Financial Accounting Quiz
1. Which of the following is the person who originally owns the rights to use the asset, in other words he owns the asset and allows the lessee to use it?
a) Lessor
b) Lessee
c) Hire Purchaser
d) Debtor
2. Which of the following is the person who utilizes the right to use the asset for a specific period against a payment or series of payments?
a) Lessor
b) Lessee
c) Creditor
d) Hire Vender
3. If the ownership not transferred by the end of the lease term then it is called:
a) Finance lease
b) Hire purchase
c) Operating lease
d) Possession
4. Which of the following transfers substantially all the risks and rewards incident to ownership?
a) Finance lease
b) Operating lease
c) Hire purchase
d) Possession
5. Which of the following reduced the risk of obsolescence?
a) Buying
b) Leasing
c) Selling
d) Borrowing
6. ABC Co. makes a contract to acquire the plant from its associated company (XYZ Co.). The asset will be used by ABC Co. ltd. for 3 years and regular installments will be paid by the company against it. In this example, which of the following is correct?
a) The lessee conveys to the lessor in return for a series of payment the right to use an asset for an agreed period of time
b) The lessor not conveys to the lessee in return for a series of payment the right to use an asset for an agreed period of time
c) It is a lease agreement
d) It is not a lease agreement
7. In case of operating lease asset is recorded in the books of lessee in which of the following value?
a) Faire value
b) Present value
c) Market value
d) Not recorded at any value
8. In case of operating lease rental payments are recorded as:
a) An Income
b) An Asset
c) An expense
d) A Liability
9. Which of the following shall not be immediately recognized as income by the lessee in case of finance lease?
a) Excess of carrying amount over the sales proceeds
b) Excess of sales proceeds over the carrying amount
c) Excess of sales proceeds over the accumulated depreciation
d) Excess of sales proceeds over the break up value
10. If: carrying amount is Rs. 40,000, Fair value is Rs. 50,000 and Sale proceeds is Rs. 50,000 then which of the following option is correct under Sale & Lease back transactions resulting in Operating Lease?
a) The profit and loss account will be credited
b) The profit and loss account will be debited
c) Asset account will be debited
d) Bank account will be credited
11. Minimum Lease Payment = --------------.
a) Initial Payments + All lease rentals - Down Payments
b) Initial Payments + All lease rentals + Contingent rent
c) Initial Payments + All lease rentals + Any lease processing charges
d) Initial Payments + All lease rentals + Any amount that is guaranteed to be paid during or at the end of the lease term
12. Which of the following is correct formula to find the Present Value, where FV = Future Value , r = Interest rate and n = Time period
a) FV(1 + r)n
b) FV(1 + r)-n
c) FV(1 - r)-n
d) FV(1 x r)-n
13. Which of the following is correct formula to find the Future Value, where PV = Present Value , r = Interest rate and n = Time period
a) PV(1 + r)n
b) PV(1 + r)-n
c) PV(1 - r)-n
d) PV(1 x r)-n
14. If A. ltd Co. entered into a contract with Pakistan leasing company to acquire the asset with down payment of Rs. 30,000, semi-annually payment of Rs. 50,000 and the lease term is 2 years. The lessee guaranteed the lessor to purchase the asset at the end of lease term at Rs. 10,000 which is estimated residual value. Then what is the amount of Minimum Lease Payment with respect to the lessee?
a) Rs. 240,000
b) Rs. 130,000
c) Rs. 220,000
d) Rs. 230,000
15. You have Rs. 1,500 to invest today at 10 % interest compounded annually. How much will you have accumulated in the account at the end of 2 years?
a) Rs. 300
b) Rs. 1,815
c) Rs. 315
d) Rs. 1,800
16. What single investment, made today, earning 10% annual interest, will be worth Rs. 2,420 at the end of 2 years?
a) Rs. 420
b) Rs. 484
c) Rs. 2,000
d) Rs. 2,928
17. Which of the following is charged to revenue?
a) Material renewals
b) Addition or extension of assets
c) Premium given for lease
d) Repair and maintenance
18. Which of the following is capitalized?
a) Repair and maintenance
b) Interest
c) Petrol consumed in motor vehicles
d) Material renewals and improvements
19. Which of the following comes under the heading of short term running finance?
a) Current portion of long term borrowing
b) Current portion of murabaha
c) Provision for taxation
d) All of the given options
20. Which of the following is not a current liability?
a) Murabaha
b) Accrued liabilities
c) Provision for taxation
d) Debentures