F3/FFA Financial Accounting

Mock Exam with Answer

SAPP Academy
F fb.com/sapp.edu.vn
T 096 972 94 63
W sapp.edu.vn
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

F3/FFA Financial Accounting Mock Exam

This paper is divided into two sections:

Section A - ALL 35 questions are compulsory and MUST be attempted. Each question carries 2 marks

Section B - BOTH questions are compulsory and MUST be attempted. Each question carries 15 marks

You have two hours in which to complete the exam

sapp.edu.vn | 2
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

SECTION A – Thirty-five questions, both of which MUST be attempted

1. Which of the following are differences between sole traders and limited liability companies
(1) A sole traders’ financial statements are private; a company’s financial statement are sent to
shareholders and are publicly filed
(2) Only companies have capital invested into the business
(3) A sole trader is fully and personally liable for any losses that the company might make

A- 2 and 3 only
B- 1 and 3 only
C- 1 and 2 only
D- 1,2,3

2. The purpose of a statement of financial position is to show

A- The assets of the business and the claims against those assets
B- A clear and definite estimate of what a business is really worth
C- The amount the business could be sold for in liquidation
D- The amount the business could be sold for as a going concern

3. The separate entity concept requires that a business is treated as being separate from its
owners
Is this statement true or false?
A- True
B- False

4. A company receives rent from a large number of properties. The total received in the year
ended 30 April 2008 was $1,154,880
The following were the amounts of rent in advance and in arrears at 30 April 2007 and 2008:
30 April 2007 30 April 2008
Rent received in advance $68,880 $74,880
Rent in arrears (all subsequently received) $50,880 $44,160

What amount of rental income should appear in the company’s Statement of Profit or Loss for
the year ended 30 April 2008?
A- $1,106,160
B- $1,203,600
C- $1,142,160
D- $1,167,600

sapp.edu.vn | 3
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

5. Vine sublets part of its office accommodation. The rent is received quarterly in advance on 1
January, 1 April, 1 July, and 1 October each year
The annual rent was $24,000, but was increased to $30,000 from 1 July 2005

What amounts for rent should appear in the company’s financial statements for the year ended
31January 2006?

Statement of profit or loss: Income of $27,000/$27,500

Statement of financial position: prepaid income/accrued income of $2,500/$5,000

6. On 1 May 2010, Jonas paid a rent bill of $1,800 for the period to 30 April 2011

What is the expense in the Statement of profit or loss, and the entry in the Statement of
financial position, for the year ended 30 November 2010?

$750/$1,050/$1,800 expense in the Statement of profit or loss, and a prepayment/accrual of

$750/$1,050/$Nil on the Statement of financial position

7. At 31 October 2013 a business had machines with a cost of $120,000 and with accumulated
depreciation of $25,000.
On 1 January 2014 they sold a machine for $10,000. This machine had originally cost $30,000 on
1 April 2012.
The business had a depreciation policy of charging straight-line depreciation at the rate of 20%
per annum, on a monthly basis

What is the depreciation expense for the year ended 31 October 2014?

8. What is the purpose of charging depreciation in accounts?

A- To ensure that funds are available for the eventual replacement of the asset
B- To reduce the cost of the asset in the Statement of financial position to its estimated market
value
C- To replace the cost of the asset with its estimated replacement value
D- To allocate the cost less residual value of a non-current asset over the accounting periods
expected to benefit from its use

9. A non-current asset was purchased at the beginning of year 1 for $2,400 and depreciated by
20% per annum using the reducing balance method
At the beginning of year 4 it was sold for $1,200
(Choose the correct answers)
The result of this was;
28.80/240.00 loss on disposal/profit on disposal

sapp.edu.vn | 4
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

10. According to IAS2 Inventories, which of the following costs should be included in valuing the
inventories of a manufacturing company?
(Tick all that apply)
A- General administrative overheads
B- Carriage inwards
C- Depreciation of factory machines
D- Carriage outwards

11. A business received a delivery of goods on 29 June 2013, which was included in inventory at 30
June 2013
The invoice for the goods was recorded in July 2013

What effect will this have had on the business?

