Omair Masood: AS Level MCQs Madness

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MCQ MADNESS AS LEVEL - OMAIR MASOOD

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Q1. i i a useful economic i life ofi 25 years. The estimated A non-current asset costs $250 000 and has i residual value is $10000. i l Depreciation is provided on a straight line basis.

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After i10 years the asset iis sold for $120000. Disposal costs of $20 000 are incurred. What is the loss on disposal? $30 000

A

Q2.

B

$34 000

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$50 000

C

D

$54 000

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l i i A computer used for demonstration to customers was treated as capital expenditure. i i The following year a customer purchased the computer in the ordinary course of business.

Which entries are needed to adjust the cost of sales? l i debited account to be

account to be credited

A

inventory

computersl

B

purchases

C

sales

computers i

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i inventory

selling expenses l

D

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The table shows information about a business. $ provision for doubtful debts at 1 January 2012

700

trade receivables at 31 December 2012 (after writing off a bad debt of $30) i i l

15 000 i

charge to income statement for bad and doubtful debts for year lli i i ended 31 December 2012 (including the bad debt written off)

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200

i i l What is the total percentage provision that has been made for doubtful debts at 31 December 2012? i i 3.5%

A

B

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4.7%

5.8%

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6.0%

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Q4. A trader provides the following financial information for th e year. $ direct costs

210 000

indirect costs

55 000

increase in work in progress

7000

raw materials taken for own use

2000

Which figures should appear in the manufacturing account?

prime cost $

overheads $

transfer to trading account of income statement $

A

208 000

55 000

256 000

B

208 000

55 000

270 000

C

210 000

53 000

256 000

D

210 000

53 000

270 000

Q5. ii

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i i The following information has been taken from the books of accounts of a limited company for the year iended 31 December 2012. l

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$ bank loan interest for the year

1650

bank overdraft interest for the year lli l i ordinary dividends paid during the year

2150 900

8% debenture taken out on 1 October 2012

30000

What are the total finance costs in the income statement for the year ended 31 December 2012? A

$4400

$4700i

B

$5300

C

D

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$6200


Q6. X, Y and Z are in partnership, sharing profits, X 40%, Y 20% and Z 40%. Existing goodwill is shown in the ledger as $10 000. The partners agree that the goodwill is now worth $40 000 and they agree to share future profits equally. They also agree that, in future, goodwill is not to appear in the ledger. Which journal entry will record this change? debit $

credit $

A

X Y Z goodwill

1 334 7 333 1 333

B

X Y Z lligoodwill i

10 000 10 000 10 000 i

X Y Z

12 000 6 000 12 000

goodwill X Y Z goodwill

13 334 13ii333 i 13 333

C

D

10 000

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30 000

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30 000 i

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Q7. A company has 1 000 000 ordinary shares of $1 issued at $2.50. It also has a 5% debenture of $300 000. Profit from operations for the year was $465000. The directors paid an 8% ordinary dividend during the year. What is the retained profit for the year? A

$250 000 lli

$370 000

B

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$385 000

D

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$400 000

i i MCQ MADNESS AS LEVEL - OMAIR MASOOD

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Q8. Whichi statements about absorption i i i costing lare .correct? 1 i llIt iapportions between production andservice departments. i i overheads i l i

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2

It enables a company to know its break-even levelof production.

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i valuations i l i i thanmarginal costing. It leads to higher inventory

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i It i is used by i management formake or buy decisions. i

1, 2 and 3

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1 and 3 only i

Q9.

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2 and 4 only

C

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3 and 4 only

D

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Anna owns a plumbing business. Costs for the year were $49500 for wages and $95 000 for materials. These included $2200 labour and $540 materials used by Anna in the extension of the business premises. Additional planning and legal costs of the extension were $450.

l What was Anna’s total revenue expenditure for the year? $141 310

A

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$141 760

B

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$142 300

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$144 500

D

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A trader buys inventorylicosting $6000. i l He is entitled to trade discount at cash discount of 5%. l 10% l andilli i On the same day he discovers that he can only sell the inventory for $5000. l l i illi i Which amount should he record as the purchase price of the inventory? i i i i il l $5000 illi

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$5130 illi

B

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$5400 illi

C

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$6000 illi

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i MCQ MADNESS AS LEVEL i- OMAIR MASOOD i

Q11. A company has the following expenses for the year. $ directors’ salaries i li i

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ii depreciation of delivery vehicles

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140 000

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87 000 90 000

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loan interest i l discounts allowed i

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33 000

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12 000

i i What is the overheads? i totall of the administration i i l i i 000 l $242 $263 000 i $329 000 A B C i l i i i l Q12. i i l i i i i

D

$362 000

i i l A business isl reviewing credit ii i i limits for its customers. l i in a customer’s i What would result credit limit being reduced? i ii i lii i i i i always taken by the customer. Cash discounts are A l li i li i i i Sales have increased to that customer. B i l C The customer always pays their debt on time. l i D The customer has lost a major contract. l i i l

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Q13.

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The table shows extracts from the trial balance of a business at 31 December 2012. i il $ i ordinary share capital 20 000 ll l share premium 40 000 long-term loan (repayable 2022) l

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30 000

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bank overdraft i

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60 000

4% non-redeemable preference share capital li ili i i i il 7% debentures 2017

50000 ii

70 000

What is the total of non-current liabilities in the statement of financial position? A

$100 000

B

$150 000

C

$160 000

D

$210 000


Q14. A business is preparing a bank reconciliation and finds the following. $ unpresented cheques

3190

uncredited bankings

1949

The cash book has a debit balance of $5000. Which adjustments should be made to the cash book balance to reconcile it to the bank statement? A

minus $3190, minus $1949

B

minus $3190, plus $1949

C

plus $3190, minus $1949

D

plus $3190, plus $1949

Q15. At the beginning of the year a company has a provision for doub tful debts of $1 000. At the e nd of the year the required provision is $2500. During the year debts of $1500 are written off and $100 is received in respect of a debt written off many years ago. What is the net amount charged to the income statement for bad and doubtful debts? A

$1500

B

$2500

C

$2900

D

$3000

Q16. On 30 September 2012 a manufacturer’s current assets totalled $28000. The next day, only two transactions took place. 1

Inventory was bought for cash. The price of $2000 was subject to a trade discount of 20% and a cash discount of 5%. Payment was made immediately.

2

A bad debt of $400 was written off.

What was the total of current assets on 2 October 2012? A

$27 680

B

$28 080

C

$29 520

D

$29 600


Q17. In reconciling the sales ledger control account with the balances in the sales ledger, it was noticed that there was an error in the sales journal. This had been overcast by $740. In addition, the total receipts from customers of $940 were recorded in the control account as $490. Which correcting entry must be made? control account

list of balances

$290 credit

increase by $290

A B

$290 debit

no effect

C

$1190 credit

decrease by $1190

D

$1190 credit

no effect

Q18. When is a share premium account opened? A

when shares are issued at a price above nominal value

B

when shares are issued at a price below nominal value

C

when shares are sold by a shareholder at a price above their nominal value

D

when shares are sold by a shareholder at a price below their nominal value

Q19. Sales for January 2014 are expected to be $10000 and these are expected to increase by $2000 each month. 10% of sales will be cash sales. Credit customers are expected to pay after one month. Which amount will be shown in the cash budget for receipts from customers in March 2014? A

$12 000

B

$12 200

C

$13 800

D

$14 000

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Q20. Which error must be corrected by a one-sided journal entry? i i i i A a cheque entered in the cash book but not posted in a ledger account

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a contra entry in i the sales ledger control account not entered in the purchases ledger control account i l l il ii an error in the total value of sales ledger balances included in the trial balance i i li i discount allowed entered in a customer’s account but not entered in the discount column in the cashl book l l l l l

B C D

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Q21.

