Which of the following are differences between sole traders and limited liability companies 1 A sole traders’ financial statements are private; a company’s financial statement are sent t
Trang 1F3/FFA Financial Accounting
Mock Exam with Answer
SAPP Academy
Trang 2F3/FFA Financial Accounting Mock Exam
This paper is divided into two sections:
Section A - ALL 35 questions are compulsory and MUST be attempted Each question carries 2 marks Section B - BOTH questions are compulsory and MUST be attempted Each question carries 15 marks You have two hours in which to complete the exam
Trang 3SECTION A – Thirty-five questions, both of which MUST be attempted
1 Which of the following are differences between sole traders and limited liability companies (1) A sole traders’ financial statements are private; a company’s financial statement are sent to shareholders and are publicly filed
(2) Only companies have capital invested into the business
(3) A sole trader is fully and personally liable for any losses that the company might make
A- 2 and 3 only
B- 1 and 3 only
C- 1 and 2 only
D- 1,2,3
2 The purpose of a statement of financial position is to show
A- The assets of the business and the claims against those assets
B- A clear and definite estimate of what a business is really worth
C- The amount the business could be sold for in liquidation
D- The amount the business could be sold for as a going concern
3 The separate entity concept requires that a business is treated as being separate from its
Rent received in advance $68,880 $74,880
Rent in arrears (all subsequently received) $50,880 $44,160
What amount of rental income should appear in the company’s Statement of Profit or Loss for the year ended 30 April 2008?
A- $1,106,160
B- $1,203,600
C- $1,142,160
D- $1,167,600
Trang 45 Vine sublets part of its office accommodation The rent is received quarterly in advance on 1 January, 1 April, 1 July, and 1 October each year
The annual rent was $24,000, but was increased to $30,000 from 1 July 2005
What amounts for rent should appear in the company’s financial statements for the year ended 31January 2006?
Statement of profit or loss: Income of $27,000/$27,500
Statement of financial position: prepaid income/accrued income of $2,500/$5,000
6 On 1 May 2010, Jonas paid a rent bill of $1,800 for the period to 30 April 2011
What is the expense in the Statement of profit or loss, and the entry in the Statement of
financial position, for the year ended 30 November 2010?
$750/$1,050/$1,800 expense in the Statement of profit or loss, and a prepayment/accrual of
$750/$1,050/$Nil on the Statement of financial position
7 At 31 October 2013 a business had machines with a cost of $120,000 and with accumulated depreciation of $25,000
On 1 January 2014 they sold a machine for $10,000 This machine had originally cost $30,000 on
1 April 2012
The business had a depreciation policy of charging straight-line depreciation at the rate of 20% per annum, on a monthly basis
What is the depreciation expense for the year ended 31 October 2014?
8 What is the purpose of charging depreciation in accounts?
A- To ensure that funds are available for the eventual replacement of the asset
B- To reduce the cost of the asset in the Statement of financial position to its estimated market value
C- To replace the cost of the asset with its estimated replacement value
D- To allocate the cost less residual value of a non-current asset over the accounting periods expected to benefit from its use
9 A non-current asset was purchased at the beginning of year 1 for $2,400 and depreciated by 20% per annum using the reducing balance method
At the beginning of year 4 it was sold for $1,200
(Choose the correct answers)
The result of this was;
28.80/240.00 loss on disposal/profit on disposal
Trang 510 According to IAS2 Inventories, which of the following costs should be included in valuing the inventories of a manufacturing company?
(Tick all that apply)
A- General administrative overheads
The invoice for the goods was recorded in July 2013
What effect will this have had on the business?
A- Inventory at 30 June will be understated
B- Inventory at 30 June 2013 will be overstated
C- Profit for the year ended 30 June 2013 will be overstated
D- Profit for the year ended 30 June 2014 will be overstated
12 Apple has her own business selling dolls to stores At 30 June 2013 she has a balance on her trade receivables of 60,900
A balance of $2,000 due from X Co is considered irrecoverable and is to be written off Y Co was
in financial difficulty and Apple wishes to provide an allowance for 60% of their balance of
$1,600 She has also decided to make a general allowance for receivables of 10% of her
remaining trade receivables
What is the allowance for receivables in her Statement of financial position at 30 June 2013?
13 At 30 June 2005, a company’s allowance for receivables was $39,000
At 30 June 2006, trade receivables totaled $517,000 and it was decided to write of debts
Trang 614 At 1 July 2010, a company’s receivables amount $838,000 It was decided to write off $72,000 of these debts as irrecoverable and to adjust the allowance for receivables to $60,000
What are the final amounts for inclusion in the company’s statement of financial position at 30 June 2011?
