Financial Reporting (F1) Practice Test

Questions # 71:

Which TWO of the following would improve a company's short term cash flow position?

Options:

Postponing non essential capital expenditure

Increasing the working capital cycle by making payments to suppliers early

Taking advantage of bulk discounts offered on inventory purchases

Reducing levels of inventory by implementing a just in time system for purchasing

Paying a bonus to staff for exceptional performance

Questions # 72:

Which of the following is correct?

The primary purpose of a cash budget prepared on a monthly basis is to determine:

Options:

next month's sales volumes.

the amount of inventory to purchase in the following month.

when to pay employees salaries.

whether there will be sufficient cash in the bank to meet requirements.

Questions # 73:

Which TWO of the following are implications of employee income tax being paid to the tax authority through a Pay-As-You-Earn scheme?

Options:

The government can budget its cash flows more easily.

The risk of employees defaulting on the payment of tax due is reduced

The tax authority deals directly with the employees rather than the employers.

The tax is paid after the employee completes a tax return.

Most of the administrative costs of collecting the tax are borne by the tax authority

Questions # 74:

AA manufactures computers. These are sold to BB at $100 a computer plus a 5% sales tax. BB subsequently sells the computers to CC for $200 a computer plus a 5% sales tax. C sells the computers to customers at $300 a computer plus a 5% sales tax.

The total tax received by the tax authority is $30.

Which type of tax is described above?

Options:

Single-stage sales tax

Value added tax

Retail tax

Multi-stage cumulative sales tax

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