1

At 30 June 2005 a compan allowance for receivableswas $39,000. At 30 June 2006 trade receivablestotalled ys $517,000. It was decided to write off debts totalling $37,000 and to adjust the allowance for receivablesto the equivalentof 5 per cent of the trade receivablesbased on past events. What figure should appear the incomestatem entfor the year ended 30 June 2006 for these item s? in A B C D $61,000 $22,000 $24,000 $23,850

In tim es of risingprices,w hat effect doesthe use of the historicalcost concepthave on a com pan assetvalues ys and profit? A B C D Asset values and profit both understated Asset values and profit both overstated Asset values understatedand profit overstated Asset values overstatedand profit understated.

The IASBs Framework for the preparation and presentation of financial statements gives qualitative characteristics that make financial information reliable. W hich of the follow ingare exam plesof thosequalitativecharacteristics? A B C D Faithful Representatio neutrality and prudence n, Neutrality, comparability and true and fair view Prudence,comparability and accruals Neutralit , accruals and going concern y

W hich of the followingcalculatesa trade net profit for a period? rs A B C Closing net assets+ drawings capital introduced opening net assets Closing net assets drawings + capital introduced opening net assets Closingnet assets drawings capital introduced opening net assets

D Closing net assets + drawings + capital introduced opening net assets. 5 The debit side of a compan trial balance totals $800 more than the credit side. ys W hich one of the follow ingerrorsw ould fully accountfor the difference? A B C D 6 $400 paid for plant maintenance has been correctly entered in the cash book and credited to the plant asset account. Discount received$400 has been debited to discount allowed account A receipt of $800 for commission receivablehas been omitted from the records The petty cash balance of $800 has been omitted from the trial balance.

A compan income statement for the year ended 31 December 2005 showed a net profit of $83,600. It was ys later found that $18,000 paid for the purchaseof a motor van had been debited to the motor expensesaccount. It is the compan policy to depreciatemotor vans at 25 per cent per year on the straight line basis, with a full years ys charge in the year of acquisition. What would the net profit be after adjustingfor this

erro r?A $106,100 B C D $70,100 $97,100 $101,600

7 Shoulddividendspaid appearon the face of a com pan incomestatem ent? ys A B Yes No

8 At 31 December2004 Q, a limited liability company, owned a building that cost $800,000 on 1 January 1995. It was being depreciatedat two per cent per year. On 1 January 2005 a revaluationto $1,000,000 was recognized. At this date the building had a remaining useful life of 40 years. What is the depreciation chargefor the year ended 31 December2005 and the revaluationreserve balanceas at 1 Janua 2005? ry Depreciation charge Revaluation reserve for year ended 31 December2005 as at 1 January 2005 $ $ A 25,000 200,000 B C D 25,000 20,000 20,000 360,000 200,000 360,000

9 W hich of the follow ingcosts should be includedin valuing the inventoriesof a manufacturing company? (1) Carriageinwards (2) Carriageoutwards (3) Depreciationof factory plant (4) Generaladministrativeoverheads A B C D All four items 1, 2 and 4 only 2 and 3 only 1 and 3 only

10 W hich of the followingare differences between tradersand limited liability companies? sole (1) A sole tradersfinancial statementsare private; a compan financial statementsare sent to shareholdersand ys may be publicly filed (2) Only companieshave capital invested into the business (3) A sole trader is fully and personallyliable for any lossesthat the businessmight make; a compan ys shareholdersare not personallyliable for any lossesthat the company might make. A B C D 1 and 2 only 2 and 3 only 1 and 3 only 1, 2 and 3

11 W hich of the followingjournalentriesare correct,according their narratives? to Dr CR $ $ 1 Suspenseaccount 18,000 Rent receivedaccount 18,000 Correctionof error in posting $24,000 cash receivedfor rent to the rent receivedaccount as $42,000 2 Share premium account 400,000 Share capital account 1 for 3 bonus issue on share capital of 1,200,000 50c shares 400,000

Trade investment in X 750,000 Share capital account 250,000 Share premium account 500,000 500,000 50c sharesissued at $1.50 per share in exchangefor sharesin X 1 and 2 2 and 3 1 only 3 only

