F3 MOCK 4

1) Joseph makes credit sates of $12,400 and cash sales of $900, before any discounts. Sales
returns in the period are $500 and 1 trade discounts of $70 are given
What amount should be recorded as sales revenue in the income statement?
$12,730
$13,300
$13,730
$12,800

2. When performing his year end inventory count Mahmood accidentally counted goods
that were in the dispatch area waiting to be delivered to customers The goods had a cost
of $50,000 and were dispatched prior to the year end.
What impact does this uncorrected error have on profit and assets at the year end?

Overstated Understated
Asset
Profit

3. What reserve should be used in preference by a company increasing its share capital by means
of a bonus issue?
a. Revaluation reserve
b. Share premium reserve
c. Retained earnings reserve
d.General reserve

4. Which TWO of the following circumstances indicate that Company Y Is an associate of

Company X ?
a.Company X can control the operation and financial policies of Company Y
b.Company X owns 45% of the ordinary share capital of Company Y
c. Company X can appoint all of the board of directors of Company Y
d. Company Y is reliant on Company X for managerial assistance and technical expertise

5. Flora has the following property as at 31 December 20X5

Asset Date of purchase Cost ($) Residual value
(S)
Land 1 January 20X1 250,000 250,000
Building 1 January 20X1 250,000 100,000
the property was revalued at 1 January 20X5 at $800,000 ($450,000 land. $350,000 building)
There was no change in residual values Buildings are depreciated over 50 years
What is the depreciation expense for the year ended 31 December 20X5 (to the nearest $)?
$5,435
$9,783
 $7,603
$7,000

6. A company's gross profit as a percentage of sales increased from 24% in the year ended 31
December 20X0 to 27% in the year ended 31 December 20X1
Which of the following events is MOST likely to have caused the increase?
a.Overstatement of the closing inventory at 31 December 20X0
b.A decrease in advertising costs in the year ended 31 December 20X1
c.An increase in sales volume but no changes in sales price
d.Understatement of the closing inventory at 31 December 20X0

7. A Co paid $1 m to acquire 80% of B Co's shares At the date of acquisition the book value of B
Co's net assets was $ 760,000 and it was estimated that far value exceeded book value by
120,000 $. The fair value of the non controlling interest at the date of acquisition was $ 250,000
What was the goodwill on the acquisition of B Co?

8. Which of the following is an underlying assumption of the lASB's Framework for the
preparation and presentation of financial statements?
a.Materiality
b.Timeliness
c. Comparability
d. Going concern

9. IAS 28 Investments in Associates requires the equity method to be used to include an

associate within the group financial statements This involves the inclusion of an investment in
associate line within nor current assets
In accordance with IAS 28 Investments in Associates which of the following will be included in
the calculation of investment in associate in the consolidated statement of financial position?
(1) Share of post acquistion profits
(2) Cost of investment
(3) Non-controllng interests
a. 1 only
b. 1.2and3
c. 2and3only
d. 1 and 2 only

10. Which TWO of the following errors would lead to that creation of a suspense account?
o Vehicle repairs invoice debited to the non-current assets account
o Cash sales recorded in the cash book and nowhere else
o An invoice for rent debited to the heat and light account
o An overdraft debited to the balance
11. A company’s preparing its final accounts for the year ended 31 December 20X8 and has not
included a telephone bill received
in January 20X9. relating to phone calls made in December 20X8. in the final accounts
if the cost is recorded in the financial statements for the year to 31 December 20X9. how will the
net profit be affected for 20X8 and 20X9?

A. 20X Overstated 20X9 Over-stated

8
B Understated 20X9: Overstated
20XB
C. Understated 20X9 Understated
20X8
D. Overstated 20X9 Understated
20X8

12. According to IAS 37. Provisions. Contingent Liabilities and Contingent Assets,
Which TWO of the following statements are true?
Contingent assets should be disclosed in the notes if their receipt is probable
Contingent assets are included in the statement of finance position when their receipt is virtually
certain Contingent assets are never required to be disclosed in the notes to the accounts
Contingent assets should be disclosed by note if their receipt is possible

13. Which Two of the following should be listed as a credit on a trial balance?
o Interest Received
o Carriage Inwards
o Share Capital
o Sales Return

14. A sole trader only keeps limited accounting records and has the following information
available for the year ended 31 March 20X8?
Opening payables $34,560
Purchases $296,430
Goods returned to credit suppliers $2,000
Closing payables $42,650
Cash paid to credit suppliers $278,450

What is the value of the settlement discounts received by the sole trader?