A- Inventory at 30 June will be understated
B- Inventory at 30 June 2013 will be overstated
C- Profit for the year ended 30 June 2013 will be overstated
D- Profit for the year ended 30 June 2014 will be overstated

12. Apple has her own business selling dolls to stores. At 30 June 2013 she has a balance on her
trade receivables of 60,900
A balance of $2,000 due from X Co is considered irrecoverable and is to be written off. Y Co was
in financial difficulty and Apple wishes to provide an allowance for 60% of their balance of
$1,600. She has also decided to make a general allowance for receivables of 10% of her
remaining trade receivables

What is the allowance for receivables in her Statement of financial position at 30 June 2013?

13. At 30 June 2005, a company’s allowance for receivables was $39,000

At 30 June 2006, trade receivables totaled $517,000 and it was decided to write of debts
totaling $37,000 as irrecoverable.
It was also decided to adjust the allowance for receivables to 5% of the remaining trade
receivables

What expense should appear in the Statement of profit or loss for the year ended 30 June 2006?

sapp.edu.vn | 5
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

14. At 1 July 2010, a company’s receivables amount $838,000. It was decided to write off $72,000 of
these debts as irrecoverable and to adjust the allowance for receivables to $60,000.

What are the final amounts for inclusion in the company’s statement of financial position at 30
June 2011?

Receivables 766,000/838,000
Less: Allowance for receivables 108,000/60,000
Net amount 706,000/730,000/658,000/778,000

15. Which of the following statements are correct?

(Tick all that apply)
A- A company must disclose its significant accounting policies by way of a note to its financial
statements
B- A company’s statement of changes in equity must include the proceeds of any share issue
during the period
C- A company’s issued share capital must be included in its published Statement of financial
position as part of shareholders’ funds
D- If a company makes a bonus issue of ordinary shares, the total shareholders interest (share
capital plus reserves) remains unchanged

16. Which of the following may appear as liabilities in a company’s statement of financial position?
(Choose all that apply)
A- Tax payable
B- Allowance for receivables
C- Loan due for repayment within one year
D- Trade payables

17. On 1 January 2013, the capital structure of Q, a limited liability company, was as follows:

Share capital (1,000,000 ordinary shares of 50c each) $500,000

Share premium $300,000

On 1 April 2013 the company made a rights issue of 200,000 50c shares at $1.30 each, and on 1
July made a bonus issue of 1 share for every 4 in issue at that time, using the share premium
account for this purpose.

What are the balances on the accounts after the bonus issue?
(Choose the correct answers)
Share capital account $875,000/$750,000
Share premium account $610,000/$285,000/$310,000/$230,000

sapp.edu.vn | 6
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

18. Which of the following statement regarding the Statement of profit or loss for a limited
company, is correct?
Accounting standards define the expenses which are reported under ‘cost of sales’
‘Depreciation’ appears as a separate heading
Irrecoverable debts written off will be included under one of the statutory expense headings
(usually administrative expenses)
Interest payable is subtracted from the profit after taxation

19. Which of the following statements about bank reconciliations are correct?
(1) In preparing a bank reconciliation, unpresented cheques must be deducted from a balance of
cash at bank shown in the bank statement
(2) A cheque from a customer paid into the bank but dishonoured must be correctly by making a
debit entry in the cash book
(3) An error by the bank must be corrected by an entry in the cash book
(4) An overdraft is a debit balance in the bank statement
A- 2 and 3
B- 1 and 3
C- 2 and 4
D- 1 and 4

20. Which of the following accounts would be expected to have a debit balance at the end of the
year?
(Choose all that apply)
A- Payables
B- Capital
C- Discounts allowed
D- Purchases
E- Sales
F- Returns inwards

21. The cash account shows a balance of $$13,620 overdrawn at 30 September 2015. It is later
discovered that a standing order for $300 has been entered twice, and that a dishonoured
cheque for $1,080 has been debited in the cash account instead of credited.

What is the correct balance?

