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U C A A Online Quizzes Online Quiz 1 Started on State Completed on

Time taken Grade Question 1 Tuesday, 2 September 2014, 2:16 PM Finished

Friday, 5 September 2014, 4:35 PM 3 days 2 hours 26.00 out of a maximum of

30.00 (87%) Which of the following is NOT an essential characteristic of an

asset? Correct Mark 1.00 out of 1.00 Flag question Select one: a. it must be

legally owned by the entity For an item to be classified as an asset, it must

firstly meet the definition of an "asset". This is a three pronged test: 1 -Control

by the entity; 2- Control is a result of past event; and 3- Future economic

benefits are expected to flow. Thus, B & C are both true statements. A,

however, is untrue. The definition of an asset does not require legal control.

For example, if a lessee leases equipment, the legal title of the equipment still

resides with the lessor. Nevertheless, the lessee has control over the asset as

it can direct where the asset is located and the use to which the asset is put.

You can control an asset without owning it. b. the entity must have control

over the asset c. the transaction giving the entity control over the asset must

have occurred d. none of the above; all are essential characteristics The

correct answer is: it must be legally owned by the entity Question 2 Correct

Mark 1.00 out of 1.00 Remove flag If a machine is acquired in exchange for

$9,000 cash and a $21,000 loan, then: Select one: a. Total assets increase

Recall the accounting equation: Assets equals liabilities plus equity. In this

transaction, an asset increases by $30,000 (machine), an asset decreases by

$9,000 (cash), and a liability increases by $21,000 (loan). Overall, assets

increase by $21,000 ($30,000 - $9,000). There is no equity or expense effect

at this point in time. b. Total liabilities decrease c. Owner's equity increases d.

Expenses increase The correct answer is: Total assets increase Question 3

Correct Mark 1.00 out of 1.00 Flag question A stapling machine costing $25

with a useful life of 5 years, is treated as a stationery expense rather than as

an asset. What assumption/concept underlies this procedure? Select one: a.

materiality There are some basic assumptions that underlie current

accounting practice and the preparation of financial statements, some of

which are mentioned above. A - Materiality: This principle states that the

requirements of any accounting principle may be ignored when there is no

effect on the users of financial information. Professional judgement is needed

to decide whether an amount is insignificant or immaterial. B - Monetary

Concept: Not only must an accounting entity's accounting records include only

quantifiable transactions, but these same transactions must also be measured

and recorded in stable currency, such as the Australian dollar. This allows

comparisons across periods and across different companies. C - Accounting

Period: The life of a business needs to be divided into discrete periods to

evaluate performance for that period. Dividing the life of an organisation into

equal periods to determine profit or loss for that period is known as the

accounting period assumption. D - Accounting Entity. The accounting entity is

separate and distinguishable from its owners. What this means is that

business records must not include the personal assets or liabilities of the

owners. For example, a company is a separate entity from its shareholders

(owners); similarly, the accounting entity of a sole trader is separate from the

affairs of the owner. The economic benefit(s) received from using a stapling

machine is as trivial as the transaction which led to its purchase. Thus, sound

accounting judgement would suggest that it's more appropriate to treat the

transaction as an expense rather than an asset, and this thinking is in line

with the materiality assumption. By knowing the assumptions well, you would

eliminate all options except A. b. monetary concept c. accounting period d.

accounting entity The correct answer is: materiality Question 4 Correct The

purpose of dividing assets and liabilities into current and non-current classes

is to help the reader of the balance sheet to determine: Mark 1.00 out of 1.00

Select one: Flag question a. the short-term financial position of the firm b. the

long-term financial position of the firm c. the likely future financial

performance of the firm d. both A and B The terms current and short-term are

used interchangeably in accounting, and so are non-current and long-term.

