Professional Documents
Culture Documents
MC Bank Questions
MC Bank Questions
1. The life of a business is divided into equal periods to determine profit or loss for that
period. What assumption/concept underlies this procedure?
Select one:
a. materiality
b. monetary concept
c. accounting period
d. accounting entity
2. Which of the following requirements is not necessary for an asset to be reported on the
balance sheet?
Select one:
a. Probable future economic benefits
b. Result of past transactions
c. Owned by the reporting entity
d. Able to be reliably measured
3. 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 electricity used during 2016.
Accrual Profit is:
Select one:
a. $300 000
b. $275 000
c. $175 000
d. $150 000
5. The balance of retained profits at the beginning of a period was $1000 and at the end of
the period $850. A dividend of $50 was declared and paid. What was the net profit/loss for
the period?
Select one:
a. net loss $100
b. net profit $100
c. net loss $200
d. none of the above
7. Additional credit sales of $2 million (cost price $1.5 million) are made on credit. This
transaction will:
Select one:
a. increase net profit, increase cash, and increase total assets
b. increase net profit, increase total assets but not affect cash
c. increase net profit, and not affect cash or total assets
d. none of the above
8. Working capital is calculated as current assets less current liabilities. Consider the
following summarised balance sheet of Apcor Ltd at 30 June 2015:
9. LPR is a company that commenced business on 1 January 2013. Below are the balances in
the 30 June 2013 financial statements.
$
Cash 1000
Share capital 6000
Accounts receivable 3000
Accounts payable 2000
Loan owed 7000
Land 10 000
Inventory 2000
Cost of goods sold 1500
Wages expense 2500
Sales 5000
10. LPR is a company that commenced business on 1 January 2013. Below are the balances
in the 30 June 2013 financial statements.
$
Cash 1000
Share capital 6000
Accounts receivable 3000
Accounts payable 2000
Loan owed 7000
Land 10 000
Inventory 2000
Cost of goods sold 1500
Wages expense 2500
Sales 5000
What is the net profit for the period ending 30 June 2013?
Select one:
a. $1000
b. $2500
c. $3500
d. none of the above
16. Shareholders invest $100 000 in a business. $80 000 worth of inventory was bought on
credit, and of that, $10 000 worth of damaged inventory was returned. Equipment costing
$200 000 was purchased, which was financed by a loan from the seller, repayable in 5 years.
The business paid $40 000 to accounts payable. Total assets increased by:
Select one:
a. $100 000
b. $170 000
c. $330 000
d. none of the above
18. If a transaction causes an asset account to increase, which of the following related
effects may also occur?
Select one:
a. A decrease of equal amount in a liability account
b. An increase of equal amount in another asset account
c. A decrease of equal amount in an owner's equity account
d. An increase of equal amount in a liability account
20. Which of the following entries correctly records the receipt of an electricity bill from the
power company?
Select one:
a. Dr Electricity Expense Cr Electricity Payable
b. Dr Electricity Payable Cr Accounts Payable
c. Dr Accounts Payable Cr Electricity Expense
d. Dr Accounts Payable Cr Utilities Payable
21. If a transaction causes an asset account to increase, which of the following related
effects occur?
Select one:
a. A decrease of equal amount in a liability account
b. An increase of equal amount in another asset account
c. A decrease of equal amount in an owner's equity account
d. An increase of equal amount in a liability account
24. Additional credit sales of $2 million (cost price $1.5 million) are made on credit. This
transaction will:
Select one:
a. Increase net profit, increase cash, and increase total assets
b. increase net profit, increase total assets but not affect cash
c. increase net profit, and not affect cash or total assets
d. none of the above
25. In profit measurement, private transaction of owners are not taken into account. What
assumption/concept underlies this procedure?
Select one:
a. materiality
b. monetary concept
c. accounting period
d. accounting entity
26. The purpose of dividing assets and liabilities into current and non-current classes is to
help the reader of the balance sheet to determine:
Select one:
a. the short-term financial position of the firm
b. the long-term financial position of the firm
c. the likely future financial performance by the firm
d. both A and B
33. To which balance sheet grouping does the item 'Bank Overdraft' belong?
Select one:
a. current asset
b. non-current asset
c. current liability
d. non-current liability
34. LPR is a company that commenced business on 1 January 2013. Below are the balances
in the 30 June 2013 financial statements.
