1. A vehicle cost $30000. It was later sold for $9000. The profit on disposal was $1500.

What was the accumulated depreciation of the vehicle on disposal?

A $7500 B $9000 C $21 000 D $22 500

2. A transport business owned by a sole proprietor purchases a motor vehicle. This is charged to the Motor
expenses account.

What are the effects of this on the end-of-year balance sheet?

a. fixed assets understated current assets understated

b. fixed assets overstated current assets overstated
c. fixed assets overstated capital account overstated
d. fixed assets understated capital account understated

3. A business buys a computer for $2200 on 1 January 2007. The computer will be used for four years, after
which time it will be sold for $280. The business uses the straight-line method of depreciation.

What is the depreciation charge for the year ended 31 December 2008?

A $480 B $550 C $960 D $1100

4. The following information is taken from the stationery account of a business.

stock of stationery at beginning of the year 600

cash paid for stationery during the year 7000
amount owing for stationery at end of year 480
stock of stationery at end of year 800

How much should be debited to the profit and loss account for stationery?

A $6680 B $6800 C $7280 D $8080

5. Development costs are capitalised.

Which accounting principle is being applied?

a. business entity
b. historic cost
c. matching
d. materiality

6. The table shows information from the business at 30 November 2008:

 $

Credit sales invoiced during financial year 80 000

Goods despatched to customers in November 2008 and invoiced in December 2008 5 000
Goods included in sales for November 2008 on a sale or return basis, but only sold
in December 2008
– at invoice price 10 000
– at cost price 8 000
Which amount will appear in the trading account as sales for the year ended 30 November 2008?

A $75 000 B $77 000 C $83 000 D $85 000

7. In preparing the profit and loss account, only realised profits and not anticipated profits must be brought
into account. In addition, all possible losses must also be taken into account.

Which accounting principle does this describe?

A accruals
B consistency
C going concern
D prudence

8. Entries of $700 in the discount received account had not been entered in the creditors’ ledger. During the
year a machine was sold for $1000. There was only one entry made and it was a credit in the bank
account.

What is the balance on the suspense account?

a. $1700 credit
b. $1700 debit
c. $2700 credit
d. $2700 debit

9. The correct balance on purchase ledger control account is $63000 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 $ account to be credited $

A purchases ledger control account 27 000 suspense account 27 000

- suspense account 27 000
B suspense account 27 000 -
C suspense account 27 000 purchases ledger control account 27 000
D

10. Who is most likely to use the creditors’ ledger?

a. cashier
b. credit controller
c. creditors
d. purchases controller

11. A business sells some of its stock for $500 on credit to a customer. The stock originally cost
$600.

What is the effect of this transaction on the balance sheet?

current assets owner’s capital

A decrease by $100 decrease by $100

B decrease by $100 increase by $100
C increase by $100 decrease by $100
D increase by $100 increase by $100

12. A company’s policy is to depreciate its equipment by 30 % annually using the reducing balance method.

A piece of equipment which was two years old was sold for $6000 and the profit on sale was
$1590.

What was the cost price of the equipment?

A $7590 B $9000 C $9600 D $11 025

13. Which expense is included in prime cost of manufacturing?

a. depreciation of machinery
b. purchase of factory machinery
c. purchase of raw materials
d. supervisor’s wages

14. A company manufactured 3000 widgets and transferred them out of its factory at cost plus 20 %.
 per widget $

selling price 25
direct materials 6
direct labour 5
fixed overheads 4

What is the factory cost of goods manufactured as it would appear in the trading account?

A $36 000 B $39 600 C $45 000 D $54 000

15. X and Y are partners in a business.

X receives an annual salary of $5000 from the partnership and the balance of profits and losses is shared
between X and Y in the ratio of 3 : 2 respectively.

In the last financial year, the net profit was $30 000. How

much was credited to each partner for the year?

X Y

$ $
A 10 000 15 000
12 000 18 000
B 20 000 10 000
C 21 000 14 000
D

16. An extract from a company’s trial balance is shown:

debit credit
$ $

debtors’ control account – debit balances 225 000

debtors’ control account – credit balances 2 800
creditors’ control account – debit balances 3 200
creditors’ control account – credit balances 261 000
investment in another company 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

17. The following items appear in the subscriptions account of a club for a financial year.

subscriptions received owed from the previous year 3 000

subscriptions paid in advance for next year 1 000
subscriptions income transferred to the income and expenditure account 50 000
subscriptions outstanding at year end 2 000

How much cash was received from members in the year?

A $46 000 B $50 000 C $52 000 D $56 000

18. The directors of a company provide the following information.

bank overdraft 1 200

equipment 12 000
long term loan 8 000
petty cash 900
stocks 2 500
trade creditors 3 000
trade debtors 2 000

What is the amount of the net current assets?

A $1200 B $2400 C $3600 D $5200

19. 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

20. A shareholder sells some ordinary shares for more than he paid for them.

What is the effect on the company balance sheet?

ordinary share capital share premium account

 A decrease decrease
B decrease increase
C no effect decrease
D no effect no effect

21. At the beginning of the year a company has authorised share capital of 800 000 ordinary shares of $0.25
each and an issued share capital of 400 000 ordinary shares of $0.25. During the year the company
makes a further issue of 200 000 ordinary shares at a price of $0.60.

