Professional Documents
Culture Documents
Records
June 2013
Paper FA2
KAPLAN PUBLISHING
The plant and equipment account in the records of a company for the year ended
31 December 20X6 is shown below:
Plant and equipment cost
Balance b/f
1 July Cash
$
960,000
48,000
$
30 Sept Disposals
Balance c/f
84,000
924,000
1,008,000
1,008,000
The companys policy is to charge straight line depreciation at 20% per year on a pro
rata basis.
What should be the charge for depreciation in the companys income statement for
the year ended 31 December 20X6?
$184,800
$192,600
$191,400
$184,200
During the year ended 31 March 2007, Jake recorded a sales return of $563 in the
sales returns day book as $635.
What is the journal entry required to correct this error?
Debit
Credit
$72
Sales returns
$72
Sales returns
$72
$72
Suspense
$72
Sales returns
$72
$72
Suspense
$72
IAS 2 states that inventory should be valued at the lower of cost and net realisable
value.
Which of the following concepts is this in accordance with?
A
Accruals
Prudence
Consistency
Going Concern
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Annas business has rented out premises at a cost of $12,000 per annum. However,
on 1 July 2006 the rent was increased by 10%. At 1 January 2006 Anna had a prepaid
expense of $750 in respect of rent, and during the year ended 31 December 2006
Anna had paid a total of $12,850 to her landlord.
What amounts will appear in the income statement for the year ended 31 December
2006, and in the statement of financial position as at 31 December 2006 in respect of
rent?
Income statement
$12,600
$1,000 prepayment
$12,600
$1,000 accrual
$13,200
$400 prepayment
$13,200
$400 accrual
$992,640
Credit
$1,026,480
Which TWO of the following possible errors could, when corrected, cause a trial
balance to agree?
(1)
An item for payment of rent $6,160 has not been entered into the rent payable
account or the cash book.
(2)
The balance on the motor expenses account $27,680 has been incorrectly listed
in the trial balance as credit.
(3)
$6,160 proceeds of sale of a motor vehicle have been posted to the debit of
motor vehicles asset account.
(4)
The balance of $21,520 on the rent receivable account has been omitted from
the trial balance.
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Lucas and Michael are in partnership. During the year ended 30 June 2007, the
partnership made a profit of $100,000. The partnership agreement stated that
profits were to be shared in the ratio of 2:1 after Michael had received a salary of
$10,000 per annum. However, on 1 January 2007, it was decided to increase his
salary to $16,000 per annum but that the profit-sharing ratio should remain at 2:1.
What share of profits are Lucas and Michael entitled to for the year ended 30 June
2007?
Lucas
Michael
$58,000
$42,000
$50,000
$50,000
$42,000
$58,000
$60,000
$40,000
$12,300
$13,450
$14,400
$15,550
For the following transactions, what is the effect on the net profit for the period,
and what double entry is needed to correct the error? An amount of $310 was
received from a credit customer with a balance outstanding of $325. No entry has
been made for the remaining $15, and it has now been decided to treat it as a cash
discount.
Profit effect
Correction
Reduce by $15
Reduce by $15
Reduce by $15
No effect
Dr Sales $15
Cr Discounts received $15
KAPLAN PUBLISHING
Dcor sells all their goods at a mark-up of 15%. During the year ended 31 December
2007, the company made sales of $546,250. At 1 January 2007, the company had
inventory valued at $75,000 and had made purchases during the year of $485,500.
What was the value of Dcors closing inventory at 31 December 2007?
10
$64,500
$75,000
$85,500
$95,000
Less:
Outstanding cheques
$
36,840
51,240
88,080
43,620
44,460
Assuming the amounts stated for items other than the cash book balance are correct,
what should the cash book balance be?
11
$60,020 credit
$29,220 debit
$29,220 credit
A difference between the cash book and the statement must be corrected by
means of a journal entry.
(2)
(3)
Bank charges not yet entered in the cash book should be dealt with by an
adjustment in the bank reconciliation.
(4)
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12
At 1 April 2006, Tom had a payables' balance of $ 30,000. During the year ended
31 March 2007, Tom paid cheques amounting to $60,000 to his suppliers. He also
received prompt payment discounts totalling $3,000, and returned goods to
suppliers totalling $1,000. At 31 March 2007, Tom owed $20,000 to his suppliers.
