10 Which of the following factors would cause a company’s gearing ratio to fall?
1 A bonus issue of ordinary shares.
2 A rights issue of ordinary shares.
3 An issue of loan notes.
4 An upward revaluation of non-current assets.
11 The following information is available for Orset, a sole trader who does not keep full accounting records:
$
Inventory 1 July 2004 138,600
30 June 2005 149,100
Purchases for year ended 30 June 2005 716,100
Orset makes a standard gross profit of 30 per cent on sales.
Based on these figures, what is Orset’s sales figure for the year ended 30 June 2005?
12 At 1 July 2004 a company had prepaid insurance of $8,200. On 1 January 2005 the company paid $38,000 for
insurance for the year to 30 September 2005.
What figures should appear for insurance in the company’s financial statements for the year ended 30 June
2005?
Income statement Balance sheet
13 Which of the following correctly describes the imprest system for operating petty cash?
14 Alpha buys goods from Beta. At 30 June 2005 Beta’s account in Alpha’s records showed $5,700 owing to Beta.
Beta submitted a statement to Alpha as at the same date showing a balance due of $5,200.
Which of the following could account fully for the difference?
15 Which of the following statements about intangible assets are correct?
1 If certain criteria are met, research expenditure must be recognised as an intangible asset.
2 Goodwill may not be revalued upwards.
3 Internally generated goodwill should not be capitalised.
16 Which of the following events between the balance sheet date and the date the financial statements are
authorised for issue must be adjusted in the financial statements?
1 Declaration of equity dividends.
2 Decline in market value of investments.
3 The announcement of changes in tax rates.
4 The announcement of a major restructuring.
A 1
17 A company sublets part of its office accommodation. In the year ended 30 June 2005 cash received from tenants
was $83,700.
Details of rent in arrears and in advance at the beginning and end of the year were:
In arrears In advance
$ $
30 June 2004 3,800 2,400
30 June 2005 4,700 3,000
What figure for rental income should be included in the company’s income statement for the year ended 30 June
2005?
18 Which of the following statements about accounting ratios and their interpretation are correct?
1 A low-geared company is more able to survive a downturn in profit than a highly-geared company.
2 If a company has a high price earnings ratio, this will often indicate that the market expects its profits to rise.
3 All companies should try to achieve a current ratio (current assets/current liabilities) of 2:1.
19 At 30 June 2004 a company’s allowance for receivables was $39,000. At 30 June 2005 trade receivables totalled $517,000. It was decided to write off debts totalling $37,000 and to adjust the allowance for receivables to the equivalent of 5 per cent of the trade receivables based on past events.
What figure should appear in the income statement for these items?
20 IAS 2 Inventories defines the extent to which overheads are included in the cost of inventories of finished goods.
Which of the following statements about the IAS 2 requirements in this area are correct?
1 Finished goods inventories may be valued on the basis of labour and materials cost only, without including overheads.
2 Carriage inwards, but not carriage outwards, should be included in overheads when valuing inventories of finished goods.
3 Factory management costs should be included in fixed overheads allocated to inventories of finished goods.