Multiple Choice Questions
1. For a statement of cash flow, calculate the cash paid for inventory purchased.
Beginning balance of creditors $31 000
Ending balance creditors 35 000
Cost of goods sold 260 000
Beginning balance inventory 12 000
Ending balance inventory 10 000
A. $258 000
B. $254 000
C. $260 000
D. $348 000
2. Using written-down value as the investment base in return on investment calculations will tend, with the passing of time, to produce _________ returns.
A. Higher
B. Lower
C. Constant
D. It depends
3. Which statement concerning variances is correct?
A. If actual revenue is less than budgeted revenue there is a favourable variance
B. If budgeted costs are greater than actual costs there is an unfavourable variance
C. If actual costs are more than budgeted costs there is an favourable variance
D. If budgeted revenue is less than actual revenue there is a favourable variance
4. From the following data calculate the estimated cash received from credit sales for March. Credit sales for January, $12 000; February, $16 000; March, $18 000.
Credit sales are normally settled in the pattern 60% in the month following the sale 40% in the next month.
A. $17 200
B. $13 600
C. $15 600
D. $14 400
5. Select the asset that is not an identifiable intangible asset.
A. Goodwill
B. Brand name
C. Franchise
D. None of the above, i.e. all are identifiable intangible assets
6. The use of the first-in first-out (FIFO) method of valuing inventory means that:
A. The most recent goods acquired are assumed to comprise cost of goods sold
B. The earliest goods acquired are assumed to comprise cost of goods sold
C. Inventory on hand at the end of the period is assumed to consist of the most recent goods acquired
D. B and C
7. The accounting period assumption means that:
A. The activities of the owner are assumed to be separate from those of the business
B. For reporting purposes the economic life of an entity is divided into arbitrary time periods
C. The accrual approach is always used to measure profits
D. B and C
8. If net profit after interest and tax is $800 000, interest is $350 000 and tax is
$120 000 what is earnings before interest and tax (EBIT)?
A. $1 030 000
B. $330 000
C. $1 270 000
D. $570 000
9. The incorrect statement is:
A. The hedging principle is based on matching the maturity of the source of funding with its use
B. A minimum core of spontaneous sources of funding is permanently maintained
C. Permanent assets should be financed with permanent sources of funding
D. None of the statements is incorrect, i.e. all are correct statements.
10. The cost pool, Machine Set-ups, is estimated at $280 000. Two products are produced, Product P which has 300 set-ups, and Product T which has 400 set-ups. The machine set-up costs that will be allocated to product P are:
A. $140 000
B. $160 000
C. $120 000
D. $150 000