What were Toms purchases in the year ended 31 March 2007?
13
14
$54,000
$48,000
$46,000
$50,020
If a company erroneously excludes goods bought on credit from its closing inventory
and also fails to record the purchase of those goods on credit in its accounting
records, the effect would be to understate:
A
Cost of sales
Gross profit
Current assets
Working capital
A receivables ledger control account at May had balances of $32,750 debit and
$1,275 credit. During May, sales of $125,000 were made on credit.
Receipts from customers amounted to $122,500 and cash discounts of $550 were
allowed. Refunds of $1,300 were made to customers. What should the closing balance
at 31 May amount to?
15
Karen and Jamie are in partnership running a training consultancy. In the year ended
30 September 20X6, the business made a profit of $180,000. The partnership
agreement states that Karen is to receive a salary of $25,000 and the remaining
profit is shared in the ratio 3:5. During the year, Karen took $20,000 in drawings and
Jamie $60,000. What amount should be credited to Karens current account for the
year?
A
$20,000
$58,125
$63,125
$83,125
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Discount allowed
Cr
$
7,680
Discount received
5,920
Suspense account
1,760
Discount allowed
880
Discount received
880
Suspense
C
1,760
Discount allowed
6,800
Discount received
D
17
6,800
Discount allowed
3,840
Discount received
2,960
Suspense account
880
The International Accounting Standards Board Framework for the Preparation and
Presentation of Financial Statements for financial reporting gives five qualitative
characteristics which make financial information reliable.
Which of the following lists comprises these five characteristics?
18
Accruals basis, going concern concept, consistency, prudence, true and fair view
Substance over
completeness
form,
prudence,
faithful
representation,
neutrality,
X and Y are in partnership, sharing profits equally with the exception of bad debts
which are borne 75% by X and 25% by Y. The business profit for the year ended
30 June 2005 was $576,000 after writing off bad debts totalling $10,000.
How is the profit for the year to be divided between X and Y?
X
$285,500
$290,500
$293,000
$293,000
$280,500
$295,500
$288,000
$288,000
KAPLAN PUBLISHING
19
When reconciling the payables' ledger control account with the list of payables'
ledger balances, the following errors were found:
20
Control account
$500 Cr
Decrease by $400
$500 Dr
Increase by $400
$400 Dr
Increase by $500
$400 Cr
Decrease by $500
A suspense account was opened when a trial balance failed to agree. The following
errors were later discovered:
Error
1
A gas bill of $420 had been recorded in the Gas account as $240.
Interest received of $70 had been entered in the bank account only.
21
debit $210
credit $210
debit $160
credit $160
At 1 April 2006, Marcuss accounting records showed non-current assets that had
cost $156,000 and an accumulated depreciation of $33,000. During the year ended
31 March 2007, Marcus disposed of non-current assets which had originally cost
$14,000 and had a net book value of $5,600 at 1 April 2006.
Marcuss policy is to charge depreciation at 40% per annum on the reducing-balance
basis, with no depreciation charged in the year of disposal of an asset.
What is Marcuss depreciation charge for the year ended 31 March 2007?
A
$56,800
$49,200
$46,960
$43,600
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22
23
The profit of a business may be calculated by using which one of the following
formulae?
A
A company receives rent from a large number of properties. The total received in
the year ended 31 October 20X2 was $481,200.
The following were the amounts of rent in advance and in arrears at 31 October 20X1
and 20X2:
31 October 20X1
31 October 20X2
28,700
31,200
21,200
18,400
What amount of rental income should appear in the companys income statement for
the year ended 31 October 20X2?
24
$486,500
$460,900
$501,500
$475,900
At 1 April 2006, Georgina had net assets of $50,000. At 31 March 2007, she had net
assets of $75,000. During the year ended 31 March 2007, Georgina withdrew $5,000
cash from the business and took $250 of goods for her personal use.
What profit was made by Georginas business in the year ended 31 March 2007?
25
$19,750
$20,000
$30,000
$30,250
10
$1,090
$2,000
$3,090
$6,750
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26
At 30 April 2007, Foxglove, a limited liability company, was being sued by an exemployee for wrongful dismissal. Foxglove has been advised that the claim is more
than 50% likely to succeed, and that damages of $100,000 will be payable if the
claim does succeed.
