Specialized Paper Sample Questions
Discipline: Finance (P2)


A. Using the following trial balance and adjustments, prepare a Balance Sheet as of 30 June 1994:

Debit Credit
Trial balance, 30 June 1994 (Dollars) (Dollars)
Cash 10,789 -
Investments 60,000 -
Pledged contributions unpaid 251,200 -
Accounts Receivable 1,713 -
Salary Advance 5,000 -
Salaries 38,689 -
Travel 5,058 -
Miscellaneous operating expenditures 17,204 -
Supplies 8,531 -
Fellowship/Training Expenditures 22,836 -
Printing 2,700 -
Unpaid Expenditures (unliquidated obligations) 19,325 -
Prepaid Insurance 300 -
Unliquidated obligations payable - 19,325
Income from pledged contributions - 200,000
Interest income - 3,247
Public Donations - 10,000
Accounts Payable - 2,921
Fund Balance 1 January 1994 - 207,852
Total 443,345 443,345


1. $3,000 of the $5,000 salary advances granted has been earned by staff members during the month of June 1994.

2. The unpaid pledged contribution of the Government of Country X was paid in cash on 28 June through the UNDP office and the Resident Representative sent a cable request to have the amount reflected in the statements. The cash contribution was transferred to Chemical Bank, New York by cable.

3. The cost of insurance premium which was paid in advance on 1 January was for a one-year policy. Fifty percent of the value of the prepaid insurance had expired.

4. The United Nations received a firm pledge for a contribution of $50,000 from the Government of Country X on 30 June 1994 through the Economic Commission for Latin America and the Caribbean which was not yet included in the trial balance.

B. As part of an overall review and study of a major computerized Electronic Data Processing (EDP) financial system, what are the procedures which should be performed by an independent auditor to evaluate internal controls?


  1. Andrew & Associates of the United States forwarded merchandise to JMB International of Japan. Andrew billed JMB 22,000 yen for shipping charges on 16 March 1994, with payment due 15 April 1994. Assume that on 16 March 1994, 1 yen = $.44 and that on 15 April, 1 yen = $.41. Prepare the journal entries on Andrew's books to record the sale to and subsequent payment from JMB International.

  2. A firm needs $85,000 cash. A local bank will make a one-year loan but requires a 15% compensatory balance (the company would ordinarily keep a zero balance since the balance maintained in the account earns no interest). If the stated rate of interest is 12%, what is the effective cost?

  3. The High Company obtained a short term loan for $80,000 from the Centrum Bank on 1 December. The loan term was 60 days with an annual interest rate of 9.5%. On the maturity date the note was renewed for a further 30 days at an interest rate of 10.25%. On this date High Company issued a check to pay the interest for the accrued interest. At the end of the 30 days High Company issued a check to pay for the final amount owing to the Bank, including the principal.

    a) Prepare entries to record the issue of the note.

    b) Assume that at the end of each month High Company recorded in its books the accrual of interest. Prepare month end entries.

    c) Show entries for the check issued on the first maturity date.

    d) Show entries for the check issued at the second maturity date

  4. Enumerate four items you would expect to find in an auditor's permanent audit file.

  5. What should an auditor be looking for, or trying to ascertain, during his examination of accounts receivable at balance date?

  6. An international organization has local offices located in many countries with different exchange rate systems. The local offices hold bank accounts in local currencies but the unit of account for the entire organization is in US dollars.

    a) Discuss the possible financial implications of foreign exchange differences (including a fall or rise in the local currency, and a fall or rise in the US dollar).

    b) Briefly discuss the following exchange rate policies:

    (i) a managed floating exchange rate;

    (ii) a fixed exchange rate linked to a basket of currencies; and

    (iii) a fixed exchange rate backed by a currency board system.

  7. A truck was purchased on 1 January 1994, for $20,000 with no resale value. It will be depreciated for 8 years using the straight-line method. Show how the Truck account and the related Accumulated Depreciation account would appear on the balance sheet on (a) 31 December 1994; (b) 31 December 1995.

  8. Indicate four actions you would include within your audit programme to verify the accuracy of the accounts payable appearing in the balance sheet.

List of topics

Suggested reading includes basic textbooks and periodicals in the field of finance covering the following topics:

	- Accounting
	- Auditing
	- Financial Administration
	- Investments
	- Treasury

Examination Sample: General Paper (P2)