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A trader uses his bank statements and paying in books to produce a summary of his receipts and payments for the year. Why does he do this?l l A in order to calculate his closing inventory l B in order to prepare a bank reconciliation statement l l C to be able to calculate total sales and total purchases

i i i i debts i i written off to know the amount of bad

D

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Q22. ll

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X and Y are in partnership sharing profits equally. They have capital account balances of $30 000 and $80 000 respectively. Z joins the partnership and pays $10 000 for his share of goodwill. The new profit-sharing ratio is 2 : 2 : 1. l l on Y’s capital account after Z joins? What is the balance l

$70 000

A

$75 000 l

B

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$85 000

C

D

$90 000

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i i l i i i i i i A vehicle cost $12 000 and liits estimated residual value was $2000. The vehicle was depreciated l l l at 25% per annum using the straight line method. After three years the vehicle was sold for $3500. l l l thei profit or loss i i disposal? i ll il What was on i l i i A $500 iprofit i ii B $1000 loss C $1000 profit i

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Q24. A company has the following items on its statement of financial position. $000 ordinary shares

12 000

10% preference shares

5 000

retained earnings

7 000

The company had made a profit of $5 000 000 of which $2 000 000 is paid in dividends, including $500 000 paid to preference shareholders. What is the return on capital employed? A

12.5%

B

18.75%

20.83%

C

D

26.32%

Q25. The following information has been extracted from the st atement of financial position of a limit company.

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$

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6% debenture (2016 – 2018)

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20 000

ordinary share capital issued –ll 400 000 ordinary shares of $1 each l

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5% preference shares of $1 each

400 000 200 000

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share premium account

50 000

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retained earnings

75 000

What is the value of the shareholders’ equity? A

$525 000

B

$545 000

C

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$695 000

D

$725 000

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Q26. Purchases in January 2014 are expected to be $20000 and to increase by $1000 each month. 20% of purchases are for cash. Credit purchases are paid for in the month following purchase. Which amount will be shown in the cash budget for payments to credit suppliers in March 2014? A

$16 800

B

$17 600

C

$20 200

D

$21 200

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MCQ MADNESS AS LEVEL - OMAIR MASOOD i

i i i l l l Q27. A companyl manufactures and sells chairs. The following financial information is available. i i

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per unit

$

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selling price

25

direct material and labour

12

other variable production costs i ll i i i i ill variable selling costs

3

fixed costs

4

2

l i i lli i i i i ll The company has the option of buying in the chairs for r esale instead of making them. i i i l ii At which purchase price would the company’s profit be unchanged? l i ’ i $15 $17 A B Cl $19 i i D $21 i

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Q28. i

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i i creation of a suspense account? Which error would result in the A

crediting i l i l the commission received account with rent received ii

B

crediting i i the l discounts i lallowed account with the discounts received

C

debiting the bank interest paid account with bank interest received l ldebiting the petrol account with a purchase of a new car

D

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Q29.

A company has ordinary shares of $1 each. Each year it pays a dividend of 10% of the nominal value of the shares. It now wishes to raise a further $120 000 by an issue of shares. This would bring in additional profit of $10 000 and dividends paid would increase by $2500 a year. At which price should the company issue the new shares to maintain the percentage of dividend? A

$1.00

B

$1.20

$1.60

C

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$4.80


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Q30.

ll ll l A company’s financial statements show the following. l

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l profit from operations

160 000

finance charges l share capital ordinary

500 000

retained earnings

250 000

debentures

300 000

40 000

What is the return on capital employed? 15.2%

A

B

16%

C

21.3%

D

24%

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The following information applies to a business. output (units) 375

sales $

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500

750 000 l 1 000 l 000

profits $ 100 000 250 000

What is the contribution to sales ratio? 25%

A

B

40%

C

50%

D

60%

Q32. A company plans to make the following payments in June 2014. 1

an insurance premium for the 12 months from 1 July 2014

2

the payment for equipment to be delivered in April 2014 and which will start production in May 2014

In which months will these appear in the cash budget for 2014? 1

2

A

June

April

B

June

June

C

July

April

D

July

May


Q33 S and T are in partnership sharing profi ts and losses in the ratio 3: 2. Their fixed capital accounts have balances of S $80000 and T $60 000. Interest is allowed on these at the rate of 6% per year. Profit for the year was $100000. What is the division of profits between the partners? S $

T $

A

49 400

50 600

B

50 600

49 400

C

59 760

40 240

D

60 000

40 000

Q34 The following is an extract from the statement of financial position of a company. $ ordinary shares of $0.25 each

35000

6% cumulative preference shares

40000

No dividend was paid on the preference shares last year but the directors propose to pay a dividend this year. The directors also propose a final ordinary share dividend of $0.05 per share. What is the amount of dividends to be paid? ordinary shares $

cumulative preference shares $

A

1750

2400

B

1750

4800

C

7000

2400

D

7000

4800


Q35. Which type of organisation would use process costing? A

charity

B

college

C

oil refinery

D

supermarket

Q36. li i il i i i i l A business makes up its financial statements to 30 April each year. i i i li ll i i i ill i account i i 2011 li Included ini the ledger balancesi on 1 May was insurance (debit) $800. l l i i ili i an insurance ll ’ i i i of $2100 was paid for the year ending i On 31 October 2011 premium 31 October 2012. il i i i i l Which amount was charged for insurance in the income statement for the year ended i l ill i i l i 30i April 2012? i l illi $1050 $1850 $2100 $2900 A B C D i i

Q37.

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i i Alfredoillreceived his bank i statement which showed i il a balance of $937 overdrawn. This did not agree with his cash book. i i i i l On investigation he noted the following. i i i Bank charges of $76 had not been entered in the cash book. i ’ ii i i There was an unpresented cheque of $214. i i Alfredo had paid $35 cash into his bank account but this was not showing on the i i statement. •

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At which value was the bank overdraft of financial position? i i i shown in the statement i i i l i i i i A $758 i B $937 C $1116 D $1192 i i i i l l l l i l i i i l i A company is financed by 25 000 $1 ordinary i i lshares. ii i l i to finance expansion byi issuing l The company wishes 5000 $1 ordinary shares at a premium of $0.20 and $10 000 debentures. i i l

Q38.

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What will be the new i equity figure in the statement of l financial position? i i l l li i B $31 000 l A $30 000 C $40 000 D $41 000 i i l l i i i l ii i

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Q39.

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l A hospital budgets for overheads totalling l l $11 500 000 for a financial year. It expects to treat 25 000 patients in the year. Each patient stays an average of 10 days and the hospital absorbs overheads on a patient /day basis. Its direct costs for the year are budgeted at $25 000 000. l i lday? What is its overhead absorption rate per patient A

$46 l ll

Q40

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$100

$146 li

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$460

D

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The following information is extracted from a company's financial statements. l incomel lstatement

$000

profit from operations l finance charges

200 (20) 180

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taxation

(70)

profit for the year

110

statement of financial position net assets

$000 1 000

non-current liabilities

(100) 900

share capital and reserves

900

What is the return on total capital employed? A

12.2 %

B

18 %

C

20 %

D

22.2 %


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Q41 Rent for premises is paidi monthly in advance on the first day of each month. The payments during the last financial year were as follows. l i i i up to and including 1 January i l from 1 February

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$1000 per month i $1200 per month

l will appear in the financial statements for the year ended 30 April? Whichi amount(s) statement of financial position il l –

income statement i

i i i l $12 400

A

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$12 600

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$12 600

$1200 accrual

$12 600

$1200 prepaid

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i Draft financial statements show revenue of $106 00 0 and closing inventory of $2100. i i i i i i There were 100i items which l had costi $10 an item but which were for sale at $6 an item. At the year end these were with a customer on a sale or return basis. These items were treated as having sold although no sale had been agreed. l been l i il i the principle i i prudence is applied? What are the values of revenue and inventory when of ll revenue i i $

i inventory $

A

105 000 i

B

105 000

C

105 400

D

105 400 i

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Q43. The table shows information relating to closing inventory. $ cost

50 000

realisable value

45 000

costs of realisation replacement cost

5 000 35 000

What is the value of the closing inventory? $35 000

A

B

$40 000

C

$45 000

D

$50 000

Q44. A company has issued non-cumulative preference shares and ordinary shares. Which statement is correct? A

If no preference dividend is paid, it is carried forward to a future year.

B

Preference shareholders always get a dividend.

C

Preference shareholders and ordinary shareholders always get a dividend.

D

Preference shareholders may get a dividend.