What is the balance on the share capital account at the end of the year?

A $150 000 B $220 000 C $250 000 D $350 000

22. Assets and liabilities of a business at the year-end include the following:
$

accruals 5 000
bank overdraft 6 800
cash 600
prepayments 4 500
proposed dividend 12 000
stock 51 800
trade creditors 20 100
trade debtors 24 200

What is the current ratio?

A 0.67 : 1 B 1.85 : 1 C 2.19 : 1 D 2.54 : 1

23. Which actions would improve the liquidity (acid test) ratio of a business in the short term?

a. debtors paying their debts

b. delaying paying creditors
c. selling a number of surplus fixed assets
d. selling stock

A 1 and 2 B 2 and 3 C 1 and 4 D 3 and 4

24. A business has a debtor turnover period of 40 days based on year end debtors. Annual sales are
$180 000 of which 13 % are cash sales.

What is the year end debtors figure based on a year of 360 days?

A $2600 B $17 400 C $20 000 D $45 200

25. A company has an issued ordinary share capital of 240 000 ordinary shares of $0.50 each.

The company pays a total ordinary share dividend of $9600. The

current market price of an ordinary share is $3.20.

What is the current dividend yield?

A 1.25 % B 2% C 4% D 8%

26. Which name is given to the difference between company’s actual sales and break-even sales?

A margin of safety
B marginal cost
C marginal C-V-P (cost-volume-profit) analysis
D marginal revenue

27. What best describes cost of direct materials plus direct labour costs?

a. absorption cost
b. marginal cost
c. prime cost
d. total cost

28. A company has the information shown below.

actual sales for August 320 000

break-even sales for August 400 000
total fixed costs for August 150 000

What is the margin of safety for August?

a. $80 000 negative

b. $80 000 positive
c. $170 000 negative
d. $250 000 positive

29. A business has fixed costs of $100 000. It sells a single product for $25 per unit, and its
contribution to sales ratio is 40 %.

What is the break-even point in units?

A 6667 B 10 000 C 40 000 D 250 000

30. The following figures are given for a factory’s overheads and machine hours worked:
overhead
machine hours total overhead costs
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

31. A business purchases a vehicle for $10 000. The business depreciates its non current
(fixed) assets at 20 % using the diminishing value method.

What is the depreciation charge for year 2?

A $1600 B $2000 C $6400 D $8000

32. An item of capital expenditure has been incorrectly treated as revenue expenditure in the
accounts of a business.

What is the effect of this error on the accounts of the business?

assets profit

A overstated overstated
B overstated understated
C understated overstated
D understated understated

33. A business has a bank overdraft of $4800. It pays for materials invoiced at $3000 less a
trade discount of 20 % and a settlement discount of 5 %.

A cheque for $500 is received from a debtor.

What is the bank balance after these transactions?

A $2020 overdraft
B $6580 overdraft
C $7150 overdraft
D $7580 overdraft
34. Which of the following items will be debited to accounts in the purchases ledger?

a. discount allowed
b. payments to suppliers
c. purchases
d. purchases returns

A 1 and 2 B 2 and 3 C 2 and 4 D 3 and 4

35. The personal spending of the owner of a business is not recognised as a business expense.

Which accounting principle is being applied?

i. business entity
ii. consistency
iii. money measurement
iv. prudence

36. 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

37. 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
8 300
not sold by 30 April 2010

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

39. During the year ended 31 December, a sports club received $10 860 for subscriptions.

The following further information is available.

year ended 31 December

start of year end of year
$ $

subscriptions owing 580 870

subscriptions received in advance 1 640 1 220
What is the figure for subscriptions in the Income and Expenditure Account for the year ended
31 December?

A $10 150 B $10 510 C $11 570 D $12 270

40. A firm has incomplete accounting records. The following figures are known.

capital at start of year 20 000

owner’s drawings 7 000
capital at end of year 30 000

How much profit has the firm made during the year?

A $7000 B $17 000 C $27 000 D $30 000

41. A company calculates factory profit at a mark-up of 20 % on the cost of production. The
following information is available.

inventory (stock) of finished goods at cost at 31 December 2007 40 000

cost of goods produced for the year to 31 December 2008 240 000
closing inventory (stock) of finished goods at cost plus factory profit at 54 000
31 December 2008

How much will be shown as factory profit in the accounts for the year ended 31 December 2008?

A $39 000 B $40 000 C $47 000 D $48 000

42. 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

 What is the figure for subscriptions in the Income and Expenditure Account for the year ended
31 December?

A $10 150 B $10 510 C $11 570 D $12 270

43. A firm has incomplete accounting records. The following figures are known.

capital at start of year 20 000

owner’s drawings 7 000
capital at end of year 30 000

How much profit has the firm made during the year?

A $7000 B $17 000 C $27 000 D $30 000

44. A company calculates factory profit at a mark-up of 20 % on the cost of production. The
following information is available.

inventory (stock) of finished goods at cost at 31 December 2007 40 000

cost of goods produced for the year to 31 December 2008 240 000
closing inventory (stock) of finished goods at cost plus factory profit at 54 000
31 December 2008

How much will be shown as factory profit in the accounts for the year ended 31 December 2008?

