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accounting and finance

Questions and Answers of Accounting and Finance

On the financial statements prepared at the end of its first year of operations, the company must show an accurate picture of all expenses and all liabilities incurred. The last payday of the year
The amount of the group insurance premiums collected from employees during the quarter ended December 31 was ..................................$...............................
Ernesto Enterprises uses the wage-bracket method to determine federal income tax withholding on its employees. Find the amount to withhold from the wages paid each employee.
3.16 Mahbub runs a recruitment agency. The agency’s income is earned in the form of commissions from clients who pay a percentage of the first year’s salary of new employees recruited by the
3.15 In 2012 Lola’s net profit margin fell to 9.8% from 10.2% in the previous year. Her gross profit margin, on the other hand, increased from 30.2% to 33.8%. Revenue in 2011 was£148 360 and in
3.14 Lulu’s revenue in 2010 was £115 399. The following year, 2011, revenue increased by 4.3%. In 2012 revenue was 7.8% higher than it was in 2011. Gross profit margin in each of the 3 years
3.13 Jodie is a wholesaler of electrical discount goods. She buys in end-of-line and seconds quality goods from manufacturers and sells them on to small electrical retailers. She has to take
3.12 Jin-Ming’s mail order business sells trampolines. The selling price is £400 for a standard size trampoline, and £550 for a large one. The opening inventory at 1 January 2012 was 6 standard
3.11 Identify a company listed on a Stock Exchange outside the UK and obtain its annual report via the Internet (for example, try using the Deutsche Bo¨rse website to access information about
3.10 Telephone charges were £1103 for the year and other administration charges were£1575. Stationery was £761 and sundry expenses totalled £715. Basil made donations to local charities out of
3.9 Basil paid general insurance of £794, plus PII of £1250. Subscriptions and professional registration charges were £952. Business travel expenses (mileage claims for use of own car by himself
3.8 In the year ended 31 March 2012 fees from Madigan’s clients totalled £95 311. The assistant’s salary was £19 300 and the secretary was paid £11 150. Basil’s one-room office is in a
3.7 Madigan & Co is the trading name of Basil Madigan, a chartered accountant. He runs a small city centre office, employing a part-qualified accountant as an assistant, and a secretary, both on a
3.6 The summarized results of Louis’s business for the 3 years to the end of 2012 were as follows:2012 2011 2010£ £ £Revenue 291 318 282 400 269 340 Cost of sales (213 916) (206 420) (196
3.5 Leon runs a retail grocery business, dealing in luxury and delicatessen goods. In 2012 revenue was £295 993, with cost of sales at £242 085. The equivalent figures for 2011 were revenue of
3.4 Jethro sells an extensive range of childrens’ toys. He likes to be well-informed at all times about the performance of his business. Part of the routine work of his administrative assistant is
3.1 Jackie sells garden furniture in sets comprising a dining table and four chairs. She purchases each set for £75 from the manufacturer and retails a set for £132. At the beginning of June 2012
n Combine skills gained as a result of studying Chapters 2 and 3 to draw up a set of financial statements comprising an income statement and a statement of financial position.
n Be able to understand and comment on the basic information conveyed by an income statement.
n Be able to draw up an income statement for a sole trader from a list of account balances and explanatory notes.
n Understand the terminology used in an income statement, and some of the principal conventions used in presenting it.
