ABC Restaurant started the year with total assets of $60,000 and total liabilities of $40,000. During the year the business earned $100,000 in income and incurred $55,000 in expenses. Dividends paid were $10,000.

1. The net profit for ABC for the period was

A. $35,000.

B. $45,000.

C. $20,000.

D. $90,000.

E. $15,000.

2. Owner's equity at the end of the period was

A. $55,000.

B. $35,000.

C. $65,000.

D. $45,000.

E. None of the above

3. Which of these is an asset?

A. Income tax payable

B. Asset revaluation reserve

C. Interest earned on investments

D. Income received in advance E. None are assets

4. Accounts for ABC are as follows:

Cash $4,000

Bank overdraft 11,000

Creditors 3,000

Inventory 2,700

Debtors 8,100

Furniture 4,500

Loan payable 15,000

Car 12,000

Owner's equity is:

A. $13,300

B. $400

C. $5,300

D. $31,000

E. $2,300

5. For the cash account to decrease and the net profit to decrease the transaction occurring must have been:

A. purchase of a new printer for the owners home computer.

B. repayment of a loan.

C. payment of an electricity bill.

D. agreement with a supplier on the value of the next delivery.

E. None of the above

6. The bookkeeper recorded wages for the month as a decrease to the Income account rather than as an increase to Wages Expense. This error will result in:

A. Overstated net profit for the period

B. Understated equity at the end of the period

C. Understated assets at the end of the period

D. Overstated assets at the end of the period

E. No effect on net profit of the period

7. If equity at the beginning of the accounting period was $120,000 and at the end of the period was $175,000, and drawings by the owner during the period were $30,000, how much net profit was earned during the period?

A. $85,000

B. $55,000

C. $25,000

D. $30,000

E. Cannot be calculated from the information given

8. In the current accounting period expenses, calculated on an accrual basis, are $100,000 and the cash paid for expenses shown in the cash flow statement is $80,000, therefore:

A. expenses may have been paid for in advance in the previous period.

B. cash may have been collected for income earned in the previous period.

C. depreciation may have been charged in the income report.

D. A and C

E. B and C

9. If $20,000 is owed by customers at the beginning of the year, $15,000 is owed at the end and credit sales are $100,000, the cash received from customers for the year is:

A. $120,000

B. $115,000

C. $100,000

D. $95,000

E. $105,000

10. If year one equals $800, year two equals $830 and year three equals $896, the value given to year three in a trend analysis, with year one as the base year (100%), is

A. 89%

B. 100%

C. 105%

D. 112%

E. None of the above

11. CVP analysis will answer all of these questions except:

A. Why does actual overhead exceed applied overhead?

B. What is the most profitable sales mix?

C. How many more sales are required to offset an increase in variable costs?

D. If labour is replaced with machinery what will happen to profit?

E. None of the above, i.e. all are questions that can be answered by CVP

12. Barry & Co produces a range of products through several processes. Total overhead costs for process A are $400,000 and overhead is allocated to units of product on the basis of $6 of overhead for each hour of direct labour employed. If 7,000 units of product Y pass through process A requiring 3,500 direct labour hours the overhead from process A to be applied to product Y is:

A. $66,667

B. $24,000

C. $42,000

D. $21,000

E. None of the above

13. All of these are ways in which budgeting can provide information for decision-making, except:

A. providing profit forecasts to capital markets.

B. planning labour inputs.

C. predicting when a reversal in the stock market will occur.

D. setting targets for managers.

E. All of the above

14. If actual sales are $38,000 and budgeted sales are $42,000 and actual rent paid is $7,300 and budgeted rent is $8,100 the variances are respectively:

A. $4,000 F: $800 U

B. $4,000 U: $800 F

C. $4,000 F: $800 F

D. $4,000 U: $800 U

E. $4,000 U: $1,100 F

15. The decision rule for the internal rate of return method of investment decision-making is that projects will be accepted for rates that are

A. zero.

B. positive.

C. above the industry average.

D. above the entity's required rate of return.

E. None of the above