[Capital and revenue expenditure and receipts ]
➡️QUESTION⬅️
Which are examples of capital receipts?
1 a loan received from a bank, repayable in three years’ time
2 a profit made on the sale of a non-current asset
3 cash received from the sale of a non-current asset at book value
4 rent received from letting part of the business premises to a tenant
A 1and3
B 1and4
C 2and3
D 2and4
ANSWER A
➡️QUESTION⬅️
Leroy has an engineering business. On 31 May he received an invoice from AB Machines showing the following:
-cost of replacement parts for machine
-cost of repairs to machine
-cost of machine
-cost of installation of machine
Which costs are capital expenditure in Leroy’s books?
A machine, installation
B machine only
C replacement parts, machine
D replacement parts, repairs, installation
ANSWER A
[Accounting for depreciation and disposal of non-current assets ]
➡️QUESTION⬅️
Jon paid $18000 for machinery on 1 January 2016.
He depreciated this asset using the diminishing (reducing) balance method at 5% per annum.
What was the balance on the provision for depreciation account on 1 January 2018?
A $1755 credit
B $1755debit
C $1800credit
D $1800 debit
ANSWER A
➡️QUESTION⬅️
What causes computer equipment to depreciate?
A depletion
B economic reasons
C passage of time
D physical deterioration
ANSWER B
➡️QUESTION⬅️
A café owner decided to use the revaluation method to calculate epreciation on the kitchen equipment.
Kitchen equipment costing $3200 was purchased on 1 January 2016. This was expected to have a useful life of 4 years.
Additional kitchen equipment was purchased during the year for $400. The total kitchen equipment was valued at $2900 on 31 December 2016.
What was the depreciation charge for the year ended 31 December 2016?
A $300
B $700
C $800
D $900
ANSWER B
➡️QUESTION⬅️
Imran’s financial year ends on 31 December. A machine purchased on 1 January 2015 for
$20000 was sold on 30 June 2017 for $8500. The machine had been depreciated using the
straight-line method at 25% per annum on a month by month basis.
What was the profit or loss on the disposal of the machine?
A loss $1000
B loss $1500
C profit $1000
D profit $1500
ANSWER C
➡️QUESTION⬅️
Why is depreciation charged on a non-current asset?
A to accumulate a fund of money to replace the asset
B tocharge the cost of using the asset against income
C to determine the market value of the asset
Dto ensure that profits are not understated
ANSWER B
[Other payables and other receivables ]
➡️QUESTION⬅️
What may a credit balance on a ledger account represent?
A accrued income
B asset
C expense
D prepaid income
ANSWER D
[Irrecoverable debts and provision for doubtful debts ]
➡️QUESTION⬅️
A trader created a provision for doubtful debts.
Why did he create this provision?
1 to ensure that money was available to cover bad debts
2 to ensure that the current assets were not overstated
3 to ensure that the matching/ accruals principle was followed
4 to ensure that the profit for the year was not overstated
A 1and3
B 1 only
C 2and4only
D 2,3and4
ANSWER D
[Valuation of inventory ]
➡️QUESTION⬅️
On 1 September 2018 Chan owed Tan $570. During September 2018 the following transactions took place.
-Tan sold goods, $380, on credit to Chan
-Chan returned goods, $150, to Tan
-Chan paid Tan $500 by cheque
What was the balance brought down on Chan's account in Tan’s ledger on 1 October 20187
A $300 credit
B $300 debit
C $840 credit
D $840 debit
ANSWER B