Reference no: EM132291271

Questions: Answer the following multiple choice questions:

1. In a growing business that keeps its asset base up-to-date, total cash flow from investing activities will normally be

a. more than cash flow from operations
b. none of the above
c. negative
d. positive

2. Wages expense in the income statement is $58,250 with the statement of financial position at the end of the year showing accrued wages of $2,000. If there were no accrued wages at the beginning of the period, how much was paid out in cash for wages during the year?

a. $54,250
b. $56,250
c. $58,250
d. $2,00

3. On 1 July 2017, LMZ Traders paid $12,000 in insurance premiums for coverage for the next three years. The insurance expense that will appear in the income statement and the amount of prepaid insurance in the statement of financial position for the year ended 30 June 2018, respectively, are

a. $4,000 and $8,000
b. $3,000 and $6,000
c. $9,000 and $0
d. $6,000 and $3,000

4. A driver started a business on 1st of January 2018, hiring out his limousine for special occasions. Current regulations require the business to purchase a license that will expire after two years. The cost of the license is $16,000. Calculate the amount of license expense to be included in the income statement for the 6 months ended 30 June 2018

a. $6,000
b. $4,000
c. $12,000
d. $3,000

5. The item that would not be included in the operating section of a statement of cash flows is

a. Cash received from sales
b. Cash payment of expenses
c. Cash received from the sale of surplus machinery
d. Cash interest received

6. Under accrual accounting, the receipt of cash from a trade debtor will

a. have no impact on profit and increase cash
b. none of the above
c. increase profit and increase cash
d. decrease profit and decrease cash

7. LTT had stock on hand on the 1st January 2018 of 100 heaters valued at $50 each. On 07 January they sold 60 heaters at $80 each (selling price). On 15 January they bought 110 heaters at $52 each and on 30 January they sold 70 heaters at $80 each (selling price). What is the cost of sales and closing stock if LTT uses FIFO

a. $6,560 and $4,160
b. $6,640 and $4,080
c. $6,630 and $4,090
d. $6,720 and $4,000

8. Which of these factors could cause operating profit to be more than cash flow from operations?

a. An increase in the balance of inventory over the period
b. An increase in the balance of accounts receivable over the period
c. Both A and B
d. An increase in the balance of accounts payable over the period

9. Employees have worked for the full year and have received total wages of $305,000 in cash. However, they must wait until the next payday to be paid for the last three days of the year they have worked. The amount owing is $6,500. Wages expense in the statement of financial performance and accrued wages in the statement of financial position are respectively:

a. $306,000 and $0
b. $311,500 and $0
c. $306,000 and $5,500
d. $311,500 and $6,500

10. Which item is not classified as a cash flow from investing activities?

a. receipt from the sale of premises
b. dividends paid to investors
c. payment for shares to be held as an investment.
d. cash purchase of office furniture

11. On 31 December 2017, a new motor vehicle with a useful life of five years and an estimated residual value of $5,000 was purchased by a business at a cost of $35,000. The amount of depreciation expense charged for the six months ended 30 June 2018, using the straight-line method, is

a. $3,000
b. $25,000
c. nil.
d. $4,000

12. If equity at the beginning of the period is $180,000, profit for the period is $90,000 and $25,000 is withdrawn by the owner during the period, equity at the end of the period is:

a. $115,000
b. $245,000
c. $289,000
d. cannot be calculated from the information provided

13. Cash received from the issue of shares will appear in which section of the statement of cash flows?

a. Does not appear in the statement
b. Investing activities section
c. Financing activities section
d. Operating activities section

14. In 2015, G Co repaid $45,000 to the bank on a mortgage loan. $35,000 was interest on the mortgage and $10,000 was repayment of the principal. The repayment would appear in the statement of cash flows as

a. operating outflow $35,000; investing outflow $10,000
b. operating outflow $45,000
c. financing inflow $45,000
d. operating outflow $35,000; financing outflow $10,000

15. Which of the following is a warning sign of problems in managing cash flows?

a. dividends paid to shareholders that are greater than profit
b. all of the above
c. cash flow from operating activities that is significantly lower than profit
d. proceeds of borrowing that are continually greater than repayments of borrowings

16. At year-end, it was forgotten to adjust the asset prepaid rent for the $7,000 rent expense used-up during the year. This will result in an

a. understatement of assets and an overstatement of profit and equity
b. overstatement of assets, profit, and equity
c. overstatement of liabilities and an understatement of profit and equity
d. understatement of assets, profit, and equity

17. Which of the following are not operating cash flows?

a. income tax paid
b. dividends paid to shareholders
c. payments to suppliers
d. interest received
18. If the opening balance of equity is $45,000, the closing balance is $60,000 and profit is $27,000, calculate the amount of dividends paid (assume all dividends declared have been paid) which will appear as a financing outflow in the statement of cash flow

a. $15,000
b. $12,000
c. Nil
d. $42,000

19. Equity at the beginning of the period is $45,000 and $56,000 at the end of the period. If $20,000 is withdrawn by the owner during the period, calculate profit

a. $31,000
b. $1,000
c. $41,000
d. $76,000

20. Which is the best description of the relationship between the statement of financial performance and the statement of financial position?

a. There is no direct relationship between the statement of comprehensive income and the statement of financial position
b. The statement of financial position is the link between two statement of comprehensive incomes
c. The opening statement of financial position plus the profit equals the closing statement of financial position
d. The statement of financial performance explains the change in equity that arises from operating activities.