Reference no: EM132737708

Questions - Please indicate explanations how you derive the answers. Thank you.

Q1. A business borrowed $200 000 from GT Finance. The effect of this transaction on the accounting equation is:

A. decrease loan from GT Finance $200 000; decrease cash $200 000.

B. increase loan from GT Finance $200 000; decrease accounts payable $200 000.

C. increase cash $200 000; increase loan from GT Finance $200 000.

D. decrease loan from GT Finance $200 000; decrease accounts payable $200 000.

E. increase cash $200 000; decrease loan from GT Finance $200 000.

Q2. Which of the following statements regarding the value of assets in the balance sheet is correct?

A. The value of assets will most likely be a mixture of values of historical cost and fair values.

B. All assets will be valued at historical cost.

C. All assets will be valued at fair value.

D. All assets will reflect the amount that would be received if the assets were sold at the date of the statement.

E. All assets will be valued at present value.

Q3. At the end of the financial period the cost of an entity's inventory on hand is $25 500. The net realisable value of the inventory is deemed to be $28 000. What value for inventory must be shown on the entity's balance sheet for the reporting period?

A. $2 500

B. $25 500

C. $28 000

D. $30 500

E. None of the above.

Q4. Equipment is purchased for $50 000. It is to be depreciated on a reducing balance basis using a rate of 10%. How much will be charged for depreciation expense for year 3 of the machine's life?

A. $4 050

B. $4 500

C. $5 000

D. $15 000

E. none of the above

Q5. Machinery is purchased for $140 000. It is estimated that it has a useful life of 5 years and a residual value of $20 000. Using the straight-line method, the balance in the accumulated depreciation account at the end of the third year of the machine's useful life is:

A. $24 000

B. $48 000

C. $68 000

D. $72 000

E. $140 000

Q6. Which of these would not be classified as an operating activity in a statement of cash flows?

A. Payment of interest expense.

B. Cash received as payment for the purchase of goods on credit.

C. Payment of salaries.

D. Loan repayments.

E. Payment of tax.

Q7. If customers owe $120 000 at the beginning of the year and $85 000 at the end of the year, and credit sales total $250 000 for the year, the cash received from customers during the year is:

A. $130 000

B. $165 000

C. $215 000

D. $285 000

E. $370 000

Q8. In a vertical analysis, the anchor point for prepaid insurance is:

A. total current liabilities.

B. total liabilities.

C. total equity.

D. total assets.

E. total income.

Q9. Which of the following statements is correct?

A. Low liquidity ratios are undesirable.

B. High liquidity ratios may indicate excessive investments in unproductive current assets.

C. Low liquidity ratios can indicate liquidity problems.

D. The rule of thumb for current ratio is 1.5 times.

E. All of the above statements are correct.

Q10. If fixed costs are $200 000 and variable costs are 60% of the selling price, the break-even point in sales dollars:

A. $120 000

B. $200 000

C. $333 333

D. $500 000

E. $800 000

Q11. From the information below, calculate the break-even number of units for Product X.

Product X Product Y Product Z

Contribution margin $10.00 $20.00 $40.00

Sales Mix 50% 25% 25%

Fixed costs $150 000

A. 1875

B. 3750

C. 5000

D. 7500

E. 10000

Q12. The authoritarian style of budgeting may lead to:

A. unit managers taking very little ownership of the budget.

B. unattainable targets.

C. demotivation of employees.

D. budgetary slack among unit managers.

E. all of the above.

Q13. Skyline Pty Ltd sells bicycle helmets. The desired ending inventory for December is budgeted at 400 helmets. If there are 300 helmets on hand at the beginning of December, and the expected sales volume for the month is expected to be 1800 units, how many helmets will Skyline Pty Ltd need to purchase for the month?

A. 1500

B. 1700

C. 1900

D. 2100

E. 2500

Q14. Discounted cash flow techniques recognise that:

A. $1 received in the future is worth less than $1 received today.

B. $1 received in the future is worth more than $1 received today.

C. $1 received in the future is equal to $1 received today.

D. $1 received today needs to be discounted to its future value.

E. none of the above options is correct.

Q15. Jimmy's Tacos is considering investing $35 000 in a new 'pop-up' shop beside a popular Melbourne park. Jimmy estimates the net cash inflow will increase by $14,000 each year for the next 5 years. The payback period for the new taco shop is:

A. 2 years

B. 2.5 years

C. 2.75 years

D. 3 years

E. 3.5 years