MCQ on Investment Accounting

a)
Current investments 

b)
Investment properties 

c)
Long-term investments 

d)
Equity investments 

**Answer:** b) Investment
properties 

2. What is the primary purpose of an investment according to AS 13? 

a)
To generate goodwill 

b)
To earn income or for capital appreciation 

c)
To gain control over another company 

d)
To hold for personal use 

**Answer:** b) To earn income
or for capital appreciation

 

3. Which of the following describes a current investment under AS 13? 

a)
Held for more than 12 months 

b)
Not readily marketable 

c)
Held for less than 12 months 

d)
Intended to generate long-term gains 

**Answer:** c) Held for
less than 12 months 

4. How are current investments valued according to AS 13? 

a)
At cost 

b)
At fair value 

c)
At the lower of cost or fair value 

d)
At market price 

**Answer:** c) At the
lower of cost or fair value 

5. What happens when there is a permanent diminution in the value of a
long-term investment under AS 13? 

a)
The investment is sold immediately 

b)
The investment is written down to its recoverable amount 

c)
The investment is reclassified as current 

d)
The investment is held at historical cost 

**Answer:** b) The
investment is written down to its recoverable amount 

6. Which of the following is an example of a physical investment? 

a)
Stocks 

b)
Bonds 

c)
Real estate 

d)
Mutual funds 

**Answer:** c) Real
estate 

7. Which type of investment is considered *non-marketable*? 

a)
Stocks 

b)
Private equity 

c)
Treasury Bills 

d)
Bonds 

**Answer:** b) Private
equity 

8. Which of the following is an example of a *transferable*
investment? 

a)
Private equity 

b)
Stocks 

c)
Real estate 

d)
Contractual agreements 

**Answer:** b)
Stocks 

9. Which of the following would typically be classified as a *short-term*
investment? 

a)
Stocks held for 5 years 

b)
Treasury Bills 

c)
Real estate 

d)
Retirement accounts 

**Answer:** b) Treasury
Bills 

10. Which of the following represents an investment pool that is traded on
stock exchanges? 

a)
Hedge funds 

b)
Mutual funds 

c)
Exchange-Traded Funds (ETFs) 

d)
Private equity  

**Answer: ** c)
Exchange-Traded Funds (ETFs) 

11. What does “cum interest” mean in the context of bond
transactions? 

a)
The buyer will not receive the next interest payment. 

b)
The bond is sold without interest. 

c)
The buyer is entitled to the next interest payment. 

d)
The seller retains the next interest payment.

**Answer:** c) The buyer
is entitled to the next interest payment.

12. When a bond is sold “ex interest,” who receives the next
interest payment? 

a)
The buyer 

b)
The seller 

c)
Both the buyer and the seller 

d)
No one

**Answer:** b) The seller

13. Which of the following statements is true for a bond sold “ex
interest”? 

a)
The buyer is entitled to the upcoming interest payment. 

b)
The buyer will receive the interest payment on the next due date. 

c)
The buyer will not receive the upcoming interest payment. 

d)
The seller retains the principal amount.

**Answer:** c) The buyer
will not receive the upcoming interest payment.

14. Which of the following is NOT considered part of the acquisition cost
of an asset? 

a)
Purchase price 

b)
Transaction costs 

c)
Ongoing operational expenses 

d)
Installation costs 

**Answer:** c) Ongoing
operational expenses 

15. What does acquisition cost refer to in the context of asset
acquisition? 

a)
Only the purchase price paid for the asset 

b)
The total cost incurred to acquire an asset, including purchase price and other
associated costs 

c)
The cost of operating and maintaining the asset 

d)
The depreciation of the asset over time 

**Answer:** b) The total
cost incurred to acquire an asset, including purchase price and other
associated costs

16. What does carrying cost refer to in inventory management? 

a)
The cost of acquiring inventory 

b)
The expenses incurred in maintaining and storing inventory over time 

c)
The cost of producing inventory 

d)
The selling price of inventory 

**Answer:** b) The
expenses incurred in maintaining and storing inventory over time 

17. Which of the following is included in the carrying cost of
inventory? 

a)
Purchase price 

b)
Opportunity costs 

c)
Marketing costs 

d)
Sales revenue 

**Answer:** b)
Opportunity costs 

18. Which of the following would be considered a storage cost? 

a)
Rent for warehouse space 

b)
Interest payments on loans 

c)
Wages of employees in production 

d)
Depreciation of assets 

**Answer:** a) Rent for
warehouse space 

19. Deterioration or obsolescence costs refer to: 

a)
The cost of producing inventory 

b)
The potential losses due to inventory becoming obsolete or damaged 

c)
The cost of financing the inventory purchase 

d)
The opportunity costs of not investing elsewhere 

**Answer:** b) The
potential losses due to inventory becoming obsolete or damaged 

20. Which of the following is the correct formula to calculate carrying
cost? 

a)
Carrying Cost = Purchase Price + Storage Costs 

b)
Carrying Cost = Storage Costs + Opportunity Costs + Deterioration or
Obsolescence Costs + Financing Costs 

c)
Carrying Cost = Selling Price – Storage Costs 

d)
Carrying Cost = Purchase Price + Financing Costs 

**Answer:** b) Carrying
Cost = Storage Costs + Opportunity Costs + Deterioration or Obsolescence Costs
+ Financing Costs 

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