The IIT Madras BS Financial Forensics (Financial Forensics) Quiz 1 paper sat on 23 Feb 2025, in the January 2025 term: 17 questions for 20 marks in 120 minutes. Every question is below with its answer. Take it as a timed mock test to be marked, or read it through first.
Total cash inflow in the operating section of the statement of cash flows should include which of the following?
Cash received from customers at the point of sale
Cash collections from customer accounts receivable
Cash received in advance of revenue recognition (unearned revenue)
All of these
Correct answer
All of these
Which of the following would not appear in the investing section of the statement of cash flows?
Purchase of land for a new office building
Interest and dividend received
Purchase of inventory
Sale of obsolete equipment used in the factory
Correct answer
Purchase of inventory
Which of the following is considered as a financing activity while preparing the statement of cash flows?
Dividends Received and Interest Paid
Dividends Received and Interest Received
Dividends Paid and Interest Received
Dividends Paid and Interest Paid
Correct answer
Dividends Paid and Interest Paid
ABC Limited, an FMCG company specializing in cosmetics, is currently facing a lawsuit from a consumer demanding INR 5,00,000 for allegedly misleading consumers with misinformation. With the verdict still pending, how should the company reflect this situation in the balance sheet and P&L statement for the quarter in which the lawsuit was filed?
Cash balance would reduce by INR 5,00,000 to account for the law suit.
Expenses would increase by INR 5,00,000
No impact in balance sheet and P&L statement
Cash balance would reduce by INR 5,00,000 and expenses would increase by the same amount to account for the law suit.
Correct answer
No impact in balance sheet and P&L statement
On January 1, 2017. XYZ Company started the year with a ₹ 400,000 in Retained Earnings, a ₹ 150,000 balance in Common Stock, and a ₹ 300,000 balance in Additional Paid-in Capital. During 2017, the company earned net income of ₹ 40,000, declared a dividend of ₹ 10,000, and issued 900 additional shares of stock (par value of ₹ 1 per share) for ₹ 10,000. What is total stockholders' equity on December 31, 2017?
₹890,000
₹900,000
₹880,000
None of these
Correct answer
₹890,000
An amount ₹1,00,000 was withdrawn from bank to finance working capital requirement of the business. The transaction will lead to
Increase in expenditure
Increase in asset
No effect on the balance sheet total
Increase in liability
Correct answer
No effect on the balance sheet total
ABC incorporation rented out an office space for running its business. It entered into an agreement with the owner of the space on 1^(st) January 2025 and agreed to pay a monthly rent of INR 1,00,000, payable on the 1^(st) of every month starting January 1^(st). How would this transaction be recorded in the balance sheet and P&L statement prepared on 1^(st) January 2025?
No impact on balance sheet and cashflow statement.
Cash balance reduces by INR 1,00,000 and Expenses increases by the same amount
Cash balance reduces by INR 1,00,000 and create a new line item in asset section titled “Right to use office space” as INR 1,00,000
Cash balance reduces by INR 1,00,000
Correct answer
Cash balance reduces by INR 1,00,000 and create a new line item in asset section titled “Right to use office space” as INR 1,00,000
Which of the following regarding retained earnings is false?
Retained earnings is increased by net income and decreased by a net loss
Retained earnings is a component of stockholders' equity on the balance sheet
Retained earnings is reported on the asset side of the balance sheet
Retained earnings represents earnings not distributed to stockholders in the form of dividends
Correct answer
Retained earnings is reported on the asset side of the balance sheet
A company purchased machinery worth ₹ 7,50,000 on January 2nd from a vendor. The company paid 50% of the amount in cash, and the remaining 50% was taken on credit from the vendor for 30 days. How many changes must be made to the balance sheet to account for this transaction?
Correct answer: 3
Correct answer: 8207000
ABC incorporation reported the following information as of Dec 31st 2024:
| Account | INR |
|---|---|
| Cash at Bank | 1,20,000 |
| Accounts Receivable | 2,00,000 |
| Inventory | 1,50,000 |
| Office Equipment (at cost) | 5,00,000 |
| Accumulated Depreciation | 50,000 |
| Accounts Payable | 1,80,000 |
| Bank Loan (long-term) | 2,00,000 |
| Capital | 4,50,000 |
| Sales Revenue | 12,00,000 |
| Cost of Goods Sold | 6,20,000 |
| Salaries and Wages | 2,00,000 |
| Rent | 1,20,000 |
| Utilities | 30,000 |
| Miscellaneous Expenses | 40,000 |
Based on the above data, answer the given subquestions.
What is the net income of the company in 2024?