Receivables 766,000/838,000
Less: Allowance for receivables 108,000/60,000
Net amount 706,000/730,000/658,000/778,000
15 Which of the following statements are correct?
(Tick all that apply)
A- A company must disclose its significant accounting policies by way of a note to its financial statements
B- A company’s statement of changes in equity must include the proceeds of any share issue during the period
C- A company’s issued share capital must be included in its published Statement of financial position as part of shareholders’ funds
D- If a company makes a bonus issue of ordinary shares, the total shareholders interest (share capital plus reserves) remains unchanged
16 Which of the following may appear as liabilities in a company’s statement of financial position? (Choose all that apply)
A- Tax payable
B- Allowance for receivables
C- Loan due for repayment within one year
D- Trade payables
17 On 1 January 2013, the capital structure of Q, a limited liability company, was as follows:
Share capital (1,000,000 ordinary shares of 50c each) $500,000
Share premium $300,000
On 1 April 2013 the company made a rights issue of 200,000 50c shares at $1.30 each, and on 1 July made a bonus issue of 1 share for every 4 in issue at that time, using the share premium account for this purpose
What are the balances on the accounts after the bonus issue?
(Choose the correct answers)
Share capital account $875,000/$750,000
Share premium account $610,000/$285,000/$310,000/$230,000
Trang 718 Which of the following statement regarding the Statement of profit or loss for a limited
company, is correct?
Accounting standards define the expenses which are reported under ‘cost of sales’
‘Depreciation’ appears as a separate heading
Irrecoverable debts written off will be included under one of the statutory expense headings (usually administrative expenses)
Interest payable is subtracted from the profit after taxation
19 Which of the following statements about bank reconciliations are correct?
(1) In preparing a bank reconciliation, unpresented cheques must be deducted from a balance of cash at bank shown in the bank statement
(2) A cheque from a customer paid into the bank but dishonoured must be correctly by making a debit entry in the cash book
(3) An error by the bank must be corrected by an entry in the cash book
(4) An overdraft is a debit balance in the bank statement
What is the correct balance?
A- $15,480 overdrawn
B- $15,000 overdrawn
C- $12,240 overdrawn
D- $14,400 overdrawn
Trang 822 Silver Co made sales of $193,200 during the year ended 31 August X1 Inventory decreased by
$13,200 over the year and all sales were made at a mark up of 42%
What was the cost of purchases during the year, to the nearest $1,000?
A- $149,000
B- $123,000
C- $109,000
D- $136,000
23 The credit column of a trial balance is $1,200 more than the debit column
Which of the following errors would fully account for the difference?
A- No entries had been made for the purchase of goods costing $1,200
B- The debit side of the cash account had been over-added by $1,200
C- Cash sales of $600 had been correctly entered in the sales account, and credited to the cash account
D- A payments of 1,200 for electricity had been correctly, and credited to the electricity
account
24 Which of the following correctly describes the entry in the receivables account for a sale by a trader who is registered for sales tax?
A- Credit with the total of sales made, including sales tax
B- Debit with the total of sales made, excluding sales tax
C- Credit with the total of sales made, excluding sales tax
D- Debit with the total of sales made, including sales tax
25 Alison is not registered for sales tax purposes
She has recently received an invoice for goods for resale which cost $500 before sales tax, which
is charged at 15% The total cost was therefore $575
What is the correct entry to be made in Alison’s ledger in respect of this invoice?
A- DR Purchases $575; CR Payables $575
B- DR Purchase $575; CR Sales tax $75; CR Payables $500
C- DR Purchases $500; CR Payables $500
D- DR Purchases $500; DR Sales tax $75; CR Payables $575
26 Which of the following material events after the reporting period and before the financial
statements are approved are adjusting events?
(Select all that apply)
A- A customer owing $200,000 went bankrupt
B- Some inventory valued in the statement of financial position at $300,000 was sold for
$250,000
C- A factory with a value of $1,000,000 was destroyed by fire
D- The company issued 2,000,000 ordinary shares
Trang 927 What is the role of the International Financial Reporting Interpretations Committee?
A- To issue guidance on the application of International Financial Reporting Standards
B- To create a set of global accounting standards
28 Should details of material adjusting or material non-adjusting events after the Statement of Financial Position date be disclosed in the notes to financial statements according to IAS10
Events after the reporting period?
