Net Present Value Calculations

Quiz 11

Question 1

 

0 / 1 point

The decision rule for net present value calculations is:

   

1) 

to invest if the NPV is above a hurdle level.

   

2) 

to invest in projects with the lowest discount rate.

   

3) 

to invest in projects with the highest discount rate.

   

4) 

to invest if the NPV is positive.

Question 2

 

0 / 1 point

             

A major deficiency of the ARR method is:

   

1) 

none of the options is a major deficiency of the ARR method

   

2) 

it ignores the timing of cash flows and subsequent profits

   

3) 

profits and costs are measured the same way

   

4) 

it is too simplistic to calculate

Question 3

 

0 / 1 point

             

The accounting rate of return (ARR) method of investment decision-making measures average profit over the period as a percentage of average

   

1) 

net cash inflow.

   

2) 

net cash flow.

   

3) 

investment.

   

4) 

opportunity cost.

Question 4

 

0 / 1 point

             

After an investment decision is made, the next step is:

   

1) 

physically implementation of the project or investment

   

2) 

to arrange finance for the project

   

3) 

to start the planning process

   

4) 

to analyse the data collected for decision making

Question 5

 

0 / 1 point

             

The payback method of investment decision making is generally regarded as:

   

1) 

too simplistic.

   

2) 

mostly accurate.

   

3) 

very accurate.

   

4) 

too complex for normal use.

Question 6

 

0 / 1 point

             

A typical feature of investments is:

   

1) 

they are risk free.

   

2) 

they often require large amounts of resources in relation to the asset base of the entity.

   

3) 

normally a relatively large cash outlay is required initially, but returns are received over a short period of time.

   

4) 

they rarely span long periods of time.

Question 7

 

0 / 1 point

             

A likely investment to decrease costs for a manufacturing entity is:

   

1) 

cloud computing

   

2) 

new plant and machinery

   

3) 

bill payment systems

   

4) 

computer networks

Question 8

 

0 / 1 point

             

A company is evaluating an investment proposal using the payback method. Cash inflows are expected to be $16 000 in year 1, $12 000 in year 2 and $8000 in year 3. The initial investment required is $32 000. Assuming even cash inflows within each year the payback period is:

   

1) 

2 years

   

2) 

2.25 years

   

3) 

2.5 years

   

4) 

2.6 years

Question 9

 

0 / 1 point

             

An advantage of the NPV method is that it takes into account:

   

1) 

the timing of the expected cash flows

   

2) 

all of the expected cash flows

   

3) 

only cash flows so it is not affected by changes to accounting rules and standards

   

4) 

all of the options are advantages of the NPV method

Question 10

 

0 / 1 point

             

The statement concerned with the ARR and the payback methods that is not correct is:

   

1) 

both methods are based on accounting profits

   

2) 

if two projects have the same ARR the one with the lowest payback period would be preferred

   

3) 

both methods are simplistic and may be useful for a quick analysis to sort out projects for further analysis

   

4) 

both methods are quite easy for managers to understand

Question 11

 

0 / 1 point

             

With the net present value method of capital investment analysis cash flows are assumed to occur

   

1) 

at the start of the period.

   

2) 

uniformly throughout the period.

   

3) 

in the middle of the period.

   

4) 

at the end of the period.

Question 12

 

0 / 1 point

             

A retailer invests $1 million in a major computer network to streamline purchasing, inventory control, bill payments and income control. In which category of investment is this capital expenditure most likely to fit?

   

1) 

replacement of old assets as they wear out

   

2) 

new technology to decrease costs

   

3) 

new investments to increase revenue

   

4) 

the capital investment project does not fit any of the categories

Quiz 10

Question 1

 

0 / 1 point

Which of these is not a fixed cost?

   

1) 

depreciation on buildings

   

2) 

supervisory salaries

   

3) 

direct labour

   

4) 

local government rates

Question 2

 

0 / 1 point

             

A fixed cost is a cost that

   

1) 

remains constant as the level of activity changes.

   

2) 

varies inversely with changes in the level of activity.

   

3) 

remains constant per unit as the level of activity changes.

   

4) 

is a fixed proportion of profit.

Question 3

 

0 / 1 point

             

The relevant range describes the

   

1) 

level of activity where cost behaviour is assumed to be valid.

   

2) 

level of activity where an entity will operate.

   

3) 

level of activity where all costs can be predicted accurately.

   

4) 

physical area where an entity plans to conduct its business.

Question 4

 

0 / 1 point

             

If selling price is $18 per unit and variable costs are $13 per unit, contribution margin is:

   

1) 

$31 per unit

   

2) 

$5 per unit

   

3) 

$6 per unit

   

4) 

$1.38 per unit

Question 5

 

0 / 1 point

             

If an entity increases its level of activity

   

1) 

no costs will remain the same.

   

2) 

some costs will vary, others will not.

   

3) 

most costs will rise.

   

4) 

costs should remain the same.

Question 6

 

0 / 1 point

             

Assuming the unit contribution margin is $1 and the break-even point is 4000 units sold, if there are 5000 units sold then profit will be:

   

1) 

$1000

   

2) 

$4000

   

3) 

$5000

   

4) 

none of the options is correct

Question 7

 

0 / 1 point

             

In a cost-volume-profit graph, the break-even point is where the

   

1) 

total revenue line crosses the fixed cost line.

   

2) 

total revenue line is above the total cost line.

