Tag: A-Level

If an item of stock which originally cost £1,420 can be sold for £1,600, after incurring further completion costs of £110 and advertising costs of £130, then it should be included in the balance sheet stock valuation at:

Select ONE answer:

1. £1,360
2. £1,420
3. £1,490
4. £1,600

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 – The net realisable value of an item of stock is its actual or estimated selling price less all further costs to completion and all costs to be incurred in marketing, selling and distributing the item. In this case, this is £1,600 – £110 – £130 = £1,360. According to IAS / GAAP, when the NRV of an item is less than its cost, the item should be valued at its NRV, i.e. £1,360.
2. Not correct
3. Not correct
4. Not correct

 

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

The net realisable value of an item of stock is its actual or estimated selling price . . .

Select ONE answer:

1. plus all further costs to completion and all costs to be incurred in marketing, selling and distributing the item.
2. less all further costs to completion.
3. less all further costs to completion and all costs to be incurred in marketing, selling and distributing the item.
4. None of the above.

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 3

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

 

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

A firm has two categories of stock. The cost and net realisable value (NRV) of each are as follows:

Cost          NRV

Category 1         £35,000   £22,000
Category 2         £22,000   £25,000

Select ONE answer:

1. £44,000
2. £47,000
3. £57,000
4. £60,000

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

Correct – Stock should be valued at the lower of its cost and its net realisable value (NRV) on an item- by-item or category-by-category basis (not on a total basis)

1. Category: Cost or NRV = Lower of Cost and NRV
   1 £35,000 or £22,000 = £22,000
   2 £22,000 or £25,000 = £22,000
   = Total of £44,000
2. Not correct
3. Not correct
4. Not correct

 

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

A firm records all transactions relating to the expense of both postage and stationery in a single ledger account.

At the beginning of a financial year. there is both a debit balance brought down of £50 and a credit balance brought down of £100 on the account.

Which of the following alternatives could explain this situation?

Select ONE answer:

1. The firm has a stock of stationery worth £50.
2. Postage is prepaid to the extent of £100.
3. The firm has a stock of stationery worth £100.
4. Postage payable amounts to £50.

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 – In any ledger account, a debit balance brought down represents either an asset or an expense and a credit balance brought down represents either a liability or income. Since the balance on an expense account is either an accrual or a prepayment, the £50 balance has to be a prepayment (asset) and the £100 balance has to be an accrual (liability). This rules out options B (£100 asset), C (£100 asset) and D (£50 liability). When the stationery expense is prepaid, there is a stock of stationery remaining at the end of the year.
2. Not correct
3. Not correct
4. Not correct

 

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

A firm records all transactions relating to the expense for both rent and rates in a single ledger account.

At the start of the year there was an accrual in respect of rent of £2,500 and a prepayment in respect of rates of £3,000.

At the end of the year there was rent due of £4,500 and rates prepaid of £3,500. The total expense for both rent and rates for the year was £36,000.

The total amount paid during the year. in respect of both rent and rates, was:

Select ONE answer:

1. £34,500
2. £35,500
3. £36,500
4. £37,500

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
   Rent & Rates Expense
   Dr Balance b/d (Rates prepaid) £3,000
   Dr Bank £34,500
   Dr Balance c/d (Rent due) £4,500
   Cr Balance b/d (Rent accrued) £2,500
   Cr Profit & Loss (Expense for the year) £36,000
   Cr Balance c/d (Rates prepaid) £3,500
   Totals £42,000
2. Not correct
3. Not correct
4. Not correct

 

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