Reference no: EM133675432

Accounting for Business Decisions

Question 1: Which of the following accounts would appear in an income statement?

A. Accumulated depreciation
B. Cost of goods sold
C. Rent payable
D. None of the answers provided

Question 2: Which of the following statements about a balance sheet is true?

A. A balance sheet presents the financial performance of a company for a period of time.
B. A balance sheet presents the company's financial position at a point in time.
C. A balance sheet shows which source of finance produced each asset.
D. A balance sheet includes all the resources of a company.

Question 3: Which of the following questions CANNOT be answered from a balance sheet?

A. What has caused the changes in cash held during the period?
B. Is the company soundly financed?
C. Can the company pay its bills on time?
D. Should a dividend be declared?

Question 4: To which balance sheet grouping does the item ‘accounts receivable' belong?

A. Current asset
B. Noncurrent asset
C. Current liability
D. Noncurrent liability

Question 5: To which balance sheet grouping does the item ‘wages payable' belong?

A. Current asset.
B. Noncurrent asset
C. Current liability
D. Noncurrent liability

Question 6: To which balance sheet grouping does the item ‘bank loan repayable in three years' belong?

A. Current asset
B. Noncurrent asset
C. Current liability

D. Noncurrent liability

Question 7: The Great Escape Company has just purchased a supply of 80 000 litres of diesel fuel for its buses. The diesel fuel is an expense to the company in the accounting period in which the fuel is:

A. ordered from the supplier.
B. received from the supplier.
C. paid for.
D. consumed in the running of the buses.

Question 8: Which of the following statements is NOT true?

A. If total assets owned by a business total $110 000 and owners' equity totals $30 000, then liabilities total $80 000.
B. If total assets decreased by $30 000 during a specific period and owners' equity decreased by $35 000 during the same period, the period's change in total liabilities was a $65 000 increase.
C. If total assets decreased by $50 000 during a specific period and owners' equity decreased by $40 000 during the same period, the period's change in total liabilities was a $10 000 decrease.
D. If total assets increased by $75 000 during a specific period and liabilities decreased by $10 000 during the same period, the period's change in total owners' equity was an $85 000 increase.

Question 9: To which balance sheet grouping does the item ‘accounts payable' belong?

A. Current asset
B. Noncurrent asset
C. Current liability
D. Noncurrent liability

Question 10: Which of the following CANNOT be classified as a current liability?

A. Accounts payable
B. Provision for long service leave
C. Loans
D. Inventory

Question 11: Which of the following statements about assets is NOT true?

A. Assets provide future economic benefits.
B. Assets are economic resources controlled by an organisation.
C. Assets result from past transactions or other events.
D. Assets are recorded at the amount they can be sold for.

Question 12. Which of the following is a liability?

A. Retained profits
B. Prepaid advertising
C. Accumulated depreciation
D. Expenses payable

Question 13. Which of the following is NOT an intangible asset?

A. Prepayment
B. Goodwill
C. Copyright
D. Brand name

Question 14. Bruce operates a coffee stall at the university. On 30 June 2016, he has $400 in his business bank account, the stall and equipment are worth $5200, ingredients on hand cost $60 and paper cups cost $10. Students owe him $120 and he owes his suppliers $370. He also owes his mother $4100, which enabled him to get started. What is Bruce's owners' equity?

A. $400
B. $1320
C. $4000
D. $5420

Question 15. James has a business mowing lawns. On 31 December 2016, he has a utility truck worth $7000, a mower worth $250 and an edger worth $110. Fuel on hand cost $70. Customers owe him $360 and he owes his fuel supplier $90. He owes his sister $5000, which is a long-term loan, and he has $110 in his business bank account. What is James's owners' equity?

A. $110
B. $2590
C. $2810
D. $7810

Question 16. Which of the following is NOT a revenue of a company?

A. Cash sales
B. Credit sales
C. Interest on investments
D. Borrowing from a bank

Question 17. Which of the following is NOT an expense of a company?

A. Cost of goods sold
B. Repayment of principal on a loan

C. Repayment of interest on a loan
D. Sales commission

Question 18. Which of the following is NOT a revenue of a company?

A. Sale of goods
B. Dividends received on shares
C. Rent from premises
D. Issue of shares

Question 19. Which of the following is NOT an expense of a company?

A. Cost of goods sold
B. Dividends paid to shareholders
C. Interest for the period
D. Depreciation on factory

Question 20. Which of the following is NOT an expense?

A. Dividends declared
B. Amount owed to electrician to be paid in the next period
C. Cost of goods sold
D. Wages

Question 21. A company buys 100 televisions for $500 each. It sells 60 televisions for $900 each. What is the ‘cost of goods sold' expense?

A. $50 000
B. $24 000
C. $54 000
D. $30 000

Question 22. A company buys 60 refrigerators for $600 each. It sells 40 refrigerators for $1000 each. What is cost of goods sold?

A. $24 000
B. $36 000
C. $40 000
D. None of the answers provided

Question 23. What is total revenue for the period in which credit sales are $20 000, cash sales are $16 000 and $14 000 cash is received from a customer as a deposit for work done in the next period?

A. $34 000
B. $36 000
C. $50 000
D. $16 000

Question 24. What is total revenue for the period in which: (i) credit sales are $100 000 of which $30 000 was received at year-end; (ii) $10 000 cash was received from customers for work done in the previous year; (iii) $12 000 was received from customers for work to be done in the next accounting period?

A. $30 000.
B. $100 000.
C. $110 000.
D. $112 000.

Question 25. Which of the following is an expense?

A. Prepaid insurance
B. Dividends paid
C. Purchase of inventory
D. Wages owing but not paid at the end of the accounting period

Question 26. Sales less cost of goods sold equals:

A. gross profit.
B. net profit.
C. net assets.
D. net sales.

Question 27. Gross profit is the difference between:

A. sales revenue and operating expenses.
B. sales revenue and cost of goods sold.
C. operating profit before tax and income tax expense.
D. sales and sales returns.

Question 28. The connecting link between the balance sheet and the income statement is:

A. dividends paid to shareholders.
B. the opening balance of retained profits.
C. total shareholders' equity.
D. net profit after tax.

Question 29. The following transactions, among others, occurred during February. Which transaction represented an expense during February?

A. Purchased a computer for $3000 cash.
B. Paid $3300 in settlement of a loan obtained three months earlier.
C. Paid $500 to a garage mechanic for automobile repair work performed in December.

D. Purchased $400 of petrol on account for the delivery trucks. Account will be paid during March.

Question 30. During the year, Grasso Ltd sold 2000 items at $30 each. The cost price of the items was $22 each. Operating expenses totalled $7000 and income tax expense was $4000. What was the gross profit of Grasso Ltd for the year?

A. $60 000
B. $16 000
C. $11 000
D. $5000

Question 31. During the year, Grasso Ltd sold 2000 items at $30 each. The cost price of the items was $22 each. Operating expenses totalled $7000 and income tax expense was $4000. What was the operating profit before tax of Grasso Ltd for the year?

A. $53 000
B. $16 000
C. $9000
D. $5000