CIE Accounting Paper-1: Specimen Questions 52 - 53 of 214

Question number: 52

MCQ▾

Question

Which method is suitable in case of those assets whose repair charges increase as they become old?

Choices

Choice (4) Response
a.

Original cost method

b.

Annuity Method

c.

Diminishing balance method

d.

Sinking Fund method.

Answer

c.

Explanation

Under diminishing balance method the depreciation are charged at fixed rate on the reducing balance of the assets at every year. Diminishing balance method is suitable in case of those assets whose repair charges increase as they become old.

Question number: 53

MCQ▾

Question

A business provided the following information.

Business information of A as on end of the accounting year

Business information of A as on end of the accounting year is given in this table.

$

Revenue (sales)

10000

Purchases

12000

Opening inventory

2000

Closing inventory

3000

Sales returns

200

Purchases returns

3000

What was the cost of sales?

Choices

Choice (4) Response
a.

7000

b.

9000

c.

8000

d.

10000

Answer

c.

Explanation

Gross profit of the particular year will be calculated with the help of the cost of sales. The following formula is used in the calculation of cost of sales:

Cost of Sales = Opening Inventory + Purchases - Purchases return - Closing inventory.

=2000+1200030003000

=8000

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