omair masood: as level mcqs madness

8/10/2019 Omair Masood: AS Level MCQs Madness

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Q1.

A non-current asset costs $250000 and has a useful economic life of 25 years. The estimatedresidual value is $10

000.

Depreciation is provided on a straight line basis.

After 10 years the asset is sold for $120000. Disposal costs of $20000 are incurred.

What is the loss on disposal?

A $30000 B $34000 C $50000 D $54000

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Q2.

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A computer used for demonstration to customers was treated as capital expenditure.

The following year a customer purchased the computer in the ordinary course of business.

Which entries are needed to adjust the cost of sales?

account to be debited account to be credited

A inventory computers

B purchases computers

C sales inventory

D selling expenses sales

Q3.

The table shows information about a business.

$

provision for doubtful debts at 1 January 2012 700

trade receivables at 31 December 2012 (after writing off a bad

debt of $30)

15

000

charge to income statement for bad and doubtful debts for year

ended 31 December 2012 (including the bad debt written off)

200

What is the total percentage provision that has been made for doubtful debts at31 December 2012?

A 3.5% B 4.7% C 5.8% D 6.0%

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MCQ MADNESS AS LEVEL - OMAIR MASOOD


4/75

Q4.

A trader provides the following financial information for the year.

$

direct costs 210000

indirect costs 55000

increase in work in progress 7000

raw materials taken for own use 2000

Which figures should appear in the manufacturing account?

prime cost$

overheads$

transfer to trading accountof income statement

$

A 208000 55000 256000

B 208000 55000 270000

C 210000 53000 256000

D 210000 53000 270000

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Q5.

The following information has been taken from the books of accounts of a limited company for theyear ended 31 December 2012.

$

bank loan interest for the year 1650

bank overdraft interest for the year 2150

ordinary dividends paid during the year 900

8% debenture taken out on 1 October 2012 30000

What are the total finance costs in the income statement for the year ended 31 December 2012?

A $4400 B $4700 C $5300 D $6200

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5/75

Q6.

X, Y and Z are in partnership, sharing profits, X 40%, Y 20% and Z 40%. Existing goodwill isshown in the ledger as $10000.

The partners agree that the goodwill is now worth $40 000 and they agree to share future profitsequally. They also agree that, in future, goodwill is not to appear in the ledger.

Which journal entry will record this change?

debit$

credit$

A X

Y

Zgoodwill

1334

7333

133310000

B X

YZgoodwill

10000

1000010000

30000

C X

YZgoodwill

12000

600012000

30000

D X

YZgoodwill

13334

1333313333

40000

Q7.

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A company has 1000000 ordinary shares of $1 issued at $2.50. It also has a 5% debenture of

$300000.

Profit from operations for the year was $465 000.

The directors paid an 8% ordinary dividend during the year.

What is the retained profit for the year?

A $250000 B $370000 C $385000 D $400000

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6/75

Q8.

Which statements about absorption costing are correct?

1 It apportions overheads between production and service departments.

2 It enables a company to know its break-even level of production.

3 It leads to higher inventory valuations than marginal costing.

4 It is used by management for make or buy decisions.

A 1, 2 and 3 B 1 and 3 only C 2 and 4 only D 3 and 4 only

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Q9.

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Anna owns a plumbing business. Costs for the year were $49500 for wages and $95000 formaterials. These included $2200 labour and $540 materials used by Anna in the extension of thebusiness premises. Additional planning and legal costs of the extension were $450.

What was Annas total revenue expenditure for the year?

A $141310 B $141760 C $142300 D $144500

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Q10.

A trader buys inventory costing $6000.

He is entitled to trade discount at 10% and cash discount of 5%.

On the same day he discovers that he can only sell the inventory for $5000.

Which amount should he record as the purchase price of the inventory?

A $5000 B $5130 C $5400 D $6000

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7/75

Q11.

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A company has the following expenses for the year.

$

directors salaries 140000

depreciation of delivery vehicles 87

000

office salaries 90000

loan interest 33000

discounts allowed 12000

What is the total of the administration overheads?

A $242

000 B $263

000 C $329

000 D $362

000

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Q12.

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A business is reviewing credit limits for its customers.

What would result in a customers credit limit being reduced?

A Cash discounts are always taken by the customer.

B Sales have increased to that customer.

C The customer always pays their debt on time.

D The customer has lost a major contract.

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Q13.

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The table shows extracts from the trial balance of a business at 31 December 2012.

$

ordinary share capital 20000

share premium 40

000

long-term loan (repayable 2022) 30000

bank overdraft 60000

4% non-redeemable preference share capital 50000

7% debentures 2017 70000

What is the total of non-current liabilities in the statement of financial position?

A $100000 B $150000 C $160000 D $210000



8/75

Q14.

A business is preparing a bank reconciliation and finds the following.

$

unpresented cheques 3190

uncredited bankings 1949

The cash book has a debit balance of $5000.

Which adjustments should be made to the cash book balance to reconcile it to the bankstatement?

A minus $3190, minus $1949

B minus $3190, plus $1949

C plus $3190, minus $1949

D plus $3190, plus $1949

Q15.

At the beginning of the year a company has a provision for doubtful debts of $1000. At the end ofthe year the required provision is $2500. During the year debts of $1500 are written off and $100is received in respect of a debt written off many years ago.

What is the net amount charged to the income statement for bad and doubtful debts?

A $1500 B $2500 C $2900 D $3000

Q16.

On 30 September 2012 a manufacturers current assets totalled $28 000. The next day, only twotransactions took place.

1 Inventory was bought for cash. The price of $2000 was subject to a trade discount of20% and a cash discount of 5%. Payment was made immediately.

2 A bad debt of $400 was written off.

What was the total of current assets on 2 October 2012?

A $27680 B $28080 C $29520 D $29600



9/75

Q17.

In reconciling the sales ledger control account with the balances in the sales ledger, it wasnoticed that there was an error in the sales journal. This had been overcast by $740. In addition,the total receipts from customers of $940 were recorded in the control account as $490.

Which correcting entry must be made?

control account list of balances

A $290 credit increase by $290

B $290 debit no effect

C $1190 credit decrease by $1190

D $1190 credit no effect

Q18.

When is a share premium account opened?

A when shares are issued at a price above nominal value

B when shares are issued at a price below nominal value

C when shares are sold by a shareholder at a price above their nominal value

D when shares are sold by a shareholder at a price below their nominal value

Q19.

Sales for January 2014 are expected to be $10000 and these are expected to increase by $2000each month. 10% of sales will be cash sales. Credit customers are expected to pay after onemonth.

Which amount will be shown in the cash budget for receipts from customers in March 2014?

A $12

000 B $12

200 C $13

800 D $14

000



10/75

Q20.

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Which error must be corrected by a one-sided journal entry?

