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Practice Questions 1

1- D
2- D Improvements are capital expenditure, repairs and maintenance are not.

3- A
4- D You are told that X is a receivable of Y. Therefore X normally owes Y money. Options B and C would imply that Y is a receivable of X and so can be ignored. Option A would increase the debit entry. Only option D would generate a credit entry. 5- C 1 Jan – 30 June (12,000 ⋅ 6/12) 1 July – 31 Dec (13,200 ⋅ 6/12)

$ 6,000 6,600 12,600

6- B

The posting is correct, but the wrong amount has been used.

7- $ 1,150 overdrawn 8- $19,000 9- Please note that you may not be able to attempt this question A Inventory should be valued at the lower of cost or net realizable value. $ Cost 1,000 Selling price Less: modification costs Less: selling costs Net realisable value 1,200 (150) (100) 950

10- C

Only realised profits can be included in the Income statement.

11- C The non-current asset register should agree with the nominal ledger but will not necessarily always agree if there are either errors in the register or in the nominal ledger. 12- A $8,400 for 24 months is $350 per month. So, the charge for the year is 12 * $350, ie $4,200. At 31/12/X2, rent has been prepaid to 31.12.X3 ie for 9 months which is 9 * $350 ie $3,150.

13- A

B and C will not give rise to any numerical imbalance.000 ∗ 5/12) = $25.D 17.C 18.C 24.$3.500 Cash book balance Bank charges Dishonoured cheque Amended cash book balance Unpresented cheques Outstanding lodgements Bank statement balance 28.000 * 7/12 = $21.D 23.D Provided that the cash receipts have been correctly posted to the cash book. 26.B 21. as you may not be able to answer it.D 16.400 ($30.200) (3.000 29.000 30.000 $ (2.000) 27.600 – $4.000 $10. then the fact that they have incorrectly been posted to payables instead of cash sales or receivables will not affect the bank.14.$22.200) (300) (400) (2.500) . 22. 15.$21.000 – $3.900) 600 (1.C 19.A Depreciation allocates the cost of an asset to the periods expected to benefit from its use.A You can ignore this question for now.D 25.$25.$25.D Gross profit – expenses = net profit 20.000 $36.000 + ($36.

000 = $25.000 Disposal proceeds Loss on disposal Total depreciation and loss on disposal = $20.$50.000 2.000 33.D An error of principle In the other three cases only statement of financial position accounts are affected and there is an equal and opposite debit and credit.000 – $20.$1.00 35.000-$20.000 6.500 650 (5.000 + $5.000 32.400 $ 20.Balance = $2.000 4 years depreciation = $20.000 31.000 (600) 2.000 Net book value in Dec 2001 = $40.600 DEF balance Additional invoice Amended balance M Ltd balance Less: cheque payment $ 2.D 34.Tanwir's capital = $38.400 39.Annual depreciation = $40.000) (450) 38.700 .700 Cash introduced on 1 October 20X9 Car introduced Profit for the year Petrol paid for privately Drawings Home phone bill Capital at the year end 40.B 38.$6.000 6 = $5. 37.000 17.000 5.C 36.A $ 20.000 3.000 4.000 15.

Opening inventory is a debit balance. The stationery would appear as an asset rather than as an expense 4.200) Credit in error (425) Unpresented cheques (3.000 .400 Charge to income statement Quarter 3 3. leaving twenty units at $3 each.$88.D 47.D Gross profit – expenses = net profit.000 2.000 Cost of machine Installation Training Testing Bank statement $ Balance (11. 45.600) Gas bill paid 2. The next would be of $3 units.$6.The first issues (twelve units) would use up the opening inventory of ten units issues and two units of the purchases at $3 each.B 2.970) Bank charges (550) (9.520) $ 80.$11.C 43. leaving 28 units at $3 each.380 (9.000 46.000 88.$735.B 50.500 Practice Questions 2 1.000 1. $ Accrual for Quarter 2 reversed (1.700 Accrual Quarter 3 2. Correct.B 3.200 overdrawn Cash book $ Balance (8.275) Outstanding deposits 5.D 49.D 48. that is $60.A Remember you were asked for the main aim.200 overdrawn 44. invoices are listed on receipt.000 5.41.520) 5.D 42.

