Incomplete records Quiz

C. The lower of the cost or the estimated selling price minus costs to complete and sell This is correct because it follows the accounting principle of valuing inventory at the lower of cost and net realisable value. Option A is incorrect because it does not consider the net realisable value. Option B is incorrect because it only considers the selling price. Option D is incorrect because it does not consider the costs to complete and sell.

D. (Opening inventory + Purchases) - Cost of goods sold This is correct because the FIFO method assumes that the first items purchased are the first items sold, so the closing inventory is valued at the most recent purchase price. Option A is incorrect because it does not consider the cost of goods sold. Option B is incorrect because it uses sales instead of cost of goods sold. Option C is incorrect because it uses sales instead of purchases.

A. It will be overstated This is correct because overvaluing inventory will result in a higher cost of goods sold, which will increase the gross profit. Option B is incorrect because it suggests that the gross profit will be lower. Option C is incorrect because the gross profit will be affected. Option D is incorrect because the gross profit will not be zero.

B. Closing capital - Opening capital - Drawings + Additional capital This is correct because the profit for the year is calculated by taking the difference between the closing and opening capital, subtracting the drawings, and adding any additional capital. Option A is incorrect because it adds the drawings instead of subtracting them. Option C is incorrect because it reverses the closing and opening capital. Option D is incorrect because it reverses the closing and opening capital and adds the drawings.

B. It will be understated This is correct because understating purchases will result in a lower cost of goods sold, which will decrease the value of the inventory. Option A is incorrect because it suggests that the inventory will be overstated. Option C is incorrect because the inventory will be affected. Option D is incorrect because the inventory will not be zero.

A. (Gross profit / Sales) x 100 This is correct because the gross profit margin is calculated by dividing the gross profit by the sales and multiplying by 100. Option B is incorrect because it uses the cost of goods sold instead of sales. Option C is incorrect because it reverses the gross profit and sales. Option D is incorrect because it reverses the gross profit and cost of goods sold.

A. It will overstate the value of inventory and current assets This is correct because overvaluing inventory will result in a higher value for inventory and current assets on the statement of financial position. Option B is incorrect because it suggests that the value will be lower. Option C is incorrect because the value will be affected. Option D is incorrect because the value will not be zero.

A. (Profit for the year / Sales) x 100 This is correct because the profit margin is calculated by dividing the profit for the year by the sales and multiplying by 100. Option B is incorrect because it reverses the profit for the year and sales. Option C is incorrect because it uses the cost of goods sold instead of sales. Option D is incorrect because it reverses the profit for the year and cost of goods sold.

B. It will be understated This is correct because understating sales will result in a lower profit for the year. Option A is incorrect because it suggests that the profit will be higher. Option C is incorrect because the profit will be affected. Option D is incorrect because the profit will not be zero.

A. (Profit for the year / Capital employed) x 100 This is correct because the ROCE is calculated by dividing the profit for the year by the capital employed and multiplying by 100. Option B is incorrect because it reverses the profit for the year and capital employed. Option C is incorrect because it uses sales instead of capital employed. Option D is incorrect because it reverses the profit for the year and sales.

A. It will be overstated This is correct because overvaluing inventory will result in a higher value for the equity of the business. Option B is incorrect because it suggests that the equity will be lower. Option C is incorrect because the equity will be affected. Option D is incorrect because the equity will not be zero.

A. Current assets / Current liabilities This is correct because the current ratio is calculated by dividing the current assets by the current liabilities. Option B is incorrect because it reverses the current assets and liabilities. Option C is incorrect because it subtracts the inventory from the current assets. Option D is incorrect because it reverses the current assets and liabilities and subtracts the inventory from the current assets.

A. It will be overstated This is correct because understating purchases will result in a lower cost of goods sold, which will increase the profit for the year. Option B is incorrect because it suggests that the profit will be lower. Option C is incorrect because the profit will be affected. Option D is incorrect because the profit will not be zero.

A. (Current assets - Inventory) / Current liabilities This is correct because the acid test ratio is calculated by dividing the current assets minus inventory by the current liabilities. Option B is incorrect because it reverses the current assets minus inventory and current liabilities. Option C is incorrect because it does not subtract the inventory from the current assets. Option D is incorrect because it reverses the current assets and current liabilities and does not subtract the inventory from the current assets.

A. It will be overstated This is correct because overvaluing inventory will result in a higher value for the assets of the business. Option B is incorrect because it suggests that the assets will be lower. Option C is incorrect because the assets will be affected. Option D is incorrect because the assets will not be zero.