Correct answer: 140000
ABC incorporation reported the following information as of Dec 31st 2024:
| Account | INR |
|---|---|
| Cash at Bank | 1,20,000 |
| Accounts Receivable | 2,00,000 |
| Inventory | 1,50,000 |
| Office Equipment (at cost) | 5,00,000 |
| Accumulated Depreciation | 50,000 |
| Accounts Payable | 1,80,000 |
| Bank Loan (long-term) | 2,00,000 |
| Capital | 4,50,000 |
| Sales Revenue | 12,00,000 |
| Cost of Goods Sold | 6,20,000 |
| Salaries and Wages | 2,00,000 |
| Rent | 1,20,000 |
| Utilities | 30,000 |
| Miscellaneous Expenses | 40,000 |
Based on the above data, answer the given subquestions.
What is the ending equity of the company?
Correct answer: 450000
ABC incorporation reported the following information as of Dec 31st 2024:
| Account | INR |
|---|---|
| Cash at Bank | 1,20,000 |
| Accounts Receivable | 2,00,000 |
| Inventory | 1,50,000 |
| Office Equipment (at cost) | 5,00,000 |
| Accumulated Depreciation | 50,000 |
| Accounts Payable | 1,80,000 |
| Bank Loan (long-term) | 2,00,000 |
| Capital | 4,50,000 |
| Sales Revenue | 12,00,000 |
| Cost of Goods Sold | 6,20,000 |
| Salaries and Wages | 2,00,000 |
| Rent | 1,20,000 |
| Utilities | 30,000 |
| Miscellaneous Expenses | 40,000 |
Based on the above data, answer the given subquestions.
What is the total assets of the company as of Dec 31^(st), 2024?
Correct answer: 970000
Alpha Corporation is a manufacturer of furniture. In a recent year, it reported the following activities. Please note that the figure in the parenthesis indicates negative values.
| ₹ | |
|---|---|
| Net income | 5,135 |
| Purchase of property, plant, and equipment | 1,071 |
| Borrowings under line of credit (bank) | 1,117 |
| Proceeds from issuance of stock | 11 |
| Cash received from customers | 37,164 |
| Payments to reduce long-term debt | 46 |
| Sale of marketable securities | 219 |
| Proceeds from sale of property and equipment | 6,894 |
| Dividends paid | 277 |
| Interest paid | ₹ 90 |
Based on the above data, answer the given subquestions.
What is the cash flow from operating activities?
₹ 37,164
₹ 42,299
₹ (42,299)
₹ (37,164)
Correct answer
₹ 37,164
Alpha Corporation is a manufacturer of furniture. In a recent year, it reported the following activities. Please note that the figure in the parenthesis indicates negative values.
| ₹ | |
|---|---|
| Net income | 5,135 |
| Purchase of property, plant, and equipment | 1,071 |
| Borrowings under line of credit (bank) | 1,117 |
| Proceeds from issuance of stock | 11 |
| Cash received from customers | 37,164 |
| Payments to reduce long-term debt | 46 |
| Sale of marketable securities | 219 |
| Proceeds from sale of property and equipment | 6,894 |
| Dividends paid | 277 |
| Interest paid | ₹ 90 |
Based on the above data, answer the given subquestions.
What is the cash flow from financing activities?
₹ 1,128
₹ 1082
₹ (805)
₹ 715
Correct answer
₹ 715
Alpha Corporation is a manufacturer of furniture. In a recent year, it reported the following activities. Please note that the figure in the parenthesis indicates negative values.
| ₹ | |
|---|---|
| Net income | 5,135 |
| Purchase of property, plant, and equipment | 1,071 |
| Borrowings under line of credit (bank) | 1,117 |
| Proceeds from issuance of stock | 11 |
| Cash received from customers | 37,164 |
| Payments to reduce long-term debt | 46 |
| Sale of marketable securities | 219 |
| Proceeds from sale of property and equipment | 6,894 |
| Dividends paid | 277 |
| Interest paid | ₹ 90 |
Based on the above data, answer the given subquestions.
What is the cash flow from investing activities?
₹ 7,113
₹ 6,042
₹ 6,261
₹ 852
Correct answer
₹ 6,042
Alpha Corporation is a manufacturer of furniture. In a recent year, it reported the following activities. Please note that the figure in the parenthesis indicates negative values.
| ₹ | |
|---|---|
| Net income | 5,135 |
| Purchase of property, plant, and equipment | 1,071 |
| Borrowings under line of credit (bank) | 1,117 |
| Proceeds from issuance of stock | 11 |
| Cash received from customers | 37,164 |
| Payments to reduce long-term debt | 46 |
| Sale of marketable securities | 219 |
| Proceeds from sale of property and equipment | 6,894 |
| Dividends paid | 277 |
| Interest paid | ₹ 90 |
Based on the above data, answer the given subquestions.
What is the total cash flow of the company at the end of the year?
₹ 43,866
₹ 51,194
₹ (34,910)
₹ 43,921
Correct answer
₹ 43,921
