1. At 30 September 2017, the balance on the receivables control account is $644,000.

The
accountant is preparing draft financial statements and must make the following adjustments:
(1) Write off debts totalling $24,000
(2) Record a receipt of $12,000 in respect of a balance which had previously been written off as
irrecoverable
(3) Make an allowance for receivables equivalent to 2% of trade receivables at 30 September
2017. At 1 October 2016, the allowance for receivables was $9,600
What amount should be recognised in current assets in respect of receivables in the
statement of financial position at 30 September 2017?

2. A company has prepared its bank reconciliation at 30 September 2017 taking the following
information into account:
$
Outstanding lodgements 12,000
Unpresented cheques 14,700
Dishonoured cheque not entered in the cash book 2,600
The bank statement shows that the company has an overdrawn balance of $1,280. What
should be the adjusted cash book balance per the bank reconciliation at 30 September
2017?
A $6,580 Dr B $6,580 Cr C $3,980 Dr D $3,980 Cr

3. What type of liabilities are the following items?

1 Amount owed for the supply of a non-current asset one month ago on 12 months interest-free
credit
2 A bank overdraft using a facility first arranged two years ago
3 8% $100 2022 loan note
Current ____________
Non-current____________

4. A business prepared a trial balance at the year end. The debit and credit totals did not agree
and a suspense account was opened for the difference. Subsequent checking uncovered the
following:
1. A credit purchase of $500 had been entirely omitted from the books
2. A credit sale for $200 had been debited to the sales account and credited to the sales ledger
control account
3. The bank overdraft had been incorrectly recorded as $5,100 in the trial balance rather than
$1,500
What was the original debit balance on the suspense account before the errors were
discovered? ______________

5. Arthur made sales on credit to Alba during July. Alba has not yet paid the invoice, but Arthur
realises that he has over charged him by $200.
What journal entry would correct this error?
A) Dr Purchases $200 Cr Payables $200
B) Dr Sales $200 Cr Receivables $200
C) Dr Sales $200 Cr Cash $200
D) Receivables $200 Cr Sales $200
6. In a period of rising prices, what is the effect of valuing closing inventory using FIFO instead
of AVCO on the inventory turnover period and current ratio?
 Increase Decrease
Current ratio ___ ___
Inventory turnover period in days ___ ___

7. Wilson produces machinery which is sold with a two year warranty for repairs in case of a
breakdown. Wilson expects to see the following levels of repair during the warranty period:
Breakdown Probability Total cost
Major repair 10% $50,000
Average repair 60% $25,000
Minor repair 25% $10,000
No repair 5% nil
What amount should Wilson provide for warranty repairs in accordance with IAS 37
Provisions, Contingent Liabilities and Contingent Assets?______________

8. The accounts payable ledger control account of a business showed a balance at the year end of
$285,000. This did not agree with the total of the list of purchase ledger balances at the year end
and subsequent checking found that:
1) Discounts received of $3,000 had been entered on the wrong side of the control account
2) Returns outwards had been overstated by $10,000
3) A supplier account of $3,000 has not been omitted to the list
What will be the balance on the accounts payable ledger control account following
correction of the above errors? $269,000 $288,000 $289,000 $292,000

9. What is the function of the IFRS Advisory Council?

A) To publish Exposure Drafts inviting comment from interested parties
B) To appoint members of the IASB
C) To provide the IASB with advice on major standard setting prefects
D) To ensure public companies comply with accounting standards

10. What is the function of the IASB?

A) interpreting the application of IFRSs;
B) To develop, in the public interest, a single set of high-quality, understandable and
enforceable global accounting standards;
C) Providing timely guidance on financial reporting issues not specifically addressed in
IFRSs;
D) To ensure public companies comply with accounting standards.

11. A company has a financial year end of 30 June 20X7 On 1 July 20X7 it was found that
during the past year:
(1) Incorrect accounting procedures had been adopted leading to the capitalisation of material
amounts that should have been expensed
(2) An employee had stolen significant amounts of the company's cash
According to IAS 10 Events After the Reporting Period, which of the above should be
regarded as adjusting events for the year to 30 June 20X7?
A) Neither 1 nor 2 B) 2 only C) 1 only D) Both 1 and 2

12. What is the definition of profit according to the lASB's Conceptual Framework for
Financial Reporting?
A) A resource controlled by the entity as a result of past events and from which future
economic benefits are expected to flow to the entity
B) The residual interest in the assets of the entity after deducting all its liabilities
C) Increases in economic benefits during the period that result in increases in equity, other
than those relating to contributions from owners
D) An entity’s present obligation arising from past events, the settlement of which is expected
to result in an outflow of economic benefits