The difference between current and non-current classes is really a question of

liquidity. In arranging asset and liability items in a balance sheet, we create

two classes: current and non-current. This arrangement facilitates review of

the balance sheet information by interested parties and reflects a difference

of liquidity, with current classes of assets and liabilities determinative of short-

term financial position, and non-current classes of assets and liabilities

determinative of long-term financial position. Thus, the answer is D. C is

incorrect because focusing solely on the division between current and non-

current classes is an insufficient indicator of future financial performance;

moreover, the information presented in financial statements is historical, and

past performance is not always an accurate indicator of future performance.

The correct answer is: both A and B Question 5 Incorrect Mark 0.00 out of 1.00

Remove flag The most common way of accommodating the need for detailed

records in the accounting system, without grossly expanding the number of

separate accounts in the general ledger, is to use the technique of: Select

one: a. double-entry accounting Commentary - Prerequisites: Understand the

Subsidiary ledgers and control accounts A - double-entry accounting is the

practice of recording two aspects of each transaction. C - accrual accounting

adjustments: Periodically (monthly, quarterly, and/or annually) adjusting

entries are required when accrual basis accounting is used. D - cash flow

statements: a statement that explains the changes in cash equivalent

balances during a fiscal period. The correct answer is B. b. subsidiary ledgers

and control accounts c. accrual accounting adjustments d. cash flow

statements. The correct answer is: subsidiary ledgers and control accounts

Question 6 Which of the following statements is true? Correct Mark 1.00 out of

1.00 Flag question Select one: a. if the liabilities owed by a business total

$450 000, then the assets also total $450 000 b. if the assets owned by a

business total $500 000, then shareholders' equity also totals $500 000 c. if

the assets owned by a business total $90 000 and liabilities total $50 000,

then shareholders' equity totals $40 000 The accounting identity states Assets

= Shareholders' Equity + Liabilities A business' resources are financed by two

key sources: either shareholder investment or liabilities (various debts and

borrowings). C is the only answer where the accounting identity holds true,

i.e., 90,000 = 50,000 + 40,000. A&B are possible answers but are not the best
answers because they each fail to consider the right hand-side of the equation

in its totality. There are two possible sources of finance. d. if the assets owned

by a business total $90 000 and liabilities total $50 000, then shareholders'

equity totals $140 000 The correct answer is: if the assets owned by a

business total $90 000 and liabilities total $50 000, then shareholders' equity

totals $40 000 Question 7 Incorrect Which of the following statements about

subsidiary ledgers and control accounts is NOT true? Mark 0.00 out of 1.00

Select one: Remove flag a. Every entry made to an account in the subsidiary

ledger is also reflected in the control account in the general ledger.

Commentary - Prerequisites: understand the operation of special journals and

subsidiary ledgers When the total of the subsidiary ledger accounts does not

agree with the balance of the control account, it signals errors in one or both

accounts. The correct answer is D. b. All credit entries will be the same in

aggregate between the subsidiary ledger and the control account. c. The total

of the balances appearing in the accounts in the subsidiary ledger should

equal the balance appearing in the control account. d. If the total of the

subsidiary ledger accounts fails to agree with the balance of the control

account, the subsidiary ledger must be in error. The correct answer is: If the

total of the subsidiary ledger accounts fails to agree with the balance of the

control account, the subsidiary ledger must be in error. Question 8 The

following accounts were taken from the trial balance: Correct Mark 1.00 out of

1.00 Flag question Net profit for the period is: Select one: a. $12 000 b. $10

000 c. $12 500 d. $11 000 Net Profit = Revenue - Cost of Goods Sold -

Operating Expenses Net Profit = 15,000 - 1,500 - 1,000 - 1,500 = 11,000 - d.

The correct answer is: $11 000 Question 9 Which of the following accounts is

not closed off at year end? Correct Mark 1.00 out of 1.00 Flag question Select

one: a. Cost of Goods Sold b. Amortisation Expense c. Interest Revenue d.

