Certified College of Accountancy’s Mock Exam

PAPER: Financial Accounting (FA)

Full Marks 100

a) Question number 1 to 35 2 X 35 = 70
b) Question number 36 15
c) Question number 37 15
Pass Marks 50

Time allowed: 2 Hour

STUDENTS NAME: ……………………………..
DATE: …………………………………………………

Marks obtained: ………………………………………………

Teachers Remarks:
:…………………………………………………………………………………………………
…………………………………………………………………………………………………
1. Francois incorrectly posted his discounts received of $400 by only making an entry in the
discounts received ledger account.
Which journal entry should be used to correct this error?
a. Dr. suspense cr. Payables
b. Dr. payables cr. Discount received
c. Dr. payables cr. Suspense
d. Dr. discount received cr. Suspense
Answer : …………………..
2. Abena has $176 in the bank at 1 January but has incorrectly recorded her bank transactions for
the month of January as follows:
Bank
Particular $ Particular $
Balance b/fwd 176 Rental income 300
Dishonoured cheque from 150 Bank charges 98
customer
Receipts from customer 5,386 Payments to suppliers 3,243
What is the balance carried forward on the bank account after the necessary revisions have been
made?
Answer : ………………..
3. Ruben Co has the following equity balances at 1 July 20X9:
Particular $
Ordinary shares of $0.20 each 300,000
Share premium 50,000
Retained earnings 75,000
During the year Ruben Co made a rights issue of one share for every ten. The rights issue price was
$1.40. The current market price of a Ruben Co. share at the date of rights issue was $1.80. Which of
the following is the correct journal to record the rights issue?
a. Dr. bank $210,000 cr. Share capital $30,000 cr. Share premium $180,000
b. Dr. bank $270,000 cr. Share capital $30,000 cr. Share premium $240,000
c. Dr. bank $42,000 cr. Share capital $30,000 cr. Share premium $12,000
d. Dr. bank $210,000 cr. Share capital $210,000
4. In accordance with IAS 37 Provisions, Contingent Liabiliti0es and Contingent Assets Which TWO of
the following statements are correct?
a) A contingent asset should be recognised if it is possible an inflow of economic benefits will be
received.
b) No disclosure is required for a contingent liability where an inflow of economic benefit is
possible
c) A probable liability of uncertain timing and amount should be provided for
d) A contingent asset should be disclosed where an inflow of economic benefit is probable
Answer : ………………..
5. The following information is relevant for ABC’s accounts receivables ledger control account for the
year ended 30 June 20X6:
A) Sales $ 152,831
B) Cash received $ 160,652
C) Goods returned $ 1,050
D) The closing balance on the accounts receivable ledger control account is $10,509
E) The allowances for receivables was increased by $600 to $5,200
What was the opening on the accounts receivables ledger control account at 1 July 20X5?
Answer : $………………..
6. A business has made a loss for the year but has increased in its bank account over the year. Which
TWO of the following could cause this to happen?
a) A large depreciation charge in the statement of profit or loss and other comprehensive income
b) A non-current asset has been sold for cash
c) The repayment of a loan liability during the year
d) The lengthening of the credit given to customers
Answer : ………………..
7. When the financial statements of Kolta were prepared for the year 31 December 20X6, the
following errors were found in the underlying accounting records. Kolta maintains receivables and
payables ledger control accounts:
a) The purchase of a new computer for $3,000 has been omitted from the records
b) The sale of goods on credit for $2,000 to C Japur and Co had been incorrectly debited to the
account of D Japur and Co
c) The purchase of goods on credit for $1,000 from D Kuche and Co had only been entered in the
purchase account. No entry had been made in the personal account of the supplier of the
payables ledger control account.
Which of these errors would cause the trial balance NOT to balance?
A) b only B) None of the errors C) c only D) a only
Answer : ………………..
8. Which FOUR of the following statements about accounting ratios are correct?
I. Ratios can be affected by a business’ choice of accounting policies
II. They provide all the information needed for interpreting company accounts
III. Gearing will indicate how risky a business is
IV. They are only useful when comparing a business’ results from one year to the next
V. If there is increase in any calculated accounting ratio, it is seen as favorable
VI. Interest cover will give an investor information about whether or not a dividend will be paid
VII. They can provide information about the profitability, liquidity, efficiency and position o0f the
company
VIII. They help the user of financial information to focus attention on significant issues.
Answer : ………………..
9. At the year end 30 June 20X9 Betty’s trial balance failed to balance. The debit column totaled
$128,350 and the credit column totaled $123,490. A suspense account was opened for the
difference. Which of the following errors would account for the difference on the trial balance?
A) A contra entry of $2,430 has been posted to the incorrect side of the trade receivables control
account
B) Motor expenses of $4,860 have been incorrectly debited to the motor vehicle cost account
C) A purchase invoice for $4,860 has been omitted from the purchase day book
D) A cash sale of $4,860 has been recorded on the wrong side of both the cash and sales accounts
Answer : ………………..

