Common Proficiency Test Model Paper 2

BOARD OF STUDIES THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA COMMON PROFICIENCY TEST Model Test Paper – BOS/CPT – 6 Time : 4 hours Maximum Marks : 200 The test is divided into four sections. Every correct answer carries + 1 mark each and – 0.25 mark will be deducted for each wrong answer. SECTION – A : FUNDAMENTALS OF ACCOUNTING (60 MARKS) 1. Transactions between owner and business are recorded as per (a) Periodicity concept (b) Going concern concept (c) Prudence concept (d) Business Entity concept 2. Which of the following items is an asset? (a) Salary paid to manager (b) Accounts payable (c) Sales (d) Debtors 3. The information provided in the annual financial statements of an enterprise pertain to: (a) Business Industry (b) Economy (c) Individual business entity (d) None of the three 4. Which of the following is not a transaction? (a) Goods are purchased on cash basis for Rs.1,000. (b) Salaries paid for the month of May, 2010. (c) Land is purchased for Rs.10 lacs. (d) An employee dismissed from the job. Common Proficiency Test (CPT) Volume - I 145 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 5. All the following statements are objectives of accounting except (a) Providing information about the assets, liabilities and capital of business entity. (b) Maintaining records of business. (c) Providing information about the performance of business entity. (d) Providing details about the personal assets and liabilities of the owner. 6. Payment of personal expenses of the owners of the business need to be recorded as: (a) Drawings. (b) Liabilities. (c) Expenses. (d) None of the three. 7. The purchases Journal records (a) All purchases. (b) All purchases of goods dealt in by the firm. (c) Credit purchases of goods dealt in by firm. (d) Cash purchase of goods dealt in by firm. 8. Which of the following lists the balance and the title of accounts given in the ledger, on a given date? (a) P & L Account. (b) Balance sheet. (c) Earnings Statement (d) Trial balance. 9. Under straight line method, depreciation is calculated on (a) Written down value. (b) Scrap value. (c) Original cost. (d) None of the three. 10. If the date of maturity of a bill is a holiday, then the bill will mature on: (a) Next working day. (b) Preceding working day. (c) Holiday itself. (d) Other agreed day. 11. A promissory note is drawn by _______ in favour of _______ . (a) Drawer, Drawee. (b) Maker, Payee. (c) Payer, Payee. (d) Drawer, Payee. 12. _______ principle requires that the same accounting method should be used from one accounting period to the next. (a) Conservatism. (b) Consistency. (c) Business entity. (d) Money measurement. 13. The left side of an account is known as _______ and the right side as _______. (a) Debit, credit. (b) Credit, debit. (c) Liability, asset. (d) None of the three. 146 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 14. In double entry book keeping system, every transaction affects at least ______account(s). (a) One. (b) Two. (c) Three. (d) Four. 15. All expense and _______ accounts appearing in the trial balance are transferred either to the trading account or profit and loss account. (a) Loss. (b) Income (c) Asset. (d) Liability. 16. Scrap value of an asset means the amount that it can fetch on sale at the _______ of its useful life. (a) Beginning. (b) End (c) Middle. (d) None of the three. 17. The petty cashier generally work on_______ system. (a) Accrual. (b) Balancing. (c) Imprest. (d) None of the three. 18. Proforma invoice is a statement of information in the form of invoice prepared by the _______ to appraise the _______ about certain essential particulars of the goods. (a) Consignee, Consignor. (b) Buyer/Seller. (c ) Consignor, Consignee. (d) None of the three. 19. Carriage charges paid for a new plant purchased if debited to carriage account would affect (a) Plant account. (b) Carriage account. (c) Plant and carriage accounts. (d) None of the three. 20. The amount due to the retiring partner on account of goodwill is debited to the continuing partners in their _______. (a) Profit sharing ratio. (b) Sacrificing ratio. (c) Capital ratio. (d) Gaining ratio. 21. Mr. A, the owner of M/s Apex Ltd. withdrew some goods from the business for his personal use. The accountant of the firm recorded this transaction on the basis of selling price of goods. He justifies his contention on the basis that business and the proprietor are two different entities as per business entity concept and therefore drawings should be charged at the same price on which the goods are sold to the outside customers. However, Mr. A emphasizes that he should be charged with only the cost price of the goods withdrawn by him. At which price, the drawings should be recorded? (a) Fair value. (b) Selling price. (c) Cost price. (d) None of the three. Common Proficiency Test (CPT) Volume - I 147 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 22. The substance of the transactions gets preference over legal position. The transactions and events recorded in the books of account and presented in the financial statements, should be governed by the substance of such transactions and not merely by their legal form as per the concept of (a) Faithful representation. (b) Substance over form. (c) Neutrality. (d) Fair disclosure. 23. A and B are partners sharing profits in the ratio of 3:2. They admit C as a new partner for 3/10th share, which he acquires 2/10 from A and 1/10 from B. The new profit sharing ratio of A, B and C is (a) 3:4:3. (b) 4:3:3. (c) 3:3:4. (d) None of the three. 24. The profits for the last four years are given as follows: Year Rs. 2006 40,000 2007 50,000 2008 60,000 2009 50,000 The value of goodwill on the basis of three years’ purchase of average profits based on the last four years will be (a) Rs.1,00,000. (b) Rs.1,50,000. (c) Rs.2,00,000 (d) None of the three. 25. G Ltd. acquired assets worth Rs. 75,000 from H Ltd. by issue of shares of Rs.10 each at a premium of Rs. 5. The number of shares to be issued by G Ltd. to settle the purchase consideration will be (a) 6,000 shares (b) 7,500 shares (c) 9,375 shares (d) 5,000 shares 26. A and B are partners in a firm sharing profits in the ratio of 3:2. They admit C as the new partner for 1/6th share in the profits. The firm’s goodwill was valued at Rs.1,50,000. For adjustment of goodwill, C’s account will be debited by (a) Rs. 20,000. (b) Rs. 15,000. (c) Rs. 25,000. (d) None of the three. 27. Following figures have been taken from the trial balance of a trader; Purchases Rs. 30,000 Purchase Returns Rs. 5,000 Sales Rs. 40,000 Sales Returns Rs. 5,000 The amount of profit will be (a) Rs. 10,000. (b) Rs. 5,000. (c) Rs. 7,500. (d) None of the three. 148 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 28. The balance of furniture and fixtures as on 1st April, 2009 was Rs. 10,000. Furniture of Rs.5,000 was purchased on 1st October, 2009. Depreciation is charged @ 10% p.a. on W.D.V. method. The depreciation for the year ended 31st March, 2010 will be _____ (a) Rs.1,500 (b) Rs.1,250 (c) Rs.1,750 (d) None of the above 29. Mr. Yatharth consigned to Mr. Ramesh 100 cases of tea costing Rs. 100 per case. He paid Rs. 1,000 as freight and cartage. Mr. Ramesh could take delivery of only 90 cases since 10 cases were loss in transit. The amount of abnormal loss will be _____ (a) Rs.1,000 (b) Rs.1,100 (c) Rs.1,050 (d) None of the three 30. Mr. Sharma holding 1,000 equity shares of Rs.10 each, issued at a discount of 10%, could pay Rs.3.50 on application, but could not paid the allotment money of Rs. 2.5 per share and his shares were forfeited. In the books of the company, shares forfeited account will be credited by ________ (a) Rs. 2,500 (b) Rs. 1,500 (c) Rs. 3,500 (d) Rs. 2,000 31. Omega Ltd. purchased assets of Alfa Ltd. for purchase consideration of Rs.60 lacs. It was decided that the purchase consideration will be discharged by issue of 10% debentures of Rs.1,000 each at a premium of 20%. The number of debentures issued will be ________ (a) 6,000 (b) 10,000 (c) 5,000 (d) None of the above 32. Asha Deep Company Ltd. issued 1,00,000, 7% debentures of Rs.100 each at a discount of 4% redeemable after 5 years at a premium of 6%. Loss on issue of debentures is ________ (a) Rs. 10,00,000 (b) Rs. 6,00,000 (c) Rs. 16,00,000 (d) Rs. 4,00,000 33. Om, Jai and Jagdish are partners sharing profits and losses in the ratio of 5: 3 :2. Om retires and goodwill is valued at Rs. 50,000. New profit sharing ratio of Jai and Jagdish will be equal. For the adjustment of goodwill, Jai and Jagdish’s capital accounts will be debited by: (a) Rs. 15,000 and Rs. 10,000 respectively (b) Rs. 10,000 and Rs. 15,000 respectively (c) Rs. 20,000 and Rs. 5,000 respectively (d) Rs. 5,000 and Rs. 20,000 respectively 34. The date of maturity of bill is 10th October, 2009. The Government of India suddenly declared 10th October, 2009 as the holiday under the Negotiable Instruments Act, then the bill will mature on _________ (a) 9th October, 2009 (b) 10th October, 2009. (c) 12th October, 2009. (d) 11th October, 2009. Common Proficiency Test (CPT) Volume - I 149 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 35. A Ltd. Company purchase machinery on 1st April, 2007 for Rs. 1,00,000. The depreciation on this machinery is charged @ 10% per annum on straight line method. On 30th September, 2009 machinery is sold for Rs.89,000. The profit or loss on sale of such machinery is: (a) Profit of Rs. 12,000. (b) Loss of Rs. 12,000. (c) Profit of Rs. 14,000. (d) Loss of Rs. 6,000. 36. The following are the details regarding purchases of a certain item during the month of January. January 1 Purchases 200 units @Rs. 7 Rs. 1,400 January 8 Purchases 900 units @Rs. 8 Rs. 7,200 January 25 Purchases 300 units @Rs. 9 Rs. 2,700 January 30 Purchases 400 units @Rs. 10 Rs. 4,000 Rs. 15,300 A physical inventory of the items taken on January 31 shows that there are 700 units in hand. The valuation of inventory as per FIFO method is: (a) Rs. 5,400. (b) Rs. 6,700. (c) Rs. 8,600 (d) Rs. 5,000. 37. A promissory note for Rs. 5,000 in favour of Mohan settled by sending him Tania’s acceptance for Rs. 5,000. The required Journal entry will be (a) Mohan Dr. Rs. 5,000 To Tania Rs. 5,000 (b) Tania Dr. Rs. 5,000 To Mohan Rs. 5,000 (c) Bill receivable Dr. Rs. 5,000 To Bills payable Rs. 5,000 (d) Bill payable Dr. Rs. 5,000 To Bills receivable Rs. 5,000 38. Shyam prepared a trial balance for his factory on 31st March, 2010. The debit total of the trial balance was short by Rs. 500. He transferred the deficiency to a suspense account. In April, 2010 after a close examination, he found that the purchases day book for September, 2009 was undercast by Rs.500. The necessary Journal entry to rectify the error will be _________ (a) Purchases A/c Dr. Rs. 500 To Cash A/c Rs. 500 (b) Suspense A/c Dr. Rs. 500 To Purchases A/c Rs. 500 (c) Purchases A/c Dr. Rs. 500 To Suspense A/c Rs. 500 (d) None of the above. 