   

3) 

total revenue line crosses the variable cost line.

   

4) 

total revenue line crosses the total cost line.

Question 8

 

0 / 1 point

             

A change in which item would not affect the break-even point?

   

1) 

total fixed costs

   

2) 

the number of units sold

   

3) 

the sales price per unit

   

4) 

variable cost per unit

Question 9

 

0 / 1 point

             

Contribution margin equals

   

1) 

selling price less cost of sales.

   

2) 

selling price less variable costs.

   

3) 

selling price less fixed costs.

   

4) 

selling price less gross profit.

Question 10

 

0 / 1 point

             

A variable cost is a cost that

   

1) 

may or may not be incurred depending on management's discretion.

   

2) 

occurs at various times of the year.

   

3) 

varies with changes in activity.

   

4) 

all of the options are correct

Question 11

 

0 / 1 point

             

The break-even point is where:

   

1) 

total sales equals fixed costs plus profit

   

2) 

total sales equals total variable costs

   

3) 

total sales equals total costs

   

4) 

total sales equals total variable costs minus profit

Question 12

 

0 / 1 point

             

If a company's selling price is $5, variable cost is $3 and fixed costs are $100 000, the break-even sales point is

   

1) 

20 000 units

   

2) 

$50 000

   

3) 

50 000 units

   

4) 

$100 000

Quiz 9

Question 1

 

0 / 1 point

The budget which deals with expenditure relating to long term investments is the:

   

1) 

budgeted balance sheet

   

2) 

production budget

   

3) 

capital budget

   

4) 

cash budget

Question 2

 

0 / 1 point

             

Which of these is not a commonly prepared budget?

   

1) 

cash budget

   

2) 

purchases budget

   

3) 

depreciation budget

   

4) 

capital budget

Question 3

 

0 / 1 point

             

Which budget is unlikely to be prepared by the government's Department of Foreign Affairs?

   

1) 

sales budget

   

2) 

expenses budget

   

3) 

cash budget

   

4) 

program budget

Question 4

 

0 / 1 point

             

If the production budget shows that 300 bicycles are to be produced for the month, it takes 1.5 labour hours to produce a bike and labour is paid at $187.50 per 7 1/2 hour day, the budget cost of labour for the month is:

   

1) 

$22 000

   

2) 

$7500

   

3) 

$11 250

   

4) 

$6600

Question 5

 

0 / 1 point

             

The key variable which is normally the starting point for the budget process and upon which many other items are based is:

   

1) 

working hours of employees.

   

2) 

sales.

   

3) 

factory capacity.

   

4) 

production.

Question 6

 

0 / 1 point

             

An interrelated set of budgets for a future period is known as:

   

1) 

a flexed budget

   

2) 

a program budget

   

3) 

an assembly of budgets

   

4) 

a master budget

Question 7

 

0 / 1 point

             

The financial budgets include all of the following, except:

   

1) 

budgeted income statement.

   

2) 

budgeted balance sheet.

   

3) 

capital budget.

   

4) 

sales budget.

Question 8

 

0 / 1 point

             

From the following list of budgets, select the budgets and the correct order in which they would be prepared as part of the development of the operating budget?

   

1) 

sales budget, materials budget, production budget

   

2) 

production budget, sales budget, materials budget

   

3) 

production budget, sales budget, labour budget

   

4) 

sales budget, production budget, materials budget

Question 9

 

0 / 1 point

             

Which of the following is a way that budgeting and its associated planning can assist in decision making?

   

1) 

setting targets for managers

   

2) 

identifying resource constraints in the budget period

   

3) 

planning labour and other inputs

   

4) 

all the options are ways that budgeting and its associated planning can assist in decision making

Question 10

 

0 / 1 point

             

The schedule of debtors receipts is prepared to provide information for the:

   

1) 

sales budget

   

2) 

cash budget

   

3) 

production budget

   

4) 

budgeted income statement

Question 11

 

0 / 1 point

             

Applicable budgets for a service business such as a fitness centre are unlikely to include:

   

1) 

a budgeted income statement.

   

2) 

a cash budget.

   

3) 

a labour budget.

   

4) 

a direct materials budget.

Quiz8

Question 1

 

0 / 1 point

Simon operates a kitchen manufacturing business. Which cost would not be classed as a direct cost of building a kitchen for a client?

   

1) 

fittings for the kitchen cabinets

   

2) 

wages of tradesmen

   

3) 

depreciation of tools and equipment

   

4) 

timber for the kitchen cabinets

Question 2

 

0 / 1 point

           

Which of the following is NOT a characteristic of financial reports prepared for management?

   

1) 

The financial reports can be both oriented to the past or to the future

   

2) 

The financial reports are very heavily regulated.

   

3) 

The financial reports are specific purpose reports.

   

4) 

The financial reports are prepared whenever information is needed for decision making purposes.

Question 3

 

0 / 1 point

           

Which of the following can be a cost object?

   

1) 

a product

   

2) 

a department

   

3) 

a business unit

   

4) 

all of the options can be cost objects

Question 4

 

0 / 1 point

           

Which of the following is NOT a characteristic of an indirect cost?

   

1) 

Cannot be traced directly to a cost object

   

2) 

Costs incurred solely for the benefit of the department

   

3) 

Sometimes called overheads

   

4) 

They are essential to the business but not directly traceable to the individual departments

Question 5

 

0 / 1 point

           

Which of the following could NOT be considered an aspect of planning and control?

