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Exam details (completed by BPP Professional Education)

ACCA PAPER F3

RESULTS

Financial Accounting (International Stream)

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Score

Course Examination 2

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Exam Identification Code

AC27 F3(2) (INT)

For office use only: Production code: ACF3CE07(INT)

ACCA Fundamentals Level


Paper F3
Financial Accounting
(International Stream)
Course Examination 2
Question Paper
Time allowed

2 hours

ALL FIFTY questions are compulsory and MUST be attempted

Instructions:
Please attempt this exam under test conditions and attach the frontsheet complete with your name and
address to your script. The completed package should be sent to BPP Professional Education.
Take a few moments to review the notes on the inside of this page titled, Get into good exam habits now!
before attempting this exam.

DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER
EXAMINATION CONDITIONS

Get into good exam habits now!


Take a moment to focus on the right approach for this exam.

Effective exam technique


The following steps are recommended for answering multiple choice and objective test questions.

Step 1

Note down how long you should allocate to each question. For this paper you will be
answering 50 questions in 120 minutes, so you will be spending on average 2.5 minutes on
each 2 mark question and 1 minute on each 1 mark question. Remember however that you will
not be expected to spend an equal amount of time on each of them and that some can be
answered instantly but others will take time to work out.

Step 2

Attempt each question. Read the question thoroughly.

Step 3

To answer a multiple choice question read the four options and see if one matches your own
answer. Be careful with numerical questions, as the distracters are designed to match answers
that incorporate common errors.

Step 4

If you are unsure of your answer.

Re-read the question to ensure that you understand it and are answering the
requirement

Eliminate any obviously wrong answers

Consider which of the remaining answers is the most likely to be correct and select
the option

Step 5

If you are still unsure, continue to the next question. Likewise if you are nowhere near
working out which option is correct after a couple of minutes, leave the question and come
back to it later.

Step 6

Revisit questions you are uncertain about. When you come back to a question after a break
you often find you are able to answer it correctly straight away. If you are still unsure have a
guess. You are not penalised for incorrect answers, so never leave a question unanswered!

ALL FIFTY questions are compulsory and MUST be


attempted
Please write your answer on lined paper with one answer per line
1

Which of the following is not an acceptable basis for inventory valuation under IAS 2?
A
B
C
D

Last in first out


Standard cost
Average cost
First in first out

(2 marks)

Which of the following material items must be disclosed on the face of the income statement?
(i)
(ii)
(iii)

Profit on sale of an operation


Write off of an irrecoverable bad debt arising from the liquidation of an overseas customer
Costs of a fundamental reorganisation

A
B
C
D

(i) only
(i) and (iii)
(i) and (ii)
(ii) and (iii)

(2 marks)

The following are all current assets: trade receivables, inventory, prepaid expenses and bank deposit
account.
If they are placed in order of decreasing liquidity, their order will be:
A
B
C
D

(2 marks)

A local taxes (rates) prepayment of $475 was treated as an accrual in preparing a trader's income
statement. As a result, his profit was
A
B
C
D

Bank deposit account, prepaid expenses, trade receivables, inventory


Trade receivables, bank deposit account, prepaid expenses, inventory
Inventory, trade receivables, prepaid expenses, bank deposit account
Prepaid expenses, bank deposit account, trade receivables, inventory

Understated by $950
Overstated by $950
Understated by $475
Overstated by $475

(2 marks)

A company has prepared draft accounts for the year ended 31 March 20X9 incorporating the
managing director's bonus of 4% of net profit.
It has now been discovered that the draft accounts omitted trade discounts allowed to customers of
$100, cash discounts allowed from suppliers of $400 and a rent prepayment of $200.
What is the adjustment required to the income statement in respect of these errors?
A
B
C
D

$480 Cr
$680 Cr
$500 Cr
$630 Cr

(2 marks)

IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires that material contingent
assets and liabilities, existing at the balance sheet date, should be treated as follows:
A