10. Colin made all sales at a uniform gross profit margin of 40%. His net profit, after charging other
expenses of $15,000 for May 20X2, was $75,000. What was Colin’s sales revenue for May 20X2?
Answer : $ ………………..
11. Which of the following costs could be capitalized as an intangible asset in accordance with IAS 38
Intangible assets?
a) Market research into a new geographical market
b) Advertising the launch of a new product
c) Testing a new process which will create efficiency savings of 10% once implemented
d) Computers used for administration purposes in the research and development department
Answer : ………………..
12. Which FOUR of the following should be listed as a credit on a trial balance?
a) Carriage inwards
b) Share capital
c) Purchase returns
d) Sales returns
e) Carriage outwards
f) Receivables
g) Receivables allowances
h) Interest received
Answer : ………………..
13. When preparing a bank reconciliation, which TWO of the following would require a correcting
entry in the cash book?
a) Cheques lodged last week have yet been cleared by the bank
b) A cheque paid into the bank has just been dishonoured by the bank
c) Bank charges of $154 were charged by the bank
d) The bank has credited interest t6o the account in error
Answer : ………………..
14. Are the following statements true or false?
Particular True/ False
Ordinary share always carry the right to a fixed dividend
Redeemable preference shares should be recognized in the financial statements as liabilities
Authorized share capital is the maximum amount of share capital that a company can issue
When preference shareholders vote at the company’s AGM, ordinary shareholders do not
need to vote
15. Which TWO of the following statements are true of the duality concept?
A) Each transaction must have only two entries
B) Each transaction has both debit and credit entries must be equal
C) The number of debit and credit entries must be equal
D) The value of debit and credit must be equal
Answer : ………………..
16. Egret, a limited liability company, made a profit before tax of $235,000 for the year ended 30 June
20X8. The tax charge for the year was $84,500 and the company transferred $10,000 from profit
to a general reserve. It paid a final ordinary dividend of $38,000 from the prior year on 18 May
20X8 which had been proposed on 1 July20X7, and on 1 July 20X8, a final dividend of $39,500 for
the current year was proposed. No interim dividends were paid or proposed. What amount is
Egret’s retained earnings reserve increased by for the year ended 30 June 20X8?
Answer : ………………..
17. The following information relates to Lyn Co for the year ended 30 September 20X1:
Particular $
Trade accounts receivable 60,000
Sales revenue 480,000
Cost of sales 270,000
Closing inventory 90,000
Trade payables 30,000
Bank overdraft 10,000
What is the current ratio of Lyn Co. as at 30 September 20X1?
Answer : ………
18. On 1 June 20X2, Thorpe Co. had 100 units in its inventory that had cost of $500 in total. Thrope Co
uses a FIFO system for its inventory. During June the following transactions took place:
➢ 10 June : 50 units were purchased costing $5.50 each
➢ 21 June : 60 units were purchased costing $6 each
➢ 23 June: 130 units were sold for $7.50 each
