1
Which of the following calculates a sole trader’s net profit for a period?
A Closing net assets + drawings – capital introduced –
opening net assets
B Closing net assets – drawings + capital introduced –
opening net assets
C Closing net assets – drawings – capital introduced –
opening net assets
D Closing net assets + drawings + capital introduced –
opening net assets
2
Which of the following explains the imprest system of operating petty cash?
A Weekly expenditure cannot exceed a set amount
B The exact amount of expenditure is reimbursed at
intervals to maintain a fixed float
C All expenditure out of the petty cash must be properly
authorised
D Regular equal amounts of cash are transferred into
petty cash at intervals
3
Which of the following statements are TRUE of limited liability companies?
(1) The
company’s exposure to debts and liability is limited
(2) Financial
statements must be produced
(3) A company
continues to exist regardless of the identity of its owners
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
4 Annie is a sole trader who does not keep
full accounting records. The following details relate to her transactions with
credit customers and suppliers for the year ended 30 June 20X6:
$
Trade
receivables, 1 July 20X5 130,000
Trade
payables, 1 July 20X5 60,000
Cash received
from customers 686,400
Cash paid to
suppliers 302,800
Discounts
allowed 1,400
Discounts
received 2,960
Contra between
payables and receivables ledgers 2,000
Trade
receivables, 30 June 20X6 181,000
Trade
payables, 30 June 20X6 84,000
What figure
should appear for purchases in Annie’s income statement for the year ended 30
June 20X6?
A $325,840
B $330,200
C $331,760
D $327,760
5
Which TWO of the following errors would cause the total of the debit column and
the total of the credit column of a trial balance not to agree?
(1) A
transposition error was made when entering a sales invoice into the sales day
book
(2) A cheque
received from a customer was credited to cash and correctly recognised in
receivables
(3) A purchase
of non-current assets was omitted from the accounting records
(4) Rent
received was included in the trial balance as a debit balance
A 1 and 2
B 1 and 3
C 2 and 3
D 2 and 4
6 At 31 December 20X5 the following require
inclusion in a company’s financial statements:
(1) On 1 January
20X5 the company made a loan of $12,000 to an employee, repayable on 1 January
20X6, charging interest at 2% per year. On the due date she repaid the loan and
paid the whole of the interest due on the loan to that date.
(2) The
company paid an annual insurance premium of $9,000 in 20X5, covering the year
ending 31 August 20X6.
(3) In January
20X6 the company received rent from a tenant of $4,000 covering the six months
to 31 December 20X5.
For these items, what total figures should be included
in the company’s statement of financial position as at 31 December 20X5?
A Current assets
$10,000 Current liabilities $12,240
B Current assets
$22,240 Current liabilities $nil
C Current assets
$10,240 Current liabilities $nil
D Current assets
$16,240 Current liabilities $6,000
7 A company’s income statement for the year
ended 31 December 20X5 showed a net profit of $83,600. It was later
found that $18,000 paid for the purchase of a motor van had been debited to the
motor expenses account. It is the company’s policy to depreciate motor vans at
25% per year on the straight line basis, with a full year’s charge in the year
of acquisition.
What would the
net profit be after adjusting for this error?
A $106,100
B $70,100
C $97,100
D $101,600
8 Xena has the following working capital
ratios:
20X9 20X8
Current ratio 1.2 : 1 1.5 : 1
Receivables
days 75 days 50 days
Payables days 30 days 45 days
Inventory
turnover 42 days 35 days
Which of the following statements is correct?
A Xena’s liquidity and working capital has improved in
20X9
B Xena is receiving cash from customers more quickly in
20X9 than in 20X8
C Xena is suffering from a worsening liquidity position
in 20X9
D Xena is taking
longer to pay suppliers in 20X9 than in 20X8
9
Which of the following statements is/are correct?
(1) A
statement of cash flows prepared using the direct method produces a different
figure to net cash from operating activities from that produced if the indirect
method is used
(2) Rights
issues of shares do not feature in a statement of cash flows
(3) A surplus
on revaluation of a non-current asset will not appear as an item in a statement
of cash flows
(4) A profit
on the sale of a non-current asset will appear as an item under cash flows from
investing activities in the statement of cash flows
A 1 and 3 only
B 3 and 4 only
C 2 and 4 only
D 3 only
10 A company receives rent from a large number
of properties. The total received in the year ended 30 April 20X6 was $481,200.
