of Retained Earnings. 9) The existence of a company ends with the death of its major shareholder. 10) Individual shareholders are protected from being sued by their company's creditors. 11) Most shareholders of a public corporation have no direct influence in the life of the corporation. 12) Public corporations find it far easier to raise capital than do partnerships. 13) When dividends a re declared, a liability account is credited. 14) Preferred shares do not generally carry voting rights. 15) The claims of preferred shareholders are superior to those of creditors. 16) The current ratio measures the ability of a business to pay its debts. 17) A quick ratio of less than one is desirable. 18) The d ebt and equity ratios together must total 100%. 19) The rate of return on net sales represents the number of cents of profit from every dollar of sales. 20) The rate of return on owner's equity may be compared to the acid test ratio to determine the t rue profitability of a firm. 3

MULTIPLE CHOICE: Choose the one alternative that best completes the statement or answers the question. 21) The actions of one partner may force an obligation on the other partner(s). This is called: A) limited liability. B) joint liability. C) unlimited liability. D) mutual agency. 22) The main difference between sole proprietorship and partnership accounting is found in: A) Capital and Drawings accounts. B) current asset and current liability accounts. C) fixed asset and long-term liability accounts. D) none of the above. 23) The taxation of a partnership is treated like that of: A) a corporation. C) a sole proprietorship.

B) a mutual agent. D) none of the above.

24) From the following list, what class of owner does not benefit from limited liability? A) a limited partner B) a general partner C) a preferred shareholder D) a common shareholder E) Two of the above do not benefit from limited liability. 25) If there is no partnership agreement: A) profits and losses are divided equally. B) the senior partner receives 51% of the profits and losses. C) the partners have limited liability. D) the partnership continues after the death of one the partners. 26) When apportioning net income, the income-sharing ratio is applied after: A) the provincial act rules are applied B) salaries C) interest D) two of the above. 27) You can usually tell if a business is a partnership from its: A) current liability accounts. B) current asset accounts C) name. D) long-term liability accounts. E) amount of capital 28) Which of the following would not appear in the expense section of a partnership's income statement? A) interest on a partner's investment B) income tax expense C) a partner's salary D) All of the above would appear. E) None of the above would appear.

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29) Which of the following is not a financial statement for a partnership? A) statement of distribution of net income B) income statement C) statement of partners' capital D) statement of retained earnings 30) Which of the following statements would be prepared first for a partnership? A) statement of partners' capital B) statement of distribution of net income C) statement of retained earnings D) income statement 31) Which of the following financial statements eliminates detail from the balance sheet of a partnership? A) income statement B) statement of partners' capital C) statement of distribution of net income D) statement of retained earnings 32) A partnership: A) has fewer capital accounts than a corporation. B) can generally raise more capital than a corporation. C) is simpler to organize than is a corporation. D) reports to fewer people than does a corporation. 33) The Toronto Stock Exchange lists: A) prefer red corporations. B) private corporations. C) public corporations. D) limited partnerships. E) two of the above. 34) The number of shareholders in a private corporation cannot exceed: A) 50.

B) 100. C) 10. D) 5.

E) None of the above is correct. 35) When shareholders invest in a company, their claim on assets is shown in: A) a capital stock account. B) the Retained Earnings account. C) the long-term liability section of the balance sheet. D) notes to the financial statements. 36) A dividend must be paid: A) yearly to preferred shareholders. C) when the board of directors declares one.

B) once per yea r. D) once every two years.

37) A dividend must be paid on: A) the date of declaration. C) the d ate of record.

B) the year-end date. D) none of the above. 5

38) When a dividend is declared, a liability: A) increases. B) decreases. C) neither, because a liability is not affected at that time. 39) Preferred shareholders have a superior claim over common shareholders on: A) tax advances. B) assets. C) dividends.

D) two of the above.

40) Working capital is found by subtracting current liabilities from: A) current assets. B) total assets. C) net income.

D) capital.

41) The debt ratio shows: A) the total amount of debt. B) the portion of assets bought with borrowed money. C) debt divided by equity. D) total debt as a percentage of profit. 42) The ratio that measures the performance of a business compared to other investments is the: A) quick ratio. B) times interest earned ratio. C) rate of return on owner's equity. D) rate of return on net sales. 43) A firm has a current ratio of 2:1. Which of the following transactions will increase this ratio? A) obtaining a mortgage loan B) collecting an account receivable C) a reduction in several accounts payable D) borrowing cash from the bank 44) When inflation raises the market value of assets above the original cost, the following ratio becomes understated: A) times interest earned. B) return on sales ratio. C) debt ratio. D) equity ratio. 45) The ratio that indicates how effectively the owner's investment is being used is called the: A) inventory turnover. B) acid test ratio. C) current ratio. D) rate of return on equity ratio. 46) Ratios are more effective as tools of analysis than simple observation of financial statements because: A) ratios are more accurate than financial statements. B) financial statement balances are usually too large. C) ratios show relationships between related accounts. D) ratios result in easily understood answers. 47) Which transaction has no effect on working capital? A) paid mortgage on building C) sold merchandise inventory at a profit

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B) collected accounts receivable D) purchased machinery for cash

48) Creditors like to see a high proportion of owner's equity because: A) such firms tend to be larger. B) profits tend to be higher. C) owners have demonstrated good planning. D) the risk to creditors is reduced. 49) Dunlop's Trailer Manufacturing has an inventory turnover of 8. It would not be useful to compare this figure to the inventory turnover of: A) competitors. B) the whole trailer industry. C) Ted's Sporting Goods. D) previous years. 50) This calculation shows how investors feel about a company listed on a stock exchange. A) the P /E ratio B) the EPS C) the rate of return on net sales D) the collection period

Part 2: Completion (Mark) Selection ISSUES in ACCOUNTING ASSIGNMENT (ESSAY) ( 3 - 4 typed pages (double-spaced)

Select and research thoroughly an issue affecting the accounting profession. 1. The Enron Scandal – what was it and what have we learned? 2. Arthur Andersen 3. Lehman Brothers and Ernst and Young 4. Accounting for Stock Options 5. CEO Salaries – out of control? 6. Consulting and Accounting services – conflict of interest? 7. International Accounting – is the merge a good idea? 8. Tax Shelters 9. Corporate Tax Structure in Canada – uncompetitive? 10. Financial Disclosure – Should it include ‘soft’ risks? 11. Ponzi Schemes 12. GAAP (choose one and expand) 13. Income Trusts 14. Mergers & Acquisitions – current trends in Canada 15. The Role of the Auditor General in Canada Your essay should include the following:     

An overview of the issue Major developments Pros/Cons or a Timeline (depends on the topic) Impact on the accounting profession (do not forget this part!) Future outlook References Make sure you list the sources you use for this research. I expect at least three different and valid sources. You do not need to be specific about any

referencing format, just make sure you list all of your sources in a way that will make it easy for me to check them.