This paper consists of TWENTY FIVE questions ONE long question (40 marks) and TWENTY FOUR objective test questions (60 marks).

Transcription

1 ERTIFITE LEVEL EXMINTION SMPLE PPER 1 (90 MINUTES) OUNTING This paper consists of TWENTY FIVE questions ONE long question (40 marks) and TWENTY FOUR objective test questions (60 marks). This paper will be assessed by computer based assessment from 1 ugust IEW\SMPLE

2 Sample Paper for new 1. HEXHM PL The following trial balance was extracted from the nominal ledger of Hexham plc on 31 March 20X8: Sales 1,150,000 Inventories at 1 pril 20X7 75,000 Purchases 465,000 istribution costs 220,000 dministrative expenses 340,000 Irrecoverable debts expense 36,000 Loan interest paid 8,000 Land and buildings cost 600,000 Plant and equipment cost 340,000 Land and buildings accumulated depreciation at 1 pril 20X7 96,000 Plant and equipment accumulated depreciation at 1 pril 20X7 63,000 ccounts receivable 60,000 llowance for receivables 5,000 ank 24,000 Ordinary share capital ( 1 shares) 400,000 Share premium 100,000 ank loan 200,000 Retained earnings 61,000 Ordinary dividends paid 15,000 ccounts payable 54,000 dvance deposits from customers 6,000 2,159,000 2,159,000 The following adjustments have yet to be accounted for: 1. Hexham plc holds two lines of inventory at 31 March 20X8. etails are as follows: Item X100 Y200 Total cost 16,200 76,000 Selling price 15,000 83, Hexham plc paid its annual insurance premium of 16,800 for the year 1 September 20X7 to 31 ugust 20X8. This payment is included in administrative expenses. 3. The company's depreciation policy is as follows: uildings Plant and equipment Straight-line over 50 years 10% straight-line The cost of the land was 200,000, and all non-current assets are assumed to have zero residual values. There were no additions to or disposals of non-current assets during the year ended 31 March 20X8. IEW\SMPLE Page 2 of 14

3 Sample Paper for new epreciation on buildings is charged to administrative expenses, and depreciation on plant and equipment is charged to cost of sales. 4. t the year end, accounts receivable includes a balance of 4,800 which is considered irrecoverable. The allowance for receivables requires adjusting to 5% of remaining receivables. The company has decided to present irrecoverable debts as other operating expenses on the face of the income statement. 5. The bank loan was received on 1 July 20X7 and is repayable in full in five years. Interest is charged at a fixed rate of 8% per annum. 6. Income tax for the year ended 31 March 20X8 is estimated at 10, The bank reconciliation performed at 31 March 20X8 revealed that Hexham plc had accounted for a cheque for 4,500 sent to a credit supplier as 5,400. IEW\SMPLE Page 3 of 14

4 Sample Paper for new Prepare the income statement for Hexham plc for the year ended 31 March 20X8 and the statement of financial position at that date. Income statement for the year ended 31 March 20X8 Revenue ost of sales Gross profit istribution costs dministrative expenses Other operating expenses Profit / (loss) from operations Finance costs Profit / (loss) before tax Income tax Profit / (loss) for year Statement of financial position at 31 March 20X8 Non-current assets Land and buildings Plant and equipment urrent assets Inventories Trade receivables Prepayments ash and cash equivalents Total assets Equity Equity share capital Preference share capital Share premium Retained earnings Non-current liabilities orrowings urrent liabilities orrowings ank overdraft Trade payables ccruals eferred income Tax payable Total equity and liabilities IEW\SMPLE Page 4 of 14