150 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 39. The following particulars relate to the business of Mohan on March 31, 2010. Balance as shown by the cash book Rs. 10,000 Cheques issued but not presented for payment Rs. 4,000 Cheque deposited but not yet collected Rs. 3,000 Balance as shown by the Bank pass book will be (a) Rs.9,000. (b) Rs.10,000. (c) Rs.11,000 (d) None of the above. 40. Which of the following errors will affect the trial balance? (a) Repairs to building wrongly debited to Building A/c (b) Total of Purchase Journal cast short by Rs.1,000. (c) Freight paid on new machinery debited to Freight A/c (d) None of the three. 41. A’s acceptance to B for Rs. 10,000 renewed for 2 months on the condition that Rs. 4,000 be paid in cash immediately and the remaining amount will carry interest @ 12% p.a. The amount of interest will be _________ (a) Rs. 120 (b) Rs. 80 (c) Rs. 90 (d) Rs. 160 42. On 1.1.2010, a machine costing Rs. 10,000 and a piece of furniture costing Rs.20,000 was purchased. Depreciation is provided @ 5% p.a. on furniture and 10% per annum on machine. The depreciation for the year ended 31st March, 2010 should be: (a) Rs.1,000. (b) Rs.300 (c) Rs.625 (d) None of the three. 43. On 1st February, 2010, a loan of Rs.10,000 was given @ 12% per annum. Interest was received for 3 months from February to April in April, 2010. In the financial statements of the year ended 31st March, 2010 amount of accrued interest should be: (a) Rs. 100. (b) Rs. 200 (c) Rs. 300 (d) Rs. 1,200 44. Goods costing Rs. 4,80,000 were sent on consignment basis. Goods are invoiced at 125% of the cost price. The invoice price and the loading will be: (a) Rs. 6,00,000 and Rs. 1,00,000. (b) Rs. 5,00,000 and Rs. 1,00,000. (c) Rs. 6,00,000 and Rs. 1,20,000. (d) Rs. 5,00,000 and Rs. 1,20,000. 45. Mr. A sent 250 units costing Rs. 10,000 each to Mr. B. Mr. B sold 150 units @ Rs. 14,200 per unit on credit and 75 units @ Rs. 14,000 for cash. Mr. B is entitled to a commission Rs.500 per unit. The amount of commission will be: (a) Rs. 75,000 (b) Rs. 37,500 (c) Rs. 1,12,500 (d) Rs. 85,000 Common Proficiency Test (CPT) Volume - I 151 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 46. Ram and Shyam enter into a joint venture. Both of them deposited Rs.65,000 and Rs.32,500 respectively into a joint venture. Goods were purchased for Rs.75,000 and expenses amounting Rs.10,950 were incurred. Goods sold for Rs.90,000 and goods unsold were taken over by Ram at an agreed value of Rs.2,700. The profit on joint venture is: (a) Rs. 17,700 (b) Rs. 4,500 (c) Rs. 4,050 (d) Rs. 6,750 47. On 1st January Shilpa owes Rs.10,000 and accepts a 3 months bill for the amount. On the date of maturity Shilpa, not being able to honour the bill. She paid Rs.4,000 cash and requested to draw another bill for three months for the balance amount with interest @ 15% per annum. The amount of interest should be (a) Rs. 200 (b) Rs. 225 (c) Rs. 500 (d) Rs. 900 48. A draws a bill of Rs.10,000 on B on 23rd December, 2009 for one month. The bill is accepted on 25th December, 2009 by B. The due date of the bill will be: (a) 26th January, 2010. (b) 28th January, 2010. (c) 27th January, 2010. (d) 25th January, 2010. 49. On 1st January, 2010, Vimal sold goods worth Rs.20,000 to Renu and drew a bill on Renu for 3 months. Renu accepted the bill and returned it to Vimal who discounted the bill with bank on 4th February, 2010 @ 15% per annum. The discounting charges will be: (a) Rs. 3,000 (b) Rs. 750 (c) Rs. 500 (d) None of the three. 50. X and Y are partners sharing profit and losses in the ratio of 2:1. On 1st January, 2009, Z is admitted with 1/4th share in profits with guaranteed amount of Rs. 25,000. The profits for the year ended 31st December, 2009 amounting to Rs. 76,000. The share of Y in the profits should be: (a) Rs.19,000 (b) Rs.38,000 (c) Rs.17,000 (d) None of the above. 51. Dheeraj and Gopal are partners in a firm with capitals of Rs. 5,00,000 each. They admit Deepak as a partner with ¼th share in the profits of the firm. Deepak bring Rs. 8,00,000 as his share of capital. The profit and loss account showed a credit balance of Rs. 4,00,000 as on the date of his admission. The value of hidden goodwill will be (a) Rs. 14,00,000. (b) Rs. 18,00,000. (c) Rs. 10,00,000. (d) None of the above. 52. Rent due for the month of March will appear___________ in the cash book (a) On the receipt side (b) On the payment side (c) As a contra entry (d) No where 152 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 53. Alfa Ltd. issued 20,000, 8% debentures of Rs. 10 each at par. The debentures are redeemable at a premium of 20% after 5 years. The amount of loss on redemption of debentures should be: (a) Rs. 50,000 (b) Rs. 40,000 (c) Rs. 30,000 (d) None of the above. 54. Gama Ltd. issued 10,000, 10% debentures of Rs.100 each at a discount of 10%. The entire amount is payable on application. Application were received for 12,000 debentures. The allotment of debentures was made on 10th October, 2009. The amount which should be credited to the debentures account on 10th October, 2009 will be: (a) Rs. 12,00,000. (b) Rs. 10,80,000. (c) Rs. 9,00,000 (d) Rs. 10,00,000 55. Indigo Ltd. had 9,000, 10% redeemable preference shares of Rs. 10 each, fully paid up. The company decided to redeem these preference shares at par by the issue of sufficient number of equity shares of Rs.10 each fully paid up at a discount of 10%. The number of equity shares issued should be: (a) 9,000 (b) 11,000 (c) 10,000 (d) None of the above. 56. A firm dealing in cloth has 15,000 meters of cloth on April 1, 2009 valued at Rs.1,50,000 according to LIFO. The firm purchased 20,000 meters @ Rs.12 per meter during the year ending 31st March, 2010 and sold 30,000 meters @ Rs.25 per meter during the same period. As per LIFO, the closing stock will be valued at: (a) Rs. 60,000 (b) Rs. 1,25,000 (c) Rs. 50,000 (d) None of the above. 57. On January 1, 2010 Victory Ltd., purchased a second hand machinery for Rs. 50,000 and spend Rs. 2,000 as shipping and forwarding charges, Rs. 1,000 as import duty, Rs.1,000 as carriage inwards, Rs.500 is repair charges, Rs. 200 as installation charges, Rs.400 as brokerage of the middle man and Rs. 100 for an iron pad. Total cost of machinery is (a) Rs. 55,100 (b) Rs. 55,000 (c) Rs. 54,600 (d) Rs. 55,200. 58. On 1-4-2009, Ram invested Rs.1,00,000 in a business. Interest on capital is to be allowed @ 12% per annum. Amount of interest to be charged to P & L Account for the year 2009-2010 is: (a) Rs. 9,000. (b) Rs. 10,000 (c) Rs. 12,000 (d) None of the above. Common Proficiency Test (CPT) Volume - I 153 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 59. Goods costing Rs. 1,20,000 were sent on consignment basis. These goods are invoiced to give a gross margin of 20% on invoice price. The amount of loading is: (a) Rs. 24,000. (b) Rs. 30,000. (c) Rs. 20,000. (d) None of the above. 60. Mohan’s trial balance contains the following information: Discount received Rs.1,000 Provision for discount on creditors Rs.1,600 It is desired to maintain a provision for discount on creditors at Rs.1,100. The amount to be credited to P & L Account is : (a) Rs.1,500 (b) Rs.3,500. (c) Rs.1,000. (d) Rs.500. SECTION – B : MERCANTILE LAWS (40 MARKS) 61. A mate’s receipt (a) Is a document of title to goods (b) Is an acknowledgement for the receipt of goods (c) Both the above (d) None of the above 62. Each partner is a principal as well as an agent of other partners. (a) The above statement is correct (b) The above statement is not correct in case of unregistered partnerships (c) The above statement is incorrect (d) The above statement is correct only in case of registered partnerships 63. A contract was entered before 1st September, 1872 is governed by The Indian Contract Act, 1872 (a) Yes if the contract was entered in Indian soil (b) Yes if there was performance of the contract on or after 1st September 1872 (c) No as the act does not apply retrospectively (d) No as there was no performance on or after 1st September 1872 64. A share in a partnership: (a) Can be transferred in accordance with the terms and conditions contained in the partnership deed (b) Can be transferred only if all the partners agree for such transfer (c) Cannot be transferred at all. (d) Can be transferred through the recognized stock exchanges. 154 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 65. Which of the following is not correct? (a) Joint Hindu Family is governed by law relating to registration of agreements. (b) Joint Hindu Family is governed by Hindu Law. (c) Joint Hindu Family is governed by the Civil Procedure Code. (d) Both (a) & (c) 66. In case of sale (a) Property in goods passes to the buyer. (b) Risk in the goods passes to the buyer. (c) Both the above. (d) None of the above. 67. Which one of the following is not a contract? (a) A engages B for a certain work and promises to pay such remuneration as shall be fixed by C. B does the work. (b) A and B promise to marry each other. (c) A takes a seat in a public vehicle. (d) A invites B to a card party. B accepts the invitation. 68. Which of the statement is incorrect? (a) All illegal agreements are void but all void agreements are not necessary illegal. (b) A voidable contract is not voidable at the option of the aggrieved party. (c) Contracts that are immoral or opposed to public policy are illegal in nature. (d) All of the above. 69. The difference between contingent contract and wagering agreements are as follows: (a) A wagering agreement consists of reciprocal promises whereas a contingent contract may not contain reciprocal promises. (b) In a wagering agreement the uncertain event is the sole determining factor while in a contingent contract the event is only collateral. (c) A wagering agreement is void whereas a contingent contract is valid. (d) All of the above. 70. An agreement made without consideration is valid under the Indian Contract Act, 1872 if (a) The agreement is expresses in writing. (b) The agreement is made on account of natural love and affection or the parties to the agreement stand in a near relation to each other. (c) The document is registered under the law for the time being in force for registration of such document. (d) All of the above. Common Proficiency Test (CPT) Volume - I 155 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 71. Which of the following is not correct? (a) Minor can always plead minority. (b) Minor is liable for necessaries supplied to him. (c) Minor is a person who has not completed 18 years of age. (d) Minor can be a beneficiary. 72. Which of the following is not correct? (a) Consideration must be at the desire of the promisor. (b) Consideration may be past, present or future. (c) Consideration need not be adequate, but should be real and supported by free consent. (d) Consideration should be always monetary. 