What is the cost of sales for June 20X2?
1. $650 2. $225 3. $470 4. $665
Answer : ………………..
19. Fawad purchased machinery costing $30,000 on 1 July 20X2 which had a useful life of ten years
and was depreciated on a straight line basis. On 1 July 20X5 Fawad reassessed the original useful
life to 15 years.
What is the depreciation charge for the machinery in the year ended 30 June 20X6?
1. $2,500 2. $1,750 3. $1,400 4. $2,000
Answer : ………………..
20. Jane had the following assets and liabilities at the beginning and end of her financial year:
Particular Beginning of year ($) End of year ($)
Cash 20,000 18,000
Trade receivables 34,200 38,400
Short-term borrowings 24,000 15,000
Trade payables 21,600 22,600
During the year, Jane made a profit of $26,700 and no capital was introduced. How much did Jane
withdraw during the year?
Answer : $ ………………..
21. Amir receives $980 from a credit customer. This was net of an early settlement discount of $20
which the customer was expected to take advantage of at the time the invoice was issued.
What is the correct double entry to record the receipt?
A) Dr. payables $1,000 cr. discount received $20 cr. Cash $980
B) Dr. receivables $980 cr. Cash $980
C) Dr cash $980 cr. Receivables $980
D) Dr. discounts received $20 dr. cash $980 cr. Payables $1,000
Answer: ___________
22. An accounts receivables ledger account showed a debit balance of $37,642. The individual credit
customers’ account in the receivables ledger showed a total of $35,840. Which of the following
could have caused this difference?
A) Entering a cash receipt of $1,802 on the debit side of a customer’s account
B) Entering a cash payment of $901 on the debit side of the control account
C) Overcasting the sales return day book by $1,802
D) Undercasting the sales day book by $1,802
23. A company bought a machine on 1 November 20X2 with Purchase Price of $ 22,000 which have
expected useful life of 7 years and estimated residual value of $ 1,000.
On 1 May 20X6 the machine was disposed of for $9,000. The company charges depreciation of
machinery on a straight-line basis with a proportional charge in the years of acquisition and disposal.
The business has a year end of 31 December.
What would be the profit or loss on disposal of the machine?
A) Loss of $2,500 B) Profit of $1,000 C) Loss of $1,000 D) Profit of $2,500
Answer _________
24. Bindi, a sole trader, commenced trading on 1 January 20X7 and the following transactions:
A) Credit purchases of $450,000 were made of which goods costing $23,000were received on 30
November 20X7. These were returned to the supplier on 15 December 20X7. Cash purchases of
$30,000 were also made.
B) The inventory as at 31 December 20X 7 included $14,000 of goods purchased on credit and
$2,000 purchased for cash.
What figure be shown for cost of sales for the year ended 31 December 20X7?
Answer : $...............
25. Which of the following are the characteristics of limited liability?
A) There are two or more owners who work in the business and share the profits between them by
agreement.
B) The owner or owners hold shares in the business which entitle them to vote at general meetings
C) The business is recognized in law as a separate legal entity to its owners

