Tuesday, October 18, 2022 2:11 PM

1. Magic Co had the following share capital in issue for the year ended 31 December 20X4.
7% $1 Irredeemable preference shares $30,000
5% $1 Redeemable preference shares $60,000
$1 Ordinary shares $100,000

Magic Co paid all the preference dividends owed and also paid in interim ordinary dividend of
$0.05 per share during the year.
What should be shown as dividends paid in the statement of changes in equity?
 $10,100
 $5,000
 $8,000
 $7,100

2. Vana received monthly statement from one of its suppliers showing an amount owing to
them of $5,300. Vana’s records, however, showed that $7,500 was owed and so an
investigation was carried out which found that:
(1) A contra entry for $600 had been omitted from Vana’s records.
(2) A credit note for $500 received by Vana for goods returned to the suppliers had not been
entered in Vana’s records.
(3) A recent credit purchase for $400 had been posted to the wrong side of the payables ledger
account in Vana’s records.
After adjusting for the above items, what discrepancy remains between the supplier’s
statement and Vana’s records?
 $3,1000
 $1,500
 $1,900
 $300

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3. Jason’s suspense account has a debit balance of $600.
Which of the following would, on its own, accounts for the suspense account balance?
 The bank overdraft of $600 was entered on the credit side of the trial balance
 Sundry income of $300 was entered on the debit side of the trail balance
 Motor expenses of $300 were entered on the credit side of the trial balance
 The debit column of the trial balance was overcast by $600

4. Dilara has calculated the following ratios:

20X9 20X8
Return on capital employed (ROCE) 40% 35%
Asset turnover 1.2 times 0.88 times

How does the profit margin for 20X9 compare with that of 20X8?
 The profit margin has increased in 20X9
 It is not possible to comment based on the information provided
 The profit margin has deceased in 20X9
 The profit margin is unchanged

5. Romeo Chocolate, a limited liability company, has several projects in progress.

Which of the following could be capitlised accounting to IAS38 Intangible Assets?
 Expenditure in developing a new white chocolate bar due to start commercial production next

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 Which of the following could be capitlised accounting to IAS38 Intangible Assets?
 Expenditure in developing a new white chocolate bar due to start commercial production next
year
 Investigation into a new recipe of chocolate icing
 Applied research on a project into non-melting chocolate
 A new machine to be used in the development laboratory producing a new chocolate bar

6. At the end of the month the following balances are extracted from the day books:
The purchase day book total is $4,500
The purchase returns day book total is $200
The cash payments book has total payments to credit suppliers of $3,000 and settlement
discounts received totaling $150
The opening balance on the accounts payables control account is $2,300
What is the balance on the accounts payables control account at the end of the month?
$ __________

7. The following information relates to a business:

$
Net assets at 1 January 20X7 48,900
Net assets at 31 December 20X7 67,950
New capital introduced by the owner 67,500
Cash drawings by the owner 16,500
Goods taken for own use by the owner 4,850

What loss was made by the business during 20X7?

$ ___________

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8. GHI has $100,000 50c ordinary shares and $300,000 7% preference shares in issue at 1 January
20X7. An ordinary dividend of 2c per share and the preference dividend were paid during the
year ended 31 December 20X7.
Are the following statements true or false?
True False
The ordinary dividend is $2,000
The preference dividend is $21,000

9. Joseph makes credit sales of $12,400 and cash sales of $900, before any discounts. Sales
returns in the period are $500 and trade discounts of $70 are given
What amount should be recorded as sales revenues in the statement of profit or loss?
 $12,730
 $12,800
 $13,730
 $13,300

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10. The following information relates to the latest financial year for Garden Co.

(1) The company made a loss of $87,445

(2) Assets were revalued resulting in an increase in the revaluation surplus of $145,000
(3) Interim dividends of $30,000 were paid during the year
(4) The final dividend of $25,000 for the period year was paid at the beginning of the year
What is the total comprehensive income for the year to be reported in the statement of
profit or loss and other comprehensive income?
 $2,555
 $145,000
 $57,555
 $27,555

11. According to IASB’s Conceptual Framework for Financial Reporting, which if any, of the
following statements are correct?