The following
were the amounts of rent in advance and in arrears at 30 April 20X5 and 20X6:
30 April 20X5 30
April 20X6
$ $
Rent received
in advance 28,700 31,200
Rent in
arrears (all subsequently received) 21,200
18,400
What amount of rental income should appear in the
company’s income statement for the year ended 30 April 20X6?
A $486,500
B $460,900
C $501,500
D $475,900
11
Which of the following are differences between sole traders and limited
liability companies?
(1) A sole
trader’s financial statements are private and never made available to third
parties; a company’s financial statements are sent to shareholders and may be
publicly filed
(2) Only
companies have share capital
(3) A sole
trader is fully and personally liable for any losses that the business might
make
(4) Only
drawings would appear in a sole trader’s financial statements
A 1 and 4 only
B 2, 3 and 4
C 2 and 3 only
D 1, 3 and 4
12
Which of the following statements is true?
A The
interpretation of an entity’s financial statements using ratios is only useful
for potential investors
B Ratios based
on historical data can predict the future performance of an entity
C The analysis
of financial statements using ratios provides useful information when compared
with previous performance or industry averages
D An entity’s
management will not assess an entity’s performance using financial ratios
13 X has a 40% shareholding in each of the
following three companies:
P: X has the
right to appoint or remove a majority of the directors of P.
Q: X has
significant influence over the affairs of Q.
R: X has the
power to govern the financial and operating policies of R.
Which of these companies are subsidiaries of X for
financial reporting purposes?
A Q and R only
B P and R only
C P and Q only
D P, Q and R
14
Which TWO of the following items must be disclosed in the note to the financial
statements for intangible assets?
(1) The useful
lives of intangible assets capitalised in the financial statements
(2) A
description of the development projects that have been undertaken during the
period
(3) A list of
all intangible assets purchased or developed in the period
(4) Impairment
losses written off intangible assets during the period
A 1 and 4
B 2 and 3
C 3 and 4
D 1 and 2
15 Bob acquired 80% of the voting equity
shares of Bill. Bill had the following equity at the date of acquisition:
$
Ordinary
shares $1 1,000,000
Retained
earnings 800,000
The cost of
the investment was $1,500,000 and the fair value of the non-controlling
interest at acquisition was $360,000.
What was the goodwill on acquisition of Bill?
A $420,000
B $60,000
C $300,000
D $48,000
16 The following transactions relate to
Rashid’s electricity expense ledger account for the year ended 30 June 20X9:
$
Prepayment
brought forward 550
Cash paid 5,400
Accrual
carried forward 650
What amount should be charged to the income statement
in the year ended 30 June 20X9 for electricity?
A $6,600
B $5,400
C $5,500
D $5,300
17 At 30 June 20X5 a company’s allowance for
receivables was $39,000. At 30 June 20X6 trade receivables totaled $517,000.
It was decided to write off debts totalling $37,000 and to adjust the allowance
for receivables to the equivalent of 5% of the trade receivables based on past
events. What figure
should appear in the income statement for the year ended 30 June 20X6 for
receivables expense?
A $61,000
B $52,000
C $22,000
D $37,000
18 The total of the list of balances in
Valley’s payables ledger was $438,900 at 30 June 20X6. This balance
did not agree with Valley’s payables ledger control account balance. The
following errors were discovered:
(1) A contra
entry of $980 was recorded in the payables ledger control account, but not in
the payables ledger.
(2) The total
of the purchase returns daybook was undercast by $1,000.
(3) An invoice
for $4,344 was posted to the supplier’s account as $4,434.
What amount
should Valley report in its statement of financial position for accounts
payable at 30 June 20X6?
A $436,830
B $438,010
C $439,790
D $437,830
19
According to IAS 2 Inventories,
which TWO of the following costs should be included in valuing the inventories of
a manufacturing company?
