.Cash Receivables control

account

Irrecoverable debts

Debit

Credit

2. Which of the following organisations provides guidance to the International Accounting Standards Board on the implications of proposed standards for users and preparers of financial statements?

The International Financial Reporting Standards Interpretations Committee

The International Financial Reporting Standards Foundation

The International Financial Reporting Standards Advisory Council

The International Federation of Accountants

3. Which of the following statements about directors are true?

(1) The directors of a company are responsible for the preparation of the financial statements of that company

(2) The directors and external auditors of a company have joint responsibility for the governance of that company

(3) The directors of a company must act honestly in what they consider to be the best interests of their fellow directors

(4) The directors of a company should seek to create wealth for the shareholders of the company as their main aim

1 and 4 only

1, 2 and 4

1 and 3

2, 3 and 4

4. Which of the following statements regarding the qualitative characteristics of financial information is FALSE?

Information is verifiable if different, knowledgeable and independent

observers could reach consensus that a particular depiction is a faithful

representation

Information will only be useful if it is relevant and faithfully represented

Understandability means that points that are too complex for non-expert users should be excluded

If information is timely then its usefulness is enhanced

5. On 3 December, a credit customer returned goods of $3,500 to Gerry. Gerry returned goods of $4,100 to his credit supplier on 2 December.

What is Gerry's correct journal entry to record these two returns?

Dr Payables $3,500 Cr Returns outwards $3,500

Dr Returns inwards $4,100 Cr Receivables $4,100

Dr Payables $4,100 Cr Returns outwards $4,100

Dr Returns inwards $3,500 Cr Receivables $3,500

Dr Returns outwards $3,500 Cr Payables $3,500

Dr Receivables $4,100 Cr Returns inwards $4,100

Dr Returns outwards $4,100 Cr Payables $4,100

Dr Receivables $3,500 Cr Returns inwards $3,5006. Katie sold goods with a list price of $18,500 to Marta on 22 May 20X0. Katie allows

a trade discount of 15% and a further discount of 5% if payment is made within seven days.

How much should Katie record in the sales ledger control account in respect of this sale?

$2,775

$15,725

$14,800

$3,700

7. If Marta pays within seven days, the further discount of 5% will be recorded in Katie's accounts as a discount allowed, which is an expense in the statement of profit or loss.

Which of the following statements about petty cash is/are true?

(1) If a business makes all of its sales on credit, it has no need to maintain a petty cash book

(2) If petty cash transactions are very small, they do not need to be recorded

(3) Petty cash records should be compared to the bank statement to confirm that payments made from petty cash are recorded

1, 2 and 3

3 only

1 and

2 only

None of the statements are true8. On 31 May 20X0, Charmaine counted her closing inventory for the year ended 31 May 20X0. Its valuation at cost amounted to $459,204. Several days later, she realised that she had included inventory of $5,130 which was in the despatch area and was to be returned to the supplier as it was faulty. Additionally, certain inventory items with a cost of $6,700 were obsolete and only had a net realisable value of $6,150.

What should the adjustments be to profit and closing inventory in the financial statements for the year ended 31 May 20X0?

.Increase by $5,680 Reduce by $5,680

Profit

Closing inventory

9. Which TWO of the following statements about IAS 2 Inventories are correct?

The costs of purchase of inventory should include any import duties paid, less any trade discounts received

Average cost and last in first out are both acceptable methods of arriving at

the cost of inventory

Inventory should be valued at the lower of cost and net realisable value

Variable production overheads should not be included in the cost of

inventory

10. What should the balance on the revaluation surplus be immediately after the revaluation?

$

11. ABK Co bought a property on 31 December 20X3 for $340,000. At the date of purchase, ABK estimated the useful life of the property to be 32 years.

On 31 December 20X5, the property was revalued to $410,000. There was no change in its useful life.

On 30 June 20X7, ABC Co sold the property for $485,000.

ABK Co depreciates property on a straight line basis, with a proportional charge in the years of purchase and disposal.

What is the profit on disposal of the property that should be recorded in ABK Co's financial statements at 31 December 20X7?

12. Daisy Co owns a non-current asset which cost $75,000 on 1 June 20X6. It had a useful life of 10 years and an expected residual value of $5,000. Non-current assets are depreciated using the straight line method.

