Monitoring Test 2

ACCA / FA
Financial
Accounting
ACCA / FA – MT2A

Time allowed 1 hour

ALL 25 questions are compulsory and MUST be attempted

Do NOT open this paper until instructed by the supervisor.

©2019 Barattson LLC

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 ALL 25 questions are compulsory and MUST be attempted.

1. Which of the following statements are true regarding to IAS 37 “Provisions, contingent liabilities and
contingent assets”:

1) Provision should be recognized, when it is probable that a transfer of economic benefits will be required to
settle the present obligation;
2) Increase in the amount of provision in subsequent period should be reflected as other income in the
Statement of Profit or Loss;
3) Expected value approach may be used for measurement of warranty provisions;
4) Contingent liabilities must only be recognized in the Statement of Financial Position, when outflow of
economic benefits is possible;

A) 2 and 3
B) 1 and 4
C) 2 and 4
D) 1 and 3

2. Mobtech Company sells mobile phones with a warranty under which customers are covered for the cost of
repairs of any manufacturing defect that becomes apparent within the next year of purchase. The Co’s past
experience and future expectations indicate the following pattern of likely repairs for the year ended at 31
December 20X8. 100 mobile phones were sold during the year.

% of mobile phones sold Defects Cost of repairs, $

40 Minor 3,000
50 None -
10 Major 5,500

Considering that, the Co’s warranty provision account had $300,000 credit balance brought forward,
how much amount should be stated in the Statement of Financial Position as at 31 December 20X8?

A) 125,000
B) 300,000
C) 175,000
D) 475,000

3. The trainee accountant recently joined to Mobtech Company prepared receivable control account for the month
ended at 31 October for review of finance manager of the Company, as indicated below:

Debit Credit
Cash sales to customers 10,000 5,500 Balance b/d
Irrecoverable debts written off 1,000 12,000 Sales to credit customers
Charge for overdue debts 2,000 4,000 Increase in loss allowance
Contra against payables 3,500 6,000 Discount received
Balance c/f 25,000 14,000 Cash paid by credit customers
41,500 41,500

What balance should be in receivables control account at 31 October, after correcting the errors?

A) 3,000
B) 9,000
C) 1,000
D) 7,000

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4. The trainee accountant recently joined to Zelda Company prepared payable control account for the month ended
at 30 June for review of finance manager of the Company, as indicated below:

Debit Credit
Purchases from credit suppliers 42,000 35,000 Balance b/d
Cash refund from credit suppliers 4,000 21,000 Payment to credit suppliers
Contra against receivables 8,000 6,000 Discount received
Discount allowed 7,000 11,000 Returns inwards
Returns outwards 14,000 2,000 Balance c/f
75,000 75,000

What balance should be in receivables control account at 30 June, after correcting the errors?

A) 24,000
B) 31,000
C) 32,000
D) 35,000

5. Zelda Company has $100,000 ordinary shares 25c each and 10% $200,000 redeemable preference shares as
at 01 July 20X8. During the year ended at 31 December 20X8, the following transactions took place:

At 05 July 20X8 the Co has declared an interim dividend of 3c per share and this dividend has not been paid till
31 December 20X8;
At 30 December 20X8 a final ordinary dividend of 4c per share was proposed;
At 31 December 20X8 the Co has paid the preference dividend on redeemable preference shares.

Based on information above, what should be recognized as a dividend at Statement of Changes of

Equity for the year ended at 31 December 20X8?

A) 12,000
B) 32,000
C) 28,000
D) 3,000

6. Comfort Company’s equity as at 31 December 20X9 is comprised of below accounts and balances:

Ordinary share capital $

Ordinary shares of 50c each 40,000

Share premium 30,000

During 20Y0 the Co made a rights issue of 2 shares for every 4 held at a premium of 20c per share. Later the Co
made a bonus issue of 3 shares for every 5 held, using the share premium account for this purpose.

Considering the transactions indicated above, what is the Co’s equity account as at 31 December 20Y0?

Ordinary share capital, $ Share premium, $

A) 96,000 2,000
B) 68,000 16,000
C) 84,000 14,000
D) 24,000 74,000

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7. Which of the following statements are true regarding according to IFRS?

1) Dividends paid on irredeemable preference shares are treated like dividends on ordinary shares;
2) Bonus issue can be used to expand the Company by involving more investment from shareholders;
3) Companies can’t make bonus issue of shares, if there is no sufficient balance in share premium;
4) Dividends paid on redeemable preference shares include into finance costs in Profit or Loss statement.

A) 1,3 and 4
B) 1,2 and 4
C) 1 and 4
D) 3 and 4

8. Which of the below lists include only transactions which appear on the credit side of the receivables
control account?

