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FA2 TEST 1 NAME: ………………….. TIME ALLOWED: 120’ 1. What transaction is recorded by the following journal entry?

Dr Legal fees $463 Cr Creditors control $463 A legal fees paid by cheque B an invoice issued to a lawyer C an invoice received from a lawyer D a credit note received from a lawyer 2. Which two of the following errors will be revealed by extracting a trial balance? i error of single entry ii error of commission iii error of omission iv error of transposition A i and iii B ii and iii C iii and iv D i and iv 3. Lance is entering an invoice in the payables day book. The invoice shows the following costs: Water treatment equipment $39,800 Delivery $ 1,100 Maintenance charge $ 3,980 Sales tax $ 7,854 Invoice total $52,734 What is the total value of capital expenditure on the invoice? A $39,800 B $40,900
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734 4. The invoice was for $780.170 D net profit will increase by $1. how will net profit be affected? A net profit will decrease by $200 B net profit will increase by $200 C net profit will decrease by $1. When Fred’s trial balance was extracted. The prepayment should have been $1.880 D $52. Joan’s draft year end accounts were prepared including a prepayment for rent of $970.170. When the error is corrected. Which of the following are reasons for maintaining control accounts? i to simplify the preparation of final accounts ii to check the accuracy of postings iii to confirm the value of sales iv to assist in locating errors in posting A i ii and iii B i iii and iv C i ii and iv D ii iii and iv 6.170 7. When posting an invoice for car repairs. $870 was entered on the correct side of the motor expenses account. the debit total was $400 less than the credit total. Which of the following errors could have caused this difference? A a sales invoice for $200 was debited to both the sales account and the receivables control account B a cheque received for $200 was entered twice in the nominal ledger C a cheque to a supplier for $200 was credited to both the expense account and the payables ledger control account D the purchases account had been undercast by $200 5. What correction should be made to the motor expenses account? A Debit $90 2 .C $44.

700 14. The balance on Amy’s receivables ledger control account in the nominal ledger is $100 more than the total of the listing of the balances on the personal accounts.900 Allowance required 1% of balances 20% of balances 75% of balances At 1 October 2002. Colin’s doubtful debts allowance was $18.650 D Credit $1.650 8.283 D a credit of $19.800 37. The aged debtors analysis at 30 September 2003 and the allowances required are: Age of debt 0 – 30 days 31 – 59 days 60 days and over $ 56.765 Which of the following should be reported in Colin’s income statement for the year to 30 September 2003? A a charge of $518 B a credit of $518 C a charge of $19. Colin allows for potential bad debts on the basis of the length of time the debt has been outstanding.B Credit $90 C Debit $1. How should the balance on the receivables ledger control account be reported in the final accounts? A as an expense B as a non-current asset C as a current asset D as a current liability 10.283 3 . Which one of the following treatments of an invoice for $100 could have caused this difference? A the invoice was entirely omitted B the invoice was entered on the credit side of the personal account C the invoice was not entered in the personal account D the invoice was entered twice in the personal account 9.

How will Alan’s profit and net assets be affected by including the prepayment and the accrual? Net Profit will: A increase by $1.900 13.900 increase by $1.000.000 as a current liability and $5.000 as a long term liability D $15.100 increase by $1. The customer is claiming damages of $3.500 and an accrual of $400.900 Net assets will: reduce by $1. but did not adjust these for a prepayment of $1. The first instalment is due for payment on 1 January 2005. How will the outstanding balance be reported in Bridget’s balance sheet at 30 November 2003? A $15.000 as a long term liability C $10.000 as a long term liability 14.100 reduce by $1. Margaret checked her bank statement to the bank account in her nominal ledger and found the following reasons for the difference: i some cheques have not been lodged by her suppliers ii the bank credited a personal lodgement to her business account in error iii the bank debited fees on her account Which of the differences require an entry in the bank account in the nominal ledger? Ai B ii C iii D ii and iii 12.100 B reduce by $1. Adele runs a restaurant. Alan prepared his draft year end accounts. she is likely to be required to pay $1. In August 2003 she received a letter from a lawyer representing a customer who claims he suffered food poisoning after eating in the restaurant. Bridget took out a business development loan for $15.900 C increase by $1.000. Her lawyer’s advice is that in the event of the case going to court. In September 2003.11.500. This is to be repaid in three equal instalments. Adele offered to pay $300.000 as a current liability and $10.100 D reduce by $1. 4 .000 as a current liability B $5.