13. The interpretation of ratios allows investors to:

(1) Form an expectation of the company's future performance
(2) Compare two companies as possible future investments
(3) Gain assurance that the financial statements are correct
(4) Calculate their future dividend to be received from the company
Which of the above statements are correct?
A) 1 and 2 only B) 1, 2 and 4 only C) 1, 2, 3 and 4 D) 3 and 4 only

14. Dutch Oven Ltd. purchased machinery with a list price of £160,000. They were given a 10%
discount by the manufacturer. They paid £1,000 for shipping and sales tax of £7,500. The
business is not registered for sales tax. Dutch Oven Ltd. estimates that the machinery will have a
useful life of 10 years and a residual value of £50,000. If Dutch Oven Ltd. uses straight-line
depreciation, annual depreciation will be:
a. £10,180. b. £15,250. c. £10,250. d. £9,400.

15. Utrecht Business Consulting (UBC) borrowed $30,000 at a 12% interest rate on June 1st,
2017. Both the principal and the interest are due on May 31st, 2018. The business has year end of
31 December. Which of the following journal entries could the firm use to record the
payment of interest on May 31, 2018?
a. Dr. Interest expense XXX
Dr. Interest payable XXX
Cr. Cash XXX
b. Dr. Interest expense XXX
Cr. Cash XXX
c. Dr. Interest expense XXX
Cr. Interest payable XXX
d. Dr. Interest receivable XXX
Cr. Interest payable XXX

16. San Diego Constructors Inc. reported net income of $186,000 during 2016 and paid dividends
during the period of $ 26,000 on ordinary shares. The company also has 10,000 shares of 6%,
$100 par value, non-cumulative preference shares outstanding. Ordinary shareholders’ equity
was $1,200,000 on January 1, 2016, and $1,600,000 on December 31, 2016. The company’s
return on ordinary shareholders’ equity for 2016 is
a. 13.3% b. 10.0% c. 9.0% d. 7.1%

17. At 1 August 20X8 a company had receivables of $26,000 and an allowance for receivables of
$1,860. During the year ended 31 July 20X9 credit sales totalled $300,000, payments from credit
customers were received amounting to $295,000 debts totalling $6,800 were written off. At 31
July 20X9 it was decided to write off further irrecoverable debts amounting to $2,600. At 31 July
20X9 it was decided to make an allowance for receivables of 10% at the year end.
What figure should appear in the company’s statement of comprehensive income for the
net irrecoverable debt expense for the year ended 31 July 20X9?_____________

18. Patel, a limited liability company, has provided the following details relating to motor
vehicles for the year ended 31 August 20X9: $
1 September 20X8 Opening balance at cost 280,000
1 November 20X8 Disposals of car at cost 48,000
1 January 20X9 Purchase for cash for new vehicles 60,000
1 March 20X9 Acquired a new vehicle, details provided are:
− Part exchange allowance for an old car 18,000
− Cash paid 12,000
1 March 20X9 Cost of old car disposed 18,000
The company’s policy is to charge depreciation at 20% per year on the straight line basis, with
proportionate depreciation in the years of purchase and disposal.
What should be the depreciation charge for the year ended 31 August 20X9?
A $57,200 B $59,000 C $64,400 D $57,800

19. A business carried out an inventory count on 8 August 20X9 and valued its inventory at cost
of $17,800. During the period from 1 August to 8 August the following transactions took place:
Purchases $5,400, Sales $8,160
The mark up was 20% on cost.
What is the correct value of closing inventory at cost at 31 July 20X9?
A $19,200 B $20,560 C $18,928 D $16,400

20. Handy, a limited liability company, has the following balances in its statement of financial
position as at 30 June 20X8 and 30 June 20X9:
30 June 20X9 30 June 20X8
Current liabilities
Taxation payable 16,000 10,000
Dividends payable 4,000 2,000
Non-current liabilities
10% Loan notes 70,000 70,000
Capital and reserves
Retained profits 105,000 55,000
What is the profit before interest and tax of Handy for the year ended 30 June 20X9?
A $82,000 B $78,000 C $77,000 D $28,000

21. If Y Ltd’s ROCE is 26.4 % and its Operating Profit Margin is 26.7%, what is its asset
turnover to two decimal places?__________________

