FREE CIMA Fundamentals of Financial Accounting Questions and Answers

Question 1

The Finance Director of EFG company has made the following statements regarding the recording of expenditures relating to the entity's property, plant, and equipment (PPE) in the nominal ledger.

Which THREE of the following statements are true?

Accepted Answer

The annual depreciation charge reduces EFG's profit for the year.

Answer

The cost of insurance for the factory is debited to the PPE asset account.

Answer

The cost of repainting the office is credited to the repairs expense account

Answer

The loss on the disposal of PPE is recorded in a liability account

Question 2

In the year ended 31 December 20X1, XYZ received an email confirming that a major customer had gone into liquidation and would be unable to pay its suppliers.

Which of the following is the impact of adjusting for this event?

Accepted Answer

Receivables decrease and allowances increase

Answer

Profits increase and allowance increases.

Answer

Receivables are unchanged and profits decrease

Answer

Receivables decrease and profits decrease

Question 3

GG has the statement below of profit or loss extract for the year ended 31 December 20X3.

What is the interest cover for GG for the year ended 31 December 20X3?

Accepted Answer

4.0 times

Answer

2.8 times

Answer

4.5 times

Answer

3.5 times

Question 4

UVW is preparing its manufacturing account for the year ended 30 June 20X7 The following information is available:

What is UVWs prime cost for year ended 30 June 20X7?

Accepted Answer

$352,000

Answer

$344,000

Answer

$389,000

Answer

$397,000

Question 5

IAS 2 Inventories does not permit the use of the last in. first out (LIFO) method of valuing inventory In a time of rising prices, which of the following is a reason for this?

Accepted Answer

Closing inventory is understated.

Answer

Purchases are overstated

Answer

The cost of sales is understated

Answer

Gross profit is overstated

Question 6

Before lending to an entity, which TWO of the following pieces of information would a potential lender want to consider?

Accepted Answer

The ability of the entity to meet interest payments

Answer

Past tax payments made by the entity

Answer

Social policies of the entity

Answer

Dividend policy of the entity

Question 7

A company produces a single product for which the following cost data are available.

Analysis by the management accountant has shown that 100% of direct material costs and 50% of direct labor costs are variable costs. 50% of production overhead and 100% of selling and distribution overhead are variable costs.

What is the marginal cost per unit?

Accepted Answer

$7

Answer

$6

Answer

$8

Answer

$9

Question 8

The forecast costs per unit for a new product are as shown in the table below.

The company uses marginal cost-plus pricing and all products are required to achieve a 40% margin.

What would be the selling price per unit?

Accepted Answer

$46.20

Answer

$37.80

Answer

$45.00

Answer

$55.00

Question 9

A hairdressing salon can either invest in:

1. New. more comfortable chairs for $5,000
2. New shop windows for $4,000

Over the next five years. Investment 1 will generate an additional amount of profit whose present value is $6,000. while Investment 2 additional amount of profit whose present value is $5,500

What is the net present value of the best project? Give your answer to the nearest whole dollar.

Accepted Answer

$1,500

Answer

$1,400

Answer

$1,300

Answer

$1,200

Question 10

Which of the following is a feature of not-for-profit organizations (NFPs)?

Accepted Answer

Their objectives can vary greatly

Answer

They have restricted flows of income

Answer

They sometimes have shareholders

Answer

They use resources inefficiently