$
Cash 1000
Share capital 6000
Accounts receivable 3000
Accounts payable 2000
Loan owed 7000
Land 10 000
Inventory 2000
Cost of goods sold 1500
Wages expense 2500
Sales 5000
35. Using the Australian dollar to measure accounting transactions allows comparisons
across periods. What assumption/concept underlies this procedure?
a. accounting entity
b. monetary concept
c. historical cost
d. going concern
39. Which of the following relates to both the balance sheet and the income statement?
Select one:
a. dividends paid to shareholders
b. the opening balance of retained profits
c. total shareholder's equity
d. net profit3
40. Given the following information, how much revenue would be recognised in June?
(1) Sales on credit of $100,000 in June, 20% to be collected in June
(2) Collected $70,000 in June from customers for May sales
(3) Received a deposit in June from a customer for $30,000; the work is to be carried
out in August
Revenue is:
Select one:
a. $90 000
b. $100 000
c. $130 000
d. $170 000
41. The balance of retained profits at the beginning of a period was $1000 and at the end of
the period $850. A dividend of $50 was declared and paid. What was the net profit/loss for
the period?
Select one:
a. a net loss $100
b. net profit $100
c. net loss $200
d. none of the above
42. Which of the following requirements is not necessary for an asset to be reported on the
balance sheet?
Select one:
a. Probable future economic benefits
b. Result of past transactions
c. Owned by the reporting entity
d. Able to be reliably measured
43. A customer provides a deposit of $500 000 near year-end. The product will not be
delivered until next year. This transaction will:
Select one:
a. Increase net profit, increase cash, and increase total assets
b. increase net profit and cash but not total assets
c. increase total assets and cash but not net profit
d. none of the above
44. The holders of bonds (Interest bearing loan) maturing in 15 years' time would be most
interested in which type of information?
Select one:
a. proposed expansion of the business
b. long-term financial stability
c. liquidity
d. profitability
45. If a machine is acquired in exchange for $9,000 cash and a $21,000 loan, then:
Select one:
a. Total assets increase
b. Total liabilities decrease
c. Owner's equity increases
d. Expenses increase
46. Greening Ltd is a newly established business selling computer hardware. Shown below
are ledger accounts in T-account form, with entries made for the first month of operations.
Use the information given above to answer the following question: What does transaction
(2) represent?
Select one:
a. Purchase of inventory on credit
b. Purchase of inventory for cash
c. Sale of inventory on credit
d. Sale of inventory for cash
QUIZ 2
1. At year-end Shifty Ltd had a balance of Accounts Receivable of $90 000 and an Allowance
for Doubtful Debts of $4000. It was decided to write off the debt of Wriggler totalling $2500
as irrecoverable. It was further decided that the Allowance for Doubtful Debts should stand
at 5% of Accounts Receivable.
What was the journal entry needed to write off the debt of Wriggler as irrecoverable?
Select one:
a. Dr Bad Debts Expense..........$2500 Cr Accounts Receivable..........$2500
b. Dr Bad Debts Expense..........$2500 Cr Allowance for Doubtful Debts..........$2500
c. Dr Allowance for Doubtful Debts..........$2500 Cr Accounts Receivable..........$2500
d. none of the above
2. The statement that compares the balance as shown in the bank's records with the
balance in the Cash at Bank account at a particular date is known as the:
Select one:
a. bank statement
b. bank reconciliation statement
c. bank control account
d. cash flow statement
4. Accompanying the bank statement was a debit memorandum for an NSF (not sufficient
funds) cheque received from a customer. What entry is required in the company's
accounts?
Select one:
a. Dr Other Revenue Cr Cash
b. Dr Cash Cr Other Revenue
c. Dr Cash Cr Accounts Receivable
d. Dr Accounts Receivable Cr Cash
5. At the end of the financial year, the usual adjusting entry for accrued salaries owed to
employees was omitted. Which of the following statements is true?
Select one:
a. Salary expense for the year was overstated.
b. The total of the liabilities at the end of the year was overstated.
c. Net profit for the year was understated.
d. Shareholders' equity at the end of the year was overstated.
