Recap Financial Accounting

Should an asset be revalued every year if the revaluation policy is chosen?

• • Yes to market value

• • No only when necessary

John & Co sold an item of used machinery at $5000.

What will be the effect on financial statements?

1. Sales will increase by $5000
2. Profit will increase by $5000
3. Non-Current assets will decrease by $5000

• • 1 & 2

• • 1 & 3

• • 3 only

• • 1,2 & 3

At 31 May 2016 Moo was being sued by a supplier over a disputed contract

Moo's solicitors advise that the supplier is likely to be successful and that damages of $100,000 will be awarded against them

How should this be dealt with in the accounts?

• • A disclosure in the accounts

• • Dr Expense 100,000 Cr Provision 100,000

Inventory is harder to liquidate therefore it is eliminated from this ratio.

• • Current ratio

• • Quick ratio

Does an increase in gross profit have to equate to an increase in gross margin?

• True

• False

The operating profit margin ratio is calculated by dividing operating profit by:

• Total assets

• Total revenue

Which of the following is NOT one of the three main categories in the statement of cash flows?

• Operating activities

• Investing activities

• Financing activities

• Administrative activities

Cash flows from operating activities include:

• Sale of long-term investments

• Payments to suppliers and employees

• Purchase of property and equipment

Cash received from the sale of long-term investments should be classified as a cash flow from:

• Operating activities

• Financing activities

• Investing activities

In the indirect method of preparing the statement of cash flows, depreciation expense is:

• Added back to net income

• Deducted from net income

• Ignored in the statement of cash flows