A B C D

12 The plant and machine account (at cost) of a business for the year ended 31 December2005 was as follows: ry Plant and machinery cost 2005 $ $ 1 Jan Balance 240,00 31 March Transfer disposal account 60,00 0 0 30 June Cash purchaseof plant 160,00 31 Dec Balance 340,00 0 0 400,00 400,00 0 0 The compan policy is to charge depreciationat 20% per year on the straightline basis, with proportionate ys depreciation in the years of purchaseand disposal. What shouldbe the depreciation chargefor the year ended 31 December2005? A B C D $68,000 $64,000 $61,000 $55,000 2005

13 W hich of the followingshouldappearin a com pan statem entof changesin ys equity? 1 2 3 A B C D Profit for the financial year Amortisation of capitaliseddevelopmentcosts Surplus on revaluationof non-current assets All three items 2 and 3 only 1 and 3 only 1 and 2 only

14 A fire on 30 Septemberdestroyedsome of a compan inventory and its inventory records. ys The following information is available: Invento 1 September ry Sales for September Purchasesfor September Invento in good conditionat 30 September ry $ 318,00 0 612,00 0 412,00 0 214,00 0

Standardgross profit percentageon sales is 25% Basedon this inform ation, what is the value of the inventoy lost? r A B C $271,000 $26,400

$96,000

D $57,000 15 At 31 December2004 a compan capital structure was as follows: ys $ Ordina share capital ry (500,000 shares of 25c each) Share premium account 125,000 100,000

In the year ended 31 December 2005 the company 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 the company made a bonus issue of 1 share for every 5 held, using the share premium account for the purpose. What was the compan capital structureat 31 December2005? ys Ordinary share capital Share premium account $ $ A 450,000 25,000 B C D 225,000 225,000 212,500 250,000 325,000 262,500

16 The invento value for the financial statementsof Q for the year ended31 May 2006 was based on an inventory ry count on 4 June 2006, which gave a total invento value of $836,200. ry Between 31 May and 4 June 2006, the following transactionstook place: Purchasesof goods Sales of goods (profit margin 30% on sales) Goodsreturned by Q to supplier $ 8,600 14,000 700

What adjustedfigure shouldbe includedin the financialstatementsfor inventories 31 May 2006? at A B C D $838,100 $853,900 $818,500 $834,300

17 At 31 December2005 the following require inclusion in a companys financial statements: (1) On 1 January 2005 the company made a loan of $12,000 to an employee, repayable on 1 January 2006, charging interest at 2 per cent per year. On the due date she repaid the loan and paid the whole of the interest due on the loan to that date. (2) The company has paid insurance $9,000 in 2005, coveringthe year ending 31 August 2006. (3) In January 2006 the company received rent from a tenant $4,000 covering the six months to 31 December 2005. For these item s, what total figuresshouldbe includedin the compan balancesheet at 31 December2005? ys Current assets Current liabilities $ $ A 10,000 12,240 B C D 22,240 10,240 16,240 nil nil 6,000

18 Alpha receiveda statementof account froma supplier Beta, showinga balanceto be paid of $8,950. Alphas payables ledger account for Beta shows a balance due to Beta of $4,140. Investigationrevealsthe following: (1) Cash paid to Beta $4,080 has not been allowed for by Beta (2) Alphas ledger account has not been adjusted for $40 of cash discount disallowed by Beta. What discrepancy rem ainsbetween Alphasand Betas recordsafter allowingfor these items? A B C D $690 $770 $9,850 $9,930

19 The business entity concept requiresthat a businessis treated as being separatefrom its owners. Is this statem enttrue or false? A B True False

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Theta prepares its financial statements for the year to 30 April each year. The company pays rent for its premises quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The annual rent was $84,000 per year until 30 June 2005. It was increasedfrom that date to $96,000 per year. What rent expenseand end of year prepayment shouldbe includedin the financialstatem ents the year ended for 30 April 2006? A B C D Expense $93,000 $93,000 $94,000 $94,000 Prepayment $8,000 $16,000 $8,000 $16,000

