Accounting Multiple Choice Question – 9 April 2020

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

Accounting

The following information relates to a hardware merchant, who is not registered for VAT and who makes all purchases on credit.

at 31 December 1996         at 31 December 1995

Stock:                  £10,600                                  £10,300
Debtors:             £5,400                                    £4,800
Creditors:          £5,900                                    £6,300

Transactions during 1996:

  • Amount received from debtors £127,600
  • Amount paid to creditors £93,200
  • Cash sales £23,200
  • Discount allowed to debtors £2,400
  • Bad debts written off £800
  • Increase in provision for doubtful debts £250
  • Refunds received from creditors £80

The gross profit earned by the merchant during 1996 was?

Select ONE answer:

  1. £38,820
  2. £38,870
  3. £61,750
  4. £62,180

 

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

  1. Not correct
  2. Not correct
  3. Not correct
  4. Correct
            • Debtors
  • Dr Balance b/d £4,800
    Dr Sales £131,400
    Dr Totals £136,200

            • Cr Bank £127,600
              Cr Discount Allowed £2,400
              Cr Bad Debts £800
              Cr Balance b/d £5,400
              Cr Total £136,200

               

  • Total Sales = Cash Sales + Credit Sales = £23,200 + £131,400 = £154,600
          • Creditors
  • Dr Bank £93,200
    Dr Balance c/d £5,900

            • Cr Balance b/d £6,300
              Cr bank 80
              Cr Purchases credit £92,720
              Cr Totals £99,100

               

  • Cost of Sales = Opening Stock + Purchases – Closing Stock = £10,300 + £92,720 – £10,600 = £92,420
  • Gross profit = Sales – Cost of sales = £154,600 – £92,420 = £62,180

 

 

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Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor

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