Contingent assets and contingent liabilities must always be disclosed in the financial
statements

Contingent assets must always be accrued and contingent liabilities must always be disclosed
in the financial statements

Contingent liabilities must always be disclosed (unless remote) and contingent assets must
sometimes be disclosed in the financial statements

Contingent liabilities must always be either accrued or disclosed and contingent assets must
always be disclosed in the financial statements
(2 marks)

In a company's cash flow statement, a revaluation of non-current assets during the year will be
A
B
C
D

(2 marks)

A trader has budgeted sales for the coming year of $275,000. He achieves a constant mark-up of 25%
on cost. He plans to reduce his inventory level by $14,000 over the year. His purchases for the year
will be
A
B
C
D

Shown as an adjustment to operating profit


Entirely excluded
Disclosed under capital expenditure
Shown as a cash inflow

$211,000
$239,000
$206,000
$254,000

(2 marks)

Disaster's trial balance shows a trade receivables account balance of $50,000. However, no
adjustment has been made for the following items.
-

$3,250 from J Crisis & Sons who have gone into liquidation, the amount is considered
irrecoverable

debts of $500 + $1,500 which are to be specifically allowed for

cash received from P Chaos of $2,500 which had previously been written off

cash received from T Ruin of $1,700 which had previously been allowed for

What is the revised trade receivables account balance?


A
B
C
D
10

$52,200
$50,200
$49,250
$45,050

(2 marks)

Harry has been unable to calculate his business' profit or loss for the year ended 31 December 20X8
as fire destroyed most of his accounting records. He has, however, been able to provide the following
information.
(1)

Net assets at 31 December 20X7 were $23,000 and $32,500 at 31 December 20X8

(2)

He introduced capital during the year of $4,000 cash

(3)

He took cash drawings of $2,500 and goods with a selling price of $800, the cost of the goods
was $750.

What was Harry's profit or loss for the year ended 31 December 20X8?
A
B
C
D
11

A non-current asset costing $500 had been credited to the purchases account
A rent payment of $500 had been debited to a non-current asset account
A $1,000 cheque received from a customer, F Bloggs, had been credited to J Bloggs account
in the payables ledger
A $1,000 cheque paid to a supplier had been credited to the suppliers account in the payables
ledger
(2 marks)

Martello Co has proposed dividends of $10,000 after the balance sheet date. What is the correct
treatment according to IAS 10?
A
B
C

13

(2 marks)

A trial balance fails to agree by $1,000. which one of the following errors could by itself account for
the discrepancy?
A
B
C

12

$8,750 profit
$1,750 loss
$9,800 profit
$2,750 loss

Adjust for the dividends


Disclose in a note to the financial statements
Do nothing

(1 mark)

Extracts from a company's balance sheets show the following non-current assets
30 June

Intangible assets
Development expenditure
Property, plant and equipment
Freehold
Plant and machinery
Fixtures and fittings

20X6
$

20X7
$

60,000

95,000

750,000
320,000
105,000

1,230,000
370,000
90,000

The expenditure for the year on development projects had been $55,000. The building element of the
freehold was depreciated by $6,000 and then revalued on 30 June 20X7 by $95,000. Plant and
machinery with a NBV of $14,000 was disposed of in November 20X6 for $8,000. Depreciation on the
other plant and machinery for the year amounted to $37,000. Depreciation of $35,000 has been
charged on fixtures and fittings.
What is the total figure included in the reconciliation of profit before tax to cash flows from operating
activities?
A
B
C
D

$84,000
$90,000
$92,000
$104,000

(2 marks)

14

Blacksmith disposes of assets with a net book value of $21,000 for $30,000 in March 20X4. In the
cash flow statement for that year this will be reflected as
Profit before tax reconciliation
A
$(9,000)
B
$9,000
C
$(21,000)
D
$21,000

