Quiz revision 2

A sole trader had opening capital of $10,000 and closing capital of $4,500. During the period, the

owner introduced capital of $4,000 and withdrew $8,000 for their own use.

Their profit or loss during the period was?

• $9,500 loss

  

• $1,500 loss

•  $7,500 profit

•  $17,500 profit

Answer explanation

In the year to 31 October 20X6, Nadine recorded some expenses that should have been charged to

profit or loss as asset expenditure.

What is the effect on her profit for the year to 31 October 20X6 and her net assets at that date?

• Profit - Overstated, Net assets - Overstated

• Profit - Overstated, Net assets - Understated

• Profit - Understated, Net assets - Overstated

• Profit - Understated, Net assets - Understated

Helen buys goods for her business with a list price of $450 for cash. She receives a 10% trade discount.

Which of the following journal entries correctly records this transaction?

• DEBIT Purchases $450, CREDIT Bank $450

  

• DEBIT Purchases $405, CREDIT Trade payables account $405

  

• DEBIT Purchases $450, CREDIT Bank $405, CREDIT Discounts received $45

  

• DEBIT Purchases $405, CREDIT Bank $405

Answer explanation

Transactions are recorded net of trade discounts. The goods were bought for cash, not on credit.

Melissa is not registered for sales tax purposes. She has recently received an invoice for goods for resale

which cost $500 before sales tax, which is levied at 20%. The total value was therefore $600.

What is the correct entry to be made in Melissa's general ledger in respect of the invoice?

• DEBIT Purchases $500, DEBIT Sales tax $100, CREDIT Trade payables account $600

•  DEBIT Purchases $600, CREDIT Sales tax $100, CREDIT Trade payables account $500

•  DEBIT Purchases $500, CREDIT Trade payables account $500

  

• DEBIT Purchases $600, CREDIT Trade payables account $600

Answer explanation

Melissa is not registered for sales tax purposes and therefore cannot reclaim the input sales tax of

$100.

In the year to 30 November 20X6 Norah paid $1,765 for electricity. At 1 December 20X5 she had an

accrual of $264 for electricity. At 30 November 20X6 the accrual was $312.

What is the charge for electricity in Norah's statement of profit or loss for the year to 30 November

20X6?

Answer explanation

$(1,765 – 264 + 312)

Beth's draft financial statements for the year to 31 October 20X5 showed a loss of $1,486. When she

prepared the financial statements, Beth did not include an accrual of $1,625 and a prepayment of

$834. Beth subsequently adjusted the financial statements to reflect the accrual and prepayment.

What was Beth's profit or loss for the year to 31 October 20X5 following the inclusion of the accrual

and prepayment?

• A loss of $695

  

• A loss of $2,277

•  A loss of $3,945

•  A profit of $1,807

Answer explanation

At 31 December 20X2 a company's receivables totalled $400,000 and an allowance for receivables of

$50,000 had been brought forward from the year ended 31 December 20X1.

It was decided to write off debts totalling $38,000 and to adjust the allowance for receivables to 10% of

the receivables.

What charge for irrecoverable and doubtful debts should appear in the company's statement of profit

or loss for the year ended 31 December 20X2?

Answer explanation

• A charge of $518

•  A credit of $518

  

• A charge of $19,283

  

• A credit of $19,283

Answer explanation

Lavinia valued her inventory at 31 December 20X2 at its cost of $11,480. This included some items

which cost $975 which have been hard to sell. Lavinia intends to have these items repacked at a cost

of $225. This will allow her to sell them for $450.

What was the correct value of closing inventory at 31 December 20X2?

Answer explanation

Answer explanation