A a cheque entered in the cash book but not posted in a ledger account

B a contra entry in the sales ledger control account not entered in the purchases ledger controlaccount

C an error in the total value of sales ledger balances included in the trial balance

D discount allowed entered in a customers account but not entered in the discount column inthe cash book

Q21.

A trader uses his bank statements and paying in books to produce a summary of his receipts andpayments for the year.

Why does he do this?

A in order to calculate his closing inventory

B in order to prepare a bank reconciliation statement

C to be able to calculate total sales and total purchases

D to know the amount of bad debts written off

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Q22.

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X and Y are in partnership sharing profits equally. They have capital account balances of $30000and $80000 respectively. Z joins the partnership and pays $10000 for his share of goodwill. Thenew profit-sharing ratio is 2 : 2 : 1.

What is the balance on Ys capital account after Z joins?

A $70000 B $75000 C $85000 D $90000

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Q23.

A vehicle cost $12000 and its estimated residual value was $2000. The vehicle was depreciatedat 25% per annum using the straight line method. After three years the vehicle was sold for$3500.

What was the profit or loss on disposal?

A $500 profit B $1000 loss C $1000 profit D $4500 loss

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11/75

Q24.

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A company has the following items on its statement of financial position.

$000

ordinary shares 12000

10% preference shares 5000

retained earnings 7000

The company had made a profit of $5 000000 of which $2000000 is paid in dividends, including$500000 paid to preference shareholders.

What is the return on capital employed?

A 12.5% B 18.75% C 20.83% D 26.32%

Q25.

The following information has been extracted from the statement of financial position of a limitcompany.

$

6% debenture (2016 2018) 20

000

ordinary share capital

issued 400

000 ordinary shares of $1 each 400

000

5% preference shares of $1 each 200

000

share premium account 50

000


000

What is the value of the shareholders equity?

A $525

000 B $545

000 C $695

000 D $725

000

Q26.

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Purchases in January 2014 are expected to be $20

000 and to increase by $1000 each month.20% of purchases are for cash. Credit purchases are paid for in the month following purchase.

Which amount will be shown in the cash budget for payments to credit suppliers in March 2014?

A $16800 B $17600 C $20200 D $21200



12/75

Q27.

A company manufactures and sells chairs. The following financial information is available.

per unit $

selling price 25

direct material and labour 12

other variable production costs 3

variable selling costs 2

fixed costs 4

The company has the option of buying in the chairs for resale instead of making them.

At which purchase price would the companys profit be unchanged?

A $15 B $17 C $19 D $21

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Which error would result in the creation of a suspense account?

A crediting the commission received account with rent received

B crediting the discounts allowed account with the discounts received

C debiting the bank interest paid account with bank interest received

D debiting the petrol account with a purchase of a new car

Q29.

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A company has ordinary shares of $1 each. Each year it pays a dividend of 10% of the nominalvalue of the shares.

It now wishes to raise a further $120 000 by an issue of shares. This would bring in additionalprofit of $10000 and dividends paid would increase by $2500 a year.

At which price should the company issue the new shares to maintain the percentage of dividend?

A $1.00 B $1.20 C $1.60 D $4.80

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13/75

Q30.

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A companys financial statements show the following.

$

profit from operations 160000

finance charges 40000

ordinary share capital 500000


debentures 300000

What is the return on capital employed?

A 15.2% B 16% C 21.3% D 24%

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Q31.

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The following information applies to a business.

output(units)

sales$

profits$

375 750000 100000

500 1000000 250000

What is the contribution to sales ratio?

A 25% B 40% C 50% D 60%

Q32.

A company plans to make the following payments in June 2014.

1 an insurance premium for the 12 months from 1 July 2014

2 the payment for equipment to be delivered in April 2014 and which will startproduction in May 2014

In which months will these appear in the cash budget for 2014?

1 2

A June April

B June June

C July April

D July May



14/75

Q33

S and T are in partnership sharing profi ts and losses in the ratio 3

:

2.

Their fixed capital accounts have balances of S $80 000 and T $60000. Interest is allowed onthese at the rate of 6% per year.

Profit for the year was $100000.

What is the division of profits between the partners?

S$

T$

A 49400 50600

B 50600 49400

C 59

760 40

240

D 60

000 40

000

Q34

The following is an extract from the statement of financial position of a company.

$

ordinary shares of $0.25 each 35000

6% cumulative preference shares 40000

No dividend was paid on the preference shares last year but the directors propose to pay adividend this year. The directors also propose a final ordinary share dividend of $0.05 per share.

What is the amount of dividends to be paid?

ordinary shares$

cumulativepreference shares

$

A 1750 2400

B 1750 4800

C 7000 2400

D 7000 4800



15/75

Q35.

Which type of organisation would use process costing?

A charity

B college

C oil refinery

D supermarket

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Q36.

A business makes up its financial statements to 30 April each year.

Included in the ledger account balances on 1 May 2011 was insurance (debit) $800.

On 31 October 2011 an insurance premium of $2100 was paid for the year ending 31 October 2012.

Which amount was charged for insurance in the income statement for the year ended30 April 2012?

A $1050 B $1850 C $2100 D $2900

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Q37.

Alfredo received his bank statement which showed a balance of $937 overdrawn. This did notagree with his cash book.

On investigation he noted the following.

Bank charges of $76 had not been entered in the cash book.

There was an unpresented cheque of $214.

Alfredo had paid $35 cash into his bank account but this was not showing on the

statement.

At which value was the bank overdraft shown in the statement of financial position?

A $758 B $937 C $1116 D $1192

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Q38.

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A company is financed by 25 000 $1 ordinary shares.

The company wishes to finance expansion by issuing 5000 $1 ordinary shares at a premium of$0.20 and $10 000 debentures.

What will be the new equity figure in the statement of financial position?

A $30 000 B $31 000 C $40 000 D $41 000

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16/75


17/75


18/75

Q39.

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A hospital budgets for overheads totalling $11 500 000 for a financial year. It expects to treat25 000 patients in the year. Each patient stays an average of 10 days and the hospital absorbsoverheads on a patient/day basis. Its direct costs for the year are budgeted at $25 000 000.

What is its overhead absorption rate per patient day?

A $46 B $100 C $146 D $460

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Q40

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The following information is extracted from a company's financial statements.

income statement $000profit from operations 200

finance charges (20)

180

taxation (70)

profit for the year 110

statement of financial position $000

net assets 1 000

non-current liabilities (100)

900

share capital and reserves 900

What is the return on total capital employed?

A 12.2% B 18% C 20% D 22.2%



19/75

Q41

Rent for premises is paid monthly in advance on the first day of each month. The paymentsduring the last financial year were as follows.

up to and including 1 January $1000 per month

from 1 February $1200 per month

Which amount(s) will appear in the financial statements for the year ended 30 April?

income statementstatement of

financial position

A $12 400

B $12 600

C $12 600 $1200 accrual

D $12 600 $1200 prepaid

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Q42

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Draft financial statements show revenue of $106 000 and closing inventory of $2100.