73. Novation means (a) Substituting a new contract for the old one. (b) Cancellation of the old contract. (c) Modifying or altering the terms of contract such that it has the effect of substituting a new contract for the old one. (d) Dispensing away the performance of the promise made by the other party. 74. The following may be treated as a breach of warranty: (a) Breach of warranty. (b) Breach of condition. (c) Both the above. (d) None of the above. 75. Registration of a partnership is complete (a) Only after the issue of certificate of Registration by the Registrar of Firms. (b) As soon as an application in the prescribed form with the prescribed fee and other relevant details is delivered to the Registrar of Firms. (c) Only after the Registrar of Firms records an entry of the statement in the Register of Firms to this effect. (d) After giving the information to the Central Government in this regard. 76. A company may be in the form of: (a) An unincorporated association. (b) Incorporated association. (c) Both the above. (d) None of the above. 77. A student was motivated by his teacher to sell his car (value being Rs. 10,00,000/-) for Rs. 5,00,000/-. The student sold the same at the desired price of the teacher. The student can sue the teacher on the ground of : (a) Undue Influence. (b) Fraud. (c) Misrepresentation. (d) Coercion. 78. Types of partners includes: (a) Active Partner. (b) Sleeping Partner. (c) Nominal Partner. (d) All of the above. 156 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 79. ‘Price’ under the Sale of Goods Act, 1930 means (a) Money or money’s worth. (b) Monetary consideration for the sale of goods. (c) Any consideration that can be expressed in terms of money. (d) None of the above. 80. Goods that are identified and agreed upon at the time of contract of sale are known as ________. (a) Specific Goods (b) Existing Goods (c) Future Goods (d) Generic Goods 81. A contract in which only one party has to fulfill his obligation at the time of the formation of the contract, the other party having fulfilled his obligation at the time of the contract or before the contract comes into existence is known as ________. (a) Unilateral Contract (b) Bilateral Contract (c) Quasi Contract (d) Express Contract 82. An offer made to the public in general which anyone can accept and do the desired act is ________. (a) General Offer (b) Special Offer (c) Cross Offer (d) Counter Offer 83. In case of an agreement to sell, subsequent loss or destruction of the goods is the liability of _______ . (a) The buyer (b) The seller (c) Both the buyer and the seller (d) The insurance company 84. An auction sale is an example of _________. (a) Invitation to treat an offer (b) Mere communication of information in the course of negotiation (c) Statement of intention (d) Offer 85. Agreement for the creation of monopolies__________. (a) Is allowed in the interest of economy (b) Is opposed to public policy and hence void (c) Is not detrimental to any nation (d) Is impossible because of perfect competition in today’s scenario 86. Quasi – contracts arise __________. (a) Where obligations are created without a contract (b) Where obligations are created under a contract (c) Out of natural causes (d) Out of man-made causes Common Proficiency Test (CPT) Volume - I 157 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 87. Wagering agreements are (a) Valid (b) Void (c) Unlawful (d) Illegal 88. The relationship of principal and agent may arise by_________. (a) Express or implied agreement (b) Ratification (c) Operation of law (d) All of the above 89. Goods that are defined only by description and not identified and agreed upon at the time of contract of sale are known as__________. (a) Specific Goods (b) Existing Goods (c) Future Goods (d) Unascertained Goods 90. Delivery by acknowledgment is_________. (a) Actual Delivery (b) Constructive Delivery (c) Symbolic Delivery (d) None of the above 91. In case of a sale the position of a buyer is that of _________. (a) Owner of the goods (b) Bailee of the goods (c) Hirer of the goods (d) None of the above 92. Rights of an unpaid seller include_________. (a) Right against the goods (b) Right of stoppage in transit (c) Right of re-sale (d) All of the above 93. Registration of a partnership firm is __________. (a) Compulsory from the beginning (b) Not compulsory till first five years of beginning of the partnership (c) Not compulsory at all (d) Compulsory only if the Registrar of Firms gives an order in this regard 94. Death of a partner ordinarily leads to _________. (a) Dissolution of the partnership. (b) Revision of the partnership. (c) Reconsidering of the partnership. (d) Induction of a new partner to carry on the partnership. 95. A new partner is held liable for all acts of the firm done __________. (a) Before he became a partner (b) After he became a partner. (c) Any time after even he ceases to be a partner and upto his death. (d) Before or after he became a partner 158 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 96. One of the essential elements of a partnership is agreement _________. (a) Which is enforceable (b) Which is legal (c) Between two or more persons (d) The object of which is not prohibited by law. 97. A person is deemed to be in a position to dominate the will of the other when he __________. (a) Holds real authority over the other (b) Holds apparent authority over the other (c) Stands in a fiduciary relation to the other (d) All of the above 98. As per the Indian Partnership Act, 1932 a partner may transfer his interest in the firm________. (a) By sale (b) By mortgage (c) By charge (d) All of the above 99. D P Tyre Co. Ltd. sold tyres to a dealer S, who sold those to D, a sub-dealer on the condition that those tyres would not be sold at a price lower than the list price fixed by D P Tyre Co. Ltd. and if the tyres were sold at a price lower than the list price, a penalty of $ 2 for every tyre sold below the list price would be recovered as damages. D sold five tyres below the list price. D P Tyre Co. Ltd. filed a suit against S. Is D P Tyre Co. Ltd. entitled to maintain the suit? (a) No since D P Tyre Co. Ltd. was not a party to the contract. (b) No since only 5 tyres are involved and the amount is insignificant. (c) Yes as D P Tyre Co. Ltd. is the producer of the tyres. (d) Yes as D P Tyre Co. Ltd. sold the tyres to S who in turn sold to D. 100. A, B and C are partners in a firm. B was murdered by D, who wanted to become a partner of the firm, but B has raised objections to it. The Partnership Deed contains a provision that the firm would not be dissolved after the death of any partner. Which of the following is correct? (a) Estate of B is liable for the act of the firm done after the death of B. (b) Estate of B is not liable for the act of the firm done after the death of B. (c) Estate of D is liable for the act of the firm done after the death of B. (d) D is liable for the act of the firm done after the death of B. SECTION – C : GENERAL ECONOMICS(50 MARKS) 101. The law of consumer surplus is based on : (a) Indifference curve analysis (b) Revealed preference theory. (c) Law of substitution (d) The law of diminishing marginal utility. Common Proficiency Test (CPT) Volume - I 159 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 102. Supply of a commodity is a: (a) Stock concept (b) A flow concept (c) Both stock and flow concept. (d) None of these. 103. If two goods were perfect substitutes of each other, it necessarily follows that (a) An indifference curve relating the two goods will be curvilinear. (b) An indifference curve relating the two goods will be linear. (c) An indifference curve relating the two goods will be divided into two segments which meet at a right angle. (d) An indifference curve relating the two goods will be convex to the origin. 104. The MC curve cuts the AVC and ATC curves (a) At the falling part of each. (b) At different points. (c) At their respective minimas. (d) At the rising part of each. 105. In general, most of the production functions measure (a) The productivity of factors of production. (b) The relation between the factors of production. (c) The economies of scale. (d) The relations between change in physical inputs and physical output. 106. Which of the following market situations explains marginal cost equal to price for attaining equilibrium? (a) Perfect competition. (b) Monopoly (c) Oligopoly. (d) Monopolistic competition. 107. The period of time in which the plant capacity can be varied is known as (a) The short period (b) The market period (c) The long period (d) All of the above. 108. A monopolist who is selling in two markets in which demand is not identical will be unable to maximize his profits unless he (a) Sells below costs of production in both markets. (b) Practices price discrimination. (c) Equates the volume of sales in both markets. (d) Equates marginal costs with marginal revenue in one market only. 109. Which of the following is not microeconomic subject matter? (a) The price of apples. (b) The cost of producing a fire truck for the fire department of Delhi, India (c) The quantity of apples produced for the apple market. (d) The national economy’s annual rate of growth. 160 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 110. Which of the following is a reason for the negative slope of the PPF? (a) The inverse relationship between the use of technology and the use of natural resources. (b) Scarcity at any point in time we have limited amounts of productive resources. (c) Resource specialisation. (d) Increasing opportunity costs. 111. SJSRY stands for (a) Swaran Jayanti Shahari Rozgar Yojana (b) Shahari Jeewan Sudhar Rashtriya Yojana (c) Sampoorna Jeewan Shahari Rozgar Yojana (d) None of the above. 112. Who is regulatory authority for telecom in India? (a) SEBI (b) TRAI (c) MTNL (d) BSNL 113. Which of the following has resulted in failure to achieve targets of industrial production? (a) Poor planning (b) Power, finance and labour problems (c) Technical complications (d) All of the above. 114. Oil and Natural Gas Corporation Indian Oil Corporation, Steel Authority of India, and Bharat Heavy Electricals are all examples of (a) Small scale units. (b) Private sector units (c) Public sector units (d) Sick units 115. Which of the following statements is correct with regard to external sector in the pre-reform period? (a) The foreign trade policy was very liberal, it allowed import of all types of goods. (b) Import of food grains was strictly prohibited (c) The balance of payments situation was quite comfortable (d) None of the above. 116. In the present context, money stock in India refers to: (a) M (b) M 1 2 (c) M (d) M 3 4 117. Giffen goods are those goods ___________ (a) For which demand increases as price increases (b) That have a high income elasticity of demand (c) That are in short supply (d) None of these Common Proficiency Test (CPT) Volume - I 161 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 118. Three methods of computing national income are ___________. (a) Production, outlay and income methods. (b) Balance of payments, income and consumption methods. (c) Saving, investment and income methods. (d) Outlay, depreciation and production methods. 