CIMA Fundamentals of Financial Accounting 2

Question 1

A company purchases machinery for $50,000, pays $2,000 for delivery, and $3,000 for installation. What is the correct cost to capitalize?

Accepted Answer

$55,000

Answer

Under IAS 16, the cost of an asset includes purchase price plus all directly attributable costs to bring it to working condition, so $50,000 + $2,000 + $3,000 = $55,000.

Question 2

Which accounting concept requires that financial statements be prepared on the assumption that the business will continue to operate indefinitely?

Accepted Answer

Going concern concept

Answer

The going concern concept assumes the entity will continue operating for the foreseeable future, justifying the use of historical cost rather than liquidation values.

Question 3

A business has net assets of $120,000 and total liabilities of $80,000. What is the total equity?

Accepted Answer

$40,000

Answer

Equity = Net assets − Liabilities is incorrect; here net assets already equals total assets minus total liabilities, so equity = $120,000 − $80,000 = $40,000.

Question 4

Under the perpetual inventory system, the cost of goods sold is recorded:

Accepted Answer

Each time a sale is made

Answer

The perpetual inventory system updates inventory and COGS continuously with each transaction, unlike the periodic system which calculates COGS only at period end.

Question 5

Straight-line depreciation on an asset costing $40,000 with a residual value of $4,000 and a useful life of 6 years gives an annual depreciation charge of:

Accepted Answer

$6,000

Answer

Annual depreciation = (Cost − Residual value) ÷ Useful life = ($40,000 − $4,000) ÷ 6 = $6,000.

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA Fundamentals of Financial Accounting 2