AS Accounting Revision Quiz 3

Which accounting treatments illustrate the use of the matching concept?

1 comparing the receipts and payments in the cash book to obtain the balance of inventory at net realisable value rather than cost

2 using the FIFO method of inventory valuation each year

3 charging depreciation on non-current assets

• 1, 2 and 3

• 1 and 3 only

• 2 only

• 3 only

A company provides the following information.

budgeted overheads $136 000

budgeted labour hours 10 568

actual overheads $146 000

actual labour hours 10 110

What is the overhead absorption rate per labour hour?

• $12.87

• $13.45

• $13.82

• $14.44

Actual output exceeds budgeted output.

Which cost is higher than budgeted?

• fixed costs per unit

• total fixed costs

• total variable costs

• variable costs per unit

A business absorbs overheads based on machine hours.

During the last quarter it had the following budgeted and actual results.

actual overheads $118 505

actual machine hours 6 230

budgeted overheads $126 725

budgeted machine hours 6 850

By how much were overheads over or under absorbed?

• over absorbed by $3250

• over absorbed by $8220

• under absorbed by $3250

• under absorbed by $8220

How is the issue of inventory from stores valued when using FIFO?

• It is calculated using the average purchase price of goods.

• It is calculated using the price paid for the earliest delivery of goods.

• It is the same as the current replacement cost.

• It is the same as the most recent price paid for the goods.

Samuel manufactures a single product. Total cost per unit is $70 when production is 100 units per week, and $62.50 when production is 160 units per week.

What are the total fixed costs per week?

• $450

• $750

• $1200

• $2000

Which item is a direct cost?

• cost of production materials

• factory supervisor’s salary

• machine cleaning materials

• stores staff wages

X and Y are in partnership. They admit Z as a new partner. The profit sharing ratio will be 2 : 1 : 1 respectively. Goodwill is valued at $100 000. Goodwill is not to be retained in the books of account.

Other assets are revalued at $40 000 in excess of their net book value.

Z introduces $250 000 cash and office equipment valued at $30 000.

What is Z’s capital account balance after his admission?

• $255 000

• $265 000

• $305 000

• $315 000

A partnership revalues its non-current assets upwards.

What are the ledger entries to record this?

• debit non-current assets

  credit bank

• debit non-current assets

  credit partners’ capital accounts

• debit non-current assets

  credit partners’ current accounts

• debit non-current assets

  credit revaluation reserve

Why is goodwill adjusted in the books of account when a new partner is admitted?

• A more accurate value of non-current assets is shown in the statement of financial position.

• Original partners can be credited for their efforts in building up the partnership business.

• Partners can take higher drawings as a result of their share of the goodwill.

• The new partner knows how much they have to introduce as capital.