ACCA PAPER F3

Financial Accounting

Final Mock – December 2014

Question Paper

Time allowed 2 hours

This paper is divided in to two sections.

Section A – All 35 questions are compulsory and MUST be attempted.

Section B – BOTH questions are compulsory and MUST be attempted.

Instructions:
Take a few moments to review the notes on the inside of this page titled, ‘Tackling Multiple Choice Questions’
before attempting this exam.

DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER
EXAMINATION CONDITIONS
FFA/F3 FINANCIAL ACCOUNTING

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 QUESTIONS

Tackling Multiple Choice Questions

MCQs are part of all FIA exams and Papers F1 – F3 of the ACCA qualification. The Section A questions in the
paper based exams are mainly MCQ and a large proportion of questions in the CBE are also MCQ.
The MCQs in your exam contain four possible answers. You have to choose the option that best answers the
question. The three incorrect options are called distracters. There is a skill in answering MCQs quickly and
correctly. By practising MCQs you can develop this skill, giving you a better chance of passing the exam.
You may wish to follow the approach outlined below, or you may prefer to adapt it.

Step 1 Skim read all the MCQs and identify what appear to be the easier questions.

Step 2 Attempt each question – starting with the easier questions identified in Step 1. Read the
question thoroughly. You may prefer to work out the answer before looking at the options, or
you may prefer to look at the options at the beginning. Adopt the method that works best for
you.

Step 3 Read the four options and see if one matches your own answer. Be careful with numerical
questions as the distracters are designed to match answers that incorporate common errors.
Check that your calculation is correct. Have you followed the requirement exactly? Have you
included every stage of the calculation?

Step 4 You may find that none of the options matches your answer.
 Re-read the question to ensure that you understand it and are answering the
requirement
 Eliminate any obviously wrong answers
 Consider which of the remaining answers is the most likely to be correct and select the
option

Step 5 If you are still unsure make a note and continue to the next question.

Step 6 Revisit unanswered questions. When you come back to a question after a break you often find
you are able to answer it correctly straight away. If you are still unsure have a guess. You are
not penalised for incorrect answers, so never leave a question unanswered!

After extensive practice and revision of MCQs, you may find that you recognise a question when you sit the
exam. Be aware that the detail and/or requirement may be different. If the question seems familiar read the
requirement and options carefully – do not assume that it is identical.

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FFA/F3 FINANCIAL ACCOUNTING

Section A – All 35 questions are compulsory and MUST be attempted.

Use the answer sheet at the end of this exam to record your answers

1 Bill, a sole trader, set up business on 1 October 20X8 with $30,000 of his own money. During the year
to 30 September 20X9 he won $50,000 on the lottery and paid $30,000 of this into his business. He
took cash drawings of $5,000 during the year and at 30 September 20X9 the net assets of the business
totalled $59,000.
What was the profit or loss of the business for the year ended 30 September 20X9?
A $4,000 profit
B $6,000 profit
C $16,000 loss
D $6,000 loss (2 marks)

2 The total of the balances in a company's trade receivables ledger is $800 more than the debit balance
on its trade receivables control account. Which one of the following errors could by itself account for the
discrepancy?
A One receivables ledger account with a credit balance of $800 has been treated as a debit
balance.
B Settlement discounts totalling $800 have been omitted from the nominal ledger.
C The sales day book has been undercast by $800.
D The cash receipts book has been undercast by $800. (2 marks)

3 When reviewing the nominal ledger, the trade receivables account was as follows:
RECEIVABLES LEDGER CONTROL ACCOUNT
$ $
Balance b/d 150 ??? 75
Sales 2,000 Cash received 1,875
Balance c/d 200
The narration for the $75 entry was illegible. What could the entry have been?
(1) Contra
(2) Irrecoverable debt write off
(3) Doubtful debt allowance
(4) Returns outwards
A 1 only
B 1 or 2 only
C 2 or 3 only
D Any of them (2 marks)

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 QUESTIONS

4 Steve’s working capital ratios are as follows:

20X1 20X2
Quick ratio 1.0 0.8
Payables’ days 29 37
Receivables’ days 63 42
Inventory turnover 28 20
Which of the following statements is correct?
A The cash operating cycle has lengthened in 20X2.
B Steve has taken advantage of early settlement discounts offered by suppliers in 20X2.
C Steve is taking longer to sell his inventory in 20X2.
D Steve has offered early settlement discounts to customers in 20X2. (2 marks)