A- $15,480 overdrawn
B- $15,000 overdrawn
C- $12,240 overdrawn
D- $14,400 overdrawn

sapp.edu.vn | 7
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

22. Silver Co made sales of $193,200 during the year ended 31 August X1. Inventory decreased by
$13,200 over the year and all sales were made at a mark up of 42%

What was the cost of purchases during the year, to the nearest $1,000?
A- $149,000
B- $123,000
C- $109,000
D- $136,000

23. The credit column of a trial balance is $1,200 more than the debit column.

Which of the following errors would fully account for the difference?
A- No entries had been made for the purchase of goods costing $1,200
B- The debit side of the cash account had been over-added by $1,200
C- Cash sales of $600 had been correctly entered in the sales account, and credited to the cash
account
D- A payments of 1,200 for electricity had been correctly, and credited to the electricity
account

24. Which of the following correctly describes the entry in the receivables account for a sale by a
trader who is registered for sales tax?
A- Credit with the total of sales made, including sales tax
B- Debit with the total of sales made, excluding sales tax
C- Credit with the total of sales made, excluding sales tax
D- Debit with the total of sales made, including sales tax

25. Alison is not registered for sales tax purposes.

She has recently received an invoice for goods for resale which cost $500 before sales tax, which
is charged at 15%. The total cost was therefore $575

What is the correct entry to be made in Alison’s ledger in respect of this invoice?
A- DR Purchases $575; CR Payables $575
B- DR Purchase $575; CR Sales tax $75; CR Payables $500
C- DR Purchases $500; CR Payables $500
D- DR Purchases $500; DR Sales tax $75; CR Payables $575

26. Which of the following material events after the reporting period and before the financial
statements are approved are adjusting events?
(Select all that apply)
A- A customer owing $200,000 went bankrupt
B- Some inventory valued in the statement of financial position at $300,000 was sold for
$250,000
C- A factory with a value of $1,000,000 was destroyed by fire
D- The company issued 2,000,000 ordinary shares

sapp.edu.vn | 8
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

27. What is the role of the International Financial Reporting Interpretations Committee?
A- To issue guidance on the application of International Financial Reporting Standards
B- To create a set of global accounting standards

28. Should details of material adjusting or material non-adjusting events after the Statement of
Financial Position date be disclosed in the notes to financial statements according to IAS10.

Events after the reporting period?

A- Adjusting events
B- Non-adjusting events

29. Which of the following statements are correct?

(1) Materiality means that only items having a physical existence may be recognized as assets
(2) The substance over form convention means that the legal form of a transaction must always
be shown in financial statements even if this differs from the commercial effect.
(3) The money measurement concept is that only items capable of being measured in monetary
terms can be recognized in financial statements
A- 1 only
B- 2 only
C- 3 only
D- 1,2 and 3

30. The accounts of Lola plc for year ended 31 December 2010 include the following information:

Revenue 7,200
Gross profit 2,376
Net profit 1,080
Inventory 300
Trade receivables 624
Cash 1,608
Trade payables 1,890

What is the current ratio?

A- 1.18
B- 1.34
C- 0.75
D- 0.49

sapp.edu.vn | 9
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

31. Part of a company’s Statement of cash flows is shown below:

Operating profit 8,640
Depreciation charges (2,160)
Proceed of sale of non-current assets 360
Increase in inventory (330)
Increase in payables 440
Cash generated from operations 6,950

Which two of the following criticism of the above are valid?

A- Proceeds of sale of non-current assets should not appear in this part of the Statement of
cash flows
B- Increase in payables should have been subtracted, not added
C- Increase in inventory should have been added, not subtracted
D- Depreciation charges should have been added, not subtracted

32. The accounts of Lola plc. for year ended 31 December 2010 include the following information:
Revenue 7,200
Gross profit 2,376
Net profit 1,080
Inventory 300
Trade receivables 624
Cash 1,608
Trade payables 1,890

What are the receivables days (to the nearest day)?

