Second Semester Mid-semester Examination (2011)

BUSINESS REPORTING & ANALYSIS (BUSN1001)

Writing period : 1 hour 30 minutes duration Study period : 10 Minutes duration Permitted materials: The examination is a closed book examination. Non-programmable calculators may be used. Electronic dictionaries are not allowed. English/foreign language dictionaries for which permission has been granted may be used. You must attempt to answer all questions. The total marks possible are 100. All questions to be completed on the multiple choice answer sheet provided.

MULTIPLE CHOICE QUESTIONS

[50 x 2 marks = 100 MARKS]

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The examination comprises fifty (50) multiple choice questions worth two (2) marks each. The total marks possible are 100. Identify the best response to the question and shade the corresponding letter on the multiple choice answer sheet provided. 1. Which of the following is not an essential characteristic of an asset: a. b. c. d. 2. It is controlled by the entity. It is owned by the entity. It is a result of past event. It is expected to bring future economic benefits to the entity.

Conceptual frameworks are: a. b. c. d. used to guide organisations responsible for the development of legally binding accounting standards used to guide business operations legally binding in Australia all of the above

3.

Which of the following is not included in the annual report of an Australian company incorporated under the Australian Corporations Act: a. b. c. d. The general purpose financial report The directors report The directors statement None of the above

4.

The purchase of inventories using cash will: a. b. c. d. increase total assets and increase cost of goods sold decrease total assets and increase cost of goods sold increase total assets and increase owners equity not affect total assets, total liabilities, and owners equity

5.

Ben purchased a computer for $5,000 in 2009. He sold the item to a complete stranger for $7,000 in 2010 and incurred a sum of $500 for advertising it. Which of the following statements is true? a. b. c. d. Historical cost of the computer is $5,000 Fair value of the computer is $7,000 Net realisable value of the computer is $6,500 All of the above

6.

Which of the following assets is not permitted to be recognised as a non-current asset? a. b. c. d. A companys own brand name Purchased patents Plant and machinery Land

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7.

On 1 July 2010, the Paris Press paid $12,000 for a three-year insurance premium. On 30 June 2011, Paris Press would show prepayments as: a. $12,000 b. $4,000 c. 0 d. $8,000 Which of the following is correct? a. b. c. d. An increase in the value of goodwill may be recognised as an income A decrease in the value of goodwill shall be expensed Goodwill may be amortised All of the above.

8.

9.

When a company uses perpetual inventory system, it: a. b. c. d. maintains a running record of all goods bought and sold does not record increases to cost of goods and decreases to inventory when goods are sold takes a physical inventory count at the end of the accounting period to determine the cost of goods sold only uses this system for inexpensive goods

10.

In August 2011 Lila Trading Ltd receives $4,000,000 from selling one of its shops. The carrying value of the shop sold is $3,500,000. In the month it earns $450,000 from the sale of goods which cost $350,000. What is Lila Trading Ltds income during August 2011? a. b. c. d. $4,450,000 $450,000 $950,000 $100,000

11.

In June 2011 Jacobs Ltd borrowed $1,000 from a bank, issued 10,000 shares at $1 each, and received $500 for services to be performed in July 2011. What amount of revenue should it record in June 2011? a. b. c. d. $0 $500 $10,500 $11,500

12.

Accounting for the electricity expense that has been incurred but the invoice has not been received gives rise to an increase in: a. b. c. d. Prepayments. Accrual Revenue Accounts payable

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13.

Derek Ltd is a trading company opened in June 2010 in Canberra. It only sells product A. It holds 10,000 units of Product A at 30 June 2011. The historical cost at 30 June 2011 for Product A is $10 per unit and its net realisable value is $12 per unit. The value of Product A which should appear in its Balance Sheet at 30 June 2011 is: a. b. c. d. $100,000 $120,000 $20,000 None of the above

14.

Which of the following methods results in the lowest profit in times when inventory prices increase during the accounting period? a. b. c d First-in, first-out Weighted average Last-in, first-out None of the above

15.

Willy Ltd uses the first-in, first-out method of cost assignment of inventory. The following data for 2010 are available: Date Beginning inventory Purchase Purchase Ending inventory 15 Jan 18 Mar 25 Jun 31 Dec Units 400 1,200 2,000 400 Unit Cost $20 $25 $30

The cost of goods sold, to the nearest dollar, for 2010 will be: a. b. c. d. 16. $86,000 $78,000 $83,000 $94,000

Consolidated financial statements are required in which of the following situations: a. b. c. d. Only when a company exercise significant influence over another company. Only when a company acquires goodwill in the purchase of another company. Only when a parent company can exercise control over its subsidiary. None of the above.

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17.

On 1 April 2010, Paris Ltd purchased equipment at a cost of $85,000. The equipment has an estimated residual value of $5,000 and is being depreciated over an estimated useful life of five years. Paris Ltd uses the straight line method of depreciation. Paris Ltds accounting year ends on 30 June. What is the carrying amount of the equipment at 30 June 2011? a. b. c. d. $85,000 $69,000 $65,000 $80,000

18.

