Pick An Answer For Each Question:

Q6-1: Accounting standards reflect 

 Question 1 options:          

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

Q6-2: The IASB’s Framework for the Preparation and Presentation of Financial Statements is mostly concerned with:

Question 2 options:          

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

Q6-3: 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?

Question 3 Options:

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

Q6-4: Which of the following expresses the accounting equation correctly?

Question 4 Options:

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

Q6-5: 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:

Question 5 Options:

€1,050,000           

€300,000           

€650,000           

€750,000

Q6-6: 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:

Question 6 Options:

£100,000           

£300,000          

 £150,000           

£400,000

Q6-7: Agency theory is predominantly concerned with:

Question 7 Options:

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

Q7-1: The difference between ROI and ROCE ratios is due to:

Question Options:

Interest, tax and long-term debt           

Tax and shareholders’ funds           

Long-term debt and shareholders’ funds           

Interest and long-term debt

Q7-2: 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

Q7-3: 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:

Question Options:

From 43% to 60%           

From 75% to 50%           

From 50% to 75%            

From 60% to 43%

Q7-4: 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:

Question Options:

Increase from 175% to 250%           

Increase from 175% to 350%           

Decrease from 175% to 150%           

Decrease from 175% to 125%

Q8-1: Inventory is valued in a Balance Sheet (Statement of Financial Position) at:

Question Options:

Selling price           

Cost price           

Net realizable value           

Lower of cost and net realizable value

Q8-2: In a manufacturing business, the completion of production results in the following flow of costs for inventory:

Question Options:

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

Q8-3: 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.

Question Options:

 €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