Suspense Questions
1)
a.
b.
c.
d.
Which of the following best describes the purpose of suspense account?
An account business uses to reconcile ledger account balances with the subsidiary ledger.
A temporary account a business used when it is uncertain of where an accounting entry should be posted.
A temporary account a business used to record the acquisition of non-current assets.
A memorandum account a business uses to non –standing accounting entries.
2) Which of the following describes a Trial balance?
A) The ledger where all of the individual accounting transaction are posted
B) A control account where summarized accounting is recorded
C) A check that no errors exist in the ledger account balance
D) A memorandum record that list the ledger account balances
3) Which of the following errors would lead to creation of suspense account?
A) Discount allow has been dealt correctly in the receivable account, but debited to the purchase ledger.
B) The total of sales books has been added incorrectly before being posted to the ledger accounts.
C) Sales return were credited to purchase return account and debited to receivables.
D) Purchase from the purchase day book have been credited to sales and dealt correctly in the payable
control account.
4) Which of the following statement is correct?
A) A share premium account can be used as a distributable reserve.
B) A right issue of share offers new share to existing shareholder in proportion to their shareholding.
C) A bonus issue to share is a method of raising cash for the expansion of business.
D) The revaluation surplus is reported as a non-current liability in the statement of financial position.
5) Which of the following is not the purpose of the IASB Conceptual Framework?
A) To assist the IASB in the preparation and review of IFRS.
B) To assist the auditor in forming an option on whether financial statement comply with IFRS.
C) To assist in determining the treatment of items not covered by the existing IFRS.
D) To be authoritative where a specific IFRS conflict with the Conceptual frame work.
6) Target co is preparing its financial statement for the year ended 30 September 20X7. The company is facing a
number of legal claim from its customer with regard to faculty product sold. The total amount being claimed
is$3.5 million. The company lawyer has said that there is 80% of chance of being successful.
As per IAS 37 what amount, of any should be recognized in respect of above in Target’s co statement of financial
position as at 30 SEPTEMBER 20X7?
Which two of the following situations are unlikely to represent control over investee?
A) Owning 55% and being able to elect 4 of the 7 directors.
B) Owning 51% but the constitution required that decision needs the unanimous consent of shareholders.
C) Having current exercisable options which would take shareholding of company to 55%.
D) Owning 40% of shares but having majority of voting right within the company.
E) Owning 35% of the ordinary shares and 80% of the preference share of the company.
7) Which two of the following events which occur after the reporting date of the company but before the
financial statements are authorized for issue are classified as Adjusting events in accordance with IAS 10
Events after reporting period?
A) A change in tax rate announced after the reporting date, but affected the current tax liabilities.
B) The discovery of fraud which has occurred during the year.
C) The determination of the sakes proceeds of an item of plant sold before the year end.
D) The destruction of factory by fire.
8) Which of the following is not the valid reason for a decrease in gross profit margin?
A) A major customer renewed their contract during the year following a competitive tender process.
B) New plant and equipment used in the manufacturing process has been purchase in the year, which has
increased the depreciation expenses.
C) Delivery cost to customer has risen following an increase in the rate charged by courier.
D) A national recession has led to sales price being cut in response.
E) Butcher co. had the following balances in its statement of financial position as at 30 June 20X0 and 20X1:
20X0
20X1
Share Capital
150,000
170,000
Share Premium
95,000
105,000
10% Debenture
190,000
170,000
How much will appear in the statement of cash flows for the year ended 30 June 20X1 under the heading
cash flow from financing activities?
………………
9) Space co. has issued share capital of 100,000 @ $0.50 shares at 1 January 20X9. On the same date the
balance on the share premium account was $25,000.The following transaction occurred in the year ended 31
December 20X9.
1. On the 1 March 20X9 Space co. made a right issue one new share at a price of $1 for every five existing
shares held.
2. On 1 September 20X9 Space co. made a bonus issue of one new share for every ten held using the share
premium.