   

1) 

Deciding on the overall objectives of the business.

   

2) 

comparing budgeted plans with actual results and taking corrective action.

   

3) 

Providing financing information to a bank.

   

4) 

Setting long term (strategic) plans.

Question 6

 

0 / 1 point

           

The classification of a cost as either direct or indirect depends primarily on:

   

1) 

The type of business

   

2) 

The knowledge of the accountant

   

3) 

The computer tracing system within the organisation

   

4) 

The definition of the cost object

Question 7

 

0 / 1 point

           

Which of the following is NOT a type of responsibility centre?

   

1) 

Cost centre

   

2) 

Profit centre

   

3) 

Investment centre

   

4) 

General centre

Question 8

 

0 / 1 point

           

Departmental contribution margin is:

   

1) 

Departmental net profit less depreciation expense.

   

2) 

Departmental interest expense plus interest revenue.

   

3) 

Departmental gross profit less direct costs.

   

4) 

Departmental revenues less interest expense.

Question 9

 

0 / 1 point

           

The system used to allocate costs to cost objects is known as:

   

1) 

an accounting system

   

2) 

a management system

   

3) 

a costing system

   

4) 

none of the options is a name for a system used to allocate costs to cost objects

Question 10

 

0 / 1 point

           

Which of the following is NOT a recent development that would impact on management accounting?

   

1) 

Lean manufacturing

   

2) 

Just in time inventory management

   

3) 

AASB 101 Presentation of Financial Statements

   

4) 

Total Quality Management

Quiz 7

Question 1

 

0 / 1 point

Net working capital is:

   

1) 

cash minus current liabilities

   

2) 

current assets minus current liabilities

   

3) 

the ability to meet short-term financial commitments

   

4) 

cash plus currents assets

Question 2

 

0 / 1 point

           

Which of the following is a characteristic of debentures?

   

1) 

debentures are issued to raise debt funding

   

2) 

debentures are secured by a fixed or floating charge over the issuing entity's assets

   

3) 

debentures may be issued to the public via a prospectus

   

4) 

all of the options are characteristics of debentures

Question 3

 

0 / 1 point

           

A rights issue is:

   

1) 

the issue of new shares to existing shareholders in proportion to their current holdings

   

2) 

the right to subscribe to shares at a  price and time that are predetermined

   

3) 

an issue of shares where the shareholder has the right to decide whether the shares are classified as debt or equity

   

4) 

none of the options is true

Question 4

 

0 / 1 point

           

Temporary assets should be financed with:

   

1) 

temporary, permanent or spontaneous sources of funding.

   

2) 

temporary sources of funding

   

3) 

spontaneous sources of funding only

   

4) 

spontaneous and permanent sources of funding

Question 5

 

0 / 1 point

           

A change in the debtor's turnover period from 31 days to 25 days means that:

   

1) 

debtors are paying their accounts faster

   

2) 

debtors are taking longer to pay their accounts

   

3) 

debtors are buying less on credit

   

4) 

sales on credit are increasing

Question 6

 

0 / 1 point

           

How do entities ensure that customers are able to honour credit sales?

   

1) 

get them to fill in a credit-scoring questionnaire before extending credit

   

2) 

have their directors give a personal guarantee for the amount owing

   

3) 

limit the size of credit a customer can build up

   

4) 

all of the options are true

Question 7

 

0 / 1 point

           

Which of the following is not a source of long term financing?

   

1) 

leasing

   

2) 

fully drawn advances

   

3) 

instalment loans

   

4) 

commercial bills

Question 8

 

0 / 1 point

           

Which of the following businesses would be most likely to have the greatest proportion of working capital held as inventory?

   

1) 

an accountant

   

2) 

a supermarket

   

3) 

a medical practice

   

4) 

an auto electrician

Question 9

 

0 / 1 point

           

Forms of funding include

   

1) 

spontaneous.

   

2) 

temporary.

   

3) 

permanent.

   

4) 

all of the options are forms of funding

Question 10

 

0 / 1 point

           

Which of the following is a way that entities can raise debt from the Australian market?

   

1) 

corporate bonds

   

2) 

unsecured notes

   

3) 

debentures

   

4) 

all the options are methods of raising debt from the Australian market

Quiz 6

Question 1

 

0 / 1 point

The gross profit margin ratio is calculated by dividing

   

1) 

profit by sales revenue

   

2) 

profit by shareholder's equity.

   

3) 

gross profit by sales revenue.

   

4) 

sales revenue by cost of sales

Question 2

 

0 / 1 point

           

In a vertical analysis of an income statement, the 100% figure would be

   

1) 

net sales.

   

2) 

profit.

   

3) 

cost of sales

   

4) 

gross profit.

Question 3

 

0 / 1 point

           

Horizontal analysis of financial statements includes the

   

1) 

calculation of liquidity ratios.

   

2) 

calculation of profitability ratios.

   

3) 

calculation of percentage changes from the previous year.

   

4) 

evaluation of data relative to a base year.