Q45. A company has an authorised share capital of 1 000 000 $0.50 ordinary shares. Its issued share capital is 800 000 shares. An ordinary dividend of 7½ % is declared. How much is payable to the shareholders? A $30 000

B $37 500

C $60 000

D $75 000

Q46. When are the reported profits under marginal costing and absorption costing principles the same amount? A

when sales revenue exceeds cost of sales

B

when units produced equals sales in units

C

when units produced exceeds sales in units

D

when unit sales exceeds production in units


Q47. A business maintains a sales journal, a purchases journal, a cash book and a general journal. Which items would be posted to the ledger accounts from the journal? l ll 1 depreciation charge for the year 2

write off of a bad debt

3

discount allowed on settlement of a debt

4

interest on overdue accounts

1, 2 and 4

A

B

1 and 4 only

C

2, 3 and 4

D

2 and 3 only

Q48. Which statement is correct? A

Assets cannot be revalued by companies at all.

B

Companies have to disclose their policy on revaluation in their accounts.

C

Companies must carry out revaluations every year. l Every asset in a particular class must be revalued by companies, not just one. l

D

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Q49.

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X and Y are in partnership, sharing profits and losses in the ratio of 2:1. X had taken goods costing $1500 from the business for his own use. The goods had been treated as a sale and credited to the sales account at their normal selling price of $2400. It was agreed that the goods should have been credited to the purchases account and not to sales and the records were corrected accordingly. Which entries should be made in the partners’ current accounts to make the correction? current accounts X $

Y $

A

credit 300

debit 300

B

debit 600

debit 300

C

debit 1000

debit 500

D

debit 1600

debit 800


Q50. The profits of Bronte Ltd are: Year ended 31 December 2010

nil

Year ended 31 December 2011

$60 000

Bronte Ltd has in issue 200 000 5% preference shares of $1 each. What is the profit available for distribution to ordinary shareholders for the year ended 31 December 2011, if the preference shares are (i) cumulative or (ii) non-cumulative? (i) Cumulative

(ii) Non cumulative

A

$40 000

$40 000

B

$40 000

$50 000

C

$50 000

$40 000

D

$50 000

$50 000

Q51 A company published the financial statements for the year ending 31 December 2011, an extract of which is detailed below. $ retained earnings at 1 January 2011

90 000

profit for year

10 000

retained earnings at 31 December 2011

100 000

share capital

20 000

What is the return on capital employed based on average capital? A

8.70 %

B

10.00 %

C

11.11 %

D

50.00 %


Q52. The diagram illustrates the cost behaviour of a typical telephone invoice.

total cost ($)

0

level of activity

Which term best describes the behaviour of this cost? A

fixed

B

semi-variable

C

stepped

D

variable

Q53. A business reports a profit using marginal costing of $75 000 for a month. Opening inventory was 10 000 units and closing inventory 15 000 units. The fixed production overhead absorption rate is $5 per unit. What is the profit using absorption costing? A

$25 000

B

$50 000

C

$100 000

D

$125 000

Q54. A company’s accounts showed a gross profit for the year of $32 500. After the draft financial statements were prepared it was found that the opening inventory had been overstated by $2400 and the closing inventory had been understated by $3400. What is the corrected gross profit for the year? A $26 700

B $31 500

C $33 500

D $38 300


Q55. Which accounting ratio is used to assess working capital management? A

gross profit ratio

B

net profit ratio

C

rate of inventory turnover

D

return on capital employed

Q56. The following are extracts from a company’s financial statements. $ profit for the year before finance charges

100 000

issued share capital

200 000

reserves

80 000

non-current liabilities

260 000

What is the company’s return on capital employed? A

18.5 %

B

21.7 %

C

35.7 %

D

50.0 %

Q57. Arun wishes to invest in a busin ess with a skilled workforce which wil l make a profit in each of the next five years. Which aspect of financial statements helps Arun to decide where to invest? A

Financial statements deal with past performance.

B

Historic cost is based on objective figures.

C

Non-monetary values are excluded.

D

Provisions can be based on estimates.


Q58. A business has the following costs. raw materials $3 per unit direct labour $2 per unit stepped costs of $5000 for every 10 000 units What is the cost of producing 15 000 units? $75 000

A

B

$82 500

C

$85 000

D

$105 000

Q59. Which statement best describes fixed costs? A

costs that are constant in total over a range of output.

B

costs that are the same in total over any output level.

C

costs that are constant per unit as output increases.

D

costs that are the same as stepped costs.

Q60. Which costing method is most suitable for fixing a selling price and which for deciding whether to make or buy in a product? fixing of selling price

decision to make or buy in a product

A

absorption costing

absorption costing

B

absorption costing

marginal costing

C

marginal costing

absorption costing

D

marginal costing

marginal costing


Q61 The following information is forecast for May. units opening inventory

25 200

closing inventory

28 200

marginal cost profit

100 800

absorption cost profit

120 300

$

What is the overhead absorption rate? $3.57

A

B

$4.27

C

$4.77

$6.50

D

Q62. The table shows opening and closing balances for the rent receivable account. start of year $

end of year $

rent received in advance

4200

1600

rent due in arrears

2000

2400

During the year, $111 000 rental income was received. What is the total rent receivable for the year? $110 600

A

B

$111 000

C

$113 200

D

$114 000

Q63 A company has an issued share capital of 200 000 6 % cumulative preference shares of $1 each fully paid and 800 000 ordinary shares of $1 each fully paid. Assuming that the company earns no profit in the year, which statement is correct? A

Both preference and ordinary shares are paid a dividend in the year.

B

The unpaid dividends for both preference and ordinary shares are carried forward to a future year.

C

The unpaid preference dividend is carried forward to a future year.

D

The preference shares are paid a total dividend of $12 000 in the year.


Q64 A non-current asset costing $206 000, with a net book value of $131 000, is revalued to $275 000. How should the revaluation be recorded? A

Dr Asset at cost $69 000 Cr Revaluation reserve $69 000

B

Dr Provision for depreciation $75 000 Dr Asset at cost $69 000 Cr Revaluation reserve $144 000

C

Dr Provision for depreciation $144 000 Cr Revaluation reserve $144 000 Dr Revaluation reserve $144 000 Cr Asset at cost $69 000 Cr Provision for depreciation $75 000

D

Q65. A business has noticed a significant increase in its trade receivables collection period. What would be the most appropriate action to help the firm improve its liquidity position? A

factoring

B

issue of shares

C

long-term bank loan

D

reducing sales

Q66 The following information is given in the financial statements of Primecrop Limited. $ ordinary shares

1 200 000

6 % preference shares

250 000

general reserve

120 000

retained earnings

710 000

8 % debentures

400 000

What is the value of ordinary shareholders’ funds? A

$1 910 000

B

$2 030 000

C

$2 280 000

D

$2 430 000


Q67 he table shows the capital and reserves for a company. $000 ordinary shares of $1 fully paid

200

8 % preference shares of $1 fully paid

100


80

general reserve

120

retained earnings

50

hat is the value of each ordinary share if valued on a balance sheet (net assets) basis? $1

B

$1.40

C

$2.25

D

$2.75

Q68. A company is going to sell a surplus non-current asset. Which term describes the net book value of the non-current asset in respect of the decision to sell? A

a fixed cost

B

a stepped cost

C

a sunk cost

D

a variable cost

Q69. A company pays rates annually in advance on 1 April each year. $4000 is paid by them on 1 April 2009 and $4800 on 1 April 2010. The company’s accounting year end is 31 December. What is the charge for rates in the 2010 income statement? A

$4000

B

$4200

C

$4600

D

$4800

Q70

A company has been depreciating its IT equip ment over 5 years, but now finds that it is becoming obsolete in 3 years. What does the consistency principle permit the company to do? A

change the depreciation policy to 3 years and highlight the effect of this in its financial statements

B

change the depreciation policy to 3 years without indicating the effect on profits

C

continue to depreciate over 5 years as per the existing policy

D

continue to depreciate over 5 years but note that after 3 years the equipment will be obsolete


Q71. Which error would cause an entry in the suspense account? A

A page total from the purchases journal was posted as $9780 rather than the correct figure of $9870.

B

Carriage outwards is credited to the carriage outwards account but correctly accounted for in the cash book.

C

Discounts allowed are debited to the discounts allowed account and credited to the purchases ledger control account.

D

Repairs to a vehicle are debited to the vehicles account.