15

Cash inflow investing activities


$30,000
$30,000
$30,000
$30,000

(2 marks)

D, E and F are in partnership, sharing profits in the ratio 5:3:2 respectively, after charging salaries for
E and F of $24,000 each per year.
On 1 July 2000 they agreed to change the profit-sharing ratio 3:1:1 and to increase E's salary to
$36,000 per year, F's salary continuing unchanged.
For the year ended 31 December 2000 the partnership profit amounted to $480,000.
Which of the following correctly states the partners' total profit shares for the year?
D
E
F
A
$234,000
$136,800
$109,200
B
$213,000
$157,800
$109,200
C
$186,000
$171,600
$122,400
D
$237,600
$132,000
$110,400
(2 marks)

16

Pauline's hairdressing business has opening net assets at 1.1.20X1 of $21,000. Her closing net assets
at 31.12.20X1 are $36,000. During the year Pauline paid herself wages of $25,000 and paid into the
business $12,000 left to her in her granny's will. How much profit did she make in 20X1?
A
B
C
D

17

(2 marks)

The IASB has the power to enforce compliance with IASs/IFRSs. Is this statement?
A
B

18

$27,000
$33,000
$28,000
$14,000

True
False

(1 mark)

The following information is available for the year ended 31 December 20X1 for Ski, a well-run
company:
$
Opening cash
1,000
Closing cash
2,000
Opening balance on the trade payables control account
8,000
Closing balance on the trade payables control account
10,000
Opening balance on the trade receivables control account
12,000
Closing balance on the trade receivables control account
14,000
Cash paid to trade accounts payable in the period
9,000
Opening inventory
6,000
Closing inventory
7,000
Mark-up on cost - 10%

Assuming the information above is complete, what was the sales for the period?
A
B
C
D
19

23

(2 marks)

$166,000
$161,000
$171,000
$168,500

(2 marks)

The equity capital of a limited liability company comprises


A
B
C
D

22

Cash received from credit customers treated as a cash sale


A supplier's invoice for $32 recorded as $23 in the purchases account
Payments to suppliers of $647 recorded as $674 in the payables ledger
One page omitted from the purchase day book

A company's issued share capital consists of $100,000 in 5% $1 preference shares and $50,000 in
50c ordinary shares. Its net profit for the year was $176,000 and the directors paid an ordinary
dividend for the year of 10c per share. What is the company's retained profit for the year?
A
B
C
D

21

(2 marks)

Which of the following errors could result in a suspense account being required to 'balance' the trial
balance (list of account balances)?
A
B
C
D

20

$12,100
$11,000
$10,000
$6,600

Ordinary share capital, preference share capital and retained earnings


Ordinary share capital
Ordinary share capital and retained earnings
Preference share capital

(2 marks)

Which of the following would be a non-adjusting event after the balance sheet date when preparing
financial statements at 30 September 20X0 according to IAS 10, Events after the balance sheet date?
A

An insurance claim is agreed on 10 October 20X0 for compensation for a fire in September
which destroyed part of the warehouse inventory

A decision is made on 9 October 20X0 to sell the group's major trading activities in South
Africa

Inventory valued at $30,000 is judged no longer saleable

Notification received on 11 October 20X0 that a customer owing $50,000 as at 30 September


20X0 has gone into liquidation
(2 marks)

Arthur sets up his demolition business from scratch on 1 January 20X1. During the year he:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)

Buys a warehouse
Pays legal expenses on the purchase
Buys three wrecking machines
Rents office premises
Builds an extension to the warehouse
Pays wages
Repairs the warehouse roof
Writes off a damaged machine

Which items represent capital expenditure?


