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Accounting I exam exercises
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Exercises1.
The opening inventories at the beginning of the year is 80,000.00 €
Purchase during the year is 40,000.00 €
Closing inventories at the end of the year is 30,000.00 €
Required: Calculate the Cost of sales for this year
Cost of sales = Opening inventories + P urchase − Closing inventories
Cost of sales = 80000 + 40000 − 30000 = 90000
Income statement and balance sheet
1. A company has reached the end of its reporting period and has only paid electricity for the first 11 month amounting to
3,200.00 €. The missing amount for the last month is 400.00 €. Show the the electricity expense in the income statement for
this period.
The electricity expense in the income statement is: 3600
The balance sheet shows an accrual of 400
The cash balance will be reduced by 3200
2. Sales revenue 300.000
Cost of sales (200.000)
Gross profit 100.000
Operating expenses (20.000)
Operating profit 80.000
Interest payable (10.000)
Profit for the year 70.000
3. A company took out a loan from a bank in spring this year. The company pays the interest quaterly in advance (on 1. March, 1
June, 1 September and 1 December). The quaterly interest to be paid is 600.00 €.
Show the effect on the financial statements
The interst paid that reduces the cash balance is 2,400.00 €
The interest expense in the income statement is 2,000.00 €
The balance sheet shows a prepayment (prepaid expense) amounting 400.00 €
FIFO, LIFO, AVCO
In a period of rising prices, the FIFO will give the highest gross profit.
Inventories have to be valued at the lower of cost and net value.
Only the FIFO and AVCO method is allowed following the IFRS regulation.
Once a particular method is selected (FIFO, AVCO etc.) this method it should be applied consistently. This follows the
consistency convention.
Exercises 1
, AVCO method
Date Event Units Price/Unit Total Avg price/unit
Opening
1 10.000 2.00 20.000 2.36
inventories
3 Bought 20.000 2.40 48.000
7 Bought 20.000 2.50 50.000
Tot: 50.000 Tot: 118.000
Closing 15.000 ∗
inventories 2.36 = 35400
(50000 −
Cost of sales 15000) ∗
2.36 = 82600
(50000 −
15000) ∗
Sales revenue
3.00 =
105000
105000 −
Gross profit 82600 =
22400
5. Depreciation
1. A business purchase a new machine at the beginning of the year. The following payments take place related to this machine:
Machine: € 20,000.00
Delivery charge: € 3,000.00
Installation: € 2,000.00
Electricity used this year to run the machine: € 2,500.00
Part exchange for an old machine: € 4,000.00
The expected economic life time for the machine is 5 years.
The expected residual value is € 5,000.00
Required:
a. Calculate the annual depreciation using the straight line method
Cost − Residual value
Depreciation =
Useful years
20000 + 3000 + 2000 − 5000
Depreciation = = 4000
5
b. Show the net book value of the machine the end of the year (balance sheet)
Cost − Depreciation = 25.000 − 4.000 = 21.000
c. Show the relevant cash flow related to the machine (excluding operating expenses/payments) for this year
21.000
2. Calculating the depreciation subjective judgement is often required
Exercises 2
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