Accounting errata sheet 2022

QUESTION BANK
Errata and clarifications
Chapter 7, Question 2
There is a typo in answer option C. It should read:
C Dr Cost of sales: £686,880; Cr Purchases: £686,880

Solution to Chapter 4, Question 6

There is an error in the Bal b/d figure. It should read 24,183

Chapter 12, Question 7

Note (7) should be amended to read as follows:
On 15 April 20X2 one of the company’s customers went into liquidation. Trade receivables at 31
March 20X2 include a balance of £95,000 owed by this a customer which has gone to liquidation. The
directors have been advised that they are unlikely to receive any of this amount and wish to write the
debt off as irrecoverable. Irrecoverable debts are written off to administrative expenses.

Chapter 12, Question 9

Note (7) should be amended to read as follows:
Colbolt plc received notice on 15 April 31 March 20X7 that one of its customers, Pulse Limited, had
gone into liquidation and the debt requires to be written off as irrecoverable. This customer owed
£165 at the year end that date. Colbolt plc decided to create an allowance for receivables on the
remaining trade receivables balance of £4,500. Irrecoverable debts are charged to
administrative expenses.

Chapter 13, Solution to Question 4

In the cash flow from operating activities section, investment income of £12,500 is deducted from
profit before tax. This represents the difference between the £25,000 income presented in the
statement of profit or loss and the cash interest received of £12,500 as shown in working 1. Whilst
the net impact on the statement of cash flows is correct, the presentation of the items is incorrect.

The correct presentation is:

In the operating activities section, the investment income of £25,000 should be added back to profit
before tax.
In the investing activities section, the interest received of £12,500 should be presented as a cash
inflow.

The corrected sections of the statement of cash flows are as follows:

£
Cash flows from operating activities
Profit before tax 911,100
Investment income (W1) (25,000)
Finance costs (W3) 75,000
Depreciation 750,600
Amortisation (W6) 12,300
Impairment charge 15,000
Gain/loss on sales of property, plant and equipment (39,500)
Movement in inventories 304,600
Movement in trade receivables (W7) (12,000)

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 £
Movement in trade payables (W4) 1,000
Cash generated from operations 1,993,100
Tax paid (W2) (300,000)
Interest paid (W3) (77,000)
Net cash from/used in operating activities 1,616,100
Cash flows from investing activities
Purchase of property, plant and equipment (W4) (1,573,000)
Purchase of intangible assets (77,500)
Proceeds from sale of property, plant and equipment 600,000
Interest received (W1) 12,500
Net cash from/used in investing activities (1,038,000)

Chapter 13, Question 10

The date in the left hand column should read 20X5

Chapter 15, Question 2 and Question 3

The scenario is missing from the question. The scenario should read:

Mock exam guidance notes

Sample exam 2, Question 23 refers to Chp 14, Q7. It should read Chp 14, Q6

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