Question 4

 

0 / 1 point

           

Westbury Pty Ltd has a current ratio of 2 to 1 and current liabilities of $22 000. If Westbury Pty Ltd has $10 000 of inventory, the quick asset ratio is:

   

1) 

1.6:1

   

2) 

2.5:1

   

3) 

1:1

   

4) 

1.2:1

Question 5

 

0 / 1 point

           

Profit is $109 000, after deducting interest of $11 000 and average total assets are $650 000. Return on assets to assess profitability from a management view point is:

   

1) 

18.5%

   

2) 

16.8%

   

3) 

15%

   

4) 

168%

Question 6

 

0 / 1 point

           

One ratio result on its own is meaningless unless it can be compared to an appropriate yardstick or benchmark. An appropriate benchmark would be

   

1) 

all the options are appropriate benchmarks

   

2) 

industry averages

   

3) 

other entities in the same industry

   

4) 

the entity's ratios over time

Question 7

 

0 / 1 point

           

Liquidity ratios measure the ability of an entity to:

   

1) 

survive in the long-term

   

2) 

meet its short term obligations and unexpected cash needs

   

3) 

generate profit

   

4) 

all of the options are correct

Question 8

 

0 / 1 point

           

With ratio analysis, when an income or statement of cash flows item is compared to a balance sheet item:

   

1) 

the year-end balance of the balance sheet item should be used

   

2) 

the average of the beginning and ending year values should be taken for the balance sheet item rather than just using the year-end value.

   

3) 

the beginning balance of the balance sheet item should be used

   

4) 

none of the options is correct

Question 9

 

0 / 1 point

           

The current ratio is also known as the:

   

1) 

quick asset ratio

   

2) 

working capital ratio

   

3) 

cash flow ratio

   

4) 

capital structure ratio

Question 10

 

0 / 1 point

           

The asset turnover ratio is calculated by dividing

   

1) 

average total assets by sales revenue.

   

2) 

average total assets by profit.

   

3) 

profit by average total assets.

   

4) 

sales revenue by average total assets

Question 11

 

0 / 1 point

           

A change in the inventory turnover period from 47 days to 51 days indicates:

   

1) 

inventory is being sold faster

   

2) 

it is taking longer to sell inventory

   

3) 

the inventory turnover ratio is too high

   

4) 

the inventory turnover ratio is too low

Question 12

 

0 / 1 point

           

The return on assets is a profitability ratio that measures the:

   

1) 

profit that the entity has generated specifically for its owners

   

2) 

ability of an entity to generate income from its asset investments

   

3) 

the relative amount of cash flow generated by each sales revenue dollar

   

4) 

none of the options is correct

Question 13

 

0 / 1 point

           

All of these are efficiency ratios, except:

   

1) 

asset turnover ratio.

   

2) 

times interest cover ratio.

   

3) 

days inventory.

   

4) 

times debtors turnover.

Question 14

 

0 / 1 point

           

What information would a financial institution contemplating giving a loan to an entity be most interested in?

   

1) 

profitability

   

2) 

cash flow

   

3) 

none of the options is correct

   

4) 

turnover of debtors

Question 15

 

0 / 1 point

           

If the debtors turnover ratio changes from 45 days to 40 days this indicates that:

   

1) 

it is taking longer to collect money from trade debtors.

   

2) 

the time taken to collect money from trade debtors is decreasing

   

3) 

the time taken to sell inventory is increasing

   

4) 

none of the options is correct

Quiz 5

Question 1

 

0 / 1 point

Which of the following is not an advantage of the company form of business?

   

1) 

It has a unlimited life.

   

2) 

It has limited liability.

   

3) 

It has the ability to raise large amounts of capital.

   

4) 

It must comply with the Corporations Act 2001 and other legislation.

Question 2

 

0 / 1 point

           

Which of the following would be a disadvantage of a private company going public?

   

1) 

increased disclosure requirements

   

2) 

costs associated with running IPOs

   

3) 

potential loss of control

   

4) 

all options are disadvantages

Question 3

 

0 / 1 point

           

Dividends paid:

   

1) 

increase assets.

   

2) 

increase expenses.

   

3) 

decrease income.

   

4) 

decrease retained earnings.

Question 4

 

0 / 1 point

           

One of the main attributes of a company that enables companies to raise equity finance is:

   

1) 

it is a separate legal entity

   

2) 

it can sue or be sued

   

3) 

limited liability of shareholders

   

4) 

it is listed on the securities exchange

Question 5

 

0 / 1 point

           

In which of the following financial statements would a retained earnings account be found?

   

1) 

Partnership

   

2) 

Company

   

3) 

Sole trader

   

4) 

None of the options shown would contain a retained earnings account

Question 6

 

0 / 1 point

           

Nearly all companies issue ordinary shares:

   

1) 

all of the options are true

   

2) 

but not all companies issue preference shares.

   

3) 

but not all companies issue options

   

4) 

but not all companies issue rights issues

Question 7

 

0 / 1 point

           

Retained earnings at the end of the period is equal to:

   

1) 

assets plus liabilities.

   

2) 

profit earned for the period plus retained earnings at the start of the period.

   

3) 

retained earnings at the beginning of the period plus profit earned for the period minus dividends.

   

4) 

retained earnings at the beginning of the period plus profit earned for the period minus liabilities.

Question 8

 

0 / 1 point

           

A company has which of these sets of characteristics?

   

1) 

Harder to raise funds and gives the owner full control

   

2) 

Shared control, tax advantages for family members, limited life

   

3) 

Simple to set up and control will always remain with the founder

   

4) 

Easier to transfer ownership and raise funds, and limited liability

Question 9

 

0 / 1 point

           

An expense in a company's income statement that would not appear in a partnership income statement is:

   

1) 

Income tax expense

   

2) 

Interest expense

   

3) 

Depreciation expense

   

4) 

Insurance expense

Question 10

 

0 / 1 point

           

Which of these is the most numerous type of company registered in Australia?

