Financial'Accounting'An'Integrated'Approach'5E'

Acct 5930 Quiz 1

Question 1
The professional code of ethics of an accountant involves:
1 - Behaving in a professional manner
2 - Maintaining a level of expertise required in order to perform skillfully
3 - Following procedures that will ensure that high standards of work are met
4 - Ensuring that clients do not break the law
Correct Answer: d. 1, 2, and 3 only

Question 2
A valid variation of the accounting equation is:
Correct Answer: a. Assets - Liabiities = Equity

Question 3
Accounting transactions need to be measured in a common denomination. What
assumption/concept underlies this procedure?
Correct Answer: e. Monetary

Question 4
Which of the following is not a function of financial accounting?
Correct Answer: d. To provide budgets for future accounting periods.

Question 5
On which financial statement would you find an item called Wages Expense?
Correct Answer: b. Income Statement

Question 6
The connecting link between the Balance Sheet and the Income Statement is:
Correct Answer: b. Net profit after tax

Question 7
Which of the following statements best describes a Statement of Cash Flows?
Correct Answer: b. It provides details on the movement in cash balances during
the year.

Question 8

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The letters GAAP stand for:

Correct Answer: a. Generally accepted accounting principles

Question 9
Which accounting concept directly concerns the requirement that financial
statements contain information that is useful to those who are making decisions?
Correct Answer: d. Relevance

Question 10
During 2009 a company makes credit sales of $200,000 of which $150,000 was
collected at year end. It pays $80,000 in cash expenses and owes $10,000 for
electricity used during 2009. What is accrual profit?
Correct Answer: d. $110,000

Question 11
On which of the following financial statement would you find an item called Share
Capital?
Correct Answer: a. Balance Sheet

Question 12
Which of the following statements about accrual accounting is true?
Correct b. It requires that revenues be recognized in the accounting
Answer: period in which they occur.

Question 13
The following information is at 30 June 2009 for Bush Limited:
Share Capital: $100,000
Equipment: $150,000
Inventory: $30,000
Accounts Receivable: $20,000
Accounts Payable: $30,000
Retained Profits: $80,000
Cash: $10,000

What is the balance of total assets at 30 June 2009?

Correct Answer: c. $210,000

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Question 14
Which of the following statements about financial accounting is true?
Correct d. Financial statements are summaries of a large number of
Answer: individual events.

ACCT5930 Quiz 2
Question 1
Which of the following statements about a balance sheet is true?
Correct Answer: b. A balance sheet presents the financial position at a point in
time.

Question 2
Which of the following statements about contingent liabilities is true?
Correct Answer: e. Contingent liabilities can include obligations for which the
outflow of economic benefits is not sufficiently probable.

Question 3
Given only the following information, what is the balance of current assets?
Accounts receivable: $200,000
Accounts payable: $100,000
Revenue received in advance: $80,000
Prepayments: $50,000
Inventory: $10,000
Correct Answer: c. $260,000

Question 4
Working capital equals:
Correct Answer: b. Current assets less current liabilities

Question 5
A debit may signify:
Correct Answer: c. A decrease in liability accounts

Question 6
A chart of accounts:
Correct Answer: b. Is a listing of the titles and numeric references of all accounts
in the ledger.

Question 7
Which of the following errors will be able to be detected by a trial balance?
Correct Answer: d. A journal entry recording a cash sale was posted to the cash at
bank ledger account but not the sales ledger account.

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Question 8
A company receives a payment from a customer for credit sales made in the previous
period. What is the effect on the accounting equation?
Correct Answer: d. An asset increased and another asset decreased.

Question 9
Which of the following would be essential for income to be recognised in the
financial statements?
Correct Answer: b. The increase in assets or decrease in liabilities associated with
the income must be capable of being reliably measured.

Question 10
The left hand column of a T-account is most importantly used to:
Correct Answer: c. Show debits

Question 11
An asset should be recognized in the financial statements when:
1. An exchange has occurred.
2. It possesses a cost or other value that can be measured reliably.
3. It is probable that the future economic benefits embodied in the asset will
eventuate.
Correct Answer: d. 2 and 3 only

Question 12
Lalor Ltd has current assets of $80,000 and curent liabilities of $50,000. Its current
ratio is:
Correct Answer: c. 1.6

Question 13
Which of the following is/are an essential requirement for an asset to exist for
accounting purposes?
1. The entity must be able to control the future economic benefits associated with the
item.
2. The entity must be the legal owner of the item.
3. The entity must have purchased the item.
4. The entity must be able to sell the item for a price that is reliably measured.
Correct Answer: a. 1 only

Question 14
Which of the following statements about liabilities is true?
Correct Answer: b. Liabilities must result from a past transaction or event.

Question 15
The correct classification for the following ledger accounts is:

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1. Prepaid insurance
2. Accrued wages
3. Depreciation
4. Cost of goods sold
Correct Answer: b. Asset, Liability, Expense, Expense

Question 16
The purpose of ledgers is to:
Correct Answer: b. Accumulate the large number of transactions affecting each
account in one place.

