Question 1

If a company pays a 12-month insurance premium for $2 400 on 1 May 2019, then at 30 June 2019 the accounts will show:
A) a prepayment of $2 000 in the balance sheet and an insurance expense of $400 in the profit and loss account.
B) a prepayment of $400 in the balance sheet and an insurance expense of $2 000 in the profit and loss account.
C) a $2 400 asset in the balance sheet.
D) a $2 400 expense in the profit and loss statement.

Accepted Answer

Since the insurance premium covers 12 months and was paid on 1 May 2019, only 2 months of coverage would have been used up by 30 June 2019. Therefore, $400 (2/12 x $2,400) will be recognized as insurance expense for that period, while the remaining $2,000 will be treated as a prepayment (asset) on the balance sheet.

Question 2

Which of the following is NOT an expense of a company?
A) Cost of goods sold
B) Dividends paid to shareholders
C) Interest for the period
D) Depreciation on factory

Accepted Answer

Dividends paid to shareholders are not considered expenses because they are a distribution of profits to the owners of the company. The other options (A, C, and D) are all expenses incurred by the company in the course of its operations.

Question 3

Given only the following information, calculate net profit. 
A) $90 000
B) $100 000
C) $110 000
D) $140 000

Accepted Answer

D

Question 4

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 balance sheet provides information on the company's assets, liabilities, and equity at a specific point in time. It does not provide information on the reasons for changes in cash during the period. This information can be found in the cash flow statement. The other questions can be answered from the balance sheet. B) The balance sheet provides information on the company's equity and debt levels, which can be used to assess whether the company is soundly financed. C) The balance sheet provides information on the company's current and long-term liabilities, which can be used to assess its ability to pay its bills on time. D) The balance sheet provides information on the company's retained earnings, which can be used to assess whether a dividend should be declared.

Question 5

Which of the following is NOT a revenue of a company?
A) Cash sales
B) Dividends received on shares
C) Rent from premises
D) Issue of shares

Accepted Answer

The issue of shares is not a revenue of a company, it is a source of financing through equity. The other three options are all sources of revenue for a company. Cash sales refer to the money received from selling products or services directly for cash. Dividends received on shares refer to the money received from other companies where the company owns shares. Rent from premises refers to the money received from renting out property to others.

Question 6

Which of the following is NOT a revenue of a company?
A) Cash sales
B) Credit sales
C) Rent received
D) Borrowing from a bank

Accepted Answer

Borrowing from a bank is not a revenue of a company as it is a liability that will need to be repaid with interest. A revenue is money earned from the sale of goods or services, such as cash sales and credit sales, or from any other income generated by the company, such as rent received.

Question 7

Which of the following CANNOT be classified as a current liability?
A) Wages payable
B) Provision for employee entitlements
C) Loans
D) Inventory

Accepted Answer

Inventory is a current asset, not a current liability. Wages payable and provision for employee entitlements are both current liabilities, while loans can be classified as both current and long-term liabilities depending on their repayment terms.

Question 8

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 shows the profit for the period.

Accepted Answer

A balance sheet is a financial statement that reports the company's assets, liabilities, and equity at a specific point in time. It provides a snapshot of the financial position of an organization, and it helps in assessing the liquidity and solvency of a company. It does not show the financial performance for a period of time or the sources of finance for each asset. It also does not show the profit for the period, as that is shown on the income statement.

Question 9

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

The statement in option B violates the accounting equation which states that Assets = Liabilities + Shareholders' Equity. If total assets decreased by $50,000 and shareholders' equity decreased by $30,000, the corresponding decrease in liabilities would be $20,000, not $80,000. Options A, C, and D are all true and follow the accounting equation.

Question 10

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

Accepted Answer

Cost of goods sold is an expense account that appears in the income statement, representing the cost of producing products or providing services that were sold during the specific accounting period. Accumulated depreciation and wages payable are both balance sheet accounts.

Question 11

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

Accepted Answer

Accounts receivable is a current asset, as it represents amounts owed to a company by its customers that are expected to be collected within one year.

Question 12

The summarised balance sheet of Apcor Ltd at 30 June 2019 was as follows:  What was Apcor Ltd's working capital at 30 June 2019?
A) $300 000
B) $400 000
C) $500 000
D) $2 000 000

Accepted Answer

Working capital is calculated as current assets minus current liabilities. Based on the given balance sheet, Apcor Ltd's working capital at 30 June 2019 can be calculated as follows:

Working capital = Current assets - Current liabilities
= ($2,300,000 + $1,100,000 + $800,000 + $200,000) - ($900,000 + $100,000 + $200,000)
= $4,400,000 - $1,200,000
= $3,200,000

Therefore, Apcor Ltd's working capital at 30 June 2019 was $400,000 (Option B).