What should be the balance on the share capital and share premium accounts at 31 December 20X9?
Share Capital………………..
Share Premium…………………
10) Which TWO of the following errors would cause the total of the debit column and the total of the credit
column of a trial balance not to agree?
1. a transposition error was made when entering a sales invoice into the sales day book.
2. a cheque received from a customer was credited to cash and correctly recognized in receivables.
3. a purchase of non-current assets was omitted from the accounting records.
4. rent received was included in the trial balance as a debit balance.
a. 1 and 2
b. 1 and 3
c. 2 and 3
d. 2 and 4
11) A Is analysing his financial statements for the year ended 31 may 20x0. He has not yet made adjustments for
the following.
a. electricity expenses for the three months to 31st may 20x0 are estimated to be $ 250.
b. insurance of $ 528 for the 12 months to 31stdec. 20x0 was paid on 1 Jan 20x0.
What is the net impact on profit when the appropriate adjustment are made?
1.Decrease of $ 558
2.Increase of $ 58
3.Increase of $ 30
4.Decrease of $ 58
12) A was owned $500 from a customer who has gone bankrupt. A has been informed that she will receive 50c
for every $1 owed. A also needs to increase her allowance for receivables by $ 275 . How much will A”s profit
be reduced by when the items have been accounted for?
$.........
13) At 31stdec. 20x5 the following require inclusion in a companys financial statements.
1. On 1 jan 20x5 the made a loan of $12,000 to an employee, repayable on 1 jan 20x6, charging interest at
2% per year. On the due date she repaid the loan and paid the whole of the interest due on the loan to that
date.
2. The company paid an annual insurance premium of $ 9,000 in 20x5, covering the year ended 31staug 20x6.
3. In jan 20x6 the company received rent from a tenant of $ 4,000 covering the six months to 31stdec 20x5.
For these items, what figure should be included in the company financial position as at 31stdec20x5.
a.current assets $ 10,000
current liabilities $ 12,240
b. current assets $ 22,240
current liabilities $ nil
c. current assets $10,240
current liabilities $ nil
d. current liabilities $ 6000
current assets $ 16,240
14) On 31st march 2014, the balance on the receivables control account of P company is $425,700. The
bookkeeper has identified that the following adjustments for receivables are required:
Irrecoverable debt recovered
$2,000
Specific allowances
$2,400
It was decided that a further allowance for receivables of 2% should be made based on past events.
The allowances for receivables on 1 april 2013 was$1,900.
What was the receivables expense for the year ended 31 march 2014?
$...................
15) The financial statements of Olaf Co were approved for publication on 20 July 20X4.
As required by IAS 10 Events After the Reporting Period, which TWO of the following should be treated as nonadjusting events in the financial statements of Olaf Co for the period ended 31 March 20X4?
1. Inventory items at 31 March 20x4, original cost $45,000 were sold in June 20X4 for $25,000
2. There was a fire on 2 May 20X4 in Olaf Co’s main warehouse which destroyed 5% of the total inventory
3. A strike by the workforce which started on 1 April 20X4 stopped all production for 10 weeks before being
settled
4. On 1 December 20X3, a customer commenced legal action against Olaf Co. At 31 May 20X4, legal opinion
confirmed that Olaf Co will probably have to pay damages of $175,000
16) Which TWO of the following are expenses?
1. Increase in owner’s drawings
2. Increase in warranty provision
3. Decrease in allowance for receivables
4. Irrecoverable debts written off
17) On 30 September 20X4, Ravi has a balance on her receivables control account of $26,000 but the total of the
individual accounts in the receivables ledger came to $25,448. Upon investigation the following errors were
discovered.
The sales day book was overcast by $120
A credit balance of $84 on customer’s account in the receivables ledger had been incorrectly treated as a
debit balances
A payables contra of $600 had been entered in the customer’s individual account but no other entry was
made
After accounting for the above errors, what is the correct amount on both the receivables ledger and the
receivables control account?
