Question 1

Identify the current liability.
A) Wages owing.
B) Loan from B Buy (due in 4 months).
C) Bill payable (due in 2 years).
D) Both A and B.

Accepted Answer

Current liabilities are debts or obligations that are due within one year. Both wages owing and a loan due in 4 months fit this definition, making them current liabilities.

Question 2

The effect on the statement of financial position when the owner contributes her private vehicle for the exclusive use of the business is:
A) increase asset vehicle; increase equity.
B) increase asset vehicle; decrease equity.
C) increase asset vehicle; increase owner's drawings.
D) none of the above.

Accepted Answer

When the owner contributes her private vehicle for the exclusive use of the business, the asset vehicle increases as the business now has a new asset. Equity also increases as the value of the asset is deemed to be an injection of capital into the business by the owner. Therefore, choice A is the correct answer. Choice B is incorrect because equity would not decrease in this scenario. Choice C is incorrect because owner's drawings do not increase as a result of the owner contributing the vehicle. Choice D is also incorrect as there is a noticeable change in the statement of financial position.

Question 3

Calculate equity.Cash at bank $3,400; inventory $1,200; accounts receivable $2,500; accounts payable $1,700; loan from ABC bank $3,500.
A) $8,900.
B) $5,300.
C) $1,900.
D) $12,300.

Accepted Answer

Equity is calculated as total assets minus total liabilities. Total assets = $3,400 (cash) + $1,200 (inventory) + $2,500 (accounts receivable) = $7,100. Total liabilities = $1,700 (accounts payable) + $3,500 (loan) = $5,200. Therefore, equity = $7,100 - $5,200 = $1,900.

Question 4

Identify the current asset.
A) Fixtures and fittings.
B) Inventory.
C) Delivery vehicle.
D) Loan to L Hardie repayable in 2 years.

Accepted Answer

The current asset is inventory as it is a stock of goods or materials kept on hand for sale or distribution. Fixtures and fittings are considered as non-current assets as they have a useful life of more than one year. A delivery vehicle and loan to L Hardie are also non-current assets.

Question 5

The effect on the statement of financial position when a debtor pays the amount that is owed is:
A) increase asset bank; decrease asset debtor; increase equity.
B) increase asset bank; increase equity.
C) increase asset bank; decrease asset debtor.
D) none of the above.

Accepted Answer

When a debtor pays the amount that is owed, it leads to an increase in the asset bank (as the cash is received), and a decrease in the asset debtor (as the amount owed by the debtor is now settled). However, there is no impact on equity in this case. Therefore, option C is the correct answer.

Question 6

If assets are $34,800 and equity is $12,700,liabilities are:
A) $47,500.
B) $22,100.
C) $47,000.
D) $22,900.

Accepted Answer

Liabilities can be calculated using the accounting equation: Assets = Liabilities + Equity. Therefore, Liabilities = Assets - Equity = $34,800 - $12,700 = $22,100.

Question 7

You are provided with the statement of financial position at the beginning of the period for a firm of accountants.You are also given four of the transactions that have occurred during the period.
REQUIRED:
a)Complete the table to show how each transaction affects the accounts shown.
b)Calculate the figures in the final column of the table from which the statement of financial position at the end of the period can be prepared.
 $\begin{array}{|l|l|l|l|l|l|l|}
\hline  &\text { Beginning balance}&\text { Transaction }1&\text { Transaction }2&\text { Transaction }3&\text { Transaction }4&\text { Ending balance}\&\text { Sheet }&&&&&\text { Sheet }\\hline \text { Assets } & \
\$ & \$& \$& \$& \$& \$ \\hline \text { Cash } & 10,000 \
\hline \text { accounts } & \
\text { receivable } & 5,500 \\hline \text { Plant \& } & \
\text { Equip } & \underline{50,000} \\hline &65,000\\hline \text { Liabilities } & \
\hline \text { accounts } & \
\text { payable } & 6,000 \\hline \text { Equity } & \underline{59,500} \
\hline & 65,500 \
\hline 
\end{array}$ 
Transactions for the period:
1.Collected $3,000 from debtors
2.Paid accounts payable $6,000
3.Owner paid in additional capital contribution of $10,000
4.Purchased on credit $2,000 of additional plant.

