CT2- MCQs

[Bharti Singla]

Please anyone help me with the following MCQs.

1. The ans. is B. I am agree with it. But why not D? Right issue also results in increase in no. Of shares and hence diluted EPS. Then why D is not an ans.?

2. Please explain the accounting treatment in this case. The correct ans. is C.

3. I didn't get how to choose between B and C? The ans. is C. That is okay. But going concern concept also satisfy this. What is the difference between cost concept and going concern concept ?


Please anyone help.

Thank you!

 

[Simon James]

Please anyone help me with the following MCQs.

1. The ans. is B. I am agree with it. But why not D? Right issue also results in increase in no. Of shares and hence diluted EPS. Then why D is not an ans.?

The question doesn't ask what might alter the EPS, it asks why it is necessary to quote it. The presence of convertible loan stock means there is a possible dilution effect.

2. Please explain the accounting treatment in this case. The correct ans. is C.

as the inventory is purchased but not used it effective cancels out in the P&L (stock used = opening + purchases - closing). However the cash used to fund the purchase does go through the cash flow statement

3. I didn't get how to choose between B and C? The ans. is C. That is okay. But going concern concept also satisfy this. What is the difference between cost concept and going concern concept ?

Cost concept is about how purchases of non-current assets are recorded. In this case using market value contravenes this concept.
Going concern is about the business continuing to operate in the future. The going concern concept has little relevance in this case.

 

[Bharti Singla]

Thank you so much.