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MCQs Chapter 5 Sol

This document contains 13 multiple choice questions testing knowledge of accounting concepts related to assets, liabilities, equity, depreciation, and preparing financial statements. It addresses the key accounting equations of assets = liabilities + equity and determining equity as assets - liabilities, as well as identifying components of equity like retained earnings and reserves. It also covers accounting for inventory at the lower of cost or net realizable value, and recording assets acquired from other entities at fair value.

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karenfouad156
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50 views

MCQs Chapter 5 Sol

This document contains 13 multiple choice questions testing knowledge of accounting concepts related to assets, liabilities, equity, depreciation, and preparing financial statements. It addresses the key accounting equations of assets = liabilities + equity and determining equity as assets - liabilities, as well as identifying components of equity like retained earnings and reserves. It also covers accounting for inventory at the lower of cost or net realizable value, and recording assets acquired from other entities at fair value.

Uploaded by

karenfouad156
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

If total assets equal $50000 and total liabilities are $35000 then total equity equals:
a. $ 15 000.
b. $35 000.
c. $50,000.
d. $75 000.

2. If total assets equal $295 total liabilities are $165and total equity equals $130, then net assets equals:
a. $2950.
b. $130.
c. $165.
d. $30.

3. C. Mickelborough purchases 1500 shares of McPherson Ltd that were listed on the stock exchange.
As a result of this transaction, what will be the effect on the total equity of McPherson Ltd?
a. Total equity will remain unchanged
b. Total equity will increase
c. Total equity will decrease
d. Total equity will be greater than total assets
e
4. Equity is determined as:
a. Assets less liabilities at a point in time.
b. Assets less liabilities for a period of time.
c. Assets plus profits.
d. Assets plus retained earnings.

5. Which of the following is not part of shareholders' equity in the statement of financial position?
a. Dividends payable
b. Share capital
c. Retained earnings
d. General reserve

6. Which of the following does not affect equity?


a. Cash at bank
b. Sales
c. Expenses
d. Revaluation reserve

7. In the statement of financial position, how is inventory categorised?


a. Current liability
b. Non-current asset
c. Non-current liability
d. Current asset
8. Stealth Health Pty Ltd transfers $75 000 from the retained earnings account to a general reserve
account. What is the effect of this transfer on the company's statement of financial position?
a. Total shareholders' equity remains unchanged
b. Total shareholders' equity will decrease
c. Total shareholders' equity will increase
d. Total shareholders' equity will decrease and assets will decrease

9. Which of the following would not be classified as 'cash and cash equivalents'?
a. Accounts receivable
b. Short-term deposits
c. Cash at bank
d. Petty cash

10. At the end of the financial period the cost of an entity's inventory on hand is $25 500. The net
realisable value of the inventory is deemed to be $28 000. What value for inventory must be shown on
the entity's statement of financial position for the reporting period?
a. $28 000
b. $25 500
c. $2500
d. None of the above

11. Which of the assets listed below is not required to be depreciated/amortised?


a. Trademarks
b. Machinery
c. Motor vehicles
d. Land

12. Office furniture was purchased for $15000 and its useful life is estimated to be 7 years. The residual
value of the furniture is $1000. What is the annual depreciation amount?
a. $1000
b. $14 000
c. $2000
d. $1400

13. Angel Campers purchased a motor vehicle at a cost of $40000. The motor vehicle's fair value is
assessed to be $10000 and its carrying amount is $12000. TTC Ltd purchased the motor vehicle from
Angel Campers for $14000. What value is recorded for this motor vehicle in the statement of financial
position of TTC Ltd?
a. $40000
b. $14000
c. $12000
d. $10000

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