Mock 2

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Section A ALL FIFTY questions are compulsory and MUST be attempted Each question in this section is worth 2 marks.

. Please use the Candidate Registration Sheet provided to indicate your chosen answer to each multiple choice question. 1 Which of the following correctly calculates cost of sales? A B C D Opening Opening Opening Opening inventory + Closing inventory Purchases inventory Closing inventory Purchases inventory + Closing inventory + Purchases inventory Closing inventory + Purchases

When the purchases day book was posted to the general ledger, $650 for stationery was posted to the wrong side of the stationery account. Which of the following will correct the error on the stationery account? A B C D a a a a debit entry of $650 debit entry of $1,300 credit entry of $650 credit entry of $1,300

When Yvonne checked the entries in her cash book with her bank statement seven cheques with a total value of $3,259 had not been presented at her bank. Yvonne had instructed her bank to cancel two of these cheques but did not make any entries in her cash book. The value of the cancelled cheques is $642. What entry should Yvonne make in the bank account in her general ledger to correct the balance? A B C D Debit $642 Debit $2,617 Credit $642 Credit $2,617

The closing balance on Franks bank account in his general ledger is $2,355 (debit). How should the balance be reported in Franks final accounts? A B C D as as as as a a a a non-current asset current asset current liability non-current liability

Which of the following statements is/are correct? (i) a separate suspense account should be opened for each error in the ledgers (ii) a suspense account is sometimes opened to complete postings while more information is sought on a transaction A B C D neither (i) nor (ii) (i) only (ii) only (i) and (ii)

Normas trial balance includes a suspense account with a credit balance of $280. She has discovered that a suppliers invoice for $140 was entered twice in the purchase day book. What is the balance on the suspense account after the error is corrected? A B C D nil $140 credit $280 credit $420 credit

Jane has acquired a computer for use in her business. The invoice analyses the total amount due as follows: Basic cost of computer Additional memory Maintenance for first year Total $ 2,500 125 250 2,875

What is the value of Janes capital expenditure? A B C D $2,500 $2,625 $2,750 $2,875

If capital expenditure is incorrectly classified as revenue expenditure, how will net profit and net assets be affected? A B C D Net profit understated understated overstated overstated Net assets understated overstated overstated understated

The total of the balances on the individual suppliers accounts in Arnolds payables ledger is $81,649. The balance on the payables control account in his general ledger is $76,961. He has discovered that an invoice for $4,688 has been posted twice to the correct suppliers account and that payments totalling $1,606 which he made by standing order have been omitted from his records. What amount should be reported in Arnolds balance sheet for trade payables? A B C D $72,273 $75,355 $76,961 $81,649

10 Jennifer is preparing her year end accounts and she has to deal with a prepayment for rent. Which of the following statements is correct? A B C D the the the the prepayment prepayment prepayment prepayment will increase the charge to the income statement will reduce the charge to the income statement has no effect on the income statement will only affect the income statement

11 When he prepared his draft accounts, Ralph included $1,400 as an accrual for rent for two months. However he should have provided for only one months rent. How will Ralphs current liabilities be affected when he adjusts the accrual? A B C D reduced by $1,400 increased by $1,400 reduced by $700 increased by $700

12 Nigel has closing inventory which cost $38,750. This includes some damaged items which cost $3,660. It will cost Nigel $450 to repair these. He will be able to sell them for $1,500 after the repairs are completed. What is the correct value of Nigels closing inventory? A B C D $35,090 $36,140 $36,590 $38,750

13 When she prepared her draft accounts, Wilma included her closing inventory at a value of $21,870. She has just found out that some items valued at $2,150 had not been included in the calculation. How will net profit and net assets be affected when the inventory value is corrected? A B C D Net profit reduced by $2,150 reduced by $2,150 increased by $2,150 increased by $2,150 Net assets reduced by $2,150 increased by $2,150 reduced by $2,150 increased by $2,150

14 Which one of the following statements correctly describes the difference between current liabilities and noncurrent liabilities? A B C D Current liabilities are amounts which it is currently known must be paid, while non-current liabilities are amounts which might need to be paid in the long term. Current liabilities are amounts which must be paid within the next year, while non-current liabilities are amounts which must be paid in more than one year. Current liabilities are amounts under a certain value, while non-current liabilities are amounts greater than that value. Current liabilities are amounts for which there is currently a known value, while the value of non-current liabilities requires confirmation.

