1) 2) 3) ® (Exam A) FD Paints Limited started trading on 1 January 201. The company provided the following Information for the year ended 31 December 2015. $ Profit for the year 80000 Dividend paid 4200 Dividend proposed 10400 Transfer to general reserve 5000 What were the retained earnings at 31 December 20157 A B c D ‘$60400 $70800 $75800 $89200 A club records its equipment at valuation. How does it calculate its depreciation? A B c D Value at start of year — equipment purchased — value at end of year value at start of year ~ equipment purchased + value at end of year value at start of year + equipment purchased — value at end of year value at start of year + equipment purchased + value at end of year Which statements are true about the current ratio? 00 @ > 1 Itcan be higher than the quick ratio. 2 Itcan be lower than the quick ratio, 3 Itdiffers from the quick ratio because of bank overdraft. 4 Itdiffers from the quick ratio because of inventories of goods. tands tand4 2and3 2and4 t] 11 a)7 4) 5) 6) @ On 4 January 2014 Lionel had a debit balance on his current account of $2000. During the year the following were recorded in his current account. Interest on capital Interest on drawings Share of residual profit Drawings 12500 840 18 000 25600 ‘What was the balance on Lionel's current account on 1 January 2015? A c $2060 credit $3740 credit $6060 credit $7740 credit Which statement about debentures is correct? A ‘They carry a fixed rate of dividend. They carry a fixed rate of interest. They carry a variable rate of dividend. They carry a variable rate of interest. a 1) The activities of the Wilhelm Archery club include the running of an equipment shop. (On 1 January the accumulated fund of the club amounted to $16 200 and on 31 December $18 000. ‘What does this increase mean? A ‘The non-current assets increased by $1800. ‘There was a surplus for the year of $1800. ‘There was a trading profit from the shop of $1800. The subscriptions received amounted to $1800, m1 [Turn over* 3) 1) A D . Which business document would be sent by a customer to a supplier? credit note debit note invoice ‘statement of account a ‘An insurance account shows an amount paid for the year of $2000 and a prepayment at the Which entry appears in the insurance account to record the transfer to the income end of the year of $400. statement? A credit entry of $1600 B credit entry of $2400 © debit entry of $1600 D debit entry of $2400 Where would a dishonoured cheque from a customer be recorded in tht supplier? A credit side of the purchases ledger control account credit side of the sales ledger control account debit side of the purchases ledger control account debit side of the sales ledger control account LJ a 1@ books of the [1]lo) tt) © Jamal treats purchases of loose tools as capital expenditure. On 4 July 2014 his loose. On 4 September 2014 tools were valued at $7100. ‘On 30 June 2015 he he bought new tools costing $1200, valued loose tools at $6000. Which amount for loose to 30 June 2015? ols appeared in his income statement for the year ended A $100 B $1100 © $1200 D $2300 a The following account appeared in Andrew's ledger. ‘Andrew Advertising account 2015 $ 2014 30 April Bank 4000 1May Balance b/d 2015 30 April Income statement Balance old 4000 2015 1May Balancebld 700 Which statement is correct? A Andrew eared $2800 from advertising during the year. B Andrew had prepaid $700 for advertising on 1 May 2015. € Andrew owed $700 for advertising on 1 May 2015, D ‘Andrew paid $2800 for advertising during the year. $ 500 2800 700 ‘4000 1U) [Turn over1a) 13) 14) © Why does a Partnership prepare an appropriation account? A to allocate profit for the year to each partner B to calculate interest on partners’ loans C to ensure that drawings are accounted for D_ to record dividends paid and proposed i During the accounting year a limited company had the following transactions. $ ordinary share dividend paid 25 000 interest paid on short term bank loan 3.000 interest paid on debentures (repayable in 2019) 12.000 interest received on bank deposit 5.000 Which amount appeared in the expenses in the income statement? A = $10000 B $12000 Cc $15 000 D $35000 (1) Why does a sports club prepare the trading account section of an income statement? A __ ithas paid staff as well as voluntary workers B_ itoperates a café © tocalculate subscriptions for the year D__tovalue the closing inventory 1)15) it) 14) What is the purpose of book-keeping? A to identify trends over a number of years B to prepare the financial statements of the business C to present interested parties with relevant information D to record the financial transactions of the business (1) Carriage outwards, $600, was posted as $400 to the debit side of the carriage inwards account. Which effect did the correction of this error have on the draft profit for the year? A decrease $200 B_ decrease $1000 C__ increase $200 D__ increase $1000 1" ‘A bank statement showed a credit balance of $300 on 31 March. On that date unpresented cheques amounted to $120. What