Question 17
Which of the following entries records the acquisition of equipment on account?
Correct Answer: d. Dr Equipment; Cr Accounts Payable

Question 18
To which balance sheet grouping does 'Bank Overdraft' belong?
Correct Answer: b. Current Liabilities

Question 19
Which is an advantage of a sole trader form of business?
Correct Answer: e. Owner makes all the decisions

Question 20
Which of the following are credits?
Correct Answer: d. Increases in owners' equity.

Question 21
During the year, assets have increased by $120,000 and liabilities have increased by
$24,000. No shares were issued during the year, and there were no dividends paid
during the year. The net profit or loss for the year is:
Correct Answer: c. $96,000 profit

Question 22
What was the effect if inventory was purchased for cash?
Correct Answer: a. An asset increased and another asset decreased.

Question 23
An accountant failed to record a $30,000 purchase of inventory on account. The effect
of this on the financial statements would be:
Correct Answer: b. Inventory would be understated and Accounts Payable would
be understated.

Question 24

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What is the source document to support the sale of goods on credit?

Correct Answer: b. A copy of the invoice issued by the vendor.

Question 25
Harry borrowed $10,000 from the bank in the month of November. This transaction
will:
Correct Answer: a Increase Borrowings and Increase Cash.
.
Question 26
Which of the following may be a liability of a business enterprise?
a. Accumulated depreciation
b. Prepayments
c. Retained Profits
d. Share Capital
e. Wages Payable
Correct Answer: e. Wages Payable

Question 27
An account has a debit balance if:
a. Its normal balance is a debit (without regard to the amounts or number
of entries on the debit side).
b. The amount of debits exceeds the amount of credits.
c. The first entry of the accounting period was posted on the debit side.
d. The last entry of the accounting period was posted on the debit side.
e. There are more entries on the debit side than on the credit side.
Correct Answer: b. The amount of debits exceeds the amount of credits.

Question 28
The entry to record payment of salaries not previously recognized would be:
a. Dr Accounts Payable; Cr Accounts Receivable
b. Dr Cash; Cr Accounts Receivable
c. Dr Cash; Cr Salaries Expense
d. Dr Salaries Expense; Cr Accounts Payable
e. Dr Salaries Expense; Cr Cash
Correct Answer: e. Dr Salaries Expense; Cr Cash

ACCT5930 Quiz 3
Question 1
Closing entries:
a. Are required prior to preparation of financial statements.
b. Are the last step in the accounting cycle.
c. Bring the balances in the balance sheet accounts to zero.
d. Close off all ledger accounts.
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e. Ensure that there is adequate cash for payment of bills.

Correct Answer: a. Are required prior to preparation of financial statements.

Question 2
Which of the following accounts is not closed as part of closing entries at the end of
the year?
a. Sales Revenue
b. Wages Expense
c. Accumulated Depreciation
d. Bad Debts Expense
e. Cost of Goods Sold
Correct Answer: c. Accumulated Depreciation

Question 3
As at 30 June 2009 Smyth Ltd has a balance in Accounts Receivable of $30,000 and
an Allowance for Doubtful Debts of $1,000. It was decided that the Allowance for
Doubtful Debts should stand at 10% of Accounts Receivable. What is the journal
entry to bring the Allowance for Doubtful Debts to the required level?
a. Dr Accounts Receivable $2,000; Cr Allowance for Doubtful Debts $2,000
b. Dr Accounts Receivable $3,000; Cr Allowance for Doubtful Debts $3,000
c. Dr Bad Debts Expense $1,000; Cr Allowance for Doubtful Debts $1,000
d. Dr Bad Debts Expense $2,000; Cr Allowance for Doubtful Debts $2,000
e. Dr Bad Debts Expense $3,000; Cr Allowance for Doubtful Debts $3,000
Correct Answer: d. Dr Bad Debts Expense $2,000; Cr Allowance for Doubtful Debts
$2,000

Question 4
Which of the following statements about reversing entries is true?
a. They facilitate the preparation of closing entries.
b. They are an essential part of the accounting system.
c. They facilitate the accurate recording of cash payments for accrued expenses in
the following accounting period.
d. They are normally entered into the ledger after preparing adjusting entries but
prior to the preparation of closing entries.
e. They facilitate the accurate recording of expenses that have been prepaid.
Correct Answer: c. They facilitate the accurate recording of cash payments for
accrued expenses in the following accounting period.

Question 5
Supplies purchased on account were incorrectly recorded as Office Equipment. The
correcting entry would be:
a. Dr Accounts Receivable; Cr Supplies
b. Dr Accounts Payable; Cr Supplies
c. Dr Office Equipment; Cr Supplies

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d. Dr Supplies; Cr Accounts Payable

e. Dr Supplies; Cr Office Equipment
Correct Answer: e. Dr Supplies; Cr Office Equipment

Question 6
Segregation of duties involves:
a. Ensuring only qualified accountants are employed in the accounting department.
b. Maintaining effective records.
c. Physically protecting sensitive assets.
d. Providing each staff member with an individual password.
e. Separating record-keeping from handling of assets.
Correct Answer: e. Separating record-keeping from handling of assets.

