Financial Statements 1 Test 32

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Financial Statements 1 Test 32

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Weekly Quiz Competition

Question 1
1 / -0

Under inflationary conditions, which of the following methods will have highest value of closing stock ?

A
FIFO

B
LIFO

C
Weighted Average

D
None of the above

Solution

The LIFO method results in less net income because COGS is greater. FIFO gives us a good indication of ending inventory value, but it also increases net income because inventory that might be several years old is used to value COGS.
Question 2
1 / -0

In the previous year, closing stock was valued more by Rs.10,000. As a result __________________.

A
Previous year's profit is overstated and current year's profit is also overstated

B
Previous year's profit is understated and current year's profit is overstated

C
Previous year's profit is understated and current years's profit is also understated

D
Previous year's profit is overstated and current year's profit understated
Question 3
1 / -0

If closing stock is understated _____________________.

A
the profit will increase and current assets will decrease

B
the profit will decrease and current assets will increase

C
Both the profit and current assets will increase

D
Both the profit and current assets will decrease
Question 4
1 / -0

Opening Inventory Rs.1,00,000, Purchase Rs.4,00,000 , Sales Rs.3,00,000, Selling Price -1/3rd on cost. Goods costing Rs.25,000 destroyed by fire.Market value of closing inventory is 20% less than the cost . In the financial statements closing inventory will appear at _________________.

A
Rs.1,40,000

B
Rs.2,20,000

C
Rs.2,00,000

D
Rs.1,60,000
Question 5
1 / -0

In the previous year,closing stock was undervalued by Rs.10,000. As a result ____________________.

A
Previous year's profit is overstated and current year's profit is also overstated

B
Previous year's profit is understated and current year's profits is overstated

C
Previous year's profit is understated and current year's

D
Previous year's profit is overstated and current year's profit is understated.

Solution

If the closing stock of a year is undervalued then the profit for the same year will be understated because Closing stock is shown on credit side of Trading A/c. If after the undervaluation of closing stock of a year, opening stock of the next year will also be undervalued due to which profit of the next year will be overstated because opening stock is debited to Trading A/c.
Therefore, B is the correct option.
Question 6
1 / -0

If opening stock is understated _________________.

A
the profit will increase

B
The profit will decrease

C
the profit will not change

D
None of these
Question 7
1 / -0

If the goods purchased are in transit , then the journal entry at the end of the period will be ____________________.

A
Goods-in-transit A/c Dr.

To Supplier's A/c

B
Goods-in-transit A/c Dr.

To Purchases A/c

C
Good-in-transit A/c Dr.

to Trading A/c

D
(b) or (c)

Solution

Goods-in-Transit means Material has been dispatched by
Supplier but not received by us this entry is important when
book to be closed on 31st, March

When Goods in Transit (Matching Concept)

Goods-in -Transit A/c --------Dr. (Current Assets)
To Purchase A/c --------- Cr.
Question 8
1 / -0

Opening Inventory Rs.1,00,000, Purchase Rs.4,00,000, Sales Rs.3,00,000, Selling price -1/3rd on cost. Value of closing inventory as per physical verification Rs.2,00,000. The estimated cost of missing inventory is __________.

A
Nil

B
Rs.1,00,000

C
Rs.75,000

D
None of these
Question 9
1 / -0

X purchased 2000 boxes costing Rs 100 each. 400 boxes were sent out to Y at 25%+ on cost. 1200 boxes were sold at Rs 120 each. What will be the amount of gross profit to be recorded in general trading A/c?

A
Rs. 24,000

B
Rs. 34,000

C
Rs. 6,000

D
None

Solution

Total number of boxes = 2000 , out of which
400 units are sold at 25% + on cost i.e. 400*125= 50000
1200 units are sold at Rs 120 = 144000
Closing stock = 400*100= 40000
Calculation of Gross Profit = (50000+144000+40000) - 200000 (Cost of total boxes) =Rs 34000
Question 10
1 / -0

Opening Stock Rs.1,60,000; Purchase Rs.3,20,000; Sales Rs.4,00,000.It is noticed that goods worth Rs.60,000 were destroyed due to fire .Against this , the insurance company accepted a claim of Rs.40,000. The company sells goods at cost plus 1/3rd. The value of closing inventory, after taking into account the above transaction is ______________.

A
Rs.20,000

B
Rs.60,000

C
Rs.2,00,000

D
Rs.1,20,000

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Financial Statements 1 Test 32

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Financial Statements 1 Test 32

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Question 1

FIFO

LIFO

Weighted Average

None of the above

Solution

Question 2

Previous year's profit is overstated and current year's profit is also overstated

Previous year's profit is understated and current year's profit is overstated

Previous year's profit is understated and current years's profit is also understated

Previous year's profit is overstated and current year's profit understated

Question 3

the profit will increase and current assets will decrease

the profit will decrease and current assets will increase

Both the profit and current assets will increase

Both the profit and current assets will decrease

Question 4

Rs.1,40,000

Rs.2,20,000

Rs.2,00,000

Rs.1,60,000

Question 5

Previous year's profit is overstated and current year's profit is also overstated

Previous year's profit is understated and current year's profits is overstated

Previous year's profit is understated and current year's

Previous year's profit is overstated and current year's profit is understated.

Solution

Question 6

the profit will increase

The profit will decrease

the profit will not change

None of these

Question 7

Goods-in-transit A/c Dr.To Supplier's A/c

Goods-in-transit A/c Dr.To Purchases A/c

Good-in-transit A/c Dr.to Trading A/c

(b) or (c)

Solution

Question 8

Nil

Rs.1,00,000

Rs.75,000

None of these

Question 9

Rs. 24,000

Rs. 34,000

Rs. 6,000

None

Solution

Question 10

Rs.20,000

Rs.60,000

Rs.2,00,000

Rs.1,20,000

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Goods-in-transit A/c Dr.

To Supplier's A/c

Goods-in-transit A/c Dr.

To Purchases A/c

Good-in-transit A/c Dr.

to Trading A/c