1-2b. Pearson Qs

Question 1

Deciding whether to produce an item of accounting information is a question of balancing the​ __________ against the​ ______.

A. risks, returns
B. revenue, expenses
C. benefits, costs
D. time, effort

Answer 1

C. benefits, costs

Question 2

Consider the following forms of​ business:
1. Sole proprietorship
2. Partnership
3. Limited company
Which of the above businesses do not normally require formal procedures to set them​ up?

Answer 2

1 and 2

Question 3

During the most recent accounting​ period, a business sold inventories for ​£1,850 on credit that it had originally purchased for ​£1,050.

How would this transaction affect the statement of financial position of the​ business?

Answer 3

Decrease inventories 1050​, increase trade receivables 1850​, increase equity 800

Question 4

A machine acquired at a cost of 300,000 is expected to be in use for years. It is expected to have a residual value of 25,000.

It is to be depreciated using the​ straight-line method over its useful life.
What is the carrying amount of the asset after the end of ​years?

Answer 4

(300,000 - 25,000) = 275,000

( 275,000 / 5 ) x 2 = 110,000

300,000 - 110,000
= 190,000

Question 5

Consider the following two statements.

From the​ investors’ perspective:
1. Preference shares are a more risky form of investment than ordinary shares.
2. Preference shares are a more risky form of investment than loan notes.

Which of the above statements are​ correct?

Answer 5

2 only

Question 6

Which one of the following summarises the accounting​ equation?

A. Assets​ = Liabilities Equity
B. Equity​ = Assets Liabilities
C. Liabilities​ = Assets Equity
D. Equity​ = Assets Liabilities

Answer 6

D. Equity​ = Assets Liabilities

Question 7

Gladstone paid ​£10,452 for oil during the current year. At the beginning of the​ year, ​£725 was owing for oil​, and at the end of the​ year, ​£1,549 was owing for oil.

How much would be shown as the expense in the income statement for the current​ period?

Answer 7

The oil expense is 11,276

Question 8

GWCC started Year 9 with total assets of ​£18,000 and total liabilities of ​£8,000. At the end of Year​ 9, GWCC total assets stood at ​£26,000 and total liabilities were ​£12,000.

(1) Did ​’s ​GWCC owner’s equity increase or decrease during Year​ 9? By how​ much?

(2) Identify two possible reasons for the change in​ owner’s equity during the year.

Answer 8

(1)

First determine the​ owner’s equity increase or decrease and by how much.
The​ owner’s equity increased during the year by ​£4000.

(2)

Select two possible reasons for the change in​ owner’s equity from the lists​ below:
Additional investment by owner, and Profit

Question 9

Which one of the following cannot be a current​ liability?

A. Trade payables
B. A bank overdraft
C. A loan repayable in 6​ months’ time
D. Trade receivables

Answer 9

D. Trade receivables

Question 10

What would be the effect of a business overstating the value of its closing​ inventories?   

A. Understating its performance and overstating its assets
B. Overstating its performance and understating its assets
C. Overstating its performance and overstating its assets
D. Understating its performance and understating its assets

Answer 10

C. Overstating its performance and overstating its assets

Question 11

Which ONE of the following is not normally considered the right of an ordinary​ shareholder?

A. An interest in the profits earned by the company  
B. An involvement in the​ day-to-day running of the company  
C. Voting rights at meetings  
D. An interest in the net assets of the company  

Answer 11

B. An involvement in the​ day-to-day running of the company