Question 7
Which of the following is not a desirable internal control attribute?
a. Employees taking regular leave.
b. Adequate pay and motivation of employees.
c. Adequate insurance over assets.
d. Employees performing the same job for an extended period of time.
e. Separation of record keeping from handling of assets.
Correct Answer: d. Employees performing the same job for an extended period of
time.

Question 8
Super Ltd has the following balance sheet information as at 28 February:
Accounts Receivable: $500,000
Allowance for Doubtful Debts: $29,100
Net Accounts Receivable: $470,900
On 1 March, the company receives notification from Downer Corporation that it is
insolvent. The CFO of Super Ltd decides to write off Downer's account for $5,300.
Which of the following statements is true?
a. Neither net income nor net accounts receivable will decrease.
b. Net income and net accounts receivable will decrease.
c. Net income and accounts receivable will decrease.
d. Net income will decrease but no change will occur in net accounts receivable.
e. No change will occur in net income but net accounts receivable will decrease.
Correct Answer: a. Neither net income nor net accounts receivable will decrease.

Question 9
The monthly bank statement for DEF Ltd included bank service charges. What entry
is required in the company's accounts?
a. Dr Bank Charges, Cr Cash
b. Dr Cash, Cr Other Revenue
c. Dr Cash, Cr Accounts Payable

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d. Dr Interest Revenue, Cr Cash

e. No entry is required.
Correct Answer: a. Dr Bank Charges, Cr Cash

Question 10
At the end of the financial year, the usual adjusting entry for accrued salaries owed to
employees was omitted. Which of the following statements is true?
a. Net profit for the year was overstated.
b. Retained profits were understated.
c. Revenue for the year was understated.
d. Salary expense for the year was overstated.
e. The total of the liabilities at the end of the year was overstated.
Correct Answer: a. Net profit for the year was overstated.

Question 11
The petty cash account was not reimbursed as at the end of the year. The petty cash
imprest is $100 and there is currently $62 cash available. As a result of not
reimbursing petty cash at the end of the year:
a. Petty cash in the balance sheet will be overstated.
b. Petty cash in the balance sheet will be understated.
c. Expenses in the income statement will be understated.
d. Expenses in the income statement will be overstated.
e. Cash in the balance sheet will be understated.
Correct Answer c. Expenses in the income statement will be understated.

Question 12
On 30 June 2010, the petty cash fund of Charles Ltd was replenished when the count
of petty cash on hand totalled $60. Vouchers revealed that postage expenses of $40
had been incurred. The journal entry to record the replenishment was:
a. Dr Petty Cash $40; Cr Cash $40
b. Dr Petty Cash $60; Cr Cash $60
c. Dr Petty Cash Expense $40; Cr Petty Cash $40
d. Dr Postage Expense $40; Cr Cash $40
e. Dr Postage Expense $40; Cr Petty Cash $40
Correct Answer: d. Dr Postage Expense $40; Cr Cash $40

Question 13
As at 30 June 2009 Dodgey Ltd had a balance in Accounts Receivable of $40,000 and
an Allowance for Doutful Debts of $2,000. It was decided to write off as irrecoverable
the debt of Tomony Ltd totalling $3,500. It was further decided that the Allowance for
Doubtful Debts should stand at 10% of Accounts Receivable. What is the journal
entry to write off the debt of Tomony Ltd as irrecoverable?
a. Dr Accounts Receivable $1,500; Cr Allowance for Doubtful Debts $1,500
b. Dr Accounts Receivable $3,500; Cr Bad Debts Expense $3,500

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c. Dr Allowance for Doubtful Debts $3,500; Cr Accounts Receivable $3,500

d. Dr Bad Debts Expense $3,500; Cr Accounts Receivable $3,500
e. Dr Bad Debts EXpense $3,500; Cr Allowance for Doubtful Debts $3,500
Correct Answer: c. Dr Allowance for Doubtful Debts $3,500; Cr Accounts Receivable
$3,500

Question 14
What is the journal entry to record depreciation expense for the year on motor
vehicles?
Correct Answer: c. Dr Depreciation Expense; Cr Accumulated Depreciation

Question 15
Use the information given below to answer the following question.
Cash sales: $10,000
Credit sales: $30,000
Cash received from accounts receivable: $22,000
Wages paid: $8,000
Wages owing at year-end: $5,000
What is the net profit for 2009?
Correct Answer: b. $27,000

Question 16
Consider the following transactions;
(i) Repayment of a loan in June 2008
(ii) Depreciation of equipment in June 2008
(iii) Payment of accounts payable in June 2008
(iv) Payment of an insurance bill in June 2008, which covers 1 July 2008 to 30 June
2009
Which of the above transactions increase 2008 expenses?
Correct Answer: a. (ii) only

