Assignment Problem-Answer all Problems
Problem 1. Which of the following is a form of the balance sheet equation?
a. Assets=Liabilities + (Paid in Capital + Retained Income)
b. Assets+ Liabilities= Owners' Equity
c. Assets + Owner's Equity =Liabilities
d. Assets-Paid in capital = Liabilities-Retained income
Problem 2. If an accumulated provision for depreciation account is in use then the entries for the year's depreciation would be:
a. Credit Provision for Depreciation Account, debit Income Statementc
b. Credit Asset Account, debit Provision for Depreciation Account
c. Debit Asset Account, credit Income Statement
d. Credit Income Statement, debit Provision for Depreciation Account
Problem 3. The practice of relating costs and revenue to a particular period for which the measurement of income is derived is known as:
a. Matching principle
b. Going concern assumption
c. Conservatism convention
d. Revenue recognition
Problem 4. Cash, accounts receivables, inventories, deposits, prepaid expenses
a. are current assets on the balance sheet
b. are liabilities on the balance sheet
c. are classifications of stockholders' equity
d. none of the above
Problem 5. Which of the following is a capital expense?
a. Drawings
b. Rent and rates
c. Salaries
d. Purchase of a motor van
Problem 6. Which of the following is a record of all the account balances at the year end, and is used to prepare the final accounts?
a. A trial balance
b. A statement of financial position
c. A statement of cash flows
d. An income statement
Problem 7. During the year ended 31 December, the business made sales of £45,000 and purchases of £25,000. The inventory at the beginning of the year was valued at
£8,000 and, at 31 December, £4,500. The gross profit for the year was: a. £23,500.
b. £20,000.
c. £16,500.
d. £32,500.
Problem 8. Chandra's bakery business has the following account balances at 30 September 2011: ovens £38,000, inventories £4,100, trade payables £2,650, loan of £5,000 and a bank overdraft of £1,090. Chandra's capital account as at 30 September 2011 is:
a. £35,540.
b. £38,660.
c. £38,360.
d. £33,360.
Problem 9. Misha bought a machine for £39,000, which she expects to have a useful life of four years and a residual value of £4,000 at the end of that time. If depreciation is to be provided on the straight-line basis, the net book value after two years will be:
a. £17,500.
b. £19,500.
c. £21,500.
d. £30,250.
Problem 10. The following bank reconciliation statement has been prepared by a trainee accountant:
|
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$
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|
Overdraft per bank statement
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3,860
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less: Outstanding cheques
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9,160
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|
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5,300
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add: Deposits credited after date
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16,690
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Cash at bank as calculated above
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21,990
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What should be the correct balance per the cash book?
a. $21,990 balance at bank as stated
b. $3,670 balance at bank
c. $11,390 balance at bank
d. $3,670 overdrawn.
Problem 11. Which of the following would be classified as external users of financial statements?
a. Creditors of the organization and the Internal Revenue Service
b. Stockholders and the CFO of the organization
c. Management of the organization and the audit firm
d. Management of the organization and SEC
Problem 12. The accounting entry required when the bank advises that a bank loan has been approved is:
a. Debit Bank account credit Cash account
b. Debit Bank account credit Bank loan account
c. Debit Cash account credit Bank loan account
d. Debit Cash account credit Bank account
Problem 13. Kindra Novelties acquired equipment costing $3,000 on account. The effect of this transaction on Kindra Novelties would be to
a. increase equipment by $3,000 and decrease capital by $3,000.
b. increase equipment by $3,000 and increase capital by $3,000.
c. increase equipment by $3,000 and increase accounts payable by $3,000.
d. increase equipment by $3,000 and decrease accounts payable by $3,000.
Problem 14. Matt bought a delivery van for £14,000 on 1 July 2012. It is expected to have a useful life of 4 years and a value at the end of that time of £3,000. If depreciation is to be provided at 30% on the reducing-balance basis, the depreciation charge for the year ended 30 June 2014 will be:
a. £2,940.
b. £1,260.
c. £4,200.
d. £2,310.