119. When AR = Rs. 10 and AC = Rs. 8 the firm makes ___________. (a) Normal profit (b) Net profit (c) Gross profit (d) Supernormal profit 120. If two goods are complements, this means that a rise in the price of one commodity will induce ___________. (a) An upward shift in demand for the other commodity. (b) A rise in the price of the other commodity. (c) A downward shift in demand for the other commodity. (d) No shift in the demand for the other commodity. 121. ___________ controls affect indiscriminately all sectors of the economy. (a) Selective credit (b) Quantitative (c) Margin requirements (d) Optional 122. ‘The lender of last resort’ means ___________. (a) The government coming to the rescue of poor farmers. (b) Central bank coming to the rescue of other banks in times of financial crisis. (c) Commercial banks coming to the rescue of small industrial units. (d) People coming to the rescue of commercial banks in times of their financial crisis. 123. ___________is the custodian of monetary reserves in India (a) SBI (b) SIDBI (c) NABARD (d) RBI 124. Demand for final consumption arises in ____________. (a) Household sector only. (b) Government sector only. (c) Both household and government sectors. (d) Neither household nor government sector. 125. Service Tax was introduced in the financial year ___________. (a) 1991-92 (b) 2001-02 (c) 1994-95 (d) 1995-96 126. At present, the marginal rate of income tax(i.e. tax for the highest slab) is___________ (a) 10%. (b) 20% (c) 30% (d) 40% 162 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 127. About ___________ percent of the external assistance has been in the form of loans. (a) 40 (b) 30 (c) 10 (d) 90 128. ___________ is a systematic record of all the economic transactions between one country and rest of the world (a) Balance of trade (b) Balance of transactions (c) Budget (d) Balance of payments 129. If borrowings and other liabilities are added to the budget deficit we get ___________. (a) Revenue deficit (b) Capital deficit (c) Primary deficit (d) Fiscal deficit 130. ___________ gives the financial assistance for construction of house to be given to the poor living in the rural area. (a) NREGS (b) IAY (c) IRDP (d) SGRY 131. According to National Sample Survey 2004-05 ___________ percent of the population of India lives below poverty line. (as per URP Method) (a) 27.5 (b) 25.7 (c) 22.5 (d) 21.5 132. In terms of deposit mobilization, ___________ leads other states. (a) U.P (b) Maharashtra (c) Kerala (d) Bihar Questions 133 to 137 are based on the Figure 1. Figure 1 Common Proficiency Test (CPT) Volume - I 163 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 133. Figure 1 represents a: (a) Perfectly competitive firm. (b) Perfectly competitive industry. (c) Monopolist (d) None of the above. 134. In figure 1, the firm’s marginal revenue curve is curve (a) E (b) A (c) F (d) B 135. In Figure 1, curve E is the firm’s: (a) Marginal cost curve (b) Average cost curve (c) Demand curve. (d) Marginal revenue curve 136. In figure 1, the firm’s most efficient output is: (a) K (b) L (c) M (d) N 137. In figure1, the firm’s most profitable output is: (a) K (b) L (c) M (d) N Consider Sumit’s production data given in the table 1. Use Table 1 to answer questions 138-142 Table 1 Number of Workers Total Output 1 10 2 22 3 31 4 40 5 47 6 52 7 56 8 58 9 60 10 61 138. Suppose Sumit has to pay his workers Rs 20 per hour, and further suppose there are no other production costs at all. What is the marginal product of the 5th worker? (a) 12 (b) 9 (c) 7 (d) 8 164 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 139. In Table 1, Sumit’s Average Total Cost when 40 units are produced is: (a) Rs. 2 (b) Rs. 80 (c) Rs. 5 (d) Rs. 20 140. Using data in Table 1, we know that the approximate marginal cost of the 52nd unit of output is: (a) Rs. 0.25 (b) Rs. 1.25 (c) Rs. 2.50 (d) Rs. 4.00 141. Suppose Sumit decides to purchase fire insurance which costs Rs. 87,600 a year.(As it happens, it works out to be Rs 10 per hour) The approximate marginal cost of the 52nd unit now is: (a) Rs. 0.25 (b) Rs. 1.25 (c) Rs. 2.50 (d) Rs. 4.00 142. Sumit’s marginal product of the 9th worker: (a) 2 units (b) 3 units (c) 5 units (d) 7 units Read table 2 and answer Questions number 143-145 % change in price % change in quantity Elasticity demanded(quantity supplied) Demand for salt 20 -1 x Demand for bananas 15 y 3 Supply of chicken z 14 1 143. Refer Table 2 and find the value of x. (a) -20 (b) -0.05 (c) -1 (d) Can not be determined 144. Refer Table 2 and find the value of y. (a) -5 (b) 15 (c) -45 (d) -3 145. Refer table 2 and find the value of z. (a) 14 (b) 1 (c) 0.07 (d) 5 Common Proficiency Test (CPT) Volume - I 165 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 Read table 3 and answer Questions number 146-147 With the same amount of resources, a farmer can feed the following combinations of sheep and cows: Table 3 Sheep Cows Option I 84 22 Option II 75 25 146. Given the options available to him, what is the opportunity cost to the farmer of feeding one cow? (a) 1 sheep (b) 3 sheep (c) 9 cows. (d) 9 sheep. 147. Given the options available to him, what is the opportunity cost to the farmer of feeding one sheep? (a) 9 sheep. (b) 3 cows. (c) 1/3 sheep. (d) 1/3 cow. 148. If the quantity of CD demanded increases from 260 to 290 in response to an increase in income from Rs. 9,000 to Rs. 9,800, the income elasticity of demand is approximately: (a) 3.4 (b) 0.01 (c) 1.3 (d) 2.3 149. If the quantity of good X demanded increases from 8 to 12 in response to an increase in the price of good Y from Rs. 23 to Rs. 27, the cross elasticity of demand for X with respect to the price of Y is approximately: (a) 0.35 and X and Y are complements. (b) 0.35 and X and Y are substitutes. (c) 2.5 and X and Y are complements. (d) 2.5 and X and Y are substitutes. 150. The following table provides a breakdown of a country’s population (millions): Table 4 Total population 228 Children(below the working age) 36 Unemployed people looking for a job 18 Full-time students (not looking for a job) 4 Retired people 28 Employed people 126 People confined to correctional institutions 2 Other adults not in the labour force 14 Based on the information in table 4, the country’s unemployment rate is (a) 7.9% (b) 12.5% (c) 20.2% (d) 22.2% 166 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India SECTION – D : QUANTITATIVE APTITUDE(50 MARKS) 151. Standard deviation of binomial distribution is : (a) (npq)2 (b) npq (c) (np)2 (d) np 152. A∪∪∪∪∪A’ is equal to (a) A (b) Sample Space (c) φ (d) None of these x³ 153. The integral of dx is equal to: x²+1 1+2x² 1−2x² +c +c (a) 4 ( x²+1 ) ² (b) 4 ( x²+1 ) ² −( 1+2x² ) +c (c) 4 ( x²+1 ) ² (d) None of these. 154. Find f o g for the functions f (x) = x8, g(x) = 2x2 + 1 (a) x8 (2x2+1) (b) x8 (c) 2x2+1 (d) (2x2+1)8 155. A sample survey is prone to: (a) Sampling error. (b) Non-sampling error. (c) Either (a) or (b). (d) Both (a) and (b). 156. Simple Aggregative Method is used for computing a: (a) Relative index. (b) Price index. (c) Value index. (d) None of these. 157. The algebraic sum of deviations of a set of observations from their A.M. is: (a) Negative. (b) Positive. (c) Zero. (d) None of these. 158. Number of petals in a flower is an example of: (a) A continuous variable. (b) A discrete variable. (c) An attribute. (d) All of these. Common Proficiency Test (CPT) Volume - I 167 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 159. A Qualitative characteristic is known as : (a) An attribute. (b) A variable. (c) A discrete variable. (d) A continuous variable. 160. Methods that are employed for the collection of primary data (a) Interview method. (b) Questionnaire method. (c) Observation method. (d) All of these. 161. The normal curve is ______. (a) Bell-shaped (b) U-shaped (c) J-shaped (d) Inverted J-shaped 162. The ______ is satisfied when P ××××× P ××××× P = 1 ab bc ca (a) Time reversal test (b) Factor reversal test (c) Circular test (d) Unit test 163. ______ is an extension of time reversal test. (a) Factor reversal test (b) Circular test (c) Unit test (d) None of these 164. For a set of observations, the sum of absolute deviations is ______, when the deviations are taken from the median. (a) Zero (b) Maximum (c) Minimum (d) None of these 165. The triplicate ratio of 4: 5 is ______. (a) 125: 64 (b) 16:25 (c) 64:125 (d) None of these 166. When we want to divide the given set of observations into two equal parts, we consider ______. (a) Mean (b) Median (c) Mode (d) None of these dy 167. If y = x2x then is ______. dx (a) 2x2x(1 + logx) (b) 2(1 + logx) (c) x2x(1 + logx) (d) None of these 168 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 2x2 +x–3 168. The value of lim is ______. x→1 x³+9 (a) 1 (b) 2 (c) 0 (d) 3 169. The two variables are known to be ______ if the movement on the part of one variable does not produce any movement on other variable in a particular direction. (a) Correlated (b) Uncorrelated (c) Positive correlated (d) Negative correlated 170. The correlation between demand and price (for normal goods) is ______. (a) Zero (b) Positive (c) Negative (d) None of these 171. Differentiate 1+x² w.r.t. x, we get : 2x x (a) (b) 1−x² 1+x² x² (c) (d) None of these. 1+x² x9 −a9 172. If lim = 9, the value of a is : x→a x−a (a) 9,–9 (b) 1,–1 (c) 8,–8 (d) None of these 173. If the coefficient of correlation between two variables is –0.3, then the coefficient of determination is (a) 0.3 (b) 0.09 (c) 0.7 (d) 0.9 174. If the coefficient of correlation between two variables is 0.6, then the percentage of variation accounted for is _______ (a) 60% (b) 40% (c) 64% (d) 36% 175. What is the chance of picking a heart or a queen not of heart from a pack of 52 cards? (a) 17/52 (b) 1/3 (c) 4/13 (d) 3/13 Common Proficiency Test (CPT) Volume - I 169 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 176. In a single throw with two dice, chance of throwing 8 is (a) 1/9 (b) 5/36 (c) 5/18 (d) 2/9 177. A bag contains 10 red and 10 green balls and a ball is drawn from it. The probability that it will be green is: (a) 1/10 (b) 1/3 (c) 1/2 (d) None of these 178. If an event cannot take place, probability will be_______ (a) 1 (b) –1 (c) 0 (d) None of these 179. The mean of binomial distribution is 4 and standard deviation 3. What is the value of n? (a) 14 (b) 16 (c) 18 (d) 20 180. Two variables x and y are related by 5x + 6y + 9 = 0 and x = 6, then y is (a) 6.50 (b) 6.66 (c) – 6.50 (d) – 6.66 181. The mean weight for a group of 40 female students is 42 kg and that for a group of 60 male students is 52 kg. What is the combined mean weight? (a) 46 (b) 47 (c) 48 (d) 49 182. The wages of 8 workers expressed in rupees are 42, 45, 49, 38, 56, 54, 55, 47. Find median wage? (a) 47 (b) 48 (c) 49 (d) 50 183. Refer following table: Frequency distribution of weights of 16 students Weight in kg. No. of students (Class interval) (Frequency) 44 – 48 4 49 – 53 5 54 – 58 7 Total 16 Find class mark for the first class interval? (a) 4 (b) 46 (c) 44 (d) 48 170 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 184. Find the sum of 10 terms G. P with first term and common ratio being 8 and 3 respectively? (a) 2,63,291 (b) – 2,36,192 (c) 2,19,631 (d) 2,36,192 185. If compounding is done quarterly, what will be the amount Mr. Ravi will receive for Rs. 4000 @10% rate of interest for 4 years? (a) Rs. 5893.02 (b) Rs. 5938.02 (c) Rs. 5000 (d) None of these. 