$..................
18) Would the following be a movement in equity in the statement of financial position?
No
Purchase of non-current assets
Revaluation
Yes
19) The trial balance of Darwin does not agree and a suspense account has been opened for the difference. On
investigation it was discovered there were only one error. The opening prepayment for rent of $250 had
been credited to the rent expense account.
What journal is needed to correct this?
1.
2.
3.
4.
Dr. suspense account
Dr. rent expense
Dr. suspense account
Dr. rent expense
$500
$500
$250
$250
cr. Rent expense
$500
cr. Suspense account $500
cr. Rent expense
$250
cr. Suspense account $250
20) Are the following statements true or false?
True
False
Bonus issue of share capital are a useful way of raising finance
A bonus issue of share capital will cause the market value of each share to decrease
21) The following undetected errors have been made preparing the trial balance for XYZ Co for the year ended
30 April 20X8:
1. Purchases of $2,125 have been debited to both the purchase account and the trade payables account
2. A loan of $4,000 was correctly credited to the loan account but no other entry was made
What suspense account balance is required to balance the trial balance?
1.
2.
3.
4.
$250 cr.
$1,875 cr.
$1,875 dr.
$250 dr.
22) Where there are material non-adjusting events, which of the following should be disclosed in a note to the
financial statements in accordance with IAS 10 Events After the Reporting Period?
1. The nature of the event and the estimated financial effect
2. Confirmation that solicitors have been involved in determining its financial effect
3. Reference to where the amounts involved have been provided in the financial statements
a. 1 only
b. 1 and 2 only
c. 3 only
d. all of the above
23) Why would the following items be identified when preparing a bank reconciliation?
It is on the bank statement but
not in the cash book
A direct debit
An unpresented cheque
It is in the cash book but not on
the bank statement
24) Which TWO of the following are true?
1. Sales are included in the statement of profit or loss gross of the sales tax charged
2. Sales tax can be repaid to a business by the tax authorities
3. Sales tax is collected on behalf of the tax authorities
4. Sales are included in receivables net of sales tax charged
25) Are the following statements in relation to the year end adjustments for accruals and prepayments true or
false?
True
False
Profits will increase after adjusting for accrued expenses
Net assets will increase after adjusting for prepaid expenses
26) According to the definition of an asset in the IASB’s Conceptual Framework for Financial Reporting, which
TWO of the following transactions would result in an asset being recognized in Joe’s accounts?
1. Joe has ordered some items of inventory which will not be delivered until next month
2. Joe’s father has given him a $5,000 cash contribution to his business with no obligation for Joe to repay in
the future
3.Joe has purchased an item of machinery which has been delivered and he agrees to pay for it in three
months time
4. Joe has promised to pay $50 to Andrew for delivery goods to customers
27) Martha started a business on 1 January 20X4 with $1,000 cash at bank and entered into the following cash
and credit transactions:
Purchased a second hand vehicle for $500 cash
Purchased goods for resale of $500 on credit
Sold all of the goods for $800 on credit
Made cash drawings of $100
What is the closing balance on Martha’s capital account at 31 January 20X4?
1.$400
2. $1,300
3. $1,000
4. $1,200
28) Fred, a sole trader, has made a loss during the year to 31 December 20X0 but the amount of cash at the year
end has increased from the previous year.
Which TWO of the following could be a reason for this?
A) He is holding less inventory this year end than at last year end
B) His credit customers are taking a longer time to pay
C) Some non-current assets were sold during the year
D) He has taken more money out as drawings during the year
29) Which of the following correctly describes the purpose of a suspense account?
1. It is an account in the statement of financial position used to group small, immaterial balances
2. It is a temporary account created when the total debits and the total credits in atrial balance do not agree
3. It is used to record movements in provision which are expected to reverse in the following year
4. It is a temporary account to record receipts from customers before they are allocated against the individual
customer
30) Jason’s suspense account has a debit balance of $600.
