Pick An Answer For Each Question:
1: Accounting standards reflect
How a particular company standardizes its financial statements from year to year
Laws that govern how financial statements are presented
The basic principles generally accepted by the accounting profession
A consensus between international and USA standard-setting agencies
2: The IASB's Framework for the Preparation and Presentation of Financial Statements is mostly concerned with:
The format of financial statements
The setting of accounting standards
Satisfying shareholders' demands for information
The definition, recognition and measurement of the elements in financial statements
3: A business has the following balances in its financial records: Income tax £30,000; Selling & administration expenses £80,000; Revenue £350,000; Interest expenses £15,000; Cost of Sales £190,000. Which of the following is correct?
Gross profit £160,000; Operating profit £80,000; Net profit after tax £35,000
Gross profit £80,000; Operating profit £65,000; Net profit after tax £35,000
Gross profit £160,000; Operating profit £65,000; Net profit after tax £30,000
Gross profit £80,000; Operating profit £65,000; Net profit after tax £35,000
4: Which of the following expresses the accounting equation correctly?
Net assets = non-current assets less non-current liabilities
Equity = assets plus liabilities
Total assets = liabilities less equity
Net assets = total assets less total liabilities
5: The following items appear in a Statement of Financial Position: Receivables €200,000; Payables €350,000; Inventory €100,000; Non-current assets €750,000; Long term loan €400,000. Shareholders' funds (SH Equity) would be shown in the same Statement of Financial Position as:
€1,050,000
€300,000
€650,000
€750,000
6: ABC buys a smaller company XYZ for a negotiated price of £1 million. XYZ's assets are valued at £750,000. Assuming goodwill is amortized over 5 years, the value of goodwill in ABC's Statement of Financial Position at the end of the third year after acquisition will be:
£100,000
£300,000
£150,000
£400,000
7: Agency theory is predominantly concerned with:
Shareholders appointing agents to manage the business
Directors preparing contracts for various business functions
Managers appointing agents to carry out various business functions
Contractual relationships between shareholders and directors and managers
8: The difference between ROI and ROCE ratios is due to:
Interest, tax and long-term debt
Tax and shareholders' funds
Long-term debt and shareholders' funds
Interest and long-term debt
9 Use the following information extracted from ABC's Income Statement and Balance sheet and match the item with the correct calculation.
Sales £4,200,000; Gross profit £2,700,000; Receivables £630,000; Payables £275,000; Inventory £300,000. ABC calculates its financial ratios based on being open for business 6 days per week for 50 weeks per year.
45 123 1. ABC's days' sales outstanding
55 123 2. ABC's Inventory turn
5 123 3.ABC's days' payables outstanding
10: A company has capital employed of €1,000,000 and generates a profit after tax of €300,000. The change in return on investment between a Balance Sheet with 60% debt and one with 40% debt is:
From 43% to 60%
From 75% to 50%
From 50% to 75%
From 60% to 43%
11: A business has current assets of $35,000 and current liabilities of $20,000. It collects its receivables more quickly and uses $10,000 of its cash at bank to repay a long-term debt. The effect on the working capital ratio after the long-term debt is repaid is to:
Increase from 175% to 250%
Increase from 175% to 350%
Decrease from 175% to 150%
Decrease from 175% to 125%
12: Inventory is valued in a Balance Sheet (Statement of Financial Position) at:
Selling price
Cost price
Net realizable value
Lower of cost and net realizable value
13: In a manufacturing business, the completion of production results in the following flow of costs for inventory:
Decrease raw materials and increase finished goods
Decrease work in progress and increase cost of sales
Decrease work in progress and increase finished goods
Decrease finished goods and increase cost of sales
14: A business purchases inventory stock on four separate occasions. Purchased 3,500 units at a total cost of €8,050; Purchased 3,000 units at a total cost of €7,110; Purchased 4,000 units at a total cost of €9,600; and Sold 5,995 units at a total price of €24,760. Each purchase was completed in the order provided within the same period. Match the inventory method with the correct cost of sales and the correct value of inventory.
€13,963 1234
€4,082 1234
€3,896.75 1234
€14,148.20 1234
1. weighted average method for cost of sales
2. first in-first out method for cost of sales
3. weighted average method for the value of inventory
4. first in-first out method for the value of inventory