Question

34. Nest Inc. is a wholesaler of electronics. It purchased 1,200 units of Product X for $600 each during 2019. The selling price during the year was $800 per unit. At year end, it had 200 units on hand; due to advances in technology, the selling price will have to be reduced by 35% in order to sell them. The ending inventory value of Product X on the statement of financial position as at December 31, 2019 should be

Question 34 options:

	$312,000.
	$104,000.
	$416,000.
	$145,600.
	None of the above

35. On December 31, 2019, Team Corp. sells an asset that originally cost $500,000 for $100,000. The company recognized a loss on disposal of $25,000. Assume the asset was originally expected to be used for ten years and have no residual value at the end of its useful life. How long did Team Corp use the asset before sale?

Question 35 options:

	6 years
	4 years
	7.5 years
	10 years
	None of the above

39. On April 1, 2019, Tool Ltd. sells equipment for $18,000. The original cost was $50,000, the estimated residual value was $8,000, and the expected useful life was seven years. On December 31, 2018 the Accumulated Depreciation account had a balance of $29,400. If the straight-line method of depreciation was used, the gain or loss on the sale was

Question 39 options:

	$1,100 loss.
	$2,600 gain.
	$850 loss.
	$300 gain.
	None of the above.

42. The declaration of a stock dividend will

Question 42 options:

	increase total liabilities.
	increase share capital.
	increase total assets.
	change total shareholders' equity.
	none of the above.

Answer 1

Question No.	Correct Option	Reason:
34	Correct Option B i.e. $104000	Ending Inventory should be lower of cost of net realizable value
			Cost	NRV	Lower of cost NRV	Qty	Value
		Product X	600	520	520	200	104000
				(800*65%)
35	Correct Option C i.e. 7.5 Years	Depreciation per year = 500000/10
		=50000
		Sale Price	100000
		Add: LOSS on sale	25000
		Book value as on date of sale	125000
		Depreciation charged upto date of sale	375000	(500000-125000)
		No. of year asset used	7.5	(375000/50000)
39	Correct Option A i.e. $1100 loss	ORIGINAL Cost	50000
		Less: Accumulated Dep	29400
		Less: Depreciation for 3more months	1500	((50000-8000)/7)*3/12)
		Book Value on date of sale	19100
		Less: Selling Price	18000
		Loss on sale	1100
42	Correct Option C	increase share capital.