On 1 July 2010, the balance in Walter Ltds provision for doubtful debts account was $3,000. During the financial year ended 30 June 2011 a total of $3,850 accounts receivable was written off as bad debt. The balance in the provision for doubtful debts account at 30 June 2011 was $7,000. The total amount of bad debts expense recognised during the financial year is: a. b. c. d. $7,850 $3,850 $13,850 $4,000

19.

When an entity correctly accounts for a finance lease it: a. does not bring an asset or liability to account and does not mention the lease in the notes to the financial report. b. brings to account an asset and a liability. c. brings to account an asset but no liability. d. does not bring an asset or liability to account but provides details of the lease in the notes to the financial report.

20.

Alan Ltd determines that at year end the Provision for doubtful debts needs to be increased from $20,000 to $36,000. This will result, in the year in which the provision is increased, in: a. a cash payment and an increase in bad debts expenses of $36,000 b. a cash payment and an increase in bad debts expenses of $16,000 c. an increase in the provision for doubtful debts and an increase in bad debts expenses of $36,000 d. an increase in the provision for doubtful debts and an increase in bad debts expenses of $16,000

21.

Which of the following is not reported in a single statement of comprehensive income? a. b. c. d. profit or loss for the period share capital other comprehensive income revenue for the period

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22.

At 1 June 2011 Lily Tradings inventory was $550,690 and at 30 June 2011 was $620,534. Purchases of inventory during June 2011 were $878,512 and Sales revenue was $1,143,508. Lily Tradings Gross Profit for the month of June 2011 was: a. b. c. d. $264,996 $522,974 $334,840 None of the above

23.

As contrasted with the straight-line depreciation method, the reducing-balance method results in: a. the same amount of accumulated depreciation expense over the useful life of an asset. b. higher depreciation expense during the early years of an assets life. c. lower depreciation expense during the later years of an assets life. d. all of the above.

24.

Robert Ltd is a second-hand car dealer. It purchased a second-hand car on 1 January 2011 for $55,000 and spent $10,000 on modifying it. The car was sold for $70,000 on 1 March 2011. Robert Ltd incurred $800 for advertising the car for sale. Robert Ltd made revenue on the sale of the car of: a. b. c. d. $15,000 $4,200 $14,200 $70,000

25.

Which of the following is not reported in the statement of changes in equity? a. b. c. d. Profit Other comprehensive income Issue of share capital None of the above

26.

Walter Ltds financial statements for the year ended 30 June 2011 shows the following information: Cash collections from customers Proceeds from sale of used equipment Depreciation expense Purchase of short-term securities $50,000 15,000 26,000 10,000

What is the amount of cash flows from its investing activities? a. b. c. d. $15,000 $5,000 -$10,000 None of the above

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27.

Jane Ltd had a balance of shareholders equity of $400,000 at 30 June 2010. During the year ended 30 June 2011 it recorded a net profit of $80,000 and other comprehensive income of $20,000, distributed dividends of $60,000 and borrowed $20,000. What is the companys shareholders equity at 30 June 2011? a. b. c. d. $440,000 $460,000 $480,000 $420,000

28.

Which of the following is not added to net profit when calculating cash flows from operations under the indirect method? a. b. c. d. The net increase in accounts payable The net decrease in accounts receivable Depreciation expense reported on the statement of comprehensive income All of the above are added

29.

Jones Ltds Balance Sheet at 30 June 2011 showed Buildings of $600,000 and Accumulated Depreciation buildings of $150,000. Its carrying amount of Buildings at 30 June 2011 was: a. b. c. d. $600,000 $450,000 $750,000 none of the above

30.

Which of the following would not affect total retained earnings? a. b. c. d. cash dividends share issue premium expenses profit

31.

During the first month of operations, Eric Ltd provided services and billed customers in the amount of $16,000. By the end of the first month, $6,000 had been collected and it was expected that the other $10,000 would be collected during the following month. During the first month, Eric Ltd also issued $10,000 shares to its owners. On Erics statement of comprehensive income for the first month, what amount of revenue should be reported? a. b. c. d. $16,000 $6,000 $10,000 $26,000

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32.

Cash in the statement of cash flows includes: a. b. c. d. cash on hand bank bills bank overdrafts all of the above

33.

Failure to recognise accrued electricity expenses would cause which of the following? a. An overstatement of assets and shareholders equity b. An understatement of expenses and liabilities and an overstatement of shareholders equity c. An overstatement of assets and liabilities d. An understatement of expenses, liabilities and shareholders equity

34.