D 21 Mountain sells goods on credit to Hill. Hill receivesa 10% trade discount from Mountain and a further 5% settlement discount if goods are paid for within 14 days. Hill bought goods with a list price of $200,000 from Mountain. Sales tax is at 17.5%. What am ountshouldbe includedin M ountai receivables ns ledgerfor this transaction? A B C $211,500 $200,925 $235,000 $20 9,9 25

22 A company receivesrent from a large number of properties. The total receivedin the year ended 30 April 2006 was $481,200. The following were the amounts of rent in advanceand in arrearsat 30 April 2005 and 2006: 30 April 2005 $ 28,700 21,200 30 April 2006 $ 31,200 18,400

Rent receivedin advance Rent in arrears(all subsequently received) What amount of rental income shouldappear in the compan income statementfor the year ended 30 April ys 2006? A B C D $486,500 $460,900 $501,500 $475,900

23 Annie is a sole trader who does not keep full accounting records.The following details relate to her transactionswith credit customersand suppliers for the year ended 30 June 2006: $ Trade receivables,1 July 2005 130,00 060,00 Trade payables,1 July 2005 0 Cash receivedfrom customers 686,40 0 Cash paid to suppliers 302,80 0 1,40 Discounts allowed 0 Discounts received 2,96 0 Contra between payablesand receivablesledgers 2,00 0 Trade receivables,30 June 2006 181,00 084,00 Trade payables,30 June 2006 0 What figure shouldappearin Anniesincom estatem entfor the year ended 30 June 2006 for p urchases? A B C D $331,760 $740,800 $283,760 $330,200

24 The bookkeeperof Field made the following mistakes: Discounts allowed $3,840 was credited to the discounts receivedaccount Discounts received$2,960 was debited to the discounts allowed account W hich journalentry will correctthe erro rs? A Discounts allowed Discounts received Suspenseaccount Discounts allowed Discounts received Suspenseaccount Discounts allowed Discounts received Discounts allowed Discounts received Suspenseaccount DR $7,680 CR $5,920 $1,760 $880 $880 $1,760 $6,800 $6,800 $3,840 $2,960 $880

C D

25 The total of the list of balancesin Valleys payablesledgerwas $438,900 at 30 June 2006. This balance did not agree with Valleys payablesledger control account balance. The following errors were discovered: 1 2 3 A contra entry of $980 was recordedin the payables ledger control account, but not in the payablesledger. The total of the purchasereturns daybook was undercastby $1,000. An invoice for $4,344 was posted to the supplie account as $4,434. rs

What am ountshouldValley report in its balancesheet as accountspayableat 30 June 2006? A B C D $436,830 $438,010 $439,790 $437,830

26 Gareth,a sales tax registeredtrader purchaseda computerfor use in his business.The invoice for the computer showed the following costs relatedto the purchase: $ 89 09 5 1 0 2 0 2 5 1,04 0 18 Sales tax (17.5%) 2 Total 1,22 2 How m uch shouldGareth capitaliseas a non-current assetin relationto the Computer Additional memory Delivery Installation Maintenance(1 year) purchase? A B C D $1,040 $890 $1,015 $1,222

27 What is the correctdoubleentry to recordthe depreciationchargefor a period? A DR Depreciationexpense CR Accumulateddepreciation

DR Accumulateddepreciation CR Depreciationexpense

28 A company values its inventory using the first in, first out (FIFO) method. At 1 May 2005 the company had 700 engines in inventory, valued at $190 each. During the year ended 30 April 2006 the following transactionstook place: 2005 1 July 1 November 2006 1 February 15 April Purchase d Sold Purchase d Sold 500 engines at $220 400 engines each for $160,000

300 engines at $230 250 engines each for $125,000 What is the value of the com pan s closinginvento of enginesat 30 April 2006? y ry A B C D $188,500 $195,500 $166,000 $106,000

29 A compan motor vehicles at cost account at 30 June 2006 is as follows: ys Motor vehicles cost $ $ Balance b/f 35,80 Disposal 12,00 0 0 Additions 12,95 Balance c/f 36,75 0 0 48,75 48,75 0 0 W hat openingbalance should be included in the followingperiodstrial balance for motor vehicles cost at 1 July 2006? A B C D $36,750 DR $48,750 DR $36,750 CR $48,750 CR