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FA2 Revision Question 3
FA2 Revision Question 3
Revision Questions 3
Q1. According to the IASB Framework for the Preparation and Presentation of Financial Statements
which TWO of the following needs apply to the government and its agencies in relation to the business
of a sole trader?
Q3. Franz plc is a manufacturer. Its 12 month reporting periods ends on 31 July and it adopts the
average cost (AVCO)method of inventory usage and valuation. At 1 August 20X4 it held inventory of
2,400 units of the material Zobdo, valued at $10.00 each. In the year to 31 July 20X5 there were the
following inventory movements of Zobdo:
What was the value of Franz plc’s closing inventory of Zobdo at 31 July 20X5?
A $11,700
B $9,000
C $15,075
D $35,100
Q4. On 1 January 20X4 Joffa plc purchased a new machine at a cost of $96,720. Delivery costs were
$3,660 and internal administration costs of $9,450 were incurred in relation to the acquisition. At the
acquisition date Joffa plc planned to replace the machine in 5 years, when it would have a zero residual
value, and to depreciate the machine on a straight line basis.
Joffa plc decides on 1 January 20X6 that the machine only has one remaining year of useful life. There is
no expected change to the residual value at the end of its life.
How much depreciation will be debited in respect of this machine in Joffa plc’s depreciation expense
account in the year ended 31 December 20X6?
A $58,032
B $60,228
C $65,898
D $33,460
Q5. On 1 April 20X5 Herepath plc bought a Foxy car for $23,500. The company’s depreciation policy for
cars is 30% per annum using the reducing balance method. On 1 April 20X7 the Foxy was part exchanged
for a Vizgo car, which had a purchase price of $28,200. Herepath plc handed over a cheque to the seller
for $19,350, in final settlement.
What was Herepath plc’s profit or loss on the disposal of the Foxy?
A $5,150 loss
B $7,835 profit
C $2,665 loss
D $6,250 loss
Q11. Ewan, a sole trader, has taken goods valued at $1,800 for his own use. This has not been
recorded in arriving at his draft reported profit figure. To record the drawings he must.
Q12. As at 31 December 20X4 Isembard plc’s trial balance failed to balance and a suspense account was
opened. When the following errors were discovered and then rectified, the suspense account
balance was eliminated.
Q13. The debit balance in Omar plc’s bank ledger account at the year end is $42,510. The following
items appear in the bank reconciliation at the year end.
$
Unpresented cheques 2,990
Uncleared lodgements 10,270
A customer’s cheque for $2,470 was returned unpaid by the bank before the year end, but this
return has not been recorded in the bank ledger account.
Q16. Which THREE of the following could be found in the financial statement of a partnership?
A Non Current Assets
B Share premium
C Drawings
D Profit for the year
Q17. Sun started business on 1 December 20X3 with cash of $5,000. He has not yet prepared a full
set of financial statements. As at the end of his first reporting period, 30 November 20X4, he has
cash at bank of $1,726. He made sales of $33,498 during the period and paid expenses in cash of
$19,385. He has no outstanding creditors at the end of the period, and has no non current assets or
inventory, but one customer owes him $2,387.
Assuming Sun made no other capital injections but took drawings of $15,000 in the period, identify
his profit for the 12 month reporting period to 30 November 20X4 and his net assets at the end of
the period on an accrual basis.
Q18. Which of the following descriptions of the going concern assumption is the one used in IAS 1
(revised) Presentation of Financial Statement?
A management does not intend to liquidate the entity nor to cease trading
B the entity is able to pay its debts as and when they fall due
C the directors expect the entity’s assets to yield future economic benefits
D financial statements have been prepared on the assumption that the entity is solvent and would
be able to pay all creditors in full in the event of being wound up.
Q20. Sara, Ed and Alex are in partnership, preparing financial statements as at 31 August each year
and sharing profits 4:3:1. Sara retired on 30 April 20X2, and Ed and Alex continued, sharing profits
3:1 respectively. The business’s profit for appropriation (arising evenly over the 12 months to 31
August 20X2) was $121,248. For the year to 31 August 20X2 Ed’s profit share is:
A $30,312
B $45,468
C $60,624
D $90,936
Q21. Helen, John and Chris are in partnership, preparing financial statements as at 31 January each
year and sharing profits 5:3:2. Helen retired on 30 September 20X6, and John and Chris continued,
sharing profits 5:3 respectively. Goodwill as at 30 September 20X6 (not to be retained in the
accounts) was valued at $50,000. The net entry to John’s capital account to include and then
eliminate goodwill is:
A debit $3,750
B debit $16,250
C credit $3,750
D credit $16,250
Q24. Den plc makes only statutory deductions from employees’ pay, which are all paid to HMRC when
due. In March 20X6 Den plc paid $18,538 to its employees by bank transfer. Gross pay for the month of
$28,456 was debited to the salaries expense account, but a debit balance of $3,983 remained on the
salaries control account. This balance represented:
Q25. Moon plc’s initial trial balance as at 31 October 20X1 has already been entered on the extended
trial balance for the period.
Extended trial balance (extract) Trial balance
$ $
Irrecoverable debt expense
Allowance for receivables as at 1 November 20X0 6,546
Trade receivables 251,760
As at 31 October 20X1 Grey’s balance to Moon plc of $1,860 is irrecoverable. Ben owes $12,650, but
Moon plc believes an allowance of 40% of this amount is necessary. In the adjustments columns on the
extended trial balance Moon plc should make THREE entries:
Q26. Leonard’s initial trial balance as at 30 April 20X9 has already been entered on the extended trial
balance for the period. Leonard’s drawings of $38,100 in total have been debited to the other expenses
account in error. In the adjustments columns on his extended trial balance Leonard should make TWO
entries of $38,100:
Q27. Bark plc’s initial trial balance as at 30 June 20X8 has already been entered on the extended trial
balance for the period. In respect of revenues in the year of $17,550, staff commission of 10% has not
yet been paid. In the adjustments columns on the extended trial balance Bark plc should make TWO
entries of $1,755:
Q28. Queen plc’s initial trial balance as at 31 May 20X3 has already been entered on the extended trial
balance for the 12 month reporting period.
