Question 1

Accumulated depreciation is what type of account?

Accepted Answer

A)  A liability account. 
B)  An expense account. 
C)  A contra asset account. 
D)  An equity account. 
A)  A liability account. 
B)  An expense account. 
C)  A contra asset account. 
D)  An equity account.

Question 2

The estimated residual value of an asset is its:

Accepted Answer

A)  estimated disposal value at the end of its useful life. 
B)  carrying value. 
C)  historical cost. 
D)  book value. 
A)  estimated disposal value at the end of its useful life. 
B)  carrying value. 
C)  historical cost. 
D)  book value.

Question 3

Calculate the goods available for sale if sales are $7,000,inventory at beginning is $3,400,inventory at end is $2,100 and purchases of inventory are $5,600.

Accepted Answer

A)  $6,900. 
B)  $18,100. 
C)  $12,500. 
D)  $9,000. 
A)  $6,900. 
B)  $18,100. 
C)  $12,500. 
D)  $9,000.

Question 4

Which of these is not an area where judgement must normally be applied in order to calculate depreciation expense?

Accepted Answer

A)  Determining the residual or disposal value of the asset. 
B)  Determining the expected useful life of the asset. 
C)  Choosing a depreciation method. 
D)  None of the above. 
A)  Determining the residual or disposal value of the asset. 
B)  Determining the expected useful life of the asset. 
C)  Choosing a depreciation method. 
D)  None of the above.

Question 5

Calculate gross profit if sales are $90,000,inventory at beginning is $5,600,purchases of inventory are $30,500 and inventory at end is $4,900.

Accepted Answer

A)  $41,000. 
B)  $31,200. 
C)  $58,800. 
D)  $59,500. 
A)  $41,000. 
B)  $31,200. 
C)  $58,800. 
D)  $59,500.

Question 6

An item of inventory costing $750 can now only be sold at auction for $200.Auction costs of $50 will be incurred to make the sale.The net realisable value of the inventory is:

Accepted Answer

A)  $700. 
B)  $150. 
C)  $750. 
D)  $200. 
A)  $700. 
B)  $150. 
C)  $750. 
D)  $200.

Question 7

Choose the statement about depreciation that is correct.

Accepted Answer

A)  Yearly depreciation will always be higher using the straight-line method. 
B)  At the end of the asset's useful life, total depreciation charged will be the same whichever depreciation method is used. 
C)  Yearly depreciation will always be lower using the units of use method. 
D)  Yearly depreciation will always be higher using the reducing-balance method. 
A)  Yearly depreciation will always be higher using the straight-line method. 
B)  At the end of the asset's useful life, total depreciation charged will be the same whichever depreciation method is used. 
C)  Yearly depreciation will always be lower using the units of use method. 
D)  Yearly depreciation will always be higher using the reducing-balance method.

Question 8

The following information was prepared for Xi Services as at 30 June 2014.
 $\begin{array}{lr}&\text { Assets Expenses }&\text { Liabilities Owner's }\&&\text { Equity Income }\&\$&\$\
\text { Bank } & 10,000 \
\text { Prepaid insurance } & 4,000 \
\text { Accounts payable } &&15,000\
\text { Secretarial expenses }&35,000\\text { Mortgage loan payable } 1 \text { Aug } 2017&&210,000\
\text { Salaries expense } & 55,000 \
\text { Land and buildings } & 420,000\\text { Capital Xi } 1 \text { July } 2013&&20,000\
\text { Accounts receivable } & 52,000 \
\text { Income } &&217,000 \
\text { Equipment } & 90,000\text { Accumulated depreciation equipment }&&24,000\
&\$666,000&\$666,000
\end{array}$ 
Additional information available at 30 June 2014:
1.Interest expense outstanding is $4,500.
2.An allowance for doubtful debts is to be created for $1,500.
3.Depreciation of equipment is at the rate of 15% p.a.using the reducing-balance method.
4.$2,500 of the prepaid insurance has been used-up during the year
REQUIRED:
Incorporating all the above information,prepare:
a)an Income Statement for the year ended 30 June 2014.
b)a statement of financial position as at 30 June 2014.

Accepted Answer

a)
 @#IMG-DLM& b)Statement of

Question 9

The expense in the statement of financial performance which represents the purchase price of the goods that have been sold is called:

Accepted Answer

A)  payments for stock. 
B)  cost of sales. 
C)  sales. 
D)  merchandise. 
A)  payments for stock. 
B)  cost of sales. 
C)  sales. 
D)  merchandise.