Q72 There are 75 members of a tennis club, paying an annual subscription of $95 each. The treasurer has provided the following information for the year. $ subscriptions received

7 305

overheads: tennis balls - purchased

850

- opening inventory - closing inventory

110 95

other overheads

4 700

How much surplus will the club’s income and expenditure account for the year show? A

$1560

B

$1670

C

$1740

D

$1850

Q73. An investor owns 10 000 5 % preference shares in Howdo Limited. One year Howdo does not have enough profits to pay the preference dividend. The investor is not too worried as he expects the profits to improve and he thinks the directors will pay the missed dividend the following year. Which type of preference shares does the investor own? A

cumulative

B

non-cumulative

C

participating

D

redeemable


Q74. A company is operating in a very competitive market. Which ratios represent the reaction to the competition? gross profit percentage

period of credit allowed to customers

A

20 %

30 days

B

20 %

60 days

C

25 %

30 days

D

25 %

60 days

Q75. The balance sheet of a business at 30 June includes the following items: Year 1

Year 2

trade receivables

47 000

63 000

other receivables

1 900

2 700

Total sales for Year 2 amounted to $450 000 of which $85 000 were cash sales. What is the average trade receivables collection period during the year ended 30 June Year 2? A

44 days

B

51 days

C

55 days

D

63 days

Q76. Which statements about marginal costing are correct? 1

The marginal cost of a product includes an allowance for fixed overheads.

2

The marginal cost of a product represents the additional cost of making one extra unit.

3

If inventory decreases during a period, the profits under absorption costing will be lower than under marginal costing.

A 1 only

B

1, 2 and 3

C 2 only

D

2 and 3 only


Q77. A company uses absorption costing and makes and sells one product. In the last month budgeted overheads totalled $60 000. Budgeted production was 15 000 units and budgeted sales were 14 000 units. The company now decides to apply marginal costing principles for the last month. Which effect will this have on profits? A $3500 decrease B $4000 decrease C $4000 increase D no effect

Q78 A business has the following budgeted and actual results for a period. $ budgeted fixed overheads

354 000

actual fixed overheads

360 000

under absorption of overheads

3 000

The fixed overheads are absorbed per unit. The budgeted number of units was 118 000. What is the actual level of activity in units? A

118 000

B

119 000

C

120 000

D

121 000

Q79. What should companies not show as non-current assets in their balance sheets? A

plant bought on hire purchase

B

plant fully depreciated

C

plant held on finance leases

D

plant held on operating leases


Q80 Subscriptions received by a sports club were as follows. received year ended 31 December 2008 $

2009 $

2010 $

for membership in the year ended 31 December 2008

1900

100

–

2009

300

2100

400

2010

–

200

2500

Note: all subscriptions for 2009 are included above. A receipts and payments account and an income and expenditure account have been prepared for the year ended 31 December 2009. What are the amounts of membership subscriptions shown in the receipts and payments account and the income and expenditure account for 2009? receipts and payments account $

income and expenditure account $

A

2100

2100

B

2400

2100

C

2400

2800

D

2800

2400

Q81 When is working capital most likely to increase? A

when the business increases its selling prices

B

when the credit period allowed to customers is reduced

C

when the credit period taken from suppliers is increased

D

when the value of inventory decreases


Q82 What might stop financial statements showing a true and fair view? A

changes in depreciation methods from year to year

B

changes in dividend policy

C

creation of an asset revaluation reserve

D

inclusion of purchased goodwill in a balance sheet

Q83. An analysis of a business’s record of inventory for an item shows the following: On 1 January the business had an inventory of 100 units at a cost of $10 each. units purchased

units sold

February

50 units

March

60 units at $11 each

April

70 units at $12 each

100 units

May

30 units

All sales are made at $13 per unit. The business values its inventory on a FIFO basis. What is the value of the inventory at the end of May? A

$500

B

$550

C

$600

D

$650

Q84. Which statements about marginal costing are correct? 1

The marginal cost of a product includes an allowance for fixed overheads.

2

The marginal cost of a product represents the additional cost of making one extra unit.

3

A

1 only

If inventory decreases during a period, the profits under absorption costing will be lower than under marginal costing. B

1, 2 and 3

C

2 only

D

2 and 3 only


Q85. A company uses absorption costing and makes and sells one product. In the last month budgeted overheads totalled $60 000. Budgeted production was 15 000 units and budgeted sales were 14 000 units. The company now decides to apply marginal costing principles for the last month. Which effect will this have on profits? A $3500 decrease B $4000 decrease C $4000 increase D no effect

Q86. The non-current assets of a business are shown. end of year $

start of year $

cost

360 000

300 000

accumulated depreciation

120 000

75 000

net book value

240 000

225 000

During the year, non-current assets costing $110 000 were bought and non-current assets with a net book value of $20 000 were sold. What was the depreciation charge for the year? A

$35 000

B

$45 000

C

$50 000

D

$75 000

Q87. The cash book of a business shows a credit balance of $12 500 at 30 June. Bank charges of $2000 have not yet been entered in the cash book. A cheque for $20 000 received from a debtor, and a cheque for $3000 paid to a creditor have been entered in the cash book, but have not yet been shown on the bank statement. What is the balance shown on the bank statement at 30 June? A $2500 credit B $2500 debit C $31 500 credit D $31 500 debit


Q88. What is the main use of a computerised age analysis of debtors? A

aid debt collection procedures

B

match sales invoices against orders

C

reconcile sales ledger balances

D

show credit notes issued

Q89. A company issues for cash 50 000 shares of $5 each at a premium of $15 each and $300 000 4 % debentures. By what amount will the net assets of the company increase? A $250 000

B $550 000

C $1 000 000

D $1 300 000

Q90. The following information is provided by a company for a month. actual direct labour hours worked

4500

budgeted direct labour hours

5000

budgeted overhead expenditure

$80 000

overheads under-recovered

$12 000

What is the amount of the actual overhead expenditure? A $60 000

B $68 000

C $72 000

D $84 000


Q91. Which graph shows the fixed cost per unit produced in a manufacturing process? A

fixed cost per unit

0

B

fixed cost per unit

0

quantity produced

C

fixed cost per unit

0

quantity produced

D

fixed cost per unit

quantity produced

0

quantity produced

Q92. The cash book of a business shows a credit balance of $12 500 at 30 June. Bank charges of $2000 have not yet been entered in the cash book. A cheque for $20 000 received from a debtor, and a cheque for $3000 paid to a creditor have been entered in the cash book, but have not yet been shown on the bank statement. What is the balance shown on the bank statement at 30 June? A

$2500 credit

B

$2500 debit

C

$31 500 credit

D

$31 500 debit


Q93. Closing inventory has been overvalued. What is the effect on the financial statements? net current assets

profit from operations

A

overstated

overstated

B

overstated

understated

C

understated

overstated

D

understated

understated

Q94. On 1 January 2009 a business had prepaid rent of $50. During 2009, three rent payments were made of $250 each. On 31 December 2009, the business still owes $200 rent on account for 2009. The business owner has charged the rent payments made during 2009 in his income (profit and loss) account. What is the effect on net profit? A

$200 too high

B

$200 too low

C

$250 too high

D

$250 too low

Q95. A customer paid a deposit in advance for goods to be supplied at a later date. How should this be recorded in the seller’s books?

A

debit

credit

cash

customer

B

cash

sales

C

customer

prepayment

D

customer

sales


Q96 At 30 June the balance sheet of a business includes the following. $ trade receivables (debtors)

46 000

provision for doubtful debts 5%

2 300

During July, sales of $350 000 were made of which 20 % were in cash. Credit customers paid $303 800 after deducting a 2% cash discount. How much did the trade receivables (debtors) owe to the business at 31 July? A $15 200

B $16 000

C $22 200

D $76 000

Q97. For the eleven months ended 31 August 2009, snack bar takings were correctly recorded at $109 340. For September 2009, the snack bar takings were mixed up with other income. The snack bar profit margin was 30.%. The table shows figures for the snack bar for September 2009. $ opening inventory (stock) at cost

6 303

purchases

8 844

closing inventory (stock) at cost

7 370

What was the gross profit of the snack bar for the year ended 30 September 2009? A

$27 566

B

$36 135

$36 593

C

D

$43 912

Q98. The table shows extracts from the trial balance of a company at 31 December 2009. $ ordinary share capital

750 000

8 % preference shares

250 000

6 % debentures (2015)

150 000

bank loan repayable (2012)

75 000

bank overdraft

110 000

mortgage on buildings (repayable 2010)

120 000

What is the total of non current liabilities in the balance sheet at 31 December 2009? A $195 000

B $225 000

C $345 000

D $595 000

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Q99.

