ACCT 102 FINAL EXAM QUESTIONS
AND ANSWERS ALL CORRECT
As an accountant working in New Zealand, and with the purpose of calculating the
depreciation of PP&E, you MUST complete the following calculation after you've chosen
a depreciation method, the residual amount and the useful life: (pick the best choice)
a. You must consider the amount paid for the PP&E, net of GST.
b. In order to find the cost, you must consider all expenditures - net of GST - required to
bring the equipment to being fully operational.
c. If one of the required expenditures involves workers preparing the site for the PP&E,
then that labor cost must also be considered as part of the overall cost.
d. You must start counting the time towards depreciation only once the equipment is
fully operational.
e. All of the above apply. - Answer- e) all apply.
XYZ Ltd purchased a service van for $60,000 (GST exclusive) on 1st January and
decides to depreciate it using the linear depreciation method. Residual was estimated to
be 10,000 and useful life 5 years. The accounting year of XYZ Ltd ends on 30th June
each year.
Calculate the car's depreciation for the first year and pick the correct option.
a. $15,000
b. $12,000
c. $10,000
d. $ 7,500
e. $ 5,000 - Answer- e) $5,000
Given the following data, what is the amount of net cash used in financing activities?
Gain on sale of equipment $ 12,000
Proceeds from sale of equipment $ 20,000
Purchase of Government Bonds $ 360,000
Increase in accounts receivable $ 25,000
Increase in accounts payable $ 15,000
Increase in long-term borrowings $ 125,000
Dividends declared $ 90,000
Dividends paid $ 76,000
Proceeds from issue of shares $ 150,000
a. ($251,000)
b. ($161,000)
c. $ 74,000
,d. $109,000
e. $199,000 - Answer- e) $199,000
ABC Ltd and XYZ Ltd are retailers in the same trade and operate in a very competitive
environment. Having been informed that gross profit margin for ABC is 40% while for
XYZ is 10%, which of the following options would apply?
a. ABC Ltd is likely to operate at the higher end of this market.
b. ABC Ltd is likely to have higher expenses than XYZ Ltd.
c. ABC Ltd is likely to maintain a wider range of inventory than XYZ Ltd.
d. ABC Ltd inventory turnover period is likely to be longer than XYZ Ltd.
e. All of the above statements are likely to apply. - Answer- e) All apply.
You are the chief financial officer (CFO) of a company. Your company is not leveraged:
for total funds of $2.0 million (liabilities and equity), $1.8 million is equity. Further, you
company is profitable, with ROE at 25% p.a. on a consistent basis. Upon reviewing this
information, and based only on this, which of the following actions would you be inclined
to take?
a. Use the yearly profits to pay back any outstanding loan.
b. Increase capital and reduce borrowing, but keeping total funds unchanged.
c. Increase borrowing since there is room to leverage, but only if there are opportunities
to expand safely.
d. Reduce capital and increase borrowing, since there is room to leverage the firm.
e. Do not change anything: things seem find as they are. - Answer- c
The financial information for Harrison Ltd (in thousands) is provided below.
2019 2018
Sales $ 87,774 $ 82,165
Other operating revenues $ 236 $ 208
C.O.G.S. ($64,368) ($60,682)
Other (non-operating) revenues $ 371 $ 335
Branch expenses ($14,698) ($13,165)
Administrative expenses ($ 3,921) ($ 3,840)
Financial expenses ($ 615) ($ 474)
Financial income $ 45 $ 52
Profit before income tax $ 4,824 $ 4,599
Income tax expense ($ 1,438) ($ 1,327)
Profit for the period $ 3,386 $ 3,272
Having completed a horizontal analysis using 2018 as the base year, pick the correct
statement that follows (percentage numbers have been rounded to the first decimal).
a. Revenues and cost have increase by about the same rate of 6%; thus, the gross
profit has also increased at that same rate.
b. The I.S. item with the highest percentage change is financial income.
c. The horizontal analysis does not indicate a change in the net profit margin (i -
Answer- c
,Refer to Kosinski Ltd. The net cash paid out to suppliers (including employees) is ...
a. $3,947,000
b. $3,967,000
c. $4,843,000
d. $4,860,000
e. $4,873,000 - Answer- c) $4,843,000 = 3,967,000 (purchases = 834-867+4000) -
20,000 (accounts payable adjustment) + 893,000 (other expenses, including wages) +
3,000 (warranties adjustment).
