Reference no: EM132346960

1 Which statement is correct?

A Carriage inwards is a credit.

B Carriage outwards is a debit.

C Purchase returns is a debit.

D Sales returns is a credit.

2 The table shows opening and closing balances for the rent receivable account.

	start of year $	end of year $
rent received in advance rent due in arrears	4200 2000	1600 2400

During the year, $111 000 rental income was received. What is the total rent receivable for the year?

A $110 600          

B $111 000          

C $113 200          

D $114 000

3 A non-current asset costing $206 000, with a net book value of $131 000, is revalued to $275 000. How should the revaluation be recorded?

A Dr Asset at cost $69 000

Cr Revaluation reserve $69 000

B Dr Provision for depreciation $75 000 Dr Asset at cost $69 000

Cr Revaluation reserve $144 000

C Dr Provision for depreciation $144 000 Cr Revaluation reserve $144 000

D Dr Revaluation reserve $144 000 Cr Asset at cost $69 000

Cr Provision for depreciation $75 000

4 A business buys a machine on hire purchase for $50 000.

Although it will not own the machine until it has paid the final instalment, it has made the following entries:

debit	credit
Machinery account     $50 000	Bank account                             $5 000 Finance company account       $45 000

Which accounting principle has been applied?

A going concern

B matching

C prudence

D substance over form

5 A sole trader owns a vehicle valued at $4000 for his own use and a vehicle valued at $2500 for business use.

On 1 April 2012 he sold the business vehicle. On the same date he bought a new vehicle for

$8000 for his own use and transferred his old vehicle to the business. What is the change in the value of vehicles in the business accounts?

A $1500               

B $4000               

C $5500               

D $6500

6 Which accounting principle means that a company's financial statements are comparable from one period to the next?

A accruals

B consistency

C going concern

D materiality

7 The table shows details relating to a company's banking transactions at 31 December.

	$
balance at bank as per bank statement	22 650
uncleared lodgements	3 110
unpresented cheques	6 290
bank credit recorded twice by bank in error	650

Which  balance  for  cash  at  bank  should  appear  in  the  statement  of  financial  position  at  31 December?

A $18 820            

B $20 120            

C $25 180            

D $26 480

8 A company's accounts showed a gross profit for the year of $32 500. After the draft financial statements were prepared it was found that the opening inventory had been overstated by $2400 and the closing inventory had been understated by $3400. What is the corrected gross profit for the year?

A $26 700            

B $31 500            

C $33 500            

D $38 300

9 A manufacturing company has the following information for the year ended 31 December.

	$
purchase of raw materials	58 000
wages of machine operators	97 000
depreciation on factory plant	15 000
opening inventory of raw materials	10 000
closing inventory of raw materials	8 000
wages of factory supervisor	18 000
factory light and heating costs	22 000

What is the prime cost for the year?

A $153 000          

B $157 000          

C $175 000          

D $212 000

10 The table shows information about four partners in a partnership.

Which partner has the greatest net reward from interest on capital and interest on drawings?

	fixed capital $	annual drawings $
A B C D	20 000 20 000 60 000 60 000	30 000 50 000 30 000 50 000

11 X and Y are in partnership sharing the profits equally. No goodwill account is maintained in the accounts. Z joins the partnership and pays $30 000 cash for his share of the goodwill.

Profits are to be shared equally between X, Y and Z.

What are the increases in the capital accounts on the admission of Z into the partnership?

	capital accounts
	X $	Y $	Z $
A B C D	10 000 - 15 000 -	10 000 - 15 000 -	10 000 30 000 - -

12    Which statements about non-profit making organisations are correct?

1 A club or society may engage in trading activities.

2 A club or society may suffer bad debts.

3 Subscriptions are credited to the income and expenditure account in the year in which they are received.

4 The term 'excess of expenditure over income' replaces 'profit for the year'.

A 1 and 2             

B 1 and 4             

C 2 and 3             

D 3 and 4

13 A business sells goods at cost plus 25 %.

Information for a year is shown.

	$
revenue opening inventory closing inventory	240 000 42 000 48 000

What is the total of purchases for the year?

A $180 000          

B $186 000          

C $192 000          

D $198 000

14 The inventory records of a business show the following information for product X.

		units	cost per $	unit
1 January	opening balance	100	3
3 January	receipts into inventory	50	4
8 January	inventory issued	120	-

What is the value of the inventory issued on 8 January using the first in first out (FIFO) method?

