Jolly Roger's Seafood Restaurant had bank issued credit card sales of $3,300

including GST. The entry to record the sales is:

Select one:
a. Cash                                                                3300
GST Collections                                                            300
Sales Revenue                                                             3000 
b. Accounts Receivable                                      3300
Sales Revenue                                                             3300
c. Accounts Receivable                                      3000
GST Collections                                                            300
Sales Revenue                                                             3000
d. Cash                                                                3000
Sales Revenue                                                             3000

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Question 2
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The classification of liabilities on the basis of timing of settlement, i.e. current

and non-current, is useful as it helps decision-makers assess the firm's ability to
meet all of the following except:
Select one:
a. Commitments which are part of the operating cycle
b. Profitability 
c. Capital repayments
d. Dividends

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Question 3
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The Allowance for Doubtful Debts account has a balance at the start of the year
of $1000. At the end of the year debts of $990, including $90 GST, are to be
written off and the Allowance for Doubtful Debts is to be adjusted to 10% of the
closing Accounts Receivable balance of $22 000 (including $2000 GST). The
amount for Bad and Doubtful Debts appearing in the Income statement for the
year will be:
Select one:
a. $2000
b. $2100
c. $1900 
1900 = $2000 - $100*
(*$1000 - $900).

d. $2200

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  Jolly Roger's Seafood Restaurant had bank issued credit card sales of $3,300
including GST. The entry to record the sales is:
Select one:
a. Cash                                                                3300
GST Collections                                                            300
Sales Revenue                                                             3000 
b. Cash                                                                3000
Sales Revenue                                                             3000
c. Accounts Receivable                                      3300
Sales Revenue                                                             3300
d. Accounts Receivable                                      3000
GST Collections                                                            300
Sales Revenue                                                             3000

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Question 5
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Which of these would be defined as contingent liabilities?

I.          A loan from a financial institution
II.        An unresolved lawsuit bought against the entity for breach of health and
safety regulations
III.       An agreement to act as guarantor for another firm’s borrowings
IV. A bank overdraft
Select one:
a. I, II, IV
b. II, III 
c. I, II
d. I, III
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The key characteristic of contingent liabilities is:

Select one:
a. The liability does not exist beyond a reasonable doubt
b. A legal dispute must exist at balance date
c. The liability will be confirmed only by the occurrence or non-occurrence of a
future event not completely within the control of an entity 
d. The timing of the future sacrifice of economic benefits is uncertain

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The key difference between provisions and liabilities is:

Select one:
a. Whether there is an obligation
b. The uncertainty regarding the amount or timing of the future sacrifice of
economic resources 
c. Whether the obligation is current or non-current
d. The party that the obligation is owed to

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Question 8
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 Which of these would not be defined as a liability under the Conceptual

Framework?
Select one:
a. Money owing to a supplier for goods purchased
b. A loan from a financial institution
c. Wages owing to employees
d. An arrangement to pay a bonus commission to salespersons for achieving
sales over a certain level 

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Question 9
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 Flag question

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The statement concerning the Allowance for Doubtful Debts account that
is not true is:
   
Select one:
a. Allowance for Doubtful Debts represents cash set aside to cover losses
incurred as a consequence of customers being declared bankrupt 
b. Allowance for Doubtful Debts is used to adjust receivables for estimated bad
debts because individual debtor’s balances cannot be removed from the ledger
unless there is indisputable evidence they are bad
c. Allowance for Doubtful Debts is a contra-asset account designed to reduce
receivables to estimated realisable value
d. Allowance for Doubtful normally has a credit balance

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Question 10
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The requirement of IAS 37 that a provision must satisfy the definition of a

liability means which of these is not regarded as a liability?
Select one:
a. Provision for doubtful debts 
b. Provision for warrantee expenses
c. Provision for long-service leave
d. Provision for onerous contracts

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Question 11
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These are the balances for Johnson Co at 12 December:

            Accounts Receivable              $23 452
            Allowance for Doubtful Debts               1 252           $22 200
If an account for $300 is written off on 15 December what is the estimated
realisable value of Accounts Receivable after the write-off? (Ignore any GST
adjustment for the purposes of this question).
Select one:
a. $20 452
b. $22 200 
c. $19 200
d. $25 200

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Under the Conceptual Framework ‘probable’ in the recognition criteria means:

Select one:
a. 100% probability
b. A higher than 75% probability
c. A higher than 50% probability 
d. A higher than 90% probability

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Question 13
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The essential characteristics of a liability under the definition in the Conceptual

Framework  are?
i. A legal debt.
ii. A present obligation to an external party.
iii. Settlement requiring an outflow of resources embodying economic benefits.
iv. The obligation must have resulted from past events.
Select one:
a. ii, iii
b. i, ii, iii,
c. i, ii, iii, iv
d. ii, iii, iv 

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Question 14
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On 30 June 2013, Cook Enterprises decided that it needed to finally write off as
a bad debt a receivable of $4 400 (including $400 GST) from Jamie Ltd (in
liquidation). If Sicuro uses the allowance method the entry to achieve the write
off is:
Select one:
a. Debit Bad Debts Expense $4400; credit GST Collections $400; credit Accounts
Receivable $4000
b. Debit Bad Debts Expense $4400; credit Accounts Receivable $4400
c. Debit Allowance for Doubtful Debts $4000, debit GST Collections $400; credit
Accounts Receivable $4400 
d. Debit Allowance for Doubtful Debts $4000; credit Bad Debts Expense $4000

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 The statement concerning the receivables turnover ratio that is true is:
 
 
 
Select one:
a. It is calculated as total sales divided by average receivables
b. A change in the ratio from 2.8 times to 3.1 times is an unfavourable change
c. If the receivables turnover ratio is divided into 365 this gives the average
number of days it takes to sell receivables
d. It is a measure of how many times the average receivables balance is
converted into cash in a year 

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 Jarrod Co has the following balances in its general ledger:

                      Accounts receivable                                          $42 000
                          Less Allowance for doubtful debts                 - 4 000
                                                                                                  $38 000
If a debt for $1 000, previously provided for as doubtful, is written off as bad,
what is the estimated net realisable value of accounts receivable after the write
off?
Select one:
a. $39 000
b. $41 000
c. $37 000
d. $38 000 
$38 000 = $41 000 – $3 000
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Question 17
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The classification of liabilities on the basis of timing of settlement, i.e. current

and non-current, is useful as it helps decision-makers assess the firm's ability to
meet all of the following except:
Select one:
a. Capital repayments
b. Dividends
c. Commitments which are part of the operating cycle
d. Profitability 

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Question 18
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   Simpson Inc recorded sales of $180 000 during the year (net of GST). Of
these, $80 000 were on credit. Bad debts have averaged one half of one percent
of credit sales. The entry to estimate bad debt expense for the year is:
Select one:
a. Bad Debts Expense                                                    $900
Allowance for Doubtful Debts                                              $ 900
b. Bad Debts Expense                                                    $400
Allowance for Doubtful Debts                                         $400 
c. Bad Debts Expense                                                    $400
Accounts Receivable                                                  $400
d. Bad Debts Expense                                                    $900
Accounts Receivable                                                  $900

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Question 19
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 A contingent liability is reported:

Select one:
a. In the income statement
b. On the balance sheet
c. As a contra to an asset account
d. In a footnote to the financial reports 

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 The selling of accounts receivable as a means of quickly raising cash,

minimising debt collecting expenses and minimising bad debt losses is known as:
Select one:
a. Discounting
b. Debt factoring 
c. Establishing a bill receivable
d. Ageing of debtors

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