Question 1

Describe the nature and importance of working capital to a business entity.

Accepted Answer

Working capital is represented by the ex

Question 2

A choice between debt finance and equity finance will result in a trade-off between risk and return.

Accepted Answer

A) True 
 B)False

Question 3

The purchase of an asset using loan finance and the leasing of an asset under a finance lease will both result in ownership of the asset being transferred at the time of acquisition/beginning of lease and not when all payments have been made.

Accepted Answer

A) True 
 B)False

Question 4

Describe the nature of trade credit, factoring and bank overdrafts as sources of short-term finance.

Accepted Answer

Trade credit refers to the short-term fu

Question 5

When a company obtains financial resources from owners, it is termed:

Accepted Answer

A)  debt. 
B)  operating. 
C)  equity. 
D)  risk-free. 
A)  debt. 
B)  operating. 
C)  equity. 
D)  risk-free.

Question 6

Why do companies manage their working capital?

Accepted Answer

Companies manage their working capital b

Question 7

Debentures are essentially the same as a long-term loan except that debentures are particular to limited companies and have a fixed interest rate.

Accepted Answer

A) True 
 B)False

Question 8

Temporary differences occur when an income or expense item enters into the calculations of accounting profit and taxable income in different periods.

Accepted Answer

A) True 
 B)False

Question 9

The following information applies to questions 23 and 24.
Kucinta Manufacturing Company started operations with the following capital:
  
-What is the amount of equity financing for this partnership?

Accepted Answer

A)  $30 000 
B)  $25 000 
C)  $45 000 
D)  $20 000 
A)  $30 000 
B)  $25 000 
C)  $45 000 
D)  $20 000

Question 10

Classifying preference shares as debt not equity, would alter the gearing (leverage) of a company.

Accepted Answer

A) True 
 B)False

Question 11

Wilmington Fisheries had a Retained Profits account balance on 1 January of $12 000. During the year, the firm had net profit of $7200 and paid a $3600 cash dividend. What is the balance in Retained Profits at the end of the financial year on 31 December?

Accepted Answer

A)  $12 200 
B)  $15 600 
C)  $19 600 
D)  $21 200 
A)  $12 200 
B)  $15 600 
C)  $19 600 
D)  $21 200

Question 12

FF Ltd declared and paid $150 000 in dividends during the financial year ending 31 December. Closing retained profits as at 31 December were $860 000. What was opening retained profits at the beginning of the financial year on 1 January, if FF Ltd made a loss of $180 000 for the year ended 31 December?

Accepted Answer

A)  $530 000 
B)  $860 000 
C)  $890 000 
D)  $1 190 000 
A)  $530 000 
B)  $860 000 
C)  $890 000 
D)  $1 190 000

Question 13

A bank overdraft is normally securitised over assets, either as a fixed charge over specific assets or as a floating charge over all assets; factoring is secured over specific assets being accounts receivable; whereas accounts payable generally require no security.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is incorrect?

Accepted Answer

A)  Preference shares usually have a fixed dividend and rate higher than ordinary shares in a situation where a company goes into liquidation. 
B)  A redeemable preference share with a fixed redemption date is classified as equity. 
C)  A non-redeemable cumulative preference share gives the right to be paid current or accumulated dividends before ordinary shareholders. 
D)  A non-redeemable cumulative preference is normally classified as equity. 
A)  Preference shares usually have a fixed dividend and rate higher than ordinary shares in a situation where a company goes into liquidation. 
B)  A redeemable preference share with a fixed redemption date is classified as equity. 
C)  A non-redeemable cumulative preference share gives the right to be paid current or accumulated dividends before ordinary shareholders. 
D)  A non-redeemable cumulative preference is normally classified as equity.

Question 15

AKP Ltd uses the accrual-basis method of accounting for accounting profit. In the current accounting period, they have recognised income for interest not yet received. Taxable income is determined on a cash basis. Based on this information, which of the following statements is correct?

Accepted Answer

A)  Taxable income will be greater than accounting profit, and will give rise to a deferred tax liability. 
B)  Taxable income will be less than accounting profit, and will give rise to a deferred tax liability. 
C)  Taxable income will be greater than accounting profit, and will give rise to a deferred tax benefit. 
D)  Taxable income will be less than accounting profit, and will give rise to a deferred tax benefit. 
A)  Taxable income will be greater than accounting profit, and will give rise to a deferred tax liability. 
B)  Taxable income will be less than accounting profit, and will give rise to a deferred tax liability. 
C)  Taxable income will be greater than accounting profit, and will give rise to a deferred tax benefit. 
D)  Taxable income will be less than accounting profit, and will give rise to a deferred tax benefit.

Question 16

Accounting for income tax gives rise to temporary differences, which arise when the tax value and the carrying value of assets and liabilities differ.

Accepted Answer

A) True 
 B)False

Question 17

The operating net profit before income tax of Fraxinus Ltd for the year ended 30 June - the entity's first year of operation - was $8 000 000. The figure was derived using the accrual approach to measuring profit. The company determines tax based on a cash basis.
Additional information
   Taking into consideration the additional information provided above, you are required to:

Accepted Answer

(a) Accounting income taxation

Question 18

Which of the following must be known in order to determine the firm's total amount of working capital? Current assets Current liabilities

Accepted Answer

A)  Yes Yes 
B)  Yes No 
C)  No Yes 
D)  No No 
A)  Yes Yes 
B)  Yes No 
C)  No Yes 
D)  No No

Question 19

On 1 January, the Harglo Construction Company leased a bulldozer from ASIS Sales Corporation. The lease meets the criteria for classification as a finance (capital) lease and requires Harglo to make annual payments of $30 000 at the end of each of the next 10 years with the first payment due at the end of each year on 31 December. The present value of the lease payments is $200 000 based on an interest rate of 8%.
How would the lessee record:

Accepted Answer

The answer of On 1 January, the Harglo Construction Company...

