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Multiple choice questions

How many units were sold in the period?

Which correctly describes the amount of dividend?

What will the club's Income and Expenditure account show?

What is the maximum dividend per share payable from this year's profits?

When a shareholder sells some shares for less than he paid for them, what will happen to the share capital of the company?

What effect will this transaction have on the current and quick (acid test) ratios?

What is the creditors' payment period?

A company wishes to improve its current ratio and its acid test ratio. How can this be done?

What is the effect of this method of allocation?
What is the fixed cost?What are the variable unit costs?

I The following information relates to a business for a period.
$
selling price per unit
100
variable costs per unit
60
total fixed costs
90 000
net profit
15 000
How many units were sold in the period?
A 1500 B 1750 C 2250 D 2625

16 A company has an authorised share capital of 2 million $0.25 ordinary shares of which 1.6 million
are in issue. It is proposed to pay a dividend totalling $40 000.
Which correctly describes the amount of dividend?
A an ordinary dividend of 8%
B an ordinary dividend of 10%
C an ordinary dividend of $0.08 per share
D an ordinary dividend of $0.10 per share

17 The treasurer of a tennis club has provided the following information for a year.
number of members 75

annual subscription $95

subscriptions received $7,305

overheads: tennis balls - purchased $850

Opening stock $110
Closing stock $95

other overheads $4,700

What will the club's Income and Expenditure account show?
A $1560 surplus B $1670 surplus C $1740 surplus D $1850 surplus

18 A company is financed by:
10 000 $1 ordinary shares
$5000 10 % Loan

Net profit before interest and taxation is $2500.
Tax payable is $400.
What is the maximum dividend per share payable from this year's profits?
A $0.16 B $0.20 C $0.21 D $0.25

19 When a shareholder sells some shares for less than he paid for them, what will happen to
the share capital of the company?
A It will fall by the nominal value of the shares sold.
B It will fall by the sales proceeds of the shares sold.
C It will increase by the amount received from the sale of the shares.
D It will remain the same as before.

20 A business sells stock to a credit customer at a selling price greater than cost.
What effect will this transaction have on the current and quick (acid test) ratios?
A Both ratios will be unchanged.
B Both ratios will increase.
C The current ratio will increase while the quick ratio will not change.
D The current ratio will not change while the quick ratio will increase.

21 The following items are included in the Balance Sheet of a business.
$0
Stock $64

Debtors $126

Creditors $87

Bank (debit balance) $21

Bank loan (repayable in 2 years) $50

What is the quick (acid test) ratio?
A 1.1:1 B 1.2:1 C 1.7:1 0 2.4:1
22 The following information is available for a business.

opening stock $29,000

credit purchases $186,000

closing stock $8,000

creditors at year end $24,000

What is the creditors' payment period?
A 40 days B 43 days C 48 days D 54 days
23 The opening stock of a business is $10 000 and the cost of goods sold is $200 000.
Using the average figure of opening and closing stock, what value of closing stock is needed to give a stock turnover of 10?
A $10,000 B $20,000 C $30000 D $40,000

24 A company wishes to improve its current ratio and its acid test ratio.
How can this be done?
A increasing discounts to debtors
B increasing the provision for doubtful debts
C purchasing additional stock on credit
D selling fixed assets
25 A business uses job costing to calculate the cost of vehicle repair jobs.
Overheads are allocated on an absorption costing basis.
What is the effect of this method of allocation?
A overheads will include both fixed and variable overhead costs
B overheads will include direct costs only
C overheads will include fixed overhead costs only
D overheads will include variable overhead costs only
26 The table shows costs at three activity levels.
activity levels 65 Units 90 Units 100 Units
$ $ $
fixed cost ? ? ?
Variable Cost ? ? ?
total Cost 15600 19600 21200

What is the fixed cost?
A $1600 B $4000 C $5200 D $5600
What is the fixed cost?
A $1600 B $4000 C $5200 D $5600
27 What will result in under-absorption of fixed production overhead?
A absorption based on actual expenditure and actual activity
B actual expenditure below budget expenditure
C actual activity above budget activity
D actual activity below budget and expenditure as budgeted

28 What does the diagram show?

A Fixed costs per unit are less as production increases.
B Total fixed costs are less as production increases.
C Total variable costs are less as production increases.
D Variable costs per unit are less as production increases.
29 The information relates to a product.

Break even Sales revenue $15000
unit Sales Price $10
Fixed Cost $6,000

What are the variable unit costs?
A $2.00 B $2.50 C $4.00 D $6.00
30 The table shows opening and closing balances for the Rent Receivable account.
start of year end of year
rent received in advance $4,200 $1,600
rent due in arrears $2,000 $2,400

During the year, $111 000 rental income was received.
What is the total rent receivable for the year?
A $110,600 B $111 000 C $112800 D $114,000

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I The following information relates to a business for a period.
$
selling price per unit
100
variable costs per unit
60
total fixed costs
90000
net profit
15 000
How many units were sold in the period?
A 1500 B 1750 C 2250 D 2625

selling price per unit 100
variable costs per unit 60
Therefore contribution= 40

total fixed costs 90000
No of units required to break even= 2250 =90000/40

Net profit 15000
No of units required= 375

Total no of units sold= 2625

16 A company has an authorised share capital of 2 million $0.25 ordinary shares of which 1.6 million
are in issue. It is proposed to pay a dividend totalling $40 000.
Which correctly describes the amount of dividend?
A an ordinary dividend of 8%
B an ordinary dividend of 10%
C an ordinary dividend of $0.08 per share
D an ordinary dividend of $0.10 per share

Total no of shares outstanding 1,600,000

Total dividend $40,000

Dividend per share= $0.0250

Par value of share= $0.25

Dividend per share/ Par value= 10.00%

17 The treasurer of a tennis club has provided the following information for a year.
number of members 75

annual subscription $95

subscriptions received $7,305

overheads: tennis balls - purchased $850

Opening stock $110
Closing stock $95

other overheads $4,700

What will the club's Income and Expenditure account show?
A $1560 surplus B $1670 surplus C $1740 surplus D $1850 surplus

subscriptions received $7,305

overheads: tennis balls - purchased $850
other overheads $4,700
$5,550

Decrease in stock $15
$5,565

Surplus= $1,740

18 A company is financed by:
10 000 $1 ordinary shares
$5000 10 % Loan

Net profit before interest and taxation is ...

Solution Summary

The solution provides answers to multiple choice questions on authorized share capital, Net profit before interest and taxation, current ratio, quick ratio, acid test ratios, debtors, creditors, overhead allocation, absorption costing, under-absorption, fixed production overhead, Break even Sales, revenue

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