There were 100 items which had cost $10 an item but which were for sale at $6 an item. At theyear end these were with a customer on a sale or return basis. These items were treated ashaving been sold although no sale had been agreed.

What are the values of revenue and inventory when the principle of prudence is applied?

revenue

$

inventory

$

A 105 000 2700

B 105 000 3100

C 105 400 2700

D 105 400 3100

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20/75

Q43.

The table shows information relating to closing inventory.

$

cost 50 000

realisable value 45 000

costs of realisation 5 000

replacement cost 35 000

What is the value of the closing inventory?

A $35 000 B $40 000 C $45 000 D $50 000

Q44.

A company has issued non-cumulative preference shares and ordinary shares.

Which statement is correct?

A If no preference dividend is paid, it is carried forward to a future year.

B Preference shareholders always get a dividend.

C Preference shareholders and ordinary shareholders always get a dividend.

D Preference shareholders may get a dividend.

Q45.

A company has an authorised share capital of 1 000 000 $0.50 ordinary shares. Its issued sharecapital is 800 000 shares. An ordinary dividend of 7% is declared.

How much is payable to the shareholders?

A $30 000 B $37 500 C $60 000 D $75 000

Q46.

When are the reported profits under marginal costing and absorption costing principles the sameamount?

A when sales revenue exceeds cost of sales

B when units produced equals sales in units

C when units produced exceeds sales in units

D when unit sales exceeds production in units



21/75

Q47.

A business maintains a sales journal, a purchases journal, a cash book and a general journal.

Which items would be posted to the ledger accounts from the journal?

1 depreciation charge for the year

2 write off of a bad debt

3 discount allowed on settlement of a debt

4 interest on overdue accounts

A 1, 2 and 4 B 1 and 4 only C 2, 3 and4 D 2 and 3 only

Q48.


A Assets cannot be revalued by companies at all.

B Companies have to disclose their policy on revaluation in their accounts.

C Companies must carry out revaluations every year.

D Every asset in a particular class must be revalued by companies, not just one.

Q49.

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X and Y are in partnership, sharing profits and losses in the ratio of 2:1.

X had taken goods costing $1500 from the business for his own use. The goods had been treatedas a sale and credited to the sales account at their normal selling price of $2400.

It was agreed that the goods should have been credited to the purchases account and not tosales and the records were corrected accordingly.

Which entries should be made in the partners current accounts to make the correction?

current accounts

X$

Y$

A credit 300 debit 300

B debit 600 debit 300

C debit 1000 debit 500

D debit 1600 debit 800



22/75

Q50.

The profits of Bronte Ltd are:

Year ended 31 December 2010 nil

Year ended 31 December 2011 $60 000

Bronte Ltd has in issue 200 000 5% preference shares of $1 each.

What is the profit available for distribution to ordinary shareholders for the year ended31 December 2011, if the preference shares are (i) cumulative or (ii) non-cumulative?

(i) Cumulative (ii) Non -cumulative

A $40 000 $40 000

B $40 000 $50 000

C $50 000 $40 000

D $50 000 $50 000

Q51

A company published the financial statements for the year ending 31 December 2011, an extractof which is detailed below.

$

retained earnings at 1 January 2011 90 000

profit for year 10 000

retained earnings at 31 December 2011 100 000

share capital 20 000

What is the return on capital employed based on average capital?

A 8.70% B 10.00% C 11.11% D 50.00%



23/75

Q52.

The diagram illustrates the cost behaviour of a typical telephone invoice.

totalcost($)

level ofactivity

0

Which term best describes the behaviour of this cost?

A fixed

B semi-variable

C stepped

D variable

Q53.

A business reports a profit using marginal costing of $75 000 for a month.

Opening inventory was 10 000 units and closing inventory 15 000 units.

The fixed production overhead absorption rate is $5 per unit.

What is the profit using absorption costing?

A $25 000 B $50 000 C $100 000 D $125 000

Q54.

A companys accounts showed a gross profit for the year of $32 500. After the draft financialstatements were prepared it was found that the opening inventory had been overstated by $2400and 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



24/75

Q55.

Which accounting ratio is used to assess working capital management?

A gross profit ratio

B net profit ratio

C rate of inventory turnover

D return on capital employed

Q56.

The following are extracts from a companys financial statements.

$

profit for the year before finance charges 100 000

issued share capital 200 000

reserves 80 000

non-current liabilities 260 000

What is the companys return on capital employed?

A 18.5

% B 21.7

% C 35.7

% D 50.0

%

Q57.

Arun wishes to invest in a business with a skilled workforce which wil l make a profit in each of thenext five years.

Which aspect of financial statements helps Arun to decide where to invest?

A Financial statements deal with past performance.

B Historic cost is based on objective figures.

C Non-monetary values are excluded.

D Provisions can be based on estimates.



25/75


26/75

Q61

The following information is forecast for May.

units

opening inventory 25 200

closing inventory 28 200

$

marginal cost profit 100 800

absorption cost profit 120 300

What is the overhead absorption rate?

A $3.57 B $4.27 C $4.77 D $6.50

Q62.

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

start of year$

end of year$

rent received in advance 4200 1600

rent due in arrears 2000 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

Q63

A company has an issued share capital of 200 000 6% cumulative preference shares of $1 eachfully 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 futureyear.

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.



27/75

Q64

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

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

D Dr Revaluation reserve $144 000Cr Asset at cost $69 000Cr Provision for depreciation $75 000

Q65.

A business has noticed a significant increase in its trade receivables collection period.

What would be the most appropriate action to help the firm improve its liquidity position?

A factoring

B issue of shares

C long-term bank loan

D reducing sales

Q66

The following information is given in the financial statements of Primecrop Limited.

$

ordinary shares 1 200 000

6% preference shares 250 000

general reserve 120 000

retained earnings 710 000

8% debentures 400 000

What is the value of ordinary shareholders funds?

A $1 910 000 B $2 030 000 C $2 280 000 D $2 430 000



28/75

Q67

he table shows the capital and reserves for a company.

$000

ordinary shares of $1 fully paid 200

8% preference shares of $1 fully paid 100


general reserve 120retained earnings 50

hat is the value of each ordinary share if valued on a balance sheet (net assets) basis?

$1 B $1.40 C $2.25 D $2.75

Q68.

A company is going to sell a surplus non-current asset.

Which term describes the net book value of the non-current asset in respect of the decision tosell?

A a fixed cost

B a stepped cost

C a sunk cost

D a variable cost

Q69.

A company pays rates annually in advance on 1 April each year. $4000 is paid by them on1 April 2009 and $4800 on 1 April 2010. The companys accounting year end is 31 December.

