Financial Accounting: practice questions

6 questions · 13 marks · free, no account · Read the notes first

1. Question 1Multiple choice · 1 mark

   Opening inventory $20 000, purchases $100 000, closing inventory $30 000. Find the cost of goods sold.

   A

   $90 000

   B

   $110 000

   C

   $150 000

   D

   $70 000

2. Question 2Multiple choice · 1 mark

   A machine costs $60 000, with a residual value of $6000 and a useful life of 6 years. Using the straight-line method, the annual depreciation is

   A

   $10 000

   B

   $9000

   C

   $6000

   D

   $54 000

3. Question 3Multiple choice · 1 mark

   Rent owing at the end of the financial year is shown in the statement of financial position as

   A

   a current asset.

   B

   a non-current liability.

   C

   a current liability.

   D

   a deduction from capital.

4. Question 4Multiple choice · 1 mark

   Current assets are $150 000 and current liabilities are $60 000. The current ratio is

   A

   0.40 : 1

   B

   1.50 : 1

   C

   1 : 2.50

   D

   2.50 : 1

5. Question 55 marks

   From the following information for the year, calculate (a) net sales, (b) cost of goods sold, (c) gross profit, (d) profit for the year, and (e) the gross profit ratio (2 decimal places).

   	$
   Sales	300 000
   Returns inwards	5000
   Opening inventory	25 000
   Purchases	180 000
   Closing inventory	35 000
   Rent	24 000
   Salaries	50 000
   Depreciation	6000

   Show worked solution

   (a) Net sales = 300 000 − 5000 = $295 000 (1)

   (b) Cost of goods sold = 25 000 + 180 000 − 35 000 = $170 000 (1)

   (c) Gross profit = 295 000 − 170 000 = $125 000 (1)

   (d) Profit for the year = 125 000 − (24 000 + 50 000 + 6000) = $45 000 (1)

   (e) Gross profit ratio = 125 000 ÷ 295 000 × 100% = 42.37% (1)

6. Question 64 marks

   During the year a business paid rent of $26 000; the rent for the year is $24 000. It also paid electricity of $9000, and $1000 of electricity was still owing at the year end.

   For rent and for electricity, state the amount charged in the income statement and the item shown in the statement of financial position.

   Show worked solution

   Rent: income statement $24 000 (1); the extra $2000 is a prepaid expense under current assets. (1)

   Electricity: income statement 9000 + 1000 = $10 000 (1); the $1000 owing is an accrued expense under current liabilities. (1)