Category: Accounting

A firm has net assets of £8,000, net current assets of £3,000 and no long-term debt.

Its fixed assets are?

Select ONE answer:

1. £3,000
2. £5,000
3. £8,000
4. The total of fixed assets cannot be ascertained from the information provided.

 

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 2

1. Not correct
2. Correct – Fixed Assets + Net Current Assets = Net Assets.  Thus Fixed Assets + £3,000 2= £8,000, Therefore, Fixed Assets = £5,000
3. Not correct
4. Not correct

 

 

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Catherine O’Byrne‘s trade is seasonal.

Her monthly sales are 50% higher in the three summer months than in the other nine months of the year. She earns a gross margin of 25% in the summer months and 20% during the rest of the year.

If her total sales for the year ended 30 April were £283,500, her cost of sales for the same period was?

Select ONE answer:

1. £212,625
2. £222,075
3. £223,256
4. £226,800

 

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 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

Answer 2 analysis:

• Let sales in the low season = X
• Therefore, Sales in the high season = 1.5X
• Total sales = £283,500 = (9 X) + (3 * 1.5X) = 13.5X
• Therefore X = £283,500 / 13.5 = £21,000
• Sales in 9 off-peak months = 9 * £21,000 = £189,000
• Sales in 3 summer months = 3 * £21,000 * 1.5 = £94,500
• 3 months – 9 months = Total Sales: £94,500 + £189,000 = £283,500
• Gross Profit Margin: 25% – 20%
• Gross Profit (sales * gross profit margin: £23,625 +£37,800
• Cost of Sales (sales – gross profit): £70,875 +£151,200 = £222,075

 

 

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At the end of its most recent financial year, a firm, which sells exclusively on credit, was owed £60,000 by its debtors. The firm applies a mark-up of 25% on all goods and allows its debtors 60 days credit (based on 360 days in the firm’s financial year).

Its gross profit for the year was?

Select ONE answer:

1. £72,000
2. £90,000
3. £122,000
4. £180,000

 

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 1

1. Correct – Days credit given = (Debtors / Credit sales) * 360. Therefore 60 = (£60,000 / Credit sales) * 360. Therefore, Credit sales = £360,000. Cost + 25% = £360,000. Therefore, Cost = £288,000. Gross profit = Sales – Cost of sales = £360,000 – £288,000 = £72,000
2. Not correct
3. Not correct
4. Not correct

 

 

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Over the course of an accounting period a business’s debtors increased by £40,000.

If 80% of the business’s total sales of £750,000 were made on credit, no discount was allowed to debtors and no bad debts were written off, the amount of money received from debtors during the period was?

Select ONE answer:

1. £560,000
2. £640,000
3. £710,000
4. £790,000

 

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 1

1. Correct – Let opening debtors = 0. Therefore closing debtors = £40,000. Assume Bank Balance c/d 0 thus Sales (Credit) (£750k * 80%) = £600,000 – Therefore Cr Bank £560,000 Cr Debtors Balance b/d £40,000 = Total £600,000
2. Not correct
3. Not correct
4. Not correct

 

 

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A business’s rate of stock turnover during any given accounting period is calculated as . . .?

Select ONE answer:

1. the business’ sales for that period divided by the value of its stock at the beginning of the period.
2. the business’ sales for that period divided by the value of its stock at the end of the period.
3. the business’ purchases for that period divided by the value of its stock at the end of the period.
4. the business’ cost of sales for that period divided by the average of the business“ stock during the period (the average being the sum of its stock at the beginning of the period and its stock at the end of the period divided by two).

 

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 – Stock Turnover = Cost of Sales / Average Stock

 

 

This work is licensed under a Creative Commons Attribution 4.0 International License.