6. Which of the following is NOT a way that management can establish proper control over
the enterprise's affairs?
Select one:
a. rotation of employees over a range of jobs
b. combining record-keeping with handling of assets
c. carrying insurance on assets
d. requiring staff to take annual leave
7. Based on the special journal for sales shown below what is posted to the subsidiary
ledger account/s?
Select one:
a. $40 000 and $60 000
b. $80 000 and $140 000
c. $100 000
d. $220 000
9. Able Ltd operates on a five-day working week. Employees are paid on Thursday for work
completed to Wednesday. The weekly wages bill is $40 000. If 30 June 2011 fell on a
Tuesday, what was the accrued wages payable on 30 June 2011?
Select one:
a. $8000
b. $16 000
c. $32 000
d. none of the above
10. Gum Ltd maintains subsidiary ledgers for debtors and creditors. At 1 July 2008, debtors
owed $4000, and $7200 was owing to creditors. Transactions for year ended 30 June 2009
were as follows:
What was the balance of the Debtors control account at 30 June 2009?
Select one:
a. $3000
b. $7000
c. $10 000
d. none of the above
11. In preparing a bank reconciliation statement for a business with a substantial bank
balance, the appropriate treatment for a cheque outstanding at end of month, $450, is to:
Select one:
a. add it to the balance as per bank statement
b. deduct it from the balance as per bank statement
c. add it to the balance per company records
d. deduct it from the balance per company records
12. Gum Ltd maintains subsidiary ledgers for debtors and creditors. At 1 July 2008, debtors
owed $4000, and $7200 was owing to creditors. Transactions for year ended 30 June 2009
were as follows:
What was the balance of the Creditors control account at 30 June 2009?
Select one:
a. $5200
b. $5500
c. $6000
d. none of the above
13. In preparing a bank reconciliation statement for a business with a substantial bank
balance, the appropriate treatment for $650 that a customer paid directly into the
company's bank account is to:
Select one:
a. add it to the balance as per bank statement
b. deduct it from the balance as per bank statement
c. add it to the balance per company records
d. deduct it from the balance per company records
14. The trial balance of Allen Ltd at balance date showed a credit balance of $5000 in the
Allowance for Doubtful Debts account. Although the account of a customer outstanding at
$1400 had been determined to be uncollectable, this had not been written off. What was
the effect of this neglect on the year-end balance sheet?
Select one:
a. there was an understatement of total liabilities
b. there was an overstatement of total assets and shareholders' equity
c. there was an understatement of total assets and shareholders' equity
d. there was no effect on total liabilities, assets or shareholders' equity
15. Choo Ltd invested $200 000 with a bank for one year at 12% on 1 September 2010
(interest payable at end of loan). What is the adjusting journal entry at balance date, 30
June 2011?
Select one:
a. Dr Accrued Revenue $18 000 Cr Interest Revenue $18 000
b. Dr Accrued Interest $20 000 Cr Interest Revenue $20 000
c. Dr Accrued Revenue $24 000 Cr Interest Revenue $24 000
d. Dr Unearned Revenue $18 000 Cr Interest Revenue $18 000
16. A credit balance in a customer's account in the Debtors ledger could be due to:
Select one:
a. increased credit sales in the period
b. an overpayment by the customer
c. a bad debt
d. none of the above
17. Griffin Ltd made a sale of $800 to a customer on terms of 2.5/10, n/30 on 1 July. The
account was paid on 8 July. Griffin Ltd would make which of the following postings to the
ledger on 8 July?
Select one:
a. DR Discount expense $20
b. DR Accounts receivable $800
c. CR Discount revenue $20
d. CR Discount expense $20.
18. The entry to recognise the depreciation of plant for the period is:
Select one:
a. Dr. Accumulated depreciation; Cr. Plant
b. Dr. Depreciation expense; Cr Plant
c. Dr. Depreciation expense; Cr. Accumulated depreciation
d. Dr. Accumulated depreciation; Cr. Depreciation expense
19. In preparing a bank reconciliation statement for a business with a substantial bank
balance, the appropriate treatment for monthly service charge appearing on the bank
statement, $45, is to:
Select one:
a. add it to the balance as per bank statement
b. deduct it from the balance as per bank statement
c. add it to the balance per company records
d. deduct it from the balance per company records
20. Which of the following entries records the receipt of cash for 3 months' rent? The cash
was received in advance of providing the service.