A
B
C
D
24

(a), (b), (c) and (e)


(a), (b), (c), (e), (g) and (h)
(a) and (c)
All of them

(2 marks)

Bill, a sole trader, set up business on 1 October 20X0 with $30,000 of his own money. During the year
to 30 September 20X1 he won $50,000 on the lottery and paid $30,000 of this into his business. He
took cash drawings of $5,000 during the year and at 30 September 20X1 the net assets of the
business totalled $59,000.
What was the profit or loss of the business for the year ended 30 September 20X1?
A
B
C
D

25

$4,000 profit
$6,000 profit
$16,000 loss
$6,000 loss

(2 marks)

For Morgan the prime cost of production of each unit of inventory is $46 (including carriage inwards
of $11 and import duties of $1 on the raw materials element). Production overheads amount to $15
per unit. Currently the goods can only be sold if they are modified at a cost of $17 per unit. The selling
price of each modified unit is $80 and selling costs are estimated at 10% of selling price.
At what value should each unmodified unit of inventory be included in the balance sheet?
A
B
C
D

26

Decrease by the nominal value of the shares


Increase by the nominal value of the shares
Increase by the amount received for the shares
Remain unchanged

(2 marks)

According to IAS 2, inventories should be valued at the lower of cost and


A
B

28

(2 marks)

If a shareholder in a limited liability company sells his shares to another private investor, for less than
he paid for them, the share capital of the company will
A
B
C
D

27

$48
$55
$64
$61

Net realisable value


Net book value

(1 mark)

A sole trader who runs a newsagent's business makes up his accounts each year to 31 May. His rent
is payable quarterly in advance on 1 January, 1 April, 1 July and 1 October. Local taxes (rates) are
paid each year in two equal instalments on 1 April and 1 October.
His annual rental for the calendar years 20X6 and 20X7 was $4,800 and $5,400 respectively but on 1
January 20X8 this was increased to $6,600 per annum. Local taxes for the last three years have been
as follows:
$
Year commencing 1 April 20X6
3,600
Year commencing 1 April 20X7
3,900
Year commencing 1 April 20X8
4,500

In preparing his accounts for the year ended 31 May 20X8, what would be the charge to the income
statement from his rent and local taxes account?
A
B
C
D
29

(2 marks)

A van for sale on a motor dealer's forecourt is shown as a non-current asset in the motor dealer's
balance sheet. Is this statement?
A
B

30

$10,000
$9,900
$5,000
$12,250

True
False

(1 mark)

Extracts from the financial statements of Hamilton are set out below:
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 20X1

$'000

Revenue
Cost of sales
Gross profit
Profit on sale of non-current assets
Expenses
Depreciation

$'000
300
(150)
150
75
225

15
30
(45)
180

Net profit
Balances at 31 December
20X0
$'000
70

Net current assets

20X1
$'000
50

The figure in the cash flow statement of Hamilton for the year ended 31 December 20X1 in respect of
net cash flow from operating activities would be how much?
A
B
C
D
31

(2 marks)

There is $100 in the cash till at the year end for Demon, but the accountant had discovered that some
cash has been stolen. At the beginning of the year there was $50 in the cash till and receivables were
$2,000. Total sales for the year were $230,000. Receivables at the end of the year were $3,000.
Cheques banked from credit sales were $155,000, and cash sales of $50,000 have been banked.
How much cash was stolen during the year?
A
B

32

$180,000
$150,000
$165,000
$155,000

$23,950
$24,050

(1 mark)

On 1 January 20X0 Goblin bought a machine for $63,000. It was estimated that the machine's useful
life would be 7 years and its residual value $7,000. Two years later the useful life was revised to four
remaining years with a residual value of $7,000. At 31 December 20X4 the machine was sold for
$30,000.

What is the profit or loss on disposal?


A
B
C
D
33

$3,000 loss
$7,000 profit
$3,000 profit
$7,000 loss

(2 marks)

An extract from a business' income statement is:

Sales
Opening inventory
Purchases

$
115,200

21,000
80,000
101,000
5,000

Closing inventory

96,000
19,200
What is the mark up achieved?
A
B
34

20%
16.6%

(1 mark)

A company's share capital consists of 20,000 25c ordinary shares all of which were issued at a
premium of 20%. The market value of the shares is currently 70c each.
What would the balance on ordinary share capital be?
A
B
C

35

$14,000
$6,000
$5,000

(1 mark)

On 30 April 20X1 part of the inventory of Neutron, a limited liability company, was destroyed by fire.
The following information is available.