15 A few days before his year end, Colin received a claim for $30,000 following an accident caused by one of his lorries. He accepted liability and offered to pay $15,000. His offer was rejected and legal proceedings were commenced. His legal advisor told him that when the claim goes to court he will be required to pay $20,000. What amount should Colin provide in his year end accounts? A B C D no provision is required $15,000 should be provided $20,000 should be provided $30,000 should be provided

16 At 31 October 2003 Maurices balance sheet included a provision for $35,000. He has re-assessed the provision at 31 October 2004, and has decided that at that date the provision should be $38,000. What will be the effect on Maurices income statement for the year to 31 October 2004? A B C D a a a a debit of $3,000 credit of $3,000 debit of $38,000 credit of $38,000

17 Which of the following statements is/are correct? (i) salaries paid to partners should be charged to the income statement (ii) each partners current account must have a credit balance A B C D (i) only (i) and (ii) (ii) only neither (i) nor (ii)

18 Albert and David are in partnership, sharing profits and losses in the ratio 3:2. Under the terms of the partnership agreement, David is entitled to a salary of $8,000. The partnership income statement for the year to 30 November 2004 reported a profit of $16,000. What is Alberts share of the profit? A B C D $3,200 $4,800 $9,600 $11,200

19 Tina is preparing her accounts for the year to 30 September 2004 using an extended trial balance. After extending and completing the extended trial balance, the totals are: Income Statement Columns Dr Cr $ $ 148,990 136,909 Balance Sheet Columns Dr Cr $ $ 149,608 161,689

What is Tinas profit or loss for the year to 30 September 2004? A B C D a a a a profit of $12,081 loss of $12,081 profit of $12,699 loss of $12,699

20 In the year to 31 August 2004 Jermaine received $29,860 from his customers. At 31 August 2004 he was still owed $15,865. A year earlier he was owed $16,528. What is the value of Jermaines sales for the year to 31 August 2004? A B C D $29,197 $29,860 $30,523 $45,725

21 Which of the following is a bank overdraft an example of? A B C D An asset A liability Revenue Expense

22 Tony made one error when he posted the total value of invoices from the purchase daybook to the general ledger. He posted $274,865 to the debit side of the purchases account. The correct total was $274,685. How is the trial balance affected by this error? A B C D The The The The total total total total of the of the of the of the debit balances debit balances debit balances credit balances and the total of the credit balances will agree, but will be overstated and the total of the credit balances will agree, but will be understated will exceed the total of the credit balances will exceed the total of the debit balances

23 What is the main purpose of a balance sheet? A B C D To report the current value of the business To indicate if the business is trading profitably To report the assets and liabilities of the business To report the personal assets of the business owner

The following information relates to questions 24 and 2 5: Arnold bought a machine for use in his business on 1 November 2004. He gave the supplier a cheque for $11,570 and traded in an old machine. The supplier allowed him $4,430 in part exchange for the old machine. Arnold depreciates machinery on the reducing balance basis at a rate of 20% per annum. The old machine had cost $12,000 and had been depreciated by $5,856. 24 What is the depreciation charge on the new machine for the year to 31 October 2005? A B C D $886 $1,428 $2,314 $3,200

25 What is the profit or loss on the trade in of the old machine? A B C D a a a a profit of $1,426 profit of $1,714 loss of $1,426 loss of $1,714

26 Linda found the following when carrying out her bank reconciliation: (i) a cheque for $7,523 has not been presented at the bank (ii) a cheque for $560 has been incorrectly recorded as $650 in Lindas ledger Which of these items will require an entry in Lindas general ledger? A B C D (i) only (ii) only both (i) and (ii) neither (i) nor (ii)