Question 17
ABC Ltd maintains subsidiary ledgers for debtors and creditors. At 1 July 2008,
debtors owed $10,000, $7,300 was owing to creditors, and the balance in the
Allowance for Doubtful Debts account was $250. Transactions for the year ended 30
June 2009 were as follows:
Credit sales: $120,000
Cash sales: $300,000
Credit purchases: $80,000
Cash purchases: $200,000
Cash received from debtors: $90,000
Cash paid to creditors: $72,000
Discount received from creditors: $1,200
Discount allowed to debtors: $800

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Bad debts written off: $150

Increase in allowance for doubtful debts: $300
What was the balance of the Debtors control account at 30 June 2009?
Correct Answer: c. $39,050

Question 18
When preparing the current month's bank reconciliation, the accountant identifies that
a cheque outstanding at the end of last month has not been presented this month.
When preparing this month's bank reconciliation, the accountant will:
Answer
Correct Answer: e. Not record a journal entry and continue to include the
unpresented cheque as a reconciling item in the current month's reconciliation.

Question 19
If a company pays a 12-month insurance premium for $1,200 on 1 May 2009, then at
30 June 2009 the accounts, after recording the appropriate adjusting entries,will show:
Answer
Correct Answer: b. A prepayment of $1,000 in the balance sheet and an insurance
expense of $200 in the income statement.

Question 20
Which of the following statements about worksheets is true?
Correct Answer: d. Worksheets facilitate the preparation of interim financial
statements.

Question 21
Jomes Limited has one motor vehicle that was purchased for $24,000 cash three years
ago. The opening balance of Accumulated Depreciation - Motor Vehicles was
$17,000 (credit) and the closing balance was $20,000 (credit). The depreciation
expense for the year was:
Answer
Correct Answer: a. $3,000

Question 22
Bird Ltd made a sale of $800 to a customer on terms of '2.5/10, n/30' on 1 July. The
account was paid on 8 July. Bird Ltd would make which of the following postings to
the ledger on 8 July?
Answer
Correct Answer: e. Dr Discount Expense, $20

Question 23
The accountant of Marlon Limited did not post a credit sale entered in the sales
journal on June 28 to the subsidiary ledger. The entries to the general ledger were
posted correctly at the end of the month. As a result of not posting the sale to the

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subsidiary ledger:
Correct Answer: d. The total of the accounts receivable subsidiary ledger will not
reconcile with the total of the accounts receivable control account.

Question 24
During 2009, the first year of operations, a company makes credit sales of $500,000,
of which $375,000 is collected at year-end. It pays $200,000 in expenses and owes
$25,000 for electricity used during 2009. Accrual profit is:
Correct Answer: d. $275,000

Question 25
Manery Limited uses the balance sheet approach for the calculation of Allowance for
Doubtful Debts. The opening balance of the Allowance for Doubtful Debts was
$19,000 (Credit) and the closing balance was $16,000 (credit). The Income Statement
reveals that Bad Debts Expense for the year was $21,000. The value of debts written
off as uncolectable during the year was:
Correct Answer: e. $24,000

Question 26
Able Limited operates on a 5 day working week. Employees are paid on Thursday for
work completed to Wednesday. The weekly wages bill is $40,000. If the year end fell
on a Tuesday, what would be the adjusting journal entry?
Correct Answer: a. Dr Wages Expense $8,000; Cr Wages Payable $8,000

Question 27
Pintar Limited sells groceries at four stores across Sydney and uses a general journal,
cash receipts journal, cash payments journal, sales journal, and purchases journal.
Which of the following transactions would be entered in the general journal?
Correct Answer: e. Purchased a delivery van on credit.

Question 28
Which of the following statements accurately describes posting of entries entered in
the cash payments journal?
Correct Answer: a. Entries in the cash at bank column are totalled and posted to
the general ledger at the end of the month.

Question 29
Kramer Limited ships goods to Sykes Company on consignment. When the goods are
delivered to Sykes, Kramer should record:
Correct Answer: b. Sale of Inventory: No; Revenue: No

Question 30
In preparing the monthly bank reconciliation, Jon Ltd ascertains that there is a note
collected by the bank for $500 and an interest on overdraft charge of $760.

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Outstanding cheques total $9,400 and there is a deposit in transit for $2,900. It will be
necessary to make journal entries for:
Correct Answer: c. The note collected and the interest charge.

Question 31
Which of the following statements relating to special journals and subsidiary ledgers
is false?
Correct Answer: b. Subsidiary ledgers can only be used for accounts receivable
and accounts payable.

Question 32
Accounts Receivable is a credit column in the:r
Correct Answer: b. Cash Receipts Journal

ACCT5930 Quiz 4
Question 1
In a period of rising purchase prices, which cost flow assumption provides the highest
net profit?
Correct Answer: a. First-in first-out (FIFO)

Question 2
Using the periodic inventory control method, entries are made in the inventory ledger
account when inventory is:
Correct Answer: e. None of the above

Question 3
The lower of cost and net realisable value rule for inventory is an example of the
principle of:
Correct Answer: a. Conservatism

Question 4
During the year ended 30 June 2010, Rico Ltd has net sales of $750,000 and net
purchases of $440,000. Cost of goods sold was $475,000. What was Rico Ltd's gross
profit for the year ended 30 June 2010?
Correct Answer: b. $275,000

Question 5
Which of the following statements about the use of the first-in, first-out (FIFO)
assumption is false?
Correct Answer: d. The FIFO assumption produces inventory asset values that are
based on older purchase costs.