Refer to Kosinski Ltd. The amount of cash flow pertaining to financing activities should
include a line that shows dividends paid. Pick the correct answer.
a. In this particular case, no dividends were paid.
b. $200,000.
c. $230,000.
d. $430,000.
e. Not possible to calculate with the information provided. - Answer- b) $200,000, which
results from comparing the profit reported of $430,000 with the change in retained
earnings being $230,00, such that the difference of $200,000 is the amount of dividends
paid.
Refer to Kosinski Ltd. The net cash flow pertaining to investing activities is ...
a. $227,000 (inflow)
b. - $620,000 (i.e., an outflow)
c. - $680,000 (i.e., an outflow)
d. - $717,000 (i.e., an outflow)
e. - $750,000 (i.e., an outflow) - Answer- c) $680,000 outflow = outflow of $750,000
when buying new machine plus inflow of $70,000 when selling PP&E. To find out the
cash inflow when selling PP&E, one must first find the historical cost of the PP&E sold.
This is the difference between the increase in PP&E in the BS being $620 and the
amount paid for the new machine being $750, that is, $130. Next, one finds the
depreciation expense associated with that PP&E sold: this is the difference between the
depreciation expense of 880 and the change in depreciation in the BS being 847, that
is, $33. Thus, the book value of PP&E sold is 130 - 33 = 97. Since there was a loss of
27, the cash inflow when selling this machine is $70,000.
Refer to Kosinski Ltd.The amount of cash received from trade customers is ...
a. $6,418,000
b. $6,583,000
c. $6,748,000
d. $6,960,000
e. $7,125,000 - Answer- a) $6,418,000 = $6,583 + $610,000 - $775,000
Refer to Kosinski Ltd. Information about losses on disposal is available. When
reconciling profits with net cash flows (i.e., the Indirect Method), the following
adjustment is required:
a. Subtract the loss from profit for $27,000.
, b. Add the loss to profit for $27,000.
c. Use the information on the loss to calculate the amount of money received from
disposal and thus subtract $70,000 from profit.
d. Neither add nor subtract any loss amount when using the indirect method because
this adjustment pertains to investing activities.
e. None of the above. - Answer- b) Add $27,000
Which inventory system updates on a continuous basis with COGS being readily
available and reported on the income statement - Answer- Perpetual system
Which inventory system is updated at year end only and COGS are calculated after a
physical stock take - Answer- Periodic system
What are the four inventory cost flow methods? - Answer- 1. Specific identification
approach
2. First-in, First-out approach
3. Last-in, First-out approach
4. Average cost approach
What are the most appropriate inventory system and inventory cost flow methods for the
following businesses?
a) Co-op bookshop
b) Local petrol station
c) Antique shop
d) Bottled juice in a fruit bar
e) Jewellery - Answer- a) perpetual & FIFO
b) perpetual & moving average cost
c) periodic & specific identification approach
d) perpetual & FIFO
e) either & specific identification approach
Under inflation which yields higher profits? LIFO or FIFO? - Answer- FIFO
Why is FIFO a better valuation approach? - Answer- It provides a measure of inventory
value that is closer to the market value
Inventory Turnover equation - Answer- COGS/Average Inventory
Inventory Turnover Period equation - Answer- 365/Inventory Turnover
Closing inventory equation - Answer- Opening inventory + purchases - COGS
What factors result in the bank balance not matching the bank T-account - Answer- -
bank fees and interest
- unpresented cheques issued by the firm
AND ANSWERS ALL CORRECT
As an accountant working in New Zealand, and with the purpose of calculating the
depreciation of PP&E, you MUST complete the following calculation after you've chosen
a depreciation method, the residual amount and the useful life: (pick the best choice)
a. You must consider the amount paid for the PP&E, net of GST.