Question 20

The sources of equity finance for a company are:

Accepted Answer

A)  contributed equity. 
B)  retained profits. 
C)  general reserves. 
D)  all of the above. 
A)  contributed equity. 
B)  retained profits. 
C)  general reserves. 
D)  all of the above.

Describe the nature and importance of working capital to a business entity.

A choice between debt finance and equity finance will result in a trade-off between risk and return.

The purchase of an asset using loan finance and the leasing of an asset under a finance lease will both result in ownership of the asset being transferred at the time of acquisition/beginning of lease and not when all payments have been made.

Describe the nature of trade credit, factoring and bank overdrafts as sources of short-term finance.

When a company obtains financial resources from owners, it is termed:

Why do companies manage their working capital?

Debentures are essentially the same as a long-term loan except that debentures are particular to limited companies and have a fixed interest rate.

Temporary differences occur when an income or expense item enters into the calculations of accounting profit and taxable income in different periods.

The following information applies to questions 23 and 24. Kucinta Manufacturing Company started operations with the following capital: -What is the amount of equity financing for this partnership?

Classifying preference shares as debt not equity, would alter the gearing (leverage) of a company.

Wilmington Fisheries had a Retained Profits account balance on 1 January of $12 000. During the year, the firm had net profit of $7200 and paid a $3600 cash dividend. What is the balance in Retained Profits at the end of the financial year on 31 December?

A bank overdraft is normally securitised over assets, either as a fixed charge over specific assets or as a floating charge over all assets; factoring is secured over specific assets being accounts receivable; whereas accounts payable generally require no security.

Which of the following statements is incorrect?

AKP Ltd uses the accrual-basis method of accounting for accounting profit. In the current accounting period, they have recognised income for interest not yet received. Taxable income is determined on a cash basis. Based on this information, which of the following statements is correct?

Accounting for income tax gives rise to temporary differences, which arise when the tax value and the carrying value of assets and liabilities differ.

Which of the following must be known in order to determine the firm's total amount of working capital? Current assets Current liabilities

The sources of equity finance for a company are:

Introduction to Accounting

Types of Organisations and the Financial Reporting Framework

Ethics and Corporate Governance

Wealth and the Measurement of Profit

Presentation of Financial Position and the Worksheet

Presentation of Financial Performance and the Worksheet

Presentation of Cash Flows

Accounting for Selected Assets

Financial Statement Analysis

Worksheet to Debits and Credits

An Introduction to Management Accounting: a Strategic Perspective

Performance Measurement and the Balanced Scorecard

Costs and Cost Behaviour

Budgets

Cost-Volume-Profit Analysis

Accounting for Decision Making: With and Without Resource Constraints

Capital Investment Decisions

Filters

Exam 9: Liabilities and Sources of Financing

Describe the nature and importance of working capital to a business entity.

A choice between debt finance and equity finance will result in a trade-off between risk and return.

The purchase of an asset using loan finance and the leasing of an asset under a finance lease will both result in ownership of the asset being transferred at the time of acquisition/beginning of lease and not when all payments have been made.

Describe the nature of trade credit, factoring and bank overdrafts as sources of short-term finance.

When a company obtains financial resources from owners, it is termed:

Why do companies manage their working capital?

Debentures are essentially the same as a long-term loan except that debentures are particular to limited companies and have a fixed interest rate.

Temporary differences occur when an income or expense item enters into the calculations of accounting profit and taxable income in different periods.

The following information applies to questions 23 and 24. Kucinta Manufacturing Company started operations with the following capital: -What is the amount of equity financing for this partnership?

Classifying preference shares as debt not equity, would alter the gearing (leverage) of a company.

Wilmington Fisheries had a Retained Profits account balance on 1 January of $12 000. During the year, the firm had net profit of $7200 and paid a $3600 cash dividend. What is the balance in Retained Profits at the end of the financial year on 31 December?

A bank overdraft is normally securitised over assets, either as a fixed charge over specific assets or as a floating charge over all assets; factoring is secured over specific assets being accounts receivable; whereas accounts payable generally require no security.

Which of the following statements is incorrect?

AKP Ltd uses the accrual-basis method of accounting for accounting profit. In the current accounting period, they have recognised income for interest not yet received. Taxable income is determined on a cash basis. Based on this information, which of the following statements is correct?

Accounting for income tax gives rise to temporary differences, which arise when the tax value and the carrying value of assets and liabilities differ.

Which of the following must be known in order to determine the firm's total amount of working capital? Current assets Current liabilities

The sources of equity finance for a company are:

Introduction to Accounting

Types of Organisations and the Financial Reporting Framework

Ethics and Corporate Governance

Wealth and the Measurement of Profit

Presentation of Financial Position and the Worksheet

Presentation of Financial Performance and the Worksheet

Presentation of Cash Flows

Accounting for Selected Assets

Financial Statement Analysis

Worksheet to Debits and Credits

An Introduction to Management Accounting: a Strategic Perspective

Performance Measurement and the Balanced Scorecard

Costs and Cost Behaviour

Budgets

Cost-Volume-Profit Analysis

Accounting for Decision Making: With and Without Resource Constraints

Capital Investment Decisions

Filters