Professional Documents
Culture Documents
If Hansel has 7,000 units on hand at December 31, the cost of ending inventory under the
average-cost method is:
[(5000 x $8) + (15,000 x $10) +
(20,000 x $12) - 40,000] = $10.75;
$10.75 x 7,000
A. $84,000.
B. $70,000. C.
$56,000.
D. $75,250.
13. Which of the following transaction increases total assets of a company?
A. Buying $1.000 worth of goods with cash.
B. Depositing $1.000 cash into the company’s bank account.
C. Transferring $1.000 from company’s bank account to settle a debt.
D. Borrowing $1.000 from a financial institution.
14. Which of the following statement is false?
A. Trial balance does not ensure that ledger is 100% correct.
B. The total debited and credited amounts should be equal.
C. A group of accounts for a business is called a ledger.
D. Normal balance of a liability account is a debit balance.
15. On the beginning of the current year, the business has the following account balances:
Cash
$6,250; Account Receivable $18,100; Supplies $2,200; Equipment $40,000; Account Payable
$7,800; Accumulated Depreciation $500. The amount of Owner’s Equity as of the beginning
of the current year would be:
A. $59,250
B. $19,250
C. $58,250
D. $41,150
16. Net Income (Profit) is the differences between:
A. Sale Revenues and Cost of Goods Sold.
B. Sales Revenues and Operating Expenses.
C. Gross Income (Profit) and Selling Expenses.
D. Total Revenues and total expenses.
17. Which of the following accounting principles/concepts would help to enhance the
comparison between financial statements?
A. Going concern
B. Consistency
C. Periodic Inventory System
D. Business Entity
18. The objective of most business is:
A. To earn revenue
B. To create jobs for society
C. To maximise profits
D. To build-up their image
19. A company bought a vehicle for $400.000. It is expected to have 8 years of useful life. At
the end of the 4th year, the accumulated depreciation amount is:
A. $200.000
B. $400.000
C. $100.000
D. $50.000
20. According to the terms of a contract, company A paid company B $500 in advance for
some goods in June/20X0. The goods is delivered in July/20X0. 15 days after the receipt of
the goods, company B received the rest of the payment from company A. Revenues is
recorded when:
A. Company B received the second payment.
B. Both companies entered into the sale contract.
C. Finish delivering the goods to company A and company A accepted them.
D. Company B received the first payment.
21. Depreciation is a process of:
A. valuation
B. cash accumulation.
C. cost allocation.
D. appraisal.
22. Which of the following represents an internal stakeholder of a business?
A. Creditor
B. Bank
C. Employee
D. Tax authorities
23. Gross profit will result if:
A. operating expenses are less than net income.
B. net sales are greater than operating expenses.
C. net sales are greater than cost of goods sold.
D. operating expenses are greater than cost of goods sold.
24. To record the sale of goods for cash in a perpetual inventory system:
A. only one journal entry is necessary to record cost of goods sold and reduction of inventory.
B. only one journal entry is necessary to record the receipt of cash and the sales revenue.
C. two journal entries are necessary: one to record the receipt of cash and sales revenue,
and one to record the cost of goods sold and reduction of inventory.
D. two journal entries are necessary: one to record the receipt of cash and reduction of
inventory, and one to record the cost of goods sold and sales revenue.
25. A company has cash sales of $75,000, credit sales of $320,000, sales returns and
allowances of $13,700, and sales discounts of $6,000. Its net sales equal
net sales=$75,000+$320,000-$13,700-$6,000=$375,300
A. $395,000
B. $375,300
C. $300,300
D. $339,700
Candidates use the following information to answer for questions 26 to 32
On December 1, 20X0, Rodriguez Distributing Company had the following account balances.
A. $80,000
B. $85,000
C. $86,000
D. $88,000
37. The carrying amount of a company's non-current assets was $200,000 at 1 August 20X0.
During the year ended 31 July 20X1, the company sold non-current assets for $25,000 on
which it made a loss of $5,000. The depreciation charge for the year was $20,000. What was
the carrying amount of non- current assets at 31 July 20X1?