Accepted Answer

The answer of You are provided with the statement of...

Question 8

What is the effect on the statement of financial position when the business buys inventory on credit?
A) Increase asset inventory; increase liability creditor.
B) Increase asset inventory; increase equity.
C) Decrease asset inventory; decrease liability creditor.
D) Decrease asset inventory; increase liability creditor.

Accepted Answer

When the business buys inventory on credit, it increases the asset inventory because it is now owned by the business. However, it also increases the liability creditor because the business now owes money to the supplier for the inventory purchased on credit.

Question 9

Identify the non-current asset.
A) 5-year loan to Ti Finance.
B) Machinery.
C) Long-term investment.
D) All of the above.

Accepted Answer

All of the options listed are examples of non-current assets, which are assets that are not expected to be converted to cash or used up within a year or the operating cycle of a business. A 5-year loan to Ti Finance is a long-term receivable, machinery is a fixed asset, and a long-term investment is an investment in securities or other assets held for more than a year.

Question 10

The effect on the statement of financial position when the business pays a creditor is:
A) decrease asset creditor; decrease liability bank.
B) decrease asset bank; decrease liability creditor.
C) decrease asset bank; decrease equity.
D) none of the above.

Accepted Answer

When the business pays a creditor, it decreases the liability to the creditor (which is decreased on the statement of financial position) and the asset in the form of cash or bank balance is also decreased. Thus, choice B is the correct answer as it reflects this change in the statement of financial position. The other choices do not reflect this change accurately.

Question 11

Which of the following statements in relation to non-current assets is untrue?
A) They are held for sale or consumption.
B) They may be tangible or intangible.
C) May vary in classification according to the nature of the business.
D) They are generally held for generating wealth.

Accepted Answer

Non-current assets are not held for sale or consumption, but rather for use in the business to generate wealth.

Question 12

What is the overall effect on the statement of financial position when the business sells inventory for a profit of $3,000?
A) Increase total assets $3,000; decrease total equity $3,000.
B) Increase total assets $3,000; increase total equity $3,000.
C) No change in total assets; no change in total equity.
D) None of the above.

Accepted Answer

Selling inventory for a profit of $3,000 will increase total assets by $3,000 as cash is received from the sale. At the same time, the profit earned from the sale will increase net income, which in turn increases total equity by the same amount of $3,000. Therefore, the overall effect on the statement of financial position is an increase in both total assets and total equity by $3,000 each.

Question 13

Non-current liabilities represent:
A) amounts due to the owner of the business which are not payable within 12 months.
B) amounts due to outsiders which are not payable within 12 months.
C) amounts due and payable to outsiders within 12 months.
D) Both A and B.

Accepted Answer

Non-current liabilities are amounts owed to outsiders that are not due to be paid within the next 12 months.

Question 14

The effect on the statement of financial position of a business buying supplies for cash is to:
A) increase asset supplies; increase asset bank.
B) decrease asset supplies; decrease asset bank.
C) decrease asset supplies; increase asset bank.
D) increase asset supplies; decrease asset bank.

Accepted Answer

Buying supplies for cash increases the asset supplies as more supplies are added to the business's assets. However, it decreases the asset bank because cash is used to pay for these supplies, reducing the amount of cash or bank balances the business has.

Question 15

Calculate the missing cash at bank account balance from these statement of financial position items.Equity $5,700; accounts receivable $890; accounts payable $450; inventory $360; loan to a business $1,400.
A) $4,900.
B) $5,400.
C) $2,600.
D) $6,300.

Accepted Answer

Cash at bank account balance = Equity + Accounts receivable - Accounts payable - Inventory - Loan to a business
= $5,700 + $890 - $450 - $360 - $1,400
= $4,900

Question 16

Calculate the profit for the year if capital at the beginning is $35,000,capital at the end is $40,000 and during the year the owner withdrew $15,000.
A) $5,000.
B) $15,000.
C) $10,000.
D) $20,000.