A) Discount allowed; irrecoverable debts written off; increase in loss allowance; cash received from credit
customers
B) Cash received from credit customers; discount allowed; irrecoverable debts written off; contra against
payables
C) Irrecoverable debts written off; contra against payables; cash refund to customers; discount allowed
D) Discount allowed; irrecoverable debts written off; recovery of bad debts; cash received from credit
customers

9. The accountant of Sugarrr Company has found below issues which caused a difference between the Co’s cash
book balance and bank statement balance as at 30 June 20X9:

1) Bank charges;
2) Deposits paid into bank before 30 June 20X9, but was not credited until 03 July 20X9;
3) Standing order;
4) Cheques sent to suppliers before 30 June 20X9, but not yet presented for payment;
5) Payment receipt of $56 was recorded as $65 in the cash book.

Which of the above items requires entry in cash book and bank reconciliation statement?

Cash book Bank reconciliation

A) 1,3 and 5 2
B) 1 and 3 2,4 and 5
C) 1, 3 and 5 2 and 4
D) 2 and 4 1,3 and 5

10. The credit side of a trial balance has totals $600 more than the debit side.

Which one of the following errors would fully account for the difference indicated above?

A) The bank overdraft account was overstated by $600 in the trial balance.
B) Discount allowed of $300 has been credited to discount received account.
C) $600 paid for maintenance of equipment has been correctly entered in cash book, however debited to
plant asset account.
D) Return outwards of $300 has been debited to return inwards account.

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11. The accountant of Flowerpots Company performed bank reconciliation and revealed below information:

- Cashbook indicated $4,300 overdrawn before taking below items into consideration;
- Standing order of $1,100 was omitted from records;
- Bank charges of $55 on the bank statements was not considered in the cashbook;
- A cheque of $115 from a customer had been dishonored by the bank;
- Cheques paid into bank account of $3,300 had not been entered by the bank and not stated in the bank
statement.

Based on information stated above, what was the balance in the bank statement before taking above
items into consideration?

A) 8,870 credit
B) 5,570 overdrawn
C) 5,570 credit
D) 8,870 overdrawn

12. Which of the following errors can be identified by examination of the Trial Balance?

1) Electricity bill of $35 was incorrectly debited to maintenance expense account;

2) Purchase of trade goods of $100 was only entered in the purchase control account;
3) Cash receipt of $12 from customer was omitted from the records;
4) Discount allowed of $20 was incorrectly debited to discount received account;
5) Invoice to customer of $89 was indicated as $98 in sales daybook.

A) Only 2
B) 2 and 5
C) 2,3 and 5
D) 2 and 4

13. Extracted Trial Balance of Flowerpots Company did not agree, thus Debit side was $3,300 more than the credit
side. The accountant opened suspense account for the difference and revealed below errors during examination
of the accounting records:

- An invoice for customer B for $350 had been considered in the account of customer C in error;
- $5,500 received for rent income from tenant has been correctly entered in the cashbook and credited to rent
account;
- Return outwards of $1,000 was debited to return inwards account;
- Payment to supplier of $450 was recorded twice in the cashbook;

Considering the information above, what will the balance be on the suspense account after making
relevant corrections for errors stated above?

A) 1,750 credit
B) 5,750 credit
C) 250 credit
D) 600 credit

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14. The suspense account opened by the accountant of Shoelice Company indicates a debit balance of $300.

Which error could cause this balance in the suspense account?

A) Purchase control account’s balance of $300 was omitted from the trial balance.
B) Bad debt from liquidated customer of $300 was failed to write-off in the records.
C) Discount allowed of $150 was credited to discount received account.
D) Cash payment to supplier of $150 was correctly entered in the payables control account, but entered
twice in the bank account.

15. Fishking Company has the following information regarding to movement in its inventory for the year ended at 31
December 20X9:

Amount, $

Opening inventory 159,600

Purchases 221,000
Closing inventory 67,400

The Company applies profit margin of 20% to all of its sales.

What is sales revenue figures based on above information?

A) 313,200
B) 375,840
C) 391,500
D) 78,300

16. The financial statements of Fishking Company for the year ended at 31 December 20X9 was authorized on 28
February 20Y0. But before they were authorized, below events happened:

1) On 22 February 20Y0, the customer with an outstanding receivables balance of $3,000 went into liquidation;
2) On 30 January 20Y0, a final ordinary dividend for year 20X9 was declared by 5c for each share held;
3) On 11 March 20Y0, the court case based on customer’s claim against the Company was won by the
Company, which relevant provision was included in the financial statements for year 20X9;
4) On 10 February 20Y0, massive fire in the warehouse occurred and half of inventory kept was burnt.

How should above events be treated by the Company regarding to IAS 10 “Events after the reporting
period”?

A) Adjusting – 1,2 and 3; Non-adjusting – only 4

B) Adjusting – 1 and 2; Non-adjusting – 3 and 4
C) Adjusting – only 1; Non-adjusting – 2,3 and 4
D) Adjusting – only 3; Non-adjusting – 1,2 and 4

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17. Which of the following is correct regarding to Cash Flows Statement?