Therefore the carrying value of the assets still remaining at the end of the year is
200,000 – 30,000 – 20,000 = $150,000.
A. $150,000
B. $155,000
C. $160,000
D. $180,000
38. Anderson Company purchased equipment for $2,400 cash. As a result of this event:
A. owner's equity decreased by $2,400.
B. total assets remained unchanged.
C. total assets increased by $2,400.
D. Both a and b.
39. Credit terms of 2/10, n/30 mean that:
A. a 2% cash discount may be taken if payment is made within 10 days of the
invoice date; otherwise the full amount is due within 30 days.
B. a 10% cash discount may be taken if payment is made immediately; a 2% discount if
paid within 30 days.
C. a 2% cash discount may be taken if payment is made within 10 days of the invoice
date; otherwise the full amount is due at the end of the month.
D. an additional amount equal to 2% of the invoice price must be paid if payment is not
received within 10 days; the account is overdue after 30 days.
40. A profit-making business that operates as a separate legal entity and its ownership is
divided into shares is known as a: A. Sole trader.
B. Company.
C. Service business.
D. Partnership.
REVISION 2
1. Business stakeholder is:
a. A person who has an interest in the business.
b. An investor.
c. A supplier who has trading businesses with the organisation.
d. Tax authority.
2. The resources controlled by a business are called:
a. Liabilities.
b. Assets.
c. The accounting equation.
d. Owner's equity.
3. A summary of the revenue and expenses for a specific period of time is:
a. Profit and loss statement.
b. Balance sheet.
c. Statement of cash flows.
d. Statement of owner's equity.
4. The objective of most business is:
a. To earn revenue
b. To create jobs for society
c. To maximise profits
d. To build-up their image
5. Business entity concept means:
a. When we record the transactions of an entity, we assume that the entity will continue to
operate for the foreseeable future.
b. The owner and the business are treated as separate entities.
c. Accountant tries to prepare the financial statement of the entity on the same basis every
year.
d. Revenues and related expenses should be reported in the same period.
6. A group of accounts for a business is called:
a. A chart of accounts
b. A financial statement
c. A ledger
d. A T-account
7. Which of the following statements is correct?
a. The cost of the goods sold is subtracted from sales to arrive at net profit.
b. Purchases discounts are reported as a reduction of the cost of goods sold.
c. The main differences between a service business and a trading business relate to revenue
activities.
d. Trade discounts are discounts of the cost of goods sold.
8. The historical cost concept means:
a. The owner and the business are treated as separate entities.
b. When we record the transactions of an entity, we assume that the entity will continue to
operate for the foreseeable future.
c. Accountant tries to prepare the financial statement of the entity on the same basis every
year.
d. Assets and services bought by a business are recorded in term of actual amounts.
9. A credit sale of $750 is made on June 13, terms 2/10, net/30. A return of $50 is granted on
June 16. The amount received as payment in full on June 23 is:
a. $700
b. $686.
c. $685.
d. $650.
10. Normal balances of Liability, Expense and Asset consecutively are:
a. Credit, Debit and Credit
b. Credit, Credit and Debit
c. Debit, Debit and Credit
d. Credit, Debit and Debit
11. Poppins Company has the following:
If 9,000 units are on hand at December 31, the cost of the ending inventory under FIFO is:
a. $99,000.
b. $108,000.
c. $113,000.
d. $117,000.
12. Which of the following equation is true?
a. Assets - Liabilities = Owner's Equity
b. Assets - Owner's Equity = Liabilities
c. Owner's Equity + Assets = Liabilities
d. Owner's Equity - Liabilities = Assets
13. Which of the following statement is false?
a. Trial balance ensures that ledger is 100% correct.
b. The total debited and credited amounts should be equal.
c. A group of accounts for a business is called a ledger.
d. Normal balance of a liability account is a credit balance.