Select one:
a. DR Cash CR Rent revenue
b. DR Cash CR Unearned revenue
c. DR Cash CR Prepaid rent
d. DR Cash CR Rent expense
21. What is the correct adjusting entry at June 30, the end of the financial year, based on a
Supplies account balance, before adjustment, of $5200, and after adjustment, on June 30,
of $1200?
Select one:
a. Dr Supplies $1200 Cr Supplies Expense $1200
b. Dr Supplies Expense $1200 Cr Supplies $1200
c. Dr Supplies Expense $4000 Cr Supplies $4000
d. Dr Supplies $4000 Cr Supplies Expense $4000
22. The special journal for cash receipts relates to the following transactions:
Select one:
a. Cash and Credit sales
d. Receipts from debtors and Credit sales
c. Cash sales and receipts from debtors
d. Cash sales & cash purchases
23. The general ledger account representing the subsidiary ledger is known as a control
account because:
Select one:
a. inclusion of both control accounts and subsidiary ledger accounts in the general ledger
improves control
b. the accuracy of the detailed accounts in the subsidiary ledger can be checked against the
aggregate data and the balance contained in it.
c. both of the above are correct
d. none of the above are correct
24. On 1 May 2012, A Ltd pays $9600 for a one-year fire insurance policy that expires on 30
April 2013. Which of the following will appear on A Ltd's balance sheet at 30 June 2012?
Select one:
a. prepaid insurance, $1600
b. prepaid insurance $8000
c. prepaid insurance $9600
d. prepaid insurance $8800
25. The allowance for doubtful debts account would appear in the balance sheet under:
Select one:
a. current assets
b. current liabilities
c. shareholder's equity
d. property, plant and equipment
26. Which of the following is an important internal control procedure for cash?
a. Bank reconciliation
b. Accountant has responsibility for operating the bank account
c. Cheques are negotiable
d. Cash of $1 million is locked away in a filing cabinet
27. At year-end Shifty Ltd had a balance of Accounts Receivable of $90 000 and an
Allowance for Doubtful Debts of $4000. It was decided to write off the debt of Wriggler
totalling $2500 as irrecoverable. It was further decided that the Allowance for Doubtful
Debts should stand at 5% of Accounts Receivable.
What was the journal entry needed to bring the Allowance for Doubtful Debts to the
required level after writing off the debt of Wriggler?
Select one:
a. Dr Bad Debts Expense..........$3000 Cr Allowance for Doubtful Debts..........$3000
b. Dr Allowance for Doubtful Debts..........$2500 Cr Accounts Receivable ..........$2500
c. Dr Bad Debts Expense ..........$4500 Cr Allowance for Doubtful Debts ..........$4500
d. Dr Bad Debts Expense ..........$2875 Cr Allowance for Doubtful Debts..........$2875
28. The balance in the Allowance for Doubtful Debts account represents:
Select one:
a. bad debts written off in the current accounting period
b. liquid funds available to meet losses arising from customers becoming insolvent
c. an amount that is deducted from the Accounts Receivable account to reduce it to the
estimated realisable value
d. bad debts written off as Accounts Receivable considered uncollectable
29. At 1 July 2010, Epsilon Pty Ltd had 100 items of inventory which had cost $50 each.
During the year ended 30 June 2011, it purchased 1500 items at a cost of $50 each. Of
these, 200 were returned to the supplier as they were damaged. During the year, 1200
items were sold for $80 each, but 50 were returned by customers. Overhead expenses
during the year amounted to $15 000.
What was Epsilon Pty Ltd's cost of goods sold for the year?
