1. An owner of a business is confused when he saw the financial statements of his business that was prepared by his accountant. For the last accounting period, he saw that he has a decrease in profit of 15,000 but the bank balance has increased by 55,000 during the accounting period. He had asked you for reasons that might explain this discrepancy. State the reasons that may explain the above discrepancy.

a. the purchase of assets for cash during the period (for example, motorcars and stock), which were not all consumed during the period and therefore are not having an effect on expenses to the same extent as the effect on cash;

b. the receipt of cash for revenues accrued for previous accounting period which will have an effect on cash and purchase of goods on credit which will have an effect on expenses in the profit and loss account.

c. the generation of revenues on credit, where the cash has yet to be received. This will increase the sales for the period but will not have a beneficial effect on the cash balance until a later period.

d. there are some mistakes in accounting records

e. none of the options listed

2. The payments set out in table below have been made during the year in relation to a computer bought at the beginning of the year:

Cost at suppliers list1,000

Agreed discount100

Delivery 50

Installation 30

Maintenance 40

Additional memory15

What cost figure should be used as the basis for the depreciation charge for the year?

a.

b.

c.

d.

e.

3. Korzinka Inc. earned PBIT 100,000,000 last year. If its tax rate was 30%, interest expense 1,000,000, repayment of loan was 20,000,000 and number of common shared 1,000,000 what would be the EPS (earning per share)?

a.

b.

c.

d.

e.

4. A company sells goods on credit valued at 55 000 to a customer. This sale is recognized in the accounts when the goods are sent, accepted and invoiced. This case is an example of the following accounting rules and concepts

(1) Accruals

(2) Separate business entity

(3) Going concern

(4) Neutrality

a. 3 and 4

b. 2 and 3

c. only 4

d. only 1

e. none of the options listed

5. Expenses have the effect of causing owners or stockholders equity to

a. decrease

b. increase

c. remain the same

d. impossible to say

e. none of the options listed

1. A company began the accounting period with $50,000 in owners capital, ended with $75,000 in owners capital, and the owner withdrew $30,000 during the period for personal use. What was the companys net income or loss for the period?

a. $ net income

b. $ net loss

c. $ net loss

d. $ net income

e.

2. A company purchased equipment on January 1 for $5,400. This equipment has a useful life of 10 years and a residual value of $400. What would be the depreciation expense for the second-year of its useful life using the 20% reducing balance method?

a.

b.

c.

d.

e.

3. A measure of profitability is the (name of ratio)

a.

b.

c.

d.

e.

4. Working capital is a measure of (name of ratio category)

a.

b.

c.

d.

e.

5. The purchase of an office building by issuing long-term notes payable should be reported as a (in cash flow statement)

a.

b.

c.

d.

e.

6. In the annual report, where would a financial statement reader find out if the companys financial statements give a fair depiction of its financial position and operating results?

a.

b.

c.

d.

e.

7. Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments?

a.

b.

c.

d.

e.

8. Johnnys Car Repair Shop started the year with total assets of $60,000 and total liabilities of $40,000. During the year the business recorded $100,000 in total car repair revenues, $55,000 in total expenses, and dividends of $10,000.

The retained earnings reported by Johnnys Car Repair Shop for the year was

a.

b.

c.

d.

e.

9. Revenues have the effect of causing owners or stockholders equity to

a.

b.

c.

d.

e.

10. Park Inc. earned EBIT $10,000,000 last year. If its tax rate was 40%, interest expense $2,000,000 and number of common shared 1,000,000 what would be the EPS?

a.

b.

c.

d.

e.

11. A company paid in advance $4,800 for two years of prepaid insurance, which started on May 1. The adjusting entry on fiscal year ending December 31 of that year is:

a.

b.

c.

d.

e.

12. A companys statement of profit or loss for the year ended 31 December 20X5 showed a net profit of $83,600. It was later found that $18,000 paid for the purchase of a motor van had been debited to the motor expenses account. It is the companys policy to depreciate motor vans at 25% per year on the straight line basis, with a full years charge in the year of acquisition.

a.

b.

c.

d.

e.

13. From merchandisers income statement you know that Sales revenue is $ 650,000 and the gross margin is 20%. What is the cost of Goods Sold?

a.

b.

c.

d.

e.

14. The double-entry system of book-keeping normally results in which of the following balances on the ledger accounts?

Debit balances: Credit balances:

a.

b.

c.

d.

e.

15. In the year ended 31 August 20X4, Aplus records show closing inventory of 1,000 units compared to 950 units of opening inventory. Which of the following statements is true assuming that prices have fallen throughout the year?

a. Closing inventory and profit are higher using FIFO rather than AVCO.

b. Closing inventory and profit are lower using FIFO rather than AVCO.

c. Closing inventory is higher and profit lower using FIFO rather than AVCO.

d. Closing inventory is lower and profit higher using FIFO rather than AVCO.

e. none of the options listed