2.23 Erik has a retail business selling china and glass ornaments from a small shop in a town centre. He has the following balances at his year-end of 30 November:£Freehold premises 16 800 Shop
2.22 Diana’s statement of financial position at 28 August 2012 is as follows:£ £ASSETS Non-current assets 13 500 Current assets Inventory 10 300 Trade receivables 1 200 Bank account 1 000 Petty
2.21 Carmela’s business has the following balances at 18 October 2012:£Amounts due from customers 16 303 Non-current assets – machinery 12 722 Amounts payable to suppliers for materials 6 868
2.19 Bashir’s statement of financial position shows the following totals:£Capital 68 350 Non-current assets 79 403 Current assets 16 276 The liabilities in Bashir’s business are:a) £131 477b)
2.15 Which of the following statements is correct?According to the IASB’s Framework, the four principal characteristics of financial statements are:a) Relevance, timeliness, reliability,
2.13 Ernest runs an art gallery. He organizes exhibitions at which painters and sculptors show their work. If a piece of artwork is sold, Ernest takes a commission of 50% of the selling price. He
2.12 Dan’s statement of financial position at 1 May 2012 was as follows:£ £ASSETS Non-current assets 30 000 Current assets Inventory 15 000 Trade receivables 5 000 Bank account 18 000 38 000 68
2.11 Ciera’s business has the following balances at 31 December 2012:£Inventory 18 600 Trade payables 23 700 Cash in bank account 13 000 Long-term loan 20 000 Non-current assets – premises 39
2.10 Callum’s statement of financial position at 31 July shows the following:£Non-current assets 18 337 Inventory 12 018 Trade receivables 365 Cash 63 Bank overdraft 3 686 Trade payables 2 999a)
2.9 Blanche’s statement of financial position shows the following totals:£Non-current assets 36 609 Current assets 38 444 Current liabilities 26 300 Capital 39 477 The missing figure for
2.7 Bryony’s statement of financial position shows the following totals:£Non-current assets 35 840 Current assets 16 500 Current liabilities 12 000 Non-current liabilities 6 000 Bryony’s capital
2.2 Amir has a consultancy business which he runs from rented offices. The following are descriptions of some of the items in his statement of financial position. For each item fill in the adjacent
2.1 Alexander’s business manufactures and sells biscuits to supermarkets and grocery shops.Below are descriptions of some of the items in his statement of financial position. For each item fill in
n Be able to understand and comment on the basic information conveyed by a statement of financial position.
n Be able to draw up a statement of financial position for a sole trader from a list of account balances and explanatory notes.
n Understand the terminology used in a statement of financial position, and some of the principal conventions used in presenting it, and in preparing financial statements in general.
n Understand how the statement of financial position relates to the other principal financial statements.
1.18 Mohsin, a bank manager, is looking at an application for a loan from Boxer Burstall Limited, a local company. The company has included a copy of its most recent annual accounts which are for the
1.17 Ponderosa & Smythe plc is a shoe manufacturing business, specialising in children’s shoes. The finance director has just received the following letter from a shareholder who has recently
1.16 Which of the following statements is correct?The stewardship function requires directors of limited companies to:a) Act at all times in the best interests of the company.b) Allow shareholders to
1.15 Marie Deutsch is a fashion designer who, after graduation with a degree in fashion, obtained a very good job as designer in a lingerie company. She has decided that she would like to leave her
1.14 Select from the following list the most appropriate way of financing the build up of stocks of Easter eggs in a chocolate business:a) grant financeb) overdraftc) issue of new share capitald)
1.13 One of the following statements about the limited company form of business is correct:a) A limited company must submit information on a regular basis to the Registrar.of Companies.b) Directors
1.12 A group of environmental activists is interested in the activities of Burnip Chemicals plc, a company which has been regularly fined in the past for emitting toxic waste into the river which
1.11 Podgorny & Weaver Limited is involved in the wholesale of fashion goods to retailers. The company directors have a monthly meeting to discuss strategy and to make decisions.The directors are
1.10 Which one of the following statements about the regulations governing limited company businesses is correct?a) All limited companies are obliged by company law to have an annual audit.b) A
1.9 Which one of the following statements about the regulations governing partnership businesses is correct?a) Partnerships are obliged to have an annual audit of their financial statements.b)
1.8 Which one of the following statements about the regulations governing a sole trader business is correct?a) A sole trader does not need to supply any accounting information about his or her
1.7 Geoffrey is a keen dangerous sports enthusiast. He would like to set up in business as a sole trader organizing dangerous sports events and activities. His business idea is that people would pay
1.6 You are a small business adviser. A new client, Arnold Tapwood, has come to you for advice. Mr Tapwood explains that he is the sole proprietor of a small building business.One of his friends,
1.5 Select from the following list the most appropriate way of financing a new office photocopier:a) grant financeb) issue of new share capitalc) leased) mortgage.
1.4 Select from the following list the most appropriate form of finance for purchasing a new office building:a) 10-year mortgage loanb) loan repayable in 6-months’ timec) overdraftd) hire purchase.