27 Beths draft accounts for the year to 31 October 2005 report a loss of $1,486. When she prepared the accounts, Beth did not include an accrual of $1,625 and a prepayment of $834. What is Beths profit or loss for the year to 31 October 2005 following the inclusion of the accrual and prepayment? A B C D a a a a loss of $695 loss of $2,277 loss of $3,945 profit of $1,807

28 Williams trial balance at 30 September 2005 includes the following balances: Trade receivables Receivables allowance $75,943 $4,751

How should these balances be reported in Williams balance sheet as at 30 September 2005? A B C D An asset of $71,192 An asset of $75,943 and a liability of $4,751 A liability of $71,192 A liability of $75,943 and an asset of $4,751

29 At 1 November 2004 Dorothys receivables allowance was $5,670. At 31 October 2005 she was owed $275,600 by her customers. She has determined that based on past experience, an allowance equivalent to 2% of outstanding balances is required at 31 October 2005. What should be reported in Dorothys income statement for the year to 31 October 2005? A B C D a a a a credit of $158 credit of $5,512 charge of $158 charge of $5,512

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Simon, who is a sole trader, made a profit of $22,860 in the year to 30 November 2005. During the year his drawings were $16,890. At 1 December 2004 the balance on his capital account was $68,920. What is the balance on Simons capital account at 30 November 2005? A B C D $29,170 $62,950 $74,890 $108,670

31 Priscilla is completing her extended trial balance, which includes balances for depreciation expense and accumulated depreciation. Into which columns should these balances be extended? A B C D Depreciation expense Income statement debit Balance sheet credit Income statement debit Balance sheet debit Accumulated depreciation Income statement credit Balance sheet debit Balance sheet credit Income statement credit

32 At 1 November 2004 Brian owed $28,754 to his suppliers. During the year he paid his suppliers a total of $185,844. At 31 October 2005 he owed $26,189. What was the value of Brians credit purchases in the year to 31 October 2005? A B C D $130,901 $183,279 $188,409 $240,787

33 During the year to 30 November 2005, Amanda bought goods for resale at a cost of $75,550. Her inventory at 1 December 2004 was valued at $15,740. She did not count her inventory at 30 November 2005, but she knows that her sales for the year to 30 November 2005 were $91,800. All sales were made at a mark up of 20%. Based on the information above, what was the value of Amandas inventory at 30 November 2005? A B C D $13,630 $14,790 $16,690 $17,850

34 When Mervyns trial balance was extracted, the total of the debit balances was $500 more than the total of the credit balances. Which of the following errors is a possible explanation for the difference? A B C D a a a a cash cash cash cash sale sale sale sale for $250 for $250 for $250 for $250 had had had had not been recorded been recorded twice been posted to the credit side of both the sales account and the cash account been posted to the debit side of both the sales account and the cash account

35 Trevors trial balance includes a suspense account with a debit balance of $900. He has discovered that: a suppliers invoice for $16,700 was posted to the correct side of the purchases account as $17,600 (the correct entry was posted to the payables control account); and a cheque for $900 has not been recorded in his ledger.

What is the balance on the suspense account after these errors are corrected? A B C D nil $900 $1,800 $2,700

36 Which of the following are desirable characteristics of financial information according to the Framework for the Preparation and Presentation of Financial Statements? (i) relevance (ii) reliability A B C D (i) and (ii) (i) only neither (i) nor (ii) (ii) only

37 Which of the following is the correct journal entry to write off a bad debt? A B C D Debit Debit Debit Debit Sales Credit Bad debts Credit Receivables Credit Bad debts Credit Bad debts Bank Bad debts Receivables

38 At 30 November 2005 Jenny had a bank loan of $8,500 and a balance of $678 in hand in her bank account. How should these amounts be recorded on Jennys opening trial balance at 1 December 2005? A B C D Debit $7,822 Credit $7,822 Credit $8,500 and Debit $678 Debit $8,500 and Credit $678