Which of the following errors fully account for the suspense account balance?
A) The debit column of the trial balance was overcast by $600
B) The bank overdraft of $600 was entered on the credit side of the trial balance
C) Sundry income of $300 was entered on the debit side of the trial balance
D) Motor expenses of $300 were entered on the credit side of the trial balance
31) Should the following errors be highlighted by the extraction of a trial balance?
Yes
No
Discounts received were credited to receivables and debited to revenue
Rent paid by cheque was credited to bank but no other entries were made
32) The trial balance of Darwin does not agree and a suspense account has been opened for the difference. On
investigation it was discovered there was only one error. The opening prepayment for rent of $250 had been
credited to the rent expense account.
What journal is needed to correct this?
A) Dr. Suspense account $500
Cr. Rent expense
$500
B) Dr. Rent expense
$250
Cr. Suspense account $250
C) Dr. Suspense account
$250
Cr. Rent expense
$250
D) Dr. Rent expense
$500
Cr. Suspense account $500
33) A company prepared its trial balance and discovered that the totals of the debit column and of the credit
column did not agree. A suspense account was opened for the difference. It was subsequently discovered
that a rent invoice for $420 had been recorded in the rent expense account as $240.
What journal entry is required to correct this error?
1. Dr. Suspense
$180
cr. Rent $180
Being correction of error of transposition
2. Dr. Rent
$180
cr. Suspense $180
Being correction of error of commission
3. Dr. Suspense
$180
cr. Rent
$180
Being correction of error of commission
4. Dr. Rent
$180
cr. Suspense $180
Being correction of error of transposition
34) The financial statements of Olaf Co were approved for publication on 20 July 20X4.
As required by IAS 10 Events After the operating Period, which TWO of the following should be treated as nonadjusting events in the financial statements of Olaf Co for the period ended 31 March 20X4?
A) A strike by the workforce which started on 1 April 20x4 stopped all production for 10 weeks before being
settled
B) There was a fire on 2 May 20X4 in Olaf Co’s main warehouse which destroyed 5%of the total inventory
C) On 1 December 20X3, a customer commenced legal action against Olaf Co. At 31 May 20X4, legal
opinion confirmed that Olaf Co will probably have to pay damages of $175,000
D) Inventory items at 31 March 20X4, original cost $45,000 were sold in June 20X4 for $25,000
35) Cosmo has entered a contra entry of $10,000 in his payables control account on the credit side of the
account. The other side of the entry was dealt with correctly in his receivables control account.
Which journal entry would correct this error?
A) Dr. Payables
$10,000
Cr. Receivables
$10,000
B) Dr. Payables
$20,000
Cr. Suspense
$20,000
C) Dr. Payables
$10,000
Cr. Suspense
$10,000
D) Dr. Suspense
$20,000
Cr. Payables
$20,000
36) According to IAS 37 Provisions, Contingent Assets and Contingent Liabilities, which TWO of the following
statements are true?
1. Contingent assets are never required to be disclosed in the notes to the accounts
2. Contingent assets should be disclosed in the notes if their receipt is probable
3. Contingent assets are included in the statement of financial position when their receipt is virtually certain
4. Contingent assets should be disclosed by note if their receipt is possible
37) Which of the following errors would lead to the creation of a suspense account?
1. A cash sale of $300 was completely omitted from the accounts
2. A credit sale was recorded as cash sale
3. A transposition error was made to the debit entry recording a credit purchase
4. An electricity expense of $500 was recorded as a telephone expense
a. 1 and 4
b. 3 only
c. 2 and 4
d. 1, 2 and 3
38) Which TWO of the following are examples of ‘intangible assets’?