5 On 1 December 20X8 Gilbert's payables ledger control account had a balance of $3,200 (credit).
During the month the following transactions occurred:
$
Payments to suppliers 2,500
Cash purchases 300
Purchases on credit 3,300
Returns outwards 750
What is the balance on the control account as at 31 December 20X8?
A $1,850
B $3,250
C $3,350
D $4,750 (2 marks)

6 A company has prepared draft accounts for the year ended 31 March 20X9 incorporating the managing
director's bonus of 4% of net profit.
It has now been discovered that the draft accounts omitted trade discounts allowed to customers of
$100, cash discounts allowed from suppliers of $400 and a rent prepayment of $200.
What is the adjustment required to the statement of profit or loss in respect of these errors?
A $480 Cr
B $680 Cr
C $500 Cr
D $630 Cr (2 marks)

7 A trader has budgeted sales for the coming year of $275,000. He achieves a constant mark-up of 25%.
He plans to reduce his inventory level by $14,000 over the year.
What will his purchases for the year be?
A $192,250
B $206,000
C $206,250
D $220,000 (2 marks)

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FFA/F3 FINANCIAL ACCOUNTING

8 Harry has been unable to calculate his business' profit or loss for the year ended 31 December 20X8 as
fire destroyed most of his accounting records. He has, however, been able to provide the following
information.
(1) Net assets at 31 December 20X7 were $23,000 and $32,500 at 31 December 20X8.
(2) He introduced capital during the year of $4,000 cash.
(3) He took cash drawings of $2,500 and goods with a selling price of $800; the cost of the goods
was $750.
What was Harry's profit or loss for the year ended 31 December 20X8?
A $8,750 profit
B $1,750 loss
C $9,800 profit
D $2,750 loss (2 marks)

9 The following information is available for the year ended 31 December 20X8 for Ski, a well-run
company:
$
Opening cash 1,000
Closing cash 2,000
Opening balance on the trade payables control account 8,000
Closing balance on the trade payables control account 10,000
Opening balance on the trade receivables control account 12,000
Closing balance on the trade receivables control account 14,000
Cash paid to trade accounts payable in the period 9,000
Opening inventory 6,000
Closing inventory 7,000
Mark-up of 10%
Assuming the information above is complete, what was the sales figure for the period?
A $6,600
B $10,000
C $11,000
D $13,200 (2 marks)

10 Which of the following errors could result in a suspense account being required to 'balance' the trial
balance?
A Cash received from credit customers treated as a cash sale.
B A supplier's invoice for $32 recorded as $23 in the purchases account.
C Payments to suppliers of $647 recorded as $674 in the payables ledger.
D One page omitted from the purchase day book. (2 marks)

11 A car has a list price of $23,500 but the garage gives the company a trade discount of $2,350. In
settlement the garage accepts a cheque for $18,000, together with an old company car on which it
grants a trade-in allowance of $3,150. How much should the company capitalise?
A $21,150
B $23,500
C $18,000
D $20,350 (2 marks)

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 QUESTIONS

12 Which of the following errors would result in a trial balance imbalance?

(1) The discounts allowed balance was listed as a credit on the trial balance.
(2) Drawings for the last month of the year had been posted to the sundry expenses account.
(3) A contra settlement had been recorded only in the receivables and payables ledgers.
A (3) only
B (1) only
C (1) and (2)
D (1), (2) and (3) (2 marks)

13 During the year ended 30 June 20X9 Joy purchased $84,300 of inventory for resale. Over the year,
inventory held fell by $4,100. She used a mark up of 25%.
What was the gross profit for the year?
A $26,734
B $29,467
C $22,100
D $20,050 (2 marks)

14 There is $100 in the cash till at the year-end for Demon, but the accountant had discovered that some
cash has been stolen. At the beginning of the year there was $50 in the cash till and receivables were
$2,000. Total sales for the year were $230,000. Receivables at the end of the year were $3,000.
Cheques banked from credit sales were $155,000, and cash sales of $50,000 have been banked.
How much cash was stolen during the year?
A $23,950
B $24,050
C $24,150
D $30,040 (2 marks)

15 An extract from a business' statement of profit or loss is:

$ $
Sales 115,200
Opening inventory 21,000
Purchases 80,000
101,000
Closing inventory 5,000
96,000
19,200

What is the mark up achieved?

