G Preparing financial statements

Written by Fahad Mirza (ACCA)

ACCA · Financial Accounting · 10 questions

Name: ____________________ Date: ____________

The estimated income tax for the year is $30,000. The previous year's provision of $25,000 was settled at $26,200. What is the income tax expense?
- A $31,200
- B $26,200
- C $30,000
- D $28,800
Revenue is $500,000, cost of sales $300,000, selling expenses $50,000 and administrative expenses $40,000. What is the operating profit?
- A $200,000
- B $110,000
- C $150,000
- D $160,000
Which is an adjusting event after the reporting period?
- A A fire destroys a warehouse after the year end
- B A new loan is taken out after the year end
- C The company issues new shares after the year end
- D A customer goes bankrupt, confirming that a receivable at the year end is irrecoverable
Which is a non-adjusting event after the reporting period?
- A A fire destroys a warehouse after the year end
- B Inventory is found to be damaged before the year end
- C A customer's bankruptcy confirms a debt owed at the year end is irrecoverable
- D A court case that was ongoing at the year end is settled
Profit before income taxes is $50,000, depreciation $8,000, receivables increased by $6,000, payables increased by $3,000 and inventories decreased by $2,000. What is cash from operations (before income taxes paid)?
- A $53,000
- B $57,000
- C $41,000
- D $59,000
In a statement of cash flows, the purchase of equipment is classified as:
- A Operating activities
- B It is not shown
- C Financing activities
- D Investing activities
In a statement of cash flows, the payment of a dividend to shareholders is classified as:
- A Operating activities
- B Financing activities
- C Investing activities
- D It is not shown
A sole trader's cost of sales is $60,000 and goods are sold at a mark-up of 25 percent on cost. What are the sales?
- A $85,000
- B $80,000
- C $60,000
- D $75,000
Opening net assets were $40,000 and closing net assets $55,000. Drawings were $12,000 and no capital was introduced. What was the profit for the year?
- A $67,000
- B $15,000
- C $3,000
- D $27,000
A revaluation gain on a non-current asset is reported in:
- A Other comprehensive income
- B Operating expenses
- C Cost of sales
- D Revenue

Answer key

1. A, 2. B, 3. D, 4. A, 5. B, 6. D, 7. B, 8. D, 9. D, 10. A

The under-provision of $1,200 is added to this year's estimate.
500,000 - 300,000 - 50,000 - 40,000 = 110,000.
An adjusting event provides evidence of a condition that existed at the reporting date.
The fire is a new condition that arose after the year end, so it is disclosed if material.
Add depreciation, subtract an increase in receivables, add an increase in payables and add a decrease in inventories.
Buying and selling non-current assets are investing flows.
Dividends are a return to those who finance the entity.
Sales = 60,000 x 1.25 = 75,000. A 25 percent margin on sales would be $80,000, which is a different figure.
Profit = increase in net assets + drawings = 15,000 + 12,000.
It is recognised in other comprehensive income and added to the revaluation surplus.