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Accounting - Test 2


1. At what value is inventory stated in a company's Balance Sheet?
A. cost price
B. net realisable value
C. the greater of net realisable value or cost price
D. the lower of net realisable value or cost price


2. Some of the accounting records of a company have been partially destroyed by fire. The remaining records show sales for the year of $85,240. The company has a gross profit margin of 20%. What is the cost of sales for the year?
A. $17,048
B. $21,310
C. $63,930
D. $68,192


3. Which transaction is entered in the general journal?
A. credit sale of goods
B. goods returned to supplier
C. purchase of a non-current asset on credit
D. purchase of inventory for cash


4. A company makes furniture. What will be treated as a direct cost in the company's manufacturing account?
A. depreciation of vehicles that deliver the furniture
B. insurance of the machinery used to make the furniture
C. transport costs of bringing in the raw materials to make the furniture
D. wages of workers maintaining the factory machinery


5. A business with sales of $125k sells its goods at a 25% markup on cost. It has overhead of $10k. What is the net profit as a percentage of sales?
A. 10%
B. 12%
C. 17%
D. 22%


6. What is the correct method of valuing inventory?
A. at a valuation decided by the management
B. at the lower of cost or net realisable value
C. at the net book value of the inventory
D. at the purchase price of the inventory


7. Which account usually has a debit balance?
A. capital account
B. purchases account
C. purchases returns account
D. sales account


8. A non-current asset cost $8k. It is sold for $4,800. At the date of its disposal its net book value is $3k. What is the profit or loss on disposal?
A. $200 loss
B. $1,800 loss
C. $200 profit
D. $1,800 profit


9. A business receives rent for lease of premises. How is this rent classified?
A. capital expenditure
B. revenue expenditure
C. capital income
D. revenue income


10. A sole trader writes off a bad debt. What will be the effect of this on the balance sheet?
A. capital reduced and assets reduced
B. liabilities increased and assets reduced
C. liabilities reduced and assets increased
D. no effect on assets or liabilities







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