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l

product X $

product Y $

selling price

20

30

direct labour (per unit) lli i direct materials (per unit) il i

10

20

4

2

i $48 000. i l Total fixed costs are

i

Onlyl 3000 units of Y can be made and sold. i l many iunits of product X must be l made and sold to break even? How A

1800

i

3000

B

Q100.

4000 l

C

i

i

D

l

8000

i

A factory produces a product with a variable cost of $0.60 per unit. i i l i Fixed costs are $15 000 per quarter, including rent of $6000 per quarter. i ii l i i ii If more than 20 000 units are made per quarter, additional space is required which increases the rent by 50 %. i l i i i i What is the total cost per unit of producing 30 000 units in a quarter? A

$0.60

B

$0.90

C

$1.10

D

$1.20

Q101. A manufacturer has 700 units of finished goods in stock on 1 March. On 31 March the total number of units in stock is 770. At present, stock is valued using the total costing method. What would be the effect on the operating profit if the marginal costing method is used for stock valuation? A

increase operating profit

B

no change in operating profit

C

no change in operating profit but a 10 % increase in gross profit

D

reduce operating profit lli

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Q102. What does the application of the accounting principle of consistency ensure? A

that all losses are provided for

B

that assets are recorded at their actual cost

C

that financial statements are produced annually

D

that profits are calculated the same way each year

Q103. The table shows the year end information for three companies. company

sales $

operating profit as % of all sales

capital employed $

X

500 000

15

100 000

Y

200 000

8

40 000

Z

400 000

10

80 000

How should the companies rank in order of return on the actual capital employed? return on capital employed highest

lowest

A

X

Z

Y

B

Y

Z

X

C

Z

X

Y

D

Z

Y

X

Q104. Which of the following items will be debited to accounts in the purchases ledger? 1

A

discount allowed

2

payments to suppliers

3

purchases

4

purchases returns

1 and 2

B

2 and 3

C

2 and 4

D

3 and 4


Q105 A business obtained a machine by means of a hire purchase agreement. It showed the machine in its balance sheet at the cash price of $30 000 although only $10 000 has been repaid. Which accounting principle is involved? A

accruals

B

materiality

C

prudence

D

substance over form

Q106 The table shows information from the books of a business at 30 April 2010. details

$

credit sales invoiced during financial year

79 000

goods sent to customers on 28 April 2010 and invoiced 4 May 2010

6 100

goods sent to customers during April 2010 on sale or return basis but not sold by 30 April 2010

8 300

What is the amount of sales for the year ended 30 April 2010? A $76 800

B $85 100

C $85 300

D $93 400

Q107. The table shows transactions relating to an inventory (stock) item during a period. number of units

per unit

bought

100

cost $16

sold

60

selling price $25

Of the remaining units, 20 are damaged and can only be sold for $10 each. What is the profit for the period? A

$220

B

$300

C

$420

D

$540


Q108. A customer places an order for 20 000 bricks. Which costing method will the supplier use to price the order? A

batch

B

job

C

marginal

D

unit

Q109 A company has total production costs of $6000 to make 10 000 units, and $13 000 to make 24 000 units. What is its total cost to make 20 000 units? A

$1000

B $10 000

C $11 000

D $12 000

Q110. A business makes wedding dresses. Each machinist is paid $30 a day and each supervisor $40 a day. Each supervisor can work with up to 10 machinists and each machinist can produce one wedding dress a day. If 95 wedding dresses a day are produced, what is the daily labour cost? A

$2850

$3210

B

$3230

C

D

$3250

Q111. X, Y and Z are in partnership sharing profits and losses in the ratio 5 : 2 : 3. Y is entitled to a salary of $18 000 per annum. Partners receive interest at 6 % per annum on their capital account balances at the start of the year. At the beginning of the year, capital account balances were: X

$30 000

Y

$22 000

Z

$20 000

The net profit before salary and interest for the year is $140 000. What is Y’s share of the total profits? A

$23 536

B

$28 000

C

$42 856

D

$46 000


Q112. A company is set up with an authorised share capital of $3 million. It plans to purchase immediately a factory for $1 million. Preliminary expenses will be $100 000 and the immediate requirement for working capital will be $800 000. It will also require new equipment costing $600 000 in 12 months time. What is the minimum amount the company needs to raise now? A

$1 000 000

B

$1 900 000

C

$2 500 000

D

$3 000 000

Q113. A company buys and re-sells goods. It has a higher gross profit margin tha n its rivals. Which reason could explain this? A

Rival companies pay less for goods than the company.

B

Rival companies spend less on advertising than the company.

C

The Company charges a higher selling price than its rivals.

D

The Company charges a lower price than its rivals.

Q114. The following information is given about four products. Which product makes the most gross profit? inventory (stock) turnover (per annum)

average inventory (stock) in units

mark up on cost %

A

8 times

1000

15

B

6 times

1000

30

C

7 times 10 times

1000 1000

25 20

D

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Q115. A soup manufacturer uses batch costing. It produces a batch of 10 000 tins of soup with a direct materials cost of $2500. i Direct labour involved 200 hours at a cost of $2000, and overheads are absorbed at the rate of $15 per direct labour hour. What is the cost of a tin of soup? $0.25

A

i

$0.45

B

$0.55

C

$0.75

D

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Q116. The accounting year end of a business is 31 October. On 1 April the business rents out part of its warehouse for an annual rent of $6000. Payments were received in equal instalments on 1 April, 1 July, 1 October and 1 January. At 31 October what would the final accounts show? profit and loss account $

balance sheet $

A

rental income

3500

current asset

1000

B

rental income

3500

current liability

1000

C

rental income

4500

current liability

1000

D

rental income

6000

current asset

1500

i l i Q117.

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What will result in a reduction of working capital? A

decreasing the rate of stock t urnover

B

i i icollection period l l i reducing the debtor by offering discounts

C

reducing the time taken ii to pay suppliers l

D

selling some surplus fixed assets i

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Q118. A particular cost is classified as ‘semi-variable’. What effect will a 20% reduction in activity have on the unit cost? A

decrease by 20%

B

decrease by less than 20%

C

increase by 20%

D

increase by less than 20%

Q119. An extract from a company’s balance sheet is given. $000 issued ordinary share capital issued preference shares

250 180

profit and loss account

320


125

8 % debentures

100

What are the ordinary shareholders’ funds? A

$695 000

B

$775 000

C

$875 000

Q120. Development costs are capitalised. Which accounting principle is being applied? A

business entity

B

historic cost

C

matching

D

materiality

D

$975 000


Q121. The correct balance on the purchases ledger control account is $63 000 but has been entered in the trial balance as $36 000. The difference on the trial balance has been entered in a suspense account. Which journal entry corrects this error? account to be debited

$

purchases ledger control account

A

-

B

account to be credited

27 000

suspense account

$

suspense account

suspense account

suspense C account D

27 000

27 000 27 000

-

27 000

purchases ledger control account

27 000

Q122. An extract from a company’s trial balance is shown. debit $ debtors’ control account – debit balances

credit $

225 000

debtors’ control account – credit balances

2 800

creditors’ control account – debit balances

3 200

creditors’ control account – credit balances investment in another company

261 000 12 000

How much should be shown as trade debtors in the company’s financial statements? A

$222 200

B

$228 200

C

$237 400

D

$240 200


Q123.