A $39 000 B $40 0don’t 00 C $47 000 D $48 000

45. At 1 January 2009 the capital structure of a company was as follows.

issued share capital 100 000 ordinary shares of $1 each 100 000
share premium account 30 000

On 1 April 2009 the company made a rights issue of 20 000 shares of $1 each for $36 000.

On 1 June 2009 a bonus issue of one share for every six in issue was made. The share premium
account was used for this purpose.

What is the balance on the share premium account at 31 December 2009?

A $26 000 B $34 000 C $46 000 D $56 000

46. When is a share premium account opened?

A. when shares are issued at a price above nominal value
B. when shares are redeemed by the company at a premium
C. when shares are sold by a shareholder at a price above their nominal value
D. when the company issues bonus shares

47. A company buys and re-sells goods. It has a higher gross profit margin than 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.

48. A business has trade payables (creditors) of $8000 and a bank overdraft of $2000. Its
current ratio is 2 : 1 and its quick (acid test) ratio is 1.5 : 1.

What is the value of its inventory (stock)?

A $4000 B $5000 C $28 000 D $35 000

49. sales during a 365 day year are shown in the table.

cash sales 179 580

credit sales 927 100
total sales 1 106 680

The trade receivables (debtors) turnover ratio at the year end is 42 days.

What is the end-of-year trade receivables (debtors) balance?

A $22 074 B $98 460 C $106 680 D $127 344

50. The following information is given about four products.

 Which product makes the most gross profit?

inventory (stock) average inventory mark up on cost

turnover (per annum) (stock) in units %

A 8 times 1000 15
B 6 times 1000 30
C 7 times 1000 25
D 10 times 1000 20

51. A soup manufacturer uses batch costing. It produces a batch of 10 000 tins of soup with a
direct materials cost of $2500.

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?

A $0.25 B $0.45 C $0.55 D $0.7

52. The table shows costs at three activity levels.

activity levels 65 units 90 units 100 units

$ $ $
fixed cost ? ? ?
variable cost ? ? ?
total cost 15 600 19 600 21 200

What is the fixed cost?

A $1600 B $4000 C $5200 D $5600

53. 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

54. 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

55. 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 B $3210 C $3230 D $3250

56. An item of capital expenditure has been incorrectly treated as revenue expenditure in the
accounts of a business.

What is the effect of this error on the accounts of the business?

assets profit

A overstated overstated
B overstated understated
C understated overstated
D understated understated

57. A business has a bank overdraft of $4800. It pays for materials invoiced at $3000 less a
trade discount of 20 % and a settlement discount of 5 %.

A cheque for $500 is received from a debtor.

What is the bank balance after these transactions?

A $2020 overdraft
B $6580 overdraft
C $7150 overdraft
D $7580 overdraft

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

A. discount allowed
B. payments to suppliers
1 purchases
C. purchases returns

A 1 and 2 B 2 and 3 C 2 and 4 D 3 and 4

59. The personal spending of the owner of a business is not recognised as a business expense.
 Which accounting principle is being applied?

A. business entity
B. consistency
C. money measurement
D. prudence

60. 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

61. 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
8 300
not sold by 30 April 2010

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

62. Which item will be entered in a purchase ledger control account?

A discount allowed
B discount received
C prepaid rent
D returns inwards

63. The total of the list of individual balances in the purchase ledger does not agree with the
balance on the purchase ledger control account.

When listing the individual suppliers’ accounts a credit balance had been shown as a debit
balance.

What is needed to correct the mistake on the total of the purchase ledger balances?

A. decrease by the amount of the credit balance

B. decrease by twice the amount of the credit balance
C. increase by the amount of the credit balance
D. increase by twice the amount of the credit balance
64. Which error will cause an entry in the suspense account?

A. a transposition error when transferring a ledger account balance to the trial balance
B. an error of commission where the wrong account is used for a transaction but it is the correct
type of account
C. an error of omission
D. an error of principle

65. A trial balance at 31 December shows:

debit credit
$ $

trade receivables (debtors) control account 48 500 2 900

trade payables (creditors) control account 3 600 34 800

It is then found that an invoice, $900, issued to a debtor on 27 December, has not been entered
in the accounting records.

What is the correct figure for trade receivables (debtors) in the balance sheet at 31 December?

A $46 500 B $49 400 C $51 200 D $53 000

66. During the year ended 31 December, a sports club received $10 860 for subscriptions.

The following further information is available.

year ended 31 December

start of year end of year
$ $

subscriptions owing 580 870

subscriptions received in advance 1 640 1 220

What is the figure for subscriptions in the Income and Expenditure Account for the year ended
31 December?

A $10 150 B $10 510 C $11 570 D $12 270

67. A firm has incomplete records, following details are available:

 $

capital at start of year 20 000

owner’s drawings 7 000
capital at end of year 30 000
How much profit has the firm made during the year?

A $7000 B $17 000 C $27 000 D $30 000

68. A company calculates factory profit at a mark-up of 20 % on the cost of production. The
following information is available.

inventory (stock) of finished goods at cost at 31 December 2007 40 000

cost of goods produced for the year to 31 December 2008 240 000
closing inventory (stock) of finished goods at cost plus factory profit at 54 000
31 December 2008

How much will be shown as factory profit in the accounts for the year ended 31 December 2008?