Select one:
a. $47 500
b. $57 500
c. $60 000
d. $62 500
30. Management uses the percentage-of-sales approach method to calculate the allowance
for doubtful debts. Management calculated the allowance for doubtful debts on the basis of
2% of sales. However, by year-end it was aware that the rate should have really been 3% of
sales. Management does not adjust the allowance for doubtful debts at year-end. As a
result:
Select one:
a. assets are overstated, and net profit is overstated
b. assets are overstated, and net profit is understated
c. assets are understated, and net profit is overstated
d. assets are understated, and net profit is understated
31. Which of the following statements about a subsidiary ledger is NOT true?
Select one:
a. the accounts in the subsidiary ledger represent components of the double-entry
equation
b. a subsidiary ledger is a set of ledger accounts that collectively represent a detailed
analysis of one general ledger account classification
c. At the end of an accounting period, the total of the accounts in the subsidiary ledger
should equal the balance in the control account
d. At the end of an accounting period, every entry made to an account in the subsidiary
ledger is also reflected in the control account
32. The adjusting entry for prepaid insurance that has expired by the end of the period is:
Select one:
a. Dr. Insurance expense; Cr. Prepaid insurance
b. Dr. Retained profits; Cr Prepaid insurance
c. Dr. Prepaid insurance; Cr. Insurance expense
d. Dr. Prepaid insurance; Cr. Cash
33. The trial balance of Anderson Ltd included the following balances:
Debit Credit
Accounts Receivable $35 000
Allowance for Doubtful Debts $4000
On 1 October 2009, an account for $1600 was determined to be uncollectable. The journal
entry to be made on that date would include a debit to:
Select one:
a. Bad Debts Expense
b. Accounts Receivable
c. Allowance for Doubtful Debts
d. none of the above
34. T Ltd paid $240 000 in wages during the year. The opening balance of Accrued Wages
was $8000 and the closing balance was $10 000. What was the wages expense for the year?
Select one:
a. $238 000
b. $240 000
c. $242 000
d. none of the above
37. Red Shoes Ltd has gone bankrupt and will not pay $10 000 to XYZ. XYZ has accounts
receivable of $12 million and an allowance for doubtful debts of $500 000. XYZ does not
adjust the accounts for the $10 000 that will not be paid by Red Shoes Ltd. Which of the
following statements is true about the balance sheet of XYZ?
Select one:
a. total assets are overstated
b. total assets are understated
c. net accounts receivable is correctly stated
d. none of the above
38. The most common way of accommodating the need for detailed records in the
accounting system, without grossly expanding the number of separate accounts in the
general ledger, is to use the technique of:
Select one:
a. double-entry accounting
b. subsidiary ledgers and control accounts
c. accrual accounting adjustments
d. cash flow statements
39. The supplies account has a balance of $975 at the beginning of the year and was debited
during the year for $2800, representing the total of supplies purchased during the year. If
$750 of supplies is on hand at the end of the year, the supplies expense to be reported on
the profit and loss statement for the year is:
Select one:
a. $750
b. $975
c.$2800
d. $3025
40. Which of the following statements about subsidiary ledgers and control accounts is NOT
true?
Select one:
a. Every entry made to an account in the subsidiary ledger is also reflected in the control
account in the general ledger.
b. All credit entries will be the same in aggregate between the subsidiary ledger and the
control account.
c. The total of the balances appearing in the accounts in the subsidiary ledger should equal
the balance appearing in the control account.
d. If the total of the subsidiary ledger accounts fails to agree with the balance of the control
account, the subsidiary ledger must be in error.
41. In 2011, Zealous Ltd paid $1900 for 2010 expenses, $32 000 for 2011 expenses and
$4000 advance payment for 2012 expenses. In 2012, it paid $8000 for 2011 expenses.
Furniture depreciation for 2011 was $5000. What was the accrual accounting expense for
2011?
Select one:
a. $37 000
b. $40 000
c. $50 900
d. $45 000
42. In preparing a bank reconciliation statement for a business with a substantial bank
balance, the appropriate treatment for a deposit for $2300 not appearing on the bank
statement is to:
Select one:
a. add it to the balance as per bank statement
b. deduct it from the balance as per bank statement
c. add it to the balance per company records
d. deduct it from the balance per company records
43. Which of the following does NOT qualify a cash control procedure?
Select one:
a. Keeping unbanked cash in a locked safe
b. Regular bank reconciliations
c. Cheques countersigned
d. Managing director keeps the accounting records.