1.1 Which one of the following statements about the sole trader form of business is correct?a) A sole trader has to pay corporation tax.b) Sole traders submit annual information to the Registrar of
n Know about the functions that accountants perform in the production of accounting information.
n Be able to identify the principal groups in society who need and use accounting information, and to know about the principal characteristics and features of accounting information.
n Understand why accounting information is produced.
n Know in outline about some important features of the business environment including the various ways in which tax is charged on businesses.
n Understand the differences between the sole trader, partnership and company forms of business organization, and know, in outline, about some of the sources of business finance available to
What is the basic formula for measuring the economic value-added by a firm? (p. 504)AppendixLO1
What do you understand by the efficiency P/E ratio? (p. 501)AppendixLO1
How is the free cash flow to equity defined? (p. 499)AppendixLO1
What does the dividend growth model predict to be the effect on the volatility of markets at high rates of growth compared with the rate of return required by equity investors? (p. 497)AppendixLO1
How is growth related to the retention ratio? (p. 490)AppendixLO1
What are the two broad methods by which growth in dividends can be estimated? (p. 488)AppendixLO1
Write out the dividend growth model. (p. 487)AppendixLO1
What two sources of financial return to the shareholders drive the value of their equity? (p. 486)AppendixLO1
How does the 'entanglement phenomenon' arise? (p. 486)AppendixLO1
Define the P/E ratio and the market to book ratio and explain why high multiples of the latter are observed in practice. (p. 483)AppendixLO1
What financial reporting standard defines how earnings-per-share should be reported? (p. 483)AppendixLO1
How are the dividend payout ratio and the retention ratio related? (p. 482)AppendixLO1
Define 'dividend per share', 'dividend yield' and 'dividend payout ratio'. (pp. 481-482))AppendixLO1
How is the payback on a project calculated? (p. 428-429)AppendixLO1
How does the differential return on capital employed differ from the accounting rate of return? (p. 427)AppendixLO1
What are the two principal problems with the internal rate of return criterion and which of these does the modified internal rate of return overcome? (p. 424)AppendixLO1
What ratio should be used to select projects for investment when capital is in short supply? (p. 416)AppendixLO1
What three approaches can be used to incorporate risk in net present value analysis? (p. 415)AppendixLO1
How are real and nominal rates of interest linked? (p. 410)AppendixLO1
What should be excluded from the cash flow projections as part of a net present value analysis? (pp. 406-407)AppendixLO1
Write out the formulas for an annuity and a terminal value. (p. 400)AppendixLO1
State the assumptions behind and the conclusion of the Fisher-Hirshleifer separation theorem. (p. 399)AppendixLO1
What three factors influence the time value of money? (p. 398)AppendixLO1
What is the fundamental difference between compounding and discounting? (pp. 394-397)AppendixLO1
After a firm has met its trading cash requirements what other factors might determine its immediate cash requirement? (p. 383)AppendixLO1
List the three economic motives for holding cash. (p. 380)AppendixLO1
How is the 'liquidity gap' measured? (p. 378)AppendixLO1
What steps can be taken to mitigate the effects of late payments? (pp. 374-376)AppendixLO1
What are the benefits of a negotiated reduction in the credit period offered to customers for a firm that is growing its sales? (p. 373)AppendixLO1
List six actions you could take to determine the creditworthiness of a potential customer. (pp. 371-372)AppendixLO1
What are the two components of the reorder level and how are they determined? (p. 364)AppendixLO1
What is Just-in-Time stock management and what cost condition needs to be in place for it to be justified? (p. 366)AppendixLO1
Write out the economic order quantity formula, defining each of its variables. (p. 362)AppendixLO1
What two categories of cost determine the total cost of stock holding and how do they vary with the order quantity? (p. 361)AppendixLO1
What does it imply about a firm's credit management policy if it can sustain a current asset ratio of significantly less than 1.0. (p. 359)AppendixLO1
What three cycles define the operating cycle of the business? (p. 358)AppendixLO1
Detail step by step the process whereby raw materials are purchased, converted and sold to customers. (p. 357)AppendixLO1
Give two benefits of target costing. (pp. 348-349)AppendixLO1
How does cost-plus pricing differ from target rate of return pricing? (p. 348)AppendixLO1
Identify four strategies for identifying the best market price for a product. (pp. 343-344)AppendixLO1
Upon what model of the firm is activity-based costing constructed? (p. 340)AppendixLO1

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