Financial and Management Accounting - University of Canterbury [PDF]

A perceived disadvantage of the sole trader form of business organisation is: 1. the ease with which one can commence ..

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Idea Transcript


College of Business & Economics

Year 13 Accounting Challenge 2010

Financial and Management Accounting

Time allowed:

50 minutes

Number of pages:

7

INSTRUCTIONS: 

Answer all questions by writing your answer on the answer sheet provided.



If you need to change your answer, simply erase your original answer and replace with your new choice.



You must choose the option that most accurately represents the correct answer.



One mark will be allocated for each correct answer.



A half mark will be deducted for every incorrect answer.



No mark will be allocated to any unanswered questions.

University of Canterbury Year 13 Accounting Challenge 2010

1.

The going concern concept refers to a presumption that: 1. the entity will be profitable in the coming year. 2. the entity will not be involved in a merger within a year. 3. the entity will continue to operate in the foreseeable future. 4. top management of the entity will not change in the coming year.

2.

The ‘balance sheet’ (or ‘statement of financial position’) shows which of the following for the reporting period? 1. the financial position at the end of the period. 2. the result for the period. 3. the cash flows during the period. 4. details of investments by, and distributions to, owners during the period.

3.

A perceived disadvantage of the sole trader form of business organisation is: 1. the ease with which one can commence a business. 2. the lack of formal requirements needed to start operations. 3. the unlimited nature of the owner’s personal liability. 4. being one’s own boss.

4.

The Interest Receivable account for February showed a closing balance of $8,500. The opening balance was $5,000. Which of the following is true? 1. The increase resulted from debiting Cash and crediting Interest Receivable. 2. The increase probably resulted from debiting Interest Revenue and crediting Interest Receivable. 3. Interest Receivable is a liability account. 4. The increase probably resulted from debiting Interest Receivable and crediting Interest Revenue.

5.

Transactions are summarised in financial . 1. 2. 3. 4.

and accounts are further

in the

accounts, summarised, statements statements, summarised, accounts transactions, disclosed, contracts contracts, recognised, transactions

6.

Current GAAP and auditing standards require the financial statements of an entity for the reporting period to include: 1. details of the number of employees at balance date. 2. projected earnings for the subsequent period. 3. financial position at the end of the period. 4. current market values of all assets at the end of the period.

7.

At the beginning of the year, paid-in capital was $82 and retained earnings were $47. During the year, the owners invested $24 and dividends of $6 were declared and paid. Retained earnings at the end of the year were $52. Net profit for the year was: 1. $10 2. $11 3. $15 4. $20

2

University of Canterbury Year 13 Accounting Challenge 2010

8.

If X Ltd owed $5,000 to Y Ltd at the same time Y Ltd owed $6,000 to X Ltd, and they agreed to ‘offset’ $5,000 of this amount to each other, what is the effect on the accounting equation of X Ltd when Y Ltd pays the additional $1,000 it owes to X Ltd? 1. owners’ equity and assets both increase by $1,000. 2. liabilities decrease by $1,000 and assets increase by $1,000. 3. there is no effect – assets remain the same as receivables decrease by $1,000 and bank increases by $1,000. 4. only the liability side of the equation is affected.

9.

Smiths Company Ltd has the following account balances: Purchases $28,000 Cost of goods sold $25,875 Sales Returns and Allowances $4,000 Discount on sales $2,500 Freight-in $2,875 Freight-out $2,500 The cost of goods purchased for the period is: 1. $32,500 2. $28,750 3. $30,875 4. $25,875

10.

In an inflationary economic environment, the selling price set for a firm's products will: 1. not be affected by the cost flow method applied by the entity. 2. be higher if LIFO is used than if FIFO is used. 3. be higher if FIFO is used than if LIFO is used. 4. be derived from the weighted average cost of inventory.

11.

Spend-Less Ltd has 20 employees who each earn $100 per day. The pay week runs from Friday to Thursday (on a five day per week basis). The end of the accounting period is 31 March, which is a Wednesday. How much in wages should the firm accrue at the end of the period? 1. $10,000 2. $4,000 3. $8,000 4. none of the above

12.