A) 2 and 3 only
B) 1, 2 and 3
C) 3 only
D) 1and 2 only
Answer:
26. Rackit had a receivables allowance of $50,000 at 31 December 20X7. At 31 December 20X8 trade
receivables totalled $970,000. It has been decided to write off debts totaling $20,000 and to
adjust the allowance for receivables to 10% of trade receivables at 31 December 20X8. What
figure should appear for trade receivables in the statements of financial position as at 31
December 20X8?
Answer : $...............
27. Which of the following would help a company with high gearing to reduce its gearing ratio?
A) Issuing further long-term loan stock
B) Paying dividends on its equity shares
C) Making a rights issue of equity shares
D) Taking out a loan with a bank loan
Answer: _________
28. What accounting concept means that the financial statements must reflect the underlying
commercial reality of a transaction?
A) Going concern
B) Materiality
C) Business entity
D) Substance over form
Answer: __________
29. According to the IASB’s Conceptual Framework for Financial Reporting, which of the following
elements are directly related to the statement of financial position?
A) Income
B) Liabilities
C) Assets
D) Expenses
E) Equity
A) 2, 3 and 5 only B) 2 and 3 only C) 1 and 4 only D) All of the above

30. The financial statements for the year ended 31 May 20X6 of Jahangir were prepared on 12 August
20X6 and were authorized for issue on 26 August by the board of directors.
The following significant events were occurred.
A) The company announced the disposal of one of its major subsidiaries on 11 August 20X6
B) Bonus payments due to senior managers for work done during the year to 31 May 20X6 were
finally agreed on 17 August 20X6.
C) A major fraud that occurred in April 20X6 was detected on 20 August 20X6
Which of the above events should be treated as adjusting events in accordance with IAS 10 Events
after the Reporting Period in the financial statements for the year 321 May 20X6?
A) 1 and 3 B) 2 only C) 1 only D) 2 and 3
Answer:
31. Lime Co. owns a brand name which was purchased in the prior for $40,000. It has an estimated
useful life of four years and is being amortised on a straight-line basis.
Which FOUR of the following items of information must be disclosed in respect of brand name in
accordance with IAS 38 Intangible Assets?
a) The name of the brand
b) The useful life of the brand
c) A reconciliation of the carrying amount at the beginning and end of the period
d) The accumulated amortization at the beginning and end of the period
e) How the brand will be used in the business
f) The amortization expense for the period
Answer: _________
32. Portland’s opening balance on the sales tax account on 1 July 20X6 was $16,260 credit. Sales and
purchase are net of 17.5 % sales tax. During the month the following transactions occurred:
1) Cash of $12,500 was paid to the tax authorities for sales tax owing
2) Credit sales of $64,000 were made
3) Credit purchases of $65,800 were made

What is the credit balance on the sales tax accountant 31 July 20X6?
a) $3,975 b) $3,445 c) $ 315 d) $3,392

Answer: ____________
33. Simon has a financial year end of 31 December. An asset was acquired on 1 April 20X4 for
$200,000. Depreciation policy is straight-line 20% on cost with a full charge in the year of
acquisition and none in the year of disposal. On 1 January 20X6 the asset was revalued to
$205,000.
Which journal would record the revaluation at 1 January 20X6?
A) Dr. Non-current asset cost $5,000
Dr. Accumulated depreciation $80,000
Cr. Revaluation reserve $85,000
B) Dr. Non-current asset cost $5,000
Dr. Accumulated depreciation $70,000
Cr. Revaluation reserve $75,000
C) Dr. Revaluation reserve $85,000
Cr. Accumulated depreciation $80,000
Cr. Non-current asset $5,000
D) Dr. Non-current asset cost $5,000
Cr. Revaluation reserve $5,000

34. F Co statement of profit or loss for the year ended 31 March 2015 shows a profit for the year of
$575,000. During the year, an ordinary dividend of $130,000 was paid and land costing $600,000
was revalued to $640,000. What was the total comprehensive income for the year?
A) $ 40,000 B) $ 485,000 C) $ 575,000 D) $ 615,000

Answer: ______________

35. Which TWO of the following items within the statement of financial position change immediately
following an issue of redeemable preference shares?
A) Cash B) Retained earnings C) Equity D) Long term loans

Answer: _____________
36. The summarized trial balance of Dinisa Co. for the year ended 31 October 20X7 is shown below:
Particular $’000 $’000
Equity shares of $1 each 20,000
Retained earnings at 1 November 20X6 9,600
Draft profit for the year ended 31 October 20X7 3,420
5% bank loan (repayable in 20X9) 10,000
Trade payables 2,750
Land and buildings at cost 45,000
Plant and equipment- at cost 9,400
Accumulated depreciation at 1 November 20X6
-Buildings (note 1) 9,600
-Plant and equipment (note 1) 3,620
Inventory at 31 October 20X7 1,940
Trade and other receivables 2,820
Current tax 170
59,160 59,160
The following notes are relevant.
1. Dinisa Co. purchased its only land for $5,000,000 several years ago. The value of land has
increased significantly in recent years. At 31 October 20X7, an independent surveyor valued the
land at $8,000,000. Dinisa Co. wants to record this valuation in the financial statements for the
first time.
2. Buildings had a useful life of 50 years at the date of acquisition and plant and equipment is
depreciated at 15% on a reducing balance basis.
3. Interest on the bank loan is payable annually in arrears on 31 October. Dinisa Co. had not paid
this interest at the reporting date
4. An income tax charge of $250,000 is required for the year ended 31 October 20X7. The balance
on current tax in the trial balance represents the over provision for the year ended 31 October
20X6.
Task 1: (12 marks)
Use the information above to complete the following extracts from the financial statements of
Dinisa Co. as at 31 October 20X7:
Dinisa Co: (Option 1) ……………………………………………………………………………………..

