Multiple Choice Questions
Select the right answer (only one possible answers unless otherwise stated).
1 Which of the following measurement basis does not exist?
(a) Historical cost
(b) Decreasing cost
(c) Realizable value
(d) Present value
2 A business has two bank accounts: one has a positive balance of 100 CU and the second has a negative balance of 40 CU. What should be reported in the balance sheet?
(a) A net positive balance of 60 CU on the assets side
(b) A net positive balance of 60 CU on the liabilities side
(c) A balance of 100 CU on the assets side and a balance of 40 CU on the liabilities side
(d) A balance of 40 CU on the assets side and a balance of 100 CU on the liabilities side
3 Information which, if not disclosed on the financial statements, could influence the economic decisions of users, is known as:
(a) Material
(b) Substantial
(c) Interesting
(d) Important
(e) None of these
4 Which answer in the list of principles below best serves to achieve the objective of prudence?
(a) Conservatism
(b) Matching
(c) Accrual
(d) All of these
(e) None of these
5 Sales revenue should be recorded only when:
(a) The order is received
(b) The sales manager has negotiated the price with the customer
(c) The customer is satisfied
(d) The goods have been shipped and invoiced
6 Which of the following fixed assets are generally not subject to depreciation?
(a) Building
(b) Equipment
(c) Land
(d) Office furniture
7 On 1 June, The Dukas Company paid three months rent in advance, for a total cost of 900 CU. At the time of payment, prepaid rent was increased by this amount. What adjusting entry is necessary as part of the 30 June closing?
a.

b.

c.

d.

8 The Dukas Company signed a 3,000 CU debit note to Bankix, their local bank on 1 September X3. At that time, the accountant of the company made the appropriate entry. However, no other entry relating to the note has been made. Given that the bank is charging interest at a yearly rate of 5 percent, what adjusting entry, if any, is necessary on Dukas Company€™s year-end date of 31 December X3?
a.

b.

c.

d.

e.

f.

9 The Dukas Company owns offices, which are rented to other businesses. On 1 February, Dukas rented some office space and received six months€™ rent in advance, totaling 6,000 CU. At that time, the entire amount was recorded to increase unearned rent. What adjusting entry is necessary on 28 February, if the company decides to prepare financial statements on that date?
a.

b.

c.

d.

(e) No adjusting entry is necessary
The Dukas Company owns an interest-bearing note receivable with a nominal value of 1,000 CU. Interest at 4 percent per annum on the note receivable has accrued for three months and is expected to be collected when the note is due in July. What adjusting entry is necessary on 31 March, if the company decides to prepare financial statements at that date?
a.

b.

c.

d.

e.

(f) No adjusting entry is necessary

Balance sheet Income statement Prepaid rent Rent experse 300 300 Balance sheet Incorme statemernt Prepaid rent 300 Rent expense 300 Balance sheat Income statement Rent expanse Prepaid rent 600 600 Balance sheet Income statement Prepaid rent Rent expense 600 600 Balance sheet Income statement Interest payable Interest expense 150 150 Balance sheet Income statement Note payable Interest expense 50 50 Balance sheet lncome statement Accrued interest payable Interest expense 50 50 Balance sheet noome statement Note payable Interest expenise 150 150 Balance sheet noome statement Note payable Interest expense 50 50 Balance sheet Income statement Note payable Interest expense 150 150 Balance sheet lncome statement Accrued interest payable Interest expense 50 50 Balance sheot Income statemert Unearned rent Rent revenue 1,000 1,000 Balance sheet Income statement Unearmed rent Rent revernue 5,000 5,000 Balance sheat Income staternent Unearned rent Rent revenue 5,000 5,000 Balance sheet income statement Accrued interest payable Interest revenue 10 10 Balance sheet Income statenent Notes receivable Interest revenue 40 40 Balance sheet Income statement Notes receivable Interest revenue 40 40 Balance sheet Income statement Accrued interest receivable Interest revenue 10 10 Balance sheet Income statement Accrued interest receivable Interest revenue 40 40