Reference no: EM132978183

Questions -

Q1. A company had to pay R15 million in respect of customers' claims for injuries suffered from goods manufactured and sold in the previous year. When preparing the financial statements for the previous year the company was not aware of it nor did they provide for these damages. How should the company report the amount paid?

a. In the Statement of changes in equity as a deduction from balance brought forward.

b. In the current year's Statement of income, included as part of Administration Expenses.

c. On the Statement of financial position as a deduction from the total of Equity and reserves.

d. In the current year's Statement of income, describing it as an extraordinary item.

Q2. The share capital account of the company reports a balance of R500 000 reporting ordinary shares of 20 cents each. Directors have declared an interim dividend of 5 cents per share. What is the amount of the dividend to be accounted for?

a. R75 000

b. R125 000

c. R50 000

d. R25 000

Q3. ABC LTD has inventory of R7m at the start of an accounting period and R8m at the end of the period. Sales for the period are R60m and the gross profit is R15m. The inventory holding period is_______.

a. 49 days

b. 61 days

c. 46 days

d. 65 days