45. The entry to recognise the depreciation of plant for the period is:
Select one:
a. Dr Accumulated Depreciation; Cr Plant
b. Dr Depreciation expense; Cr Plant
c. Dr Depreciation expense; Cr Accumulated depreciation
d. Dr Accumulated depreciation; Cr Depreciation expense
46. Based on the special journal for sales show below what is posted to the subsidiary ledger
account/s?
Sales Journal
Date Inv No. Customer Post ref COGS Accounts
Receivable
July 5 0001 M Baxt √ $40 000 $80 000
July 31 0002 B Whitt √ $60 000 $140 000
$100 000 $220 000
Select one:
a. $40 000 and $60 000
b. $80 000 and $140 000
c. $100 000
d. $220 000
47. If we pay a 12month insurance premium of $600 on 1 February 2011, at 30 June 2011
the prepayment will be equal to:
Select one:
a. $600
b. $350
c. $300
d. $250
48. In posting the total of the cash column in a cash receipts journal, the entry that would be
made is:
Select one:
a. Dr Cash
b. Cr Cash
c. Dr each specific accounts that comprise the total
d. none of the above
QUIZ 3
1. U Ltd made purchases and sales of inventory in the last three months of operation as
follows:
Units sold
Nov 6 20
Dec 3 45
Dec 20 30
U Ltd uses the FIFO assumption and a perpetual inventory system. There were no units of
inventory on hand at the beginning of October. Cost of Sales for the three months is
calculated as follows:
Select one:
a. 95 x ($720+$600+1 050)/120 = $187.63
b. 40 x $1.80 + 30 x $2.00 + 25 x $2.10 = $184.50
c. 30 x $2.00 + 35 x $1.80 + 30 x $2.10 = $186.00
d. 50 x $2.10 + 30 x $2.00 + 15 x $1.80 = $192.00
2. The fixed costs per unit are $10 when a company makes 10 000 units. What are the per
unit fixed costs when 12 500 units are produced?
Select one:
a. $6.00
b. $12.00
c. $10.00
d. $ 8.00
3. If the price Product A is $20, unit variable cost is $5 and unit fixed cost is $6, what is the
contribution margin per unit?
Select one:
a. $14
b. $9
c. $15
d. $21
4. Peach Ltd purchased a machine for $20,000 on 1 January 2010. Peach depreciated it using
straight-line depreciation, assuming that it would have a useful life of three years and
$5,000 salvage value. However, on 31 December 2011 the machine was sold for $8,000
cash. What was the gain or loss on sale?
Select one:
a. $8,000 gain
b. $3,000 gain
c. $10,000 loss
d. $2,000 loss
5. Which of the ratios listed helps to indicate whether a company has enough short-term
assets to cover its short-term liabilities?
Select one:
a. current ratio
b. profit margin
c. debt to equity
d. return on assets
6. In July 2012, Orange Pty Ltd had 100 items of inventory which had cost $50 each. During
the year ended 30 June 2013, it purchased 1500 items at a cost of $50 each. Of these, 200
were returned to the supplier as they were damaged. During the year, 1200 items were
sold for $80 each, but 50 were returned by customers. What was COGS for the year?
Select one:
a. $47,500
b. $57,500
c. $60,000
d. $62,500
7. The contribution margin ratio is the proportion of each sales dollar available to cover
fixed costs and provide for profit. The contribution margin ratio can be calculated as
follows:
Select one:
a. Fixed Costs/Sales
b. Variable Costs/Fixed Costs
c. (Sales - Variable Costs)/Sales
d. (Sales - Variable Costs)/Fixed Costs
8. The operating profit after tax of Calculus Ltd is $10 million and sales are $100 million.
Asset turnover is 1.25 times p.a. What is Calculus Ltd's ROA?
Select one:
a. 0.0125
b. 0.1
c. 0.125
d. none of the above
9. The firm's fixed costs are $60 000, variable cost per unit is $15 and selling price per unit is
$20.
The contribution margin per unit is:
Select one:
a. $5
b. $15
c. $20
d. $35
11. Which of the following statements about the use of the weighted average assumption is
true?