(1) Carriage
inwards
(2) Carriage
outwards
(3)
Depreciation of factory plant
(4) General
administrative overheads
A 1 and 4
B 1 and 3
C 3 and 4
D 2 and 3
20 Prisha has not kept accurate accounting
records during the financial year. She had opening inventory of $6,700 and purchased
goods costing $84,000 during the year. At the year end she had $5,400 left in
inventory. All sales are made at a mark up on cost of 20%. What is Prisha’s
gross profit for the year?
A $13,750
B $17,060
C $16,540
D $20,675
21 Exe Co acquired 70% of the ordinary share
capital of Barle Co six years ago. The following information relates to BarleCo for the
year ended 30 September 20X3.
$
Sales revenue 480,000
Cost of sales 270,000
Administration
expenses 90,000
Taxation 30,000
What is the
profit attributable to the non-controlling interest in the consolidated income
statement?
A $27,000
B $63,000
C $36,000
D $84,000
22
Which of the following should appear in a company’s statement of changes in
equity?
(1) Total
comprehensive income for the year
(2)
Amortisation of capitalised development costs
(3) Surplus on
revaluation of non-current assets
A 1, 2 and 3
B 2 and 3 only
C 1 and 3 only
D 1 and 2 only
23 The
plant and machinery account (at cost) of a business for the year ended 31
December 20X5 was as follows:
The company’s
policy is to charge depreciation at 20% per year on the straight line basis,
with proportionate depreciation in the years of purchase and disposal.
What should be
the depreciation charge for the year ended 31 December 20X5?
A $68,000
B $64,000
C $61,000
D $55,000
24 The following extracts are from Hassan’s
financial statements:
$
Profit before
interest and tax 10,200
Interest (1,600)
Tax (3,300)
–––––––
Profit after
tax 5,300
–––––––
Share capital
20,000
Reserves
15,600
–––––––
35,600
Loan liability
6,900
–––––––
42,500
–––––––
What is Hassan’s return on capital employed?
A 15%
B 29%
C 24%
D 12%
25
Which of the following statements about sales tax is/are true?
(1) Sales tax
is an expense to the ultimate consumer of the goods purchased
(2) Sales tax
is recorded as income in the accounts of the entity selling the goods
A 1 only
B 2 only
C Both 1 and 2
D Neither 1 nor 2
26 Q’s trial balance failed to agree and a
suspense account was opened for the difference. Q does not
keep receivables and payables control accounts. The following errors were found
in Q’s accounting records:
(1) In
recording an issue of shares at par, cash received of $333,000 was credited to
the ordinary share capital account as $330,000
(2) Cash of
$2,800 paid for plant repairs was correctly accounted for in the cash book but
was credited to the plant asset account
(3) The petty
cash book balance of $500 had been omitted from the trial balance
(4) A cheque
for $78,400 paid for the purchase of a motor car was debited to the motor
vehicles account as $87,400.
Which of the
errors will require an entry to the suspense account to correct them?
A 1, 2 and 4 only
B 1, 2, 3 and 4
C 1 and 4 only
D 2 and 3 only
27 Prior to the financial year end of 31 July
20X9, Cannon Co has received a claim of $100,000 from a supplier for providing
poor quality goods which have damaged the supplier’s plant and equipment. Cannon Co’s
lawyers have stated that there is a 20% chance that Cannon will successfully
defend the claim.
Which of the following is the correct accounting
treatment for the claim in the financial statements for the year ended 31 July
20X9?
A Cannon should neither provide for nor disclose the
claim
B Cannon should disclose a contingent liability of
$100,000
C Cannon should provide for the expected cost of the
claim of $100,000
D Cannon should provide for an expected cost of $20,000
28 Gareth, a
sales tax registered trader purchased a computer for use in his business. The
invoice for the computer showed the following costs related to the purchase:
$
Computer 890
Additional
memory 95
Delivery 10
Installation 20
Maintenance (1
year) 25
––––––
1,040
Sales tax
(17·5%) 182
––––––
Total 1,222
––––––
How much should
Gareth capitalise as a non-current asset in relation to the purchase?
A $1,193
B $1,040
C $1,222
D $1,015
29 The following
bank reconciliation statement has been prepared by a trainee accountant:
$
Overdraft per
bank statement 3,860
Less: Unpresented cheques 9,160
–––––––
5,300
Add:
Outstanding
lodgements 16,690
–––––––
Cash at bank 21,990
–––––––
What should be the correct balance per the cash book?