Question 6
Which of the following statements about the use of the weighted average / moving

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average assumption is true?

Correct Answer: a. The valuation of inventory in the balance sheet is between that
which would be the case with the use of last-in first-out (LIFO) assumption and the
first-in first-out (FIFO) assumption.

Question 7
Which of the following ledger accounts is not found in the ledger of an enterprise
employing the periodic inventory control method?
Correct Answer: a. Cost of goods sold

Question 8
The perpetual inventory control method has which of the following advantages over
the periodic control method?
Correct Answer: b. Availability of details of number of items on hand

Question 9
A company has four products and has 100 units of each in stock. The cost and net
realisable value of each of the products are:
Product V: Cost $10, Net Realisable Value $8
Product X: Cost $8, Net Realisable Value $7
Product Y: Cost $8, Net Realisable Value $9
Product Z: Cost $5, Net Realisable Value $10
The value of inventory in the balance sheet after applying the lower of cost and net
realisable value rule should be:
Correct Answer: c. $2,800

Question 10
Harry employs a perpetual inventory system. When a customer returns merchandise to
Harry that was purchased on credit, which of the following entries would Harry
make?
Correct Answer: d. Dr Sales Returns; Cr Accounts Receivable

Question 11
The following information relates to Moderate Ltd:
Net Sales: $345,000
Beginning Inventory: $60,000
Ending Inventory: $36,000
Cost of Goods Sold: $210,000
What were the purchases for the period?
Correct Answer: b. $186,000

Question 12
Which of the following statements about last-in, first-out (LIFO) assumption is true?
Correct Answer: a. LIFO assumes that inventory on hand consists of the oldest

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units.

Question 13
The following lots of a particular commodity were available for sale during the year:
10 units at $60 Beginning inventory
25 units at $63 First purchase
30 units at $64 Second purchase
15 units at $70 Third purchase
The firm uses the periodic inventory control system and there are 20 units of the
commodity on hand at the end of the year. What is the valuation of inventory at the
end of the year using the first-in first-out assumption?
Correct Answer: d. $1,370

ACCT5930 Quiz 5
Question 1
Equipment that cost $500,000 and had accumulated depreciation of $300,000, was
sold for $180,000. This results in a:
Correct Answer: b. $20,000 loss

Question 2
The choice of depreciation method should be primarily driven by:
Correct Answer: e. the use patern of assets

Question 3
Which of the following methods of depreciation will result in the largest amount of
depreciation being charged over an asset's useful life?
Correct Answer: e. All methods result in the same amount of depreciation being
charged over an asset's unseful life.

Question 4
Creep Ltd purchased a machine for $100,000 on 1 January 2008. It has an estimated
useful life of 5 years. Creep Ltd's financial period ends on 31 December. The machine
was depreciated using the reducing balance method at 60%. What was the
depreciation expense for the year ended 31 December 2009?
Correct Answer: c. $24,000

Question 5
A motor vehicle was acquired by Jones Limited. Jones Limited gave the vendor 1,000
shares in AZB Limited (c company whose shares are actively traded on the Australian
Stock Exchange) in consideration for the purchase of the new vehicle. The shares in
AZB Limited cost Jones Limited $25,000 when they were acquired 5 years ago. The
market value of the shares at the date the motor vehicle was purchased was $30,000.
The market value of the motor vehicle at the time of acquisition was reliably
determined to be $32,000.

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The cost of the motor vehicle was:

Correct Answer: d. $30,000

Question 6
Aspore Limited purchased 40% of the issued capital of Morane Limited on 1 January
2010 for $1,000,000. Aspore Limited accounts for its investment in Morane Limted
using the equity method. During the year ended 31 December 2010, Morane Limited
reported a net profit after tax of $200,000 and declared dividends totalling $80,000.
What will be the carrying amount of the investment in Morane Limited in the Balance
Sheet of Aspore Limited as at 31 December 2010?
Correct Answer: c. $1,048,000

Question 7
Which of the following statements about the capitalisation of goodwill is true?
Correct Answer: c. Internally generated goodwill is never capitalised, but
purchased goodwill is capitalised.

Question 8
Where there is an asset revaluation increment that does not reverse a previous
decrement, the amount of the increment is credited to:
Correct Answer: d. Revaluation Surplus

Question 9
Consider the following transactions:
(i) Sale of equipment with a book value of $100,000 for $130,000 cash.
(ii) Revaluation upwards of land from $1,000,000 to $1,500,000. The land has not
previously been revalued downwards.
Correct Answer: a. (i) increases profit and (ii) has no effect on profit

Question 10
Which of the following statements about intangible assets is true?
Correct Answer: c. Indefinite useful life intangible assets are not amortised.

