Reference no: EM132594745

Question 1: From the following information, calculate the gross profit margin:

£

Revenue 110,000

Purchases 56,000

Opening inventory 13,000

Closing inventory 15,000

Return inward 5,000

Return outward 3,000

Discount received 2,500

Discount allowed 3,500

Option 1: 52.38%

Option 2: 51.43%

Option 3: 50.91%

Option 4: 48.18%

Question 2: Which of the following statement is true?

Option 1: The value of a company is likely to be very different from the total net value of the individual assets and liabilities reported on the balance sheet.

Option 2: The value of a company is identical to the total net value of the individual assets and liabilities reported on the balance sheet.

Option 3: The value of a company is identical to retained earnings, as reported on the balance sheet.

Option 4: The value of a company is equal to current assets, less current liabilities.

Question 3: Which of the following accounting concept applies to revenue and costs that are recognised as they are earned or incurred?

Option 1: Consistency

Option 2: Comparability

Option 3: Accrual

Option 4: Prudence

Question 4: The following balances were related to Eagle plc's Trial Balance as at 31 December 2019:

Equipment at cost £540,000 Provision for Depreciation £123,500

During 2019, the company disposed an item of equipment for £8,500. It was purchased on 1 June 2016 for £20,000. Equipment is depreciated at 25% on a straight-line basis. According to the company's policy, full year depreciation is provided in the year of acquisition and no depreciation is provided in the year of disposal.

What is the profit or loss on disposal relating to the item mentioned above?

Option 1: Profit of £62.50

Option 2: Loss of £62.50

Option 3: Profit of £3,500

Option 4: Loss of £3,500

Question 5: Referring to the information given in Question 3, what is the depreciation expense on equipment that should be charged to the income statement for the year ended 31 December 2019?

Option 1: £99,125

Option 2: £102,015

Option 3: £101,312

Option 4: £130,000

Question 6: If the difference between the closing and opening balances of an electricity prepayment was £1,000 (i.e. closing - opening), what would be the effect on the electricity expense in the trial balance?

Option 1: Electricity expense would be increased by £1,000

Option 2: Electricity expense would be reduced by £1,000

Option 3: There is no change to the electricity expense

Option 4: Insufficient information to determine

Question 7: On 31 December 2019, Bates Ltd's revenues were £600,000 and expenses were £320,000 before consideration of the following items:

Accrued wages total £22,000;

Outstanding trade receivables total £72,000; Depreciation expense is £34,000;

Bad debt expense total 16,000

What is Bates' operating profit after consideration of the above information?

Option 1: £280,000

Option 2: £226,000

Option 3: £208,000

Option 4: £136,000