Select one:
a. the balance sheet figure is between the LIFO and FIFO figures
b. when prices are rising, it shows lower balance sheet figures than the LIFO method
c. when prices are falling, it shows lower balance sheet figures than the FIFO method
d. none of the above
12. A cost that remains unchanged in total as the activity level changes is called a:
Select one:
a. Fixed cost
b. Variable cost
c. Semi-fixed cost
d. Mixed (semi-variable) cost
13. Steel Tables Ltd is a company specialising in the production of a range of steel tables for
outdoor use. Which of the following is an example of a manufacturing overhead cost?
Select one:
a. The wages of a person constructing the tables.
b. The steel that goes into a table
c. Paint used for a table
d. Electricity costs of the factory
16. The following question relates to PQR Ltd, which has the following ratios: Return on
assets, (ROA) 12%; Return on equity (ROE) 14%; and current ratio (CR) of 2:1.
Additional credit sales of $2 million (cost price $1.5 million) are made. This transaction will:
Select one:
a. increase ROA, ROE and CR
b. increase ROA and ROE but not CR
c. increase ROA and CR but not ROE
d. do none of the above
17. The entry to record a credit purchase when the periodic inventory method is employed
will include a:
Select one:
a. debit to Inventory
b. credit to Purchases
c. debit to Purchases
d. debit to Cost of Goods Sold
18. Which of the following is not one of the enhancing qualitative characteristics of
information?
Select one:
a. Understandability
b. Verifiability
c. Timeliness
d. Relevance
19. On 1 January 2014 Lloyd Ltd commenced a business of manufacturing leather bags.
Lloyd Ltd's accounting records show:
• $300 000 direct labour for the month to 31 January 2014
• $500 000 direct materials purchased for the month to 31 January 2014
• $250 000 total overhead incurred for the month to 31 January 2014
• $100 000 direct materials on hand at 31 January 2014
• $80 000 work in progress inventory at 31 January 2014
The cost of goods manufactured for the month of January 2014 is:
Select one:
a. $1 230 000
b. $1 050 000
c. $870 000
d. $800 000
20. The firm's fixed costs are $60 000, variable cost per unit is $15 and selling price per unit
is $20. The contribution margin percentage is:
Select one:
a. 2.5%
b. 25%
c. 33%
d. 400%
21. Ribco Company Ltd makes and sells only one product. The unit contribution margin is $6,
and the break-even point in unit sales is 24 000. What are the company's fixed expenses?
Select one:
a. $400 000
b. $14 400
c. $40 000
d. $144 000
22. One of the external auditor fundamental roles is to render a competent opinion on
financial statement. Which of the following is not an exception to unqualified opinion?
Select one:
a. Qualified opinion
b. Adverse opinion
c. Disclaimer
d. Grand opinion
24. On 1 January 2008, a new motor vehicle with a useful life of 4 years and an estimated
residual value of $12 000 was purchased by a business for $54 000. The straight-line method
is employed and the financial year ends on 31 December.
What was the depreciation expense for the year ended 31 December 2009?
a. $5250
b. $10 500
c. $13 500
d. $21 000
26. Which of the following sections in a Company's annual report is NOT audited?
Select one:
a. Directors report
b. Financial statements
c. Notes to the financial statements
d. Directors declaration regarding accounting standards, true and fair view and solvency
27. The average inventory of Dyer Ltd for year ended 31 December 2008 was $70 000. The
number of days' inventory on hand was 91.25 days. What was the cost of goods sold for the
year?
Select one:
a. $259 000
b. $280 000
c. cannot be determined from the information provided
d. none of the above
28. Fairchild Pty Ltd began April with a finished goods inventory of $25 000. The cost of
goods manufactured during the month was $40 000 and the cost of goods sold during April
was $50 000. The inventory remaining in finished goods at the end of April was:
Select one:
a. $35 000
b. $25 000
c. $20 000
d. $15 000
29. Which of the following statements about the current ratio is NOT true?
Select one:
a. the current ratio indicates whether the company has enough short-term assets to cover
its short-term debts
b. an extremely high ratio is always a favourable sign
c. a ratio above 1 indicates that working capital is positive
d. none of the above
30. Using the periodic inventory method, entries are made in the inventory account when
stock is:
a. delivered
b. sold.
c. paid for
d. none of the above
31. On 1 January 2008, a new motor vehicle with a useful life of 4 years and an estimated
residual value of $12 000 was purchased by a business for $54 000. The straight-line method
is employed and the financial year ends on 31 December.