Question 11
Squires Ltd purchased equipment for $90,000 on 1 July 2008. It had an estimated
useful life of 3 years and no scrap value. The machine was depreciated using the
sum-of-the-year's-digits method. The financial period of Squires Ltd ends on 30 June.
What was the depreciation expense for the year ended 30 June 2010?
The correct answer is: $30,000

Question 12
Which of the following statements about expenditure on an asset subsequent to its
acquisition is correct?
Correct Answer: d. Subsequent expenditure on an asset after its acquisition is

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recorded as an asset if the expenditure gives rise to future economic benefits in

addition to that embodied in the original asset.

Question 13
Accumulated depreciation is a(n):
Correct Answer: b. contra asset account

Question 14
A used machine with a purchase price of $75,000, requiring an overhaul costing
$8,000, installation costs of $4,000 and testing costs of $2,000, would have a cost of:
Correct Answer: e. $89,000

Question 15
Balby Limited owns 30% of the issued capital of Wane Limited and accounts for its
investment using the equity method. During the year ended 31 December 2010, Wane
Limited made a profit after tax of $100,000 and paid dividends totalling $50,000.
What revenue will Balby Limited recognise from its investment in Wane Limited for
the year ended 31 December 2010?
Correct Answer: b. $30,000

Question 16
Which of the following assets can be revalued upwards?
Correct Answer: b. buildings

Question 17
On 1 January 2008, a new motor vehicle with a useful life of 4 years and an estimated
trade-in value of $12,000 was purchased by a business for $54,000. The straight-line
method is employed and the financial year ends on 31 December. What was the
accumulated depreciation at 31 December 2010?
Correct Answer: c. $31,500

Question 18
Speedy Ltd purchased a delivery truck on 1 July 2007 for $450,000. It had an
estimated salvage value of $150,000. The estimated number of kilometers to be driven
was 150,000. The truck was depreciated using the units-of-production method.
Speedy Ltd's financial period ends on 31 December. The truck was driven the
following distances:
During the 6 months to 31 December 2007: 25,000km
During the 12 months to 31 December 2008: 75,000km
During the 12 months to 31 December 2009: 40,000km
What was the depreciation expense for the year ended 31 December 2008?
Correct Answer: d. $150,000

Question 19

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X buys Y for $1,200,000. The fair value of the identifiable purchased items are:
Property plant and equipment $800,000; Accounts receivable $160,000; Loan from
the bank $60,000; and Provision for employee entitlements $80,000. The value of
goodwill is:
Correct Answer: d. $380,000

Question 20
When a company discards machinery that is fully depreciated, the transaction will be
recorded with which of the following entries?
Correct Answer: a. Dr Accumulated Depreciation - Machinery; Cr Machinery

Question 21
Where there is an asset revaluation decrement that does not reverse a previous
increment, the amount of the decrement is debited to:
Correct Answer: b. Expense

ACCT5930 Quiz 6
Question 1
Jones Ltd accounts for GST using the cash basis and sold a machine on credit for
$11,000 including GST of 10%. The journal entry to record this sale would include:
Correct Answer: b. Dr Accounts Receivable $10,000

Question 2
As at 30 June 2010, Jim Ltd owes $120,000 on its loan. During the next year it must
make 12 monthly repayments of $1,500 including interest. If the interest will amount
to $10,800 over the next year, the Balance Sheet of Jim Ltd as at 30 June 2010 will
show:
Correct Answer: a. A current liability of $7,200

Question 3
Jones Limited issued a $1,000 6 month 12% Note to Smith Ltd for a $1,000 overdue
account. When the note matures and Smith Ltd pays Jones Limited the amount owing,
the journal entry Jones Limited records will include:
Correct Answer: b. Cr Note Receivable $1,000

Question 4
Which of the following is not a liability?
Correct Answer: a. Allowance for Doubtful Debts

Question 5
A debit balance in the Retained Profits account indicates that the company:
Answer
Correct Answer: b. has made a loss in at least one period

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Question 6
The directors of Walter Limited resolve to issue 100,000 shares to Mr Castle at an
issue price of $2 each to be paid in cash. The journal entry to record the issue of these
shares would include:
Correct Answer: d. Cr Share Capital $200,000

Question 7
Bonus share issues increase:
Correct Answer: d. Share Capital

Question 8
Purlay Limited's main product is sold with a warranty. Sales of this product for the
year ended 31 December 2010 totalled $540,000. The opening balance of the
'Provision for Warranty Claims' account as at 1 January 2010 was $14,800. During the
year ended 31 December 2010, Purlay Limited recorded warrranty expenses of
$42,000 and paid warranty claims totalling $38,000. What is the balance of the
'Provision for Warranty Claims' account as at 31 December 2010?
Correct Answer: b. $18,800

Question 9
Use the following information to answer the next two questions:
For the year ended 31 December 2010, Parly Limited made a net profit after tax of
$1,000,000. 350,000 ordinary shares were on issue at the beginning of the year and a
further 100,000 ordinary shares were issued on 1 July 2010. 5% convertible debt of
$3,000,000 is outstanding for the entire year. The debt is convertible into one ordinary
share for every $50 of debt outstanding. The tax rate is 40%.
What is the basic earnings per share for Parly Limited for the year ended 31
December 2010?
Correct Answer: d. $2.50 per share

Question 10
What is the diluted earnings per share for Parly Limited for the year ended 31
December 2010?
Correct Answer: c. $2.37 per share

Question 11
Which of the following would be disclosed in the financial statements as a contingent
liability?
Correct Answer: b. A dispute with the taxation department where legal advice
suggests that the company will win the dispute.