On 1 June 20X8, Daisy Co estimated that the remaining life of the asset was now only five years with an expected residual value of $3,000.

What should the depreciation charge be for the financial year ending 31 May 20X9?

13. What amount should be capitalised as development expenditure in the year ended 30 November 20X7?

$277,400 $362,050 $265,500 $0

(1) Electricity expenses for the three months to 31 May 20X0 are estimated to be $250

(2) Insurance of $528 for the 12 months to 31 December 20X0 was paid on 1 January 20X0

What is the net impact on profit when the appropriate adjustments are made?

Decrease of $558

Decrease of $58

Increase of $30

Increase of $58

15.Which of the following statements is true?

Redeemable preference shares are disclosed as a liability in the statement of financial position

Issued shares are included in the statement of financial position at their

market value

Preference shares give the holders a right to vote at company meetings

Holders of ordinary shares will always receive an annual dividend

16. The share capital and reserves of Bondai on 1 January 20X8 were as follows:

$

Share capital ($1 shares) 52,000

Share premium 21,000

Retained earnings 25,659

98,659

On 1 April 20X8, Bondai issued 1,500 shares in a bonus issue utilising the share premium account.

On 1 May 20X8, Bondai issued 5,000 $1 shares for $1.50 per share.

What is the balance of share capital and share premium after both share transactions have taken place?

.$22,000 $23,500 $57,000 $58,500

Share premium

Share capital

17. Mary has the following ledger balances in her general ledger:

$

Capital 6,260

Cash at bank 0

Discounts allowed 1,500

Discounts received 2,300

Expenses 15,910

Non-current assets (carrying amount) 31,845

Opening inventory 4,820

Purchases 71,470

Payables 6,930

Receivables 15,870

Sales 126,970

What is the balance required in a suspense account to make Mary's trial balance agree?

$155 Dr

$155 Cr

$1,445 Cr

18. Which of the following would cause the totals of the debit column and the credit column of a trial balance not to agree?

(1) A sale of $600 was recorded only as a credit in the sales account

(2) A purchase invoice was recorded as a debit of $965 in the purchases account and a credit of $956 in payables

(3) A payment of $440 was omitted from the ledger accounts entirely

1, 2 and 3

1 and 3 only

1 and

2 only

2 and

3 only

19. Emily's payables ledger control account shows a balance of $24,903 which does not agree with the payables ledger. She has found three errors:

(1) A purchase invoice has been entered into the purchase day book as $594 rather than $495

(2) The purchase day book has been undercast by $200

(3) Discounts received of $150 from credit suppliers have not been entered in the control account

What is the corrected payables ledger control account balance?

$24,654

$24,854

$24,952

20. The following are Hubble's transactions for the month of May:

$

Opening payables ,199

Opening receivables 84,122

Purchases 122,914

Purchase returns 6,192

Sales 154,610

Sales returns 8,112

Cash paid to suppliers 100,032

Cash received from customers 132,011

Contra between purchase ledger and sales ledger 2,912

All sales and purchases are made on credit.

What should the balance on the purchase ledger control account be at the end of May?

21. The following information relates to a business's bank balance at 30 November 20X7:

$

Balance in cash book 25,050 Dr

Cheques not yet presented at bank 8,612

Deposits not yet cleared at bank 11,665

Cheques paid to suppliers on 29 November not yet recorded in the cash

2,157 book

Cheque received on 27 November recorded twice in the cash book 620

Cheque received on 1 December 20X7 1,019

What is the correct bank balance to be included in the financial statements at 30 November 20X7?

22. Which of the following errors would lead to the creation of a suspense account?

An error of omission An error of principle A compensating error A transposition error

23. Which of the following statements describes a suspense account?

An account used to record period end adjustments such as accruals and prepayments

A ledger account which records non-standard accounting entries A temporary account used when the business is not sure where an accounting entry should be posted

An account used to record the balances extracted from the ledger accounts at the period end

24. Below is an extract of ADC Co's trial balance, after adjustments.

Dr ($)

Cr ($) Cash at bank 2,500

Receivables

3,750

Allowances for receivables

550

Irrecoverable debts

200

Current assets $3,400

Current liabilities $2,500

Current assets $3,750

Current liabilities $3,050

Current assets $3,200

Current liabilities $2,500

Current assets $3,750

Current liabilities $2,850

25. Albert Co is preparing accounts for the year ended 31 May 20X0. The tax charge has been estimated as $112,500 for the year. In the previous financial year, the tax expense was estimated to be $99,400 and the company actually paid $102,600 when the tax expense was agreed with the tax authorities.