39 Bert has extracted the following list of balances from his general ledger at 31 October 2005: Sales Opening inventory Purchases Expenses Non-current assets (NBV) Receivables Payables Cash at bank Capital $ 258,542 9,649 142,958 34,835 63,960 31,746 13,864 1,783 12,525

What is the total of the debit balances in Berts trial balance at 31 October 2005? A B C D $267,049 $275,282 $283,148 $284,931

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40 Which of the following is/are correct? (i) the non-current asset register is part of the double entry system. (ii) a non-current asset register is required in every organisations accounting system. (iii) assets should be removed from the non-current asset register when they have been fully depreciated. A B C D (i) only (ii) only (iii) only none of the statements

41 Which of the errors will require an adjustment to the list of balances? A B C D neither (i) nor (ii) (i) only (ii) only both (i) and (ii)

42 Shirley has prepared the following reconciliation of the balance on the receivables ledger control account in her general ledger to the total of the list of balances on customers personal accounts: $ Balance on general ledger control account 35,776 452 less : Balance omitted from list of balances 35,324 900 add: Sales day book undercast Total of list of balances 36,224 What is the correct balance of receivables to be reported on the balance sheet? A B C D $35,324 $35,776 $36,224 $36,676

43 At 31 March Sally was owed $47,744 by her customers. At the same date her doubtful debts allowance was $3,500. How should these balances be reported on Sallys balance sheet at 31 March? A B C D $44,244 as a current asset $3,500 as a current asset and $47,744 as a current liability $47,744 as a current asset and $3,500 as a current liability $51,244 as a current asset

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44 Colin made a mistake in his calculations which resulted in the value of his closing inventory at 30 April 2004 being overstated by $900. The value was calculated correctly at 30 April 2005. What was the effect of the error on the profit reported in Colins accounts for each of the two years? A B C D 2004 overstated by $900 overstated by $900 understated by $900 understated by $900 2005 not affected understated by $900 not affected overstated by $900

45 Kieron is an antiques dealer. His inventory includes a clock which cost $15,800. Kieron expects to spend $700 on repairing the clock which will mean that he will be able to sell it for $26,000. At what value should the clock be included in Kierons inventory? A B C D $15,100 $15,800 $25,300 $26,000

46 On 1 November 2004 Leah took out a business development loan of $30,000. The loan is to be repaid in 10 equal six monthly instalments. Leah made the first repayment of $3,000 on 1 May 2005. How should the outstanding balance of $27,000 be reported on Leahs balance sheet at 31 May 2005? A B C D Current liability nil 1$6,000 $21,000 $27,000 Non-current liability $27,000 $21,000 1$6,000 nil

47 Darren is a second hand car dealer. If a car develops a fault within 30 days of the sale, Darren will repair it free of charge. At 30 April 2004 Darren had made a provision for repairs of $2,500. At 30 April 2005 he calculated that his provision should be $2,000. What entry should be made for the provision in Darrens income statement for the year to 30 April 2005? A B C D a a a a charge of $500 credit of $500 charge of $2,000 credit of $2,000

48 Ossie is completing his extended trial balance. Into which columns should he extend the entries for closing inventory? A B C D Income statement columns debit debit credit credit Balance sheet columns debit credit debit credit

debit

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19 When Ossie completed his extended trial balance the totals were: Income statement columns Debit Credit $ $ 129,685 136,894 What is Ossies profit or loss for the period? A B C D a a a a loss of $7,209 loss of $12,318 profit of $7,209 profit of $12,318 Balance sheet columns Debit Credit $ $ 149,212 142,003

20 Consider the following statements: (i) Double entry bookkeeping means that two sets of records are maintained. (ii) In double entry bookkeeping we have a basic check on the accuracy of the entries as the total value of the debit entries and the total value of the credit entries should be equal. Are the statements true or false? Statement (i) True A True B False C False D Statement (ii) True False True False

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