b. In order to find the cost, you must consider all expenditures - net of GST - required to
bring the equipment to being fully operational.
c. If one of the required expenditures involves workers preparing the site for the PP&E,
then that labor cost must also be considered as part of the overall cost.
d. You must start counting the time towards depreciation only once the equipment is
fully operational.
e. All of the above apply. - Answer- e) all apply.
XYZ Ltd purchased a service van for $60,000 (GST exclusive) on 1st January and
decides to depreciate it using the linear depreciation method. Residual was estimated to
be 10,000 and useful life 5 years. The accounting year of XYZ Ltd ends on 30th June
each year.
Calculate the car's depreciation for the first year and pick the correct option.
a. $15,000
b. $12,000
c. $10,000
d. $ 7,500
e. $ 5,000 - Answer- e) $5,000
Given the following data, what is the amount of net cash used in financing activities?
Gain on sale of equipment $ 12,000
Proceeds from sale of equipment $ 20,000
Purchase of Government Bonds $ 360,000
Increase in accounts receivable $ 25,000
Increase in accounts payable $ 15,000
Increase in long-term borrowings $ 125,000
Dividends declared $ 90,000
Dividends paid $ 76,000
Proceeds from issue of shares $ 150,000
a. ($251,000)
b. ($161,000)
c. $ 74,000
,d. $109,000
e. $199,000 - Answer- e) $199,000
ABC Ltd and XYZ Ltd are retailers in the same trade and operate in a very competitive
environment. Having been informed that gross profit margin for ABC is 40% while for
XYZ is 10%, which of the following options would apply?
a. ABC Ltd is likely to operate at the higher end of this market.
b. ABC Ltd is likely to have higher expenses than XYZ Ltd.
c. ABC Ltd is likely to maintain a wider range of inventory than XYZ Ltd.
d. ABC Ltd inventory turnover period is likely to be longer than XYZ Ltd.
e. All of the above statements are likely to apply. - Answer- e) All apply.
You are the chief financial officer (CFO) of a company. Your company is not leveraged:
for total funds of $2.0 million (liabilities and equity), $1.8 million is equity. Further, you
company is profitable, with ROE at 25% p.a. on a consistent basis. Upon reviewing this
information, and based only on this, which of the following actions would you be inclined
to take?
a. Use the yearly profits to pay back any outstanding loan.
b. Increase capital and reduce borrowing, but keeping total funds unchanged.
c. Increase borrowing since there is room to leverage, but only if there are opportunities
to expand safely.
d. Reduce capital and increase borrowing, since there is room to leverage the firm.
e. Do not change anything: things seem find as they are. - Answer- c
The financial information for Harrison Ltd (in thousands) is provided below.
2019 2018
Sales $ 87,774 $ 82,165
Other operating revenues $ 236 $ 208
C.O.G.S. ($64,368) ($60,682)
Other (non-operating) revenues $ 371 $ 335
Branch expenses ($14,698) ($13,165)
Administrative expenses ($ 3,921) ($ 3,840)
Financial expenses ($ 615) ($ 474)
Financial income $ 45 $ 52
Profit before income tax $ 4,824 $ 4,599
Income tax expense ($ 1,438) ($ 1,327)
Profit for the period $ 3,386 $ 3,272
Having completed a horizontal analysis using 2018 as the base year, pick the correct
statement that follows (percentage numbers have been rounded to the first decimal).
a. Revenues and cost have increase by about the same rate of 6%; thus, the gross
profit has also increased at that same rate.
b. The I.S. item with the highest percentage change is financial income.
c. The horizontal analysis does not indicate a change in the net profit margin (i -
Answer- c
,Refer to Kosinski Ltd. The net cash paid out to suppliers (including employees) is ...
a. $3,947,000
b. $3,967,000
c. $4,843,000
d. $4,860,000
e. $4,873,000 - Answer- c) $4,843,000 = 3,967,000 (purchases = 834-867+4000) -
20,000 (accounts payable adjustment) + 893,000 (other expenses, including wages) +
3,000 (warranties adjustment).
