Question 1

Which of the following CANNOT be classified as a current liability?
A) Accounts payable
B) Provision for long service leave
C) Loans
D) Inventory

Accepted Answer

Inventory is a long-term asset, not a current liability. Current liabilities are obligations that are due within a year or within the normal operating cycle of the business, whichever is longer. Accounts payable, provision for long service leave, and loans are all examples of current liabilities.

Question 2

Which of the following accounts would appear in an income statement?
A) Accumulated depreciation
B) Cost of goods sold
C) Rent payable
D) None of the answers provided

Accepted Answer

Cost of goods sold is a key expense account that appears on an income statement, representing the cost of producing or purchasing the goods that were sold during a period. Accumulated depreciation is a contra asset account that shows up on a balance sheet, and rent payable is a liability account that also appears on a balance sheet.

Question 3

Which of the following is NOT an intangible asset?
A) Prepayment
B) Goodwill
C) Copyright
D) Brand name

Accepted Answer

Prepayment is not an intangible asset. It is a type of current asset that represents the advance payment made for goods or services that will be received later. Goodwill, copyright, and brand name are all examples of intangible assets that are recognized on a company's balance sheet.

Question 4

To which balance sheet grouping does the item 'bank loan repayable in three years' belong?
A) Current asset
B) Noncurrent asset
C) Current liability
D) Noncurrent liability

Accepted Answer

Bank loan repayable in three years is a long-term or noncurrent liability as it is not due for payment within the next 12 months.

Question 5

Which of the following is NOT a liability?
A) Provision for long service leave
B) Interest payable
C) Share capital
D) Creditors

Accepted Answer

Share capital is not a liability, it represents the equity or ownership of the shareholders in the company. Liabilities are obligations or debts owed by the company, such as long service leave provisions, interest payable, and creditor amounts.

Question 6

The summarised balance sheet of Apcor Ltd at 30 June 2016 was as follows:

What was Apcor Ltd's working capital at 30 June 2016?
A) $200 000
B) $400 000
C) $500 000
D) $2 000 000

Accepted Answer

The answer of The summarised balance sheet of Apcor Ltd...

Question 7

The Great Escape Company has just purchased a supply of 80 000 litres of diesel fuel for its buses. The diesel fuel is an expense to the company in the accounting period in which the fuel is:
A) ordered from the supplier.
B) received from the supplier.
C) paid for.
D) consumed in the running of the buses.

Accepted Answer

The diesel fuel is an expense to the company in the accounting period in which it is consumed in the running of the buses. Until it is actually used in the operation of the buses, it is classified as inventory or a prepaid expense.

Question 8

Which of the following statements is NOT true?
A) If total assets decreased by $30 000 during the period and shareholders' equity decreased by $20 000, liabilities decreased by $10 000 for the period.
B) If total assets decreased by $50 000 during the period and shareholders' equity decreased by $30 000, liabilities decreased by $80 000 for the period.
C) If the total assets owned by a company were $80 000 and shareholders' equity totalled $35 000 for the period, liabilities are $45 000.
D) If total assets increased by $45 000 for the period and liabilities decreased by $20 000, shareholders' equity increased by $65 000.

Accepted Answer

According to the accounting equation, Assets = Liabilities + Shareholders' Equity. Therefore, if total assets decrease and shareholders' equity also decreases, it means that liabilities must have increased. Option B is not true because if assets decrease by $50 000 and shareholders' equity decrease by $30 000, liabilities cannot decrease by $80 000. The correct answer would be that liabilities increased by $20 000 ($50 000 decrease in assets - $30 000 decrease in equity).

Question 9

To which balance sheet grouping does the item 'accounts payable' belong?
A) Current asset
B) Noncurrent asset
C) Current liability
D) Noncurrent liability

Accepted Answer

Accounts payable represent a company's short-term debts to suppliers or vendors for goods or services received but not yet paid for. Therefore, it belongs to the Current Liability section of the balance sheet.

Question 10

To which balance sheet grouping does the item 'wages payable' belong?
A) Current asset.
B) Noncurrent asset
C) Current liability
D) Noncurrent liability

Accepted Answer

Wages payable represents unpaid wages to employees and is a current liability because the payment is expected within a short period, usually within the current fiscal year.

Question 11

Which of the following is a liability?
A) Retained profits
B) Prepaid advertising
C) Accumulated depreciation
D) Expenses payable

Accepted Answer

Expenses payable is the only option that is a liability. Retained profits are a part of equity, prepaid advertising is a type of asset, and accumulated depreciation is not a liability but rather a contra-asset.

Question 12

To which balance sheet grouping does the item 'accounts receivable' belong?
A) Current asset
B) Noncurrent asset
C) Current liability
D) Noncurrent liability

Accepted Answer

Accounts receivable is an asset that represents the amounts owed to a company by its customers for goods or services that have been sold on credit but not yet collected. As it is expected to be collected within a year, it belongs to the current asset category of the balance sheet.

Question 13

Which of the following statements about accumulated depreciation is true?
A) Accumulated depreciation is the amount of depreciation recognised at the date of disposal of the asset.
B) Cost less accumulated depreciation gives net book value.
C) Accumulated depreciation represents the depreciation charge for the current period.
D) Accumulated depreciation is ignored when an asset is sold.

Accepted Answer

Accumulated depreciation is the total amount of depreciation recognized over the life of the asset up to the reporting date. It is a contra-asset account that is subtracted from the cost of the asset to determine its net book value. Therefore, option B is true. A, C and D are incorrect statements about accumulated depreciation.