Accounts Receivable Only temporary accounts, income and expense accounts

(income statement accounts) are closed off at the end of year. The reason

behind this is twofold: (1) to reset income and expense accounts for next year

to avoid double counting, and (2) to transfer net profit or loss for the period to

retained earnings in the balance sheet. Permanent accounts, balance sheet

accounts-assets, liabilities, and shareholders' equity, continue on year-to-year

and are not closed off, for it would not make sense to close off a balance

sheet account: businesses don't start re-accumulating assets they already

have in the New Year. For example, if you ended with $500 worth of inventory

in 2011, then you open with $500 worth of inventory in 2012. Your inventory

account would not start off with a zero balance in the New Year. A-C are

income statement accounts and would all be closed off at the end of the year.

The only item that wouldn't be closed off is D, because it's a permanent

account and appears on the balance sheet. The correct answer is: Accounts

Receivable Question 10 Correct Mark 1.00 out of 1.00 Flag question At the end

of the financial year, the usual adjusting entry for accrued salaries owed to

employees was omitted. Which of the following statements is true? Select

one: a. Salary expense for the year was overstated. b. The total of the

liabilities at the end of the year was overstated. c. Net profit for the year was

understated. d. Shareholders' equity at the end of the year was overstated.

Commentary - Prerequisites: understand and apply accrual accounting

adjustment The adjusting entry for accrued salaries is: DR salary expense $xx

CR salary payable $xx If this adjusting entry was omitted, salary expense was

understated, liability was also understated. When salary expense was

understated, net profit was overstated, therefore, shareholder's equity was

also overstated. The correct answer is D. The correct answer is: Shareholders'

equity at the end of the year was overstated. Question 11 Correct Mark 1.00

out of 1.00 Flag question The Framework states that an asset should be

recognised when and only when: i. The asset possesses a cost or other value

that can be measured reliably ii. It is legally owned by the entity iii. It is

probable that the future economic benefits embodied in the asset will

eventuate Select one: Skip Quiz navigation a. i and ii only b. i and iii only For

an item to be classified an asset, it must firstly meet the definition of an

"asset". This is a three pronged test: 1 - Control by the entity; 2 - Control is a

result of past event; and 3 - Future economic benefits are expected to flow.

Even though the item may meet the definition of an asset, we may not

necessarily recognise it on the balance sheet (ie present it on the face of the
balance sheet). We will only recognise an item on as an asset on the balance

sheet if it has 1) met the definition of an asset and 2) met the recognition

criteria, ie: 1 - Probable that future economic benefits will flow. 2 - Item has a

cost or value that can be measured reliably. c. ii and iii only d. i, ii and iii The

correct answer is: i and iii only Question 12 Which of the following are debits?

Correct Mark 1.00 out of 1.00 Flag question Select one: a. contributions of

capital b. increases in revenues c. increases in liabilities d. decreases in

owners' equity A, B, and C are all increases in sources of finance, the right-

hand side of the accounting equation. Assets = Shareholders' Equity/Owners'

Equity + Liabilities. Accounts that fall under the right-hand side of the

accounting equation have as their normal balance an entry on the right-hand

side (credit balance) and are increased by credit entries and decreased by

debit entries. Owners' Equity has a credit balance; therefore, to decrease an

account with a credit balance you must debit it -d. The correct answer is:

decreases in owners' equity Question 13 Correct Mark 1.00 out of 1.00

Remove flag The supplies account has a balance of $975 at the beginning of

the year and was debited during the year for $2800, representing the total of

supplies purchased during the year. If $750 of supplies is on hand at the end

of the year, the supplies expense to be reported on the profit and loss

statement for the year is: Select one: a. $750 b. $975 c. $2800 d. $3025.

Commentary - Prerequisites: understand and apply accrual accounting

adjustment For the supplies account, during the period, Closing balance (i.e.

supplies on hand, $750) = opening balance ($975) + supplies purchased

($2800) - supplies used Supplies expenses incurred during the year = $975+

$2800 -$750=$3025 The correct answer is D. The journal entry to record

supplies expense is: DR supplies expense $3025 CR supplies $3025 The

correct answer is: $3025. Question 14 Which of the following is not a

transaction? Incorrect Mark 0.00 out of 1.00 Flag question Select one: a. The

purchase of inventory from suppliers b. The donation of a motor vehicle to the

company In all of options A, B, and C, a significant event has taken place. In A,

an order has been made. In B, an asset has been received. In C, money has

changed hands. However, in option D, an individual is seeking compensation,

but we do not know what the outcome will be - we do not know if it is

probable that the company will have to pay damages, and even if it were

probable, we cannot reliably measure the likely size of damages in advance. c.