22. Which of the following statements in respect of intangible assets is incorrect?

A All intangible assets are amortised
B Intangible assets lack physical substance
C Brands may only be capitalised if purchased
D Research expenditure in conjunction with acquiring an intangible assets should always be
expensed
23. When using the „period end‟ method to account for closing inventory, the closing inventory
journal may be described as an application of which accounting concept?
A Prudence B Going concern C Accruals D Consistency
24. Parson Co is the parent company of Shrub Co. Parson have agreed to act as guarantors in
respect of a $100,000 overdraft facility that Parson has agreed with their bankers.
Having discussed the matter with the auditors of Parson Group, it is understood that the
guarantee represents a possible obligation on the part of Parson Co.
How should the $100,000 be treated in the accounts of Parson Co?
A Disclose by way of note to the account
B Recognise a provision in the accounts
C No adjustment or disclose required as there only exists a possible obligation.

25. It is the responsibility of whom, to ensure the accounts are free from fraud and error?
A External auditors B Internal auditors C Shareholders D Directors

26. After checking a business cash book against the bank statement, which of the following items
could require an entry in the cash book?
1 Bank charges
2 A cheque from a customer which was dishonoured
3 Cheque not presented
4 Deposits not credited
5 Credit transfer entered in bank statement
6 Standing order entered in bank statement.
A 1, 2, 5 and 6 B 3 and 4 C 1, 3, 4 and 6 D 3, 4, 5 and 6

27. On 31 December 20X3 the inventory of V was completely destroyed by fire.

The following information is available:
(1) Inventory at 1 December 20X3 at cost $28,400
(2) Purchases for December 20X3 $49,600
(3) Sales for December 20X3 $64,800
(4) Standard gross profit percentage on sales revenue 30%
Based on this information, which of the following is the amount of inventory destroyed?
A $45,360 B $32,640 C $40,971 D $19,440

28. At 1 November 20X6, Ollie, a limited liability company, was structured as follows: $
Ordinary shares of 50c 100,000
Share premium 30,000
On 10 January 20X7, in order to raise finance for expansion, there was a 1 for 4 rights issue at
$1.20. The issue was fully taken up.
What is the balance on the share premium account after the above transaction?__________

29. Weedens trial balance at 31 October 20X9 does not agree, with the credit side totalling
$1,610 less than the debit side. During November, the following errors were discovered:
• The debit side of the purchases account for October had been overcast by $150.
• Rent payable of $240 had been debited to the rent receivable account.
• The allowance for receivables, which increased by $240, had been recorded in the
allowance for receivables account as a decrease.
Following the correction of these errors, the balance on the suspense account would be:________
30. You are given the following information about a sole trader called Chiron as at 31
January 20X5:
The value of assets and liabilities were
• Non-current assets at cost £10,000 • Trade receivables £2,000
• Loan £7,500 • Closing capital (at 31 January 20X5) £3,500
There were no other assets or liabilities
(a) Calculate the amount of accumulated depreciation at the year-end 31 January 20X5
£_________
(b) Chiron sells goods at a mark-up of 25%. What would be the gross profit on a sales price of
£11,000? £________________

31. At 31 December 20X5 the following require inclusion in a company’s financial statements:
(1) On 1 January 20X5 the company made a loan of $12,000 to an employee, repayable on 1
January 20X6, charging interest at 2% 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 paid an annual insurance premium of $9,000 in 20X5, covering the year ending
31 August 20X6.
(3) In January 20X6 the company received rent from a tenant of $4,000 covering the six months
to 31 December 20X5.
For these items, what total figures should be included in the company’s statement of
financial position as at 31 December 20X5?
A Current assets $10,000 Current liabilities $12,240
B Current assets $22,240 Current liabilities $nil
C Current assets $10,240 Current liabilities $nil
D Current assets $16,240 Current liabilities $6,000

32. Q’s trial balance failed to agree and a suspense account was opened for the difference. Q does
not keep receivables and payables control accounts. The following errors were found in Q’s
accounting records:
(1) In recording an issue of shares at par, cash received of $333,000 was credited to the ordinary
share capital account as $330,000
(2) Cash of $2,800 paid for plant repairs was correctly accounted for in the cash book but was
credited to the plant asset account
(3) The petty cash book balance of $500 had been omitted from the trial balance
(4) A cheque for $78,400 paid for the purchase of a motor car was debited to the motor vehicles
account as $87,400.
Which of the errors will require an entry to the suspense account to correct them?
A 1, 2 and 4 only B 1, 2, 3 and 4 C 1 and 4 only D 2 and 3 only