Extended trial balance (extract) Trial balance
$ $
Opening inventory (at 1 June 20X2) 456,875
Closing inventory (at 31 May 20X3)
Inventory was counted on 31 May 20X3 and its cost has been established at $572,904. Of this, inventory
costing $27,485 is damaged and is estimated to have a net realisable value of only $15,000. In the
adjustments columns on the extended trial balance Queen plc should make TWO entries:
A debit $456,875 to the opening inventory account
B debit $545,419 to the closing inventory account
C debit $560,419 to the closing inventory account
D debit $572,904 to the closing inventory account
E credit $456,875 to the opening inventory account
F credit $545,419 to the closing inventory account
G credit $560,419 to the closing inventory account
H credit $572,904 to the closing inventory account
Q29. On her extended trial balance, Heather’s final net profit figure will appear in which TWO of the
following columns?
A debit column of the statement of profit or loss
B credit column of the statement of profit or loss
C debit column of the statement of financial position
D credit column of the statement of financial position
Q30. Mandy plc includes profits and losses on disposal of non current assets in administrative expenses
in its statement of profit or loss. Depreciation is charged on fixtures and fittings at 20% using the
reducing balance method. On 1 July 20X6 some fixtures that cost $4,000 on 1 July 20X3 were sold for
$150. In the administrative expenses account Mandy plc must:
A debit $1,450
B credit $1,450
C debit $1,898
D credit $1,898
Q31. Brand plc acquired five apartments on 1 June 20X4 and immediately rented them out to different
tenants. Brand plc has a credit balance on its rent receivable account in its initial trial balance as at 31
May 20X5 of $22,850. In the adjustments column of the ETB there are entries for rent in arrears as at 31
May 20X5 of $4,490, and for rent in advance at the same date of $7,720.
What amount will appear for rent under other income in Brand plc’s statement of profit or loss for the
year ended 31 May 20X5?
A $19,620
B $22,850
C $26,080
D $35,060
Q32. Platoon plc is preparing its financial statements for the year ended 30 April 20X1, having prepared
an initial trial balance.
Purchases in the period were $686,880. Inventories were valued at $18,081 on 1 May 20X0, and at
$18,647 on 30 April 20X1. In Platoon plc’s statement of profit & loss for the year ended 30 April 20X1 the
figure for cost of sales will be:
A $686,314
B $686,880
C $687,446
D $723,608
Q33. Jared plc is preparing its financial statements for the 12 month reporting period ended 30 June
20X9. Its initial trial balance includes:
- A balance for administrative expenses paid in the reporting period (including rent) of $44,064
- A balance for prepayment of rent at 1 July 20X8 of $4,251
On 31 May 20X9 Jared plc paid its quarterly rent in advance of $7,200.
In Jared plc’s statement of profit or loss for the year ended 30 June 20X9 the figure for administrative
expenses will be
A $35,013
B $43,515
C $44,064
D $45,915
Q35. Zen plc is preparing its financial statement for the 12 month reporting period ended 31 August
20X6 having prepared an initial trial balance which includes the following balances:
$
Accruals at 1 September 20X5 948
Interest paid 2,733
Of the accruals at 1 September 20X5, $362 related to interest payable. At 31 August 20X6 accruals will
include $419 related to interest payable.
In Zen plc’s statement of profit or loss for the 12 month reporting period ended 31 August 20X6 the
finance costs will be
A $2,204
B $2,676
C $2,733
D $2,790
Q36. Muse plc commences trading on 1 January 20X8 and has zero inventories at that date. During 20X8
it has purchases of $455,000, incurs carriage inwards of $24,000, and carriage outwards of $29,000.
Closing inventories at 31 December 20X8 are valued at $52,000.
In the statement of profit or loss for the year ended 31 December 20X8 the cost of sales figure is:
A $456,000
B $427,000
C $432,000
D $531,000
Q37. Red plc commenced trading on 1 April 20X3. The carrying amount of plant and equipment in Red
plc’s financial statements as at 31 March 20X5 was $399,960. The cost of these assets was $614,500. On
31 March 20X6 an asset costing $11,500 was acquired. Depreciation is charged on plant and equipment
monthly at an annual rate of 25% straight line. There are no residual values.
The carrying amount of Red plc’s plant and equipment in its statement of financial position at 31 March
20X6 is:
A $254,960
B $257,835
C $299,970
D $308,595
Q38. At its year end of 31 July 20X1 Hurry plc has in its draft financial statements a figure for trade
receivables of $578,645, an allowance for receivables in respect of Cute plc as at 1 August 20X0 of
$1,200 and irrecoverable debts expense of $3,290. You are told that:
In its completed financial statements as at 31 July 20X1 Hurry plc will show:
A charge for irrecoverable debts of $2,251 and trade receivables net of allowance of $578,395
B charge for irrecoverable debts of $2,340 and trade receivables net of allowance of $577,606
C charge for irrecoverable debts of $2,340 and trade receivables net of allowance of $578,395
D charge for irrecoverable debts of $3,451 and trade receivables net of allowance of $578,395
Q39. According to IAS 1 (revised) Presentation of Financial Statements, compliance with International
Accounting Standards and International Financial Reporting Standards will normally ensure that