1. Goodwill
2. Capitalized development costs
3. Revalued property
4. Advertising expenditure
39) On 30 September 20x4 Ravi has a balance on her receivables control account of $26,000 but the
total of the individual accounts in the receivables ledger came to $25,440. Upon investigation the
following errors were discovered.
The sales daybook was overcast by $120.
A credit balance of $84 on a customer’s account in the receivables ledger had been incorrectly treated
as a debit balance.
A payables contra of $800 had been entered in the customer’s individual but no other entry was made.
After accounting for the above errors, what is the correct amount on both the receivables ledger and
the receivables control account?
………………….
40) Which of the following errors would lead to the creation of suspense account?
1. Sales return were omitted to the purchase return account and debited to receivables
2. Discounts allowed have been dealt with correctly in the receivables account, but debited to the
purchases account
3. The total of the sales daybook has been added incorrectly before being posted to the ledger
accounts
4. Purchases from the purchases daybook have been credited to sales and dealt with correctly in the
payables control account
41) Kim is reconciling her payables control account to the list of individual payables balances in her
payables ledger but they do not agree.
Which TWO of the following errors could account for the difference between payables ledger and the
list of individual balances?
1. An invoice of $6,568 has been recorded on the credit side of an individual payable balances of
smith & son
2. A supplier account of $2,129 has been omitted from the list of individual balances
3. An invoice of $723 has been recorded in the payables control as $273
4. An invoice for $230 was omitted from the purchase day book
42) Gorky has received a statement of account from a supplier showing a total balance owing $90.
The payables ledger of Gorky shows a balance owing to the supplier of $50. An investigation reveals
the following:
1. Gorky sent a cheque for $20 two days ago and this has not been included in the supplier’s
statement
2. Gorky purchased goods for $10 four days ago and has omitted this transaction from their
accounting records
What discrepancy remains between Gorky and the supplier’s records, after allowing for these
items?
………………….
43) Julie has been reviewing his accounts receivables and had decided to increase her allowance for
receivables from $550 to $675. Julie has accounted for this by debiting receivables expense account
with $675 and crediting the allowance for receivables with $675.
What journal entry will Julie need to post in order to correct this error?
1.
2.
3.
4.
Dr. Allowances for receivables
Dr. Receivables expenses
Dr. Receivables expenses
Dr. Allowances for receivables
$550
$125
$125
$550
cr. Accounts receivables control account
cr. Suspense account
cr. Allowances for receivables
cr. Receivables expenses
$550
$125
$125
$550
44) A sole trader has capital of $25,000. Current liabilities are $4,400 and the trader has a long-term
loan of $22,000. Current assets are $6,100.
What is the value of non-current assets?
45) A company intends to purchase a motor vehicle with a list price of $24,400. The dealer offers a part
exchange allowance and the balance of $15,000 is to be paid in cash. The old motor vehicle to be
used in part exchange originally cost $20,600 and has accumulated depreciation to date of $12,000.
How would the part exchange allowance be recorded by the company?
1.
2.
3.
4.
Dr. Disposals $15,000
Dr. Cash
$9,400
Dr. Motor vehicles $9,4000
Dr. Cash
$15,000
cr. Cash
cr. Disposals
cr. Disposals
cr. Disposals
$15,000
$9,400
$9,400
$15,000
46) A sole trader, who commenced trading on 1 November 20x6, does not keep accounting records but
the following information is available for the year ended 31 December 20x7:
$
Cash introduced
80,000
Introduction of motor vehicle
22,500
Drawings
12,000
Net assets at 31 October 20x7
123,750
What profit was made in the year to 31 October 20x7?
1. $33,250
2. $9,250
3. $55,750
4. $76,250
47) which of the following statements about depreciation is true or false?
True
False
Depreciation is the application of the accruals concept
Depreciation is charged as a means of ensuring that funds are available to
replace an assets in the future
48) According to IASB’s conceptual framework for financial reporting, which of the following elements
are directly related to the statements of financial position?