(1) An asset can only be recognized if it is legally owned by the company and its cost can be
reliable measured
(2) Relevant but complex matters should be left out of the financial statements due to the
qualitative characteristics of understandability
 Neither 1 nor 2
 2 only
 Both 1 and 2
 1 only

12. Which FOUR of the following statements about accounting ratios are correct?

 Gearing will indicate how risky a business is

 They provide all the information needed for interpreting company accounts
 They help the user of financial information to focus attention on significant issues
 If there is an increase in any calculated accounting ratio, it is seen as favorable
 They are only useful when comparing a businesses’ results from one year to the next
 Interest cover will give an investor information about whether or not a dividend will be paid
 Ratios can be affected by a business’ choice of accounting policies

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13. Abena has $176 in the bank at 1 January but has incorrectly recorded her bank transactions
for the month of January as follows:
$ $
Balance b/fwd 176 Retail income 300
Dishonoured cheque from customer 150 Bank charges 98
Receipts from customers 5386 Payments to suppliers 3243

What is the balance carried forward on the bank account after the necessary have been
made?
$ __________

14. Annie does not keep detailed accounting records. Her opening inventory was $17,200 and her
closing inventory was $14,800. During the year purchases were $122,000 and purchase returns
were $2,800. Annie’s mark up on cost is 20%.
What are Annie’s sales for the year?
 $121,600
 149,280
 $145,920
 $152,000

15. Which TWO of the following accounting errors would lead to the trial balance not balancing

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15. Which TWO of the following accounting errors would lead to the trial balance not balancing
and a suspense account being required?
 The purchase of a computer for $5,000, which is for business use, had been incorrectly
detailed to the purchase account, but correctly recorded in cash.
 The stationery account had been understated by $1,000
 An accrued expense had been entered correctly in the expense account, but shown in the trial
balance as a prepayment.
 A credit purchase for $2,500 had been debited to the purchase account as $5,200 and credited
to the accounts payables ledger control account as $5,200

16. Which of the following statements describes what the retained earnings balance represents in
the statement of financial position?
 The profit for the period less any dividends paid during the year
 The combination of profits, revaluation surplus and other general reserves
 The accumulated profits of the company to date less any dividends paid to shareholders
 The profit for the period less any dividends proposed for the year

17. Purchases of $69 were entered into the purchase day book as $96.
Which of the following journal entries will correct this error?
Dr Purchases account $27 Cr Payables ledger control account $27
Dr Purchases account $96 Cr Payables ledger control account $96
Dr Payables ledger control account $96 Cr Purchases account $86
Dr Payables ledger control account $27 Cr Purchases account $27

18. Denise has extracted the following balances whilst preparing her trial balance. Unfortunately
she has forgotten to include her drawings account.
$
Cash at bank and in hand 40
Capital 310
Payables 250
Sales 1,800
Purchases 700
Wages 600
Insurance 300
Purchase returns 80
Sales returns 20

What amount should be included for drawings in the trial balance?

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 Sales returns 20

What amount should be included for drawings in the trial balance?

$ __________

19. A company bought an asset on 1 January 20X4 for $200,000. Depreciation is charged on a
reducing balance basis at 20%. On 1 January 20X7 the asset is revalued to market value of
$250,000
How much should be credited to the revaluation surplus at 1 January 20X7?
 $50,000
 $122,000
 $147,600
 $170,000

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20. Which TWO of the following statements about a debit note are correct?
 It is raised by the purchaser of goods
 It is an agreement to sell goods or services
 It is raised by the seller of goods
 It is a formal request for a credit note to be issued

21. Which of the following would help a company with high gearing to reduce its gearing ratio?
 Issuing further long-term loan stock
 Making a rights issue of equity shares
 Paying dividends on its equity shares
 Taking out a loan with a bank

22. ABC has profit before tax of $100,000

Depreciation is $45,000, there was an increase in inventories of $10,000, a decrease in
receivables of $15,000 and a decrease in payables of $8,000.
Using the indirect methods, what is the cash flow from operating activities?
$ __________

23. If inventory levels remain the same and prices are rising, what will be the impact of using FIFO
rather than average cost as a method of inventory valuation?
High Lower
Closing inventory value
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 rather than average cost as a method of inventory valuation?
High Lower
Closing inventory value
Profit

24. Which of the following would reduce the gearing ratio of a highly geared
company?
1. Making a bonus issue of ordinary shares
2. Making a rights issue of ordinary shares
3. Issuing new loan stock
4. Making a new issue of ordinary shares
 1 and 2
 1 and 3
 3 and 4
 2 and 4
25. Which of the following would be recognized as a provision in the financial
statements in accordance with IAS37 Provisions, Contingent Liabilities and
Contingent Assets?
 A possible obligation depending on the occurrence on a future uncertain
event
 A possible obligation as a result of a past event
 A present obligation as a result of past event
 A probable obligation which cannot be reliably measured at present
26. A sole trader, who commenced trading on 1 November 20X6, does not keep
accounting records but the following information is available for the year
ended 31 October 20X7.
$
Cash introduced 80,000
Introduction of motor vehicle 22,500
Drawings 12,000
Net assets at 31 October 20X7 123,750
What profit was made in the year to 31 October 20X7?
 $55,750
 $9,250
 $78,250
 $33,250
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  $9,250
 $78,250
 $33,250