A 16.6%
B 20%
C 24%
D 69.4% (2 marks)

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FFA/F3 FINANCIAL ACCOUNTING

16 Which of the following would feature in the statement of changes in equity?

(1) Share premium
(2) Warranty provision
(3) Revaluation surplus
(4) Retained earnings
A All of them
B 1, 2 & 3 only
C 1, 3 & 4 only
D 2, 3 and 4 only (2 marks)

17 The trial balance of Z failed to agree, the totals being: debit $836,200
credit $819,700
A suspense account was opened for the amount of the difference and the following errors were found
and corrected:
(1) The totals of the cash discount columns in the cash book had not been posted to the discount
accounts. The figures were discount allowed $3,900 and discount received $5,100.
(2) A cheque for $19,000 received from a customer was correctly entered in the cash book but was
posted to the receivables ledger control account as $9,100.
What will be the remaining balance on the suspense be after the correction of these errors?
A $25,300 credit
B $7,700 credit
C $27,700 debit
D $5,400 credit (2 marks)

18 Which of the following statements about discounts is correct?

(1) Trade discounts received should be deducted from the gross sales price.
(2) Settlement discounts received are deducted from the cost of purchases.
A 1 only
B 2 only
C 1 and 2
D Neither (2 marks)

19 Which of the following can be included in the cost price of inventories?

(1) Distribution costs incurred when selling the finished inventories
(2) Directly attributable handling costs incurred when purchasing the raw materials
(3) Salesmen’s wages incurred when selling the finished inventories
(4) Fixed production overheads incurred when manufacturing the inventories
A 1, 2 and 4
B 2 and 4
C 1 and 3
D 1, 3 and 4 (2 marks)

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 QUESTIONS

20 IAS2 Inventories requires inventories to be valued on which of these bases?

(1) Using any of FIFO, AVCO or LIFO
(2) At the lower of cost and net realisable value
A 1 only
B 2 only
C 1 and 2
D Neither (2 marks)

21 Which of the following is a correct representation of the business equation?

A Opening net assets = Closing net assets + drawings – profit – capital introduced
B Closing net assets = Opening net assets + capital introduced – profit + drawings
C Capital introduced = Closing net assets + drawings + profit – opening net assets
D Profit = Closing net assets + drawings + capital introduced – opening net assets
(2 marks)

22 Sam owns a business selling timber to trade customers only. During the year ended 30 June 20X6, a
salesman from one of Sam’s biggest trade customers tripped over some unstacked timber and fell on the
warehouse floor. Shortly before the year-end, Sam received a letter from the solicitor of the customer,
stating that it was going to take Sam to court as a result of the accident. The letter stated that if Sam
wanted to come to an arrangement out of court, the customer was willing to settle for $25,000;
otherwise the customer would be claiming $50,000. Sam’s solicitor has advised him to settle out of
court as there is a good chance of the case coming to court and Sam losing.
How much should Sam include as a provision in the accounts for the year ended 30 June 20X6?
A Nil
B $25,000
C $50,000
D $75,000 (2 marks)

23 Which of the following statements about share capital is correct?

(1) Authorised share capital is the maximum amount of share capital that a company is empowered
to issue.
(2) The amount of authorised share capital cannot be changed.
(3) The amount of issued capital cannot exceed the amount of authorised capital.
A 1, 2 and 3
B 1 and 3
C 2 and 3
D 1 and 2 (2 marks)

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FFA/F3 FINANCIAL ACCOUNTING

24 Which of the following must be disclosed for a revalued tangible non-current asset?
(1) Whether an independent valuer was used
(2) The qualifications and experience of the valuer
(3) The basis used to revalue the assets
(4) A comparison of the depreciation charge based on revalued amount and cost
A 1, 2 and 3
B 2, 3 and 4
C 1 and 3
D 2 and 4 (2 marks)

25 Purple Co has the following amounts on its statement of financial position at the year-end.
$
Tangible non-current assets 133,750
Intangible assets 15,800
Inventory 27,400
Receivables 17,430
Cash at bank and in hand 3,200
Bank overdraft 1,500
Trade payables 34,340
Five year bank loan 50,000
Provisions 5,700
What is Purple Co’s gearing ratio?
A 33.0%
B 55.0%
C 32.0%
D 47.2% (2 marks)

26 Simran has two business bank accounts for her company’s use: one is a current account and the other is
a high-interest deposit account. At the year-end, the current account shows a balance of $2,750
overdrawn and her deposit account shows a balance of $4,780. How will these balances be disclosed in
the company’s statement of financial position at the year-end?
A Current asset $4,780 Current liability $2,750
B Current asset $2,030 Current liability nil
C Current asset nil Current liability $2,030
D Current asset $7,530 Current liability nil (2 marks)

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 QUESTIONS

27 Which of the following events does not require adjustment in the year-end financial statements?
A A customer owing $45,000 at the year-end becomes bankrupt shortly after the year-end.
B A fire three days after the year-end has destroyed all the company’s financial records.
C The tax rate for the previous tax year has been amended.
D A material amount of inventory held at the year-end has become obsolescent due to technological
changes just after the year-end. (2 marks)

28 The following extracts are from Daljit’s financial statements:

$
Profit before interest and tax 24,500
Interest (875)

Profit before tax 23,625

Tax (1,270)

Profit after tax 22,355

Share capital 50,000

Reserves 33,200
83,200

Loan liability 4,750

Bank overdraft 2,000
89,950

What is Daljit’s return on capital employed?

