HKMA David Li Kwok Po College

MC Revision Exercise 1
1
The following information relates to Larry Co for the year ended 31 December 2013:
Dr Cr
$ $
Opening inventory 4,951
Carriage inwards 439
Carriage outwards 585
Purchases and sales 75,467 124,390
Returns 4,625 5,800
Commission revenue 1,996

Given that closing inventory was four times that of opening inventory, gross profit for the year was
A. $44,708.
B. $64,512.
C. $42,712.
D. $42,358.

2
The following information relates to Larry Co for the year ended 31 December 2013:
Dr Cr
$ $
Opening inventory 4,951
Carriage inwards 439
Carriage outwards 585
Purchases and sales 75,467 124,390
Returns 4,625 5,800
Commission revenue 1,996

Given that closing inventory was four times that of opening inventory, net profit for the year was
A. $42,712.
B. $62,516.
C. $76,275.
D. $65,923.
3
The formula for calculating gross profit is:
A. Opening inventory + Purchases – Closing inventory
B. Sales – (Purchases – Opening inventory + Closing inventory)
C. Sales – (Purchases + Opening inventory – Closing inventory)
D. Sales + (Opening inventory + Purchases – Closing inventory)

4
If opening inventory was $70,000, purchases for the year were $460,000 and closing inventory was
$52,000, the cost of goods sold for the year would be
A. $582,000.
B. $478,000.
C. $338,000.
D. $64,000.

5
If opening inventory is $34,776, the cost of goods sold is $366,665, and closing inventory is $85,432,
purchases for the year would be
A. $246,457.
B. $486,873.
C. $316,009.
D. $417,321.

6
Which of the following are not credit balance accounts?
(1) Carriage outwards
(2) Carriage inwards
(3) Returns inwards
(4) Returns outwards
(5) Sales

A. (1), (2) and (3) only

B. (1), (2) and (5) only
C. (1), (4) and (5) only
D. (2), (3) and (4) only
7
The common characteristics of laws and ethics are that they
(1) change over time.
(2) reflect the values of society.
(3) clearly specify sanctions and punishment.
(4) have absolute standards.

A. (1) and (2) only

B. (2) and (3) only
C. (3) and (4) only
D. (1), (3) and (4) only

8
The difference between laws and ethics is that
A. sanctions are clearly specified for laws but not for ethics.
B. legal standards vary among people but ethical standards do not.
C. ethics can change with the times but laws cannot.
D. there are many grey areas in laws but not in ethics.

9
A firm must take up social responsibilities because
A. this can enhance staff morale and loyalty.
B. this can promote its image as a good corporate citizen.
C. this can attract more customers.
D. All of the above

10
Which of the following are considered unethical behaviour of a firm?
(1) Asking employees to work overtime
(2) Using production materials that may harm the environment
(3) Offering lower wages to South Asian employees
(4) Using low-cost raw materials for production

A. (1) and (2) only

B. (2) and (3) only
C. (1), (3) and (4) only
D. (1), (2), (3) and (4)
11
The following actions can demonstrate a restaurant’s awareness of social responsibility to society
except
A. using organic ingredients for cooking.
B. making donations to charity organisations.
C. offering $10 dishes to the poor.
D. increasing the restaurant’s profits by all means.

12
Which of the following is a characteristic of a nominal partner?
A. He is an owner of the firm.
B. He invests in the business.
C. He does not take part in running the business.
He shares in the profits and losses of the partnership.

13
Steve, Maggie and Keith set up a business in the form of limited partnership. Only Maggie and Keith
will invest money into the business. While Keith is involved in the management of the business,
Steve and Maggie do not take part in the running of the business.

Steve is a __________ partner; Maggie is a__________ partner.

A. general; limited
B. nominal; general
C. limited; nominal
D. nominal; limited

14
When entering the Mainland market, Mary decides to form to joint venture with a local company.

Which of the following statements is correct ?

A. The joint venture does not have a separate legal entity.
B. The partner in the joint venture can make business decisions on its own.
C. The joint venture should be operated as a limited company.
D. Mary can terminate the joint venture with the consent of the partner.
15
Mark and Linda open a restaurant as a private limited company. Which of the following statements is
correct?
A. They have limited liability.
B. If the business fails, their losses can be unlimited.
C. They can both easily transfer the ownership to others.
D. Financial information should be disclosed to the public.