Inventory at 1 April 20X1 $99,600


Purchases for April 20X1 $177,200
Sales for April 20X1 $260,000
Inventory at 30 April 20X1 undamaged items $64,000
Standard gross profit percentage on sales 30%

Based on this information, the cost of the inventory destroyed is how much?
A
B
C
D
36

$35,000
$30,600
$38,750
$30,800

(2 marks)

The current liabilities of A includes the following:


20X8
$25,000

Taxation payable

20X7
$20,000

The tax charge in the income statement for the year ended 20X8 is $27,000.
What figure would the cash flow statement for the year ended 20X8 show for taxation paid?
A
B

$32,000
$22,000

(1 mark)

10

37

A car has a list price of $23,500 but the garage gives the company a trade discount of $2,350. In
settlement the garage accepts a cheque for $18,000, together with an old company car on which it
grants a trade-in allowance of $3,150. The amount to be capitalised by the company is how much?
A
B

38

(1 mark)

Adam, a sole trader has net assets at 31 December 20X1 of $65,250. During the year he made a loss
of $3,000, he took inventory for his own use of $850 and removed cash of $2,250. If he introduced
capital of $5,000 during the year, what was the capital as at 1 January 20X1?
A
B
C
D

39

$21,150
$23,500

$62,250
$71,350
$66,350
$65,250

(2 marks)

A company purchased a car for $18,000 on 1 January 20X0.


The car was traded in on 1 January 20X2. The new car has a list price of $30,000 and the garage
offered a part-exchange allowance of $5,000.
The company provides depreciation on cars using the reducing balance method at a rate of 25%.
What profit or loss on disposal will be recognised in the income statement for the year ended 31
December 20X2?
A
B
C
D

40

$5,125 loss
$5,125 profit
$7,250 profit
$7,250 loss

(2 marks)

The following occurrence might explain the existence of a credit balance on an individual customers
account:
The bookkeeper posted a total from the returns inwards book to the receivables control account twice
by mistake.
A
B

41

(1 mark)

The NBV of B's property, plant and equipment is $51,000 at 1 January 20X5 and $100,000 at 31
December 20X5. A motor vehicle costing $20,000 was purchased during the year and land was
revalued by $43,000. What is the depreciation expense for the year?
A
B
C
D

42

True
False

$26,000
$7,000
$13,000
$14,000

(2 marks)

Which of the following errors would result in a trial balance imbalance?


(i)
(ii)
(iii)
A
B
C
D

The discounts allowed balance was listed as a credit on the trial balance?
Drawings for the last month of the year had been posted to the sundry expenses account
A contra settlement had been recorded only in the receivables and payables ledgers
(iii) only
(i) only
(i) and (ii)
(i), (ii) and (iii)

(2 marks)

11

43

When no partnership agreement exists which of the following applies?


A
B
C
D

44

Profits are shared equally


Interest on capital is calculated at 5%
Interest on loans is calculated at 10%
None of the above

(2 marks)

A company has prepared draft accounts for the year ended 31 March 20X9 incorporating the
managing director's bonus of 5% of net profit.
It has now been discovered that the draft accounts omitted trade discounts allowed to customers of
$100, cash discounts allowed from suppliers of $600 and a telephone accrual of $200.
What is the adjustment required to income statement in respect of these errors?
A
B
C
D

45

(2 marks)

Which of the following items should be treated as capital expenditure in the accounts of a sole trader?
A
B
C
D

46

$570 Cr
$665 Cr
$285 Cr
$350 Cr

$500 drawings made by the proprietor to buy himself a colour television


$150 paid to a painter for decorating his office
$2,000 on purchasing a micro-computer for resale
$200 spent on purchasing a new typewriter to replace his secretary's old one

(2 marks)

The following information relates to a company's year ended 31 December 20X5.