What is the charge for rates in the 2010 income statement?

A $4000 B $4200 C $4600 D $4800

Q70

A company has been depreciating its IT equipment over 5 years, but now finds that it is becomingobsolete in 3 years.

What does the consistency principle permit the company to do?

A change the depreciation policy to 3 years and highlight the effect of this in its financialstatements

B change the depreciation policy to 3 years without indicating the effect on profits

C continue to depreciate over 5 years as per the existing policy

D continue to depreciate over 5 years but note that after 3 years the equipment will be obsolete



29/75

Q71.

Which error would cause an entry in the suspense account?

A A page total from the purchases journal was posted as $9780 rather than the correct figure of$9870.

B Carriage outwards is credited to the carriage outwards account but correctly accounted for inthe cash book.

C Discounts allowed are debited to the discounts allowed account and credited to thepurchases ledger control account.

D Repairs to a vehicle are debited to the vehicles account.

Q72

There are 75 members of a tennis club, paying an annual subscription of $95 each.

The treasurer has provided the following information for the year.

$

subscriptions received 7 305

overheads: tennis balls - purchased

- opening inventory

- closing inventory

850

110

95

other overheads 4 700

How much surplus will the clubs income and expenditure account for the year show?

A $1560 B $1670 C $1740 D $1850

Q73.

An investor owns 10 000 5% preference shares in Howdo Limited.

One year Howdo does not have enough profits to pay the preference dividend.

The investor is not too worried as he expects the profits to improve and he thinks the directors willpay the missed dividend the following year.

Which type of preference shares does the investor own?

A cumulative

B non-cumulative

C participating

D redeemable



30/75

Q74.

A company is operating in a very competitive market.

Which ratios represent the reaction to the competition?

gross profitpercentage

period of creditallowed to customers

A 20% 30 days

B 20% 60 days

C 25% 30 days

D 25% 60 days

Q75.

The balance sheet of a business at 30 June includes the following items:

Year 1 Year 2

trade receivables 47 000 63 000

other receivables 1 900 2 700

Total sales for Year 2 amounted to $450 000 of which $85 000 were cash sales.

What is the average trade receivables collection period during the year ended 30 June Year 2?

A 44 days B 51 days C 55 days D 63 days

Q76.

Which statements about marginal costing are correct?

1 The marginal cost of a product includes an allowance for fixed overheads.

2 The marginal cost of a product represents the additional cost of making one extraunit.

3 If inventory decreases during a period, the profits under absorption costing will belower than under marginal costing.

A 1 only B 1, 2 and 3 C 2 only D 2 and 3 only



31/75

Q77.

A company uses absorption costing and makes and sells one product. In the last month budgetedoverheads totalled $60 000. Budgeted production was 15 000 units and budgeted sales were14 000 units.

The company now decides to apply marginal costing principles for the last month.

Which effect will this have on profits?

A $3500 decrease

B $4000 decrease

C $4000 increase

D no effect

Q78

A business has the following budgeted and actual results for a period.

$

budgeted fixed overheads 354 000

actual fixed overheads 360 000

under absorption of overheads 3 000

The fixed overheads are absorbed per unit.

The budgeted number of units was 118 000.

What is the actual level of activity in units?

A 118 000 B 119 000 C 120 000 D 121 000

Q79.

What should companies not show as non-current assets in their balance sheets?

A plant bought on hire purchase

B plant fully depreciated

C plant held on finance leases

D plant held on operating leases



32/75

Q80

Subscriptions received by a sports club were as follows.

received year ended 31 December

2008$

2009$

2010$

for membership in the year ended31 December

2008 1900 100

2009 300 2100 400

2010 200 2500

Note: all subscriptions for 2009 are included above.

A receipts and payments account and an income and expenditure account have been preparedfor the year ended 31 December 2009.

What are the amounts of membership subscriptions shown in the receipts and payments accountand the income and expenditure account for 2009?

receipts and

payments account$

income and

expenditure account$

A 2100 2100

B 2400 2100

C 2400 2800

D 2800 2400

Q81

When is working capital most likely to increase?

A when the business increases its selling prices

B when the credit period allowed to customers is reduced

C when the credit period taken from suppliers is increased

D when the value of inventory decreases



33/75

Q82

What might stop financial statements showing a true and fair view?

A changes in depreciation methods from year to year

B changes in dividend policy

C creation of an asset revaluation reserve

D inclusion of purchased goodwill in a balance sheet

Q83.

An analysis of a businesss record of inventory for an item shows the following:

On 1 January the business had an inventory of 100 units at a cost of $10 each.

units purchased units sold

February 50 units

March 60 units at $11 each

April 70 units at $12 each 100 units

May 30 units

All sales are made at $13 per unit. The business values its inventory on a FIFO basis.

What is the value of the inventory at the end of May?

A $500 B $550 C $600 D $650

Q84.

Which statements about marginal costing are correct?

1 The marginal cost of a product includes an allowance for fixed overheads.

2 The marginal cost of a product represents the additional cost of making one extraunit.

3 If inventory decreases during a period, the profits under absorption costing will belower than under marginal costing.

A 1 only B 1, 2 and 3 C 2 only D 2 and 3 only



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35/75

Q88.

What is the main use of a computerised age analysis of debtors?

A aid debt collection procedures

B match sales invoices against orders

C reconcile sales ledger balances

D show credit notes issued

Q89.

A company issues for cash 50 000 shares of $5 each at a premium of $15 each and $300 0004% debentures.

By what amount will the net assets of the company increase?

A $250 000 B $550 000 C $1 000 000 D $1 300 000

Q90.

The following information is provided by a company for a month.

actual direct labour hours worked 4500

budgeted direct labour hours 5000

budgeted overhead expenditure $80 000

overheads under-recovered $12 000

What is the amount of the actual overhead expenditure?

A $60 000 B $68 000 C $72 000 D $84 000



36/75

Q91.

Which graph shows the fixed cost per unit produced in a manufacturing process?

0

fixed cost

per unit

quantity produced

A

0

fixed cost

per unit

quantity produced

B

0

fixed cost

per unit

quantity produced

C

0

fixed cost

per unit

quantity produced

D

Q92.

The cash book of a business shows a credit balance of $12 500 at 30 June. Bank charges of$2000 have not yet been entered in the cash book.

A cheque for $20 000 received from a debtor, and a cheque for $3000 paid to a creditor havebeen entered in the cash book, but have not yet been shown on the bank statement.

What is the balance shown on the bank statement at 30 June?

A $2500 credit

B $2500 debit

C $31 500 credit

D $31 500 debit



37/75

Q93.

Closing inventory has been overvalued.

What is the effect on the financial statements?

net current assets profit from operations

A overstated overstated

B overstated understated

C understated overstated

D understated understated

Q94.