Problem 15. Which of the following would be the transaction which decreases both the assets and the liabilities?
a. A vehicle was acquired paying $ 32000
b. A loan of $ 25000 was settled
c. Goods were purchased for sale from Orlando Ltd for $ 12800
d. Received a cheque for $ 5850 from a credit customer
Problem 16. An error of commission arises when
a. a correct figure is entered in the double-entry accounting records, once in the correct ledger account and once in the wrong person's account.
b. a transaction is not recorded in the double-entry accounting records.
c. either the debit entry or the credit entry for a particular transaction is recorded in the wrong class of ledger account.
d. None of the above.
Problem 17. 'Obsolescence' means
a. the decline in the book value of non-current assets as a result of them being depreciated using the straight-line method of depreciation.
b. the decline in the book value of non-current assets as a result of them being depreciated using the reducing balance method of depreciation.
c. the decline in the value of non-current assets as a result of them becoming outdated by technological improvement and invention.
d. None of the above.
Problem 18. On 31 March the balance brought down on a firm's bank account in its ledger was£3,600, credit. At the same date, outstanding cheques amounted to £1,400 and outstanding respect of it being dishonoured. On the basis of the above information, the balance on the firm's bank statement at 31 March was:
a. £4,200 overdrawn.
b. £3,500 credit.
c. £4,700 overdrawn.
d. £3,700 credit.
Problem 19. A sole trader sells goods for cash for $ 500 which had cost $ 300. Which elements of the accounting equation will change due to this transaction?
a. Assets and liabilities
b. Assets and capital
c. Capital and liabilities
d. Assets only
Problem 20. In which book of original entry would discounts allowed be recorded?
a. Sales day book
b. Purchases day book
c. Cash book
d. Journal
Problem 21. When performing a reconciliation between the bank statement and the cash book, which TWO of the following would require an entry in the cash book?
a. Deposits credited after date
b. Direct debit on bank statement only
c. Bank charges
d. Bank error
Problem 22. The following are all current assets; trade receivables, inventories, prepaid expenses and cash at bank. Which is the least liquid?
a. Trade receivables
b. Inventories
c. Prepaid expenses
d. Cash at bank
Problem 23. What is the reasoning behind charging depreciation in historical cost accounting?
a. To ensure funds are available for the eventual replacement of the asset
b. To comply with the consistency concept
c. To ensure the asset is included in the statement of financial position at the lower of cost and net realizable value
d. To match the cost of the non-current asset with the revenue that the asset generates
Problem 24. The double entry to record a settlement or cash discount granted by a supplier is
a. Debit Payables, Credit Discounts allowed
b. Debit Payables, Credit Discounts received
c. Debit Discounts received, Credit Payables
d. Debit Discounts allowed, Credit Payables
Problem 25. If creditors at 1 January 2020 were £2,500, creditors at 31 December 2020 £4,200 and payments to creditors £32,000, then purchases for 2020 are:
a. £30,300
b. £33,700
c. £38,700
d. £31,600
Problem 26. In the case of a newsagent's shop, which of the following is an error of principle?
a. A sale is not recorded in the double-entry accounting records.
b. A credit sale to A. Barker is entered on the credit side of the sales account and on the debit side of A. Baker's account.
c. The cost of purchasing a photocopier on credit is entered on the debit side of the purchases account and on the credit side of the creditor's account.
d. None of the above.
Problem 27. Carriage inwards is included in the cost of sales calculation because
a. it is a cost associated with the purchase of goods.
b. carriage outwards is shown as an expense in the profit and loss account.
c. it should not be shown in the statement of financial position (balance sheet).
d. None of the above.
Problem 28. A sole trader incurred a loss of £10,000 during his most recent accounting period, yet had more money in his bank account at the end of the period than he had at the beginning of it. Which of the following, on its own, could explain this?
a. The introduction of £15,000 new capital during the period.
b. The purchase of Non-current assets during the period.
c. His customers taking longer than normal to pay the amounts they owe to him.
d. An increase in the amount of his Inventory over the course of the period.
Problem 29. Which of the following payments is revenue expenditure?
a. Money put into the business by the owner
b. Purchase of a motor van
c. Cost of servicing the motor van
d. Money taken out by the owner of the business
Problem 30. In the case of a retail garage, which of the following double-entries is the correct way to record the payment, by cheque, of an electricity bill for the current accounting period?
a. Account to Debit Account to Credit Electricity Bank
b. Account to Debit Account to Credit Bank Electricity
c. Account to Debit Account to Credit Electricity Cash
d. None of the above.