Question 14

Which of the following statements about assets is NOT true?
A) Assets provide future economic benefits.
B) Assets are economic resources controlled by an organisation.
C) Assets result from past transactions or other events.
D) Assets are recorded at the amount they can be sold for.

Accepted Answer

Assets are generally recorded at their historical cost, not at the amount they can be sold for.

Question 15

Which of the following statements is NOT true?
A) If total assets owned by a business total $110 000 and owners' equity totals $30 000, then liabilities total $80 000.
B) If total assets decreased by $30 000 during a specific period and owners' equity decreased by $35 000 during the same period, the period's change in total liabilities was a $65 000 increase.
C) If total assets decreased by $50 000 during a specific period and owners' equity decreased by $40 000 during the same period, the period's change in total liabilities was a $10 000 decrease.
D) If total assets increased by $75 000 during a specific period and liabilities decreased by $10 000 during the same period, the period's change in total owners' equity was an
$85 000 increase.

Accepted Answer

The period's change in total liabilities would actually be a $5,000 decrease ($30,000 decrease in assets - $35,000 decrease in equity = -$5,000 change in liabilities, meaning they decreased by $5,000).

Question 16

Which of the following questions CANNOT be answered from a balance sheet?
A) What has caused the changes in cash held during the period?
B) Is the company soundly financed?
C) Can the company pay its bills on time?
D) Should a dividend be declared?

Accepted Answer

The changes in cash held during the period are reflected in the statement of cash flows, not the balance sheet. The other three questions can be answered from the balance sheet.

Question 17

Given only the following information, what is the balance of shareholders' equity?

A) $40 000
B) $50 000
C) $100 000
D) $140 000

Accepted Answer

The answer of Given only the following information, what is...

Question 18

Which of the following statements about a balance sheet is true?
A) A balance sheet presents the financial performance of a company for a period of time.
B) A balance sheet presents the company's financial position at a point in time.
C) A balance sheet shows which source of finance produced each asset.
D) A balance sheet includes all the resources of a company.

Accepted Answer

A balance sheet is a financial statement that presents a company's financial position or condition at a specific point in time. It includes the company's assets, liabilities, and equity. It does not show the financial performance over a period of time, which is presented in the income statement. It also does not show the source of finance for each asset. However, it includes all the resources owned by the company, including both tangible and intangible assets.

Question 19

To which balance sheet grouping does the item 'accumulated depreciation on equipment' belong?
A) Current asset
B) Noncurrent asset
C) Current liability
D) Noncurrent liability

Accepted Answer

'Accumulated depreciation on equipment' is a contra-asset account that represents the total amount of depreciation expenses that have been recorded for the equipment over time. As a contra-asset account, it offsets the related asset account, which is equipment in this case. Both of these accounts belong to the noncurrent asset section of the balance sheet as they represent long-term assets that are not expected to be converted into cash within one year.

Question 20

The balance sheet of Hemp Ltd at 30 June 2016 showed: noncurrent assets $500 000; noncurrent liabilities $320 000; total liabilities $400 000; and shareholders' equity $300 000. What was the working capital of Hemp Ltd at 30 June 2016?
A) $120 000
B) $180 000
C) $200 000
D) $300 000

Accepted Answer

Working capital is calculated as current assets minus current liabilities. However, the balance sheet does not provide information on the amount of current assets and current liabilities. Therefore, we cannot directly calculate the working capital. Instead, we can use the formula: Working capital = Total assets - Total liabilities. From the information given, we know that total liabilities were $400,000 and total assets were the sum of noncurrent assets ($500,000) and current assets (unknown), therefore, the total assets were greater than $500,000. Since shareholders' equity was $300,000, we can assume that current assets were less than $200,000 ($500,000 + $300,000 = $800,000 total assets - $400,000 total liabilities = $400,000 non-current assets – $320,000 non-current liabilities = $80,000 current assets). Therefore, we can conclude that working capital was $80,000 ($80,000 current assets - $0 current liabilities = $80,000).

Quiz 2: Measuring and Evaluating Financial Position and Financial Performance

Which of the following CANNOT be classified as a current liability?

Which of the following accounts would appear in an income statement?

Which of the following is NOT an intangible asset?

To which balance sheet grouping does the item 'bank loan repayable in three years' belong?

Which of the following is NOT a liability?

The summarised balance sheet of Apcor Ltd at 30 June 2016 was as follows: What was Apcor Ltd's working capital at 30 June 2016?

The Great Escape Company has just purchased a supply of 80 000 litres of diesel fuel for its buses. The diesel fuel is an expense to the company in the accounting period in which the fuel is:

Which of the following statements is NOT true?

To which balance sheet grouping does the item 'accounts payable' belong?

To which balance sheet grouping does the item 'wages payable' belong?

Which of the following is a liability?

To which balance sheet grouping does the item 'accounts receivable' belong?

Which of the following statements about accumulated depreciation is true?

Which of the following statements about assets is NOT true?

Which of the following statements is NOT true?

Which of the following questions CANNOT be answered from a balance sheet?

Given only the following information, what is the balance of shareholders' equity?

Which of the following statements about a balance sheet is true?

To which balance sheet grouping does the item 'accumulated depreciation on equipment' belong?

The balance sheet of Hemp Ltd at 30 June 2016 showed: noncurrent assets $500 000; noncurrent liabilities $320 000; total liabilities $400 000; and shareholders' equity $300 000. What was the working capital of Hemp Ltd at 30 June 2016?