A $39 000 B $40 000 C $47 000 D $48 000

69. 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

70. 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

71. L and M are in partnership.

Which item should appear in the partnership appropriation account?

A. additional capital contributed by M

B. cash drawings of L and M during the year
C. salary due to L
A salary paid to M’s wife

72. 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

73. At 1 January 2009, the capital structure of a company was as follows:

issued share capital 100 000 ordinary shares of $1 each 100 000
share premium account 30 000

On 1 April 2009 the company made a rights issue of 20 000 shares of $1 each for $36 000.

On 1 June 2009 a bonus issue of one share for every six in issue was made. The share premium
account was used for this purpose.

What is the balance on the share premium account at 31 December 2009?

A $26 000 B $34 000 C $46 000 D $56 000

74. When is a share premium account opened?

A. when shares are issued at a price above nominal value

B. when shares are redeemed by the company at a premium
C. when shares are sold by a shareholder at a price above their nominal value
D. when the company issues bonus shares

75. A company buys and re-sells goods. It has a higher gross profit margin than 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.

76. A business has trade payables (creditors) of $8000 and a bank overdraft of $2000. Its
current ratio is 2 : 1 and its quick (acid test) ratio is 1.5 : 1.

What is the value of its inventory (stock)?

A $4000 B $5000 C $28 000 D $35 000

77. A company’s sales during a 365 day year are shown in the table.

cash sales 179 580

credit sales 927 100
total sales 1 106 680

The trade receivables (debtors) turnover ratio at the year end is 42 days.

What is the end-of-year trade receivables (debtors) balance?

A $22 074 B $98 460 C $106 680 D $127 344

78. The following information is given about four products.

Which product makes the most gross profit?

inventory (stock) average inventory mark up on cost

turnover (per annum) (stock) in units %

A 8 times 1000 15
B 6 times 1000 30
C 7 times 1000 25
D 10 times 1000 20

79. A soup manufacturer uses batch costing. It produces a batch of 10 000 tins of soup with a
direct materials cost of $2500.
 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?

A $0.25 B $0.45 C $0.55 D $0.75

80. The table shows costs at three activity levels.

activity levels 65 units 90 units 100 units

$ $ $
fixed cost ? ? ?
variable cost ? ? ?
total cost 15 600 19 600 21 200

What is the fixed cost?

A $1600 B $4000 C $5200 D $5600

81. 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

82. 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

83. 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 B $3210 C $3230 D $3250

84. The graphs show projected sales and cost information for products X and Y.
 Which statement most accurately interprets the graphs?

A. Product X breaks even at a higher number of units sold than product Y.

B. Product X has lower fixed costs than product Y.
C. Product X has a lower selling price per unit than product Y.
D. Product X has a lower variable cost per unit than product Y.

85. A business purchases a vehicle for $10 000. The business depreciates its non
current (fixed) assets at 20 % using the diminishing value method.

What is the depreciation charge for year 2?

A $1600 B $2000 C $6400 D $8000

86. A business has a bank overdraft of $4800. It pays for materials invoiced at
$3000 less a trade discount of 20 % and a settlement discount of 5 %.

A cheque for $500 is received from a debtor.

What is the bank balance after these transactions?

A $2020 overdraft
B $ 6580 overdraft
C $ 7150 overdraft
D $ 7580 overdaft

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

A. discount allowed
B. payments to suppliers
C. purchases
D. purchases returns

A 1 and 2 B 2 and 3 C 2 and 4 D 3 and 4

88. The personal spending of the owner of a business is not recognised as a business
 expense.

Which accounting principle is being applied?

A. business entity
B. consistency
C. money measurement
D. prudence

89. 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
B
C
D substance over form

90. 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
8 300
not sold by 30 April 2010

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

91. Which item will be entered in a purchase ledger control account?

A discount allowed
B discount received
C prepaid rent
D returns inwards

92. The total of the list of individual balances in the purchase ledger does not agree
 with the balance on the purchase ledger control account.

When listing the individual suppliers’ accounts a credit balance had been shown
as a debit balance.

What is needed to correct the mistake on the total of the purchase ledger balances?

A. decrease by the amount of the credit balance

B. decrease by twice the amount of the credit balance
C. increase by the amount of the credit balance
D. increase by twice the amount of the credit balance

93. Which error will cause an entry in the suspense account?

A. a transposition error when transferring a ledger account balance to the trial balance.
B. an error of commission where the wrong account is used for a transaction, but it is
the correct type of account.
C. an error of omission
D. an error of principle

94. A trial balance at 31 December shows:

debit credit
$ $

trade receivables (debtors) control account 48 500 2 900

trade payables (creditors) control account 3 600 34 800

It is then found that an invoice, $900, issued to a debtor on 27 December, has not
been entered in the accounting records.

What is the correct figure for trade receivables (debtors) in the balance sheet at 31
December?

A $46 500 B $49 400 C $51 200 D $53 000

95. During the year ended 31 December, a sports club received $10 860 for
subscriptions.

The following further information is available.

year ended 31 December

start of year end of year
$ $

subscriptions owing 580 870

subscriptions received in advance 1 640 1 220
 What is the figure for subscriptions in the Income and Expenditure Account for the
year ended 31 December?

A $10 150 B $10 510 C $11 570 D $12 270

96. A firm has incomplete accounting records. The following figures are known.

capital at start of year 20 000

owner’s drawings 7 000
capital at end of year 30 000

How much profit has the firm made during the year?