Opening balance on receivables control account
Closing balance on receivables control account
Irrecoverable debts
Sales (including sales tax at 17 %)

$21,000
$28,000
$17,000
$103,500

The amount of cash received from customers was:


A
B
C
D
47

$113,500
$63,975
$79,500
$66,000

(2 marks)

A sales tax registered trader has recorded the following transactions during the accounting period.
Standard rated sales
Purchases

$
200,000
150,000

Included in purchases are the purchases of a motor car for $20,000, a photocopier for $8,000 and
entertaining expenses of $5,000. Sales tax is not recoverable on the motor car or entertainment
expenses.
All figures are given inclusive of sales tax at 17.5%.
How much input tax can be reclaimed by the trader?
A
B
C
D

$22,340
$21,875
$18,617
$23,975

(2 marks)

12

48

The trial balance of Z failed to agree, the totals being:

debit $836,200
credit $819,700

A suspense account was opened for the amount of the difference and the following errors were found
and corrected:
1

The totals of the cash discount columns in the cash book had not been posted to the discount
accounts. The figures were discount allowed $3,900 and discount received $5,100.

A cheque for $19,000 received from a customer was correctly entered in the cash book but
was posted to the customer's account as $9,100.

What will be the remaining balance on the suspense be after the correction of these errors?
A
B
C
D
49

(2 marks)

The IASB's Framework gives five qualitative characteristics which make financial information reliable.
These five characteristics are:
A
B
C
D

50

$25,300 credit
$7,700 credit
$27,700 debit
$5,400 credit

Prudence, consistency, understandability, faithful representation, substance over form


Accruals basis, going concern concept, consistency, prudence, true and fair view
Faithful representation, neutrality, substance over form, completeness, consistency
Substance over form, faithful representation, neutrality, prudence, completeness
(2 marks)

With respect to sales tax which of the following statements is correct?


A

Sales tax is charged on purchases and sales after trade discounts and before
discounts.

Exempt and zero rated supplies have the same tax effect.

Sales tax is not reclaimable on capital expenditure.

Sales tax is charged on purchases and sales after trade discounts and after settlement
discounts.
(2 marks)

End of Question Paper

13

settlement

14

Student self-assessment
Having completed this exam, take a few minutes to consider what you did well and what you found difficult.
Use this as a basis to focus your future study on effectively improving your performance.

Common problems

Future emphasis if you answer Yes

Timing and planning


Did you finish too early?

Y/N

Go back and check your answers, especially those you were


unsure of.

Did you overrun?

Y/N

Focus on allocating your time better.


Practise questions under strict timed conditions.
If you get behind move on.

Interpreting the questions?

Y/N

Learn subject jargon (look at key terms in your Study Text).


Read questions carefully.
Practise as many questions as possible.

Understanding the subject?

Y/N

Review your notes/text.


Work through easier examples first.
Classroom students please contact your tutor for further help.
Home Study students please contact ACCA queries for further
help (accaqueries@bpp.com).

Remembering the notes/text?

Y/N

Quiz yourself constantly as you study. You need to develop


your memory as well as your understanding of a subject.

Content
Did you struggle with:

Note here any thoughts on your performance which could help you on the big day.

15

16

ACCA Fundamentals Level


Paper F3
Financial Accounting
(International Stream)
Course Examination 2

Suggested solutions and guidance

ACF3CE07(INT)

AC27 F3(2) (INT)

Guidance on improving your exam performance


To help improve your performance you should focus on these key areas.
1

Terminology
This paper tests your understanding of a large number of key terms and definitions. Learning as many
of these as you can will help save you time in the exam which you can use to answer questions that
require more thought. Your Study Text provides you with assistance by highlighting these terms and
definitions.