14. On the beginning of the current year, the business has the following account balances:
Cash $6,250; Account Receivable $18,100; Supplies $2,200; Equipment $40,000; Account
Payable $7,800; Accumulated Depreciation $500. The amount of Owner's Equity as of the
beginning of the current year would be: a. $59,250
b. $19,250
c. $58,250
d. $41,150
15. Which of the following accounts has no opening balance and closing balance? a.
Inventories
b. Bank Loan Interest Payable
c. Capital
d. Depreciation Expense
16. Which of the following represents an external stakeholder of a business? a.
Manager
b. Bank
c. Employee
d. CEO
17. Which of the following accounting principles/concepts would help to enhance the
comparison between financial statements?
a. Going concern
b. Consistency
c. Periodic Inventory System
d. Business Entity
18. If the Equipment account has a debit balance of $22,500 and its Accumulated
Depreciation account has a credit balance of $14,000, the Net book value of the equipment is:
a. $8,500
b. $14,000
c. $22,500
d. $36,500
19. An Income Statement (Profit and Loss Statement) informs users of:
a. Revenues, expenses and profits during an accounting period.
b. Revenues, expenses and profits at a point in time.
c. Assets, liabilities and Owners' Equity at a point in time.
d. Assets, liabilities and Owners' Equity during an accounting period.
20. If goods purchased on account are returned, the buyer might inform the seller of the
details by issuing:
a. A debit note
b. A credit note
c. An invoice
d. A bill
21. At the end of the year, Accounts Receivable has a balance of $100,000 and Provision for
Doubtful Debts has a balance of $7,000. The expected net realizable value of the accounts
receivable is:
\a. $7,000
b. $100,000
c. $93,000
d. $107,000
22. "All money owing by other entities, including people, business firms, and other
organizations". Which of the following terms is appropriate to the above statement?
a. bad debts
b. accounts receivable
c. contra asset
d. receivables
23. Which of the following expenditures incurred in connection with purchasing machinery is
recorded in the asset account?
a. Freight
b. Installation costs
c. Both are correct
d. Both are incorrect
24. Depreciation is a process of:
a. valuation
b. cash accumulation.
c. cost allocation.
d. appraisal.
25. During the early stage of business, which activity always provide positive net cashflow?
a. Operating
b. Financing
c. Investing
d. Other
26. Which accounting field always exists in all organizations?
a. Financial
b. Management
c. Tax
d. Auditing
27. If net sales are $400,000, cost of goods sold is $310,000, and operating expenses are
$60,000, the gross profit is: gross profit = Sales revenue- cost of goods sold
a. $30,000.
b. $90,000.
c. $340,000.
d. $400,000.
28. If opening inventory is $60,000, cost of goods purchased is $380,000, and closing
inventory is $50,000, cost of goods sold is:
a. $390,000.
b. $330,000.
c. $370,000.
d. $420,000.
29. If revenue was $45,000, expenses were $37,500 and the owner’s withdrawals were
$10,000, the amount of net profit or net loss would be:
a. $45,000 net profit
b. $7,500 net profit
c. $37,500 net loss
d. $2,500 net loss
30. A debit balance in which of the following accounts would indicate a likely error?
a. Account receivable
b. Cash
c. Fee Earned (revenue Cr)
d. Miscellaneous Expense
31. Alpha sells machine B for $50,000 cash on 30 April 20X4. Machine B cost $100,000
when it was purchased and has a net book value of $65,000 at the date of disposal. What are
the journal entries to record the disposal of machine B?
a. Dr. Accummulated depreciation $35,000; Dr. Loss on disposal $15,000; Dr. Cash
$50,000;
Cr. Fixed asset $100,000
b. Dr. Accummulated depreciation $35,000; Dr. Loss on disposal $35,000; Cr. Fixed asset
$100,000
c. Dr. Accummulated depreciation $35,000; Dr. Cash $50,000; Dr. Gain on disposal $20,000;
Cr. Fixed asset $65,000
d. Dr. Fixed asset $65,000; Dr. Accumulated depreciation $35,000; Cr Cash $50,000; Cr
Gain on disposal $50,000