900 2.700 Carriage inwards Postage Wages Advertising Other expenses 750 340 6.400 and her trial balance included the following balances: Debit $ Sales Purchases 29.710 5 . This includes $350 which Rena paid from her personal funds.000 1.500 16.635 C $2. There was an opening accrual of $329 on the car expenses account and the closing accrual was $464.500 Credit $ 45.The solicitor also advised that the court case is unlikely to take place before April 2004. What is Pamela’s gross profit? A $4. What amount should be provided for in respect of the claim in Adele’s final accounts for the year ended 30 September 2003? A $nil B $300 C $1.000 15. What is the charge for car expenses to be reported in Rena’s income statement for the year to 30 September 2003? A $2.985 The following information relates to questions 16 and 17: At 30 September 2003 Pamela’s inventory was valued at $6.850 for business car expenses. In the year to 30 September 2003 Rena paid a total of $2.500 D $3.715 D $2.000 Inventory at 1 October 2002 5.365 B $2.

600 and she introduced additional capital of $2. Jenna’s capital balance increased by $6.498 profit 6 .190 18.695 4.700 9.286 B $49.174 5.450 D $16.900.902 loss B $18. What is Jenna’s net profit or loss for the year? A $4. What sum will be reported as expenses in Pamela’s income statement? A $10.110 C $15.902 profit D $18.360 D $60.544 C $60.498 loss C $4.537 On reviewing his calculations.490 D $17. In the year her drawings totalled $14. In the last twelve months.B $15.890. Albert does not keep full accounting records.876 19. you note that he did not include $258 of unpaid invoices for expenses. His last accounts show that his capital balance was $42.798.860 7. At the year end he calculated that his assets and liabilities are: $ Non-current assets Inventory Receivables Payables Bank overdraft 41.200 17.740 C $11. What is the value of Albert’s closing capital? A $49.400 B $10.

what accounting entries should be made? Debit A B C D Sales account Trade receivables account Cash account Sales account 21. During the year to 31 October 2010 he recorded the following in relation to vehicle expenses: (i) invoices for $19. When goods are sold to a customer on credit.705 B $19. Which of these errors require an entry in the trade payables control account in the general ledger? A (i).195 D $18.630. What is the correct debit balance for vehicle expenses on his trial balance at 31 October 2010? A $20.375 C $20.20. Shari is carrying out the reconciliation between the balance on her trade payables control account in her general ledger and the list of balances in her purchase ledger. She has found the following errors: (i) a credit balance on a supplier’s account has been listed as a debit balance. and (iii) no record has been made of discount received from a supplier. He has extracted his trial balance before calculating his closing accruals and prepayments. Arif had a prepayment of $820 for vehicle expenses. (ii) and (iii) B (i) and (ii) only C (ii) and (iii) only D (i) and (iii) only 7 .555 22. (ii) an invoice was recorded in the purchase day book for the wrong value. and (ii) credit notes for $255. Credit Cash account Sales account Sales account Trade receivables account At 1 November 2009.

The last electricity invoice she received was for $858.350 C $25. and (ii) an invoice for $89 has been treated as a credit note. The credit entry was made correctly.644 by her customers.627.23. Jacinta assumes that electricity costs are constant throughout the year. At 31 October 2010.600. Which of the mistakes will be revealed by extracting a trial balance? A (i) only B (ii) only C both (i) and (ii) D neither (i) nor (ii) 26. The total of the list of balances is $25. Davindra is reconciling the total of the list of balances from her sales ledger to the balance on the trade receivables control account. How should receivables be reported in Jemma’s statement of financial position at 31 October 2010? 8 . Jemma was owed $138. This was for the three months to 31 August 2010. Vernon thinks the following mistakes may have been made in his accounting records: (i) a credit sale was recorded at the wrong value in the sales day book. She has discovered two errors: (i) a customer’s account has been overcast by $99. She has calculated that her receivables allowance should be $2. What is the corrected total of the list of balances from her sales ledger? A $25.706 24. How should the accrual for electricity be reported in Jacinta’s statement of financial position at 31 October 2010? A as a current liability of $286 B as a current liability of $572 C as a current asset of $286 D as a current asset of $572 25. Jacinta is preparing her statement of financial position at 31 October 2010.617 B $25. and (ii) a cheque issued to a credit supplier was debited to the purchases account.439 D $25.

