Faculty of Business

Department of Accounting and Finance

SAMPLE EXAM PAPER

Autumn Semester AY 2020/2021

Module Title: Principles of Accounting

Module Code: AC4001
Lecturer/Examiner: Dr. Antoinette Flynn
External Examiners: Prof. Joan Ballantine
Duration: 2.5 Hours
% of Total Module Marks: 75%

Instructions to Candidates:
1. Answer all 40 multiple choice questions (MCQ) on SULIS under Tests and
Quizzes (total of 100 marks).
2. Section A has 20 MCQ based on an Income Statement and Financial Position
and each question is worth 3 marks (60 marks).
3. Section B has 20 MCQ and each question is worth 2 marks (40 marks).
4. Negative marking applies.
Section A: (60 marks)

The Trial Balance of Alfredi Cuisine as at 31 st December, 2016 was as follows:

Trial Balance € Debit € Credit

Capital 194,000
Premises (cost) 175,000
Machinery (cost €12,000) 5,400
Vehicles (cost €28,000) 18,700
Equipment (cost €34,000) 31,900
Investments (short-term) 11,250
Mid-Term Loan (10% on principle) 20,000
Advertising 3,500
Provision for bad debt 730
Administrative salaries 6,370
Bad debt expense 740
Discount Allowed/Received 290 440
Sales 128,640
Purchases 81,230
Accountant’s fee 590
Wages & Salaries 14,100
Returns Inwards/Outwards 230 640
Carriage inwards 310
Insurance 600
Rental income 410
Income Statement Account 1/1/2016 13,800
Light & Heat 940
Telephone 870
Inventory 8,760
Trade receivables 8,400
Trade payables 7,890
Bank overdraft   2,630
369,180 369,180

The following information is pertinent:

1. Depreciation is to be charged as follows:

 Vehicles 10% per annum on the cost;
 Equipment 20% reducing balance
 Machinery: depreciation expense = €1,650

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2. Inventory at 31st December 2016 was valued as €11,680.
3. Insurance includes a prepayment of €150 for next year.
4. A vehicle was sold for cash €7,000 on the 31/12/2016. It originally cost Alfredi
€8,000 on 1/1/2015 and his depreciation policy is to fully provide for
depreciation on vehicles in the year of disposal. He had not expected any
residual value on the vehicle. None of the disposal transactions were recorded
in Alfredi’s books.
5. Bad Debts of €400 are to be written off.
6. A provision of 5% of the remaining trade receivables is to be made.
7. Goods purchased for €500 and then sold on credit for €1,000 were returned
and placed back in Inventory. This sales returns transaction was never
recorded at all and has implications for sales returns, closing inventory, trade
receivables (Debtors) and provision for doubtful debts accounts.
8. Advertising expenditure relates to the time period 1/1/2016 up to 31/7/2016.
Alfredi continued to have his business advertised at the same monthly rate on
social media and local radio for the rest of the year, but had not yet settled his
bill.
9. The interest on the loan was not yet paid.
10. €110 of the rental income relates to the fiscal year 2017.

Required:
Prepare the Alfredi Cuisine Income Statement for the year ended December
31st, 2019 and a Alfredi Cuisine Statement of Financial Position at the same
date, in conformance with IAS 1 Presentation of financial statements, to answer
multiple choice questions 1 to 20 in section A.
The 20 MCQs are available on SULIS AC4001 AY 20/21 under the heading
AC4001 Exam – Section A. Allow 1 hour to complete the Income Statement and
the Statement of Financial Position and 20 minutes to answer 20 questions Q1 to
Q20 in Section A, each worth 3 marks. There are 5 possible answers (A to E) for
each question. Negative marking applies. There is no deduction where a question
is left unanswered. The 20 questions appear to each student in a randomized
manner and within each question, the answers are displayed randomly. The
questions appear one at a time and you can only move forward with the questions
on SULIS - you cannot go back to change your online answer.
(Total 60 marks)

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Q1: The net sales in the Alfredi Cuisine Income Statement is:
A. 126,410
B. 128,640
C. 127,410
D. 127,640
E. None of the above.

Q2: From the Income Statement, the figure for the cost of goods available for sale
is:
A 89,660
B. 81,230
C. 77,480
D. 101,840
E. None of the above.

Q3: From the Income Statement, the gain/loss on the disposal of the asset is:
A. 1,000 loss
B. 7,000 gain
C. 6,400 loss
D. 600 gain
E. None of the above.