A $21,990 balance at bank as stated
B $3,670 balance at bank
C $11,390 balance at bank
D $3,670
overdrawn
30 The IASB’s Framework for the Preparation and Presentation of Financial Statements gives qualitative characteristics that make
financial information reliable.
Which of the
following are examples of those qualitative characteristics?
(1) Accruals
(2) Faithful
representation
(3) Going
concern
(4) Neutrality
A 1 and 2
B 2 and 4
C 2 and 3
D 1 and 4
31 The
following control account has been prepared by a trainee accountant:
What should the closing balance be when all the errors
made in preparing the receivables ledger control account have been corrected?
A $395,200
B $304,300
C $309,500
D $307,100
32
Which of the following material events after the reporting date and before the
financial statements are approved are adjusting events?
(1) A
valuation of property providing evidence of impairment in value at the
reporting date.
(2) Sale
(3) Discovery
of fraud or error affecting the financial statements.
(4) The
insolvency of a customer with a debt owing at the reporting date which is still
outstanding.
A 1, 2 and 4
only
B 1, 2, 3 and 4
C 1 and 4 only
D 2 and 3 only
33 A company values its inventory using the
FIFO method. At 1 May 20X5 the company had 700 engines in
inventory, valued at $190 each. During the year ended 30 April 20X6 the
following transactions took place:
20X5
1 July
Purchased 500 engines at $220 each
1 November
Sold 400 engines for $160,000
20X6
1 February
Purchased 300 engines at $230 each
15 April Sold
250 engines for $125,000
What is the
value of the company’s closing inventory of engines at 30 April 20X6?
A $188,500
B $195,500
C $166,000
D $106,000
34 Amy is a sole trader and had assets of
$569,400 and liabilities of $412,840 on 1 January 20X8. During the
year ended 31 December 20X8 she paid $65,000 capital into the business and she
paid herself wages of $800 per month.
At 31 December
20X8, Amy had assets of $614,130 and liabilities of $369,770.
What is Amy’s
profit for the year ended 31 December 20X8?
A $32,400
B $23,600
C $22,800
D $87,800
35 Bumbly Co extracted the trial balance for
the year ended 31 December 20X7. The total of the debits exceeded the credits by $300.
Which of the
following could explain the imbalance?
A Sales of $300
were omitted from the sales day book
B Returns inward
of $150 were extracted to the debit column of the trial balance
C Discounts
received of $150 were extracted to the debit column of the trial balance
D The bank
ledger account did not agree with the bank statement by a debit of $300
36
Are the following statements correct or incorrect?
(1) Discount
received should be recorded on the debit side in the payables ledger account
(2) Discount
received should be recorded on the debit side in the general ledger
Statement 1 Statement
2
A Correct Correct
B Correct Incorrect
C Incorrect Correct
D Incorrect Incorrect
37
Which TWO of the following will be classified as non-current assets for a
dealer in computer equipment?
(1) Computers
for resale
(2) Vehicles
for delivering computers
(3) Business
capital
(4) Office
furniture
A 1 and 2
B 2 and 3
C 2 and 4
D 3 and 4
38 The following items have to be considered in
finalising the financial statements of Q, a limited liability company:
(1) The
company gives warranties on its products. The company’s statistics show that
about 5% of sales give rise to a warranty claim.
(2) The
company has guaranteed the overdraft of another company. The likelihood of a
liability arising under the guarantee is assessed as possible.
What is the
correct action to be taken in the financial statements for these items?
Item 1 Item 2
A create a
provision disclose by
note only
B disclose by
note only no
action
C create a
provision create a
provision
D disclose by
note only disclose
by note only
39 A
company’s motor vehicles cost account at 30 June 20X6 is as follows:
What opening balance
should be included in the following period’s trial balance for Motor vehicles –
cost at 1 July 20X6?
A $36,750 Dr
B $48,750 Dr
C $36,750 Cr
D $48,750 Cr
40 On 30 June 20X2, H acquired 80% of the
share capital of S. The non-controlling interest had a fair value of
$1,300,000. Extracts from the statement of financial position of S at 30 June
20X2 and 30 June 20X6 are shown below:
Statement of
financial position
30 June 20X2 30
June 20X6
$ $
Ordinary share
capital 1,000,000
1,000,000
Share premium
account 400,000 400,000
Retained
earnings 4,700,000
5,600,000
What figure for
non controlling interest should appear in the consolidated statement of
financial position as at 30 June 20X6?