How should this matter be treated in the financial statements of Foxglove for the year
ended 30 April 2007?
27
28
On 1 January 2007, a business sells a van which it bought on 1 January 2004 for
$6,000 and has depreciated each year at 25% pa by the straight-line method. It
trades in this van for a new one costing $10,000 and pays the supplier $9,200 by
cheque.
What is the profit or loss on the disposal of the old van?
29
$700 loss
$800 profit
$1,500 profit
$1,500 loss
The following extracts are taken from the trial balance of Charlies business at
31 December 2007:
Receivables
$36,800
$1,460
On checking the accounts it was found that a bad debt of $570 had not been written
off and a bad debt recovered of $240 had not yet been entered in the books.
Charlie wishes to carry forward an allowance of 6% of receivables. What is the charge
or credit to the income statement in respect of bad and doubtful debts?
A
Charge of $1,354
Charge of $1,044
Charge of $804
Credit of $384
KAPLAN PUBLISHING
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30
31
A business compiling its financial statements for the year to 31 July each year pays
rent quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The
annual rent was increased from $60,000 per year to $72,000 per year as from
1 October 20X3.
What figure should appear for rent expense in the business income statement for the
year ended 31 July 20X4?
32
$69,000
$62,000
$70,000
$63,000
$
14,000
100,000
23,800
3,250
7,000
31,050
12,560
150
1,200
1,500
What are the correct figures for current liabilities and current assets?
Current liabilities
$
12
Current assets
$
34,300
35,010
32,250
38,260
57,250
38,260
60,500
35,010
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33
During 20X4, Tom Jones, paid a total of $60,000 for rent, covering the period from
1 October 20X3 to 31 March 20X5.
What figures should appear in the companys financial statements for 31 December
20X4?
34
Income statement
$40,000
Prepayments $10,000
$40,000
Prepayments $15,000
$50,000
Accrual $10,000
$50,000
Accrual $15,000
35
36
Correct
Overstated by $80
Understated by $80
Understated by $40
Credit balances:
The most important reason for producing a trial balance prior to preparing the final
accounts is:
A
it shows that the ledger accounts contain debit and credit entries of an equal
value
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37
38
An item of inventory was purchased for $500. It is expected to be sold for $1,200
although $250 will need to be spent on it in order to achieve the sale. To replace the
same item of inventory would cost $650. How should the inventory be valued in the
accounts?
A
$500
$750
$950
$650
In the quarter ended 31 March 20X2, Chas had taxable sales, net of sales tax, of
$90,000 and taxable purchases, net of sales tax, of $72,000.
If the rate of sales tax is 10%, how much sales tax is due?
39
40
41
14
$1,800 receivable
$2,000 receivable
$1,800 payable
$2,000 payable
Which of the following items appear on the same side of the trial balance?
A
Stock should be valued at the lower of costs and net realisable value. Which one of
the following accounting concepts governs this?
A
Consistency concept
Accruals concept
Prudence concept
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43
44
Which of the following best explains the imprest system of petty cash control?
A
Regular equal amounts of cash are transferred into the petty cash at intervals
Which one of the following is a book of prime entry AND part of the double entry
system?
A
The journal
(1)
Cr
450
450
100,000
Share capital
100,000
Suspense account
Motor vehicle
1,000
1,000
None of them
(1) only
(2) only
(3) only
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15
45
Cash paid to Beta 4,080 has not been allowed for by Beta.
(2)
Alphas ledger account has not been adjusted for 40 of cash discount allowed
by Beta.
(3)
What discrepancy remains between Alphas and Betas records after allowing for
these items:
46
47
9,310
390
310
1,070
Which of the following items could appear on the credit side of a sales ledger control
account?
(1)
(2)
(3)
(4)
Discount allowed
(5)
Sales
(6)
(7)
After the profit and loss account of GH had been prepared, it was found that
accrued expenses of 2,500 had been omitted from one of the expenses accounts
and that closing stock had been under-valued by 1,500.
The effect of these errors is:
16
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48
49
Which of the following will not cause an entry to be made in a suspense account?
A
50
25%
20%
16.7%
15%
Rowlings year-end is 30 June 2006. In August 2006, a major credit customer went
into liquidation and the directors believe they will not be able to recover the
$500,000 owed to them.
How should this item be treated in the financial statements for the year ended
30 June 2006?
A
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18
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