Q4: The rental income charged to the Alfredi Cuisine Income Statement is:
A. 520
B. 300
C. 110
D. 410
E. None of the above.

Q5: The insurance expense to be charged to the Income Statement is:

A. 150
B. 450
C. 300
D. 600
E. None of the above.

Q6: From the Income Statement, the interest expense for the year ended is:
A. zero
B. 10
C. 10,000
D. 2,000
E. None of the above.

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Q7: The bad debts provision expense in the Income Statement is:
A. Increased by 730
B. Decreased by 760
C. Decreased by 380
D. Increased by 1,000
E. None of the above.

Q8: From the Income Statement, the depreciation on Equipment is:

A. 2,100
B. 8,480
C. 8,500
D. 6,380
E. None of the above.

Q9: The depreciation charge for Vehicles as shown in the Income Statement is:
A. 8,500
B. 20,000
C. 9,500
D. 2,800
E. None of the above.

Q10: From the Income Statement, the depreciation expense for Machines shown
for the year
A. 12,000
B. 1,650
C. 3,750
D. 6,000
E. None of the above.

Q11: From the Income Statement, the advertising expense for the year is:
A. 3,500
B. 2,500
C. 1,000
D. 6,000
E. None of the above.

Q12: In the Statement of Financial Position, the net book value of non-current
assets is:
A. 213,770
B. 38,770
C. 241,000
D. 27,230
E. None of the above.

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Q13: The inventory figure included in the Statement of Financial Position is:
A. 8,760
B. 12,180
C. 11,250
D. 81,230
E. None of the above.

Q14: The net Trade Receivables after bad debt provision included in the Statement
of Financial Position is:
A. 7,000
B. 6,500
C. 6,650
D. 7,350
E. None of the above.

Q15: The figure for prepaid insurance in the Statement of Financial Position is:
A. 150
B. 350
C. 4,370
D. 2,500
E. None of the above.

Q16: Under the Current Assets heading in the Statement of Financial Position, the
total amount is?
A. 213,770
B. 11,250
C. 34,600
D. 248,370
E. None of the above.

Q17: The income amount transferred from the Income Statement to the Statement
of Financial Position as at December 31st is:
A. 8,070
B. 21,870
C. 13,800
D. 43,200
E. None of the above.

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Q18: The amount for current liabilities accrued included in the Financial Position is:
A. 4,610
B. 20,000
C. 4,500
D. 410
E. None of the above.

Q19: The figure for Trade Payables as shown on the Statement of Financial
Position is:
A. 8,790
B. 7,890
C. 12,500
D. 7,000
E. None of the above.

Q20: From the Statement of Financial Position, the amount for owners’ equity and
liabilities is:
A. 235,870
B. 228,370
C. 215,870
D. 248,370
E. None of the above.

(Total 60 marks for Section A)

Section B: (30 marks)

This section of the exam is 20 MCQs that relate to all of the module topics. The 20
MCQs are available on SULIS AC4001 AY 20/21 under the heading AC4001 Exam –
Section B. Allow one hour and 10 minutes (70 minutes) to answer 20 questions Q21
to Q40 in Section B, each worth 2 marks. There are 5 possible answers (A to E) for
each question. Negative marking applies. There is no deduction where a question is
left unanswered.
The 20 questions are randomly drawn from a much wider pool of questions on
SULIS. Then the 20 questions will appear to each student in a randomized manner
and within each question, the possible answers are also displayed randomly. The

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questions appear one at a time and you can only move forward with the questions -
you cannot return back to change your answer. Please take your time to work out the
answer to each question. (Total 40 marks)

Q21. Which of the following statements is not correct?

A. The internal audit department is part of the internal controls within an
entity.
B. Internal auditors review value for money.
C. Internal audit departments should be independent from the activities
audited by them.
D. Internal auditors should not liaise with external auditors.
E. All of the above

Q22. McMillian discovered that a cash sale was never recorded in his books (at
all). The cash sale of €125,000 was based on inventories that cost
€15,100. In terms of the Income Statement (IS) and the Statement of
Financial System (SFP), how will this transaction retrospectively affect
those statements, when it is properly recorded?

1. Decrease Sales by 125,000 in the IS

2. Increase Cash by 15,100 in the SFP
3. Increase Sales by 125,000 in the IS
4. Increase Cash by 125,000 in the SFP
5. Increase Inventories by 15,100 in the IS
6. Decrease Inventories by 15,100 in the SFP
7. Increase Cost of Goods Sold by 15,100 in the IS
8. Decrease Cost of Goods Sold by 15,100 in the SFP
A. Items 3, 4, 6 and 7.
B. Items 2, 5 and 4.
C. Items 2, 5, 6 and 7.
D. Items 1, 5, 7 and 8.
E. All of the items.