186. The equation of a line passing through (3, 4) and slope 2 is (a) y – 2x + 2 = 0 (b) y – 3x + 4 = 0 (c) y – 4x + 3 = 0 (d) y – 2x + 4 = 0 187. Find the logarithmic of 58,564 to the base 11 2 (a) 3 (b) 4 (c) 2 (d) None of these 1 1 1 188. Find the sum of progression 1, , , ,,…………… ,10 terms. 2 4 8 (a) 1.9 (b) 1.989 (c) 1.998 (d) 1.89 189. Eleven students are participating in a race. In how many ways the first 5 prizes can be won? (a) 44550 (b) 55440 (c) 120 (d) 90 190. Solve for x, 4x – 3.2x+2 + 25=0 (a) 4, 8 (b) –2, –3 (c) 2, 6 (d) 2,3 191. A sum of money doubles itself in 25 years. The number of years it would trebles itself is: (a) 50 years. (b) 37.5 years. (c) 75 years. (d) None of these. 192. The ratio compound of two ratios 4:3 and 7:3 is (a) 12:21 (b) 28:9 (c) 9:28 (d) None of these Common Proficiency Test (CPT) Volume - I 171 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 6 3 ∫( ) 3x²+5x+2 193. Evaluate the value of dx 0 (a) 55 (b) 55.5 (c) 57 (d) 56 194. The ratio of two quantities is 5:9. If the antecedent is 25, the consequent is: (a) 9 (b) 45 (c) 40 (d) None of these 195. The sum of two numbers is 38 and their difference is 2. Find the two numbers? (a) 20, 18 (b) 10, 12 (c) 17, 15 (d) None of these. 196. Mr. A plans to invest upto Rs. 50,000 in two stocks X and Y. Stock X(x) is priced at Rs. 175 and Stock Y(y) at Rs. 95 per share. This can be shown by _________ (a) 175x + 95y < 30,000 (b) 175x + 95y > 30,000 (c) 175x + 95y = 30,000 (d) None of these 197. Find the value of n if (n + 1)! = 42 (n – 1)! (a) 6 (b) –7 (c) 7 (d) –6 198. The number of subsets of the set {1, 2, 3, 4} is: (a) 13 (b) 12 (c) 16 (d) 15 199. The derivative of 8x2–2x+5 w.r.t. x is : (a) 16x + 2 (b) 16x – 2 (c) 16x – 2 + 5 (d) 16x + 7 200. A box contains 7 red, 6 white and 4 blue balls. How many selections of three balls can be made so that none is red? (a) 90 (b) 120 (c) 48 (d) 24 (cid:2)(cid:2)(cid:2) 172 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India BOARD OF STUDIES THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA COMMON PROFICIENCY TEST Model Test Paper – BOS/CPT – 7 Time : 4 hours Maximum Marks : 200 The test is divided into four sections. Every correct answer carries + 1 mark each and – 0.25 mark will be deducted for each wrong answer. SECTION – A : FUNDAMENTALS OF ACCOUNTING (60 MARKS) 1. “Assets should be valued at the price paid to acquire them” is based on: (a) Accrual concept. (b) Cost concept. (c) Money measurement concept. (d) Realisation concept. 2. Cash book is a form of (a) Trial Balance. (b) Journal. (c) Ledger. (d) All of the above. 3. If bank balance as per cashbook differs from that appearing in the current account statement, then the balance considered for finalizing the accounts is of (a) Adjusted cash book. (b) Cash book before any adjustments. (c) Pass book. (d) Not taken to final accounts in case of difference in the balance. 4. Material costing Rs. 700 in the erection of the machinery and the wages paid for it amounting to Rs. 400 should be debited to: (a) Material account. (b) Wages account. (c) Purchases account. (d) Machinery account. Common Proficiency Test (CPT) Volume - I 173 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 5. Difference of totals of both debit and credit side of the trial balance is transferred to (a) Difference account. (b) Trading account. (c) Miscellaneous account. (d) Suspense account. 6. “Inventories should be out of godown in the sequence in which they arrive” is based on: (a) HIFO. (b) LIFO. (c) FIFO. (b) Weighted average. 7. The value of an asset after deducting depreciation from the historical cost is known as: (a) Fair value. (b) Book value. (c) Market value. (d) Net realisable value. 8. Expenses incurred to retain the title of a building is a (a) Revenue expenditure. (b) Capital expenditure. (c) Deferred revenue expenditure. (d) None of the above. 9. Carriage inwards is debited to (a) Trading account. (b) Profit and loss account (c) Profit and loss appropriation account (d) Balance sheet 10. A bill has been drawn on 26.2.2010 payable after 90 days. The maturity date of the bill will be _________ (a) 30.5.2010. (b) 29.5.2010. (c) 28.5.2010. (d) 27.5.2010. 11. If total of all debits of a ledger account is more than the total of all credits of the same account, then the balancing figure is placed at the __________ (a) Debit side of that ledger account. (b) Credit side of that ledger account. (c) End of that ledger account as a footnote. (d) None of the above. 12. The cost of a small calculator is accounted as an expense and not shown as an asset in a financial statement of a business entity due to __________ (a) Materiality concept. (b) Matching concept. (c) Periodicity concept. (d) Conservatism concept. 13. A minimum quantity of stock always held as precaution against out of stock situation is called __________ (a) Zero stock. (b) Risk stock. (c) Base stock. (d) None of the above. 174 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 14. M/s Bhaskaran & Co. drew a three months’ bill of Rs. 6,000 on M/s Patel & Co. on 1.1.2010 payable to M/s Surendran & Co. or bearer. Here the payee will be _______ (a) M/s Bhaskaran & Co. (b) M/s Patel & Co. (c) M/s Surendran & Co. or bearer. (d) All of the above. 15. Fluctuating capital account is credited with __________ (a) Interest on capital. (b) Profits of the year. (c) Salaries or remuneration of the partners. (d) All of the above. 16. If the incoming partner brings any additional amount in cash other than his capital contributions then it is termed as ________ (a) Capital. (b) Reserves. (c) Profits. (d) Premium for goodwill. 17. Memorandum joint venture account is prepared _________ (a) When separate set of joint venture books is prepared. (b) When each co-venturer keeps records of all the the joint venture transactions himself. (c) When each co-venturer keeps records of their own joint venturer transactions. (d) None of the above. 18. In case of del-credere commission provided by consignor to consignee, bad debts is a loss of _________ (a) Consignee. (b) Consignor. (c) Both consignor and consignee. (d) Neither of the two. 19. The party who sends the goods for sale on fixed commission basis is __________ (a) Consignee. (b) Consignor. (c) Drawee. (d) Drawer. 20. Discounting of bill by the drawer is done with________ (a) Creditor. (b) Drawee. (c) Bank. (d) Notary public. Common Proficiency Test (CPT) Volume - I 175 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 21. Under this method, the annual charge for depreciation decreases from year to year, so that the burden and benefits of later years are shared by the earlier years. Also, under this method, the value of asset can never be completely extinguished. The other advantage of this method is that the total charge to revenue is uniform when the depreciation is high, repairs are negligible; and as the repairs increase, the burden of depreciation gets lesser and lesser. This method of depreciation is: (a) Straight Line Method. (b) Written Down Value Method. (c) Annuity Method. (d) Sinking Fund Method. 22. M/s Mittal & Sen & Co. sends goods costing Rs. 50,000 to M/s Suneja & Jadeja & Co. for sale at invoice price. The invoice price of the goods was Rs. 60,000. Former spends Rs. 2,000 on freight for sending the delivery and later spends Rs. 1,500 for receiving the delivery. M/s Suneja & Jadeja & Co. sold 90% of goods at invoice price and earned a commission of Rs. 5,400. In the due course he made some credit sales also out of which some amount were proved to be bad and was borne by him only. Remaining goods were taken back by M/s Mittal & Sen & Co. The balance due was paid by M/s Suneja & Jadeja & Co. through a demand draft. The above transactions are in the nature of : (a) Consignment (b) Joint venture (c) Sale of goods on sale or return basis (d) Credit sales 23. It is decided to form a partnership with a total capital of Rs. 6,00,000. Three partners Ajay, Vijay and Sanjay who will share profits and losses in the ratio of 5:3:2, agreed to contribute proportionate capital. Their capital contribution will be: (a) Rs. 3,00,000: Rs.1,80,000: Rs. 1,20,000 (b) Rs. 2,00,000: Rs.2,00,000: Rs. 2,00,000 (c) Rs. 3,00,000: Rs.2,00,000: Rs. 1,00,000 (d) Rs. 1,00,000: Rs.2,00,000: Rs. 3,00,000 24. Aditya Ltd. issued 50,000 equity shares of Rs. 10 each for subscription. 40,000 shares were subscribed by the public by paying Rs. 3 as application money. Number of shares allotted to public by Aditya Ltd. will be: (a) 50,000 equity shares. (b) 40,000 equity shares. (c) 30,000 equity shares. (d) 10,000 equity shares. 25. A company issued 1,00,000 equity shares of Rs.10 each at a premium of Rs. 2 and 5,000 10% Debentures of Rs. 100 each at 10% discount. All the shares and debentures were subscribed and allotted by crediting 10% Debentures account with : (a) Rs. 10,00,000 (b) Rs. 12,00,000 (c) Rs. 5,00,000 (d) Rs. 4,50,000 176 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 26. Preference shares amounting to Rs. 1,00,000 are redeemed at a premium of 5% by issue of shares amounting to Rs. 50,000 at a premium of 10%. The amount to be transferred to capital redemption reserve account will be: (a) Rs. 55,000. (b) Rs. 50,000. (c) Rs. 45,000. (d) Rs. 57,500. 27. On 1st June 2009, Harsh Ltd. issued 4,000 9% convertible debentures of Rs. 100 each at a premium of 10%. Interest is payable on September 30 and March 31, every year. Assuming that the interest runs from the date of issue, the amount of interest expenditure debited to profit and loss account for the year ended 31st March 2010 will be : (a) Rs. 12,000. (b) Rs. 18,000. (c) Rs. 36,000. (d) Rs. 30,000. 28. Followings are the information related to Great Ltd.: (i) Equity share capital called up Rs. 3,00,000, (ii) Call-in advance Rs. 10,000, (iii) Call in arrears Rs. 15,000 and (iv) Proposed dividend 20%. The amount of dividend payable by Great Ltd. will be: (a) Rs. 57,000 (b) Rs. 59,000. (c) Rs. 60,000. (d) Rs. 58,000. 29. 3,000 shares of Rs. 10 each of Krishna were forfeited by crediting Rs. 5,000 to share forfeiture account. Out of these, 1,800 shares were re-issued to Radhe for Rs. 9 per share. The amount to be transferred to capital reserve account will be (a) Rs. 3,200. (b) Rs. 2,000. (c) Rs. 1,800. (d) Rs. 1,200. 