A- 211 days
B- 32 days
C- 95 days
D- 49 days

sapp.edu.vn | 10
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

33. On 1 January 2009, X paid $21,600 to acquire 90% of the ordinary shares of y which was
incorporated on that date
At 31 December 2010 the statements of financial position of the each of the two companies
were as follows
X Y
Non-current assets 70,000 36,000
Investment in Y, at cost 21,600
Current assets 27,000 15,000
118,600 51,000

Share capital - $1 shares 62,000 24,000

Retained earnings 44,600 19,500
Current liabilities 12,000 7,500
118,600 51,000

What amount should appear for goodwill in the consolidated statement of financial position?
A- $21,600
B- $24,000
C- $ nil
D- $19,500

34. On 1 January 2009, X paid $21,600 to acquire 90% of the ordinary shares of y which was
incorporated on that date
At 31 December 2010 the statements of financial position of the each of the two companies
were as follows
X Y
Non-current assets 70,000 36,000
Investment in Y, at cost 21,600
Current assets 27,000 15,000
118,600 51,000

Share capital - $1 shares 62,000 24,000

Retained earnings 44,600 19,500
Current liabilities 12,000 7,500
118,600 51,000

What amount should appear for retained earnings in the consolidated statement of financial
position?
A- $62,150
B- $64,100
C- $17,550
D- $44,600

sapp.edu.vn | 11
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

35. On 1 January 2009, X paid $21,600 to acquire 90% of the ordinary shares of y which was
incorporated on that date
At 31 December 2010 the statements of financial position of the each of the two companies
were as follows
X Y
Non-current assets 70,000 36,000
Investment in Y, at cost 21,600
Current assets 27,000 15,000
118,600 51,000

Share capital - $1 shares 62,000 24,000

Retained earnings 44,600 19,500
Current liabilities 12,000 7,500
118,600 51,000

What amount should appear for non-controlling interest in the consolidated statement of
financial position?
A- $2,400
B- $1,950
C- $4,350
D- $21,900

sapp.edu.vn | 12
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

SECTION B – Two questions, both of which MUST be attempted

Question I
Alice bought 90% of the equity share capital of Bertha two years ago on 1 July 2012, when the
retained earnings of Bertha stood at $12,000
The Statements of financial position of both Alice and Bertha at 30 June 2014
Alice $‘000 Bertha $‘000
Non-current assets:
Property, plant and equipment 240 72
Investment in Bertha, at cost 85 0
325 72

Current assets:
Inventory 22 48
Receivables 264 60
Cash at bank 24 12
310 120
$635 $192
Equity:
Share capital 36 12
Retained earnings 189 72
225 84
Non-current liabilities 290 70
Current liabilities 120 38
$635 $192

During the year Alice had transferred goods to Bertha for $45,000 – this figure includes a mark-
up of 50%. Two thirds of these goods remained in inventory at the year end.
The balance on the current account between Alice and Bertha was $53,000 at the year end.

The fair value of the non-controlling interest at the date of acquisition was $10,000

You are required to prepare a consolidated statement of financial position.

On this and the following pages, you will be required to answer several questions from your
statement. The marks available for each part will be shown on each page

Question 1
What is the amount of Goodwill on consolidation? $ 000
(4 marks)

Question 2
What figure will appear for Retained earnings? $ 000
(4 marks)

sapp.edu.vn | 13
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

Question 3
What figure will appear for Receivables? $ 000
(1 mark)

Question 4
What amount will appear for Share capital?
(1 mark)

Question 5
What amount will appear for Non-controlling interest?
(4 marks)

Question 6
What is the value of inventory? $ 000
(1 mark)

Question II
The following financial statements of Downton plc for the year ended 31 December 2013

Statement of financial position as at 31 December 2013

2013 $’000 2012 $’000
Non-current assets 84,000 32,000

Current assets
Inventory 7,200 11,400
Receivables 10,500 9,200
Cash 4,100 2,600
21,800 23,200
Total assets $105,800 $55,200

Equity 20,000 15,000

Ordinary share capital 39,700 15,900
Retained earnings 8,000 0
Revaluation reserve 67,700 30,900

Non-current liabilities 22,100 14,000

Current liabilities
Trade payables 8,400 6,200
Taxation 7,600 4,100
$105,800 $55,200

sapp.edu.vn | 14
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

Statement of profit or loss for the year ended 31 December 2013

$’000
Profit before tax 32,300
Taxation 8,500
Profit after tax $23,800

The depreciation expense for the year was $8,200,000.