A $1,220,000
B $1,300,000
C $1,480,000
D $1,400,000
41
Which of the following statements regarding the method of consolidation is
true?
(1)
Subsidiaries are consolidated in full
(2) Associates
are equity accounted
A Neither
statement
B Statement 1
only
C Both
statements
D Statement 2
only
42
Which of the following statements about the valuation of inventory is correct,
according to IAS2 Inventories?
A Inventory
items are normally to be valued at the higher of cost and net realisable value
B The cost of
goods manufactured by an enterprise will include materials and labour only.
Overhead costs cannot be included
C LIFO is an
accepted valuation method for inventory. FIFO is not an accepted valuation
method for inventory
D Selling price
less estimated profit margin may be used to arrive at cost if this gives a reasonable
approximation to actual cost
43 A company’s gross profit as a percentage of
sales increased from 24% in the year ended 31 December 20X1 to 27% in the year
ended 31 December 20X2.
Which of the
following events is most likely to have caused the increase?
A An increase in
sales volume
B A purchase in
December 20X1 mistakenly being recorded as happening in January 20X2
C Overstatement
of the closing inventory at 31 December 20X1
D Understatement of the closing inventory at 31 December
20X1
44
Which of the following statements are correct?
(1)
Capitalised development expenditure must be amortised over a period not
exceeding five years
(2)
Capitalised development costs are shown in the statement of financial position
under the heading of non-current assets
(3) If certain
criteria are met, research expenditure must be recognised as an intangible
asset
A 2 only
B 2 and 3
C 1 only
D 1 and 3
45 IAS 28 Investments in Associates governs
the identification of associates.
Which of the
following would suggest that an entity is an associate of another entity?
A The investing
entity has owned its share since the incorporation of the investee entity
B The investor
holds greater than 20% but less than 50% of the voting power of the investee
C The investing
entity has some influence over other entities in the same industry
D The investor
often trades with the investee
46 Theta
prepares its financial statements for the year to 30 April each year. The company
pays rent for its premises quarterly in advance on 1 January, 1 April, 1 July
and 1 October each year. The annual rent was $84,000 per year until 30 June
20X5. It was increased from that date to $96,000 per year. What rent
expense and end of year prepayment should be included in the financial
statements for the year ended 30 April 20X6?
Expense
Prepayment
A $93,000 $8,000
B $93,000
$16,000
C $94,000 $8,000
D $94,000
$16,000
47
Alpha
received a statement of account from a supplier Beta, showing a balance to be
paid of $8,950. Alpha’s purchase ledger account for Beta shows a
balance due to Beta of $4,140.
Investigation
reveals the following:
(1) cash paid
to Beta of $4,080 has not been accounted for by Beta
(2) Alpha’s
ledger account has not been adjusted for $40 of cash discount disallowed by
Beta
What
discrepancy remains between Alpha’s and Beta’s records after allowing for these
items?
A nil
B $690
C $770
D $730
48
The
inventory value for the financial statements of Q for the year ended 31 May
20X6 was based on an inventory count on 4 June 20X6, which gave a total inventory
value of $836,200.
Between 31 May
and 4 June 20X6, the following transactions took place:
$
Purchase of
goods 8,600
Sales of goods
(profit margin 30% on sales) 14,000
Goods returned
by Q to supplier 700
What adjusted
figure should be included in the financial statements for inventories at 31 May
20X6?
A $838,100
B $853,900
C $818,500
D $834,300
49 Wheddon Co purchased 60,000 ordinary
shares in Raleigh
Ordinary
shares $180,000
Retained
earnings 70,000
The fair value
of the non-controlling interest at acquisition was $22,000.
What was the
goodwill arising on acquisition of Raleigh Co?
A $7,000
B $10,000
C $25,000
D $43,000
50 At 31 December 20X4 a company’s capital
structure was as follows:
$
Ordinary share
capital 125,000
(500,000
shares of 25c each)
Share premium
account 100,000
In the year
ended 31 December 20X5 the company made a rights issue of 1 share for every 2
held at $1 per share and this was taken up in full. Later in the year the
company made a bonus issue of 1 share for every 5 held, using the share premium
account for the purpose.