Consolidated financial statements report financial position, performance, and cash flows for: 1. a parent corporation and its subsidiaries. 2. a parent corporation alone. 3. two corporations that are owned by the same individual. 4. a parent corporation and its 100% owned subsidiaries only.

3

University of Canterbury Year 13 Accounting Challenge 2010

13.

An outstanding cheque in the bank reconciliation process refers to: 1. a cheque that has ‘bounced’ from the issuer’s bank because there was insufficient funds to honour it. 2. a very good ‘quality’ cheque. 3. one of the bank reconciliation steps has not yet been completed and consequently has not been checked by someone with appropriate authority. 4. a cheque that has been recorded as a reduction in the entity’s cash records but which has not yet been presented to the bank for payment.

14.

The current assets of most companies are usually made up of: 1. assets that are currently used in the operations of the company. 2. cash and assets expected to be converted to cash within a year. 3. a very small proportion (less than 10%) of the total assets of the entity. 4. cash, marketable securities and loans receivable.

15.

Bad debt expense is recognised in the same accounting period as the revenue that is related to the receivable because: 1. the accounts receivable asset should be stated at original cost. 2. the exact amount of the losses from bad debts is known. 3. revenues should be stated at realisable value. 4. the concept of accrual accounting requires that treatment.

16.

Smith, Smith and Smith Associates borrowed $5,000 on 1 April 2008 at 8% interest with both principal and interest due on 31 March 2009. How much should be in the firm's interest payable account at 31 December 2008? 1. $300 2. $400 3. $66 4. $333

17.

The principal challenge to calculating depreciation is estimating: 1. the cost of the asset. 2. the salvage value. 3. the useful life. 4. 2 and 3 only

18.

When a machine with a net book value of $5,000 is sold for $4,000: 1. current assets increase, equipment (net) increases, and net profit increases. 2. current assets increase, equipment (net) decreases, and net profit increases. 3. current assets increase, equipment (net) decreases, and net profit decreases. 4. current assets increase, equipment (net) increases, and net profit decreases.

19.

XYZ Ltd purchased a moulding machine for $190,000. It has an estimated useful life of 14 years (or 700 moulds) and a salvage value of $50,000. What is the depreciation expense for the period if only 75 moulds were produced? 1. $27,100 2. $34,300 3. $20,000 4. $15,000

4

University of Canterbury Year 13 Accounting Challenge 2010

20.

Theoretically, if particular expenditure is expected to current asset beyond that used in the original be . 1. shorten, purchase, expensed 2. capitalise, depreciation, prolonged 3. extend, cost, reimbursed 4. extend, depreciation, capitalised

21

Current liabilities are those obligations: 1. that attract interest for the time that they are outstanding. 2. that must be paid or satisfied within a year of the balance sheet date. 3. where credit has been obtained in the form of a loan or in the course of business. 4. designed to mitigate increases in the replacement cost of assets due to inflation.

22.

Which of the following items would be recorded in the accounts as a liability? 1. the intention to refurbish or conduct extensive repairs and maintenance. 2. contingent losses on unsettled lawsuits against the entity where the amount cannot be reliably estimated. 3. negotiations for the possible purchase of inventory. 4. obligations of the entity to suppliers for goods and services that have been provided to the entity on credit terms.

23.

Dividends that have been declared but not paid as at balance sheet date, require which of the following journal entries: 1. Dr expense, Cr liability 2. Dr assets, Cr expense 3. Dr retained earnings, Cr expense 4. Dr retained earnings, Cr liability

24.

An appropriate journal entry to record a previously declared dividend once finally paid is: 1. Dr retained earnings, Cr dividends payable 2. Dr dividends payable, Cr retained earnings 3. Dr dividends payable, Cr cash at bank 4. Dr cash at bank, Cr retained earnings

25.

Ordinary shares normally have the following characteristics associated with them: 1. debt-like features, limited claims on assets, voting rights 2. unlimited liability, no voting rights, unlimited claims on assets 3. guaranteed dividends, less risk, pre-emptive rights 4. residual claim to assets and profits of company, voting rights, limited liability

26.

Under most circumstances, in order to recognise revenue: 1. cash must have been received. 2. the entity must expect to receive all the cash in the future. 3. the entity must have paid for all expenses incurred in generating the revenue. 4. the goods/services have to have been transferred to the purchaser.