1. Income
2. Liabilities
3. Assets
4. Expenses
5. Equity
49) A business prepared a trial balance at the year end. The debit and credit totals did not agree and a
suspense account was opened for the difference. Subsequent checking uncovered the following
errors:
1. A credit purchase of $500 had been entirely omitted from the books
2. A credit sale of $200 had been debited to the sales account and credited to the sales ledger
control account
3. The bank overdraft had been incorrectly recorded as $5,100 in the trial balance rather than
$1,500
4. What was the original debit balance on the suspense account before the errors were
discovered?
6. $
50) The following transactions have been recognized in the financial statements of Monument Co. for
the year.
Loss of $50,000 on the revaluation of a property that had previously been revalued upwards by
$80,000.
Gain of $20,000 on disposal of equipment that was accounted for using the cost model.
Where should these items be recognized in the financial statements?
Statement of profit or loss
Statement of other
comprehensive income
Equipment -gain on disposal
Property-revaluation loss
51) Which TWO of the following be included in a statement of profit or loss?
1. Income for the year
2. Non-current liabilities
3. Drawings taken from the business
4. Current assets
5. Expenses for the year
6. Capital
52) The debit and credit columns of XYZ’s trial balance did not agree. A debit balance of $25,950 was
entered in a suspense account and the following errors were subsequently identified:
1. A cheque received for $1,900 had been correctly posted to the cash account and posted to the
receivables ledger as $9,100
2. Rent paid of $6,500 had been posted correctly to the cash account and posted to the rent expenses
account as $650
3. No entries had been made to reflect a cash sale of $1,000
What is the remaining debit balance on the suspense account after making adjustments for the above
errors?
$
Dr
53) Rent paid of $200 has been credited to the rent suspense account. The year end bank balance of
$860 at bank had been entered on the trial balance as a debit of $680.
What is the debit balance on the suspense account as a result of these errors?
$
54) Jason’s suspense account has a debit balance of $600
Which of the following errors fully account for the suspense account balance?
1.
2.
3.
4.
The bank overdraft of $600 was entered on the credit side of the trial balance
The debit column of the trial balance was overcast by $600
Sundry income of $300 was entered on the debit side of the trial balance
Motor expenses of $300 were entered on the credit side of the trial balance
55) On 21 Dec 20X4 Ming purchased 6,000 units of component X with a retail price of $12 per unit. The supplier
gave Ming a $2 per unit trade discount and a further discount of $0.50 unit if she paid within two month.
Although Ming had not paid for the goods before her year end of 31 DEC 20X4 she plans to pay for the goods
on 28 JAN 20X5.
What is the correct journal entry record the purchase of components X on 28 Dec 20X4?
A)
B)
C)
D)
E)
F)
DR purchase $72,000
DR purchase $ 72,000
DR purchase $ 57,000
DR purchase $57,000
DR purchase $ 57,000
DR purchase $57,000
CR discount received $12,000
CR payable $60,000
CR payable $72,000
CR cash $57,000
CR payable $60,000 purchase $ 72,000 CR payable $72,000
CR cash $57,000
CR payable $60,000
Interpretation and analysis
56) Which of the following correctly explain why company manager calculate an Interpretation?
1. To check that the information in the financial statements is completely accurate.
2. To monitor key performance area in the business.
3. To check that individual business units are performing as expected.
A) 2 only
B) 1 and 3 only
C) 1,2and 3
D) 2 and 3 only
57) A company experience an increase in inventory of$250 a decrease in the bank balance of$400 and an
increase in trade payable of $1,200.
What should be the movement in the working capital?
A) An increase in working capital of$1,050
B) A decrease in working capital of $1,050
C) An increased in working capital of$1,350
D) A decrease in working capital of $ 1,350
58) The finance director of a company is concerned about the efficiency of the credit control department.
Which ratio would help the finance director to monitor this?
A) Return on capital employed.
B) Accounts receivable collection period.
C) Gearing.