A company profit and loss account includes: $000 dividend

300

increase in stock

200

overheads

400

purchases

800

If the net profit percentage is 20 %, what is the figure for sales? A $1 120 000

B

$1 250 000

C

$1 625 000

D $1 750 000

Q124. The following figures are given for a factory’s overheads and machine hours worked. machine hours

total overhead costs

overhead absorption rate

budgeted

122 000

$268 400

$2.20

actual

116 000

$261 000

$2.25

What was the under- or over-absorption of overhead for the quarter? A

$5800 over-absorbed

B

$5800 under-absorbed

C

$7400 over-absorbed

D

$7400 under-absorbed


Q125. A creditor for $720 transferred from the purchases ledger has been entered on the wrong side of the sales ledger control account. The sales ledger control account has a closing balance of $92 460, before correcting the transfer. A provision for doubtful debts of £1000 is to be made. What is the correct balance on the sales ledger control account? A

$90 020

B

$91 020

C

$91 740

D

$92 180

Q126. The stock records of a business show the following information for product X. amount in units 1 January

opening balance

3 January

receipts into stock

8 January

stock issued

cost per unit $

100

3

50

4

120

-

What is the value of the stock issued on 8 January using the First In First Out (FIFO) method? A

$360

B

$380

C

$410

D

$420

Q127. A business has the following assets and liabilities. $ short-term investment

6 000

loan interest owing

1 500

loan repayable within one year

12 000

deposits from customers for orders

4 500

creditors

27 000

debtors

39 000

pre-payments

3 500

What is the amount of net current assets? A

$3500

B

$4500

C

$8000

D

$15 500


Q128. A business provides the following data for the year. budgeted output (units)

10 000

actual output (units)

8 000 $

budgeted fixed production costs

1 200 000

budgeted variable production costs

800 000

budgeted fixed selling overhead

600 000

What is the absorption cost per unit used for stocktaking? $200

A

B

$250

C

$260

D

$325

Q129 The following debit balance appears on a trial balance after preparing the manufacturing account for the year. loose tools

$18 000

What is this item? A

a creditor for loose tools

B

the annual charge for loose tools

C

a prepayment for loose tools

D

stock of loose tools

Q130. At the year-end a cash book shows a credit balance of $4800. The bank statement included bank charges of $25 which had not been included in the cash book. Cheque payments entered in the cash book before the year end to the value of $250 had not yet cleared the bank. How would the bank balance be shown in the balance sheet? $ A

current asset

4775

B

current liability

4825

C

current asset

5025

D

current liability

5075


Q131 A business has a gross profit to sales ratio of 40 %, and a net profit to sales ratio of 10 %. If the sales volume increases by 8 % which of the following will generally be true? gross profit to sales ratio

net profit to sales ratio

A

increase

decrease

B

increase

increase

C

unchanged

decrease

D

unchanged

increase

Q132 A company uses a predetermined direct labour rate of $5.40 per hour to absorb production overhead. Each unit of product manufactured requires four direct labour hours. The following information is available for a period. actual production overhead

$518 400

under-absorbed production overhead

$32 400

What was the actual output of t he product in the period? A

22 500 units

B

24 000 units

C

25 500 units

D

30 000 units

i lli i i

ii

. i

i

i


.

.

Q133 A company manufactures and sells a single product. At an output of 1000 units per month the budget shows $ selling price

120 000

variable cost

40 000

fixed cost

50 000

profit

30 000

Fixed costs are due to increase by $10 000 per month and the selling price will be increased to maintain the profit at $30 000. What is the effect on the break-even point to the nearest unit? A

decrease by 42 units

B

increase by 42 units

C

decrease by 125 units

D

no change

Q134. A company sells two products, X and Y.

sales (units)

X

Y

1000

2000

$

$

selling price per unit

22

12

contribution per unit

12

4

Which would increase the company’s profit by $10 000? A

a 30 % increase in the sales of X

B

a 50 % increase in the sales of both products

C

an increase in the selling price of X by $1 and Y by $6

D

a reduction in the variable costs of both products by $5


Q135 A club’s income and expenditure account for 2006 showed rent and rates as $4000. On 31 December rent owing was $600 and rates paid in advance was $800. What was the amount shown in the receipts and payments account for rent and rates for the year ended 31 December 2006? $3800

A

Q136.

B

i

$4000

C

l

$4200

D

$5400

l

What is the purpose of providing for depreciation? A

i Toi apply the matchingi principle.

B

To ascertain the true value of fixed assets. i i

C

To ensure that i money is available for irepair of fixed assets.

D

To provide cash in the business for replacement. i l

Q137

i l

Partnership capitals are $60 000 for X and $90 000 for Y. The partnership agreement provides for interest on capitals at 10 % per annum, but makes no other financial provisions. i i i i Profits for the current year total $75 000. i How will the total profits be divided between the partners? i Xl ($) A

30 000

B i C

36 000

D

39 000

37 500

iY ($) i 45 000 i 39 000 i 37 500

l

i

l

36 000

ll

l

l l

ll

l

l

l

ll l


Q138 The table shows the capital structure of a company. $000 ordinary shares of $1 each

100


200

retained profits

300 600

15 % loan stock (issued 5 years ago)

400 1000

Operating profits average $260 000 per annum. What is the return on shareholders’ funds? A

26.0 %

B

33.3 %

C

43.3 %

D

66.7 %

Q139. A business has two items in stock which need to be repaired before sale. cost $

selling price $

repair costs $

item 1

2 160

2 450

190

item 2

3 190

3 060

320

What is the total stock value of these items? A

$4900

B

$5000

C

$5510

D

$5640


Q140. A company receives payment for 20 % of its sales in the month of sale, 50 % in the following month and 30 % two months after the month of sale. The table shows sales for four months. $ January

180 000

February

240 000

March

270 000

April

220 000

How much were total cash receipts in April? A

$220 000

B

$228 000

C

$249 000

D

$251 000

Q141. The capital structure of a company is shown. $ 700 000 ordinary shares of $0.25 each

175 000

8 % loan stocks

160 000

During the year the company made profits before interest of $105 000. The directors wish to distribute as much of the profits as possible by way of dividend. What is the dividend per share? A

$0.1317

B

$0.15

C

$0.5268

D

$0.60

Q142 What will cause under-absorption of fixed production overheads? A

absorption of overheads is based on actual expenditure and actual activity

B

actual expenditure of overheads is below budget expenditure

C

actual activity is above budgeted activity

D

actual activity is below budgeted activity and actual expenditure is as budgeted


Q143. A firm has calculated the following accounting ratios for the year ended 30 June: year ended 30 June 2005

30 June 2006

gross profit on sales

30%

33 %

net profit on sales

15%

14 %

What could explain the changes in the percentages? A

A fall in interest payments was equal to an increase in administration costs.

B

An increase in raw material costs was covered by an increase in selling price.

C

An increase in the advertising budget has allowed the firm to increase the selling price.

D

An increase in the advertising budget has led to a rise in sales volume.

Q144. A bank statement shows a credit balance of $8360. Comparison with the cash book reveals: •

Cheques totalling $18 725, sent to suppliers, have not been presented.

•

Cheques totalling $16 223, received from customers, have not been credited by the bank.

•

Bank charges of $124 have not been entered in the cash book.

What is the correct cash book balance? A

$5734 credit

B

$5734 debit

C

$5858 debit

D

$10 986 credit


Q145. The following data is available: this year $

last year $

credit sales

60 000

50 000

credit purchases

40 000

28 000

creditors (average)

10 000

16 000

debtors (average)

12 000

8 000

Which statement is correct? A

Debtors’ and creditors’ turnover ratios have improved.

B

Debtors’ and creditors’ turnover ratios have worsened.

C

Debtors are paying faster, but creditors are being paid more slowly.

D

Debtors are paying more slowly, but creditors are being paid faster.

Q146. On 30 September 2005 a manufacturer’s current assets totalled $28 000. The next day only two transactions took place. 1 Stock bought for cash. The list price of $2000 was subject to a trade discount of 20 % and a cash discount of 5 %. Payment was made immediately. 2 A bad debt of $400 was written off. What was the total of current assets on 2 October 2005? A $27 680

B $28 080

C $29 520

D $29 600


Q147. A company manufactures a single product with a selling price of $75 per unit. The table shows the costs, based on sales and production volume of 8000 units. $ 000 prime costs

158

variable manufacturing overheads

74

fixed manufacturing overheads

80

variable selling overheads

20

fixed administration overheads

100

If absorption costing is applied, what is the gross profit on each unit sold? A

$21.00

B

$36.00

C

$43.50

$46.00

D

Q148. A company excludes from its Balance Sheet machinery for which spare parts are no longer obtainable. Which concept is being applied by the company? A B

going concern materiality

C

prudence

D

substance over form

Q149. X and Y are sole traders. On 1 October 2004 they agreed to form a partnership which would take over the assets of the separate businesses. At 30 September 2004 the following information was available: X $

Y $

Goodwill

15 000

12 000

machinery

25 000

18 000

stock and debtors cash at bank / (overdraft)

8 000

3 000

10 000

(4 000)

What was the total of the tangible assets taken over by the partnership? A

$60 000

B

$64 000

C

$87 000

D

$91 000


Q150 The following items of expenditure take place during the first month of a transport business. $ rent