Accepted Answer

The profit for the year can be calculated by adding the owner's withdrawals to the increase in capital, then subtracting the initial capital. The increase in capital is $40,000 - $35,000 = $5,000. Adding the withdrawals of $15,000 gives $20,000.

Question 17

The effect on the statement of financial position when the owner withdraws money from the business is:
A) decrease asset bank; decrease equity.
B) decrease drawings; decrease equity.
C) increase drawings; increase equity.
D) decrease asset bank; increase equity.

Accepted Answer

When the owner withdraws money from the business, it results in a decrease in the business's bank assets (or cash) and a corresponding decrease in the owner's equity, as the withdrawal represents a reduction in the resources owned by the business.

Question 18

Assets are classified as either current or non-current.Current assets are:
A) goodwill.
B) expected to be turned into cash within 12 months.
C) the infrastructure assets.
D) all of the above.

Accepted Answer

Current assets are those that are expected to be turned into cash within 12 months. Goodwill and infrastructure assets are typically non-current assets.

Question 19

What is the effect on the statement of financial position when the business has cash sales of $12,000 of goods that were originally purchased for $8,000?
A) Increase asset bank $12,000; increase equity $12,000.
B) Increase asset bank $12,000; decrease asset inventory $8,000; increase equity $4,000.
C) Increase asset bank $4,000; increase equity $4,000.
D) None of the above.

Accepted Answer

When the business makes cash sales of $12,000 of goods that were originally purchased for $8,000, the effect on the statement of financial position would be an increase in the asset bank by $12,000, a decrease in the asset inventory by $8,000, and an increase in equity by $4,000. Therefore, choice B is the best option. Choice A is incorrect because it does not reflect the decrease in inventory. Choice C is incorrect because it does not reflect the original cost of goods sold, which is $8,000. Choice D is incorrect because there is an effect on the statement of financial position.

Question 20

What is the effect on the statement of financial position when the business buys a car for $25,000,paying a deposit of $5,000 and promising to pay the balance within 60 days?
A) Increase asset vehicle by $5,000; decrease asset bank by $5,000.
B) Increase asset vehicle by $20,000; increase liability accounts payable by $20,000.
C) Increase asset vehicle by $25,000; decrease asset bank by $5,000; increase liability accounts payable by $20,000.
D) None of the above.

Accepted Answer

The purchase of the car increases the asset "vehicle" by $25,000. However, the company only paid a deposit of $5,000, so the asset "bank" decreases by $5,000. The remaining balance of $20,000 is recorded as a liability "accounts payable" since the promise to pay within 60 days means the company owes this amount to the supplier. Therefore, the correct option is C, which correctly reflects the increase in assets and liabilities resulting from the purchase of the car.

Quiz 2: Measuring and Reporting Financial Position

Identify the current liability.

The effect on the statement of financial position when the owner contributes her private vehicle for the exclusive use of the business is:

Calculate equity.Cash at bank $3,400; inventory $1,200; accounts receivable $2,500; accounts payable $1,700; loan from ABC bank $3,500.

Identify the current asset.

The effect on the statement of financial position when a debtor pays the amount that is owed is:

If assets are $34,800 and equity is $12,700,liabilities are:

What is the effect on the statement of financial position when the business buys inventory on credit?

Identify the non-current asset.

The effect on the statement of financial position when the business pays a creditor is:

Which of the following statements in relation to non-current assets is untrue?

What is the overall effect on the statement of financial position when the business sells inventory for a profit of $3,000?

Non-current liabilities represent:

The effect on the statement of financial position of a business buying supplies for cash is to:

Calculate the missing cash at bank account balance from these statement of financial position items.Equity $5,700; accounts receivable $890; accounts payable $450; inventory $360; loan to a business $1,400.

Calculate the profit for the year if capital at the beginning is $35,000,capital at the end is $40,000 and during the year the owner withdrew $15,000.

The effect on the statement of financial position when the owner withdraws money from the business is:

Assets are classified as either current or non-current.Current assets are:

What is the effect on the statement of financial position when the business has cash sales of $12,000 of goods that were originally purchased for $8,000?

What is the effect on the statement of financial position when the business buys a car for $25,000,paying a deposit of $5,000 and promising to pay the balance within 60 days?