A 24.8%
B 26.9%
C 27.9%
D 29.4% (2 marks)

29 Raj produces his accounts to 30 June each year. His business premises are rented and he has to pay
rent quarterly in arrears on 1 February, 1 May, 1 August and 1 November each year. The quarterly rent
payments are $2,250. Raj pays an annual insurance charge on the premises of $1,800 at the start of
each calendar year. What amounts will be shown in Raj’s statement of financial position for the year
ended 30 June 20X1?

A Current assets $1,500 Current liabilities $900

B Current assets $900 Current liabilities $1,500
C Current assets $2,400 Current liabilities nil
D Current assets nil Current liabilities $2,400 (2 marks)

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FFA/F3 FINANCIAL ACCOUNTING

30 Which of the following would be classified within non-current assets on the statement of financial
position?
(1) Property held for resale by a property development business
(2) Research costs in a pharmaceutical business
(3) Offices owned and used by a business
(4) Laptops that are usually sold off to staff when they are five years old
A 1 and 4
B 3 and 4
C 2 and 3
D 1 and 2 (2 marks)

31 Jack is a sole trader and had assets of $223,700 and liabilities of $52,500 on 1 January 20X1.
During the year ended 31 December 20X1 he paid himself wages of $640 per month. At 31 December
20X1, Jack had assets of $264,230 and liabilities of $69,750, and had made a profit of $13,490.
How much capital did Jack introduce into his business in the year ended 31 December 20X1?
A $7,890
B $17,470
C $29,090
D $44,450 (2 marks)

32 Which of the following are qualitative characteristics under which financial statements are produced?
(1) Going concern
(2) Faithful representation
(3) Accruals
(4) Relevance
A 1 and 2
B 1 and 3
C 2 and 4
D 3 and 4 (2 marks)

33 The carrying amount of Mike’s property, plant and equipment is $112,000 at 1 January 20X8. During
the financial year, a delivery van costing $18,000 was purchased and a plot of land originally costing
$55,000 was sold for $91,000. The depreciation charge for the year was $17,540.
What is the carrying amount at 31 December 20X8?
A $21,460
B $57,460
C $92,540
D $166,540 (2 marks)

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 QUESTIONS

34 Which of the following statements about partnerships is/are true?

(1) A partnership is an arrangement between individuals to carry on business in common with a view
to profit.
(2) If a partnership wants to raise more funds, it can issue shares.
(3) A partnership does not have a separate legal identity from its owners, the partners.
A 1 only
B 1 and 2 only
C 1 and 3 only
D All three statements are true (2 marks)

35 Which of the following statements about ordinary and preference shares is correct?
A Preference shares have priority over ordinary shares in the event of a liquidation.
B Both preference and ordinary shares carry voting rights.
C Ordinary shares carry a right to a fixed dividend.
D Preference shares may be cumulative, and are always redeemable, unlike ordinary shares.
(2 marks)

(70 marks)

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FFA/F3 FINANCIAL ACCOUNTING

SECTION B – BOTH questions are compulsory and must be attempted.

Use blank paper to record your answers

Question 1
Roe Co acquired 80% of the share capital of Gallant Co on 1 October 20X7. The consideration was a cash
payment of $6 and 4 $0.50 shares in Roe, worth $2.50 each, for each share in Gallant. The shares used to
acquire Gallant were issued on 1 October 20X7. There were no adjustments for fair value on acquisition. Both
companies have an accounting year-end of 31 March.

On 1 October prior to the completion of the acquisition, Roe had issued share capital of 750,000 $0.50 shares
and a share premium account of $165,000. Roe’s retained reserves as at 1 April 20X7 were $760,000 and its
retained profits for the year ended 31 March 20X8 were $280,000.

At 1 April 20X7 Gallant Co had issued share capital of 50,000 $1 shares and retained reserves of $520,000.
Gallant Co did not issue any shares between 1 April and 1 October 20X7. During the year ended 31 March
20X8 Gallant made profits of $150,000. The fair value of the non-controlling (20%) interest on 1 April 20X7
was $95,000. This was augmented by the minority’s share of Gallant’s profits during the year ended 31 March
20X8.