No dividend was paid during the year.
You are required to prepare the Statement of cash flows for the year ended 31 December 2013

Question 1
What figure will appear on the Statement in respect of tax paid?
$
(2 marks)

Question 2
Complete the following (6 marks)
Cash generated from operations:
Profit before/after tax
Add/Less Depreciation 8,200,000
Add/Less Change in inventory 4,200,000
Add/Less Change in receivables 1,300,000
Add/Less Change in payables 2,200,000

Cash generated from operations

Question 3 (2 marks)
What is the figure for ‘acquisition of non-current assets’ to appear in the Statement?

Question 4 (1 mark)
Under which heading on the Statement of cash flows will ‘acquisition of non-current assets
appear?

Question 5 (2 marks)
Complete the following
Cash flows from financing activities
Issue of shares
Loan

sapp.edu.vn | 15
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

Question 6 (2 marks)
Choose the correct answers:
In preparation of this Statement of cash flows, we have used the direct/ indirect method in
arriving at the cash generated from operations.
Had we used the alternative method, we would have arrived at the same/different answer

sapp.edu.vn | 16
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

KEYS FOR SOLUTIONS

1. B
Sole traders and companies both have capital invested in the business

2. A
The purpose of a SOFP is to show the assets of the business and the claims against those
assets

3. A
The statement is true

4. C
1,154,880 + 68,880 – 50,880 + 44,160 – 74,880 = $1,142,160

5. 27,500/prepaid income/5,000
Expense
1 Feb 2005 to 30 June 2005 (5 mths) 5/12 x 24,000 = 10,000
1 July 2005 to 31 January 2006 (7 mths): 7/12 x 30,000 = 17,500
Total expense = 10,000 + 17,500 = 27,500

6. 1,050/prepayment/750
Expense
From 1 May 2010 to 30 November 2010 (7 mths): 7/12 x 1,800 = 1,050
Prepayment
From 1 December 2010 to 30 April 2011 (5 mths): 5/12 x 1,800 = 750

7. 19,000
Deprecation from 1 November 2013 to 31 December 2013 (2 mths) is:
2/12 x 20% x 120,000 = $4,000
Depreciation from 1 January 2014 to 31 October 2014 (10 mths) is:
10/12 x 20% x (120,000 – 30,000) = $15,000
Total depreciation = 4,000 + 15,000 = $19,000

8. D
The purpose of charging depreciation is to allocate the cost less residual value of a non-
current asset over the accounting periods expected to benefit from its use

9. 28.80/loss on disposal
NBV at year end 1 = 2,400 – (20% x 2,400) = 1,920
NBV at end year 2 = 1,920 – (20% x 1,920) = 1,536
NBV at end year 3 = 1,536 – (20% x 1,536) = 1,228.80

Loss on disposal = 1,228.80 – 1,200 = $28.80

sapp.edu.vn | 17
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

10. B,C
Carriage inwards and depreciation of factory machines should be included
(Carriage outwards is a delivery cost; General admin overheads are an administrative cost)

11. C
The goods were correctly included in inventory
The invoice should also have been included. Because it had not been, purchases have been
understated and therefore profit overstated

12. 6,890
Specific allowance = 60% x 1,600 = 960
General allowance = 10% x (62,900 – 1,600 – 2,000) = 5,930
Total allowance = 960 + 5,930 = 6,890
(We do not have a general and a specific allowance on the same debt)

13. 22,000
Allowance required at end of year: 5% x 517,000 - 37,000 = 24,000
Decrease in allowance = 39,000 -24,000 = 15,000
Expense for the year = 37,000 – 15,000 = 22,000

14. 766,000/60,000/706,000
Receivables = 838,000 – 72,000 = 766,000
Allowance (per question) = 60,000
Net receivables = 766,000 – 60,000 = 706,000

15. All of the statement are correct

16. A,C,D
All except the allowance from receivables (which is subtracted from the receivables balance)

17. 750,000/310,000
The right issue is of 200,000 shares
Share capital increases by 200,000 x $0.50 = $100,000
Share premium increases by 200,000 x $0.80 = $160,000
The bonus issue is of ¼ x 1,200,000 = 300,000 shares

18. C
Irrecoverable debts written off will be included under one of the statutory expense headings
(usually administrative expenses) is the only item that is correct