A $7000 B $17 000 C $27 000 D $30 000

97. A company calculates factory profit at a mark-up of 20 % on the cost of production. The
following information is available.

inventory (stock) of finished goods at cost at 31 December 2007 40 000

cost of goods produced for the year to 31 December 2008 240 000
closing inventory (stock) of finished goods at cost plus factory profit at 54 000
31 December 2008

How much will be shown as factory profit in the accounts for the year ended 31
December 2008?

A $39 000 B $40 000 C $47 000 D $48 000

98. 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

99. 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

100. L and M are in partnership.

Which item should appear in the partnership appropriation account?

A. additional capital contributed by M

B. cash drawings of L and M during the year
C. salary due to L
D. salary paid to M’s wife

101. 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

102. At 1 January 2009 the capital structure of a company was as follows.

issued share capital 100 000 ordinary shares of $1 each 100 000
share premium account 30 000

On 1 April 2009 the company made a rights issue of 20 000 shares of $1 each for $36
000.

On 1 June 2009 a bonus issue of one share for every six in issue was made. The
share premium account was used for this purpose.

What is the balance on the share premium account at 31 December 2009?

A $26 000 B $34 000 C $46 000 D $56 000

103. When is a share premium account opened?

A. when shares are issued at a price above nominal value

B. when shares are redeemed by the company at a premium
C. when shares are sold by a shareholder at a price above their nominal value
D. when the company issues bonus shares

104. A company buys and re-sells goods. It has a higher gross profit margin than
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.

105. A business has trade payables (creditors) of $8000 and a bank overdraft
of $2000. Its current ratio is 2 : 1 and its quick (acid test) ratio is 1.5 : 1.

What is the value of its inventory (stock)?

A $4000 B $5000 C $28 000 D $35 000

106. A company’s sales during a 365 day year are shown in the table.

cash sales 179 580

credit sales 927 100
total sales 1 106 680

The trade receivables (debtors) turnover ratio at the year end is 42 days. What is the

end-of-year trade receivables (debtors) balance?

A $22 074 B $98 460 C $106 680 D $127 344

107. The following information is given about four products.

Which product makes the most gross profit?

 inventory (stock) average inventory mark up on cost
turnover (per annum) (stock) in units %

A 8 times 1000 15
B 6 times 1000 30
C 7 times 1000 25
D 10 times 1000 20

108. A soup manufacturer uses batch costing. It produces a batch of 10 000 tins
of soup with a direct materials cost of $2500.

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?

A $0.25 B $0.45 C $0.55 D $0.75

109. The table shows costs at three activity levels.

activity levels 65 units 90 units 100 units

$ $ $
fixed cost ? ? ?
variable cost ? ? ?
total cost 15 600 19 600 21 200

What is the fixed cost?

A $1600 B $4000 C $5200 D $5600

110. 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

111. 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

112. 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 B $3210 C $3230 D $3250

113. A business purchases a vehicle for $10 000. The business depreciates
its non current (fixed) assets at 20 % using the diminishing value method.

What is the depreciation charge for year 2?

A $1600 B $2000 C $6400 D $8000

D $46 000

114. A business paid $10 000 for waste disposal in the year. The opening
prepayment was $1500 and the closing accrual was $2000. What was the charge for
waste disposal for the year?

A $6500 B $9500 C $10 500 D $13 500

115. 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

116. Which transaction would increase the current assets of a business?

A. paying invoices $950, after receiving $50 cash discount

 B. purchasing a machine on credit for $1200
C. purchasing inventory for $1100 cash and selling it on credit for $1500
A selling inventory with an original cost of $800 at below cost price

117. The following summarised information has been taken from the balance sheet
of a partnership.

non-current assets 42 000

capital accounts 36 000
current accounts (debit) 5 000
current liabilities 7 000
non-current liabilities 15 000

What is the amount of current assets?

A $6000 B $11 000 C $17 000 D $21 000

118. Accountants prefer the commercial reality of a transaction to a strictly legal

approach.

Which accounting principle is being applied?

A
B
C
D substance over form

119. There is great uncertainty about the continuance of a business. This has
caused the proprietor to make a large reduction in the valuation of the year-end
inventory.

Which accounting principle does this illustrate?

A. going concern
B. matching
C. materiality
D. substance over form

120. 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

121. 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

122. What is the main use of a computerized 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

123. A manufacturing company has the following balances at its year end.

closing inventory of raw materials 24 500

direct manufacturing wages 162 800
purchases of raw materials 85 200
supervisors’ wages 44 000
opening inventory of raw materials 27 800

What is the prime cost for the year?

A $244 700 B $248 000 C $251 300 D $295 300

124. A partnership provides the following financial information for the year ended
 30 June 2011.

$000

profit from operations 240

bank interest payable 21
interest credited to current accounts 15
drawings 100
partnership salaries 95

What is the residual balance of profits to be appropriated between the partners?

A $9000 B $104 000 C $109 000 D $204 000

125. A new business was established with opening capital of $20 000.

At the end of the first year, assets less liabilities were $26 000. The owner
withdrew $7000 as drawings during the year and this resulted in a bank overdraft of
$5000 at the end of the year.

