Mock Test 1 Flashcards
When the Bank of England sells securities, what happens?
Interest rates rise
A reduction in the discount rate makes borrowing less
expensive
When we study the quantity demanded of a good and invoke the “other things equal” assumption, we assume all of the following are constant except the
price of the good itself
Expansionary open market operations will tend to ___________ excess reserves of banks
increase
How can the Bank of England increase the money supply?
By buying securities
There is a separation between ownership and management of a company. True or false?
True
Financial statements are prepared for external users and is published __________
yearly
The business entity convention holds that owner’s personal transactions must be separated from that of
business
Revenues and expenses have to be matched in the same year or period
Matching
characteristic of financial statements concerned with the usefulness of information that has the ability to influence users’ decisions
Relevance
Calculate assets if liabilities are £234,390, capital (or equity) is £460,000
£694,390
Calculate cost of sales if opening inventories is £25,000, purchases are £12,000 and closing inventories is £6,000
£31,000
Clive’s business has paid telephone bills amounting to £21,500 during his financial year, which ended on 30 September. After the year end, he receives a bill for the three months ended 31 October amounting to £6,600.
How much should the business accrue for the telephone expenses at the year end?
4,400
Meta Ltd purchased a new equipment costing £70,000. Its expected useful life is 5 years, at which point it is anticipated that the machine will have a residual value of £10,500. Applying the reducing-balance method of depreciation at 31.6% per annum, how much is the annual depreciation charge in Year 2?
15,130
Lowland Ltd consumed electricity of £2,760 in October 2012 and will only pay the bill in November 2012. As at 31 October 2012, this amount should be recognised in the Statement of Financial Position as:
accrued expense
Due, but not paid
Accrual
Paid, but not due
Prepayment
Formula for gross profit margin
Gross profit/sales revenue
If an asset cost £27,000 and the annual depreciation charge calculated using the straight-line method is £6,750 per annum, then depreciation is being charged at the rate of…
25%
If the trial balance at Laurie’s year end shows trade receivables of £19,900 and bad debts of £600 written off during the year, how should it be recorded at the income statement / SoPoL?
Trade receivables: 19,300
Bad debt expense: 600
Revenue arising from the sale of goods should be recognised when the _______________ can be measured reliably, probable that the economic benefits will be ____________, and that the ownership and control of goods has been passed to the _____________.
amount of revenue; received; buyer
The effects on the Statement of Financial Position of the business when the business buys machinery on credit are to:
increase assets (machinery), increase liabilities (trade payables)
If goods J and K are substitutes, an increase in the price of J causes:
a decrease in quantity demanded for J and an outward shift of K’s demand curve.
If the Bank of England LOWERS reserve requirements and NO increase in the money supply follows:
banks must now have excess reserves
Annual depreciation =/= _____ depreciation
AccUMULATED
