Accounting and Finance Questions and Answers

This page provides answers to various accounting and finance questions, including LIFO and FIFO methods, fixed asset disposal, payment calculations, accounting source documents, and more. Each question is answered in detail with relevant calculations and explanations.

Question Answer

SECTION A
LIFO Method
Month Purchases Sales Balance
Quantity Price Value Quantity Price Value Quantity Value
01/01 2000 10 20,000 2000 20,000
31/01 1600 10 16,000 400 4,000
01/02 2400 11 26,400 2800 30,400
28/02 2400 11 26,400
200 10 2,000 200 2,000
1/03 1600 12 19,200 1800 21,200
31/03 1000 12 12000
Total 800 9200
FIFO Method
Month Purchases Sales Balance
Quantity Price Value Quantity Price Value Quantity Value
01/01 500 12500
01/01 2000 10 20,000 2000 20,000
31/01 1600 10 16,000 400 4,000
01/02 2400 11 26,400 2800 30,400
28/02 400 10 4000
2200 11 24200 200 2200
1/03 1600 12 19,200 1800 21,400
31/03 200 11 2200

800 12 9600 800 9600
Total 800 9600
SECTION B
PART A
1. Calculate the total accumulated depreciation on the vehicle sold on 1 September 2008
Cost price of vehicle: 98000
Carrying value: 40000
Actual value: 98000 – 40000
= 58000
Depreciation apply with 20% = 58000 * 20%
= 11600
Accumulated depreciation: Cost of assets – salvage value / Life of the assets * No of years
= 98000 – 40000
= 58000
2. Calculate the profit or loss on the vehicle sold.
Selling price: 32500
Net cost: 58000
Depreciation: 11600
Profit/loss: 32500 - (58000-11600)

= 32500 – 46400
= -13900 Loss
3. Provide two possible reasons for disposing a fixed asset
1. A company may sell its capital assets for a variety of reasons. It might be as easy as
replacing an item that has reached the end of its lifespan, selling gear, or simply retiring.
Whatever the cause, it is critical that a disposal activity is accurately entered for itemized
invoice.
2. In most cases, an asset is entirely disposed of, but in certain cases, only a portion of the
property is sold off. There'll be a difference in outcomes depending on the asset's
statement of financial position and any selling revenues for a full liquidation. Because
only a piece of the asset is sold, a partial disposition is a little more difficult. This can
happen with sophisticated equipment that is formed up of numerous parts.
PART B
Ledger accounts

SECTION C
Payment
number
Payment
amount
Interest Paid Principal paid Remaining
Balance
0 0 0 0 N$ 10,000
1 N$ 1,845.98 N$ 300 N$ 1,545.98 N$ 8,454.02
2 N$ 1,845.98 N$ 253.62 N$ 1,592.36 N$ 6,861.66
3 N$ 1,845.98 N$ 205.85 N$ 1,640.13 N$ 5,221.53
4 N$ 1,845.98 N$ 156.65 N$ 1,689.33 N$ 3,532.20
5 N$ 1,845.98 N$ 105.97 N$ 1,740.01 N$ 1,792.19
6 N$ 1,845.98 N$ 53.79 N$ 1,792.19
Total ? ? ?

What is the total amount that Mike will pay at the end of six (6) years for this loan?
Total 6 years amount = 1845.98 * 6
= 11075.88
What is the total interest paid for this loan over the six (6) year period?
Total 6 years interest = 300 + 253.62 + 205.85 + 156.65 + 105.97 + 53.79
= 1075.88
What is the total principal paid for this loan at the end of six (6) years?
Total 6 years principal amount = 1575.98 + 1592.36 + 1640.13 + 1689.33 + 1740.01 + 1792.19
= 10030
State whether the following statement is true or false. “The payment amount is made up of the
interest and principal payment
True
The loan receivable non-current balance in the balance sheet
The loan is represented in the balance sheet as Loans receivable within current asset from the
lender's perspective. We debit the Loans receivables account, credit the interest accrued record,
and debit the Cash account in number one.
The loan receivable current balance in the balance sheet.
Whenever an asset is collectable in less than a year and has a typical debit balance, it is termed a
current asset. The loan is represented in the balance sheet as Loans receivables within current
asset from the lender's perspective. This transaction provides a lender with interest revenue at
about the same time.
The interest income in the Profit and Loss account.
It is presenting in receivable side of P&L account

SECTION D
Name at least five (5) common things a business document should have
1. Employment agreement
2. Business reports
3. Business plan
4. Financial documents
5. Compliance and regulatory documents
Name and explain three (3) types of accounting source documents
1. Cash memo: Any company enterprise's key aspects are selling and acquisitions. Cash
notes are used as primary sources for documenting cash transactions and acquisitions. A
cash note is a reference document that should be used to capture every commercial
transactions sales budget or acquisitions.
2. Invoice and bill: The financial activities connected to the buying or selling are recorded
on the invoices or bill. When a company buys or sells items on credit, this document is
created. When a commercial firm sells products on credit, a goods receipt is created in
which all information of the credit sales, such as volume, rates, and overall sum, are
listed.
3. Receipt: A receipt is proof that a transaction was made on the accounts of a business
contract. This resource document is made to demonstrate the handing of money to the
person (who gets the cash) in connection with any business arrangement. Each receipt is
duplicated at least twice.
What is the difference between the statement of accounts and an invoice
A bill's legal or technological documentation is an invoice. But at the other extreme, a
declaration is a current update on what customers still owing suppliers on accounts. It is the
current state of a company account at a given time. Financial records, for example, are produced
on a regular basis and detail all transactions – both credited (money deposited to the accounts)
and debits (money being taken out of the consideration to make payment acquired) – that
occurred during the week.