   

1) 

A proprietary company limited by shares

   

2) 

A public company limited by shares

   

3) 

A public company limited by guarantee

   

4) 

A public No-liability company

Question 11

 

0 / 1 point

           

ABC Restaurant Pty Ltd started the year with total assets of $90 000 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. Equity at the end of the period was:

   

1) 

$50 000.

   

2) 

$85 000.

   

3) 

$35 000.

   

4) 

$45 000.

Question 12

 

0 / 1 point

           

Limited liability for a company applies to:

   

1) 

the managers

   

2) 

the board of directors collectively

   

3) 

the individual directors

   

4) 

the shareholders

Quiz 4

Question 1

 

0 / 1 point

An accounting period that is one year in length is called:

   

1) 

the time period assumption.

   

2) 

a financial year.

   

3) 

an interim period.

   

4) 

an economic year

Question 2

 

0 / 1 point

           

Which of these will be recorded as income?

   

1) 

A loan is received from a bank

   

2) 

Money is collected from a customer owing from goods sold last week

   

3) 

A sale is made on credit

   

4) 

Additional capital is contributed by the owner

Question 3

 

0 / 1 point

           

The income statement

   

1) 

presents the income and expenses of an entity for a specific period of time.

   

2) 

reports the changes in assets, liabilities and equity over a period of time.

   

3) 

reports the assets, liabilities and equity at a specific point in time.

   

4) 

summarises the change in retained earnings over a specific period of time.

Question 4

 

0 / 1 point

           

Which of the following statements about gross profit is not true?

   

1) 

Gross profit is equal to sales less cost of sales

   

2) 

An entity cannot be sustainable unless the gross profit is positive

   

3) 

Gross profit is applicable to manufacturing and retail businesses

   

4) 

Gross profit is equal to total income minus total expenses

Question 5

 

0 / 1 point

           

If income earned is not accrued at the end of the accounting period, the result will be an

   

1) 

Understatement in liabilities and an overstatement in profit

   

2) 

Overstatement in liabilities and an understatement in profit

   

3) 

Overstatement in assets and profit

   

4) 

Understatement in assets and profit

Question 6

 

0 / 1 point

           

Which of these is not an income type item?

   

1) 

sales revenue

   

2) 

interest revenue

   

3) 

dividends received

   

4) 

unearned revenue

Question 7

 

0 / 1 point

           

Which is correct?

   

1) 

The income statement, the balance sheet and the statement of cash flows are all cash based

   

2) 

The income statement and the statement of cash flows are cash based and the balance sheet is accrual based

   

3) 

The income statement and the balance sheet are accrual based and the statement of cash flows is cash based

   

4) 

The income statement, the balance sheet and the statement of cash flows are all accrual based

Question 8

 

0 / 1 point

           

Office supplies purchased in bulk are initially charged to an asset account and are used on a daily basis. An expense will normally be recorded when:

   

1) 

supplies are ordered.

   

2) 

supplies are paid for.

   

3) 

at the end of the accounting period when a balance day adjustment is prepared for supplies used.

   

4) 

on a daily basis.

Question 9

 

0 / 1 point

           

Equity is increased by

   

1) 

liabilities.

   

2) 

expenses.

   

3) 

income.

   

4) 

dividends

Question 10

 

0 / 1 point

           

If a car is serviced on 31 May and an invoice is issued, the owner picks up the car on 31 May, the owner sends a cheque to the servicing firm on 4 June, and the firm banks the cheque on 7 June, income is recognised by the servicing firm on

   

1) 

31 May

   

2) 

4 June

   

3) 

7 June

   

4) 

5 June

Question 11

 

0 / 1 point

           

If sales = $45 000, purchases = $25 000, beginning inventory = $10 000 and ending inventory = $8000 cost of sales is:

   

1) 

$18 000

   

2) 

$27 000

   

3) 

$7000

   

4) 

$20 000

Question 12

 

0 / 1 point

           

If an expense is paid for in cash, then

   

1) 

liabilities will decrease.

   

2) 

assets will decrease.

   

3) 

assets will increase.

   

4) 

equity will increase.

Question 13

 

0 / 1 point

           

A test for distinguishing between an asset and an expense is

   

1) 

whether the item will be turned into cash by the end of the accounting period.

   

2) 

whether the benefit extends into the next accounting period.

   

3) 

whether the payment is made in cash.

   

4) 

the amount of the transaction.

Question 14

 

0 / 1 point

           

A machine is purchased for $130 000. It is estimated that it has a useful life of 8 years and will then be sold for $10 000. Using the straight-line method the balance in the accumulated depreciation account at the end of the third year of the machine's useful life is:

   

1) 

$120 000

   

2) 

$45 000

   

3) 

$48 750

   

4) 

$15 000

Question 15

 

0 / 1 point

           

If a legitimate expense is not accrued at the end of the accounting period, the result will be an

   

1) 

understatement in liabilities and an overstatement in profit.

   

2) 

overstatement in liabilities and an understatement in profit.

   

3) 

overstatement in assets and profit.

   

4) 

understatement in assets and profit.