Options 1 : A) Statement of financial position for the year ended 31 October 20X7
B) Statement of profit or loss as at 31 October 20X7
C) Statement of financial position as at 31 October 20CX7
D) Statement of profit or loss for the year ended 31 October 20X7
 Particular $’000
Non-current assets
Land
Buildings (Option 1)
Plant and machinery (Option 2)

Equity
Share capital
Revaluation surplus

Current liabilities
Trade payables
Taxation (Option 3)
Loan interest

Option 1:
a. 29,600 b. 30,400 c. 34,500 d. 35,400
Option 2:
a. 9,400 b. 4,913 c.5,780 d. 4,370
Option 3:
a. 250 b.250+170 c. 250-170 d. 170

Task 2: (3 marks)
What impact will the adjustments in notes 1 to notes 4 have on the retained earnings for the year ended
31 October 20X7?
Particular Increase Decrease No impact
Loan interest accrual
Depreciation of buildings
Over provision of the current tax liability for the year ended 31
October 20x6
Revaluation of land
Depreciation of plant and equipment
Income tax charge for the year ended 31 October 20X7
37. Several years ago Walever Co. acquired 70% of the ordinary share capital of Noval Co. The
statements of profit or loss of the two companies for the year ended 31 December 20X9 are as
follows:
Particular Walever Co $’000 Noval Co $’000
Revenue 70,000 28,400
Less: cost of sales 38,000 12,000
Gross profit 32,000 16,400
Less: operating expenses 8,720 5,400
Add: interest received 10
Profit before tax 23,290 11,000
Less: income tax expense 4,100 2,300
Profit for the year 19,190 8,700
Additional information:
During the year ended 31 December 20X9, Walever Co. sold goods to Noval Co. for $180,000. 60% of
the goods remained in NovalCo’s inventory at the year end. Walever Co. makes a 20% mark-up on
cost.
Task 1: (3 marks)
Select the correct options to complete the following sentences:
➢ By acquiring 70% of Noval Co. has a ……………………. (Option 1) of the voting power and this
enables Walever Co. to have …………………………… (Option 2)over the operating and financial
decisions of the company.
➢ The remaining shareholders are collectively known as ……………………….. (Option3).
➢ Walever Co. will have to ……………………….. (option 4) the results of Noval Co in the group
accounts.

Option 1: A) Majority B) Minority

Option 2: A) No influence B) Participating interest C) Significant influence D) Control
Option 3: A) Associates B) Majority interest C) Shareholders D) Non-controlling interest
Option 4: A) Consolidate B) Equity account for
Task 2: ( 3.5 marks )
What amounts should be included in the consolidated statement of profit or loss for the year ended
31 December 20X9?
Particular $’000
Revenue
Less: Operating expenses
Add: Interest received
Less: Taxation
Task 3: (2 Marks)
What formula would be used to calculate each of the following amounts for inclusion in the
consolidated statements of profit or loss?
Profit for the year attributable to:
Non- controlling interest:
a) 70% × Group profit after tax C) 30% × Group profit after tax
b) 70% × NovalCo’s profit after tax d) 30% ×NovalCo’s profit after tax
Owners of the parent:
a) Group profit after tax b) Group profit after tax + Non-controlling interest
b) WaleverCo’s profit after tax d) Group profit after tax – Non-controlling interest
Task 4: (2 marks)
What is the amount of the adjustment required in the consolidated financial statements for the
unrealized profit?
Answer : $................’000
Task 5: (1.5 marks)
Complete the following statement:
The adjustment for unrealized profit requires the unrealized profit to be……………………………
(subtracted from / added to) the ……………………………….. in Walver’s Co’s consolidated statement of
profit or loss. The non-controlling interest will be allocated ……………………… (none/ its share) of this
adjustment.
Task 6 : (3 marks )
Walever Co is also interested in making an investment in Bravdal Co, but is unsure of what form this
investment should take. The ordinary shares in Bravdal Co carry one vote each and there are no
voting rights.
How will each of the following proposals be accounted for within the group accounts?
Particular Subsidiary Associate Investment
Purchase o0f 50% of the preference share capital and 30% of the
ordinary share capital which gives a significant influence over
BravdalCo’s financing and operating policies
Purchase of more than 50% of the preference share capital
Purchase of 30% of ordinary share capital which gives a significant
influence over BravdalCo’s financing and operating policies
Purchase of 30% of ordinary share capital which gives control over
BravdalCo’sfinancing and operating policies by virtue of an
agreement
Purchase of more than 50% of the preference share capital and debt
Purchase of more than 50% of the ordinary share capital