On 1 January 2009 a business had prepaid rent of $50. During 2009, three rent payments weremade of $250 each. On 31 December 2009, the business still owes $200 rent on account for2009.

The business owner has charged the rent payments made during 2009 in his income (profit andloss) account.

What is the effect on net profit?

A $200 too high

B $200 too low

C $250 too high

D $250 too low

Q95.

A customer paid a deposit in advance for goods to be supplied at a later date.

How should this be recorded in the sellers books?

debit credit

A cash customer

B cash sales

C customer prepayment

D customer sales



38/75

Q96

At 30 June the balance sheet of a business includes the following.

$

trade receivables (debtors) 46 000

provision for doubtful debts 5 % 2 300

During July, sales of $350 000 were made of which 20 % were in cash. Credit customers paid$303 800 after deducting a 2

% cash discount.

How much did the trade receivables (debtors) owe to the business at 31 July?

A $15 200 B $16 000 C $22 200 D $76 000

Q97.

For the eleven months ended 31 August 2009, snack bar takings were correctly recorded at$109 340. For September 2009, the snack bar takings were mixed up with other income. Thesnack bar profit margin was 30.%.

The table shows figures for the snack bar for September 2009.

$

opening inventory (stock) at cost 6 303

purchases 8 844

closing inventory (stock) at cost 7 370

What was the gross profit of the snack bar for the year ended 30 September 2009?

A $27 566 B $36 135 C $36 593 D $43 912

Q98.

The table shows extracts from the trial balance of a company at 31 December 2009.

$

ordinary share capital 750 000

8

% preference shares 250 000

6

% debentures (2015) 150 000

bank loan repayable (2012) 75 000

bank overdraft 110 000

mortgage on buildings (repayable 2010) 120 000

What is the total of non current liabilities in the balance sheet at 31 December 2009?

A $195 000 B $225 000 C $345 000 D $595 000



39/75


40/75


41/75

Q105

A business obtained a machine by means of a hire purchase agreement. It showed the machinein its balance sheet at the cash price of $30 000 although only $10 000 has been repaid.

Which accounting principle is involved?

A accruals

B materiality

C prudence

D substance over form

Q106

The table shows information from the books of a business at 30 April 2010.

details $

credit sales invoiced during financial year 79 000

goods sent to customers on 28 April 2010 and invoiced 4 May 2010 6 100

goods sent to customers during April 2010 on sale or return basis but

not sold by 30 April 20108 300

What is the amount of sales for the year ended 30 April 2010?

A $76 800 B $85 100 C $85 300 D $93 400

Q107.

The table shows transactions relating to an inventory (stock) item during a period.

number of units per unit

bought 100 cost $16

sold 60 selling price $25

Of the remaining units, 20 are damaged and can only be sold for $10 each.

What is the profit for the period?

A $220 B $300 C $420 D $540



42/75


43/75

Q112.

A company is set up with an authorised share capital of $3 million.

It plans to purchase immediately a factory for $1 million. Preliminary expenses will be $100 000and the immediate requirement for working capital will be $800 000. It will also require newequipment costing $600 000 in 12 months time.

What is the minimum amount the company needs to raise now?

A $1 000 000 B $1 900 000 C $2 500 000 D $3 000 000

Q113.

A company buys and re-sells goods. It has a higher gross profit margin than its rivals.

Which reason could explain this?

A Rival companies pay less for goods than the company.

B Rival companiesspend less on advertising than the company.

C The Company charges a higher selling price than its rivals.

DThe Company charges a lower price than its rivals.

Q114.

The following information is given about four products.

Which product makes the most gross profit?

inventory (stock)turnover (per annum)

average inventory(stock) in units

mark up on cost%

A 8 times 1000 15

B 6 times 1000 30

C 7 times 1000 25

D 10 times 1000 20



44/75

Q115.

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A soup manufacturer uses batch costing. It produces a batch of 10 000 tins of soup with a directmaterials cost of $2500.

Direct labour involved 200 hours at a cost of $2000, and overheads are absorbed at the rate of$15 per direct labour hour.

What is the cost of a tin of soup?

A $0.25 B $0.45 C $0.55 D $0.75

Q116.

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The accounting year end of a business is 31 October.

On 1 April the business rents out part of its warehouse for an annual rent of $6000. Paymentswere received in equal instalments on 1 April, 1 July, 1 October and 1 January.

At 31 October what would the final accounts show?

profit and loss account$

balance sheet$

A rental income 3500 current asset 1000

B rental income 3500 current liability 1000

C rental income 4500 current liability 1000

D rental income 6000 current asset 1500

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Q117.

What will result in a reduction of working capital?

A decreasing the rate of stock turnover

B reducing the debtor collection period by offering discounts

C reducing the time taken to pay suppliers

D selling some surplus fixed assets

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45/75

Q118.

A particular cost is classified as semi-variable.

What effect will a 20 % reduction in activity have on the unit cost?

A decrease by 20%

B decrease by less than 20%

C increase by 20%

D increase by less than 20%

Q119.

An extract from a companys balance sheet is given.

$000

issued ordinary share capital 250

issued preference shares 180

profit and loss account 320


8% debentures 100

What are the ordinary shareholders funds?

A $695 000 B $775 000 C $875 000 D $975 000

Q120.

Development costs are capitalised.

Which accounting principle is being applied?

A business entity

B historic cost

C matching

D materiality



46/75

Q121.

The correct balance on the purchases ledger control account is $63 000 but has been entered inthe trial balance as $36 000. The difference on the trial balance has been entered in a suspenseaccount.

Which journal entry corrects this error?

account to be debited $ account to be credited $

A purchases ledger control account 27 000 suspense account 27 000

B - suspense account 27 000

C suspense account 27 000 -

D suspense account 27 000 purchases ledger control account 27 000

Q122.

An extract from a companys trial balance is shown.

debit$

credit$

debtors control account debit balances 225 000

debtors control account credit balances 2 800

creditors control account debit balances 3 200

creditors control account credit balances 261 000

investment in another company 12 000

How much should be shown as trade debtors in the companys financial statements?

A $222 200 B $228 200 C $237 400 D $240 200



47/75

Q123.

A company profit and loss account includes:

$000

dividend 300

increase in stock 200

overheads 400

purchases 800

If the net profit percentage is 20 %, what is the figure for sales?

A $1 120 000 B $1 250 000 C $1 625 000 D $1 750 000

Q124.

The following figures are given fora factorys overheads and machine hours worked.

machine hours total overhead costsoverhead

absorption rate

budgeted 122 000 $268 400 $2.20

actual 116 000 $261 000 $2.25

What was the under- or over-absorption of overhead for the quarter?

A $5800 over-absorbed

B $5800 under-absorbed

C $7400 over-absorbed

D $7400 under-absorbed



48/75

Q125.