Question spotting
Avoid the temptation to question spot or to assume certain areas of the syllabus will be examined in a
particular way. Ensure you are able to answer questions across the syllabus in a number of question
styles as this will maximise the number of questions that you will be able to attempt successfully.

What went wrong?


OK, you're not going to get 100% correct, but pay attention when you consistently get certain areas of
the syllabus wrong. This is your cue to revise these areas fully, learn from your mistakes, AND NEVER
REPEAT THEM!

Answers
1

IAS 2 does not permit the use of LIFO.

A bank deposit account is already cash, but inventory must be sold and receivables pay their
balance due before cash is received.

It was debited instead of credited, so the effect is doubled.

A
$

Profit adjustment
Discounts allowed
Discounts from suppliers
Rent prepayment
Increase in profit
$500 @ 4%

(100)
400
200
500
(20)
480 Cr

Contingent liabilities must be disclosed


Contingent assets are only disclosed if they are probable.

Revaluations do not involve cash movements.


$
Cost of sales = 275,000

100

220,000

125

Less reduction in inventory


9

(14,000)
206,000

$
50,000
(3,250)
(1,700)
45,050

Balance per trial balance


Less irrecoverable debt written off
Less cash received from T Ruin

Note: P. Chaos will either be adjusted to irrecoverable debts or (if over one year ago) as
income received from irrecoverable debts in the income statement
10

Using the accounting equation

$
32,500

Net assets at 31.12.X8

$
Opening capital
(= opening net assets)
Capital introduced
Profit (balancing figure)
Drawings (2,500 + 750)

23,000
4,000
8,750
(3,250)
32,500

Goods drawn by proprietor are taken at cost

11

12

13

In Options B and C the double entry has been preserved, even though not in the correct
accounts. In Option D the trial balance discrepancy would be $2,000 ($1,000 credited instead
of $1,000 debited). In Option A the $500 is credited to purchase instead of being debited to
non-current assets, and the discrepancy is therefore 2 x $500 = $1,000

b/f
Addn

b/f

Addn

INTANGIBLE
60
Amort
55
c/f
115
PLANT & MACHINERY
320
Disposals
Depn
101
c/f
421

FREEHOLD
750
95
Depn
391
c/f
1,236

b/f
Reval
Addn

20
95
115

1,230
1,236

FIXTURES AND FITTINGS


105
Depn

b/f
14
37
370
21

Addn

20

c/f

35
90

125

125

Items which would be shown in the reconciliation


$'000
98
6
104

Depreciation/amortisation (20 + 6 + 37 + 35)


Loss on disposal of plant and machinery (8 - 14)
14

15

The $9,000 profit on disposal will be deducted from profit before tax to arrive at net cash flow
from operating activities.
D
$
Salaries
PSR to 1.7.20X0 (240,000 24,000) 5:3:2
PSR to 31.12.20X0 (240,000 30,000) 3:1:1

16

36,000 21,000 12,000 + 25,000

17

The IASB has no power of enforcement.

108,000
126,000
234,000

E
$
30,000
64,800
42,000
136,800

F
$
24,000
43,200
42,000
109,200

18

Purchases
Cash paid
Trade payables b/f
Trade payables c/f

$
9,000
(8,000)
10,000
11,000

Cost of sales
Opening inventory
Purchases

6,000
11,000
17,000
(7,000)
10,000

Closing inventory

Sales 110 10,000

11,000

100

19

C will only affect the payables ledger and A and D will not cause an imbalance.

20

176,000 (100,000 5%) (50,000 2 10c)

21

Preference shares are not equity capital.

22

A, C and D are adjusting events.


B is a post year-end decision not clarifying the balance sheet position and is therefore nonadjusting.