A Remember.A 7.A 10. Individual invoices are .B Cost 20X7 Depreciation 20X8 Depreciation 20X9 Depreciation 20Y0 Part exchange Profit 12.6. daybook totals are posted to the control account.C 14. so appears in the suspense account as DR 19.625 1.B This receipt will eliminate the insurance receivable and reduce the loss on disposal by 500. charge to I/S $3. 18.A The expenditure has been understated by $45 so the cash drawn from the bank will also be $45 short.C 13.A $ 10.A We would need to know either sale proceeds or length of time in order to calculate the other 11.$2.B FIFO will treat Inventory on hand as the most recent purchases. Accrued: $560. which are the most Expensive 16.500 1.C 9.950. giving a balance of $705. 10 units at $45 plus 50 units at $50 17.800 Discount received should have been posted as a credit.320 $6.500 7.800 8.875 5.406 4.000 781 15.219 5.000 2.

350 (170) (230) (110) 11.500 500 2. so an error in a total does not affect the list of 20.C Sales Less cost of sales Gross profit $ 21.000) Net Profit 21.400 Accruals CR 1.C Sales (10.840 Cash book balance Bank charges Direct debit Dishonoured cheque 23.350 .000) 5.400 24.000 550 5.B Missing accrual Closing inventory overvalued – cost of sales understated Net profit overstated 1.20X1 – 31.950 (100%) 17. 22.000 $ – 10.$11.000 (5.B $ 12.000 6.20X2 1800 x 9/12 = 1.390 (20%) 26.7.450 $ 11.000 balances.C 25.560 (80%) 4.000 × 220% × 50%) Opening inventory Purchases Closing inventory Cost of goods sold Gross profit Less discount (5% × 11.840 Gas charges for two months have to be accrued Gas expense DR 1. 27.000 10.C 1.D The cost of the equipment has been debited to the income statement instead of non-current assets so both profit and non-current assets are understated.3.posted to the individual accounts.

.000 * 1%) 2-3 months (8.B Window cleaning Stationery Coffee etc. (Sorry.840 (2.850 240 800 1. X7 and X8). Both are prepared for not-for-profit organisations.6.100 33. Staff receipt Cash sale proceeds Increase in float 37.840) 47. this seems to be a repeat of Question 28) 35.D This is the accounting equation.1.B The assets have been depreciated for 4 years (X5.D 29.D 36. X6.600 38.B 30.D 40.20X2 2000 x 3/12 = 28.20X2 – 30.A 1-2 months (24.400 (130%) 28. 32.160 31.000 (100%) 8.4.A 39.D Sales Less cost of sales Gross profit Less expenses Net loss 20 100 145 (20) (60) 75 260 36.000 (2.$1.000 * 10%) Over 3 months (6.400 (14.B It helps in detecting errors.B 34.800 2.880) (40) 50.000) 5.000 ∗ 30%) SOFP total Provision b/f Credit income statement Total receivables Less provision 500 1. It should agree to the sales ledger.

so the errors will not be detected by taking out a trial balance.Only option D would generate a credit entry (This is also a repeat of Question 4 under “Practice Set 1”) 50.000 – 2. 45.000)/4 = 12.000/4 = 3.41.C 46.A .A Annual depreciation on the machine : Depreciable amount (14.D All of these entries. 49.D 48. Options B and C would imply that Y is a receivable of X and so can be ignored.D You are told that X is a receivable of Y. An investment is classified as a tangible non-current asset.C 43. Therefore X normally owes Y money.000 42. have equal postings to debit and credit. Option A would increase the debit entry.D 47. or lack of entries.A 44.