Refer to Kosinski Ltd. The amount of cash flow pertaining to financing activities should
include a line that shows dividends paid. Pick the correct answer.
a. In this particular case, no dividends were paid.
b. $200,000.
c. $230,000.
d. $430,000.
e. Not possible to calculate with the information provided. - Answer- b) $200,000, which
results from comparing the profit reported of $430,000 with the change in retained
earnings being $230,00, such that the difference of $200,000 is the amount of dividends
paid.
Refer to Kosinski Ltd. The net cash flow pertaining to investing activities is ...
a. $227,000 (inflow)
b. - $620,000 (i.e., an outflow)
c. - $680,000 (i.e., an outflow)
d. - $717,000 (i.e., an outflow)
e. - $750,000 (i.e., an outflow) - Answer- c) $680,000 outflow = outflow of $750,000
when buying new machine plus inflow of $70,000 when selling PP&E. To find out the
cash inflow when selling PP&E, one must first find the historical cost of the PP&E sold.
This is the difference between the increase in PP&E in the BS being $620 and the
amount paid for the new machine being $750, that is, $130. Next, one finds the
depreciation expense associated with that PP&E sold: this is the difference between the
depreciation expense of 880 and the change in depreciation in the BS being 847, that
is, $33. Thus, the book value of PP&E sold is 130 - 33 = 97. Since there was a loss of
27, the cash inflow when selling this machine is $70,000.
Refer to Kosinski Ltd.The amount of cash received from trade customers is ...
a. $6,418,000
b. $6,583,000
c. $6,748,000
d. $6,960,000
e. $7,125,000 - Answer- a) $6,418,000 = $6,583 + $610,000 - $775,000
Refer to Kosinski Ltd. Information about losses on disposal is available. When
reconciling profits with net cash flows (i.e., the Indirect Method), the following
adjustment is required:
a. Subtract the loss from profit for $27,000.
, b. Add the loss to profit for $27,000.
c. Use the information on the loss to calculate the amount of money received from
disposal and thus subtract $70,000 from profit.
d. Neither add nor subtract any loss amount when using the indirect method because
this adjustment pertains to investing activities.
e. None of the above. - Answer- b) Add $27,000
Which inventory system updates on a continuous basis with COGS being readily
available and reported on the income statement - Answer- Perpetual system
Which inventory system is updated at year end only and COGS are calculated after a
physical stock take - Answer- Periodic system
What are the four inventory cost flow methods? - Answer- 1. Specific identification
approach
2. First-in, First-out approach
3. Last-in, First-out approach
4. Average cost approach
What are the most appropriate inventory system and inventory cost flow methods for the
following businesses?
a) Co-op bookshop
b) Local petrol station
c) Antique shop
d) Bottled juice in a fruit bar
e) Jewellery - Answer- a) perpetual & FIFO
b) perpetual & moving average cost
c) periodic & specific identification approach
d) perpetual & FIFO
e) either & specific identification approach
Under inflation which yields higher profits? LIFO or FIFO? - Answer- FIFO
Why is FIFO a better valuation approach? - Answer- It provides a measure of inventory
value that is closer to the market value
Inventory Turnover equation - Answer- COGS/Average Inventory
Inventory Turnover Period equation - Answer- 365/Inventory Turnover
Closing inventory equation - Answer- Opening inventory + purchases - COGS
What factors result in the bank balance not matching the bank T-account - Answer- -
bank fees and interest
- unpresented cheques issued by the firm