1 000

insurance of building

1 300

insurance of vehicle

350

road tax

500

purchase of vehicle

15 000

number plate for vehicle

150

painting of vehicle in company colours

750

wages for lorry driver

100

wages for painting vehicle

150

What is the total capital expenditure? A $15 000

B $15 500

C $16 050

D $16 550

Q151 The journal entry ‘Debit Subscription Income, Credit Creditors’ was made in the accounting records of a club. What does this represent? A

subscriptions owed by members

B

subscriptions received by cheque

C

subscriptions received in advance

D

subscriptions refunded to members

Q152. A company has two items in stock which require to be repaired before sale. cost $

selling price $

repair costs $

item 1

5 260

7 600

880

item 2

2 360

2 450

190

What is the total stock value of these items? A

$6550

B

$7520

C

$7620

D

$8980


Q153 The following information is extracted from the books of a company. $000 freehold premises at cost

125

provision for depreciation of freehold premises

50

The premises are revalued at $180 000. Which entries are required in the company’s books to record the revaluation? Profit and Loss Account

Freehold Premises at Cost account

Provision for depreciation

Revaluation Reserve credit $105 000

A

none

debit $55 000

debit $50 000

B

debit $50 000

debit $55 000

none

credit $105 000

C

debit $55 000

debit $75 000

debit $50 000

credit $180 000

D

debit $75 000

debit $55 000

debit $50 000

credit $180 000

Q154. The table shows information from a company’s accounts. $ 000 Turnover

135

Gross profit

34

Profit before interest and tax

11

Profit after tax

8

Fixed assets

59

Current assets

50

Debentures

12

Current liabilities

40

What is the return on total capital employed? A

8.1 %

B

11.3 %

C

14.0 %

D

15.9 %


Q155. The following information has been calculated from the accounts of a business. days taken to pay creditors

36

days taken by debtors to pay

65

stock turnover in days

14

What is the cash operating cycle? A

15 days

B

29 days

C

43 days

D

79 days

Q156. The following information applies to X Ltd. output (units)

sales $ 000

profits $ 000

750

750

100

1000

1000

250

60 %

D

What is the contribution to sales ratio? A

25 %

B

40 %

C

Q157. What may result in an under-absorption of fixed overhead? A

absorption based on actual expenditure and actual activity

B

activity above budget

C

activity below budget

D

expenditure below budget

87 %

l

l


l

ll

l

l

Q158. What are major assumptions in contribution / sales (c / s) analysis? 1

costs can be identiflied as either variable or fixed

2

fixed cost per unit is constant as activity rises

3

variable cost per unit fluctuates with the volume of activity

4

volume l of activity is the only factor that affects revenue and variable costs

A

1 and 2 only

B

1 and 4 only

C

2 and 3 only

D

2 and 4 only

l

Q159.

A company has the following balances. l

$

l trade debtors at 31 December 2003

l

l

l

provision for doubtfullldebts at 1 January 2003 l

125 400 1 800

l December 2003 l During the year ended 31 bad debts of $20 500 were written off. The company provides for 5 % of trade debtors at each year end. What is the ldoubtful debts expense for the year ended 31 December 2003? A

$3445

$4470

B

C

$5245

D

$6270

l

Q160.

The table shows details relating to a company’s banking transactions at 31 December. $ balance at bank per bank statement

l

22 650

unclearedlodgements

3110

unpresentedcheques

6290

bankl credit recorded twice by bank in error

650

l at 31 December? Which balance for cash at bank should appear in the Balance Sheet A

l $18 820

l

lB

ll C l

$20 120 l

$25 180

l

l

l l

l l

l

l

l

l

D

$26 480


Q161. In the absence of a partnership agreement the partners claim that they are: 1

entitled to interest on the capitals at the rate of 5 % per annum

2

entitled to interest on loans to the firm at 5 % per annum

3

entitled to interest on loans to the firm at 10 % per annum

4

not entitled to interest on capitals

5

not entitled to interest on loans to the firm

Which claims are correct? A

1 and 2

B

2 and 4

C

3 and 4

D

4 and 5

Q162. A company sells goods on sale or return at a mark up of 25 %. At the Balance Sheet date the following information is available. goods in warehouse

$300 000 (cost)

goods sent on sale or return

$200 000 (at invoice price)

What will be the value of closing s tock in the company accounts? A

$300 000

B

$450 000

C

Q163. A business uses absorption costing. Which cost is used to value finished stock? A

full cost

B

prime cost

C

variable cost of production

D

variable cost of sales

$460 000

D

$500 000


Q164 What does the diagram show about costs?

$000

sales revenue

profit

revenue and costs fixed costs

12345 years A

fixed costs are increasing

B

total costs as a % of sales are decreasing

C

variable costs per unit are decreasing

D

variable costs per unit are increasing

Q165. A vehicle was part exchanged for a new vehicle. The value placed on the old vehicle was $12 000. Which entries record the $12 000 part exchange? account debited

account credited

A

Cash

MotorVehicles

B

MotorVehicles

Cash

C

Disposals

Motor Vehicles

D

Motor Vehicles

Disposals


Q166. At the end of a financial period, a business has the following balances. $ totaldebtorsbalances

10620

baddebtnotyetwrittenoff

260

provision for doubtful debt brought forward

460

What should the business do if it wishes to maintain the bad debt provision at 5% of debtors? A

decrease the existing provision by $58

B

increase the existing provision by $58

C

decrease the existing provision by $71

D

increase the existing provision by $71

Q167. A trial balance does not balance. The difference has been entered in a Suspense account. The following errors are found. 1

The Purchase Ledger Control account balance of $48 300 has been included as a debit balance.

2

Provision for depreciation has been overcast by $960.

3

A cash payment of $630 for rent has been credited in the cash book and debited to the Bad Debts account.

What is the correcting debit entry to the Suspense account? A

$47 340

B

$95 010

C

$95 640

D

$97 560

Q168 When a company is short of liquid funds, for what purpose may the reserves be used? A

to finance the take-over of another business the company is anxious to acquire

B

to maintain dividends during periods of low profitability

C

to pay creditors promptly so as to obtain discounts

D

to write down assets whose value to the business has fallen


Q169. A club charges each of its 100 members an annual subscription of $12. At the end of a year four members had not paid their annual subscription. What will be the entries in the financial statements for subscriptions? Income and Expenditure account

Balance Sheet

A

$1152

currentasset

B

$1152

currentliability

$48 $48

C

$1200

currentasset

$48

D

$1200

currentliability

$48

Q170. Production overhead expenditure in a period totalled $102 660 compared with a budget of $105 270. Direct labour hours are used to absorb production overheads. 8700 direct labour hours were worked in the period and production overhead was over-absorbed by $1740. What was the production overhead absorption rate per direct labour hour? A

$11.60

B

$11.80

C

$12.00

D

$12.10

Q171. A business has a draft net profit of $84 000. It is discovered that the closing stock was overvalued by $4000 and that discounts received of $1500 were treated as an expense. What is the corrected net profit? A

$81 500

B

$83 000

C

$89 500

D

$91 000

i

i

i

i


Q172. A bank reconciliation statement shows a credit balance of $400 in the Cash Book and a balance in hand of $100 in the bank statements. The bank reconciliation statement includes unpresented cheques of $700 in addition to cheques banked and not yet credited in the bank statements. What is the total of cheques banked and not yet credited? A

$200

$400

B

$1000

C

$1200

D

Q173. A business owner suspects a loss of cash has occurred. He provides the data shown. l $ cash balance at the start of the month

150

l cash balance at the end of the month

100

l cash banked

10 200

cashsalespertillrolls

10500

How much cash has been lost?l ll ll $200

A

l $250

B

Q174. i

ll

i i

li

$300

C

D

$350

i

Which is a realised gain? l lof the i following i

l

A l a isurplus on revaluation market value i i l ofl trade i investments to current i l B

i i arising from l al surplus a professional revaluation of the company office block

C

ill arising i i a surplus on the sale of patents

D

Goodwill arising on the purchase of another business i

ll

Q175.

i

ill i

i

i

ll i lli i i Which of the following actions would improve the liquidity (acid test) ratio of a business in the l shorti term?i i i i

i

i

i

i i l

1 i 2

l

l i

i

selling a number of surplus fixed assets l i i

4 l selling stock

1 lland 2

A

l debtors paying their debts i l delaying paying creditors

l

3

i ll

l

2 and 3 l

B

l

C

1 and 4

i i

ll

i il

il

i i

i

i

i

i

i

i

i

i

i

i

i i i

3 and 4

D

i

i

i

i

l

li

i

l i

i

i

i

l

l

i

l

l i

ll

i

i i i

il i i i

i

i l

l

i i

i

i i

l

l


Q176. The graph shows the way in which a cost increases according to the level of activity of the business.