On 1 July 2007 Motorist Ltd purchased a new car for $32,000 which they expect to sell after it has travelled 40,000 km for $12,000. The company uses the units-of-output method of depreciation for depreciating its vehicles. The car travels 5,000 km in the year ended 30 June 2008, and 8,000 km in the year ended 30 June 2009, and 6,000 km in the year ended 30 June 2010. What is the accumulated depreciation of the car at 30 June 2010? a. b. c. d. $32,000 $9,500 $22,500 $20,000

35.

In 2011 Julia Ltd received $50,000 cash from a customer for services to be performed in 2012. The impact of this transaction on the 2011 financial statements of Julia Ltd is: a. b. c. d. an increase in cash and an increase in revenue of $50,000 an increase in cash and an increase in liabilities of $50,000 an increase in cash and an increase in prepayments of $50,000 none of the above

36.

Which of the following is not shown in the investing activities of a statement of cash flows? a. b. c. d. Cash paid to acquire property, plant and equipment. Cash received from disposal of property, plant and equipment. Gains from the sale of property, plant and equipment. None of the above.

37.

Which of the following does not involve an expense? a. b. c. d. Depreciate non-current assets. Amortise intangible assets. Pay dividends to shareholders. Make provision for doubtful debts

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38.

For the year ended 30 June 2011, Eddy Ltd recognised sales revenue $560,000. Its opening accounts receivable was $54,000, and ending accounts receivable was $30,000. The amount of cash collected from its customer in the year was: a. $584,000 b. $536,000 c. $644,000

39.

Lila purchased a couch for her own house, paying $3,000 in cash; the payment was made from Lila bookstore. The impact of this transaction on the financial statements of Lilas bookstore is: a. b. c. d. cash is decreased by $3,000 and owners equity is decreased by $3,000 no impact on total assets and owners equity cash is decreased by $3,000 and liabilities is decreased by $3,000 none of the above

40.

Which of the following is not an essential characteristic of a liability? a. b. c. d. It is a present obligation. It is a past obligation. It arises from past events. It results in an outflow of future economic benefits.

41.

Wendy Ltd has been operating for two years. On 30 June 2011, its comparative balance sheet reported opening accounts payable of $24,000 and ending accounts payable of $30,000. During the year Wendy Ltd made purchases of $360,000. The amount of cash paid to its suppliers was: a. b. c. d. $360,000 $354,000 $414,000 $366,000

42.

Which of the following appear in the operating activities of a statement of cash flows? a. b. c. d. Sale of goods to customers Sale of short-term marketable securities Sale of property, plant and equipment All of the above

43.

In 2010 financial year, Eddy Ltd paid $456,000 for employee salaries for the year, and increased its accrued salaries payable by $72,000. The employee salaries expense recognised for the year was: a. b. c. d. $384,000 $456,000 $528,000 $72,000

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44.

Which of the following is not shown in the financing activities of a statement of cash flows? a. b. c. d. Cash paid to creditors. Cash received from issue of shares. Cash received from collection of loans. Cash paid for dividends.

45.

Katie Ltd revalued its land which had a book value of $500,000 to a fair value of $800,000. The impact of this revaluation on its financial statements is a. b. c. d. Land increased by $300,000, and asset revaluation reserve increased by $300,000. Land increased by $800,000, and asset revaluation reserve increased by $800,000. Cash increased by $300,000, and total assets increased by $300,000. Cash increased by $300,000, and asset revaluation reserve increased by $300,000

46.

Amanda Ltd issued 100,000 shares at a premium of 50 cents per share. The share issue premium gave rise to: a. b. c. d. an increase in share capital by $50,000 an increase in income by $50,000 an increase in reserves by $50,000 a decrease in expenses by $50,000

47.

Nobel Ltd subscribes to three magazines and pays $240, $190 and $176, respectively, on 1 January 2010. The subscriptions are for two years and are recorded in Prepaid Subscriptions when paid. At 31 December 2010, what amount is recorded for magazine expense and what is the balance of the Prepaid Subscription account? Magazine Expense a. $303 b. $606 c. $303 d. $606 Prepaid Subscriptions $303 $606 $606 $303

48.

Hyde Ltd is a retailer. On 1 July 2010 its balance sheet reports the following information: Accounts Payable $600 Accounts Receivable $5,200 Cash 7,000 Unearned revenue 4,400 Retained Profits 20,600 Inventory 16,800 Reserves 2,000 Prepayments 1,600 Share capital 2,000 Accruals 1,000 The amount of Hyde Ltds total liabilities is: a. b. c. d. $600 $6,000 $1,600 $5,000

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49.

Which of the following directly involves cash? a. b. c. d. Depreciate non-current asset. Revaluate non-current assets. Make provision for doubtful debts. None of the above.

50.

Cohen Ltd had the following transactions during the month of August 2011: 1. Owners started the company by investing $400,000 in cash. 2. Earned $60,000 of services revenue. $40,000 was received in cash with the balance on accounts receivable. What was the amount of total assets for Cohen Ltd at the end of August 2011? a. b. c. d. $400,000 $460,000 $40,000 $60,000

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