Payment of legal fees d. The compensation sought by an individual taking

legal proceedings against the company The correct answer is: The

compensation sought by an individual taking legal proceedings against the

company Question 15 Correct The life of a business is divided into equal

periods to determine profit or loss for that period. What assumption/concept

underlies this procedure? Mark 1.00 out of 1.00 Select one: Flag question a.

materiality b. monetary concept c. accounting period There are some basic

assumptions that underlie current accounting practice and the preparation of

financial statements, some of which are mentioned above. A - Materiality: This

principle states that the requirements of any accounting principle may be

ignored when there is no effect on the users of financial information.

Professional judgement is needed to decide whether an amount is

insignificant or immaterial. B - Monetary Concept: Not only must an

accounting entity's accounting records include only quantifiable transactions,

but these same transactions must also be measured and recorded in stable

currency, such as the Australian dollar. This allows comparisons across periods

and across different companies. C - Accounting Period: The life of a business

needs to be divided into discrete periods to evaluate performance for that

period. Dividing the life of an organisation into equal periods to determine

profit or loss for that period is known as the accounting period assumption. D -

Accounting Entity. The accounting entity is separate and distinguishable from

its owners. What this means is that business records must not include the

personal assets or liabilities of the owners. For example, a company is a

separate entity from its shareholders (owners); similarly, the accounting entity

of a sole trader is separate from the affairs of the owner. By knowing the

assumptions well, you would eliminate all options except C. d. accounting

entity The correct answer is: accounting period Question 16 Correct Mark 1.00

out of Using the Australian dollar to measure accounting transactions allows

comparisons across periods. What assumption/concept underlies this

procedure? 1.00 Flag question Select one: a. accounting entity b. monetary

concept There are some basic assumptions that underlie current accounting

practice and the preparation of financial statements, some of which are

mentioned below. A - Accounting Entity. The accounting entity is separate and

distinguishable from its owners. What this means is that business records

must not include the personal assets or liabilities of the owners. For example,

a company is a separate entity from its shareholders (owners); similarly, the

accounting entity of a sole trader is separate from the affairs of the owner. B -

Monetary Concept: Not only must an accounting entity's accounting records

include only quantifiable transactions, but these same transactions must also

be measured and recorded in stable currency, such as the Australian dollar.

This allows comparisons across periods and across different companies. C -

Historical Cost: According to the historical cost principle, assets are initially