30. Bittu Ltd. issued 10,000 shares of Rs.10 each to public. Applications were received for 12,000 shares by paying Rs.2 per share. Shares were allotted on pro-rata basis to the public and excess money was kept to be used in allotment and further calls. Kittu failed to pay the allotment money of Rs.3 per share and her 1,000 shares were forfeited after due notice. No further calls were made to her. Her call in arrears was (a) Rs. 3,000. (b) Rs. 2,800. (c) Rs. 2,600. (d) Rs. 2,400. 31. He, She and Me are partners in a firm sharing profits and losses in the ratio of 5:3:2. Firm took Separate Life Policy of Rs. 50,000, Rs.1,00,000 and Rs.1,50,000 for He, She and Me respectively. The share of C in the policy will be: (a) Rs. 1,50,000. (b) Rs. 90,000. (c) Rs. 60,000. (d) Rs. 3,00,000. 32. Vijay, Vineet and Vivek are partners in a firm sharing profits or losses in 3:2:1. Vijay retires and goodwill of the firm was revalued at Rs.18,000. If new profit sharing ratio is 2:1, then Vijay’s share of goodwill debited respectively to Vineet and Vivek’s capital account will be: (a) Rs. 6,000: Rs. 3,000. (b) Rs. 9,000: Rs. 9,000. (c) Rs. 4,500: Rs. 4,500. (d) Nothing is to be debited to their account. Common Proficiency Test (CPT) Volume - I 177 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 33. Amit, Rohit and Sumit are partners sharing profits and losses in the ratio of 5:4:3. Sumit retires and if Amit and Rohit shares profits of Sumit in 4:3, then new profit sharing ratio will be: (a) 4:3. (b) 47:37. (c) 5:4. (d) 5:3. 34. Rachna and Sapna are partners sharing profits equally. They admitted Ashna for 1/3 share in the firm. The new profit sharing ratio will be: (a) 3:2:1. (b) 2:2:1. (c) 1:1:1. (d) Cannot be calculated. 35. Find the goodwill of the firm using capitalization method from the following information: Total capital employed in the firm Rs. 80,00,000 Reasonable rate of return 15% Profits for the year Rs. 12,00,000 (a) Rs. 68,00,000. (b) Rs. 12,00,000. (c) Rs. 11,88,000. (d) Nil. 36. A trader has credited certain items of sales on approval aggregating Rs. 60,000 to Sales Account. Of these, goods of the value of Rs.16,000 have been returned and taken into stock at cost Rs. 8,000 though the record of return was omitted in the accounts. In respect of another parcel of Rs.12,000 (cost being Rs. 6,000) the period of approval did not expire on the closing date. Cost of goods lying with customers should be: (a) Rs. 12,000 (b) Rs. 54,000 (c) Rs. 6,000 (d) None of the above 37. On 1st January 2010 Nisha draws a bill for Rs. 5,000 on Disha for 3 months for mutual accommodation. On the same day, Disha draws a bill for Rs. 6,000 on Nisha for 4 months. Both the bills were discounted with the bank for Rs. 4,850 and Rs. 5,700 respectively. 50% of the receipt was sent to the other party. First bill was met on its due date. On the maturity date of Nisha’s acceptance, Disha will send (a) Rs. 3,000 (b) Rs. 2,850 (c) Rs. 2,425 (d) Rs. 2,500 38. Gaurav has to pay Rs. 10,000 to Saurabh on account of Bill accepted by him for credit purchases. Due to financial crisis, Gaurav was unable to pay the bill and was declared insolvent and his estate realized only 30 paisa in a rupee. The amount to be debited to bad debts account of Saurabh will be (a) Rs. 3,000 (b) Rs. 7,000 (c) Rs. 10,000 (d) None of the above 178 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 39. Ram in a joint venture with Shyam purchased goods costing Rs. 20,000 and sends to Shyam for sale incurring Rs.1,000 on freight. Shyam took the delivery and paid Rs. 500 as carriage. He sold the goods costing Rs. 18,000 for Rs. 25,000 and kept the remaining goods at cost price. Sharing equal profits of the venture, amount to be paid by Shyam to Ram will be: (a) Rs. 25,000 (b) Rs. 22,250 (c) Rs. 23,750 (d) Rs. 24,500 40. Expenses incurred by the consignor on sending the goods to the consignee is Rs.1,000 for insurance, Rs. 1,500 on freight and Rs.500 on packing the goods. While expenses incurred by the consignee on behalf of the consignment are Rs. 800 on octroi, Rs. 600 as godown charges and Rs. 1,200 as selling expenses. The amount to be excluded while calculating consignment stock will be: (a) Rs. 2,600 (b) Rs. 600 (c) Rs. 1,200 (d) Rs. 1,800 41. The holder of debentures issued as collateral security is entitled to interest on (a) The amount of loan (b) Face value of debentures (c) Both (a) and (b) (d) No interest will be payable. 42. Opening stock of the year is Rs. 20,000, Goods purchased during the year is Rs.1,00,000, Carriage Rs. 2,000 and Selling expenses Rs.2,000. Sales during the year is Rs. 1,50,000 and closing stock is Rs. 25,000. The gross profit will be: (a) Rs. 53,000. (b) Rs. 55,000. (c) Rs. 80,000. (d) Rs. 51,000. 43. Following errors have been rectified at the end of the year: (i) The return inward book was undercast by Rs. 150. (ii) The return outward book was overcast by Rs. 1,000. (iii) A payment of Rs.1,500 on account of salaries has been posted twice in the salaries account although entered correctly in the cashbook. The above errors if rectified, will give correct trial balance. Before rectification, balance of suspense account was (a) Rs. 150 (Dr.) (b) Rs. 1,150 (Dr.) (c) Rs. 350 (Cr.) (d) Rs. 1,500 (Cr.) 44. Given below are the ledger balances of a management consultancy firm: Capital Rs. 4,00,000, Computer Rs. 25,000, Air conditioner and furniture Rs. 1,00,000, Fixed Deposits Rs. 2,00,000, Salaries Rs. 8,00,000, Fees received Rs. 12,00,000, Travelling expenses Rs. 1,50,000, Rent and office expenses Rs. 2,40,000, Cash balances Rs. 1,80,000. Bank overdraft Rs. 95,000. The total of trial balance will be: (a) Rs. 16,00,000. (b) Rs. 16,95,000. (c) Rs. 14,50,000. (d) Rs. 15,00,000. Common Proficiency Test (CPT) Volume - I 179 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 45. M/s Delhi Stationers purchase goods from the manufacturers, do packaging and labelling and sell to their customers. At the year-end they had 1,000 pieces of toilet soaps in hand, purchase price of which is Rs. 3.25 per piece. These are yet not packed and labelled. The packaging cost per unit is Re. 0.35 per piece and selling price is Rs. 4.25 per piece. The historical cost and selling price of the closing stock will be (a) Rs. 3,250 and Rs. 3,900 respectively. (b) Rs. 3,600 and Rs. 4,250 respectively. (c) Rs. 3,250 and Rs. 4,250 respectively. (d) Rs. 3,600 and Rs. 3,900 respectively. 46. Depreciable amount of the machinery is Rs. 11,00,000. The machine is expected to produce 30 lakhs units in its 10 year life and expected distribution of production units is as follows: 1-3 year 5 lacs units each year 4-6 year 3 lacs units each year 7-10 year 1.5 lacs units each year. Annual depreciation for 1-3 year, using production units method will be ______ (a) Rs. 1,10,000. (b) Rs. 55,000. (c) Rs. 65,000. (d) Rs. 1,83,333. 47. The cashbook showed an overdraft of Rs. 2,000 as cash at bank, but the pass book made up to the same date showed that cheques of Rs. 200, Rs. 150 and Rs. 175 respectively had not been presented for payments; and the cheque of Rs. 600 paid into account had not been cleared. The balance as per the pass book will be ______ (a) Rs. 2,150. (b) Rs. 2,175. (c) Rs. 1,475. (d) Rs. 2,075. 48. If cost of physical stock on 31.3.2010 is Rs.2,80,000 and out of which stock of Rs. 1,20,000 is held as consignee. Goods costing Rs. 25,000 were damaged beyond repair and were expected to realize Rs. 5,000 only. The value of own stock on 31.3.2010 will be ______ (a) Rs. 2,60,000 (b) Rs. 1,60,000 (c) Rs. 1,35,000 (d) Rs. 1,40,000 49. A lease is purchased on 1st January, 2010 for 4 years at a cost of Rs. 1,00,000. Lease is to be depreciated by the annuity method charging 5% interest. Annuity of Re.1 over 4 years charging 5% interest is Re. 0.282012. The amount of annual depreciation will be ______ (a) Rs. 28,201. (b) Rs. 20,000. (c) Rs. 25,000. (d) None of the above. 50. 18% investment of Rs. 1,00,000 and interest received on investment Rs. 15,000 have been given in the trial balance for the period ended on 31.3.2010. The amount of interest outstanding in the final accounts will be ______ (a) Rs.18,000 (b) Rs.15,000 (c) Rs.3,000 (d) Nil 180 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 51. Bank overdraft as per trial balance is Rs. 1,60,000. Bank has allowed the customer to overdrew 80% of the hypothecated value of the stock. Hypothecation of stock has been done by the bank at 80% of the original closing stock value. The amount of closing stock is: (a) Rs. 2,00,000. (b) Rs. 2,50,000. (c) Rs. 1,02,400. (d) Rs. 1,28,000. 52. Net profit before commission has been Rs. 1,20,000. Manager’s commission is 20% of net profit before charging such commission. The amount of manager’s commission is (a) Rs. 22,000. (b) Rs. 25,000. (c) Rs. 24,000. (d) Rs. 20,000. 53. Out of four floors of a building, ground floor is used as a store house for trading goods, first and second floor is used for office purpose and third floor is used for residential purposes. Total depreciation of a building amounts to Rs. 80,000. The depreciation of building to be shown in the business books will be ______ (a) Rs. 80,000. (b) Rs. 60,000. (c) Rs. 40,000. (d) Rs. 20,000. 54. Closing stock was not taken on 31.3.2010 but only on 7.4.2010. Following transactions had taken place during the period from 1.4.2010 to 7.4.2010. Sales Rs. 2,50,000, purchases Rs. 1,50,000, stock on 7.4.2010 was Rs. 1,80,000 and the rate of gross profit on sales was 20%. Closing stock on 31.3.2010 will be ______ (a) Rs. 3,80,000. (b) Rs. 4,00,000. (c) Rs. 2,30,000. (d) Rs. 1,50,000. 55. Ravi Ltd. issued 1,40,00,000, 9% debentures of Rs.100 each at a discount of 6%, redeemable at a premium of 5% after 3 years payable as Rs.50 on application and Rs.44 on allotment. Total amount of loss on issue of debentures will be (a) Rs. 8,40,00,000. (b) Rs. 7,00,00,000. (c) Rs. 15,40,00,000. (d) Rs. 1,40,00,000. 56. Kena Ltd. issued 10,000 12% Debentures of Rs.100 each at a discount of 10%payable in full on application by 31st March, 2010. Applications were received for 12,000 debentures. Debentures were allotted on 9th June, 2010. The amount of excess money refunded on the same date will be ______ (a) Rs. 1,80,000. (b) Rs. 1,00,000. (c) Rs. 1,20,000. (d) Rs. 1,50,000. 57. Ankush Ltd. had issued 10,000, 10% Redeemable Preference Shares of Rs. 100 each, fully paid up. The company decided to redeem these preference shares at par, by issue of sufficient number of equity shares of Rs. 10 each at a premium of Rs.2 per share as fully paid up. The amount to be transferred to capital redemption reserve account will be ______ (a) Rs. 10,00,000. (b) Rs. 12,00,000. (c) Rs. 8,00,000. (d) Nil. Common Proficiency Test (CPT) Volume - I 181 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 58. Bill of Rs. 10,000 accepted by Rajesh was endorsed by Ritesh to Dinesh on account of final settlement of Rs.10,500. The benefit of Rs.500 earned by Ritesh was: (a) Credited to discount allowed account by Rs. 500. (b) Credited to discount received account by Rs. 500. (c) Credited to rebate account by Rs.500. (d) Not shown in the books of Ritesh at all. 59. A company on non-receipt of First Call money of Rs. 2 per share and Final Call money of Rs. 3 per share from Rahul, debited Call-in-Arrears account by Rs. 2,000 and Rs. 3,000 respectively. After due notice 1,000 shares of Rs.10 each were forfeited from Rahul. The amount to be credited to First Call Account at the time of entry for forfeiture will be (a) Rs. 2,000. (b) Rs. 3,000. (c) Nil. (d) Rs. 10,000. 