A- Adjusting events
B- Non-adjusting events
29 Which of the following statements are correct?
(1) Materiality means that only items having a physical existence may be recognized as assets (2) The substance over form convention means that the legal form of a transaction must always
be shown in financial statements even if this differs from the commercial effect
(3) The money measurement concept is that only items capable of being measured in monetary terms can be recognized in financial statements
Trang 1031 Part of a company’s Statement of cash flows is shown below:
Which two of the following criticism of the above are valid?
A- Proceeds of sale of non-current assets should not appear in this part of the Statement of cash flows
B- Increase in payables should have been subtracted, not added
C- Increase in inventory should have been added, not subtracted
D- Depreciation charges should have been added, not subtracted
Trang 1133 On 1 January 2009, X paid $21,600 to acquire 90% of the ordinary shares of y which was
incorporated on that date
At 31 December 2010 the statements of financial position of the each of the two companies were as follows
B- $24,000
C- $ nil
D- $19,500
34 On 1 January 2009, X paid $21,600 to acquire 90% of the ordinary shares of y which was
incorporated on that date
At 31 December 2010 the statements of financial position of the each of the two companies were as follows
Trang 1235 On 1 January 2009, X paid $21,600 to acquire 90% of the ordinary shares of y which was
incorporated on that date
At 31 December 2010 the statements of financial position of the each of the two companies were as follows
Trang 13SECTION B – Two questions, both of which MUST be attempted
During the year Alice had transferred goods to Bertha for $45,000 – this figure includes a
mark-up of 50% Two thirds of these goods remained in inventory at the year end
The balance on the current account between Alice and Bertha was $53,000 at the year end The fair value of the non-controlling interest at the date of acquisition was $10,000
You are required to prepare a consolidated statement of financial position
On this and the following pages, you will be required to answer several questions from your statement The marks available for each part will be shown on each page
Trang 14The following financial statements of Downton plc for the year ended 31 December 2013
Statement of financial position as at 31 December 2013
Trang 15Statement of profit or loss for the year ended 31 December 2013
$’000
The depreciation expense for the year was $8,200,000
No dividend was paid during the year
You are required to prepare the Statement of cash flows for the year ended 31 December 2013
Complete the following (6 marks)
Cash generated from operations:
Profit before/after tax
Add/Less Depreciation 8,200,000
Add/Less Change in inventory 4,200,000
Add/Less Change in receivables 1,300,000
Add/Less Change in payables 2,200,000
Cash generated from operations
Complete the following
Cash flows from financing activities
Issue of shares
Loan
Trang 16Question 6 (2 marks)
Choose the correct answers:
In preparation of this Statement of cash flows, we have used the direct/ indirect method in arriving at the cash generated from operations
Had we used the alternative method, we would have arrived at the same/different answer
Trang 17KEYS FOR SOLUTIONS
Trang 1810 B,C
Carriage inwards and depreciation of factory machines should be included
(Carriage outwards is a delivery cost; General admin overheads are an administrative cost)
11 C
The goods were correctly included in inventory
The invoice should also have been included Because it had not been, purchases have been understated and therefore profit overstated
The right issue is of 200,000 shares
Share capital increases by 200,000 x $0.50 = $100,000
Share premium increases by 200,000 x $0.80 = $160,000
The bonus issue is of ¼ x 1,200,000 = 300,000 shares
Trang 19The error that would fully account for the difference is if cash sales of $600 had been
correctly entered in the sales account, and credited to the cash account
24 D
Debit receivables (with the full amount, including sales tax)
Credit sales (with the net amount, excluding sales tax)
Credit sales tax (with the amount of the sales tax)
25 A
Alison is not registered for sales tax and therefore the entry is
Debit Purchases 575; Credit Payables 575
Adjusting events should be adjusted for
Non-adjusting events should be disclosed as notes
Trang 20Depreciation charges should have been added, not subtracted
Proceeds of sale of non-current assets should not appear in this part of the Statement of cash flows
35 Fair value @ date of acquisition (10% x 24,000) 2,400
Share of post-acquisition earnings (10% x 19,500) 1,950
4,350
SECTION B – Two questions, both of which MUST be attempted
Question I
Question 1
Consideration paid by Alice 85,000
Fair value of non-controlling interest 10,000
95,000
Share capital of Bertha 12,000
Pre-acquisition retained earnings 12,000
24,000
Goodwill = 95,000 – 24,000 = $71,000
Question 2
Retained earnings of Alice (189,000 – 10,000) 179,000
Alice’s share of post-acquisition earnings of Bertha 54,000
90% x (72,000 – 12,000)