33. Bumbly Co extracted the trial balance for the year ended 31 December 20X7. The total of the
debits exceeded the credits by $300.
Which of the following could explain the imbalance?
A Sales of $300 were omitted from the sales day book
B Returns inward of $150 were extracted to the debit column of the trial balance
C Discounts received of $150 were extracted to the debit column of the trial balance
D The bank ledger account did not agree with the bank statement by a debit of $300
34. The following transactions took place during Alan’s first month of trading:
(1) Credit sales of $121,000 exclusive of sales tax
(2) Credit purchases of $157,110 inclusive of sales tax
(3) Cash payments to credit suppliers of $82,710 inclusive of sales tax
Sales tax is 20%.
What is the balance on Alan’s sales tax control account at the end of his first month of
trading?
A $1,985DR B $1,985CR C $15,770DR D $15,770CR

35. Which of the following statements is/are correct in relation to a rights issue made by a
company?
(1) A rights issue capitalises the company’s reserves, which can be a disadvantage, as this can
reduce the amount of reserves available for future dividends
(2) A rights issue is offered to the company’s existing shareholders and is usually at a discounted
price compared to the nominal value of a share
Statement 1 Statement 2
A Correct Correct B Correct Incorrect
C Incorrect Correct D Incorrect Incorrect

Section B
1. Below are the Statements of Financial Position on December 31. 2014 and December 31.
2015, and the Income Statement for the year 2015. for Koekwous N.V.. a wholesaler of
baking equipment. All amounts are in USD.
Statements of Financial Position
Assets 2015 2014
Equipment 265,000 242,500
Accumulated depreciation—equipment -47,000 -52,000
Long-term investments 140,000 114,000
Prepaid expenses 29,300 26,000
Inventory 112,500 102,850
Accounts receivable 92,800 33,000
Cash 100,350 48,400
Total 692,950 514,750
Equity and liabilities
Share capital—ordinary 220,000 175,000
Retained earnings 234,450 105,450
Bonds payable 110,000 150,000
Accounts payable 112,000 67,300
Accrued expenses payable 16,500 17,000
Total 692,950 514,750
Income Statement for the Year Ended December 31. 2015
Sales revenue 392,780
Gain on disposal of plant assets 5,000
397,780
Less: Cost of goods sold 135,460
Operating expenses, excluding depreciation 12,410
Depreciation expense 45,000
Income tax expense 27,280
Interest expense 4,730
224,880
Net income 172,900

Here is some additional information about Koekwous NV in 2015:

 Old equipment having an original cost of $57,500 and accumulated depreciation of
$50,000 was sold for $12,500 cash.
Required:
Statement of cash flow using indirect method. Show all workings. (15 marks)

2. Prop and Flap have produced the following statements of financial position as at 3 I October
2008:
Prop Flap
$m $m $m $m
ASSETS
Non-current assets
Plant and equipment 2,100 480
Investments 800
Current assets
Inventories 880 280
Receivables 580 420
Cash and cash equivalents 400 8
1,860 708
Total assets 4,760 1,188
EQUITY and LIABILITIES
Equity share capital 2,400 680
Retained earnings 860 200
3,260 880
Non-current liabilities
Long-term borrowing 400
Current liabilities
Payables 1,100 228
Bank overdraft — 80
1,100 308
Total equity and liabilities 4,760 1,188
The following information is relevant to the preparation of the financial statements of the Prop
Group:
1. Prop acquired 80% of the issued ordinary share capital of Flap many years ago when the
retained earnings of Flap were $72 million. Consideration transferred was $800 million.
2. At the date of acquisition the plant and equipment of Flap was revalued upwards by $40
million, although this revaluation was not recorded in the accounts of Flap. Depreciation
would have been $32 million greater had it been based on the revalued figure.
3. Flap buys goods from Prop upon which Prop earns a margin of 20%. At 3 I October 2008
Flap’s inventories include $180 million goods purchased from Prop.
4. At 31 October 2008 Prop has receivables of $ 140 million owed by Flap and payables of
$60 million owed to Flap.
5. The market price of the non-controlling interest shares just before Flap’s acquisition by
Prop was $ 1.30. It is the group’s policy to value the non-controlling interest at fair value.
Required:
Prepare the Prop Group consolidated statement of financial position as at 31 October 2008.