27. Accounts payables control account

$ $
Cash paid to credit suppliers 103,40 b/f 1 January 20X6 376,700
0
Contra with accounts receivables control 10,000 Credit purchase 124,300
account
Sales returns 5,000 Early settlement discounts 12,800
received
C/f 31 December 20X6 410,80 Purchase returns 15,000
0
528,80 528,800
0

What should be the balance on the accounts payable control account at 31 December 20X6
after any necessary corrections?
$ __________

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25. Carey received a cheque from a customer. Mr. Walker. For $100. When preparing the bank
reconciliation the bookkeeper for Carey notes the cheuqe has been dishnoured and returned
marked by the bank because Mr. Walker does not have sufficient funds in his account.
What adjustments should Carey’s bookkeeper make?
Dr Bank $100 Cr Receivables ledger control account$100
Dr Receivable ledger control account $100 Cr Bank $100
Dr Bank $100 Cr Payable ledger control account $100
Dr Payable ledger control account $100 Cr Bank $100

26. Aragon’s reporting date is 31 December 20X5. Their financial statements were authorized for
issue on 2 June 20X6.
Which TWO of the following events after the reporting period, should be adjusted in the
financial statements for the year ended 31 December 20X5?
 The impairment of the value of land and buildings due to ground subsidence which occurred
on 3 February 20X6.
 The declaration of an equity dividend of 1c per share on 26 January 20X6 in respect of the year
end December 20X5.
 The imposition of a significant fine on 16 March 20X6 for health and safety breaches in May
20X5
 The bankruptcy of a significant customer on 3 April 20X6, with a balance outstanding at the
end of the reporting period.

27. Sonja’s opening inventory on 1 May 20X4 was 200 units costing $12 per unit. She made the
following sales and purchase of inventory in May 20X4.

(1) 6 May Purchased 1,000 units at $15 per unit

(2) 18 May Sold 600 units at $22 per unit
(3) 24 May Purchased 400 units at $13 per unit
What is the value of Sonja’s closing inventory using the FIFO method of inventory valuation
as at the end of May 20X4?
$ __________

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29. According to the IASB’s Conceptual Framework for Financial Reporting, which of the following
elements are directly related to the statement of financial position?

(1) Income
(2) Liabilities
(3) Assets
(4) Expenses
(5) Equity

 2 and 3 only
 1 and 4 only
 2,3 and 5 only
 All of the above

30. Which of the following statements is/are correct?

(1) The amount of a transaction is the only factor that determines whether an item is material to
the financial statements
(2) The application of consistency in a set of financial statements means that a company can never
change its depreciation method

 Both 1 and 2
 1 only
 2 only
 Neither 1 nor 2
31. Roncon has a financial year end of 30 September 20X9 and a profit for the year of $119,500.
During the year ended 30 September 20X9, it was discovered that Roncon had recorded the
purchase of computer equipment costing $30,000 as computer equipment repairs. The
company depreciates computer equipment at 30% per annum using the reducing balance
method, with a full year’s charge in the year of acquisition.
What is the net profit of Roncon, after adjusting for this error?
$ __________

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32. Amanda sold goods on credit that had a gross value of $220. Sales tax on the transaction was
10%.
Dr Accounts receivables $220 Cr Sales tax $20 Cr Sales $200
Dr Accounts receivables $198 Dr Sales tax $22 Cr Sales $220
Dr Accounts receivables $220 Cr Sales tax $22 Cr Sales $198
Dr Accounts receivables $200 Dr Sales tax $20 Cr Sales $220

33. On 1 April 20X1, Garden Co purchased land and building costing $500,000, including $100,000
for the land. The buildings were being depreciated on a straight-line basis over 30 years.

On 31 March 20X7, the land and buildings were revalued to $800,000 which included $150,000
for the land.
What amount should be recorded as other comprehensive income for the year ended 31
March 20X7?
 $366,667
 $400,000
 $380,000
 $450,000

34. Yasin is finalizing his year end financial statements and has not yet made any adjustments for
prepayments for expense items.
What will be the impact on Yasin’s draft profit and draft total assets of adjusting for this year
and prepayments?
Increas Decrea
e se
Total assets
Profit
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 e se
Total assets
Profit

35. Feng started a business on 1 January 20X1 selling used

cars. During the year to 31 December 20X1. Feng
purchased 30 cars and sold 26 cars.
In the statement of profit or loss for the year to 31
December 20X1. Feng included the cost of 26 cars as part
of the cost of sales and treated the remaining 4 cars as
closing inventory.
What accounting concept is Feng applying in the financial
statements to 31 December 20X1?
 Constancy
 Accruals
 Compatibility
 Timelness

Background
Blythe Co acquired 66,000 of the ordinary shares in Shirley Co on 30 June 20X2.
The statements of profit or loss for the two companies for the year ended 30
September 20X2 were as follows:
Blythe Co Shirley Co
$ $
Revenue 250,000 180,000
Less: cost of sales 110,000 106,000
Gross profit 140,000 74,000
Less: operating expenses 78,600 41,300
Profit before tax 61,400 32,700
Less: taxation 12,900 6,800
Profit for the year 48,500 25,900

Additional information:
(1) Shirley Co’s share capital comprised 120,000 $1 ordinary shares.
(2) On 31 August 20X2 Shirley Co sold goods to Blythe Co for $42,000. Shirley Co has
a 20% mark-up on cost. Half of the goods sold were still in Blythe Co’s inventory

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 a 20% mark-up on cost. Half of the goods sold were still in Blythe Co’s inventory
at the year end.