A creditor for $720 transferred from the purchases ledger has been entered on the wrong side ofthe sales ledger control account.

The sales ledger control account has a closing balance of $92 460, before correcting the transfer.A provision for doubtful debts of 1000 is to be made.

What is the correct balance on the sales ledger control account?

A $90 020

B $91 020

C $91 740

D $92 180

Q126.

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

amount in unitscost per unit

$

1 January opening balance 100 3

3 January receipts into stock 50 4

8 January stock issued 120 -

What is the value of the stock issued on 8 January using the First In First Out (FIFO) method?

A $360 B $380 C $410 D $420

Q127.

A business has the following assets and liabilities.

$

short-term investment 6 000

loan interest owing 1 500

loan repayable within one year 12 000

deposits from customers for orders 4 500

creditors 27 000

debtors 39 000

pre-payments 3 500

What is the amount of net current assets?

A $3500 B $4500 C $8000 D $15 500



49/75

Q128.

A business provides the following data for the year.

budgeted output (units) 10 000

actual output (units) 8 000

$

budgeted fixed production costs 1 200 000

budgeted variable production costs 800 000

budgeted fixed selling overhead 600 000

What is the absorption cost per unit used for stocktaking?

A $200 B $250 C $260 D $325

Q129

The following debit balance appears on a trial balance after preparing the manufacturing accountfor the year.

loose tools $18 000

What is this item?

A a creditor for loose tools

B the annual charge for loose tools

C a prepayment for loose tools

D stock of loose tools

Q130.

At the year-end a cash book shows a credit balance of $4800.

The bank statement included bank charges of $25 which had not been included in the cash book.

Cheque payments entered in the cash book before the year end to the value of $250 had not yetcleared the bank.

How would the bank balance be shown in the balance sheet?

$

A current asset 4775

B current liability 4825

C current asset 5025

D current liability 5075



50/75

Q131

A business has a gross profit to sales ratio of 40

%, and a net profit to sales ratio of 10

%.

If the sales volume increases by 8% which of the following will generally be true?

gross profit tosales ratio

net profit tosales ratio

A increase decrease

B increase increase

C unchanged decrease

D unchanged increase

Q132

A company uses a predetermined direct labour rate of $5.40 per hour to absorb productionoverhead. Each unit of product manufactured requires four direct labour hours.

The following information is available for a period.

actual production overhead $518 400

under-absorbed production overhead $32 400

What was the actual output of the product in the period?

A 22 500 units B 24 000 units C 25 500 units D 30 000 units



51/75


52/75

Q135

A clubs income and expenditure account for 2006 showed rent and rates as $4000.

On 31 December rent owing was $600 and rates paid in advance was $800.

What was the amount shown in the receipts and payments account for rent and rates for the yearended 31 December 2006?

A $3800 B $4000 C $4200 D $5400

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Q136.

What is the purpose of providing for depreciation?

A To apply the matching principle.

B To ascertain the true value of fixed assets.

C To ensure that money is available for repair of fixed assets.

D To provide cash in the business for replacement.

Q137

Partnership capitals are $60 000 for X and $90 000 for Y. The partnership agreement provides forinterest on capitals at 10 % per annum, but makes no other financial provisions.

Profits for the current year total $75 000.

How will the total profits be divided between the partners?

X($)

Y($)

A 30 000 45 000

B 36 000 39 000

C 37 500 37 500

D 39 000 36 000

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53/75

Q138

The table shows the capital structure of a company.

$000

ordinary shares of $1 each 100


retained profits 300

600

15

% loan stock (issued 5 years ago) 400

1000

Operating profits average $260 000 per annum.

What is the return on shareholders funds?

A 26.0% B 33.3% C 43.3% D 66.7%

Q139.

A business has two items in stock which need to be repaired before sale.

cost$

selling price$

repair costs$

item 1 2 160 2 450 190

item 2 3 190 3 060 320

What is the total stock value of these items?

A $4900 B $5000 C $5510 D $5640



54/75

Q140.

A company receives payment for 20 % of its sales in the month of sale, 50 % in the followingmonth and 30% two months after the month of sale.

The table shows sales for four months.

$

January 180 000

February 240 000

March 270 000

April 220 000

How much were total cash receipts in April?

A $220 000 B $228 000 C $249 000 D $251 000

Q141.

The capital structure of a company is shown.

$

700 000 ordinary shares of $0.25 each175 000

8% loan stocks 160 000

During the year the company made profits before interest of $105 000. The directors wish todistribute as much of the profits as possible by way of dividend.

What is the dividend per share?

A $0.1317 B $0.15 C $0.5268 D $0.60

Q142

What will cause under-absorption of fixed production overheads?

A absorption of overheads is based on actual expenditure and actual activity

B actual expenditure of overheads is below budget expenditure

C actual activity is above budgeted activity

D actual activity is below budgeted activity and actual expenditure is as budgeted



55/75


56/75

Q145.

The following data is available:

this year$

last year$

credit sales 60 000 50 000

credit purchases 40 000 28 000

creditors (average) 10 000 16 000

debtors (average) 12 000 8 000


A Debtors and creditors turnover ratios have improved.

B Debtors and creditors turnover ratios have worsened.

C Debtors are paying faster, but creditors are being paid more slowly.

D Debtors are paying more slowly, but creditors are being paid faster.

Q146.

On 30 September 2005 a manufacturers current assets totalled $28 000. The next day only twotransactions took place.

1 Stock bought for cash.

The list price of $2000 was subject to a trade discount of 20

% and a cash discount of 5

%.

Payment was made immediately.2 A bad debt of $400 was written off.

What was the total of current assets on 2 October 2005?

A $27 680 B $28 080 C $29 520 D $29 600



57/75

Q147.

A company manufactures a single product with a selling price of $75 per unit. The table showsthe costs, based on sales and production volume of 8000 units.

$000

prime costs 158

variable manufacturing overheads 74

fixed manufacturing overheads 80

variable selling overheads 20

fixed administration overheads 100

If absorption costing is applied, what is the gross profit on each unit sold?

A $21.00 B $36.00 C $43.50 D $46.00

Q148.

A company excludes from its Balance Sheet machinery for which spare parts are no longerobtainable.

Which concept is being applied by the company?

A going concern

B materiality

C prudence

D substance over form

Q149.

X and Y are sole traders. On 1 October 2004 they agreed to form a partnership which would takeover the assets of the separate businesses.

At 30 September 2004 the following information was available:

X$

Y$

Goodwill 15 000 12 000

machinery 25 000 18 000

stock and debtors 8 000 3 000

cash at bank/(overdraft) 10 000 (4 000)

What was the total of the tangible assets taken over by the partnership?

A $60 000 B $64 000 C $87 000 D $91 000



58/75

Q150

The following items of expenditure take place during the first month of a transport business.