recorded at cost, which equals the value exchanged at the time of their

acquisition D - Going Concern: Unless otherwise noted, financial statements

are prepared under the assumption that the company will remain in business

indefinitely. By knowing these assumptions, you would eliminate all options

except B. c. historical cost d. going concern The correct answer is: monetary

concept Question 17 Given the information below: Correct Mark 1.00 out of

1.00 Flag question What is the cash profit of the business for 2011? Select

one: a. $9 000 b. $14 000 c. $24 000 Accrual accounting captures the

financial aspects of each economic event in the accounting period in which it

occurs, regardless of when cash changes hands. In other words, revenues are

recorded when they occur-when they're earned, and expenses are recorded

when they're incurred. Under cash accounting, revenues are recognised only

when the company receives cash or its equivalent, and expenses are

recognised only when the company pays with cash or its equivalent. For

example, say we have a ticketing business that sells multiple tickets to a

customer with the promise to deliver the tickets in 7 days. Any money

received by the business up front is treated as a liability under the accrual

basis, specifically Unearned revenue.' This is because, while the business has

received money, it hasn't discharged its obligations to the customer, i.e., it

hasn't delivered the tickets. Therefore, the business has a present obligation

to deliver the tickets. Once the tickets have been delivered, the business is

said to have earned its revenue. On the other hand, under cash accounting,

once the business receives cash, revenue is recorded, irrespective of when it

performs its substantive obligations to its customer. Cash is king, in other

words. The question asks us to determine the cash profit for 2011; therefore,

we must concentrate on cash receipts and cash payments, and disregard

accrual based entries and accounts. A - Cash Sales: Part of cash basis

accounting B - Credit Sales: We would include credit sales in accrual

calculations, but not in cash accounting-not until the cash owed to us is

received. A credit sale is a sale to a customer where money is not paid on

delivery or completion of service, but at a later date, expressly stated in the

payment terms, which generally appear on the sale invoice. Thus, we would

not include this figure. C - Cash received from accounts receivables: Part of

cash basis accounting. Cash is being received. D - Wages Paid: Part of cash

basis accounting. An expense-wages expenseis paid. E - Wages owing at the

end of the year: A business may have wages owing at the end of the year, and

will be expected to pay it sometime in the future, but until that date-a cash

accounting system remains unaffected. Once the wages that are owed are

paid, they'll be processed by the cash accounting system. Thus, 10,000 +

22,000 - 8,000 = 24,000 d. none of the above The correct answer is: $24 000

Question 18 Accounts Receivable' is a credit column in the: Correct Mark 1.00

out of 1.00 Flag question Select one: a. sales journal b. purchase journal c.

cash receipts journal To speed up the process of recording transactions,

companies use special journals to record repetitive transactions that affect the

same set of accounts have a consistent description. Such transactions can be

documented in one line. A - A sales journal records customer purchases on

credit, which requires a debit column for accounts receivable. B - A purchases

journal record the firm's purchases on credit. It has not affect on accounts

receivable. C - Transactions that increase cash are recorded in multi-column

cash receipts journal. Credit columns for accounts receivable and Sales are

normally present. D - Transactions that decrease cash are recorded in multi-

column cash payments journal. There is no accounts receivable column in this

journal. Thus, given the above explanation, the answer is C, because a

customer that repays you for goods and services purchased on credit at an

earlier time would result in a decrease to accounts receivable; this is known

as crediting accounts receivable. d. cash payments journal The correct answer

is: cash receipts journal Question 19 Correct In posting the total of the cash

column in a cash receipts journal, the entry that would be made is: Mark 1.00

out of 1.00 Select one: Flag question a. Dr Cash To speed up the process of

recording transactions, companies use special journals to record repetitive

transactions that affect the same set of accounts have a consistent

description. Such transactions can be documented in one line. Then, instead

of separately posting individual entries, each column's total is posted at the

end of the accounting period. Transactions that increase cash appear in the

multi-column cash receipts journal. The Cash column in the cash receipts

journal is a debit column. Thus, when the cash column is posted to the Cash

account in the general ledger at the end of the accounting period, the entry is

simply Dr Cash. You wouldn't debit each of the specific accounts that comprise

the total of the cash column because the corresponding accounts have their

own totals in the cash receipts journal, which also get posted at the end of the

accounting period (Sales and accounts receivable columns, for example). b. Cr

Cash c. Dr each of the specific accounts that comprise the total d. none of the

above The correct answer is: Dr Cash Question 20 Which of the following is

NOT a purpose served by special journals? Correct Mark 1.00 out of 1.00 Flag

question Select one: a. reduction in the number of postings to the general

ledger b. elimination of the general journal Commentary - Prerequisites:

Understand the Subsidiary ledgers and control accounts Special journals are

used in addition to a general journal. Transactions that are not recorded in a

special journal are recorded in general journal. The correct answer is B. c.

reduction in number of entries requiring narrations d. making it easier to find

errors. The correct answer is: elimination of the general journal Question 21

Correct A customer provides a deposit of $500 000 near year-end. The

product will not be delivered until next year. This transaction will: Mark 1.00
out of 1.00 Select one: Flag question a. increase net profit, total assets and

cash b. increase net profit and cash but not total assets c. increase total

assets and cash but not net profit Generally, a company records its revenue

only when delivery of the product occurs. It is at the point of delivery that the

company would discharge its obligations to a customer by delivering the

product it had promised to deliver in exchange for monies or monies worth.