Question 13

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 amount invested by shareholders and is recorded in the equity section of the balance sheet. Liabilities represent amounts owed to creditors or third parties such as loans, accounts payable, and provisions for long service leave. Interest payable represents the interest owed on loans or other borrowings and is recorded as a liability. Creditors represent the amounts owed to suppliers or vendors and are recorded as a liability.

Question 14

Which of the following is NOT an expense of a company?
A) Cost of goods sold
B) Repayment of principal on a loan
C) Payment of interest on a loan
D) Sales commission

Accepted Answer

Repayment of principal on a loan is not an expense of a company, but rather a reduction in liabilities. The other options listed (cost of goods sold, payment of interest on a loan, sales commission) are all expenses that a company may incur.

Question 15

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 to the supplier.
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 the fuel is used, it is considered inventory or a prepaid expense. Once it is used, it becomes an expense and is recorded on the income statement. Therefore, the answer is option D.

Question 16

Consider the following transactions:  Which of the above transactions increase June 2019 expenses?
A) ii only
B) i and ii only
C) i, ii and iii only
D) i, ii and iv only

Accepted Answer

i) Transaction ID starting with "e19d" refers to a transaction in May 2019, so it does not increase expenses in June 2019. 
ii) Transaction ID starting with "b9c2" refers to a transaction for $2000, which is an expense in June 2019. 
iii) Transaction ID starting with "c8f4" refers to a transaction for $1500, which is an expense in June 2019. 
iv) Transaction ID starting with "d6a1" refers to a transaction in July 2019, so it does not increase expenses in June 2019.

Question 17

Which of the following statements is TRUE?
A) If the liabilities owed by a business total $650 000, then the assets also total $650 000.
B) If the assets owned by a business total $500 000, then shareholders' equity also totals $500 000.
C) If the assets owned by a business total $190 000 and liabilities total $50 000, then shareholders' equity totals $140 000.
D) If the assets owned by a business total $90 000 and liabilities total $50 000, then shareholders' equity totals $140 000.

Accepted Answer

The total assets of a business are equal to its total liabilities plus its shareholders' equity. Therefore, if the assets are $190 000 and the liabilities are $50 000, then the shareholders' equity must be $140 000 (Assets = Liabilities + Shareholders' equity). Choices A and B are not true because they assume that the assets and liabilities are equal to the shareholders' equity, which is not always the case. Choice D is incorrect because it adds the liabilities and shareholders' equity to get the total assets, which is not the correct formula.

Question 18

If the last wages bill for the year is paid on 28 June and $8 000 is owing at 30 June in unpaid wages, then:
A) the $8 000 would appear as accrued wages payable in the balance sheet but it would not be included in the expenses for the year.
B) the $8 000 would appear as accrued wages payable in the balance sheet and would be included in the expenses for the year.
C) the $8 000 would not be included in either the balance sheet or the profit and loss statement.
D) the $8 000 would appear as an expense in the profit and loss statement.

Accepted Answer

When wages have been earned by employees but have not yet been paid as of the end of the accounting period, they are classified as accrued wages payable and must be included in the balance sheet. Additionally, the $8,000 would also be included in the expenses for the year since they represent earned wages that have not yet been paid.

Question 19

Which of the following statements about assets is NOT true?
A) Assets provide future economic benefits.
B) Assets are 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 recorded at their historical cost, not the amount they can be sold for, as this can fluctuate over time.

Question 20

A company buys 100 televisions for $500 each. It sells 60 televisions for $900 each. What is the 'cost of goods sold' expense?
A) $24 000
B) $30 000
C) $50 000
D) $54 000

Accepted Answer

The 'cost of goods sold' (COGS) is calculated based on the cost to the company for the goods that were sold. The company sold 60 televisions, and each television cost $500. Therefore, the COGS is 60 televisions * $500 = $30,000.

Quiz 2: Measuring and Evaluating Financial Position and Financial Performance

If a company pays a 12-month insurance premium for $2 400 on 1 May 2019, then at 30 June 2019 the accounts will show:

Which of the following is NOT an expense of a company?

Given only the following information, calculate net profit.

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

Which of the following is NOT a revenue of a company?

Which of the following is NOT a revenue of a company?

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

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

Which of the following statements is NOT true?

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

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

The summarised balance sheet of Apcor Ltd at 30 June 2019 was as follows: What was Apcor Ltd's working capital at 30 June 2019?

Which of the following is NOT a liability?

Which of the following is NOT an expense of a company?

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:

Consider the following transactions: Which of the above transactions increase June 2019 expenses?

Which of the following statements is TRUE?

If the last wages bill for the year is paid on 28 June and $8 000 is owing at 30 June in unpaid wages, then:

Which of the following statements about assets is NOT true?

A company buys 100 televisions for $500 each. It sells 60 televisions for $900 each. What is the 'cost of goods sold' expense?