Task 1
What percentage holding does Blythe Co have in Shirley Co?
___________ %

Task 2
Which of the following formulae will be used calculating Shirley Co’s retained
earnings at acquisition?
 Retained earnings at 30 September 20X2 – Profit for the year
 Retained earnings at 30 September 20X2
 Retained earnings at 30 September – Post acquisition profits
 Post acquisition profits

Task 3
Complete the following sentences;
With effect from 30 June 20X2 Blythe Co will need to consolidate Shirley Co in
the group accounts.

Task 4
Complete the following extracts from the consolidated financial statements of
Blythe Co Group.

Revenues
Less: Operating expenses
Profit attributable to the owners of the parent

Task 5
Complete the following sentences:
At the year end, the unrealized profit arising on the sales of goods to Blythe Co by
Shirley Co is calculated as $42,000 X 20/120 X 1/2

The non-controlling interest is not affected by this transaction.

Task 6

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Task 6
Complete the following to show the entries that would account for the removal of
the unrealized profit.
Debit Credit No entry
Cost of sales
Inventory in the consolidated statement of financial
position
Revenue

Background
The following extract is from the trail balance of Bali Co for the year ended 30
September 20X8.
Dr Cr
$’000 $’000
Land and buildings at cost at 1 October 20X7 1,250
Buildings accumulated depreciation at 1 October 20X7 420
Plant and machinery at cost at 1 October 20X7 842
Plant and machinery accumulated depreciation at 1 October 20X7 248
Motor vehicles at cost at 1 October 20X7 120
Motor vehicles accumulated depreciation at 1 October 20X7 32
Trade receivables 412
Allowance for receivables at 1 October 20X7 25

The trial balance includes land and buildings at cost on 1 October 20X7 at
$1,250,000. This balance includes $500,000 relating to the cost of the land. The
buildings were revalued on 2 October 20X7 to $800,000 and the land was
revalued to $650,000

Task 1
What amount should be recognized as the surplus on revaluation for land and
buildings on 1 October 20X7?
$ 620,000

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 Task 2
Which TWO places within the financial statements will the given on revaluation
for the year be reported?
 Statement of financial position – in retained earnings
 Statements of financial position – revaluation surplus
 Statement of profit or loss – as other income
 Statement of profit or loss and other comprehensive income – as other
comprehensive income

Task 3
Building are depreciated on the straight-line basis over the remaining life of 20
years.
Which of the following is the correct depreciation expense for building for the
year ended 30 September 20X8?
 37,500
 72,500
 62,500
 40,000

Task 4
The plant and machinery is depreciated at 25% reducing balance with a full year’s
charge in the year of acquisition and none in the year of disposal.

During the year, plant and machinery with a cost of $50,000 and accumulated
depreciation of $36,000 was disposed of for cash proceeds of $12,000. This has
not been recorded in the financial statements.

Calculate the following using the above information.

$’000 Profit or
loss
Profit or loss on disposal of the plant and machinery 2 Loss
Depreciation charges for plant and machinery for the (842-248-14)
year ended 30 September 20X8 X25%

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Task 5
The motor vehicles are depreciated at 20% on a reducing balance basis with a full
year’s charge in the year of acquisition and none in the year of disposal.

During the year, a vehicle with a carrying amount of $15,000 was disposed of in
part exchange for a new one. A part exchange allowance of $16,000 was given
and Bali Co paid a further $24,000 towards the cost of the new vehicle.

Calculate the following using the above information.

$’000 Profit or loss
Profit or loss on disposal of the motor vehicle 1 Profit
Cost of the new vehicle addition 40
Depreciation charge for motor vehicles for the year ended 30 September 20X8.
Caring amount at 1 October 20X7 + Cost of new asset – Carrying amount of
disposal) x 20%

Task 6
Included in trade receivables are debts amounting to $12,000 that Bali Co do not
believe are recoverable. Additionally, Bali Co wishes to adjust the allowance for
receivables to 5% remaining trade receivables.
What amount should be charged to profit or loss as receivables expense for the
year ended 30 September 20X8?

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year ended 30 September 20X8?
$

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