Thus, what we have here is an unearned revenue: Dr Cash 500,000 - record

the deposit Cr Unearned Revenue 500,000 - the product hasn't been delivered

yet; therefore, the revenue has not be earned. Unearned revenue is a liability

account because it reflects the fact that the company still has a present

obligation to deliver the product it promised to deliver to the customer. Thus,

total assets increase because cash increases but net profit remains

unchanged - c. d. increase cash but not increase net profit or total assets The

correct answer is: increase total assets and cash but not net profit Question

22 Correct Given the information below: Mark 1.00 out of 1.00 Flag question

Assume no dividends were declared during the year. What is the balance of

total assets at 30 June 2011? Select one: a. 200 000 b. $210 000 Assets =

Shareholders' Equity + Liabilities In this particular question we add up the

accounts that make up shareholders' equity and liabilities to determine total

assets. Share Capital (SE) + Retained Profits (SE) + Accounts Payable (L) =

Total Assets 100,000 + 80,000 + 30,000 = 210,000. c. $290 000 d. none of

the above The correct answer is: $210 000 Question 23 Which of the following

may be a liability of a business enterprise? Correct Mark 1.00 out of 1.00 Flag

question Select one: a. share capital b. wages payable Share Capital is part of

Shareholders' equity; Wages Payable are wages owed to employees for work

that has been performed; retained profits can be defined as a running account

of a business' year-toyear performance, including deduction for dividends.

Only possible answer is B. c. retained profits d. none of the above The correct

answer is: wages payable Question 24 Correct Mark 1.00 out of 1.00 In 2011,

Zealous Ltd paid $1900 for 2010 expenses, $32 000 for 2011 expenses and

$4000 advance payment for 2012 expenses. In 2012, it paid $8000 for 2011

expenses. Furniture depreciation for 2011 was $5000. What was the accrual
accounting expense for 2011? Remove flag Select one: a. $37 000 b. $40 000

c. $50 900 d. $45 000 Commentary - Prerequisites: understand and apply the

foundation of accrual accounting Under accrual accounting, the company

should recognize revenue and expense when revenue has been earned and

expense has incurred. Accrual accounting expense for 2011=$32 000 (which

incurred and paid in 2011) + $8000 (which incurred in 2011 but paid in 2012)

+ $5000 (furniture depreciation expenses for 2011) =$ 45 000 The correct

answer is D. The correct answer is: $45 000 Question 25 Which of the

following is an accounting transaction? Correct Mark 1.00 out of 1.00 Flag

question Select one: a. Making a purchase order b. Establishing a bank

overdraft c. Hiring a new staff member d. None of the above In order to qualify

as a financial accounting transaction, an event must normally have all five of

the following characteristics: Three Primary Characteristics: A - Exchange: The

event must involve an exchange of goods, money, cheques, legal promises or

other items of economic value; B - Past: The exchange must have happened,

even if just seconds good (remember-financial accounting is essentially an

historical information system); C - External: The exchange must have been

between the entity being accounted for and someone else. Two

Supplementary Characteristics: D - Evidence: There must be some

documentation of what has happened (recorded on paper or electronically) E -

Dollars: The event must be measurable in dollars (monetary concept) or the

currency unit relevant in the country where the transaction happens. Answer

Options: A - Making a purchase order lacks exchange. Event A is recorded by

the accounting system only when the item ordered is delivered; B -

Establishing a bank overdraft is a precursor to an exchange; it's not until the

entity begins drawing down its bank overdraft that a transaction occurs. C -

Hiring a new staff member is an internal transaction, lacking in substantive

exchange, besides a legal promise to perform contracted work on the part of

the new staff member and a promise to remunerate the staff member on the

part of the entity. Also, the event is not measurable in dollars, failing the

monetary assumption that underpins the preparation and presentation of

financial statements. Therefore, D is the correct answer because the

transactions above fail to meet the criteria that would be necessary for them

to be recorded by a financial accounting system. The correct answer is: None

of the above Question 26 Given the following information, calculate gross

profit: Correct Mark 1.00 out of 1.00 Flag question Select one: a. $30,000 b.