What should the tax expense be in the statement of profit or loss for the year ended 31 May 20X0?

$

26. Which of the following statements about disclosure notes is/are correct?

(1) IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires remote

contingent liabilities to be disclosed if they are material

(2) IAS 2 Inventories requires the disclosure of the amount of inventories carried at

net realisable value

(3) IAS 16 Property, Property, Plant and Equipment requires disclosure of whether

an independent valuer was involved in the valuation of revalued assets

1 and 2

2 and 3

1 and 3

2 only

27. Dresden Co makes all sales on credit. At 30 November 20X9, the total receivables balance amounted to $136,400.

The following information has come to light a few days after the 30 November 20X9 year end.

(1) Fred Willis, who owed Dresden Co $44,300 at the year end, has been declared

bankrupt. The liquidators have stated that the maximum Dresden Co will receive is $18,000 of the debt owed (2)

Flora Bailey, who owed Dresden Co $22,500 at the year end, has left the country and has no intention of ever settling her debt

Following the principles in IAS 10, Events after the Reporting Period, what should Dresden Co include in the statement of financial position for receivables at 30 November 20X9? $

28. On 1 January 20X9, Shelter Co had 100,000 $1 ordinary shares. On 1 April 20X9, Shelter Co issued 50,000 $1 ordinary shares for $1.25 per share and on 1 October 20X9, made a bonus issue of $20,000 $1 ordinary shares.

On 1 January 20X9, Shelter Co had $65,000 outstanding in bank loans which had increased to $92,000 by the end of the financial year.

On 1 January 20X9, Shelter Co had non-current asset investments of $40,000. Shelter Co purchased a further $10,000 of investments during the year and received $3,000 of interest income on investments.

In the statement of cash flows for the year ended 31 December 20X9, what is the net cash flow from financing activities?

$35,500 inflow

$82,500 inflow

$,500 inflow

$109,500 inflow

29. Carmela purchased goods for resale in March of $86,000. All sales are at a gross margin of 20%. Carmela had opening inventory of $22,000 and closing inventory of $16,000.

What should Carmela's revenue be for March?

30. Colin has not kept accounting records for his first year of trading. He has purchased $65,000 of goods during the year and has $5,000 of goods left in inventory at the end of the year. All sales are made at a mark-up on cost of 40%.

What is Colin's gross profit for his first year of trading?

31. Which of the following statements is true?

The interpretation of an entity's financial statements using ratios is only

useful for potential investors

Ratios based on historical data can predict the future performance of an

entity

The analysis of financial statements using ratios provides useful information when compared with previous performance or industry averages

An entity's management will not assess an entity's performance using

financial ratios32. The draft accounts of a limited company include the following assets and liabilities at the end of an accounting period.

Current assets $ $ $ Inventory 201,000

Less: Allowance for obsolescence (16,900)

184,100

Trade receivables 150,500

Less: Allowance for irrecoverable debts (11,200)

139,300

Total current assets 323,400 Current liabilities

Bank overdraft 18,500

Trade payables 174,200

Accruals 9,300

Total current liabilities 202,000 Which of the following is the company's Quick (Acid Test) Ratio?

1.60: 1

0.75: 1

0.69: 1

None of these

33. The auditor of Four Co, a manufacturing company, has noted an increase in total sales value but a decrease in the company's gross profit percentage for 20X9, as compared to the previous year.

Which of the following is consistent with, and adequately explains, the decrease?

Sales commission payable to the company's sales force increased in relation to sales values as compared to 20X8

Sales volumes have decreased as compared to 20X8

During 20X9, due to a scarcity of supply the company had to pay higher prices when purchasing components

During 20X9, a major component supplier withdrew the settlement discounts previously granted

34. Florida Co had an on-going litigation claim which had been brought against the company for damage to a public road allegedly caused by one of its lorries. At 1 October 20X2, Florida Co had disclosed a contingent liability of $120,000.

Due to new developments in the court case, the latest correspondence with the solicitors at 30 September 20X3 suggests it is now probable that Florida Co will lose and have to pay damages of $150,000.