What was the profit during the first year?

A $8000 B $12 000 C $13 000 D $18 000

126. At the year end a company discovers that some inventory is damaged.

This inventory originally cost $2000 and to replace it would now cost $1900.

It would normally sell for $2400 but can now only be sold for $2200 if repairs
costing $400 are undertaken.

At what value should the damaged inventory be shown in the financial statements?

A $1800 B $1900 C $2000 D $2200

127. 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 current asset $48

B 1152 current liability $48
C 1200 current asset $48
D 1200 current liability $48

128. How should goodwill be treated by a limited company?

A. Goodwill should always be written off immediately.

B. Non-purchased goodwill is shown in the balance sheet.
C. Purchased goodwill is shown in the balance sheet and written off over its useful life.
D. Purchased goodwill remains on the balance sheet as a permanent item.

129. 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

130. An extract from Bumble Ltd's balance sheet shows the following.

$000

ordinary shares of $0.25 each 500

share premium 100
retained earnings 300

The company makes a rights issue of 1 share for each 4 held at a price of $0.30 per
share. All shares are taken up.

What will the new balance sheet show?

A B C D
$000 $000 $000 $000

ordinary shares of $0.25 each 625 500 625 625

 rights issue – 125 – –
share premium 100 125 125 100
retained earnings 300 275 300 325

131. The following data is available at the end of a financial year.

opening inventory $60 000

purchases $420 000
closing inventory $80 000
mark up 25 %
trade receivables turnover 50 days

Sales are all on credit and accrue evenly over the year.

What is the amount of trade receivables at the end of the year (to the nearest $500)?

A $55 000 B $57 500 C $68 500 D $72 000

132. The annual accounts of a business include the following.

revenue 160 000

opening inventory 10 000
closing inventory 14 000

Inventory turnover is 10 times. What is the gross profit?

A $20 000 B $40 000 C $60 000 D $120 000

133. A company’s profit from operations was $128 000. Interest payable was
$8000.

The following amounts were included in the company’s balance sheet.

non-current assets 485 000

net current assets 27 000
non current liabilities 80 000
 How much is the return on the total capital employed?

A 20.3 % B 21.6 % C 23.4 % D 25.0 %

134. A business has $10 000 in the bank and buys inventory for $6000 paying by
cheque.

What is the effect of this on its current ratio and quick (acid test) ratio?

current ratio quick (acid test) ratio

A decreases increases
B decreases no effect
C no effect decreases
D no effect no effect

135. A company’s sales are made evenly over a year (360 days). 10 % of
the sales are for cash, debtors total $26 700 and the trade receivables turnover
period is 30 days.

What are the total sales (cash and credit) for the year?

A $320 400 B $356 000 C $801 000 D $890 000

136. A business sells goods at a mark up of 33.3 %.

Information for a year is given.

revenue 600 000

opening inventory 53 000
closing inventory 68 000

What are the total purchases for the year?

A $415 000 B $435 000 C $450 000 D $465 000

137. Which cost will decrease as production is increased?

A. fixed costs per unit

B. total fixed costs
C. total variable costs
D. variable cost per unit

138. A business sells its product for $50 a unit and has variable costs of $30 per
unit. Its fixed costs for this year were $200 000. Next year, fixed costs are expected
to be $260 000.

How many more units will have to be sold next year to make the same profit as this
year?

A 3000 B 5200 C 10 000 D 13 000

139. A business has sales of $250 000, fixed costs of $50 000 and a contribution /
sales ratio of 30 %.

What is the profit?

A $25 000 B $60 000 C $75 000 D $200 000

140. A business provides the following information for a month.

actual direct labour hours worked 8000

actual overhead expenditure $88 000
budgeted direct labour hours 7500
budgeted overhead expenditure $90 000

What is the amount of the overhead over / under recovery?

A $2000 over-recovered
B $2000 under-recovered
C $8000 over-recovered
D $8000 under-recovered

141. 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

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

143. Accountants prefer the commercial reality of a transaction to a strictly legal

approach.

Which accounting principle is being applied?

A
B
C
D substance over form

144. There is great uncertainty about the continuance of a business. This has
caused the proprietor to make a large reduction in the valuation of the year-end
inventory.
 Which accounting principle does this illustrate?

A. going concern
B. matching
C. materiality
D. substance over form

145. 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 in 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

146. 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

147. At the year end a company discovers that some inventory is damaged.

This inventory originally cost $2000 and to replace it would now cost $1900.

It would normally sell for $2400 but can now only be sold for $2200 if repairs
costing $400 are undertaken.

At what value should the damaged inventory be shown in the financial statements?

A $1800 B $1900 C $2000 D $2200

148. 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 current asset $48

B 1152 current liability $48
C 1200 current asset $48
D 1200 current liability $48

149. How should goodwill be treated by a limited company?

A. Goodwill should always be written off immediately.

B. Non-purchased goodwill is shown in the balance sheet.
C. Purchased goodwill is shown in the balance sheet and written off over its
useful life.
D. Purchased goodwill remains on the balance sheet as a permanent item.

150. 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

151. An extract from Bumble Ltd’s balance sheet shows the following.

$000

ordinary shares of $0.25 each 500

share premium 100
retained earnings 300
The company makes a rights issue of 1 share for each 4 held at a price of $0.30 per
share. All shares are taken up.