Quiz 3

Question 1

 

0 / 1 point

Which of the following items would not appear in a statement of cash flows?

   

1) 

interest paid

   

2) 

income tax paid

   

3) 

depreciation expense

   

4) 

all of the items would appear on a statement of cash flows

Question 2

 

0 / 1 point

           

Cash receipts from interest and dividends are classified as which activity in the statement of cash flows?

   

1) 

Operating

   

2) 

Financing

   

3) 

Investing

   

4) 

Financing or investing

Question 3

 

0 / 1 point

           

The section of the statement of cash flows that is generally considered to be the best measure of a company's ability to continue as a going concern is

   

1) 

Cash flows from financing activities

   

2) 

Cash flows from investing activities

   

3) 

Cash flows from operating activities

   

4) 

Each gives an equal estimation

Question 4

 

0 / 1 point

           

Reliance on the statement of cash flows by the investment community has increased because:

   

1) 

of the relative difficulty in manipulating the statement of cash flows compared with manipulating the income statement

   

2) 

all the options are correct

   

3) 

the comparison of profit or loss to the cash flow from operating activities can highlight how an entity is managing its working capital requirements

   

4) 

lenders can use the statement of cash flows to ascertain management efficiency and the ability of the entity to generate cash flow

Question 5

 

0 / 1 point

           

Which of these is an early warning sign indicating problems with cash flows?

   

1) 

Cash from operating activities is higher than profit

   

2) 

Dividends paid are greater than cash flow from operations

   

3) 

A large amount has been spent on the acquisition of fixed assets

   

4) 

Proceeds from financing activities are used to finance investment activities

Question 6

 

0 / 1 point

           

In which section of the statement of cash flows would the payment of a dividend by a company to its shareholders be included?

   

1) 

cash flows from operating activities

   

2) 

cash flows from investing activities

   

3) 

cash flows from financing activities

   

4) 

payment of dividends would not be included in the statement of cash flows

Question 7

 

0 / 1 point

           

Which of the following statements is true?

   

1) 

For an entity to survive, the net cash flow from operating activities should be positive.

   

2) 

For an entity to survive, the net cash flow from investing activities should be positive.

   

3) 

For an entity to survive, the net cash flow from financing activities should be positive.

   

4) 

For an entity to survive, the net cash flow from operating activities should be negative.

Question 8

 

0 / 1 point

           

Which of the following items would be classified as financing activities in a statement of cash flows?

   

1) 

repayment of borrowings

   

2) 

proceeds from borrowings

   

3) 

proceeds from the issue of shares

   

4) 

all the item would be classified as financing activities

Question 9

 

0 / 1 point

           

The format followed in the preparation of the statement of cash flows is:

   

1) 

cash flows from financing activities, cash flows from operating activities, cash flows from investing activities

   

2) 

cash flows from operating activities, cash flows from investing activities, cash flows from financing activities

   

3) 

cash flows from investing activities, cash flows from financing activities, cash flows from operating activities

   

4) 

cash flows from investing activities, cash flows from operating activities, cash flows from financing activities

Question 10

 

0 / 1 point

           

Which is correct?

   

1) 

The income statement, the balance sheet and the statement of cash flows are all cash based

   

2) 

The income statement and the statement of cash flows are cash based and the balance sheet is accrual based

   

3) 

The income statement and the balance sheet are accrual based and the statement of cash flows is cash based

   

4) 

The income statement, the balance sheet and the statement of cash flows are all accrual based

Question 11

 

0 / 1 point

           

Cash inflows from financing activities include

   

1) 

interest paid.

   

2) 

receipts from the issue of shares.

   

3) 

receipts from the sale of investments.

   

4) 

dividends received.

Question 12

 

0 / 1 point

           

Changes in the balance sheet items making up non-current liabilities and equity appear in the statement of cash flows under:

   

1) 

operating activities

   

2) 

investing activities

   

3) 

financing activities

   

4) 

the reconciliation of profit with cash flow from operating activities

Question 13

 

0 / 1 point

           

A net cash outflow from investing activities:

   

1) 

indicates problems in an entity's management of its non-current assets

   

2) 

may indicate a healthy growing business which needs to replace its assets as they wear out and purchase new assets to increase its future profits

   

3) 

is always an indicator that an entity is well managed

   

4) 

all the options are true

Question 14

 

0 / 1 point

           

Which of the following would not be classified as a cash flow from investing activities?

   

1) 

proceeds from repayment of loans to other parties

   

2) 

proceeds from the sale of plant and equipment

   

3) 

proceeds from a loan to the entity

   

4) 

payment for plant and equipment

Question 15

 

0 / 1 point

           

The primary purpose of the statement of cash flows is to

   

1) 

show the deficit of cash during the period.

   

2) 

show the cash balance at the end of the period.

   

3) 

provide information about the profit or loss during the accounting period.

   

4) 

provide information about the cash receipts and cash payments made during the accounting period.

Quiz 2

Question 1

 

0 / 1 point

The effect on the accounting equation of the business banking $1000 of cash received from a debtor paying his account for an amount owing is:

   

1) 

increase the asset cash; increase profit and loss to record income

   

2) 

increase the asset cash; decrease the liability debtors

   

3) 

increase the asset cash; decrease the asset debtors

   

4) 

decrease the asset cash; decrease the profit and loss

Question 2

 

0 / 1 point

           

The income statement

   

1) 

presents the income and expenses of an entity for a specific period of time.

