Question 1

Mike's Mulching (MM)had the following assets and liabilities:  Shareholders' equity would be:

Accepted Answer

A)  $2300. 
B)  $31 000. 
C)  $13 300. 
D)  None of the answers provided.

Question 2

LPR is a company that commenced business on 1 January 2016.Below are the balances in the 30 June 2016 financial statements. 
- What is the balance of liabilities?

Accepted Answer

A)  $18 000 
B)  $30 000 
C)  $20 000 
D)  $21 000

Question 3

Which of the following statements about an income statement is true?

Accepted Answer

A)  An income statement provides information on an organisation's profitability at a certain point in time. 
B)  An income statement deducts liabilities from assets to determine shareholders' equity. 
C)  The expenses relate to cash payments. 
D)  For revenue to be included,it is not necessary for cash to have been received.

Question 4

Which of the following is NOT an example of a liability?

Accepted Answer

A)  Provisions for long service leave 
B)  Share capital 
C)  Accounts payable 
D)  Loan payable

Question 5

Financial statements are prepared on the premise that the organisation will continue operations in the foreseeable future.To which financial statement assumption does this relate?

Accepted Answer

A)  Accounting entity 
B)  Monetary 
C)  Historical cost 
D)  Going concern

Question 6

Does measuring economic performance involve: (i)estimates; (ii)adjustments;and/or (iii)judgements?

Accepted Answer

A)  (i)and (ii)only 
B)  (i)and (iii)only 
C)  (ii)and (iii)only 
D)  (i), (ii)and (iii)

Question 7

During 2016,a company makes credit sales of $600 000,of which $350 000 is collected at year-end.It pays $220 000 in expenses and owes $20 000 for electricity used during 2016.Profit according to accrual accounting is:

Accepted Answer

A)  $130 000. 
B)  $380 000. 
C)  $360 000. 
D)  $710 000.

Question 8

Which of the following statements is NOT true?

Accepted Answer

A)  Judgements need to be made in determining profit. 
B)  Attempts are made to measure incomplete transactions. 
C)  The impact of transactions is recognised when cash is received or paid. 
D)  Estimates are made of certain balance sheet items.

Question 9

Given the following information,what is the balance of shareholders' equity?

Accepted Answer

A)  $40 000 
B)  $50 000 
C)  $100 000 
D)  None of the answers provided

Question 10

The owner withdraws inventory for his own use from the business.To which financial statement assumption does this relate?

Accepted Answer

A)  Materiality 
B)  Monetary 
C)  Accounting period 
D)  Accounting entity

Question 11

Which of the following statements about accrual accounting is NOT true?

Accepted Answer

A)  The impact of transactions on the financial statements is recognised when the cash is received or paid. 
B)  The financial statements include estimates. 
C)  Judgements made by accountants affect profit. 
D)  Transactions are recognised at the time when revenue and expenses occur.

Question 12

Which type of information would be of least interest to employees?

Accepted Answer

A)  Proposed expansion of the business 
B)  Long-term financial stability 
C)  Dividends declared 
D)  Profitability

Question 13

Assets are initially recorded at cost.What assumption/concept underlies this procedure?

Accepted Answer

A)  Accounting entity 
B)  Monetary 
C)  Historical cost 
D)  Going concern

Question 14

Financial statements provide useful information for shareholders to:

Accepted Answer

A)  understand day-to-day activities. 
B)  decide whether to buy,sell or hold shares of companies. 
C)  decide whether to lend money to the business entity. 
D)  create business planning strategies.

Question 15

Which of the following may be a liability of a business enterprise?

Accepted Answer

A)  Share capital 
B)  Wages payable 
C)  Retained profits 
D)  Marketable security

Question 16

Use the information given below to answer the following question. 
- What is the net profit for 2016?

Accepted Answer

A)  $70 000 
B)  $62 000 
C)  $104 000 
D)  $112 000

Question 17

Use the information given below to answer the following question.  
-What is the cash flow from operations for 2016?

Accepted Answer

A)  $52 000 
B)  $62 000 
C)  $70 000 
D)  $104 000

Question 18

LPR is a company that commenced business on 1 January 2016.Below are the balances in the 30 June 2016 financial statements. 
- What is the net profit for the period ending 30 June 2016?

Accepted Answer

A)  $2000 
B)  $4000 
C)  $5000 
D)  $7000

Question 19

Which of the following may be an asset of a business enterprise?

Accepted Answer

A)  Retained profits 
B)  Inventory 
C)  Provision for warranty repairs 
D)  Shareholders' equity

Question 20

During 2016,a company makes credit sales of $500 000,of which $375 000 is collected at year-end.It pays $200 000 in expenses and owes $25 000 for electricity used during 2016.Accrual profit is:

Accepted Answer

A)  $150 000. 
B)  $175 000. 
C)  $275 000. 
D)  $300 000.

Exam 1: Introduction to Financial Accounting

Mike's Mulching (MM) had the following assets and liabilities: Shareholders' equity would be:

LPR is a company that commenced business on 1 January 2016.Below are the balances in the 30 June 2016 financial statements. - What is the balance of liabilities?