PFA ICA1 D

BM4112: Challenger

Part D

Multiple Choice

What is the prudence concept?

• Not overstate revenue & not understate liabilities

• Not understate revenue & not overstate liabilities

• Not overstate revenue & not overstate liabilities

• Not understate revenue & not understand liabilities

Multiple Choice

Challenger's cost of inventory is valued at $1,000,000, but its NRV is valued at $900,000. Which value should Challenger use to record inventory?

• $1,000,000

• $900,000

Prudence Concept

• Not to overstate Asset/Revenue

• Not to understate Liabilities/Expenses

• Record the lower amount for inventory

Multiple Choice

Challenger is a Limited Liability Company. You are a shareholder in Challenger. Challenger just went into debt and you need to pay. How much do you need to pay?

• The amount you invested

• Equal amount spilt with the other shareholders

Types of Business Organisation Concept

• Challenger is a Public Limited Company

• Shareholders are only liable to the amount they invested

Multiple Choice

Challenger is in debt! Where can they get the funds to pay it off??

• Funds from shares that the public can buy

• Sell off its current assets

Types of Business Organisation concept

• Challenger is a Public Limited Company,

• Shares may be sold and traded to the public freely

• When Challenger needs more funds to pay its debt or sell new goods and services, 

• it can generate the funding it requires by letting the public buy its shares.