60. 1,000 shares of Rs. 100 each were issued to a promoter of the company for their legal services, rendered in the formation of the company. For this, company credited Share Capital Account and debited (a) Goodwill account by Rs. 1,00,000. (b) Legal services account by Rs. 1,00,000. (c) Promoter’s account by Rs. 1,00,000. (d) Formation expenses account by Rs. 1,00,000. SECTION – B : MERCANTILE LAWS (40 MARKS) 61. Which of the following is correct : (a) A minor can be admitted as a partner provided the partnership deed is signed by the guardian of the minor on behalf of and in the best interest of such minor. (b) A minor can enter into a contract of partnership provided it is a ‘necessity’ and not a ‘luxury’. (c) A minor cannot be admitted as a partner unless all the partners agree to it. (d) A minor can be admitted to the benefits of partnership. 62. As per the Indian Contract Act, 1872 every person is competent to contract provided he: (a) Is of the age of majority according to the law to which he is subject. (b) Is of sound mind. (c) Is not disqualified from contracting by any law to which he is subject. (d) All of the above. 63. Necessary condition for existing goods is (a) They should be in existence at the time of the contract of sale. (b) They should be owned or possessed by the seller. (c) Both of the above. (d) None of the above. 182 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 64. The action of goods being physically delivered to the buyer is known as: (a) Actual Delivery. (b) Constructive Delivery. (c) Symbolic Delivery. (d) All of the above. 65. A tells his wife that he would commit suicide, if she did not transfer her personal assets to him. She does so under his threat. (a) The wife can avoid the contract. (b) The wife cannot avoid the contract. (c) The husband can enforce the contract. (d) Both (b) & (c). 66. In case of a hire – purchase the hirer (a) Can pass a goods title to a bonafide purchaser. (b) Cannot pass a goods title to a bonafide purchaser. (c) Can choose whether to pass or not to pass the goods title to a bonafide purchaser. (d) All of the above. 67. Which of the following are the characteristics of a contingent contract: (a) The performance of a contingent contract depends upon the happening or non-happening of a certain event in future. (b) The event must be uncertain. (c) The event must be collateral to the main contract. (d) All of the above. 68. Agency by ostensible authority may happen in the following ways: (a) By estoppel. (b) By a legal presumption. (c) By holding-out. (d) All of the above. 69. A sold some land to B. At the time of sale both the parties believed to be in good faith that the area of the land sold was 10 hectares. It however, turned out that the area was 7 hectares only. How is the contract of sale affected? (a) The agreement is void. (b) The agreement is illegal. (c) The agreement is impossible. (d) All of the above. 70. Which one of the following is a legal requirement regarding consideration: (a) Consideration should move at the desire of the promise. (b) Consideration may move from promisee or any other person. (c) Consideration may be past, present or future. (d) All of the above. Common Proficiency Test (CPT) Volume - I 183 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 71. Exceptions to the statement “No consideration no contract” are the following: (a) No consideration is required to create an agency as also in the case of completed gifts. (b) A promise made without consideration is valid if it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt, which is barred by the Law of Limitation. (c) A promise made without any consideration is valid if it is a promise to compensate wholly or in part a person who has already voluntarily done something for the promisor or something which the promisor was legally compellable to do. (d) All of the above. 72. In case of a firm carrying on the business other than banking (a) There should be at least seven members and maximum number of members should not exceed fifty. (b) There should be at least two members and maximum number of members should not exceed ten. (c) There should be at least two members and maximum number of members should not exceed twenty. (d) There should be at least two members and maximum number of members should not exceed fifty. 73. Which of the following agreements are void: (a) An agreement to share the salary of a public officer. (b) An agreement to sell a religious office. (c) An agreement with the objective of procuring a public post. (d) All of the above. 74. Following conditions are implied in a contract of sale of goods unless the circumstances of the contract show a different intention: (a) Condition as to title. (b) Sale by description. (c) Sale by sample. (d) All of the above. 75. The distinction between fraud and misrepresentation are the following: (a) Misrepresentation is innocent whereas fraud is deliberate or willful. (b) In misrepresentation the person making the suggestion believes it to be true while in case of a fraud he does not believe it to be true. (c) In misrepresentation there can be no suit for damages whereas in fraud there can be a suit for damages. (d) All of the above. 76. The following are the essential elements which need to co-exist in order to make a valid contract: (a) Lawful Consideration. (b) Lawful Agreement. (c) Free Consent. (d) All of the above. 184 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 77. The test of good faith as required under Partnership Act includes the following: (a) That the expulsion must be in the interest of the partnership. (b) That the partner to be expelled is served with a notice. (c) That the partner to be expelled is given an opportunity of being heard. (d) All of the above. 78. Delivery which is effected without any change in the custody or actual possession of the thing is known as: (a) Actual Delivery. (b) Symbolic Delivery. (c) Constructive Delivery. (d) None of the above. 79. The essential elements of a partnership at will are: (a) No period has been fixed by the partners for its duration. (b) There is no provision in the partnership agreement for its determination. (c) Both of the above. (d) None of the above. 80. True test of partnership is ______________. (a) Sharing of profits (b) Sharing of profits and losses (c) Mutual agency (d) Existence of an agreement to share profits of the business 81. Where a person asserts something which is not true, though he believes it to be true, his assertion amounts to ___________. (a) Coercion (b) Undue Influence (c) Fraud (d) Misrepresentation 82. ___________ does not exist. (a) Liability for special damages (b) Liability for exemplary damages (c) Liability for nominal damages (d) Liability for disciplinary damages 83. The communication of an acceptance is complete as against the acceptor, __________. (a) When it is put in course of transmission to him so as to be out of reach of the acceptor (b) When it comes to the knowledge of the proposer (c) When both the proposer and the acceptor declare the acceptance (d) When the acceptor accepts his acceptance in a court of law 84. Total substitution of new contract in place of the old contract takes place in case of ___________. (a) Remission (b) Recission (c) Novation (d) Alteration Common Proficiency Test (CPT) Volume - I 185 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 85. Profits of a partnership firm must be distributed among the partners as per the partnership deed while the profits of a company ___________. (a) Must be distributed to its shareholders (b) May or may not be distributed to its shareholders (c) May or may not be distributed to its board of directors, shareholders and other stakeholders (d) Are not distributable at all 86. The principle evolved in the case of Garner v. Murray (1904) is ___________. (a) Deficiencies in the capital of the insolvent partner are distributed among the solvent partners in the ratio of their capital (b) Partners have a fiduciary relationship with each other (c) Partners liability is unlimited (d) Partners can make supernatural profits, provided proper disclosures are made in this regard 87. A intending to deceive B falsely represents that 750 tons of sugar is produced per annum at the factory of A and hereby induces B to buy the factory. The contract is avoidable at the option of __________. (a) B (b) A (c) Congruence of A and B (d) Either party cannot avoid the contract 88. An agency coupled with interest does not come to an end in case of __________. (a) Death of the principal (b) Insanity of the principal (c) Insolvency of the principal (d) Death or Insanity or Insolvency of the principal 89. A contract to do or not to do something if some event, collateral to such contract does or does not happen is __________. (a) A contingent contract (b) A wagering contract (c) Illegal (d) Void 90. A contracts to pay B Rs. 5,00,000/- if B’s house is destroyed by fire. It is __________. (a) A wagering contract (b) A contingent contract (c) A wagering contract plus a contingent contract (d) Neither a contingent contract nor a wagering contract 91. All Contracts which are not made under seal are __________ contracts. (a) Formal (b) Simple (c) Unlawful (d) Illegal 186 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 92. The latin maxim “Nemo dat quod non habet” means __________. (a) An eye for an eye and a tooth for a tooth (b) Never dare to quarrel with a good seller (c) No one can give what he has not got (d) Let the buyer beware. 93. Rules regarding delivery of goods are given in the __________ . (a) Sale of Goods Act, 1930 (b) Indian Partnership Act, 1932 (c) Indian Contract Act, 1872 (d) None of the above 94. Right of lien is to __________. (a) Retain possession (b) Regain possession (c) Remove possession (d) Recharge possession 95. Non - Registration of a partnership firm__________. (a) Is a Criminal offence (b) Renders the partnership illegal (c) Is compulsory to activate the partnership (d) Is not compulsory but desirable 96. A person who finds goods belonging to another and takes them into his custody __________. (a) Becomes the owner of those goods thereafter (b) Is subject to the same responsibility as a bailee (c) Is allowed to sell them and retain the money realized from such sale (d) Has no obligation to return those goods, he may do so only a good gesture 97. Quasi – contracts arise __________. (a) Where obligations are created without a contract (b) Where obligations are created under a contract (c) Out of natural causes (d) Out of man-made causes 98. Discharge by mutual agreement may involve__________. (a) Novation (b) Recission (c) Alteration (d) Novation, Recission and alteration Common Proficiency Test (CPT) Volume - I 187 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 99. A & B are partners in a partnership firm. A introduced C, a former partner, as his partner to D. C remained silent at that moment, but later on informed D that he is actually a former partner of the firm. C had also issued public notice in the year of his retirement from the partnership firm. D, a trader supplied 500 refrigerators to the firm on credit. The credit period expired and D did not get the price of his supplies. D filed a suit against A & C for the recovery of price. In light of the above circumstances answer which of the following is correct: (a) C is liable for the price to D. (b) C is liable for the price to D, irrespective of the fact, whether C remained silent or not. (c) C is not liable for the price to D. (d) None of the above. 