D) Account payable payment period.
59) If the investors wish to examine only the liquidity and adaptability of an entity, which two of the following
financial statement would be useful?
A) Statement of profit and loss
B) Statement of cash flow
C) Statement of changes in equity
D) Statement of financial position
60) Identify whether each of the following is a limitation of applying ratio analysis to published financial
statement or not.
limitation
Not
limitation
Different ways of calculating certain ratio exist.
Accounting policy choice can limit comparability between
different companies.
61) The financial statements are used by different users groups for different reasons.
For each user group what is their primary area of interest?
Profitability
Liquidity
Efficiency
Banks
Shareholders
62) The finance directors of Ash Co is concerned about the efficiency of the credit control department.
Which ratio would help the finance director to monitor this?
1.
2.
3.
4.
Return on capital employed
Accounts receivable collection period
Gearing
Accounts payable payment period
63) Which of the following would be used to calculate an inventory turnover period of 61 days (to the nearest
whole day)?
1. Sales are $240,000 and closing inventory at selling price is $40,000
2. Cost of goods sold is $360,000 and average inventory at cost is $60,000
3. Purchases are $480,000 and average inventory at cost is $80,000
4. Purchases are $180,000 and opening inventory at cost is $30,000
64) How should the following measures be classified?
Profitability
Efficiency
Asset turnover
The cash operating cycle
Net profit margin
Trade payable payment period
65) Return on capital employed (ROCE) can be broken down into two key accounting ratios:
Which of the following make up ROCE?
A) Current ratio and net asset turnover
B) Profit margin and gearing
C) Gearing and current ratio
D) Profit margin and net asset turnover
66) Bank Co is considering providing a loan to Corgi Co.
Which of the following ratios would indicate the gearing level of Corgi Co?
A) Receivables collection period and payables payment period
B) Quick ratios and current ratios
C) Debt ratios and interest cover
D) Return on capital employed and asset turnover
67) The net profit margin achieved by an enterprise is 12% and the assets turnover ratio is 2 times? Find ROCE?
………………………
68) The interpretation of ratios allows investors to:
1. Form an expectation of the company’s future performance
2. Compare two companies as possible future investments
3. Gain assurance that the financial statements are correct
4. Calculate their future dividend to be received from the company
Which of the above statements are correct?
a. 3 and 4 only
b. 1 and 2 only
c. 1, 2 and 4 only
d. 1, 2, 3 and 4
69) What do each of the following ratios help to analyse?
Liquidity
Profitability
Return on capital employed
Receivables collection days
70) Which TWO secondary ratios can be used to explain return on capital employed?
1. Assets turnover
2. Gearing
3. Profit margin
4. Receivables collection period
71) Bank Co. is considering providing a loan to Corgi Co.
Which of the following ratios would indicate the gearing level of Corgi Co.?
1.
2.
3.
4.
Receivables collection period and payables payment period
Return on capital employed and assets turnover
Quick ratio and current ratio
Debt ratio and interest cover
72) which TWO of the following ratios would help the owner of a business understand its profitability?
1. Gross margin
2. Interest cover
3. Gearing
4. Current ratio
5. Inventory days
6. Return on capital employed
73) The following are extracts from the financial statements of Holdsteady Co. for the year ended 31
December 20x7:
20x7
20x6
$
$
Inventory
13,600
10,700
Trade receivables
11,200
7,100
Cash at bank
-
6,000
Bank overdraft
4,200
-
Trade payables
16,400
12,800
Current assets:
Current liabilities:
Which TWO of the following statements are correct based on the financial information presented?
1.
2.
3.
4.
Holdsteady Co. has a net cash outflow of $10,200 in 20x7
The liquidity of Holdsteady Co. has shown improvement in 20x7
Holdsteady Co. may be experiencing rapid growth which is causing it to run out of working capital
The cash position improving partly due to Holdsteady Co. creditors later in 20x7