$

rent 1 000

insurance of building 1 300

insurance of vehicle 350

road tax 500

purchase of vehicle 15 000

number plate for vehicle 150

painting of vehicle in company colours 750

wages for lorry driver 100

wages for painting vehicle 150

What is the total capital expenditure?

A $15 000 B $15 500 C $16 050 D $16 550

Q151

The journal entry Debit Subscription Income, Credit Creditors was made in the accountingrecords of a club.

What does this represent?

A subscriptions owed by members

B subscriptions received by cheque

C subscriptions received in advance

D subscriptions refunded to members

Q152.

A company has two items in stock which require to be repaired before sale.

cost $ selling price $ repair costs $

item 1 5 260 7 600 880

item 2 2 360 2 450 190

What is the total stock value of these items?

A $6550 B $7520 C $7620 D $8980



59/75


60/75

Q155.

The following information has been calculated from the accounts of a business.

days taken to pay creditors 36

days taken by debtors to pay 65

stock turnover in days 14

What is the cash operating cycle?

A 15 days B 29 days C 43 days D 79 days

Q156.

The following information applies to X Ltd.

output(units)

sales$ 000

profits$ 000

750 750 100

1000 1000 250

What is the contribution to sales ratio?

A 25% B 40% C 60% D 87%

Q157.

What may result in an under-absorption of fixed overhead?

A absorption based on actual expenditure and actual activity

B activity above budget

C activity below budget

D expenditure below budget



61/75

Q158.

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What are major assumptions in contribution/sales (c/s) analysis?

1 costs can be identified as either variable or fixed

2 fixed cost per unit is constant as activity rises

3 variable cost per unit fluctuates with the volume of activity

4 volume of activity is the only factor that affects revenue and variable costs

A 1 and 2 only

B 1 and 4 only

C 2 and 3 only

D 2 and 4 only

Q159.

A company has the following balances.

$

trade debtors at 31 December 2003 125 400

provision for doubtful debts at 1 January 2003 1 800

During the year ended 31 December 2003 bad debts of $20 500 were written off. The companyprovides for 5% of trade debtors at each year end.

What is the doubtful debts expense for the year ended 31 December 2003?

A $3445 B $4470 C $5245 D $6270

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Q160.

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The table shows details relating to a companys banking transactions at 31 December.

$

balance at bank 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 Balance Sheet at 31 December?

A $18 820 B $20 120 C $25 180 D $26 480



62/75

Q161.

In the absence of a partnership agreement the partners claim that they are:

1 entitled to interest on the capitals at the rate of 5% per annum

2 entitled to interest on loans to the firm at 5% per annum

3 entitled to interest on loans to the firm at 10% per annum

4 not entitled to interest on capitals

5 not entitled to interest on loans to the firm

Which claims are correct?

A 1 and 2 B 2 and 4 C 3 and 4 D 4 and 5

Q162.

A company sells goods on sale or return at a mark up of 25%.

At the Balance Sheet date the following information is available.

goods in warehouse $300 000 (cost)

goods sent on sale or return $200 000 (at invoice price)

What will be the value of closing stock in the company accounts?

A $300 000 B $450 000 C $460 000 D $500 000

Q163.

A business uses absorption costing.

Which cost is used to value finished stock?

A full cost

B prime cost

C variable cost of production

D variable cost of sales



63/75

Q164

What does the diagram show about costs?

1 2 3 4 5

fixed costs

$000profit

years

sales revenue

revenueand

costs

A fixed costs are increasing

B total costs as a % of sales are decreasing

C variable costs per unit are decreasing

D variable costs per unit are increasing

Q165.

A vehicle was part exchanged for a new vehicle. The value placed on the old vehicle was$12 000.

Which entries record the $12 000 part exchange?

account debited account credited

A Cash Motor Vehicles

B Motor Vehicles Cash

C Disposals Motor Vehicles

D Motor Vehicles Disposals



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Q166.

At the end of a financial period, a business has the following balances.

$

total debtors balances 10 620

bad debt not yet written off 260

provision for doubtful debt brought forward 460

What should the business do if it wishes to maintain the bad debt provision at 5 % of debtors?

A decrease the existing provision by $58

B increase the existing provision by $58

C decrease the existing provision by $71

D increase the existing provision by $71

Q167.

A trial balance does not balance. The difference has been entered in a Suspense account.

The following errors are found.

1 The Purchase Ledger Control account balance of $48 300 has been

included as a debit balance.2 Provision for depreciation has been overcast by $960.

3 A cash payment of $630 for rent has been credited in the cash book

and debited to the Bad Debts account.

What is the correcting debit entry to the Suspense account?

A $47 340 B $95 010 C $95 640 D $97 560

Q168

When a company is short of liquid funds, for what purpose may the reserves be used?

A to finance the take-over of another business the company is anxious to acquire

B to maintain dividends during periods of low profitability

C to pay creditors promptly so as to obtain discounts

D to write down assets whose value to the business has fallen



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Q169.

A club charges each of its 100 members an annual subscription of $12.

At the end of a year four members had not paid their annual subscription.

What will be the entries in the financial statements for subscriptions?

Income and

Expenditure accountBalance Sheet

A $1 152 current asset $48

B $1 152 current liability $48

C $1 200 current asset $48

D $1 200 current liability $48

Q170.

Production overhead expenditure in a period totalled $102 660 compared with a budget of$105 270.

Direct labour hours are used to absorb production overheads. 8700 direct labour hours wereworked in the period and production overhead was over-absorbed by $1740.

What was the production overhead absorption rate per direct labour hour?

A $11.60 B $11.80 C $12.00 D $12.10

Q171.

A business has a draft net profit of $84 000. It is discovered that the closing stock was overvaluedby $4000 and that discounts received of $1500 were treated as an expense.

What is the corrected net profit?

A $81 500 B $83 000 C $89 500 D $91 000



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67/75

Q176.

The graph shows the way in which a cost increases according to the level of activity of thebusiness.

level of activity (units)

total cost

$

0

Which cost follows this pattern?

A administrative salaries

B commission on sales

C depreciation of factory

D office rent

Q177.

Which item should be treated as capital expenditure?

A the addition of a back-up system on an existing computer at a cost of $900

B costs incurred in repairing a car when the costs cannot be recovered from the insurance

company

C rent paid on a factory, whilst the company negotiated the purchase of that same factory

D the replacement of a wooden fence with a new fence



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Q178.

A trial balance at 30 April 2003, before making end of year adjustments, showed:

debit$

credit$

Trade debtors 17 800 -

Provision for doubtful debts - 580

At 30 April 2003 it was decided to write off a bad debt of $800 and to make a provision fordoubtful debts of 2% of trade debtors. During the year an amount of $200 was received from acustomer relating to a debt that was written off in the year ended 30 April 2002.