What will the new balance sheet show?

A B C D
$000 $000 $000 $000
 ordinary shares of $0.25 each 625 500 625 625
rights issue – 125 – –
share premium 100 125 125 100
retained earnings 300 275 300 325

152. A business paid $10 000 for waste disposal in the year. The opening
prepayment was $1500 and the closing accrual was $2000. What was the charge
for waste disposal for the year?

A $6500 B $9500 C $10 500 D $13 500

153. 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

154. Which transaction would increase the current assets of a business?

A. paying invoices $950, after receiving $50 cash discount

B. purchasing a machine on credit for $1200
C. purchasing inventory for $1100 cash and selling it on credit for $1500
D. selling inventory with an original cost of $800 at below cost price

155. The following summarized information has been taken from the balance sheet
of a partnership.

$
 non-current assets 42 000
capital accounts 36 000
current accounts (debit) 5 000
current liabilities 7 000
non-current liabilities 15 000

What is the amount of current assets?

A $6000 B $11 000 C $17 000 D $21 000

156. 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

157. A manufacturing company has the following balances at its year end.

closing inventory of raw materials 24 500

direct manufacturing wages 162 800
purchases of raw materials 85 200
supervisors’ wages 44 000
opening inventory of raw materials 27 800

What is the prime cost for the year?

A $244 700 B $248 000 C $251 300 D $295 300

158. A partnership provides the following financial information for the year ended
30 June 2011.

$000

profit from operations 240

bank interest payable 21
interest credited to current accounts 15
drawings 100
partnership salaries 95

What is the residual balance of profits to be appropriated between the partners?

 A $9000 B $104 000 C $109 000 D $204 000

159. A new business was established with opening capital of $20 000.

At the end of the first year, assets less liabilities were $26 000. The owner
withdrew $7000 as drawings during the year and this resulted in a bank overdraft of
$5000 at the end of the year.

What was the profit during the first year?

A $8000 B $12 000 C $13 000 D $18 000

160. The annual accounts of a business include the following.

revenue 160 000

opening inventory 10 000
closing inventory 14 000

Inventory turnover is 10 times. What is the gross profit?

A $20 000 B $40 000 C $60 000 D $120 000

161. A company’s profit from operations was $128 000. Interest payable was $8000.

The following amounts were included in the company’s balance sheet.

non-current assets 485 000

net current assets 27 000
non current liabilities 80 000

How much is the return on the total capital employed?

A 20.3 % B 21.6 % C 23.4 % D 25.0 %

162. A business has $10 000 in the bank and buys inventory for $6000 paying by
cheque.

What is the effect of this on its current ratio and quick (acid test) ratio?
 current ratio quick (acid test) ratio

A decreases increases
B decreases no effect
C no effect decreases
D no effect no effect

163. The following data is available at the end of a financial year.

opening inventory $60 000

purchases $420 000
closing inventory $80 000
mark up 25 %
trade receivables turnover 50 days

Sales are all on credit and accrue evenly over the year.

What is the amount of trade receivables at the end of the year (to the nearest $500)?

A $55 000 B $57 500 C $68 500 D $72 000

164. Which cost will decrease as production is increased?

A. fixed costs per unit

B. total fixed costs
C. total variable costs
D. variable cost per unit

165. A business sells its product for $50 a unit and has variable costs of $30 per
unit. Its fixed costs for this year were $200 000. Next year, fixed costs are expected
to be $260 000.

How many more units will have to be sold next year to make the same profit as this
year?

A 3000 B 5200 C 10 000 D 13 000

166. A business has sales of $250 000, fixed costs of $50 000 and a contribution /
sales ratio of 30 %.

What is the profit?

A $25 000 B $60 000 C $75 000 D $200 000

167. A business provides the following information for a month.

actual direct labour hours worked 8000

actual overhead expenditure $88 000
budgeted direct labour hours 7500
budgeted overhead expenditure $90 000

What is the amount of the overhead over / under recovery?

A $2000 over-recovered
B $2000 under-recovered
C $8000 over-recovered
D $8000 under-recovered

168. 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

169. A company’s sales are made evenly over a year (360 days). 10 % of
the sales are for cash, debtors total $26 700 and the trade receivables turnover
period is 30 days.

What are the total sales (cash and credit) for the year?

A $320 400 B $356 000 C $801 000 D $890 000

170. A business sells goods at a mark up of 33.3 %.

Information for a year is given.

$
 revenue 600 000
opening inventory 53 000
closing inventory 68 000

What are the total purchases for the year?

A $415 000 B $435 000 C $450 000 D $465 000

171. Which cost will decrease as production is increased?

A. fixed costs per unit

B. total fixed costs
C. total variable costs
D. variable cost per unit

172. A business paid $10 000 for waste disposal in the year. The opening
prepayment was $1500 and the closing accrual was $2000. What was the charge for
waste disposal for the year?

A $6500 B $9500 C $10 500 D $13 500

173. 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

174. Which transaction would increase the current assets of a business?

A. paying invoices $950, after receiving $50 cash discount

B. purchasing a machine on credit for $1200
C. purchasing inventory for $1100 cash and selling it on credit for $1500
 D. selling inventory with an original cost of $800 at below cost price

175. The following summarized information has been taken from the balance sheet of a
partnership:

non-current assets 42 000

capital accounts 36 000
current accounts (debit) 5 000
current liabilities 7 000
non-current liabilities 15 000
What is the amount of current assets?