$
15. Kenneth a sole trader disposed of an asset for $14,000 on 30 September 20X8 it had
originally cost $24,000 when it was acquired on 1 April 20X6 Kenneth has a depreciation policy
of 25$ reducing Balance on a pro-rata basis Kenneth prepared annual accounts with a financial
year end of 31 March
What is the profit on disposal that would be recorded in Kenneth's financial statement?
o $2188
o $5000
o $3875
o $8000

16. 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 errors
(1) A credit purchase of $500 had been entirely omitted from the books
(2) A credit sale for $500 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?
$

17. Carey received a cheque from a customer. Mr Walker, for $100 When preparing the bank
reconciliation the bookkeeper for Carey notes the cheque has been dishonoured and returned
marked 'refer to drawer’ because Mr Walker does not have sufficient funds in his account.

What adjustments should Carey's bookkeeper make?

1)Dr Bank $100 Cr Accounts receivable control account $100

2)Dr Bank $100 Cr Accounts payable control account $100

3)Dr Accounts receivable control account Cr Bank $100
$10O
4)Dr Accounts payable control account $ Cr Bank $100
100

18. Which of the following would be

disclosed in the statement of changes in
equity?

(1) Ordinary share capital

(2) irredeemable preference share capital
(3) Redeemable preference share capital
(4) Retained earnings

1)1.2 and 4 only

2) 2 and 3 only
3) 4 only
4)1.2.3 and 4

19. What Impact do the following have on profit in the income statement?
Increase in profit Decrease in profit
Recovery of a debt previously written off
Decrease in allowance for receivables

20. The following information relates to Lyen Co for the year ended 30 September 20X1
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 Lyen Co as at 30 September 20X1?

21. Which TWO of the following errors would be highlighted by performing a reconciliation of
the receivables
control account with the receivables ledger at month end?
a. An irrecoverable debt was only entered into the control account
b. A batch of cash receipts was entered into the day book as cash payments
c. A contra agreed with a customer has not been entered in the records
d. The daily total of the sales day book was added incorrectly during the month

22. Lee purchased some inventory at a cost of $1 00,000 (excluding sales tax). It cost $3,000
(excluding sales tax) to transport the inventory to Lee's premises and he paid $10,000 non-
recoverable sales tax In addition, when the inventory is sold it will cost Lee $1,OOO to deliver
the item to his customer's premises Lee always makes a large profit on his transactions and he
always offers free delivery to his customers.
At what value should the inventory be included in Lee's financial statements?

o $113,000
o $112,000
o $114,000
o $103,000

23. Bert offers a 2% settlement discount to his credit customers if payment is made within 20
days of purchase Additionally, a trade discount of 10% of standard selling price is given if more
than 100 units are purchased in one month List price is $60 per unit A customer buys 120 units
In September and pays for them 15 days later.
What is the value of the discount that will be posted to Bert's discounts allowed account?
$129.60
$144.00
$849.60
$141.60

24. A business had a balance at the bank of $2,500 at the start of the month During the month It
paid for material invoiced at $1,000 less trade discount of 20% and settlement discount of 10% It
received a cheque from a credit customer in respect of an invoice for $200. subject to a
settlement discount of 5%

What is the balance at the bank at the end of the month?

o $1,970
o $1,980
o $1,900
o $1,770

25. H Co acquired 70% of the ordinary share capital of S Co on 1 January 20X9 at that date. S
Co's retained earnings were $10 000 and its share capital was $40,000 The fair value of non-
controlling interest was $12,000. resulting in goodwill at acquisition of $10,000
What was that purchase consideration paid by H Co at 1 January 20X9 on the acquisition of S
Co?
$

26. A manufacturing business calculated the cost of its closing inventory as follows
$
Direct material cost 200,000
Direct labour cost 180,000
Share of storage costs for finished goods 20,000
Share of indirect factory overheads 60,000
Share of selling costs 35.300
545,000