Q23 The materiality principle means that amounts:

A. Are included if they make sense.
B. Are included if they are large enough.
C. Are excluded because their omission has no impact.
D. Are measurable and whose inclusion is justified by the matching
principle.
E. None of the above

Q24. During the year to 31 October 2017, car fuel bills of €8,540 were paid. A
delivery worth €130 had yet to be invoiced. Car fuel in inventory at 1
October 2017 was €1,250 and there were invoices awaited for €170. At 31
October 2017, the inventory of car fuel was valued at €980. The car fuel

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 expense to be charged to the income statement account for the year to 31
October 2017 is:

A. €8,510.
B. €9,110.
C. €8,850.
D. €8,770.
E. None of the above.

Q25. Which of the following combination of statements is correct?

(i) The accounting equation is based on the expression of total assets equalling
equity minus total liabilities.
(ii) The Income Statement summarizes revenues and expenses of the business
in an effort to demonstrate the change in the owner’s equity.
(iii) Under the double entry book keeping system, any effect of a transaction,
which increases the left hand side of the accounting equation, is called a
debit and any which decreases the right hand side of the accounting equation
is called a credit.
(iv) The accounting equation is based on the expression of total net assets
equalling the capital employed in the business.

A. Statements i and iii.

B. Statements ii and iv.
C. Statements iii and iv.
D. Statements ii, iii and iv.
E. All of the above.

Q26. International Financial Reporting Standards (IFRS) reflects.

A. Accounting legislation
B. Accounting professional bodies regulation
C. Accounting systems
D. Accounting bookkeeping
E. None of the above.

Q27 Marshall Company has authorised shares capital of €500 (1,000 shares at
€0.50). All the shares were issued at €0.75 per share. If the income after tax
was €105 and a reserve of €100 was created from this income, what is the
total of the owners’ equity at year-end?

A. €750
B. €755
C. €855
D. €1055
E. None of the above

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 Information for Q28 and Q29
Financial Position as at December 31st
2016 2017
€000 €000
NONCURRENT ASSETS:
Plant, Machinery and equipment at cost 143,000 131,000
28,000 37,000
Less: Provision for depreciation
115,000 94,000
CURRENT ASSETS:
21,600 19,400
Inventory
11,300 13,500
Trade receivables 3,900 17,100
Investments 4,600 12,800
41,400 62,800
Cash at Bank and in hand
TOTAL ASSETS 156,400 156,800
OWNERS EQUITY & TOTAL LIABILITIES
SHARE CAPITAL & RESERVES:
Ordinary Shares at €0.50 each 60,000 70,000
Share Premium 25,000 34,000
Revenue Reserve 4,200 6,900
Inc. Statement Account 3,400 5,200
Shareholders’ Interests 92,600 116,100
NONCURRENT LIABILITIES
Loan: 8% Debenture 30,000 5,000
CURRENT LIABILITIES:
8,400 6,700
Trade payables
5,800 7,200
Taxation 19,600 21,800
33,800 35,700
Proposed Dividends
€156,400 €156,800

TOTAL OWNERS EQUITY & LIABILITIES

Q28: What is the impact of the net change in working capital on cash flow, according
to IAS 7 Statement of Cash Flows for the year ended 31/12/2017 for Royal
Watch Ltd?

A. Decrease of €1,700
B. Decrease of €4,400

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 C. Increase of €2,200
D. Increase of €1,700
E. None of the above

Q29: How much cash did Royal Watch Ltd. invest in Plant, Machinery and
Equipment during the year if a machine that cost 30,000 was sold for 15,000,
according to IAS 7 Statement of cash flows for the year ended 31/12/2017?
A. €15,000
B. €30,000
C. €18,000
D. €161,000
E. None of the above

Q30: The following information is taken from the nominal ledger of a paper company
for November 2018:
€
Debtors control account balance at Nov. 1st 2018 3,450
Sales 11,780
Cheques received from debtors 9,210
Returns inwards 1,620
Discount allowed 570
Bad debts 460
Provision for doubtful debts at Nov. 1st 2018 850

The balance on the debtors control account at November 30 th 2018 will be:
A. €1,900
B. €3,370
C. €2,930
D. €2,940
E. None of the above

END OF PAPER

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