Question 12
LMN Ltd declared an interim dividend on 12 February 2009 of 5 cents per share
(500,000 issued shares) and paid it on 3 March 2009. The journal entry on 12

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February 2009 would include:

Correct Answer: b. Cr Interim Dividend Payable $25,000

Question 13
Which of the following statements about a 2:1 share split is true?
Correct Answer: b. The unit market price of each share is reduced.

Question 14
The entry to create a general reserve is usually:
Correct Answer: c. Dr Retained Profits Cr General Reserve

Question 15
Which of the following statements about 'Share Capital' is true?
Correct Answer: d. Amounts in revaluation surplus may be transferred into share
capital with the payment of a bonus/share dividend.

ACCT5930 Quiz 7
Question 1
The following information is taken from the books of Spratt Ltd.
$
Plant, 1 January 200,000
Plant, 31 December 250,000
Accumulated depreciation – plant, 1 January 40,000
Accumulated depreciation – plant, 31 December 50,000
Depreciation expense 42,000
Loss on sale of plant 9,000
Cost of plant sold during the year 70,000
What was the accumulated depreciation on plant sold during the year?
a. $10,000
b. $32,000
c. $40,000
d. $42,000
e. $52,000
The correct answer is: $32,000

Question 2
The following information is taken from the books of Registration Ltd.
$
Accounts receivable, 1 January 95,000
Accounts receivable, 31 December 70,000
Allowance for doubtful debts, 1 January 13,000
Allowance for doubtful debts, 31 December 5,000
Credit sales 300,000

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Cash sales 160,000

Bad debts expense 12,000
What was the value of bad debts written off as irrecoverable during the year?
a. $4,000
b. $5,000
c. $12,000
d. $17,000
e. $20,000
The correct answer is: $20,000

Question 3
Using the following information, what is the amount of cash paid to suppliers during
the year?
$
Inventory 1 January $20,000
Inventory 31 December $30,000
Accounts payable 1 January $38,000
Accounts payable 31 December $47,000
Cost of goods sold $500,000
Cost of inventory purchased $510,000
Discounts received $3,500
a. $496,500
b. $497,500
c. $501,000
d. $504,500
e. $515,500
The correct answer is: $497,500

Question 4
During the year, Pealte Ltd received $50,000 from its customers, $5,000 for the sale
of a motor vehicle and $20,000 for the issue of shares. It paid $27,000 to suppliers
and employees, $3,000 for income tax and $50,000 for new machinery. In addition, it
paid out $12,000 to redeem bonds. Its cash balance at the commencement of the year
was $22,000.
What was the cash flow from financing activities for Pealte Ltd?
a. $5,000
b. $8,000
c. $13,000
d. $20,000
e. $25,000
The correct answer is: $8,000

Question 5
The following information is taken from the accounts of Loret Ltd.

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$
Plant, 1 January 200,000
Plant, 31 December 250,000
Accumulated depreciation – plant, 1 January 40,000
Accumulated depreciation – plant, 31 December 50,000
Depreciation expense – plant 42,000
Loss on sale of plant 8,000
Accumulated Depreciation on plant sold during the year 29,000
Cost of plant sold during the year 70,000
What were the proceeds from the sale of plant?
a. $8,000
b. $21,000
c. $33,000
d. $49,000
e. $62,000
The correct answer is: $33,000

Question 6
Which of the following is classified as an investing activity cash flow when preparing
a Statement of Cash Flows?
a. Cash payment of interest by the company.
b. Cash payment of dividends by the company.
c. Cash payment for inventory purchased by the company.
d. Cash purchase of government bonds by the company.
e. Cash sale of inventory by the company.
The correct answer is: Cash purchase of government bonds by the company.

Question 7
Shippers Ltd made a net operating loss of $42,000. Depreciation expense was $80,000
and loss on sale of vessels was $170,000. Accounts receivable increased by $65,000
and inventory decreased by $18,000. Accounts payable increased by $160,000 and
expenses payable decreased by $1,000. What was the cash flow from operating
activities?
a. ($20,000)
b. $320,000
c. $322,000
d. $404,000
e. $450,000
The correct answer is: $320,000

Question 8
Which of the following is classified as a financing activity cash flow when preparing
a Statement of Cash Flows?
a. Interest received in cash by the company.

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b. Cash issue of shares by the company.

c. Cash purchase of government bonds by the company.
d. Cash dividends received by the company.
e. Cash purchase of shares in another company.
The correct answer is: Cash issue of shares by the company.