There were no intra-group transactions during the year ended 31 March 20X8.

Required

(a) Calculate the goodwill arising on the acquisition of Gallant Co. (5 marks)
(b) Calculate the following figures that would be included in Roe Co’s consolidated statement of financial
position at 31 March 20X8:
 Share capital
 Share premium
 Retained reserves
 Non-controlling interest (4 marks)

The following table shows factors relating to investment in another company .

Factor Description
A Control
B Greater than 25% of all shares and debt being held by the investor
C Greater than 10% of voting equity shares being held by the investor
D Representation on the board of directors
E Significant influence
F Commitment to long-term investment
G Non-controlling interest
H Frequent large transactions between the investor and investee

Required
(c) Identify which of the above factors A to H indicate the existence of an investment in an associate and
which of the above factors do not indicate the existence of an investment in an associate.
(4 marks)
(d) State whether the following statements are true or false.
(1) The goodwill arising on consolidation of a subsidiary should not be amortised if its value has not
been impaired.

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 QUESTIONS

(2) If a subsidiary is acquired during an accounting period, the consolidated accounts will exclude all
transactions between the parent and the new subsidiary for the whole accounting period.
(2 marks)
(15 marks)

Question 2
(a) The following information relates to Atkins Co for the year ended 30 September 20x9.
Extracts from the statement of profit or loss for the year ended 30 September 20X9
$000
Profit before tax 12,450
Less tax 2,860
Profit for the year 9,590
Statement of financial position as at 30 September 20X9

20X9 20X8
$000 $000
ASSETS
Non-current assets 65,120 52,350
Current assets
Inventory 6,190 5,450
Receivables 7,820 7,010
Cash 100 70
14,110 12,530

Total assets 79,230 64,880

EQUITY AND LIABILITIES

Capital and reserves
Ordinary share capital 8,000 7,000
Retained earnings 59,090 51,440
67,090 58,440

Non-current liabilities
Loan 4,000 400

Current liabilities
Bank overdraft 760 1,200
Trade payables 4,520 3,390
Taxation 2,860 1,450
8,140 6,040

Total equity and liabilities 79,230 64,880

Notes
Depreciation expense for the year was $6,190,000.

Assets with a carrying value of $1,370,000 were disposed of for a loss of $180,000.

Atkins paid a dividend of $1,940,000 during the year.

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FFA/F3 FINANCIAL ACCOUNTING

Required

Complete the statement of cash flows for Atkins Co for the year ended 30 September 20X9.
(13 marks)
(b) Identify which of the following would be classified as cash and cash equivalents in accordance with
IAS 7 Statement of cash flows and which of the following would not be classified as cash and cash
equivalents.

Item Description
A Petty cash held in the petty cash tin
B Bonds redeemable in three weeks’ time
C Current account balance at the bank
D Ordinary shares held in another company

(2 marks)
(15 marks)

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 QUESTIONS

FINANCIAL ACCOUNTING – EXTERNAL FINAL MOCK

ANSWER SHEET

Question Options (circle one option only)

1 A B C D

2 A B C D

3 A B C D

4 A B C D

5 A B C D

6 A B C D

7 A B C D

8 A B C D

9 A B C D

10 A B C D

11 A B C D

12 A B C D

13 A B C D

14 A B C D

15 A B C D

16 A B C D

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FFA/F3 FINANCIAL ACCOUNTING

17 A B C D

18 A B C D

19 A B C D

20 A B C D

21 A B C D

22 A B C D

23 A B C D

24 A B C D

25 A B C D

26 A B C D

27 A B C D

28 A B C D

29 A B C D

30 A B C D

31 A B C D

32 A B C D

33 A B C D

34 A B C D

35 A B C D

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Student self-assessment
Having completed this paper take a few minutes to consider what you did well and what you found difficult.
Use this as a basis to focus your future study on effectively improving your performance.
Common problems
Timing and planning
Did you finish too early?
Did you overrun?
Content
Did you struggle with:
Interpreting the questions?
Understanding the subject?
Remembering the notes/text?
QUESTIONS
Future emphasis if you answer Yes
Y/N Go back and check your answers.
Y/N Focus on allocating your time better.
Practise questions under strict timed conditions.
If you get behind, move on to the next question.
Y/N Learn subject jargon (interactive text index).
Read questions carefully noting all the parts.
Practise as many questions as possible.
Y/N Review your notes/text.
Work through easier examples first.
Y/N Quiz yourself constantly as you study. You need to develop
your memory as well as your understanding of a subject.
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FFA/F3 FINANCIAL ACCOUNTING

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