600 27. What amount should be charged to Giordi’s income statement for receivables expense in the year to 30 November 2010 (calculated to the nearest $1)? A $1. Eoghan charges depreciation on machinery at a rate of 20% per annum on the reducing balance basis.A as a current asset of $136. It is not clear when the arbitration hearing will take place.670 D $233 28. At 1 December 2009 Giordi’s receivables allowance was $1. Under the terms of a warranty.488. As they cannot agree on the value of the compensation. The legal advisor has also estimated the likely final settlement.000 29.721 B $2.000 C overstated by $800 D overstated by $1. Bev has agreed to pay compensation to a customer.860. He has decided that balances totalling $2. The error has not yet been corrected. How should the claim be dealt with in Bev’s statement of financial position at 31 October 2010? A it can be ignored until the dispute has finally been settled B included in trade payables as a current liability C included in trade payables as a non-current liability 9 . At 30 November 2010 the balance on his trade receivables account was $231. they have agreed to submit the dispute to arbitration.000 as revenue expenditure.644 and a current asset of $2.204 C $2. but Bev’s legal advisor has told her that it will not be before January 2011.600 C as a current liability of $136. In the year to 30 November 2009 he had incorrectly treated capital expenditure of $5.044 B as a current asset of $138.437 are irrecoverable and should be written off and that his receivables allowance should be revised to 0·75% of the remaining balances. How is his profit for the year to 30 November 2010 affected by the error? A understated by $800 B understated by $1.044 D as a current liability of $138.644 and a current liability of $2.

Elma is preparing her extended trial balance.000 $26.000 $32. but has not yet calculated the profit or loss for the year.000 32. Veronica took out a bank loan for $60.000 of capital per month starting on 31 October 2010.000 Non-current liability $34.573 Credit $287.000 $26. Statement of financial position Credit Debit Debit No entry Jan has extended and totalled the entries on her extended trial balance.000 $36.000 $34.000 $24.654 Credit $263.363 What is Jan’s profit or loss for the year? A $23.D a provision should be recognised 30. Which column(s) should closing inventory be extended into? Income statement A B C D Debit Credit No entry Credit 33.499 profit B $23. and agreed to repay $2. Which of the following statements is correct? A financial statements of a sole trader must be prepared by a qualified accountant B financial statements do not provide useful information to lenders C all the information needs of the owner are met by the financial statements D financial statements are intended to meet the needs of a number of user groups 31. but actually made the first repayment on 12 November 2010. The total of each column is: Income statement Debit $275. How should the outstanding capital on the loan be reported on her statement of financial position at 31 October 2010? Current liability A B C D $24.864 Statement of financial position Debit $275.499 loss 10 .000 on 30 September 2010.

As defined in the IASB’s ‘Framework for the preparation and presentation of financial statements’.474 C $64. At 1 November 2009 the value of Claudia’s net assets was $127. He then found that he had treated an accrual of $189 as a prepayment.825 B $29. His opening inventory value was $5.529. Floyd calculated that his profit for the year was $65.000 of capital and her drawings were $17. what is his revised profit for the year? A $65. all of which were made at a mark-up of 20%.700 C $111.975 37.960 11 .125 C $11.600. When he corrects the error.150.300 B $116. which qualitative characteristic of financial reporting requires accounting information to be ‘free from material error and bias’? A comparability B understandability C relevance D reliability 36. What was the value of Vlad’s purchases in the year to 31 October 2010? A $120.907 D $65. During the year to 31 October 2010 Claudia introduced $35.975 D $46.554.200. What was Claudia’s profit for the year to 31 October 2010? A $64.790 profit D $11.400 and his closing inventory value was $3.285. At 31 October 2010 the value was $174.096 B $65. Vlad’s sales were $142.663 35.790 loss 34. In the year to 31 October 2010.C $11.

