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Financial Statements and Accounting Concepts Quiz

The document contains 10 multiple choice questions about key financial concepts such as the purpose of financial statements, definitions of assets and liabilities, accounting for depreciation, and components of the cash flow statement. The questions cover topics like where accounts payable would appear on a balance sheet, how to calculate depreciation expense, and what items change non-cash working capital on the cash flow statement. Each question is followed by the answer, with some including additional explanations in the form of Excel files.

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126 views4 pages

Financial Statements and Accounting Concepts Quiz

The document contains 10 multiple choice questions about key financial concepts such as the purpose of financial statements, definitions of assets and liabilities, accounting for depreciation, and components of the cash flow statement. The questions cover topics like where accounts payable would appear on a balance sheet, how to calculate depreciation expense, and what items change non-cash working capital on the cash flow statement. Each question is followed by the answer, with some including additional explanations in the form of Excel files.

Uploaded by

adam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

1

Where would ‘accounts payable’ most likely appear in a set of financial


statements?
Your Answer
In the balance sheet under 'current liabilities'
Correct Answer
In the balance sheet under 'current liabilities'
Explanation
None.

2
The purpose of the income statement is to:
Your Answer
Show where the business's cash has come from and where it has been
spent
Correct Answer
Show the revenues, expenses and operating profit for the financial year
Explanation
None.

3
What is the best definition of a non-current asset?
Your Answer
An asset intended for use on a continuing basis in the company's activities
Correct Answer
An asset intended for use on a continuing basis in the company's activities
Explanation
None.

4
Within how many months of the balance sheet date is a current liability
usually payable?
Your Answer
12 months
Correct Answer
12 months
Explanation
None.

5
What is the principal purpose of charging depreciation on non-current
assets?
Your Answer
To spread the cost of the assets over their estimated useful lives
Correct Answer
To spread the cost of the assets over their estimated useful lives
Explanation
None.

6
A piece of manufacturing equipment was purchased at the beginning of
2021 for an original cost of $50,000. Over it's useful life, the equipment is
expected to produce 40,000 widgets as follows:

2021: 4,000 units


2022: 10,000 units
2023: 12,000 units
2024: 8,000 units
2025: 6,000 units

The asset can be salvaged for 10% of its original cost at the end of 2025.
The usage of the asset varies over time and is dependent on the output.
What is depreciation expense for 2025?
Your Answer
$6,750
Correct Answer
$6,750
Explanation
Download the following solution:

Q6 [Link]

7
The purpose of the cash flow statement is to:
Your Answer
Show where the business's cash has come from and where it has been
spent
Correct Answer
Show where the business's cash has come from and where it has been
spent
Explanation
None.

8
If Beta Limited has opening PP&E balance of 150, a depreciation expense
of 75, and a closing PP&E balance of 170, what is Beta's net capital
expenditure (or CAPEX)?
Your Answer
95
Correct Answer
95
Explanation
Net capital expenditure = closing PP&E + depreciation expense - opening
PP&E = 170 + 75 - 150 = 95
9
What is the net change in non-cash working capital that would appear on
the cash flow statement given the following:

i) Increase in cash of $500


ii) Increase in accounts receivables of $800
ii) Decrease in inventories of $350
iv) Decrease in prepaid expenses of $225
v) Increase in PP&E of $950
vi) Increase in accounts payable of $400
Your Answer
$175
Correct Answer
$175
Explanation
Download the following excel file:

Q9_Solution.xlsx

10
If ABC Inc. buys a piece of equipment for $50,000, will use it in the
business for 5 years and in 5 years expects to sell it for $10,000. What
should ABC Inc. show in its cash flow statement in the year of purchase?
Your Answer
$50,000 cash outflow under investing activities
Correct Answer
$50,000 cash outflow under investing activities
Explanation
None.

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