Question 1

Which statement about net profit is not true?

Accepted Answer

A) Net profit normally represents the amount of cash generated from operations for the period. 
B) Net profit is a measure of achievement or productive effort. 
C) Net profit increases equity. 
D) None of the statements, i.e., all are true. 
A) Net profit normally represents the amount of cash generated from operations for the period. 
B) Net profit is a measure of achievement or productive effort. 
C) Net profit increases equity. 
D) None of the statements, i.e., all are true.

Question 2

Inventory purchased on credit:

Accepted Answer

A) decreases the amount of assets. 
B) increases the amount of liabilities. 
C) increases the amount of equity. 
D) decreases the amount of equity. 
A) decreases the amount of assets. 
B) increases the amount of liabilities. 
C) increases the amount of equity. 
D) decreases the amount of equity.

Question 3

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

Question 4

LTT had stock on hand on the 1st January 2018 of 100 heaters valued at $50 each.
The following transactions occurred during January:
 Jan 7 $\quad$bought 110 heaters at $ \$ 52 $ each
$\quad$15$\quad$ sold 60 heaters at $ \$ 80 $ each (selling price
$\quad$30 $\quad$sold 70 heaters at $ \$ 80 $ each (selling price) REQUIRED:
a)Calculate cost of sales and closing stock at the end of the month from the above information using:
 i)$\quad$ the FIFO methed of valuation,
ii)$\quad$ the LIFO method of valuation, and
iii) $\quad$the average cost method of valuation. b)Prepare a statement of comprehensive income for the month ended 31 January under each method assuming no stock loss (use a columnar approach).
 c) 1) Which method produces the most favourable profit result for LTT?
ii) Comment on why the differences in profit have occurred under the 3 methods.

Accepted Answer

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 @#IMG-DLM& @#IMG-DLM& c)i)FIFO produces the mos

Question 5

What is the estimated residual value of an asset?

Accepted Answer

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

Question 6

Accrual accounting:

Accepted Answer

A) recognises expenses when they have been incurred (economic benefits used up), regardless of whether the cash has or hasn't been paid. 
B) recognises expenses when they are possible. 
C) recognises expenses when they are earned. 
D) recognises expenses when the cash has been paid. 
A) recognises expenses when they have been incurred (economic benefits used up), regardless of whether the cash has or hasn't been paid. 
B) recognises expenses when they are possible. 
C) recognises expenses when they are earned. 
D) recognises expenses when the cash has been paid.

Question 7

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 8

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 9

Paying rent for the premises causes which of the following to occur?

Accepted Answer

A) Increases expenses and decreases cash 
B) Increases expenses and increases accounts payable 
C) Decreases revenue and decreases cash 
D) Decreases revenue and increases accounts payable 
A) Increases expenses and decreases cash 
B) Increases expenses and increases accounts payable 
C) Decreases revenue and decreases cash 
D) Decreases revenue and increases accounts payable

Question 10

Which statement is not correct?

Accepted Answer

A) A loss is incurred when expenses > income 
B) A profit is earned when income  expenses 
A) A loss is incurred when expenses > income 
B) A profit is earned when income  expenses

Question 11

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 12

The recognition criteria that must be satisfied under the Conceptual Framework for an expense to be included in the income statement is:

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 13

How are prepaid expenses classified in the statement of financial position?

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

A driver started a business on 1st of January 2018, hiring out his limousine for special occasions. Current regulations require the business to purchase a license that will expire after two years. The cost of the license is $16 000. Calculate the amount of license expense to be included in the income statement for the 6 months ended 30 June 2018.

Accepted Answer

A) $6 000 
B) $4 000 
C) $3 000 
D) $12 000 
A) $6 000 
B) $4 000 
C) $3 000 
D) $12 000

Question 15

The method of inventory valuation that assumes the earliest inventory acquired is the first to be sold is the:

Accepted Answer

A) lower of cost and net realisable value method. 
B) average cost method 
C) FIFO method. 
D) LIFO method. 
A) lower of cost and net realisable value method. 
B) average cost method 
C) FIFO method. 
D) LIFO method.

Question 16

Which asset is not depreciated?

Accepted Answer

A) Motor vehicles 
B) Buildings 
C) Premises 
D) Land 
A) Motor vehicles 
B) Buildings 
C) Premises 
D) Land

Question 17

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 18

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 19

Under accrual accounting, income is:

Accepted Answer

A) the cash received from customers for goods or services provided by the business. 
B) the cash collected from accounts receivable. 
C) the money the owner puts into the business to start operations. 
D) the inflow of assets or the reduction in liabilities that arise as a result of trading operations. 
A) the cash received from customers for goods or services provided by the business. 
B) the cash collected from accounts receivable. 
C) the money the owner puts into the business to start operations. 
D) the inflow of assets or the reduction in liabilities that arise as a result of trading operations.

Question 20

The writing off of a debtor's account as a bad debt when no allowance for doubtful debts has been made will see:

Accepted Answer

A) a decrease in the asset accounts receivable, decrease in equity. 
B) no effect. 
C) a decrease in the asset accounts receivable, increase in the liability provision for doubtful debts. 
D) a decrease in the asset bank, decrease in the asset accounts receivable. 
A) a decrease in the asset accounts receivable, decrease in equity. 
B) no effect. 
C) a decrease in the asset accounts receivable, increase in the liability provision for doubtful debts. 
D) a decrease in the asset bank, decrease in the asset accounts receivable.

Which statement about net profit is not true?

Inventory purchased on credit:

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

What is the estimated residual value of an asset?

Accrual accounting:

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

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

Paying rent for the premises causes which of the following to occur?

Which statement is not correct?

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:

The recognition criteria that must be satisfied under the Conceptual Framework for an expense to be included in the income statement is:

How are prepaid expenses classified in the statement of financial position?

The method of inventory valuation that assumes the earliest inventory acquired is the first to be sold is the:

Which asset is not depreciated?

Choose the statement about depreciation that is correct.

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.

Under accrual accounting, income is:

The writing off of a debtor's account as a bad debt when no allowance for doubtful debts has been made will see:

Introduction to Accounting

Measuring and Reporting Financial Position

Recording Transactionsthe Journal and Ledger Accounts

Accounting Systems and Internal Control

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

Planning and Budgeting

Capital Investment Decisions

Filters

Exam 3: Measuring and Reporting Financial Performance

Which statement about net profit is not true?

Inventory purchased on credit:

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

What is the estimated residual value of an asset?

Accrual accounting:

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

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

Paying rent for the premises causes which of the following to occur?

Which statement is not correct?

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:

The recognition criteria that must be satisfied under the Conceptual Framework for an expense to be included in the income statement is:

How are prepaid expenses classified in the statement of financial position?

The method of inventory valuation that assumes the earliest inventory acquired is the first to be sold is the:

Which asset is not depreciated?

Choose the statement about depreciation that is correct.

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.

Under accrual accounting, income is:

The writing off of a debtor's account as a bad debt when no allowance for doubtful debts has been made will see:

Introduction to Accounting

Measuring and Reporting Financial Position

Recording Transactionsthe Journal and Ledger Accounts

Accounting Systems and Internal Control

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

Planning and Budgeting

Capital Investment Decisions

Filters