According to IAS 2 Inventories, what figure should be used as the cost of closing inventories?
a. $380,000
b. $440,000
c. $200,000
d. $545,000

27. Which of the following statements are correct?

a. Interest paid should always appear under the financing section of the statement
of cashflows
b. The direct method of calculating cash from operating activities leads to a different figure
than that produced by the indirect method
c. A company with high profits in the income statement will always have a cash inflow in
the statement of cash flows for that year
1) 1 only
2) 2 only
3) 3 only
4) None of the above

28. Mattie a limited liability company has a research project A and a development project B
during 2005 materials of 40,000 for project A and $30000 for project B were purchased and
used. The project manager was paid a salary of $40000 and spend 60% of her time on project A
and the remainder working on project B
According to IAS 38 intangible Assets, what is the amount of development cost to be captilised
in 2005?
o $54,000
o $70,000
o $46,000
o $110,000

29. Which of the following bodies is responsible for providing timely guidance on the
application of IFRS and for giving advice on financial reporting issues not specifically addressed
in IFRS?
o International Accounting standards board
o IFRS advisory council
 o IFRS Interpretations committee
o IFRS Foundation

30. The Jack Group has purchased 35% of the voting share capital of Vera Co
How should the investment in VERA Co be accounted for in the consolidated statement of
financial position of the jack Group?
o Include the investment at Cost plus 35% of Vera Co retained earnings
o Include the investment at cost plus 35% of vera Co’s post acquisition retained earnings
o Include the investment in Vera Co at cost in non current assets
o Add the assets and liabilities of Vera Co to those of jack Group

31. A business began operations with $800 in the cash till During the first year, all sales were
cash sales and $42,000 was banked Before making any bankings, sundry expenses of $200 per
month were paid from the cash till and the owner also withdrew $400 per month from the cash
till for Iiving expenses The cash in the till at the end of the first year was $300.
What is the cash sales figure for The first year of operations?
$

32. A company calculates accounts payable payment period as follows

Closing trade payables
Purchases X 365

Which of the following factors will cause the accounts payables payment period in
days to be higher compared to previous years?
a. An extension of the credit period offered to its customers
b. Poor long term financial management resulting in the use of extended trade
credit from supplier
c. Two major suppliers offering a significant cash discount for early payment

o 2 and 3 only
o 1 and 3 only
o 2 only
o 1 ,2 and 3 only

33. Based on past experience. Kiran has always provided 5% of revenue each year
as a provision to meet expected claims under warranty
The balance on the warranty provision at 1 January 20X6 was $20,500 During the
year. $11,600 was spent settling clams and the remaining opening provision was
released as unused.
Kiran's revenue for the year ended 31 December 20X6 was $268,000.
What should be the warranty expense charge in Kiran's income statement for year
ended 31 December 2006?
o $25,000
o $4,500
o $11,600
o $13,500

34. Should the following errors be highlighted by the extraction of trial balance?
Discounts received were credited to receivables and debited to discounts allowed Yes
No
Rent paid by cheque was credited to bank but no other entries were made? Yes No

35. Which of the following statement correctly explain why company managers
calculate and Interpret ratios?
(1) To check that the information in the financial statements is completely
accurate
(2) To monitor key performance areas in the business
(3) To check individual business units are performing as expected

o 2 only
o 1,2 and 3 only
o 1 and 3 only
o 2 and 3 only

36. Which TWO of the following items would based to finance cost in the income
statement?
o Redeemable preference dividend paid
o Taxation paid
o Loan note interest paid
o Ordinary dividend paid
37. A sole trader has capital of $25,000. current liabilities are $4,400 and the trader
has a long term bank loan of $22,000. Current assets are $6,100.
What is the value of non current assets?
$

38. Which of the following is necessary for an entity to recognise an asset in its
statment of financial position?
o The item must be in the entity's possession
o The item must be controlled by the entity
o The item must have been paid for by the entry
o The item must be owned by the entity