What was the accumulated depreciation at 31 December 2010?
Select one:
a. $42 000
b. $31 500
c. $21 000
d. none of the above
32. Which of the following is not one of the major categories of cost behaviour?
Select one:
a. Fixed
b. Mixed
c. Reasonable
d. Variable
33. Creep Ltd purchased a machine for $100 000 on 1 January 2008. It has an estimated
useful life of 5 years. Creep Ltd's financial period ends on 31 December. The machine was
depreciated using the reducing balance method at 60%. What was the balance of
accumulated depreciation at 31 December 2010?
Select one:
a. $84 000
b. $93 600
c. $97 440
d. none of the above
34. Which of the following statements about the last-in, first-out (LIFO) assumption is true?
Select one:
a. LIFO assumes that inventory on hand consists of the oldest units
b. LIFO assumes that ending inventory and cost of goods sold are composed of a mixture of
old and new units
c. LIFO results in newer costs appearing in the balance sheet
d. none of the above are true
35. The following data relates to a company's results for 30 June 2013
Sales $800 000
Less: Variable costs (420 000)
Contribution margin 380 000
Less: Fixed costs (120 000)
Profit before tax $260 000
Compute the revenue that must be earned to generate a before tax profit of $500 000.
Select one:
a. $620 000
b. $1 040 000
c. $ 1 180 952
d. $1 305263
36. The Framework states that an asset should be recognised when and only when:
i. The asset possesses a cost or other value that can be measured reliably
ii. It is legally owned by the entity
iii. It is probable that the future economic benefits embodied in the asset will eventuate
Select one:
a. i and ii only
b. i and iii only
c. ii and iii only
d. i, ii and iii
37. Peach Ltd purchased a machine for $32,000 on 1 January 2011. The machine is expected
to have a life of four years and no salvage value. The financial year ends on 31 December.
The straight-line method of depreciation is employed. What will be the balance of the
Accumulated Depreciation account at 31 December 2013?
Select one:
a. $24 000
b. $27 750
c. $31 500
d. $16 000
38. The Casual Furniture Company manufactures outdoor furniture, and incurred the
following costs during the month of January.
40. Hard-up Ltd has a current ratio of 0.75. Its current liabilities amount to $200 000. It
borrows $75 000 from a finance company, repayable in 5 years.
Select one:
a. 0.818
b. 1.125
c. cannot be determined from the above information
d. none of the above
41. Who is responsible for preparing a publicly listed company's financial statements?
Select one:
a. Management
b. Board of Directors
c. Internal Auditors
d. External Auditors
43. Which of the ratios listed helps to indicate whether current liabilities could be paid
without having to sell the inventory?
Select one:
a. current ratio
b. profit margin
c. quick ratio
d. return on assets
46. The Casual Furniture Company manufactures outdoor furniture, and incurred the
following costs during the month of January.
The conversion costs are:
a. $34 500
b. $28 500
c. $25 500
d. $29 500
47. Lance Ltd manufactures raincoats. Lance Ltd's accounting records show:
• $600 000 Cost of goods manufactured for month of January 2014
• $200 000 Finished goods inventory at 1 January 2014
• $50 000 Finished goods inventory at 31 January 2014
The cost of goods sold for the month of January 2014 is
Select one:
a. $850 000
b. $750 000
c. $600 000
d. $150 000
48. The concept of cost volume profit analysis is based on classifying costs as:
Select one:
a. fixed and variable costs.
b. variable product and period costs.
c. product controllable and uncontrollable costs.
d. fixed and variable costs AND variable product and period costs.
50. Which of the following statements about external auditing are correct?
i. Professional ethics prohibit the external auditor from having a direct financial interest in
the companies being audited'
ii. Auditors should be an unbiased, professionally sceptical reviewer of the financial
statements
iii. Auditors guarantee the accuracy of financial statements
iv. Auditors are responsible to render a competent opinion on the fairness of the financial
statements
v. When financial statements are not presented fairly in accordance with GAAP, auditors will
issue a disclaimer
Select one:
a. i, ii, iii, iv and v
b. i, ii, iv and v
c. ii, iii and iv
d. i, ii and iv