What was the total bad and doubtful debts expense for the year ended 30 April 2003?

A $360 B $560 C $940 D $1140

Q179.

Which of the following is the definition of a business as a going concern?

A The assets owned by the business exceed its liabilities.

B The business has accumulated revenue reserves.

C The business is currently liquid and able to pay its creditors.

D The business will continue in operational existence for the foreseeable future.

Q180.

The treasurer of a tennis club has provided the following information for a year.

number of members 75

$

annual subscription 95

subscriptions received 7305

overheads: tennis balls - purchased

- opening stock

- closing stock

850

110

95

other overheads 4700

What will the clubs Income and Expenditure account show?

A $1560 surplus B $1670 surplus C $1740 surplus D $1850 surplus



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Q181.

The balance on the Sales Ledger Control account amounting to $43 000 has been entered in thetrial balance as $34 000. The difference on the trial balance has been entered in a Suspenseaccount.

Which journal entry is required to correct the error?

account to be debited account to be credited

A Sales Ledger Control account $9000 Suspense account $9000

B - Suspense account $9000

C Suspense account $9000 -

D Suspense account $9000 Sales Ledger Control account $9000

Q182.

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A company is financed by:

10 000 $1 ordinary shares

$5000 10% loan

Net profit before interest and taxation is $2500.

Tax payable is $400.

What is the maximum dividend per share payable from this years profits?

A $0.16 B $0.20 C $0.21 D $0.25

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Q183.

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When a shareholder sells some shares for less than he paid for them, what will happen tothe share capital of the company?

A It will fall by the nominal value of the shares sold.

B It will fall by the sales proceeds of the shares sold.

C It will increase by the amount received from the sale of the shares.

D It will remain the same as before.



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Q184.

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A business uses job costing to calculate the cost of vehicle repair jobs.

Overheads are allocated on an absorption costing basis.

What is the effect of this method of allocation?

A overheads will include both fixed and variable overhead costs

B overheads will include direct costs only

C overheads will include fixed overhead costs only

D overheads will include variable overhead costs only

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Q185.

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The table shows costs at three activity levels.

activity levels 65 units 90 units 100 units

$ $ $

fixed cost ? ? ?

variable cost ? ? ?

total cost 15 600 19 600 21 200

What is the fixed cost?

A $1600 B $4000 C $5200 D $5600

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Q186.

The treasurer of a club has decided not to include subscriptions owing by members in theBalance Sheet at the year-end.

Which accounting concept is being applied?

A accruals

B going concern

C money measurement

D prudence

Q187.

Stock which cost $1200 has been damaged. It would have sold for $1800 when perfect. It can besold for $1700 if repairs are undertaken at a cost of $600. To replace the stock would cost $1000.

At what value should the damaged stock be shown in the final accounts?

A $ 1000 B $ 1100 C $ 1200 D $ 1800



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Q188

Accountants prefer the commercial reality of a transaction to a strictly legal approach.

This is an example of

A consistency.

B materiality.

C prudence.

D substance over form.

Q189.

A trial balance does not balance and a Suspense account is opened.

Subsequently the following errors are found and the Suspense account is cleared.

1 A sales invoice for $1240 had been omitted from the books.2 Rent paid of $2600 was entered correctly in the cash book but incorrectly as $6200 in the

Rent account.3 The purchases journal was undercast by $1980.

What was the original balance on the Suspense account?

A $1620 credit

B $4340 debit

C $5580 credit

D $5580 debit

Q190.

A trial balance does not balance and a Suspense account is opened.

Subsequently the following errors are found and the Suspense account is cleared.

1 A sales invoice for $1240 had been omitted from the books.2 Rent paid of $2600 was entered correctly in the cash book but incorrectly as $6200 in the

Rent account.3 The purchases journal was undercast by $1980.

What was the original balance on the Suspense account?

A $1620 credit

B $4340 debit

C$5580 credit

D $5580 debit



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Q191.

A partnership does not maintain a Goodwill account. It recently admitted a new partner.

No adjustments were made for Goodwill in the partners Capital accounts.

What is the effect of this omission?

A

B

C

D

overstated

understated

understated

overstated

continuing partners Capitalaccounts total balances

understated

overstated

understated

overstated

new partners Capitalaccount balance

Q192.

Which business is likely to have the lowest Gross Profit/Sales margin?

A a car manufacturer

B a computer software company

C a jewellery shop

D a supermarket

Q193.

The trial balance of a business does not agree. The difference has been entered in a Suspenseaccount.

The error was caused by a cheque for $400 from Omar being debited to Omars account.

What is the journal entry to correct this?

debit credit with

A Bank account Suspense account $400

B Suspense account Omars account $400

C Suspense account Omars account $800

D Suspense account Bank account $800



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Q194.

A business purchases stock on credit.

Which of the following is now true?

current ratio acid test

A decreases decreases

B increases increases

C unchanged decreases

D unchanged increases

Q195.

A company manufactures a variety of products, each of which requires different materials andgrades of labour.

There is little use of machinery in the manufacture of each product.

On which basis should the Overhead Absorption Rate (OAR) be calculated?

A direct labour cost

B direct material cost

C direct labour hours

D machine hours

Q196.

Which of the following may result in an under-absorption of fixed overhead?

A absorption based on actual expenditure and actual activity

B activity above budget

C activity below budget

D expenditure below budget



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Q197.

The sales included in the trial balance of a company total $880 000.

This is made up as follows:$

Cash sales 215 000Credit sales 536 000Goods sent on sale or return basis awaiting acceptance by

the consignee 45 000

Goods sent on sale or return for which customers haveaccepted invoices 84 000

Total 880 000

Which amount will be shown in the income statement as revenue?

A $751 000 B $796 000 C $835 000 D $880 000

Q198.

Which line, A, B, C orD, in the graph below best represents the behaviour of the total cost of anitem affected by bulk purchase discounts?

quantity purchased

Cost$

A

B

C

D



75/75

Q199.

The final accounts of John Gates contain two errors. The closing trade inventories have beenovervalued by $6,000, and uninsured theft of goods costing $9,000 has not been taken intoaccount.

What effect will the correctionof these errors have on John Gatess profits?

Gross profit Profit for the year (Net profit)

A reduced by $6 000 increased by $3 000

B reduced by $3 000 reduced by $3 000

C increased by $3 000 reduced by $6 000

D increased by $6 000 increased by $6 000

Q200

A company manufactures and sells widgets. The directors want to increase profitability and areconsidering buying in the widgets instead of manufacturing them.

The company should buy the widgets from an outside supplier if the price is

A less than the marginal cost of production

B more than the marginal cost of production but less than the marginal cost of sales

C more than the marginal cost of sales but less than the total cost

D more than the total cost but less than the selling price

END OF MADNESS :)


omair masood: as level mcqs madness

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