   

2) 

reports the changes in assets, liabilities and equity over a period of time.

   

3) 

reports the assets, liabilities and equity at a specific point in time.

   

4) 

summarises the change in retained earnings over a specific period of time.

Question 3

 

0 / 1 point

           

Which of these is not a current liability?

   

1) 

Dividend payable

   

2) 

Accounts payable

   

3) 

General reserve

   

4) 

Accrued expenses

Question 4

 

0 / 1 point

           

Which of the following is not a business transaction?

   

1) 

providing services on credit

   

2) 

purchasing inventory on credit

   

3) 

signing a contract to hire a new employee

   

4) 

withdrawal of cash by the owner from the business bank account

Question 5

 

0 / 1 point

           

The statement regarding equity that is true is:

   

1) 

It is decreased by profit

   

2) 

It is fixed at the amount initially contributed by the owners

   

3) 

It is the owners' claim on the net assets of the entity

   

4) 

It arises solely from the retained earnings of the entity

Question 6

 

0 / 1 point

           

The order in which the income statement and balance sheet are normally completed is:

   

1) 

irrelevant.

   

2) 

income statement first.

   

3) 

balance sheet first.

   

4) 

both done simultaneously.

Question 7

 

0 / 1 point

           

If total assets equal $145 000, total liabilities are $90 000 and total equity equals $55 000 then net assets equals

   

1) 

$145 000

   

2) 

$200 000

   

3) 

$95 000

   

4) 

$55 000

Question 8

 

0 / 1 point

           

Equity is increased by

   

1) 

liabilities.

   

2) 

expenses.

   

3) 

income.

   

4) 

dividends.

Question 9

 

0 / 1 point

           

The duality concept requires that each transaction must be recorded:

   

1) 

in at least two different accounts.

   

2) 

in a journal and a ledger.

   

3) 

in two sets of books.

   

4) 

first as income than as an expense.

Question 10

 

0 / 1 point

           

Some of ABC's transactions for the month of October are as follows. Which transaction, if any, is an expense for the month of October?

   

1) 

Purchased $50 worth of petrol on credit, to be paid for in November

   

2) 

Paid $1000 off a loan obtained during July

   

3) 

Paid a mechanic $250 for repair work carried out in September

   

4) 

Purchased a photocopier for $15 000

Question 11

 

0 / 1 point

           

The correct statement is:

   

1) 

The income statement prepared for internal use is similar to one prepared for external use

   

2) 

The income statement prepared for internal use is more summarised than one prepared for external use

   

3) 

The accounting standards govern the presentation of income statements prepared for both internal and external use

   

4) 

While the two income statements have common elements the statement prepared for external use is more aggregated than the one prepared for internal users

Question 12

 

0 / 1 point

           

On 14 May, Green Pty Ltd sells goods to Gold Pty Ltd with payment to follow within 60 days. On Green's balance sheet the amount owed by Gold should be recorded as:

   

1) 

a customer advance payment.

   

2) 

an account payable.

   

3) 

an account receivable.

   

4) 

inventory.

Question 13

 

0 / 1 point

           

All these statements about the balance sheet are true, except

   

1) 

assets are listed in order of liquidity.

   

2) 

it shows the cash received and cash paid for the period.

   

3) 

it reflects the accounting equation.

   

4) 

the total of the assets must equal the total of the liabilities plus equity.

Question 14

 

0 / 1 point

           

If assets are $560 000 and equity is $270 000 liabilities must be:

   

1) 

$830 000

   

2) 

$290 000

   

3) 

$560 000

   

4) 

$190 000

Question 15

 

0 / 1 point

           

A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits is the definition of:

   

1) 

Income

   

2) 

An expense

   

3) 

A liability

   

4) 

Equity

Question 16

 

0 / 1 point

           

The effect on the accounting equation of the business purchasing a new motor vehicle on credit for $35 500 is:

   

1) 

an increase in the asset Motor Vehicles of $35 500 and a decrease in the asset cash of $35 500.

   

2) 

an increase in the asset Motor Vehicles of $35 500 and a decrease in the liability accounts payable of $35 500

   

3) 

a decrease in the asset Motor Vehicles of $35 500 and an increase in the liability accounts payable $35 500

   

4) 

an increase in the asset Motor Vehicle of $35 500 and an increase in the liability accounts payable $35 500

Question 17

 

0 / 1 point

           

The balance sheet of an entity:

   

1) 

lists the assets, liabilities and equity at a point in time.

   

2) 

lists all assets and liabilities at present values.

   

3) 

gives all of the facts regarding financial position.

   

4) 

is the most important financial statement

Question 18

 

0 / 1 point

           

Which of the following statements about gross profit is not true?