$60,000 In accounting, Gross Profit is the difference between revenue and the

cost of making a product or providing a service, before deducting operating

expenses. Gross Profit = Revenue - Cost of sales = 100,000 - 40,000 = 60,000

c. $35,000 d. $20,000 The correct answer is: $60,000 Question 27 Which of

the following entries correctly records the receipt of an electricity Correct

Mark 1.00 out of 1.00 Flag question bill from the power company? Select one:

a. Dr Electricity Expense Cr Electricity Payable From the consumer's point of

view, electricity has been consumed during the period but not paid for. Thus,

the consumer must recognise the electricity expense and the associated

liability because he/she has used up electricity and has a present obligation to

pay the power company in the future. Hence the answer is A. b. Dr Electricity

Payable Cr Accounts Payable c. Dr Accounts Payable Cr Electricity Expense d.

Dr Accounts Payable Cr Utilities Payable The correct answer is: Dr Electricity

Expense Cr Electricity Payable Question 28 Which of the following may NOT be

a subsidiary ledger? Incorrect Mark 0.00 out of 1.00 Flag question Select one:

a. creditors b. property, plant and equipment Commentary - Prerequisites:

Understand the Subsidiary ledgers and control accounts Creditors/accounts

payable: a separate account for each creditor Property, plant and

equipment: separate records of each piece of property, plant and equipment

Finished goods inventory: separate records of each type of finished goods

held. The correct answer is D. c. finished goods inventory d. cost of goods

sold. The correct answer is: cost of goods sold. Question 29 Correct Mark 1.00

out of 1.00 Flag question At 1 July 2010, Epsilon Pty Ltd had 100 items of

inventory which had cost $50 each. During the year ended 30 June 2011, it

purchased 1500 items at a cost of $50 each. Of these, 200 were returned to

the supplier as they were damaged. During the year, 1200 items were sold for

$80 each, but 50 were returned by customers. Overhead expenses during the

year amounted to $15 000. What was Epsilon Pty Ltd's cost of goods sold for
the year? Select one: a. $47 500 b. $57 500 The cost of goods sold (COGS) is

the cost of making or buying a product that is then sold. During the year

Epsilon Pty Ltd sold 1200 items, 50 of which were returned. Thus, COGS is

equal to (number of items sold - items returned) x purchased cost of inventory

= (1200 - 50) x 50 = $57,500. c. $60 000 d. $62 500 The correct answer is:

$57 500 Question 30 Correct The general ledger account representing the

subsidiary ledger is known as a control account because: Mark 1.00 out of

1.00 Select one: Flag question a. Inclusion of both control accounts and

subsidiary ledger accounts in the general ledger improves control b. The

accuracy of the detailed accounts in the subsidiary ledger can be checked

against the aggregate data and the balance contained in it A subsidiary ledger

is a group of similar accounts whose combined balances equal the balance in

a specific general ledger account. The general ledger account that

summarises a subsidiary ledger's account balance is called a control account.

For example, an accounts receivable subsidiary ledger includes a separate

account for each customer who makes a credit purchase. The combined

balance of every account in the subsidiary ledger equals the balance of

accounts receivable in the general ledger. Thus, by a process of elimination,

and in light of the explanation, the answer is B. In and of themselves they

don't improve control. They work concurrently, feeding off each other, which

enables the financial and accounting team to cross-check the accuracy of the

accounts. c. Both of the above are correct d. None of the above are correct

The correct answer is: The accuracy of the detailed accounts in the subsidiary

ledger can be checked against the aggregate data and the balance contained

in