A $6000 B $11 000 C $17 000 D $21 000

176. Accountants prefer the commercial reality of a transaction to a strictly legal

approach.

Which accounting principle is being applied?

A
B
C
D substance over form

177. There is great uncertainty about the continuance of a business. This has
caused the proprietor to make a large reduction in the valuation of the year-end
inventory.

Which accounting principle does this illustrate?

A. going concern
B. matching
C. materiality
D. substance over form

178. 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

179. 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

180. What is the main use of a computerized 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

181. A manufacturing company has the following balances at its year end:

closing inventory of raw materials 24 500

direct manufacturing wages 162 800
purchases of raw materials 85 200
supervisors’ wages 44 000
opening inventory of raw materials 27 800
What is the prime cost for the year?

A $244 700 B $248 000 C $251 300 D $295 300

182. A partnership provides the following financial information for the year ended
30 June 2011.

$000
 profit from operations 240
bank interest payable 21
interest credited to current accounts 15
drawings 100
partnership salaries 95

What is the residual balance of profits to be appropriated between the partners?

A $9000 B $104 000 C $109 000 D $204 000

183. A new business was established with opening capital of $20 000.

At the end of the first year, assets less liabilities were $26 000. The owner
withdrew $7000 as drawings during the year and this resulted in a bank overdraft of
$5000 at the end of the year.

What was the profit during the first year?

A $8000 B $12 000 C $13 000 D $18 000

184. At the year end a company discovers that some inventory is damaged.

This inventory originally cost $2000 and to replace it would now cost $1900.

It would normally sell for $2400 but can now only be sold for $2200 if repairs
costing $400 are undertaken.

At what value should the damaged inventory be shown in the financial statements?

A $1800 B $1900 C $2000 D $2200

185. 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 current asset $48

 B 1152 current liability $48
C 1200 current asset $48
D 1200 current liability $48

186. How should goodwill be treated by a limited company?

A. Goodwill should always be written off immediately.

B. Non-purchased goodwill is shown in the balance sheet.
C. Purchased goodwill is shown in the balance sheet and written off over its
useful life.
D. Purchased goodwill remains on the balance sheet as a permanent item.

187. 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

188. An extract from Bumble Ltd's balance sheet shows the following.

$000

ordinary shares of $0.25 each 500

share premium 100
retained earnings 300

The company makes a rights issue of 1 share for each 4 held at a price of $0.30 per
share. All shares are taken up.

What will the new balance sheet show?

A B C D
$000 $000 $000 $000

ordinary shares of $0.25 each 625 500 625 625

rights issue – 125 – –
share premium 100 125 125 100
retained earnings 300 275 300 325

189. The following data is available at the end of a financial year.

opening inventory $60 000

 purchases $420 000
closing inventory $80 000
mark up 25 %
trade receivables turnover 50 days

Sales are all on credit and accrue evenly over the year.

What is the amount of trade receivables at the end of the year (to the nearest $500)?

A $55 000 B $57 500 C $68 500 D $72 000

190. The annual accounts of a business include the following.

revenue 160 000

opening inventory 10 000
closing inventory 14 000

Inventory turnover is 10 times. What is the gross profit?

A $20 000 B $40 000 C $60 000 D $120 000

191. A company’s profit from operations was $128 000.

Interest payable was $8000.

The following amounts were included in the company’s balance sheet.

non-current assets 485 000

net current assets 27 000
non current liabilities 80 000

How much is the return on the total capital employed?

A 20.3 % B 21.6 % C 23.4 % D 25.0 %

192. A business has $10 000 in the bank and buys inventory for $6000 paying by
cheque.

What is the effect of this on its current ratio and quick (acid test) ratio?

current ratio quick (acid test) ratio

 A decreases increases
B decreases no effect
C no effect decreases
D no effect no effect

193. A company’s sales are made evenly over a year (360 days). 10 % of
the sales are for cash, debtors total $26 700 and the trade receivables turnover
period is 30 days.

What are the total sales (cash and credit) for the year?

A $320 400 B $356 000 C $801 000 D $890 000

194. A business sells goods at a mark up of 33.3 %. Information for a year is given.

revenue 600 000

opening inventory 53 000
closing inventory 68 000

What are the total purchases for the year?

A $415 000 B $435 000 C $450 000 D $465 000

195. A business has sales of $250 000, fixed costs of $50 000 and a contribution /
sales ratio of 30 %.

What is the profit?

A $25 000 B $60 000 C $75 000 D $200 000

196. A business sells its product for $50 a unit and has variable costs of $30 per
unit. Its fixed costs for this year were $200 000. Next year, fixed costs are expected
to be $260 000.

How many more units will have to be sold next year to make the same profit as this
year?

A 3000 B 5200 C 10 000 D 13 000

197. 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

198. A business provides the following information for a month.

actual direct labour hours worked 8000

actual overhead expenditure $88 000
budgeted direct labour hours 7500
budgeted overhead expenditure $90 000

What is the amount of the overhead over / under recovery?

A $2000 over-recovered
B $2000 under-recovered
C $8000 over-recovered
D $8000 under-recovered