What was the
company’s capital structure at 31 December 20X5?
Ordinary share
capital Share premium account
A $450,000
$25,000
B $225,000
$250,000
C $225,000
$325,000
D $212,500 $262,500
Answer
1 A
2 B
3 C
4 C
Payables: $
Balance b/f 60,000
Cash paid to
suppliers (302,800)
Discounts
received (2,960)
Contra (2,000)
Balance c/f 84,000)
––––––––
Purchases 331,760
––––––––
5 D
6 B
Current assets $
Loan asset 12,000
Interest
(12,000 x 12%) 240
Prepayment
(8/12 x 9,000) 6,000
Accrued rent 4,000
–––––––
22,240
–––––––
7 C $
Profit 83,600
Purchase of
van 18,000
Depreciation
18,000 x 25% (4,500)
–––––––
97,100
–––––––
8 C
9 D
10 D $
Balance b/f
(advance) 28,700
Balance b/f
(arrears) (21,200)
Cash received 481,200
Balance c/f
(advance) (31,200)
Balance c/f
(arrears) 18,400
––––––––
475,900
––––––––
11 B
12 C
13 B
14 A
15 B
$000
Cost 1,500
NCI 360
Shares (1,000)
Retained
earnings (800)
––––––
60
––––––
16 A $
Balance b/f 550
Expense
incurred (cash) 5,400
Accrual c/f 650
––––––
6,600
––––––
17 C $ $
Debts written
off 37,000
Movement in
allowance:
(517 – 37) x 5% 24,000
Less opening allowance 39,000
(15,000)
–––––––
Receivables
expense 22,000
–––––––
18 D $
Balance per
ledger 438,900
Less contra (980)
Posting error (90)
––––––––
Corrected
balance 437,830
––––––––
19 B
20 B (6,700 +
84,000 – 5,400) x 20% = $17,060
21 A Profit (480 –
270 – 90 – 30) x 30% = 27,000
22 C
23 D $
Depreciation:
Jan–Mar
240,000 x 20% x 3/12 12,000
Apr–Jun
(240,000 – 60,000) x 20% x 3/12 9,000
Jul–Dec
(180,000 + 160,000) x 20% x 6/12
34,000
–––––––
55,000
–––––––
24 C 10,200/42,500
25 A
26 B
27 C
28 D 1,040 – 25 =
$1,015
29 B $
Overdraft per
bank statement (3,860)
Less: Unpresented cheques (9,160)
Add: Outstanding lodgements 16,690
–––––––
Cash at bank
3,670
–––––––
30 B
31 D
32 B
33 A Closing
inventory: $
50 x $190 9,500
500 x $220 110,000
300 x $230 69,000
––––––––
188,500
––––––––
34 A $
Opening assets
569,400
Opening
liabilities (412,840)
Capital
introduced 65,000
Drawings (800
x 12) (9,600)
––––––––
211,960
Profit (bal
fig) 32,400
––––––––
Closing net
assets (614,130 – 369,770) 244,360
––––––––
35 C
36 B
37 C
38 A
39 A
40 C
$000
At acquisition
1,300
% Post
acquisition (5,600 – 4,700) x 20% 180
––––––
1,480
––––––
41 C
42 D
43 D
44 A
45 B
46 D Expense
$84,000 x 2/12 x $96,000 x 10/12 = $94,000
Prepayment
$96,000 x 2/12 = $16,000
47 B Beta Alpha
$
$
8,950 4,140
(4,080) 40
–––––– ––––––
4,870 4,180 difference $690
48 A
$
Count 836,200
Purchases (8,600)
Sales 14,000 x 70%
Returns 700
––––––––
838,100
––––––––
49 A
$
Cost 85,000
NCI 22,000
Shares (80,000)
Retained
Earnings (20,000)
–––––––
7,000
–––––––
50 B
Share capital Share
premium
$ $
Balance b/f 125,000 100,000
Rights issue
62,500 187,500
Bonus issue
37,500 (37,500)
–––––––– ––––––––
Balance c/f
225,000 250,000
–––––––– ––––––––
