1 Which of the following would not be classified as a current liability in the balance sheet? (a) accounts payable (b) accounts receivable (c) accrued expenses (d) unerned income (e) bank overdraft 2. Which of the following items should be classed as capital expenditure? (a) (b) (c) (d) (e) software maintenance depreciation of equipment purchase of raw materials purchase of an automobile capitalisation of interest 3. A firm sells goods on credit. The effect will be to: (a) (b) (c) (d) (e) decrease inventory, decrease liabilities increase cash, increase liabilities increase cash, decrease inventory decrease inventory, increase assets decrease inventory, decrease overdraft 4. A company pays cash to a supplier for goods the firm had bought the previous month. The effect will be to (a) (b) (c) (d) (e) decrease cash, decrease accounts receivable decrease cash, decrease accounts payable decrease cash, increase current liabilities increase cash, decrease cost-of-sales decrease cash, increase cost-of-sales 5. Which of the following would not be classified as a current asset? (a) (b) (c) (d) (e) a tax overpayment security services prepayment work-in-progress precious metal owned by a commodities trader money due to suppliers 6. Omega plc purchased a piece of equipment at a cost of 125,000. It is expected to have a useful economic life of 5 years and a scrap value of 25,000 at the end of its life Omega uses straight line depreciation and a full year of depreciation is charged in the year of purchase. What would be the annual depreciation charge and the net book value (NBV) of the equipment at the end of the second year of its life? (a) (b) (c) (d) (e) Depreciation charge 25,000: NBV 100,000 Depreciation charge 25,000; NBV 75,000 Depreciation charge 20,000; NBV E85,000 Depreciation charge 20,000; NBV 80,000 Depreciation charge 30,000; NBV 65,000 7. Using the information in the previous question, what would be the depreciation charge in year 2, based on a reducing balance percentage of 30%? (a) 49,000 (b) 73,500 (c) 26,250 (d) 11,250 (e) 37,500 8. The defined benefit pension obligation is not affected by: (a) (b) (c) (d) (e) The rate at which retirement benefits are discounted at How long scheme members are expected to live after they retire Current period service costs The expected return on the pension fund's assets Changes in scheme terms from final salary to career average 9. Investment risks from a defined benefit pension plan provided by a firm: (a) Can be eliminated by a government pension lifeboat fund (b) Are borne by the pension plan's members (employees) only (c) Are borne by the pension plan's manager only (d) Are borne by the pension plan's sponsor (the firm) only (e) Are shared equally between the pension plan's sponsor and members