100. H contracted with NIC Corporation for the erection of a number of houses. In calculating his price for the houses, H by mistake deducted a particular sum twice over. The corporation affixed its seal to the contract, which correctly represented its intention. (a) The contract is now binding. (b) The contract can be avoided by H. (c) There is no contract at all, since there is no consensus ad idem. (d) The contract is not binding. SECTION – C : GENERAL ECONOMICS (50 MARKS) 101. An increase in the demand can result from: (a) A decline in market price. (b) An increase in income. (c) A reduction in the price of substitutes. (d) An increase in the price of complements. 102. In the short run if a perfectly competitive firm finds itself operating at a loss, it will: (a) Reduce the size of its plant to lower fixed costs. (b) Raise the price of its product. (c) Shut down. (d) Continue to operate as long as it covers its variable cost. 103. A competitive firm maximizes profit at the output level where: (a) Price equals marginal cost. (b) The slope of the firm’s profit function is equal to zero. (c) Marginal revenue equals marginal cost. (d) All of the above. 188 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 104. Which of the following is correct? (a) Normative economics is not concerned with value judgment. (b) A market is a process that reconciles consumer decision, production decisions and labour decisions. (c) A mixed economy has a certain level of government intervention in the economy along with private sector ownership of the economy. (d) Both (b) and (c). 105. A necessity is defined as a good having: (a) A positive income elasticity of demand. (b) A negative income elasticity of demand. (c) An income elasticity of demand between zero and 1. (d) An income elasticity of more than 1. 106. In the long run any firm will eventually leave the industry if: (a) Price does not at least cover average total cost. (b) Price does not equal marginal cost. (c) Economies of scale are being reaped. (d) Price is greater than long run average cost. 107. If a firm’s average variable cost curve is rising, its marginal cost curve must be: (a) Constant. (b) Above the total cost curve. (c) Above the average variable cost curve. (d) All of the above. 108. You are given the following data: Table 1 Output Total Costs 0 0 1 15 2 30 3 45 4 60 5 75 The above data is an example of: (a) Constant returns to scale. (b) Decreasing returns to scale. (c) Increasing returns to scale. (d) Globalization. Common Proficiency Test (CPT) Volume - I 189 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 109. Which of the following is incorrect? (a) The central problem in economics is that of allocating scarce resources in such a manner that society’s unlimited needs are satisfied as well as possible. (b) In mixed economy, the government and the private sector interact in solving the basic economic questions. (c) Microeconomics best describes the study of the behaviour of individual agents. (d) An important theme in economics is that market systems are better than command (socialistic) economies. 110. When a market is in equilibrium: (a) No shortages exist. (b) Quantity demanded equals quantity supplied. (c) A price is established that clears the market. (d) All of the above are correct. 111. Which among the following is incorrect? (a) India adopted planning as her way of life because she wanted to quicken industrialization and economic development with optimum utilization of resources and reduction of inequalities. (b) Removal of poverty and the attainment of self reliance were two basic objectives of the fifth plan. (c) India has never been able to achieve its targeted rate of growth. (d) The Second plan was a very ambitious plan as seeds of industrialization were sowed. 112. Reserve Bank of India is India’s: (a) Central bank (b) Biggest commercial bank (c) Biggest cooperative bank (d) All of the above 113. In infrastructure of an economy we include: (a) Power (b) Transport (c) Banking (d) All of the above 114. Find the odd one out: (a) State Bank of India (b) Reserve Bank of India (c) Bank of Baroda (d) Bank of India 115. Indian economy is mixed economy because: (a) Agriculture and industry have both simultaneously developed in India. (b) Agriculture and industry have both developed in the public sector. (c) Private ownership and public ownership over means of production co-exist. (d) Any of the above. 190 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 116. What is the contribution of agriculture to National income in India? (a) 44% (b) 17% (c) 34% (d) 50% 117. In a ________ budget revenue equals expenditure. (a) Balanced (b) Deficit (c) Surplus (d) Long term 118. Indian population registered a growth of 1.25% per annum during the decade ________. (a) 1941-51 (b) 1961-71 (c) 1971-81 (d) 1981-91 119. India’s population recorded the maximum growth rate of 2.22 % per annum during the decade ________. (a) 1941-51 (b) 1961-71 (c) 1971-81 (d) 1981-91 120. Suppose India’s GNP increased at an annual average rate of 6.6% during the Tenth plan, presuming that the growth rate of population is 2 per cent per annum; per capita income would increase at an annual average rate of________. (a) 3.3% (b) 4.6% (c) 6.6% (d) 2% 121. About ________ area is rain fed in India. (a) 50% (b) 40% (c) 60% (d) 80% 122. The industrial production has grown at an annual average rate of ________ during the planning period. (a) 10% (b) 8% (c) 3.5% (d) 6.2% 123. After imposition of ceilings on the landholding in India, the total surplus area distributed has been of the order of ________. (a) 2.18 million hectares (b) 2.98 million hectares. (c) 5.58 million hectares. (d) 10 million hectares. 124. Small scale sector contributes nearly _______ of the manufacturing exports in India (2005-06). (a) 60% (b) 35% (c) 40% (d) 20% 125. India’s share in the world total commercial services export in 2006 was ________%. (a) 5.2 (b) 2.7 (c) 8.2 (d) 3.5 Common Proficiency Test (CPT) Volume - I 191 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 126. Product method of calculating national income is also known as ________. (a) Income method (b) Value added method (c) Expenditure method (d) Distribution method 127. NDP is GDP minus ________. (a) Depreciation. (b) Indirect taxes. (c) Subsidies (d) NNP 128. In 2008-09, direct taxes were around ________ % of GNP. (a) 10 (b) 15 (c) 12 (d) 6.5 129. Abolition of intermediaries and tenancy reforms are both parts of ________. (a) Industrial reforms in India. (b) External sector reforms in India. (c) Land reforms in India. (d) Banking reforms in India. 130. A sick industrial unit is one ________. (a) Where most of the employees are sick. (b) Which is unable to perform its normal functions and activities of production of goods and services at a reasonable profit on a sustained basis. (c) Which is unable to make profits more than 10 percent of its capital employed. (d) Which borrows money from bank for its fixed assets. 131. BPO stands for ________. (a) Bharat Petro Organisation (b) Business Process Outsourcing (c) Big Portfolio Outsourcing (d) Business Partners Organisation 132. India accommodates ________ percent of the world’s population. (a) 16.7% (b) 11.4% (c) 15.1% (d) 25.8% Questions 133 to 135 are based on Figure 1 which shows production possibilities curve (PPC) for grape juice and wine. Figure 1 192 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India 133. The opportunity cost of increasing wine production from D to E is: (a) 0 litres of grape juice. (b) 5 litres of grape juice. (c) 1 litre of wine. (d) 0.2 litres of wine. 134. Assuming that the PPC does not shift, which of the following is true? (a) Point A is desirable but is inefficient. (b) Point D represents a more efficient allocation of resources than points A and F. (c) Point H is desirable but is not attainable. (d) If wine production equals 7 litres, the maximum amount of grape juice that can be produced simultaneously is 28 litres. 135. The PPC in the diagram reflects: (a) Increasing opportunity cost of more wine production and constant opportunity cost of more grape juice production. (b) Increasing opportunity cost of more wine production and decreasing opportunity cost of more grape juice production. (c) Decreasing opportunity cost of more wine production and decreasing cost of more grape juice production. (d) Increasing opportunity cost of more wine production and increasing cost of more grape juice production. Read the following paragraph and answer questions 136 and 137. John is Jacqueline’s father. Both of them are unemployed. Jacqueline, a brilliant new Ph.D in Economics, has turned down many job offers because she hopes eventually to teach at one of the top ten universities in her field. John (now age 54) lost his job as a shipbuilder during the recession of 1991. His plant never reopened and he has very specialized skills that are no longer in demand. 136. The type of unemployment Jacqueline is experiencing is (a) Frictional. (b) Structural. (c) Seasonal. (d) Cyclical. 137. The type of unemployment John is experiencing is (a) Frictional. (b) Structural. (c) Seasonal. (d) Cyclical. Common Proficiency Test (CPT) Volume - I 193 © The Institute of Chartered Accountants of India MODEL TEST PAPER - 7 138. In the table below what will be equilibrium market price? Table 2 Price (Rs.) Demand (tonnes per annum) Supply (tonnes per annum) 1 1000 400 2 900 500 3 800 600 4 700 700 5 600 800 6 500 900 7 400 1000 8 300 1100 (a) Rs. 2 (b) Rs. 3 (c) Rs. 4 (d) Rs. 5 Read Table 3 and answer questions 139-143 Table 3 Labor Input Output Average Product Marginal Product 0 0 - - - - - - 2 25 4 90 Labor Input Output Average Product Marginal Product 6 120 8 140 10 14 12 10 139. At a labour input of 2, output is: (a) 25 (b) 30 (c) 50 (d) 75 140. At a labour input of 4, output per worker is: (a) 20 (b) 22.5 (c) 45 (d) 90 194 Common Proficiency Test (CPT) Volume - I © The Institute of Chartered Accountants of India