The Multiple Choice Questions Blog

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

 

 

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

A firm‘s capital at the beginning of a year was £16,500 and its capital at the end of the same year was £11,350.

The proprietor‘s drawings during the year totalled £3,300 and no new capital was introduced.

The firm‘s profit or loss for the year was?

Select ONE answer:

1. Loss of £1,850
2. Profit of £1,850
3. Loss of £8,450
4. Profit of £8,450

 

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 – Opening capital + Profit (-loss) – Drawings = Closing capital.  Therefore £16,500 + profit or loss – £3,300 = £11,350.  Therefore, loss = £1,850
2. Not correct
3. Not correct
4. Not correct

 

 

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

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

 

 

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

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

 

 

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

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

 

 

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