Question 9
A summary of the entries in the cash ledger account of Staple Ltd for the month of
January was as follows:
$
Opening balance 50,000
Cash from accounts receivable 40,000
Cash sales 25,000
Dividends received 10,000
Cash from the issue of shares 60,000
Payments to accounts payable 30,000
Payments for wages 15,000
Purchase of land 20,000
Payment of dividends 20,000
Purchase of plant and equipment 45,000
Payment of taxes 25,000
Payment of interest 10,000
Closing balance 20,000
What was the cash received from customers of Staple Ltd?
a. $25,000
b. $40,000
c. $50,000
d. $65,000
e. $75,000
The correct answer is: $65,000

Question 10
Interest revenue was $120,000 for the year. At the beginning of the year, the interest
receivable account balance was $13,000. At the end of the year, the interest receivable
account was $17,000. What was the cash received for interest during the year?
Select one:
a. $116,000
b. $120,000
c. $124,000
d. $133,000
e. $137,000
The correct answer is: $116,000

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Acct 5930 Quiz 8

Question 1
Which of the following would affect return on equity?
a. Payment of an account payable.
b. Transfers from retained profits to general reserve.
c. Initial upward revaluation of land.
d. Increase in the goods and services tax (GST) rate.
e. Payment of interest accrued in the previous accounting period.
The correct answer is: Initial upward revaluation of land.

Question 2
Antire Limited has the following ratios:
Return on assets (ROA); 12%
Return on equity (ROE); 14%
Current ratio (CR); 2:1
A customer provides a deposit of $500,000 near year end. The product will not be
delivered until next year. This transaction will:
a. increase ROA and ROE, but decrease CR
b. increase ROA and ROE, but have no effect on CR
c. decrease CR, but have no effect on ROA or ROE
d. decrease ROA, but have no effect on ROE or CR
e. decrease ROA and CR, but have no effect on ROE
The correct answer is: decrease ROA and CR, but have no effect on ROE

Question 3
Which of the following statements is true?
a. If asset turnover ratio remains constant and the profit margin increases, return on
assets must have increased.
b. If return on assets increases, return on equity must increase.
c. If the current ratio increases, the quick ratio will also increase.
d. If return on assets decreases, return on equity will increase.
e. If profit margin increases, dividend payout ratio will increase.
The correct answer is: If asset turnover ratio remains constant and the profit margin
increases, return on assets must have increased.

Question 4
Which of the following ratios indicates whether a company has enough short-term
assets to cover its short-term liabilities?
a. current ratio
b. profit margin
c. debt-to-equity
d. return on assets
e. return on equity
The correct answer is: current ratio

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Question 5
Which of the following is true of common size financial statements?
a. All balance sheet figures are expressed as a percentage of shareholder’s equity.
b. They can assist in comparing the performance and financial position of companies
of different size.
c. They are of little incremental benefit if ratios are also calculated.
d. They are more informative in circumstances where the company uses a periodic
rather than perpetual inventory control system.
e. They are more effective in comparing relationships among balance sheet items than
income statement items.
The correct answer is: They can assist in comparing the performance and financial
position of companies of different size.

Question 6
Which of the following ratios indicates the average profit on each dollar of sales?
a. earnings per share
b. price to earnings
c. gross margin
d. profit margin
e. return on equity
The correct answer is: profit margin

Question 7
Which of the following ratios indicates the portion of earnings paid to shareholders?
a. earnings per share
b. price to earnings
c. dividend payout
d. profit margin
e. return on equity
The correct answer is: dividend payout

Question 8
Which of the following statements about a ratio is false?
a. A ratio that has a value significantly different than the prior year may indicate an
error in the financial statements.
b. A ratio can only be calculated using audited financial information.
c. A ratio must be interpreted with reference to the unique circumstances of the
company to which it relates.
d. A ratio only has meaning if there is a relationship between the numerator and the
denominator.
e. A ratio can be impacted by transactions entered into just prior to the year end.
The correct answer is: A ratio can only be calculated using audited financial
information.

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Question 9
Saw Ltd’s inventory at the beginning of the year was $16,300 and at the end of the
year it was $23,700. Sales for the year were $125,000 and the gross margin was 20%.
What was the inventory turnover?
a. 0.8 times p.a.
b. 1.25 times p.a.
c. 5 times p.a.
d. 5.25 times p.a.
e. 6.25 times p.a.
The correct answer is: 5 times p.a.

Question 10
Which of the following statements about the current ratio is false?
a. The current ratio is an indication of liquidity.
b. A favourable inventory turnover ratio and debtors turnover ratio can alleviate some
concern surrounding a current ratio of less than 1.
c. The current ratio is less informative in circumstances when the company’s working
capital includes large amounts of inventory and/or large prepayments.
d. A ratio below 1 indicates that working capital is positive.
e. The current ratio is calculated as current assets divided by current liabilities.
The correct answer is: A ratio below 1 indicates that working capital is positive.

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