1) A loss on disposal of property, plant and equipment should be deducted from profit under operating
activities;
2) A cash generated from right issue is stated under investing activities;
3) Increase in revaluation surplus account should not be included in cash flows statement;
4) Decrease in inventories comparing to previous period should be indicated as cash inflows under operating
activities.

A) 1 and 4
B) 2 and 4
C) 3 and 4
D) 2 and 3

18. Goodfood Company obtained $5,000 profit for the year ended at 31 December 20X8. The following extract is
from the Statement of Financial Position for current and previous year:

31 December 20X8, $ 31 December 20X7, $

Trade receivables 1,000 4,000

Inventories 3,000 1,000
Cash at bank 1,500 6,000
Trade payables 10,000 9,500
Bank overdraft 400 500

Based on information above, what amount for net cash flows under operating activities should be?

A) 3,500 outflow
B) 1,500 inflow
C) 2,900 outflow
D) 2,100 inflow

19. The following extract is from the Statement of Financial Position of Sugarrr Company at 31 December:

31 December 20X8, $ 31 December 20X7, $

Share Capital 10,000 4,000

Share Premium 18,000 8,000
Revaluation Surplus 4,500 1,500
Retained Earnings 76,000 68,000
Bank Loan 20,000 24,000

Based on information above, what net cash flows from financing activities should be disclosed in Cash
Flows Statement for the year ended at 31 December 20X8? No dividend was declared and paid.

A) 1,000 inflow
B) 23,000 inflow
C) 20,000 inflow
D) 12,000 inflow

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20. Which of the following statements is correct regarding to consolidated financial statements and parent
subsidiary relationship?

1) Having more than fifty percent of shares is enough to obtain control over the entity and consolidate it as a
subsidiary;
2) There are no grounds to be exempt from presentation of consolidated financial statements by not
consolidating subsidiaries;
3) Only subsidiaries’ post acquisition reserves can be combined with the Parent’s reserves under equity
section of the Consolidated Statement of Financial Position;
4) Intra group receivables and payables should be eliminated in the Consolidated Statement of Financial
Position;
5) Share capital and share premium of Parent and subsidiaries should be combined in the Consolidated
Statement of Financial Position.

A) 2, 3 and 4
B) 3 and 4
C) 1,4 and 5
D) 2 and 4

21. Profood Company purchased 60% shares of Seafood Company at 1 May 20X8 for $300,000, and obtained
control over the Company. Seafood Company’s retained earnings was $50,000 and $86,000 as at 1 January
20X8 and 31 December 20X8 respectively. Share capital of Seafood Company was $40,000 at acquisition and
remained unchanged at consolidation date. The fair value of non-controlling interest at 1 May 20X8 was
$200,000. During the year, Profood Company sold $10,000 goods to Seafood Company and earned profit of
$2,000. All goods were still in the warehouse of Seafood Company at 31 December 20X8.

What is the amount for Goodwill in the Consolidated Statement of Financial Position as at 31 December
20X8?

A) 410,000
B) 400,000
C) 396,000
D) 398,000

22. Considering that, Profood Company’s retained earnings was $102,000 and $110,000 as at 1 January
20X8 and 31 December 20X8 respectively, what is the amount for Consolidated Reserves in the
Consolidated Statement of Financial Position as at 31 December 20X8, based on question 21 above?

A) 122,400
B) 123,200
C) 129,600
D) 114,400

23. What is the amount for Non-Controlling Interest in the Consolidated Statement of Financial Position as
at 31 December 20X8, based on question 21 above?

A) 208,800
B) 214,400
C) 209,600
D) 213,600

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24. Plastic Company purchased 70% of ordinary shares of Synthetic Company at 1 August 20X7 for $80,000. There
were $3,000 goods remained at warehouse of Plastic Company, all purchased from Synthetic Company after
acquisition of shares. All sales by Synthetic Company are performed by making mark-up of 20% on the cost of
goods. Below extract is taken from the Statement of Profit or Loss of both Companies as of 31 December 20X7:

P&L line item Plastic Company, $ Synthetic Company, $

Revenue 30,000 17,000

Cost of sales (21,000) (8,000)
Other expenses (1,000) (3,000)
Net profit 8,000 6,000

What is the Profit to Parent and Profit to NCI in the Consolidated Statement of Profit or Loss for the year
ended at 31 December 20X7?

Profit to Parent, $ Profit to NCI, $

A) 9,400 600
B) 9,250 750
C) 11,850 1,650
D) 11,700 1,800

25. The following information was extracted from the Statement of Financial Position of Plastic Company as at 31
December 20X9:

Amount, $

Trade receivables 5,000

Loss allowance 1,000
Inventories 6,000
Cash at bank 12,000
Bank overdraft 2,000
Trade payables 8,000
Long-term bank loan 2,000

Based on information above, what is quick ratio of the Company?

A) 2.2:1
B) 1.3:1
C) 1.6:1
D) 2.3:1

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