Question 10

On 31 December 2013,a new motor vehicle with a useful life of five years and an estimated residual value of $5,000 was purchased by a business at a cost of $25,000.The amount of depreciation expense charged for the six months ended 30 June 2014,using the straight-line method,is:

Accepted Answer

A)  nil. 
B)  $2,000. 
C)  $25,000. 
D)  $4,000. 
A)  nil. 
B)  $2,000. 
C)  $25,000. 
D)  $4,000.

Question 11

Which of the following is a measure of wealth created for owners?

Accepted Answer

A)  Operating profit. 
B)  Gross profit. 
C)  Net profit. 
D)  All of the above. 
A)  Operating profit. 
B)  Gross profit. 
C)  Net profit. 
D)  All of the above.

Question 12

A forklift had a purchase price of $10,000,delivery costs of $2,000,a physical life of 6 years and a useful life of 4 years.Estimated residual value is zero.The annual depreciation charge using the straight-line method is:

Accepted Answer

A)  $1,667. 
B)  $3,000. 
C)  $2,500. 
D)  $2,000. 
A)  $1,667. 
B)  $3,000. 
C)  $2,500. 
D)  $2,000.

Question 13

Prepaid expenses are classified in the statement of financial position as:

Accepted Answer

A)  current asset. 
B)  non-current asset. 
C)  non-current liability. 
D)  current liability. 
A)  current asset. 
B)  non-current asset. 
C)  non-current liability. 
D)  current liability.

Question 14

The method of inventory valuation that assumes earliest inventory acquired comprises the stock of inventory at the end of the period is the:

Accepted Answer

A)  reducing-balance method. 
B)  FIFO method. 
C)  average cost method. 
D)  LIFO method. 
A)  reducing-balance method. 
B)  FIFO method. 
C)  average cost method. 
D)  LIFO method.

Question 15

Choose the statement which is correct.Assume that inventory prices are rising.

Accepted Answer

A)  The LIFO method gives the highest closing inventory figure in the statement of financial position. 
B)  The FIFO method gives the highest closing inventory figure in the statement of financial position. 
C)  The FIFO method gives the lowest closing inventory figure in the statement of financial position. 
D)  The LIFO method gives the lowest figure for cost of sales. 
A)  The LIFO method gives the highest closing inventory figure in the statement of financial position. 
B)  The FIFO method gives the highest closing inventory figure in the statement of financial position. 
C)  The FIFO method gives the lowest closing inventory figure in the statement of financial position. 
D)  The LIFO method gives the lowest figure for cost of sales.

Question 16

If doubtful debts are overestimated:

Accepted Answer

A)  profit for the current year will be overstated. 
B)  profit for following years will be overstated. 
C)  profit for the following years will be understated. 
D)  profit over the total life of the business will be understated. 
A)  profit for the current year will be overstated. 
B)  profit for following years will be overstated. 
C)  profit for the following years will be understated. 
D)  profit over the total life of the business will be understated.

Question 17

Employees have worked for the full year and have received total wages of $306,000 in cash.However,they must wait until the next payday to be paid for the last three days of the year they have worked.The amount owing is $5,500.Wages expense in the statement of financial performance and accrued wages in the statement of financial position are respectively:

Accepted Answer

A)  $311,500 and $5,500. 
B)  $306,000 and $5,500. 
C)  $306,000 and $0. 
D)  $311,500 and $0. 
A)  $311,500 and $5,500. 
B)  $306,000 and $5,500. 
C)  $306,000 and $0. 
D)  $311,500 and $0.

Question 18

Identify the recognition criteria that must be satisfied under the Conceptual Framework for an expense to be included in the income statement.

Accepted Answer

A)  Probable that the outflow of resources has occurred. 
B)  Outflow of resources able to be reliably measured. 
C)  Outflow of resources virtually certain. 
D)  Both A and B. 
A)  Probable that the outflow of resources has occurred. 
B)  Outflow of resources able to be reliably measured. 
C)  Outflow of resources virtually certain. 
D)  Both A and B.

Question 19

Choose the statement that best describes the effects of the LIFO inventory valuation method compared to FIFO or average cost.

