Certified Accounting Technician examination

Sample multiple choice questions – June 2009

Paper T6 (INT)
Drafting Financial Statements

Section A only
All questions are compulsory

Note: Section B of the actual exam paper will contain three written questions
The following questions are typical of those that will appear in Section A of the examination paper from June 2009
onwards. There will be a total of ten questions in section A.
All questions in Section A will be worth two marks each.

1 Aye and Bee are in partnership sharing profits and losses in the ratio 3:2 respectively. The partners’ capital and current
account balances at the beginning of the year were as follows:
Aye Bee
$ $
Current accounts 7,500CR 2,100CR
Capital accounts 12,000CR 9,000CR
The partnership made a profit of $100,000 for the year. Aye’s drawings were $9,200, and Bee’s were $7,320.
What should Aye’s current account balance be at the end of the year?
A $67,500
B $58,300
C $76,700

D $16,700
(2 marks)

2 At 1 May 2009 Tibor purchased six million of Kinnot’s ten million $1 ordinary shares for $6,000,000. At that date
Kinnot had net assets with a fair value of $8,450,000 and its share price was $1.10. It is group policy to value the
non-controlling interest at the fair value of the subsidiary’s identifiable net assets using the market value of the shares
at acquistion.
What is the total goodwill on acquisition of Kinnot?
A $930,000
B $2,450,000
C $1,550,000
D $1,950,000
(2 marks)

3 Which of the following four statements are correct?

A If all the conditions specified in IAS 38 Intangible assets are met, the directors can chose whether to capitalise the
development expenditure or not.
B Amortisation of capitalised development expenditure will appear as an item in a company’s statement of changes
in equity.
C Capitalised development costs are shown in the statement of financial position as non-current assets.
D Capitalised development expenditure must be amortised over a period not exceeding five years.
(2 marks)

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4 According to IAS I Presentation of Financial Statements, which of the following items could appear in the statement
of changes in equity:
(1) Total comprehensive income for the year
(2) Dividends
(3) Loss on sale of investments.
(4) Issue of share capital
A 1, 2 and 4 only
B 1, 3 and 4 only
C 1 and 3 only
D 1, 2, 3 and 4
(2 marks)

5 A property company received cash for rent totalling $628,950 in the year ended 31 May 2009. Figures for rent in
advance and in arrears at the beginning and end of the year were:
31 May 2008 3
1 May 2009
$ $
Rent received in advance 76,950 66,525
Rent in arrears (all subsequently received) 31,725 36,300
What amount should appear in the company’s income statement for the year ended 31 May 2009 for rental
income?
A $613,950
B $634,800
C $623,100
D $643,950
(2 marks)

6 According to IAS 10 Events after the Reporting Period, which of the above material events which occurred after
the reporting date, require an adjustment to the figures in the financial statements?
(1) An issue of shares to finance expansion.
(2) A fire destroying some of the company’s inventory (the company’s going concern status is not affected).
(3) Sale for less than cost of some old inventory held at the reporting date
(4) The bankruptcy of a major customer, with a substantial debt outstanding at the reporting date.
A 3 and 4 only
B 1, 2 and 3
C 2 and 3 only
D 2 and 4 only
(2 marks)

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7 Which of the following statements are correct?
(1) The money measurement concept is that only items capable of being measured in monetary terms can be
recognised in financial statements.
(2) Materiality means that only physical assets are recognised in the financial statements.
(3) In times of rising prices, the use of historical cost accounting tends to understate assets and overstate
profits.
A 1 only
B 2 only
C None of the statements
D 3 only
(2 marks)

8 When calculating a company’s gearing ratio which of the following factors would cause it to fall?
(1) A rights issue of ordinary shares.
(2) An issue of loan notes.
(3) An upward revaluation of non-current assets.
A 1 only
B 1 and 2
C 2 and 3
D 1 and 3
(2 marks)

9 Steve and Paul are in partnership and share profits equally. Steve receives an annual salary $30,250 and interest on
capital is paid at 5% per year.
At 1 June 2008 their capital balances were:
$
Steve 150,000
Paul 75,000
On 1 December 2008 Paul introduced a further $75,000 capital, and Steve’s salary was discontinued. The partnership
profit for the year ended 31 May 2009 was $228,250.
What was Steve’s total profit share for the year ended 31 May 2009?
A $100,000
B $99,000
C $122,625
D $105,625
(2 marks)

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10 At 31 May 2008 Stoneacre’s capital structure was as follows:
$
Ordinary share capital (1,000,000 shares of 25c each) 250,000
Share premium account 200,000
In the year ended 31 May 2009 Stoneacre made a rights issue of 1 share for every 2 held at $1 per share and this
was taken up in full.
Later in the year Stoneacre made a bonus issue of 1 share for every 10 held, using the share premium account for the
purpose.
What was the company’s capital structure at 31 May 2009?
Ordinary share capital Share premium account
$ $
A 387,500 187,500
B 412,500 537,500
C 387,500 550,000
D 400,000 550,000
(2 marks)

End of Sample Questions

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Answers

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Sample Multiple Choice Question Paper T6 (INT) Answers
Drafting Financial Statements

1 B
$
Opening balance 7,500
Profit share (100,000 x 3/5) 60,000
Drawings (9,200)

Closing current account balance 58,300

2 D
$
Consideration transferred 6,000,000
Fair value of non-controlling interest 4,000,000 x $1.10 4,400,000

10,400,000
Less fair value of net assets at acquistion (8,450,000)

Goodwill = 1,950,000

3 C

4 A

5 D 628,950 + (76,950 – 31,725) – (66,525 – 36,300) = 643,950

6 A

7 A

8 D

9 C
Steve Paul
$ $ $
Profit 228,250
Salary (30,250 x ½) 15,125 (15,125)
Interest on capital (150,000 x 5%) 7,500 (7,500)
(75,000 x 5% x ½) 1,875
(150,000 x 5% x ½) 3,750 (5,625)

Profit share 100,000 100,000 200,000
Total profit share 122,625 105,625

10 B
Share capital Share premium
$ $
Opening balance 250,000 200,000
Rights issue (1,000,000 x 1/2 x 25c) 125,000
(1,000,000 x 1/2 x 75c) 375,000
Bonus issue (1,500,000 x 1/10 x 25c) 37,500
(1,500,000 x 1/10 x 25c) (37,500)
Total 412,500 537,500