Which of the above errors require a correcting entry in the general ledger? 12 .700 was posted to the control account.D $118. After Toni prepared her draft accounts she discovered that she had incorrectly classified an item of revenue expenditure as capital expenditure. Which of the following errors should be detected by preparing a trial balance? A a credit entry made on the debit side of the correct account B a credit entry made on the credit side of the wrong account C a transaction for which no entries were made D a transaction entered in the general ledger twice 40. (ii) the total of the purchase day book was understated by $900. but only $1. 41.714 was correctly recorded on the supplier’s account. how will her net profit and capital be affected? Net profit A B C D increased reduced increased reduced Capital reduced increased increased reduced The following information relates to questions 41 and 42: While carrying out the reconciliation of the balance on the payables control account in the general ledger with the list of balances from the payables ledger. (iv) no entries were made to record an arrangement to offset a balance of $620 against a balance in the receivables ledger. A trial balance is made up of a list of debit balances and credit balances.500 38. Celine discovered the following errors: (i) a payment of $1. Which of the following statements is correct? A every debit balance represents an expense B assets are represented by debit balances C liabilities are represented by debit balances D income is included in the list of debit balances 39. (iii) a supplier’s credit note was incorrectly recorded in the daybook as an invoice.700 in full settlement of a balance of $1. When the error is corrected.

Into which columns should the entries for closing inventory be extended? A Income statement debit and income statement credit 13 . How should the movement in the receivables allowance be recorded in Minnie’s income statement? A a charge of $890 B a credit of $890 C a charge of $120 D a credit of $120 45. (ii). her receivables allowance was $770. What is the revised balance on the suspense account when Nicola corrects this error? A nil B $2.000 credit 44. At 30 April 2006. (iii) and (iv) 43. She opened a suspense account to make the two totals equal. Which of the above errors should be dealt with as an adjustment to the list of balances from the suppliers ledger? A (i) and (ii) only B (ii) and (iii) only C (iii) and (iv) only D (i).500 was entered as $500 on the credit side of the property repairs account. (iii) and (iv) 42. She then discovered that an invoice received for property repairs for $1.000.A (i) and (ii) only B (ii) and (iii) only C (iii) and (iv) only D (i). (ii). Minnie calculated that her receivables allowance at 30 April 2007 should be $890.000 debit C $2.000 credit D $3. the total of the debit balances exceeded the total of the credit balances by $1. When Nicola extracted her trial balance. Chris is completing his extended trial balance. The value of closing inventory has been recorded in the adjustment columns.

963. The value of her inventory at 1 May 2007 was $12. What is the value of Sarah’s inventory at 31 May 2007? A $6. What is Luther’s opening balance for wages at 1 May 2007? A $1.000 D $19. his drawings were $25. Sarah’s purchases were $126. Luther also had to make an accrual of $1.578.268 credit C $87. During the year to 31 May 2007.B Balance sheet debit and balance sheet credit C Income statement debit and balance sheet credit D Income statement credit and balance sheet debit 46. Sarah’s gross profit is 20% of sales.963 credit 47.864. What was Dave’s profit for the year to 31 May 2007? A $8.286 B $17. During May 2007.050 D $70.478 C $34. and her sales were $150. When he closed his ledger accounts at 30 April 2007 Luther’s wages expense account had a debit balance of $87. At 31 May 2007 his capital balance was $104.814 49.268 debit B $1.268 for outstanding wages.000 B $11.500. Carol has prepared the following reconciliation of the balance on the payables ledger control account in her general ledger with the list of balances on the payables ledger: $ Total of list of balances 86. At 31 May 2006 Dave’s capital balance was $96.000 C $14.579 14 .500.000 48.000.764.963 debit D $87.

964 50.579 B a current liability of $86.579 C a current asset of $87.964 –––––––––––––– What should be reported in Carol’s balance sheet for trade payables? A a current asset of $86. George is preparing the general ledger journal entry to write off an irrecoverable debt. In which general ledger account should the credit entry be made? A Sales account B Bank account C Receivables account D Receivables allowance account 15 .385 ––––––– Balance on control account 87.Balance omitted from list 1.964 D a current liability of $87. He knows that the debit entry should be made in the receivables expense account.