5

the useful life of a noncalculation, the expenditure could

University of Canterbury Year 13 Accounting Challenge 2010

27.

Under the perpetual inventory system what is the correct entry for the credit purchase of 10 Lawn Mowers at $250 per mower plus GST at 15%. 1. Debit Inventory $2,875; credit Accounts Payable $2,500; credit GST $375. 2. Debit Inventory $2,500; debit GST $375; credit Accounts Payable $2,875. 3. Debit Inventory $2,875; credit Accounts Payable $2,875. 4. Debit Accounts Payable $2,875; credit Inventory $2,500; credit GST $375.

28.

The three categories of cash flows to be reported in the cash flow statement are: 1. operating, investing, spending 2. income, investing, financing 3. investing, financing, operating 4. receipts, investing, financing

29.

The is a measure of the amount of each dollar of sales that is available to cover operating and , after covering the . 1. profit, expenses, gross profit, cost of goods sold 2. gross profit, expenses, profit, cost of goods sold 3. cost of goods sold, profit, expenses, gross profit 4. profit, cost of goods sold, expenses, gross profit

30.

Which of the following is NOT a reason why the gross profit ratio is useful? 1. Helpful in determining the selling price to set for an item. 2. Useful for estimating the amount of inventory lost in a fire. 3. Helpful in determining the amount available from a given amount of revenue to cover operating expenses. 4. Useful for estimating the amount of operating expenses for a period.

31.

When the periodic inventory system is used: 1. operating profit from the sale of an item from inventory is known when the item is sold. 2. gross profit from the sale of an item from inventory is known when the item is sold. 3. cost of goods sold can be calculated by opening inventory + purchases - ending inventory. 4. all of the above

32.

An item that cost $240 is to be sold for a price that will yield a gross profit ratio of 20%. The selling price should be: 1. $192 2. $288 3. $300 4. $1,200

33.

Tony’s Manufacturing Company reported the following year-end information: beginning work in process inventory, $180,000; cost of goods manufactured, $516,000; beginning finished goods inventory, $252,000; ending work in process inventory, $220,000; and ending finished goods inventory, $264,000. Tony’s Manufacturing Company's cost of goods sold for the year is: 1. $502,000 2. $528,000 3. $476,000 4. none of the above

6

University of Canterbury Year 13 Accounting Challenge 2010

34.

A materials requisition slip showed that direct materials requested were $60,000 and indirect materials requested were $12,000. The entry to record the transfer of materials from the storeroom is: 1. 2.

3. 4.

Dr Work in Process Inventory Cr Raw Materials Inventory Dr Work in Process Inventory Dr Manufacturing Overhead Cr Raw Materials Inventory Dr Manufacturing Overhead Cr Raw Materials Inventory Dr Direct Materials Dr Indirect Materials Cr Work in Process Inventory

60,000 60,000 60,000 12,000 72,000 72,000 72,000 60,000 12,000 72,000

35.

Management accountants would not: 1. assist in budget planning. 2. be concerned with the impact of cost and volume on profits. 3. determine cost behaviour. 4. prepare reports primarily for external users.

36.

Direct labour hours are often controlled by a: 1. ledger account 2. time sheet 3. purchases journal 4. inventory record

37.

Which of the following is not classified as direct labour? 1. Bottlers in a brewery. 2. Copy machine operators at a printing shop. 3. Wages of the HR (human resource) department staff. 4. All are components of direct labour.

38.

A company requires $850,000 in sales to meet its target net profit. Its contribution margin is 30%, and fixed costs are $150,000. What is the target net profit? 1. $255,000 2. $195,000 3. $350,000 4. $105,000

39.

Grant Company has fixed costs of $600,000 and variable costs are 40% of sales. What are the required sales if Grant Company desires net profit of $60,000? 1. $1,100,000 2. $1,000,000 3. $1,650,000 4. $1,500,000

40.

Which of the following statements is NOT true about breakeven analysis? 1. It is helpful in determining the level of risk a business faces. 2. It will always stay the same provided costs and revenues remain constant. 3. It tells you the number of units you need to sell to cover your fixed and variable costs. 4. All of the above are not true. 7

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