What is the impact of the above provision on the total statement of profit or loss expense for the year ended 30 September 20X3?

$150,000

Nil

$30,000

$120,000

36. Background

Claus, a limited liability company, acquired 75% of Rolph's voting share capital on 1 October 20X1 for $1.50 per share.

Rolph's share capital comprised 1 million $1 ordinary shares.

Task 1 4 marks Complete the following sentences

Claus has acquired a

be accounted for in the consolidated financial statements as at 31 March 20X2 as

The cost of the investment in Rolph will appear in

Any investment income Claus receives from Rolph will be recorded in

Task 2

8 marks

Claus purchased 75% of the voting capital of Rolph on 1 October 20X1. The additional information relates to the year ended 31 March 20X2.

The following information is relevant:

(1) On 1 October 20X1 Rolph's retained earnings were $475,000.

(2) At the date of acquisition, the fair value of Rolph's property, plant and equipment was equal to its carrying amount with the exception of Rolph's land which had a fair value of $200,000 in excess of its carrying amount. The fair value has not been reflected in Rolph's individual financial statements.

(3)

Included in Claus' receivables is a balance of $11,000 due from Rolph. This agrees with the corresponding figure shown in Rolph's balances.

Complete the following extracts from the consolidated statement of financial position as at 31 March 20X2:

Tasks 3 and 4 3 marks The following year, trading between Claus and Rolph continues. There is no change to Claus' shareholding in Rolph.

Claus makes sales of $240,000 to Rolph during the year, at a mark up of 60%.

30% of the items have been sold to a third party by the year end.

Task 3 2 marks What is the journal entry in the consolidated statement of financial position to record the elimination of the unrealised profit?

.Debit Credit No debit or credit

Inventory

Group retained earnings

Non-controlling interest

Goodwill: Net assets at acquisition

Task 4 1 mark What is the amount of the unrealised profit in inventory at the year end?

37. Background

Extracts from the trial balance of Desmond, a limited liability company, for the year ended 30 September 20X8 are shown below:

The intangible assets were purchased on 1 April 20X8 and have a useful life of five years from that date. Amortisation is calculated on a monthly basis.

Task 1 3 marks What is the carrying amount of intangible assets at 30 September 20X8?

How will this balance be classified in the statement of financial position?

Task 2 4 marks On 30 September 20X8, Desmond disposed of an item of plant for $12,000. The plant originally cost $24,000 and had accumulated depreciation of $9,000 at 1 October

20X7.

Plant is depreciated at 25% per annum using the reducing balance method. A full year's depreciation is charged in the year of acquisition and no depreciation is charged in the year of disposal.

What is the profit or loss on disposal of the plant?

What is the correct calculation for the depreciation expense on the remaining plant for the year ended 30 September 20X8 (all figures are in $’000)?

Correct Answer $’000 Proceeds

12 Carrying amount (24 – 9) 15 Loss

3

The carrying amount of the asset exceeds the sale proceeds by $3,000 therefore Desmond has made a loss.

As Desmond uses the reducing balance method depreciation on the remaining plant is based on net book value (cost – accumulated depreciation). The balances provided for both cost and accumulated depreciation at 1 October 20X7 must be adjusted to reflect the disposal.

Tasks 3 and 4

5 marks

The buildings were revalued on 1 October 20X7 to $620,000.

Task 3

2 marks

What is the journal entry to record the revaluation of buildings? .

Debit Credit No debit or credit

Buildings - accumulated depreciation

Revaluation surplus

Buildings - cost

Depreciation expense

Task 4 3 marks The buildings are depreciated at 5% per annum on cost or valuation. Desmond’s policy is to make an annual transfer of the excess depreciation from the revaluation surplus to retained earnings.

What is the depreciation expense to be charged in the statement of profit or loss for the year ended 30 September 20X8?

$

What amount should be transferred for excess depreciation from the revaluation surplus to retained earnings for the year ended 30 September 20X8?

Task 5

3 marks

The trade receivables balance has been reviewed at the year end and the following adjustments are required:

(1) An irrecoverable debt of $6,000 is to be written off.

(2) The allowance for receivables needs to be adjusted to 2% of the remaining receivables.

Complete the following statements:

The irrecoverable debt will

The impact of the movement in the allowance for receivables for the year ended

30 September 20X8 will下载本文