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Qp May01 Fafn

Qp May01 Fafn

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07/03/2014

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© The Chartered Institute of Management Accountants 2001
Foundation Level
Financial Accounting Fundamentals
1FAF
23 May 2001Day 3 – morningINSTRUCTIONS TO CANDIDATESRead this page before you look at the questionsYou are allowed three hours to answer this question paper.Answer the ONE question in section A (this has 25 sub-questions).Answer the TWO questions in section B.Answer ONE question ONLY from section C.Write your examination number in the boxes provided on the front of the answer book.Write FAFN on the line marked "Subject" on the front of the answer book.Write your examination number on the special answer sheet for section A which is on page 3 ofthis question paper booklet.Detach the sheet from the booklet and insert it into your answer book before you hand this in.Do NOT write your name or your student registration number anywhere on your answer book.Tick the appropriate boxes on the front of the answer book to indicate which questions you haveanswered.TURN OVER
 
FAFN2May 2001
SECTION A — 50 MARKSANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH
Question One1.1
The fundamental objective of an external audit of a limited company is to
A
give advice to shareholders.
B
detect fraud and errors.
C
measure the performance and financial position of a company.
D
provide an opinion on the financial statements.
1.2
A receives goods from B on credit terms and A subsequently pays by cheque. A thendiscovers that the goods are faulty and cancels the cheque before it is cashed by B.How should A record the cancellation of the cheque in his books?
A
Debit creditorsCredit returns outwards
B
Credit bankDebit creditors
C
Debit bankCredit creditors
D
Credit creditorsDebit returns outwards
1.3
The profit of a business may be calculated by using which one of the following formulae?
A
Opening capital - drawings + capital introduced - closing capital
B
Closing capital + drawings - capital introduced - opening capital
C
Opening capital + drawings - capital introduced - closing capital
D
Closing capital - drawings + capital introduced - opening capital
1.4
The turnover in a company was £2 million and its debtors were 5% of turnover. Thecompany wishes to have a provision for doubtful debts of 4% of debtors, which wouldmake the provision 33% higher than the current provision.What figure would appear in the profit and loss account in respect of doubtful debts?
A
debit £1,000.
B
credit £1,000.
C
debit £1,333.
D
credit £1,333.Each of the sub-questions numbered from
1.1
to
1.25
inclusive, given below, has only ONE correctanswer.
 
May 20013FAF
1.5
Which one of the following should be accounted for as capital expenditure?
A
The cost of painting a building.
B
The replacement of windows in a building.
C
The purchase of a car by a garage for re-sale.
D
Legal fees incurred on the purchase of a building.
1.6
A business purchases a machine on credit terms for £15,000 plus value added tax (VAT)at 15%. The business is registered for VAT. How should this transaction be recorded inthe books?
Dr C
A
Machinery15,000Creditors15,000
B
Machinery17,250Creditors17,250
C
Machinery15,000VAT 2,250Creditors17,250
D
Machinery17,250VAT 2,250Creditors15,000
1.7
Which one of the following statements most closely expresses the meaning of “true andfair”?
A
There is only one true and fair view of a company’s financial statements.
B
True and fair is determined by compliance with accounting standards.
C
True and fair is determined by compliance with company law.
D
True and fair is largely determined by reference to generally accepted accounting practice.
1.8
On 1 May 2000, A Ltd pays a rent bill of £1,800 for the period to 30 April 2001. What arethe charge to the profit and loss account and the entry in the balance sheet for the yearended 30 November 2000?
A
£1,050 charge to profit and loss account and prepayment of £750 in the balance sheet.
B
£1,050 charge to profit and loss account and accrual of £750 in the balance sheet.
C
£1,800 charge to profit and loss account and no entry in the balance sheet.
D
£750 charge to profit and loss account and prepayment of £1,050 in the balance sheet.

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