23

24

Legal expenses on the purchase can be capitalised


$
30,000
30,000
(5,000)
4,000
59,000

Net assets 1.10.X0


Capital introduced
Drawings
profit

25

$
Cost
Prime cost
Production overheads

46
15
61

Net realisable value


Sales price
Less modification costs
Less selling costs (80 x 10%)

$
80
(17)
(8)
55

Lower $55.
26

27

28

$4,000 local taxes + $5,900 rent = $9,900.


Rent
1 June 20X7 to 31 December 20X7 = 7/12 $5,400
1 January 20X8 to 31 May 20X8 = 5/12 $6,600
Local taxes
1 June 20X7 to 31 March 20X8 = 10/12 $3,900
1 April 20X8 to 31 May 20X8 = 2/12 $4,500

29

30

$
3,250
750
4,000

The van would be shown under inventory as the dealer trades in motor vehicles.
$'000
180
(75)
30
(20)
155

PBT
Profit on sale of non-current asset
Depreciation
Movement in net current assets
31

$
3,150
2,750
5,900

A
$
B/d
Cash sales

CASH

50
74,000

Bank
Theft
C/d

74,050
RECEIVABLES
$
2,000
Bank
C/d
156,000
158,000

B/d
Credit sales ()
Total sales
Credit sales
Cash sales

230,000
(156,000)
74,000

$
50,000
23,950
100
74,050

$
155,000
3,000
158,000

32

1.1.20X0 cost $63,000


Depreciation charge =

$63,000 $7,000
7

= 8,000

NBV after two years 31.12.X1 = $47,000


Useful life revised to four years

Depreciation =

$47,000 $7,000
4

= $10,000

NBV 31.12.X3 = $47,000 $20,000 = $27,000


Proceeds
Less NBV
Profit
33

19,200
100 = 20%
96,000

34

20,000 25c = $5,000

35

$
78,000

Theoretical gross profit 30% $260,000


Actual gross profit:
$260,000 $99,600 $177,200 + $64,000
Shortfall missing inventory
36

47,200
30,800

B
TAXATION PAYABLE
$
22,000
Balance b/d
25,000
Income statement
47,000

tax paid
Balance c/d
37

$
18,000
3,150
21,150

Price paid
Trade in allowance
38

$
30,000
(27,000)
3,000

Net assets = capital

$'000
66,350
5,000
71,350
(2,250)
(850)
(3,000)
65,250

Capital at 1.1.X1 (balancing figure)


Additional capital
Drawing

(cash)
(inventory)

Loss
Net assets @ 31.12.X1

$
20,000
27,000
47,000

39

$
18,000
(4,500)
13,500
(3,375)
10,125
5,000
5,125

Cost
20X0 Depreciation 18,000 25%
20X1 Depreciation 13,500 25%
NBV @ date of disposal
Proceeds
Loss on disposal (5,000 10,125)
40

41

The error has been made in the control account. This has no effect on the individual customer
account in the receivables ledger.

Balance b/d
Additions
Revaluation
42

43

44

PROPERTY, PLANT AND EQUIPMENT


$
51,000
Depreciation expense
20,000
Bal c/d
43,000
114,000

46

114,000

Unlike the UK Partnership Act, IFRSs do not set down any rules for shares in partnership
profits.
Profit adjustment
$
(100)
600
(200)
300
(15)
285 Cr

Discounts allowed
Discounts from suppliers
Telephone accrual
Increase in profit
Adjustment to bonus $300 @ 5%
45

$
14,000
100,000

Opening balance + sales (including sales tax) cash received irrecoverable debts = closing
balance
21,000 + 103,500 cash received 17,000 = 28,000
107,500 cash received = 28,000
cash received = 79,500

47

$
Input tax
Purchases
Less: motor car
entertaining

Tax included @ 17.5% = $125,000


48

150,000
(20,000)
(5,000)
125,000
17.5
117.5

= $18,617

$
16,500
3,900
(5,100)
(9,900)
5,400

Suspense account
Discount allowed
Discount received
Transposition of cash received
49

50

10