D Recording transactions and events

A business sells goods on credit for $2,400 before sales tax at 20 percent. What is the entry?

• 1 Debit receivables $2,400, credit revenue $1,920, credit sales tax $480
• 2 Debit receivables $2,400, credit revenue $2,400
• 3 Debit receivables $2,880, credit revenue $2,400, credit sales tax $480
• 4 Debit receivables $2,880, credit revenue $2,880

Inventory item: cost $12,000, expected selling price $15,000 and selling costs of $4,000. At what amount is it included in inventories?

• 1 $11,000
• 2 $12,000
• 3 $4,000
• 4 $15,000

Opening inventory was 200 units at $5. 300 units were then bought at $6 each. 350 units were sold. What is the value of closing inventory using FIFO?

• 1 $750
• 2 $1,050
• 3 $900
• 4 $840

Which cost is excluded from the cost of inventories?

• 1 Storage costs of finished goods
• 2 Delivery costs of bringing materials to the factory
• 3 Import duty on raw materials
• 4 Direct labour in production

Which of these is capital expenditure?

• 1 Installation costs of a new machine
• 2 Insurance of the machine for the year
• 3 The cost of cleaning the machine
• 4 Routine repairs to a machine

An asset cost $40,000 and has accumulated depreciation of $25,000. It is sold for $18,000. What is the result?

• 1 A gain of $3,000
• 2 A loss of $3,000
• 3 A loss of $7,000
• 4 A gain of $18,000

A machine costing $60,000 is depreciated at 25 percent a year on the reducing balance. What is the depreciation charge for year 2?

• 1 $30,000
• 2 $15,000
• 3 $45,000
• 4 $11,250

An asset cost $90,000 and is depreciated straight line over 6 years with no residual value. After 3 years its remaining useful life is re-estimated as 5 more years. What is the annual charge from year 4?

• 1 $18,000
• 2 $9,000
• 3 $15,000
• 4 $11,250

Which statement about research and development under IAS 38 is correct?

• 1 All research and development costs are expensed
• 2 All research and development costs are capitalised
• 3 Research costs are expensed, and development costs are capitalised only if the recognition criteria are met
• 4 Research costs are capitalised if the project looks promising

Insurance of $4,800 for 12 months from 1 September is paid in September. What is the prepayment at 31 December?

• 1 $0
• 2 $3,200
• 3 $1,600
• 4 $4,800

An irrecoverable debt is written off. What is the entry?

• 1 Debit bank, credit receivables
• 2 Debit receivables, credit irrecoverable debts expense
• 3 Debit irrecoverable debts expense, credit receivables
• 4 Debit allowance for irrecoverable debts, credit revenue

Receivables are $80,000 and the allowance is to be 5 percent of receivables. The opening allowance was $3,000. What is the charge to profit or loss for the allowance?

• 1 $3,000
• 2 $4,000
• 3 $7,000
• 4 $1,000

Which condition must be met for a provision to be recognised under IAS 37?

• 1 There is a present obligation from a past event, a probable outflow and a reliable estimate
• 2 The entity intends to spend money in the future
• 3 The outflow is possible but not probable
• 4 The entity cannot estimate the amount at all

A company issues 100,000 $1 shares at $1.50 each for cash. What is the entry?

• 1 Debit bank $150,000, credit share premium $150,000
• 2 Debit bank $150,000, credit share capital $150,000
• 3 Debit bank $150,000, credit share capital $100,000, credit share premium $50,000
• 4 Debit bank $100,000, credit share capital $100,000

A company with 400,000 $1 shares makes a 1 for 4 bonus issue, using share premium. What is the entry?

• 1 Debit bank $100,000, credit share capital $100,000
• 2 Debit retained earnings $400,000, credit bank $400,000
• 3 Debit share capital $100,000, credit share premium $100,000
• 4 Debit share premium $100,000, credit share capital $100,000

How are dividends on redeemable preference shares treated?

• 1 As finance costs
• 2 As a deduction from equity
• 3 As an operating expense
• 4 As revenue