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CT2- MCQs

Discussion in 'CT2' started by Bharti Singla, Aug 26, 2018.

  1. Bharti Singla

    Bharti Singla Senior Member

    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!
     

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    Bharti Singla, Aug 26, 2018
    #1
  2. Simon James

    Simon James ActEd Tutor Staff Member

    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.

    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


    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.
     
    Simon James, Aug 26, 2018
    #2
  3. Bharti Singla

    Bharti Singla Senior Member

    Thank you so much.
     
    Bharti Singla, Aug 29, 2018
    #3

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