19. D
Statements (1) and (4) are correct

sapp.edu.vn | 18
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

20. C,D,F
Returns inwards; purchases; and discounts allowed would all be expected to have a debt
balance

21. A
13,620 – 300 + (2 x 1,080) = $15,480

22. B
COS = 100/142 x 193,200 = 136,056
Therefore purchases = 136,056 – 13,200 = $122,856

23. C
The error that would fully account for the difference is if cash sales of $600 had been
correctly entered in the sales account, and credited to the cash account

24. D
Debit receivables (with the full amount, including sales tax)
Credit sales (with the net amount, excluding sales tax)
Credit sales tax (with the amount of the sales tax)

25. A
Alison is not registered for sales tax and therefore the entry is
Debit Purchases 575; Credit Payables 575

26. A,B
The bankruptcy of the customer and the sale of inventory at a price lower than cost are both
adjusting events. The other two are non-adjusting events

27. A
Their role í to issue guidance on the application of International Financial Standards

28. B
Adjusting events should be adjusted for
Non-adjusting events should be disclosed as notes

29. C
Only statement 3 is correct

30. B
Current ratio = (300+624+1,608)/1,890 = 1.34

31. A, D

sapp.edu.vn | 19
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

Depreciation charges should have been added, not subtracted

Proceeds of sale of non-current assets should not appear in this part of the Statement of
cash flows

32. B
Receivables day = (624/7,200) x 365 days = 32 days

33. Cost of investment 21,600

Fair value of non-controlling interest (10% x 24,000) 2,400
24,000
(Y was acquired on incorporation and so there were no retained earnings at that date)
Share capital of Y 24,000

Goodwill = 24,000 – 24,000 = Nil

34. Retained earnings of X 44,600

Post-acquisition earnings of Y (90%x19,500) 17,550
$62,150

35. Fair value @ date of acquisition (10% x 24,000) 2,400

Share of post-acquisition earnings (10% x 19,500) 1,950
4,350

SECTION B – Two questions, both of which MUST be attempted

Question I

Question 1

Consideration paid by Alice 85,000

Fair value of non-controlling interest 10,000
95,000
Share capital of Bertha 12,000
Pre-acquisition retained earnings 12,000
24,000

Goodwill = 95,000 – 24,000 = $71,000

Question 2

Retained earnings of Alice (189,000 – 10,000) 179,000

Alice’s share of post-acquisition earnings of Bertha 54,000

90% x (72,000 – 12,000)

sapp.edu.vn | 20
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

233,000
(PURP = 50/150 x 2/3 x 45,000 = 10,000)

Question 3

Alice 264,000
Bertha 60,000
Less: Intra-group (53,000)
271,000

Question 4

Share capital of Alice $36,000

Question 5

Fair value @ date of acquisition 10,000

Share of post-acquisition earnings 6,000
(10% x (72,000 -12,000)
16,000

Question 6

Alice 22,000
Bertha 48,000
70,000
Less: PURP (10,000)
60,000

Question II

Question 1

Own at start of year 4,100,000

Charge for the year 8,500,000
Still owing at end of year (7,600,000)
Paid during the year $5,000,000

Question 2

Cash generated from operations:

Profit before tax 32,300,000
Add Depreciation 8,200,000
Add Change in inventory 4,200,000

sapp.edu.vn | 21
 SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

Less Change in receivables 1,300,000

Add Change in payables 2,200,000

Cash generated from operations 45,600,000

Question 3

Closing balance 84,000,000

Opening balance (32,000,000)
Depreciation charge 8,200,000
Revaluation surplus (8,000,000)
Acquisitions $52,200,000)

Question 4

Cash generated from investing activities

Question 5

Cash flows from financing activities

Issue of shares + $5,000,000
Loan
+ $8,100,000

Question 6

In preparation of this Statement of cash flows, we have used the indirect method in arriving at
the cash generated from operations.
Had we used the alternative method, we would have arrived at the same answer

sapp.edu.vn | 22
SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

sapp.edu.vn | 23
SAPP Academy
6 Floor, No.2, Trai Ca alley, Truong Dinh street, Hanoi Tel: 096 972 94 63
No.31, alley 56/34 Le Van Hien street, Hanoi Web: sapp.edu.vn

sapp.edu.vn | 24