   

1) 

Gross profit is equal to sales less cost of sales

   

2) 

An entity cannot be sustainable unless the gross profit is positive

   

3) 

Gross profit is applicable to manufacturing and retail businesses

   

4) 

Gross profit is equal to total income minus total expenses

Question 19

 

0 / 1 point

           

Liabilities + equity should always be:

   

1) 

less than assets

   

2) 

equal to assets

   

3) 

greater than assets

   

4) 

greater than or equal to assets

Question 20

 

0 / 1 point

           

The accounts land, accounts receivable, sales revenue and accounts payable should be classified as follows:

   

1) 

land - asset, accounts receivable - liability, sales revenue - income, accounts payable - asset

   

2) 

land - asset, accounts receivable - asset, sales revenue - liability, accounts payable - liability

   

3) 

land - asset, accounts receivable - liability, sales revenue - liability, accounts payable - liability

   

4) 

land - asset, accounts receivable - asset, sales revenue - income, accounts payable - liability

Quiz 1

Question 1

 

0 / 1 point

Private companies in Australia must have

   

1) 

at least one shareholder

   

2) 

at least two shareholders

   

3) 

at least three shareholders

   

4) 

more than fifty shareholders

Question 2

 

0 / 1 point

           

A business which is a separate legal entity can be a:

   

1) 

sole trader.

   

2) 

partnership.

   

3) 

company.

   

4) 

all options are businesses which are separate legal entities

Question 3

 

0 / 1 point

           

The information that would be of most interest to an organisation's production manager is:

   

1) 

ability to pay off debts as they fall due

   

2) 

continuity of orders for the factory.

   

3) 

annual dividends.

   

4) 

taxable income.

Question 4

 

0 / 1 point

           

Compared to the sole trader, the advantage of the partnership form of business is:

   

1) 

mutual agency

   

2) 

limited life

   

3) 

easy to set up

   

4) 

greater access to skills and resources

Question 5

 

0 / 1 point

           

The profit for a partnership must be split:

   

1) 

50/50

   

2) 

according to the contribution of each partner

   

3) 

according to the capital contributions of each partner

   

4) 

according to the partnership agreement

Question 6

 

0 / 1 point

           

Limited liability for a company applies to:

   

the managers

   

the board of directors collectively

   

the individual directors

   

the shareholders

Question 7

 

0 / 1 point

         

Management accounting reports are prepared:

   

1) 

based on GAAP and IASB accounting standards

   

2) 

to provide information for a wide range of stakeholders

   

3) 

to provide up to date information to managers for decision making

   

4) 

based only on historical figures

Question 8

 

0 / 1 point

           

Which of these is the most numerous type of company registered in Australia?

   

1) 

A proprietary company limited by shares

   

2) 

A public company limited by shares

   

3) 

A public company limited by guarantee

   

4) 

A public No-liability company

Question 9

 

0 / 1 point

           

The term 'general-purpose financial statements' refers to the fact that the information conveyed is:

   

1) 

generally reliable but not perfect.

   

2) 

useful for general purposes but not for making specific decisions.

   

3) 

potentially valuable for a number of users.

   

4) 

average information from several accounting periods.

Question 10

 

0 / 1 point

           

Resources controlled by the entity as a result of past transactions or events and from which future economic benefits are expected to flow to the entity is the definition of:

   

1) 

equity

   

2) 

assets.

   

3) 

liabilities.

   

4) 

income.

Question 11

 

0 / 1 point

           

A company has which of these sets of characteristics?

   

1) 

Harder to raise funds and gives the owner full control

   

2) 

Shared control, tax advantages for family members, limited life

   

3) 

Simple to set up and control will always remain with the founder

   

4) 

Easier to transfer ownership and raise funds, and limited liability

Question 12

 

0 / 1 point

           

Which of the following is an advantage of being a sole trader?

   

1) 

the owner has total autonomy over business decisions

   

2) 

the owner has unlimited liability

   

3) 

the business has limited life

   

4) 

the business is not a separate legal entity

Question 13

 

0 / 1 point

           

"A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits" is the definition of:

   

1) 

an expense

   

2) 

a liability

   

3) 

equity

   

4) 

revenue

Question 14

 

0 / 1 point

           

Under the Framework, the qualitative characteristic of relevance is described as:

   

1) 

information that is of value to users in decision making.

   

2) 

information that is understandable

   

3) 

information that can be recorded in accounting reports.

   

4) 

information that can be reliably measured.

Question 15

 

0 / 1 point

           

Which of the following is not a limitation of accounting information?

   

1) 

its objective nature

   

2) 

its subjective nature.

   

3) 

the use of historical data to predict future events.

   

4) 

the time delay from when events take place and their reporting.

Question 16

 

0 / 1 point

           

A disadvantage of operating as a sole trader is:

   

1) 

being unincorporated

   

2) 

having a business that is inexpensive to start up and wind down

   

3) 

having very little government regulation

   

4) 

having total control of business decisions

Question 17

 

0 / 1 point

           

The sole trader form of business organisation:

   

1) 

is classified as a separate legal entity.

   

2) 

combines the records of the business with the personal records of the owner.

   

3) 

must apply for an Australian Business Number.

   

4) 

must have at least two owners.

Question 18

 

0 / 1 point

           

The external user of accounting information is the:

   

1) 

Purchasing officer.

   

2) 

Director of Research and Development.

   

3) 

Inventory clerk.

   

4) 

Customer.

Question 19

 

0 / 1 point

           

Under the Framework the four principle qualitative characteristics for General Purpose Financial Statements are:

   

1) 

relevance, reliability, materiality, conservatism

   

2) 

relevance, reliability, comparability, understandability

   

3) 

uniformity, consistency, prudence, readability

   

4) 

comparability, verifiability, timeliness, understandability

Question 20

 

0 / 1 point

           

Which of the following is not a business transaction?

   

1) 

incurring interest on a business loan

   

2) 

purchasing office supplies

   

3) 

receiving fees for services

   

4) 

hiring a new employee

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