Chapter 23: MULTIPLE CHOICE ANSWERS

(35 × $15) + (30 × $20) = $1,125

Therefore use NRV.

Total inventory figure = $116,400 + $1,000 + $5,500 = $122,900.

5% × (50,000 – 1,000) = $2,450

This is an example of an irrecoverable debt being written off. Credit the receivables account in order to clear the debt and debit the irrecoverable debts account with the amount of the debt written off.

There is a specific allowance for the debt of $900 which has still not been written off as irrecoverable, and an additional allowance equivalent to 2% of the remaining balance based on past history.

Depreciation to disposal

Yr 1: $2,400 × 20% = $480

Yr 2: $(2,400 – 480) × 20% = $384

Yr 3: $(2,400 – 480 – 384) × 20% = $307.20

$100,000 + $7,000 + $5,000 = $112,000

Depreciation charge = $11,600 (2% × $580,000)

NBV = $452,400 [$580,000 – ($116,000 + $11,600)]

Depreciation charge = $9,375 [25% × $37,500 ($50,000 – $12,500)]

Net book value = $28,125 [$50,000 – ($12,500 + $9,375)]

$8,500 – ($400 × 2) = $7,700

The other three lists all contain one item which should appear on the debit side of the account.

The bank reconciliation should have been calculated as follows:

Items 3 and 4 relate to timing differences only and would appear in the bank reconciliation.

The profit will be understated by the following amount:

Items 1 and 3 would result in an imbalance in the trial balance and therefore require an entry to the suspense account. Items 2, 4 and 5 do not affect the balancing of the accounts.

Closing net assets – Opening net assets = Capital Introduced + Profit for year – Drawings

$6,740 – $7,600 = 0 + Profit for year – 1,000

Profit for year = $140

Closing net assets – Opening net assets = Capital Introduced + Profit for year – Drawings in year

$27,000 – $10,000 =Capital Introduced + $5,000 – $2,000

Capital Introduced = $14,000

15/115 = 13.04%

Closing net assets – Opening net assets = Capital Introduced + Profit for year – Drawings

$4,500 – $10,000 = $4,000 + Profit/(loss) – $8,000

Loss for year = $1,500

Cost of Sales = 75% × $17,000 = $12,750

Purchases = $12,750 + $1,350 – $3,500 = $10,600

Credit sales can be calculated as a balancing figure on the Receivables ledger control account.

Credit sales = $412,400, cash sales = $112,900,

Total sales = $525,300

Sales = $84,000 × 100/60 = $140,000

The rent expense for the year should be:

(5/12 × $24,000) + (7/12 × $30,000) = $27,500

Statements 2, 3 and 5 are correct

The other lists contain adjusting items

Preference dividends 8% × $50,000 = $4,000

Total payments = $12,000 + $4,000 = $16,000

All other lists contain one or more items that would not appear in the calculation of net cash from operating activities

Turnover = X $16 + Y $8 - Intercompany transaction $2 = $22.

y is a subsidiary and Z is an associate. Therefore Z's turnover will not be included and the inter-company sales with z will not be eliminated.

11 + 10 – 3 (intra group trading) + 1 (PURP) = 19

Profit = (600 – 338 – 113 – 38) × 30% = 33,300

Profit = (960 – 540 – 180 – 60) × 40% = 72,000

Sales $600 – Cost $500 = Profit $100

Half of these goods are in inventory = PURP $100 × ½ = $50 which needs to be added back to cost of sales

20X6 550 / 2,500 = 22.0%

20X5 360 / 2,000 = 18%

20X6 500 / 2,500 = 20%

20X5 500 / 2,000 = 25%

Purchases = 3,800 + 32,500 – 6,000 = 30,300

4,750 / 30,300 = 57 days

Current ratio

18,940 / 7,221 = 2.62

Quick ratio

5,320 + 10,420 + 3,200 = 13,620 / 7,221 = 1.89

146,000 / 24,000 = 6.1 times

The other three contain items which are not considered to contribute towards reliability.