A $360                 

B $380                 

C $410                 

D $420

15 A company has an issued share capital of 200 000 6 % cumulative preference shares of $1 each fully paid and 800 000 ordinary shares of $1 each fully paid.

Assuming that the company earns no profit in the year, which statement is correct?

A Both preference and ordinary shares are paid a dividend in the year.

B The unpaid dividends for both preference and ordinary shares are carried forward to a future year.

C The unpaid preference dividend is carried forward to a future year.

D The preference shares are paid a total dividend of $12 000 in the year.

16 A company raises finance by issuing debentures. What is the effect on net current assets and short term profits?

	net current assets	profits
A B C D	decrease decrease increase increase	decrease increase decrease increase

17 A business finds that it is unable to pay its trade payables because of a poor cash flow.

What should it do to improve its cash flow?

A factor its trade receivables

B increase its trade receivables

C increase its inventory

D repay its overdraft

18 For some years a business has given 2 % cash discount to its customers and lost 3 % of its inventory to pilferage by staff.

On 1 January, the business changed the rate of cash discount to 5 % and introduced a new inventory control system that stopped the pilferage.

Which effect do these changes have on the gross profit to sales ratio?

	change in cash discount	new inventory control system
A B C D	decrease increase no effect no effect	no effect no effect decrease increase

19 The table gives information about a company.

	year 1 $	year 2 $
revenue	150 000	200 000
cost of sales	105 000	130 000
	45 000	70 000
administration and distribution expenses	27 000	47 500
profit from operations	18 000	22 500
non-current assets	120 000	110 000
net current assets	30 000	40 000
non-current liabilities	(50 000)	(10 000)

What happened to gross profit margin and return on capital employed in year 2?

	gross profit margin	return on capital employed
A B C D	decreased increased decreased increased	decreased decreased increased increased

20 A business turns over its inventory 5 times a year. Average inventory is $54 000 and sales are made at a mark-up of one-third. How much are the sales?

A $202 500          

B $270 000          

C $360 000          

D $405 000

21 What is not included in the calculation of the liquid ratio (acid test)?

A accruals for rent

B amounts prepaid for insurance

C inventory of finished goods

D trade payables

22 The owner of a business has to decide whether to sell a particular type of product.

Which ratio is the most useful in making the decision?

A current ratio

B gross profit ratio

C return on capital employed

D trade receivables turnover

23 Which statement best describes a sunk cost?

A a cost which is irrelevant for the future

B a cost which must be matched against the revenue

C a cost which remains the same at all levels of production

D a cost which varies with the level of production

24 A business has the following costs.

raw materials $3 per unit direct labour $2 per unit

stepped costs of $5000 for every 10 000 units What is the cost of producing 15 000 units?

A $75 000            

B $82 500

C $85 000            

D $105 000

25 Which statement best describes fixed costs?

A costs that are constant in total over a range of output.

B costs that are the same in total over any output level.

C costs that are constant per unit as output increases.

D costs that are the same as stepped costs.

26    Which costs are classified as manufacturing overheads for a car assembly plant?

1 assembly line employees' wages

2 cost of components assembled

3 depreciation of assembly line equipment

4 production managers' salaries

A 1 and 2             

B 1 and 4

C 2 and 3             

D 3 and 4

27 A business has the following budget for April.

	$
sales revenue	1 000 000
contribution	550 000
fixed production costs	275 000
fixed selling costs	55 000

What is the break-even sales revenue for April?

A $450 000          

B $500 000          

C $600 000          

D $670 000

28 Which costing method is best suited to valuing inventory and which for deciding whether to accept an order below normal selling price?

	valuation of inventory	decision on accepting order below normal selling price
A B C D	absorption costing absorption costing marginal costing marginal costing	absorption costing marginal costing absorption costing marginal costing

29 The following information is forecast for May.

	units
opening inventory closing inventory	25 200 28 200
	$
marginal cost profit absorption cost profit	100 800 120 300

What is the overhead absorption rate?

A $3.57                

B $4.27                

C $4.77                

D $6.50

30 What is the purpose of a job cost sheet?

A to enable the business to recover its overheads

B to ensure the customer knows the split between materials and labour

C to inform the customer of the profit margin

D to let the business find the price for a quotation