39. Which of the following statement are correct when preparing the consolidated
financial statements?
1) A non controlling interest is always created on consolidation
2) A subsidiary and an associate should be treated the same on consolidation
3) The share capital of a subsidiary is included in the consolidated statements
of financial position
4) On consolidation only the group’s share of a subsidiary’s revenue, cost of
sales and expenses is included

o 1 and 2 only
o None of the statement
o 1 and 3 only
o 3 and 4 only
40. Chanty co acquired 30,000 ordinary shares and $10,000 of the 4% loan stock in
Exbig Co
Exbig co is financed as follows
$
$1 ordinary shares 50,000
4% loan stock 40,000
Retained earnings 10,000
For the purpose of preparing consolidated financial statements what is Chanty Co’s
interest in Exbig Co?
o 50%
o 30%
o 60%
o 85%

41. A company operates an accounting system which includes a general ledger,

payables ledger and receivables ledger
Which TWO of the following transactions will the company need to enter in the
receivables ledger?
o Recorded the return of goods to a supplier
o A customer’s debt of $40 was no longer recoverable
o Corrected an entity where a credit sale was originally recorded as a cash
sales
o The allowance for receivables was increased to $1,200

42. XYZ has lodged a legal claim against ABC. ABC’s legal advisers have advised
that there is a 20% chance damages will be $45,000, a 60% chance that damages
will be $30,000 and a 20 % chance damages will be nil
What is the amount that ABC should provide for?

43. The financial statements of Jurong were prepared for the financial year ended
31 December 2006. The following events occurred after the end of the reporting
period but before the financial statements were authorized for issue
1) Inventory which was shown at its estimated net realizable value (NRV) on
the statement of financial position was sold during January 2007 at a figure
significantly lower that the NRV estimate
2) A dispute arising from a contract entered into with another company in
January 2007 has led to major litigation
3) The settlement of large claim arising from a court decision in January 2007
the court case commenced in June 2006 and a provision has been shown in
 the financial statements for the year ended 31 December 2006 however the
provision was much higher than the settlement figure
Which of the above events should be treated as an adjusting event for the year
ended 31 December 2006 in accordance with IAS 10 events after the reporting
period ?
o 1 only
o 2 and 3 only
o 2 only
o 1 and 3 only

44. There are a number of accounting ratios that can be calculated to review the
position and performance of an entity, they cover the areas of profitability liquidity
efficiency and financial position
Which combination of ratios would cover all four of these areas ?
o Current ratio, quick (acid test) ratio, inventory days, receivable days
o Current ratio, return on capital employed, receivables days and gearing
o Inventory days, payables days, gearing and net asset turnover
o Gross profit margin, quick (acid test) ratio, return on capital employed and
current ratio

45. The total of balance in a company’s sales ledger is $1250 more than the
debit balance on the control account
Which of the following errors would by itself account for this difference?
o A receivable account with a credit balance of $1,250 has been treated as a
debit balance
o The cash receipts book has been undercast by$1,250
o The sales day book has been undercast by $1,250
o Settlement discounts of $1,250 have been omitted from the general ledger

46. Which TWO of the following functions is the aged receivable analysis used
for?
o Reconciling the receivables ledger and receivables control account
o Calculating the allowance for receivables
 o Calculating the closing receivables balance
o Identifying potential irrecoverable debts

47. ABC Co purchased a building for $50,0000 on 1 January 2002 ( of which land
cost $ 200,000) with an expected useful life of 50 years. Depreciation is charged
on a straight line basis
On 1 January 2005 the building was revalued to $800,000 (including land of
$350,000)
How much should be recorded in the revaluation reserve at 1 January 2005 in
respect of the land and building?
o $318,000
o $150,000
o $300,000
o $168,000

48. Which Two of the

following items should be treated
as capital expenditure when
accounting for the purchase of a non current asset?
o Delivery Charge
o Recoverable sales tax
o Installation charge
o Annual insurance
o Maintenance charge

49. Are the following statements about the effect of an accrued expense true or
false?
True False

Profit is reduced
Net assets are reduced
50. Which of the following statements regarding events after the reporting period is
true?
o Non adjusting events must always be disclosed in the notes to the financial
statements
o Adjusting events are those events that provide additional evidence of
conditions existing at the reporting date
o Non adjusting events provide additional evidence of conditions existing at
the reporting date
o Adjusting events concern conditions which only exist between the reporting
date and the date the financial statement are approved by the directors