was the cash book balance on 31 March? A $180 credit B $180 debit © $420 credit D $420 debit a1s) 19) 20) Samuel buys a new computer and Pays the following amounts, in A B Computer system ri Ink cartridges 80 Syear maintenance contract 1200 Delivery cost 70 How much is capital expenditure? $8070 $8240 $8420 $9620 Peter bought a non-currer straight line basis. At the end of year 2 he sold it for $4100. What was the profit or loss on disposal? A B c D ‘An item of inventory ‘selling price of $18.50 althoug! $50 loss $50 profit $100 loss. $100 profit ‘Atwhich value should it be included in the financial statement? A B c D $11.05 $11.75 $17.25 $18.50 (i) nt asset for $5000 and depreciated it at 10% per annum on the (1) had been bought for $11.75 but could now be bought for $11.05. It has a ih selling and delivery costs will amount to $1.25. f11 [Turn overat) 22) 23) David and Edward are in are | Partnership. ee a Edward's interest on drawings and interest on Capital recorded in his current Interest on drawings Interest on capital * credit side credit side e credit side debit side . debit side credit side D debit side debit side A limited company decides to create a provision for doubtful debts. How does this affect its statement of financial position? A B c D decreases the ordinary share capital increases the ordinary share capital decreases the retained earnings increases the retained earnings (1) () A sports club has 120 members who each pay an annual subscription of $50. It provided the following information. ‘Subscriptions in advance at start of year ‘Subscriptions in arrears at end of year $100 $500 How much was received by the club for subscriptions during the year? A c $5400 $5600 $6400 $6600 a)The rent of a m ing busi ,) 16 a lanufacturing business 1S split 60% factory, 10% of ts? A $24.00 B $3120 4 © $36 000 aa D $46 800 i 25) Financial statements must be free from error and bias, Which accounting policy is being applied? A comparability i] relevance B C reliability D understandability m [Turn over27) 28) 24) Cs) Which statement is true about capital expenditure? ro A It consists of the purchase of Goods for resale, {includes the costs of operating a non-current asset. © Itinvolves the by : than aoar ying of an asset to be used in the business for more D 't should be written off during the year in which the expenditure arises, {1 Nusswan's rates are $100 a month. He pays six months’ rates in advance, on 1 January and i cy each year. He also receives six months’ rent of $150 a month in advance on the same Which amounts appear in the statement of financial position on 31 January? in current assets | in current liabilities A | $100 $150 B | $500 $750 c | $750 $500 D | $1250 nil Ld t) der has an increasing level of trade receivables and maintains the same rate of provision for doubt ‘debts over the years. One year he forgets to update his provision for doubtful debts account. Which effect does this have on his financial statements? profit for the year | current assets A | overstated overstated B | overstated understated ¢ | understated overstated ‘| D | understated understated | a What is meant by the term net realisable value? A selling price B selling price less costs of completion selling price less costs of completion less selling expenses D selling price less selling expenses — fi) [Turn over30) 31) 32) What is the purpose of accounting? A c D to ensure the cash book balance agrees with the bank statement to know how long trade receivables take to pay to prepare the financial ‘Statements of the business to write up all the ledger accounts Where is discount received shown? A c D credit side of the purchases ledger control account debit side of the purchases ledger control account credit side of the sales ledger control account debit side of the sales ledger control account Pedro spent $8410 buying a new vehicle. The invoice showed $ Vehicle 8000 Number plates 50 Insurance for 24 months 360 How much was the capital expenditure? A $8050 $8180 $8230 $8360 JOO (1) ti) (1)33) 34) 35) ® Safir bought a machine for $10 000 and depreciated it at the rate of 30% per annum on the reducing (diminishing) balance basis. What was the net book value at the end of year 2? A $4000 B $4900 Cc $5100 D $6000 fy Albert maintains a provision for doubtful debts account. Where is the closing balance on the account included in the financial statements? A as an expense in the income statement B _ asarevenue in the income statement C inthe current assets section of the statement of financial position D inthe current liabilities section of the statement of financial position Why is inventory valued at net realisable value when this is lower than cost? A to calculate the rate of inventory turnover B to ensure the balancing of the statement of financial position © to prevent profit being recorded before it is eared to recognise losses as soon as they are incurred C CO IL] IC] 1) 1)Multiple Choice Answers (Exam A) Question | Answer 0 DOB) >H|WAQHS/ WAS] HAA WO] >|] > lO] Wlal>|wlO]O]>|t| w]e > lwlalw