$

total cost

0

level of activity (units)

Which cost follows this pattern? A

administrative salaries

B

commission on sales

C

depreciation of factory

D

office rent

Q177. Which item should be treated as capital expenditure? A

the addition of a back-up system on an existing computer at a cost of $900

B

costs incurred in repairing a car when the costs cannot be recovered from the insurance company

C

rent paid on a factory, whilst the company negotiated the purchase of that same factory

D

the replacement of a wooden fence with a new fence


Q178. A trial balance at 30 April 2003, before making end of year adjustments, showed: debit $ Tradedebtors

credit $

17800

Provision for doubtful debts

-

-

580

At 30 April 2003 it was decided to write off a bad debt of $800 and to make a provision for doubtful debts of 2% of trade debtors. During the year an amount of $200 was received from a customer relating to a debt that was written off in the year ended 30 April 2002. What was the total bad and doubtful debts expense for the year ended 30 April 2003? A

$360

B

$560

C

$940

$1140

D

Q179. Which of the following is the definition of a business as a going concern? A

The assets owned by the business exceed its liabilities.

B

The business has accumulated revenue reserves.

C

The business is currently liquid and able to pay its creditors.

D

The business will continue in operational existence for the foreseeable future.

Q180. The treasurer of a tennis club has provided the following information for a year. numberofmembers

75 $

annualsubscription

95

subscriptionsreceived

7305

overheads: tennis balls - purchased

850

- opening stock - closing stock otheroverheads

110 95 4700

What will the club’s Income and Expenditure account show? A

$1560 surplus B

$1670 surplus C

$1740 surplus D

$1850 surplus


l

Q181.

ll

l ll The balance on the Sales Ledger Control account amounting to $43 000 has been entered in the trial balance as $34 000. The difference on the trial balance has been entered in a Suspense account. l Which journal entry is required to correct the error? l accounttobedebited A

Sales Ledger Control account

D

Suspense account

l

-

B C

accounttobecredited

ll $9000 ll

Suspense account Suspense account ll l

l ll

l

$9000 $9000

$9000

Suspense account

$9000 -

Sales Ledger Control account

$9000

l l

l

l

l

l Q182. l l A company is financed by:

10 000 $1 ordinary shares $5000 10 % loan l Net profit before interest and taxation is $2500. Tax payable is $400. What is thel maximum dividend per share payable from this year’s profits? A

$0.16

B

$0.20

C

l $0.21

D

$0.25

l ll l ll Q183. l When a shareholder sells some shares for less than he paid for them, what will happen to the sharell capital of the company? ll l l l sold. ll All It will falll by the nominal value of the shares l ll

B

It will fall by the sales proceeds of the shares sold. l

C

It willll increase by the amount received from the sale of the shares.

D

It will remain the same as before.

l l

l


ll

l

Q184. ll A business uses job costing to calculate the cost of vehicle repair jobs. ll l Overheads are allocated on an absorption costing basis. What is the effectllof this method of allocation? A

overheads will include both fixed lland variable overhead costs

B

overheads ll l will include direct costsl only

C

overheads willll include fixed overhead l l costs only

D

overheads costs only ll l will include variable overhead l

Q185.

ll

l

l

l

l

l

l

The table shows costs at three activity levels. l l activity levels

65 units

90 units

$ l fixed cost

?

l cost variable totalcost

100 units

$

$

?

?

?

?

15600

?

19600

21200

What is the fixed cost? A

$1600 ll

Q186. ll

B

$4000

C

$5200

D

$5600

l l

l

l

The treasurer l of a club has l decided not to include subscriptions owing by members in the l l Balance Sheet at the year-end. ll l Which accounting concept is being applied? ll l B

accruals l going concern

C

money measurement

D

prudence

A

l

Q187. Stock which cost $1200 has been damaged. It would have sold for $1800 when perfect. It can be sold for $1700 if repairs are undertaken at a cost of $600. To replace the stock would cost $1000. At what value should the damaged stock be shown in the final accounts? A

$ 1000

B

$ 1100

C

$ 1200

D

$ 1800


Q188 Accountants prefer the commercial reality of a transaction to a strictly legal approach. This is an example of A

consistency.

B

materiality.

C

prudence.

D

substance over form.

Q189. A trial balance does not balance and a Suspense account is opened. Subsequently the following errors are found and the Suspense account is cleared. 1 2 3

A sales invoice for $1240 had been omittedin from books. Rent paid of $2600 was entered correctly thethe cash book but incorrectly as $6200 in the Rent account. The purchases journal was undercast by $1980.

What was the srcinal balance on the Suspense account? A

$1620 credit

B

$4340 debit

C

$5580 credit

D

$5580 debit

Q190. A trial balance does not balance and a Suspense account is opened. Subsequently the following errors are found and the Suspense account is cleared. 1 2 3

A sales invoice for $1240 had been omitted from the books. Rent paid of $2600 was entered correctly in the cash book but incorrectly as $6200 in the Rent account. The purchases journal was undercast by $1980.

What was the srcinal balance on the Suspense account? A

$1620 credit

B C

$4340 debit $5580 credit

D

$5580 debit


Q191. A partnership does not maintain a Goodwill account. It recently admitted a new partner. No adjustments were made for Goodwill in the partners’ Capital accounts. What is the effect of this omission? continuing partners’ Capital accounts total balances

new partner’s Capital account balance

A

overstated

understated

B

understated

overstated

C

understated

understated

D

overstated

overstated

Q192. Which business is likely to have the lowest Gross Profit/Sales margin? A

a car manufacturer

B

a computer software company

C

a jewellery shop

D

a supermarket

Q193. The trial balance of a business does not agree. The difference has been entered in a Suspense account. The error was caused by a cheque for $400 from Omar being debited to Omar’s account. What is the journal entry to correct this? debit

credit

with

A

Bank account

Suspense account

$400

B

Suspense account

Omar’s account

$400

C

Suspense account

Omar’s account

$800

D

Suspense account

Bank account

$800


Q194. A business purchases stock on credit. Which of the following is now true?

A

current ratio

acid test

decreases

decreases

B

increases

increases

C

unchanged

decreases

D

unchanged

increases

Q195. A company manufactures a variety of products, each of which requires different materials and grades of labour. There is little use of machinery in the manufacture of each product. On which basis should the Overhead Absorption Rate (OAR) be calculated? A

direct labour cost

B

direct material cost

C

direct labour hours

D

machine hours

Q196. Which of the following may result in an under-absorption of fixed overhead? A

absorption based on actual expenditure and actual activity

B

activity above budget

C

activity below budget

D

expenditure below budget


Q197. The sales included in the trial balance of a company total $880 000. This is made up as follows: $ 215 000 536 000

Cash sales Credit sales Goods sent on sale or return basis awaiting acceptance by the consignee Goods sent on sale or return for which customers have accepted invoices Total

45 000 84 000 880 000

Which amount will be shown in the income statement as revenue? A

$751 000

B

$796 000

C

$835 000

D

$880 000

Q198. Which line, A, B, C or D, in the graph below best represents the behaviour of the total cost of an item affected by bulk purchase discounts?

A B

Cost $ C D

quantity purchased


Q199. The final accounts of John Gates contain two errors. The closing trade inventories have been overvalued by $6,000, and uninsured theft of goods costing $9,000 has not been taken into account. What effect will the

correctionof

Gross profit A

reduced by $6 000

these errors have on John Gates’s profits?

Profit for the year (Net profit) increased by $3 000

B

reduced by $3 000

reduced by $3 000

C

increased by $3 000

reduced by $6 000

D

increased by $6 000

increased by $6 000

Q200 A company manufactures and sells widgets. The directors want to increase profitability and are considering buying in the widgets instead of manufacturing them. The company should buy the widgets from an outside supplier if the price is A

less than the marginal cost of production

B

more than the marginal cost of production but less than the marginal cost of sales

C

more than the marginal cost of sales but less than the total cost

D

more than the total cost but less than the selling price

END OF MADNESS :)

Omair Masood: AS Level MCQs Madness

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