Accepted Answer

A)  During periods of falling prices, LIFO gives the highest gross profit and the lowest closing inventory value. 
B)  During periods of rising prices, LIFO gives the highest gross profit and the lowest closing inventory value. 
C)  During periods of rising prices, LIFO gives the lowest gross profit and the lowest closing inventory value. 
D)  None of the above. 
A)  During periods of falling prices, LIFO gives the highest gross profit and the lowest closing inventory value. 
B)  During periods of rising prices, LIFO gives the highest gross profit and the lowest closing inventory value. 
C)  During periods of rising prices, LIFO gives the lowest gross profit and the lowest closing inventory value. 
D)  None of the above.

Question 20

Which of these is not part of inventory for a manufacturing firm?

Accepted Answer

A)  Partly completed goods (work in process). 
B)  Raw materials. 
C)  Finished goods. 
D)  None of the above, i.e., all are part of inventory. 
A)  Partly completed goods (work in process). 
B)  Raw materials. 
C)  Finished goods. 
D)  None of the above, i.e., all are part of inventory.

Accumulated depreciation is what type of account?

The estimated residual value of an asset is its:

Calculate the goods available for sale if sales are $7,000,inventory at beginning is $3,400,inventory at end is $2,100 and purchases of inventory are $5,600.

Which of these is not an area where judgement must normally be applied in order to calculate depreciation expense?

Calculate gross profit if sales are $90,000,inventory at beginning is $5,600,purchases of inventory are $30,500 and inventory at end is $4,900.

An item of inventory costing $750 can now only be sold at auction for $200.Auction costs of $50 will be incurred to make the sale.The net realisable value of the inventory is:

Choose the statement about depreciation that is correct.

The expense in the statement of financial performance which represents the purchase price of the goods that have been sold is called:

On 31 December 2013,a new motor vehicle with a useful life of five years and an estimated residual value of $5,000 was purchased by a business at a cost of $25,000.The amount of depreciation expense charged for the six months ended 30 June 2014,using the straight-line method,is:

Which of the following is a measure of wealth created for owners?

A forklift had a purchase price of $10,000,delivery costs of $2,000,a physical life of 6 years and a useful life of 4 years.Estimated residual value is zero.The annual depreciation charge using the straight-line method is:

Prepaid expenses are classified in the statement of financial position as:

The method of inventory valuation that assumes earliest inventory acquired comprises the stock of inventory at the end of the period is the:

Choose the statement which is correct.Assume that inventory prices are rising.

If doubtful debts are overestimated:

Identify the recognition criteria that must be satisfied under the Conceptual Framework for an expense to be included in the income statement.

Choose the statement that best describes the effects of the LIFO inventory valuation method compared to FIFO or average cost.

Which of these is not part of inventory for a manufacturing firm?

Introduction to Accounting

Measuring and Reporting Financial Position

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Costvolumeprofit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters

Exam 3: Measuring and Reporting Financial Performance

Accumulated depreciation is what type of account?

The estimated residual value of an asset is its:

Calculate the goods available for sale if sales are $7,000,inventory at beginning is $3,400,inventory at end is $2,100 and purchases of inventory are $5,600.

Which of these is not an area where judgement must normally be applied in order to calculate depreciation expense?

Calculate gross profit if sales are $90,000,inventory at beginning is $5,600,purchases of inventory are $30,500 and inventory at end is $4,900.

An item of inventory costing $750 can now only be sold at auction for $200.Auction costs of $50 will be incurred to make the sale.The net realisable value of the inventory is:

Choose the statement about depreciation that is correct.

The expense in the statement of financial performance which represents the purchase price of the goods that have been sold is called:

On 31 December 2013,a new motor vehicle with a useful life of five years and an estimated residual value of $5,000 was purchased by a business at a cost of $25,000.The amount of depreciation expense charged for the six months ended 30 June 2014,using the straight-line method,is:

Which of the following is a measure of wealth created for owners?

A forklift had a purchase price of $10,000,delivery costs of $2,000,a physical life of 6 years and a useful life of 4 years.Estimated residual value is zero.The annual depreciation charge using the straight-line method is:

Prepaid expenses are classified in the statement of financial position as:

The method of inventory valuation that assumes earliest inventory acquired comprises the stock of inventory at the end of the period is the:

Choose the statement which is correct.Assume that inventory prices are rising.

If doubtful debts are overestimated:

Identify the recognition criteria that must be satisfied under the Conceptual Framework for an expense to be included in the income statement.

Choose the statement that best describes the effects of the LIFO inventory valuation method compared to FIFO or average cost.

Which of these is not part of inventory for a manufacturing firm?

Introduction to Accounting

Measuring and Reporting Financial Position

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Costvolumeprofit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters