Chap 14: Company financial statements under UK GAAP

1. What does GAAP stand for?

• A. Generally Agreed Accounting Policies

• B. Generally Accepted Accounting Policies

• C. Generally Agreed Accounting Practice

• D. Generally Accepted Accounting Practice

2. In the UK which of the following are responsible for the preparation of company annual financial statements?

• A The shareholders

• B The board of directors

• C. The auditors

• D. The members

3. Indicate whether the following statements are true or false.

Creditors falling due after more than one year are equivalent to current liabilities.

A True

B. False

Non-current assets are equivalent to fixed assets.

C. True

D. False

4. Teacup Ltd uses the first-in, first-out (FIFO) method to value its stocks of finished goods. At 1 January there were stocks of 25 units that had cost £54 each. During January the following transactions occurred: 8 January 10 units were sold for £62 each 15 January 10 units were purchased for £55 each 22 January 10 units were sold for £62 each What was the value of Teacup Ltd's closing stock at 31 January?

• A £815

• B £810

• C £825

• D £820

5. Diamond Ltd issues 250.000 equity shares with a nominal value of £2 each at a price of £3.55 each for cash Which or the following sets of entries would be made to record this transaction?

• A. Credit Bank £887,500, Debit Share capital £500,000, Debit Share premium £387,500

• B. Debit Bank £887,500, Credit Share capital £250,000, Credit Share premium £637,500

• C. Debit Bank £887,500, Credit Share capital £500,000, Credit Share premium £387,500

• D. Credit Bank £887,500, Debit Share capital £250,000, Debit Share premium £637,500

6. The following balances have been extracted from Saracen Ltd's trial balance at 31 December 20X8: Debit £ Credit £

Retained profits at 1 January 20X8 4,695,600

10% debentures issued in 20X5 1,300,000

Debenture interest paid 65,000

Operating profit for the year ended 31 December 20X8 is £520,000. Corporation tax for the year has been estimated at £156,000. What is the figure for retained profits in Saracen Ltd's balance sheet as at the year end, 31 December 20X8?

• A £4,929,600

• B. £4,994,600

• C £5,059,600

• D £5,215,600

7. Which of the following transactions are not recorded in a company's cash at bank account?

• A. Bonus issue of shares

• B. Sale of goods for cash to a customer

• C. Receipt of loan from a bank

• D. Purchase for cash of shares in another company