5 Sample Paper for new 2. Which TWO of the following information needs apply to the government and its agencies in relation to the business of a sole trader? The government and its agencies need information to E Establish levels of tax revenue ssess whether the business will continue in existence Produce national statistics ssess the owner's stewardship Take decisions about their investment 3. Which of the following definitions for the 'going concern' concept in accounting is the most accurate in the light of IS 1 (revised) Presentation of Financial Statements? 'The directors do not intend to liquidate the entity or to cease trading in the foreseeable future' 'The entity is able to pay its debts as and when they fall due' 'The directors expect the entity's assets to yield future economic benefits' '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' 4. ccording to IS 1 (revised) Presentation of Financial Statements, compliance with International ccounting Standards and International Financial Reporting Standards will normally ensure that The entity's inventory is valued at net realisable value The entity's assets are valued at their break-up value The entity's financial statements are prepared on the assumption that it is a going concern The entity's financial position, financial performance and cash flows are presented fairly IEW\SMPLE Page 5 of 14

6 Sample Paper for new 5. Johan plc enters into the following transactions in relation to Marius plc, a supplier which is also a customer. Which of Johan plc's accounting records is affected by each of these transactions? Marius plc buys goods from Johan plc on credit terms Sales day book Purchase day book Payables ledger Johan plc agrees to make contra entries in Marius plc's personal accounts in its accounting system. E F Sales day book Purchase day book Payables ledger 6. Plym plc is a retailer which is registered for VT. ll sales, and all purchases of goods for resale, attract VT at the rate of 20%. For the year to 30 June 20X7 Plym plc paid 68,100 to suppliers in respect of goods for resale, and showed revenue in the income statement of 89,400. There was no change in the figures for inventory and trade payables in the statements of financial position as at 30 June 20X6 and 20X7. What was Plym plc's gross profit for the year ended 30 June 20X7? 21,300 6,400 32,650 17,750 IEW\SMPLE Page 6 of 14

7 Sample Paper for new 7. Peri's bookkeeper made the following mistakes: 1 iscount allowed 3,840 was credited to discounts received account. 2 iscount received 2,960 was debited to discounts allowed account. 3 iscounts were otherwise correctly recorded. Which of the following journal entries will correct the errors? ebit iscount allowed 7,680, redit iscount received 5,920, redit Suspense account 1,760 ebit iscount allowed 880, ebit iscount received 880, redit Suspense account 1,760 ebit iscount allowed 6,800, redit iscount received 6,800 ebit iscount allowed 3,840, redit iscount received 2,960, redit Suspense account 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: djust cost of sales ebit 1,800 redit 1,800 So his reported profit will Increase ecrease IEW\SMPLE Page 7 of 14

8 Sample Paper for new 9. Hywel plc's trial balance includes a total for all the receivables ledger accounts as listed out at the year end. The receivables ledger is part of the double entry system. The trial balance fails to agree and a suspense account is opened. The difference is due to the following errors in Hywel plc's ledger accounts: 1 The balance on Markham plc's receivables ledger account is 9,890. This is incorrectly recorded in the trial balance as 9,980 2 discount allowed to Umberto of 33 was debited to his receivables ledger account 3 The sales account is overcast by 110 Three journals are drafted to correct these errors. Together these journals should redit the suspense account with 110 ebit the suspense account with 86 redit the suspense account with 46 ebit the suspense account with redge plc makes only statutory deductions from employees' pay, which are all paid to HMR when due. In March 20X6 redge 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: Employer's NI which should be debited to the salaries expense account Employer's NI which should be credited to the HMR liability account Total PYE and NI owed to HMR for March which should be debited to the salaries expense account PYE and employees' NI deducted from gross pay which should be debited to the salaries expense account IEW\SMPLE Page 8 of 14

9 Sample Paper for new 11. Limbo plc maintains its petty cash records using an imprest system. The total petty cash float is topped up monthly to 300. uring the month of ugust the following expenses were paid from petty cash: Stationery 36 Tea and coffee 60 Stamps 120 In error, the purchase of stamps was recorded as 12 and as a result a cheque for 108 was written to top up the petty cash float. The error made will result in which of the following? n imbalance in the trial balance of 108 and the petty cash balance being 108 less than it should be n understatement of expenses of 108 and the petty cash balance being 192 less than it should be n understatement of expenses of 108 and the petty cash balance being 108 less than it should be n imbalance in the trial balance of 192 and the petty cash balance being 192 less than it should be 12. The debit balance in Omar plc's cash book 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 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 cash book. What was the balance in hand shown by the bank statement? 37,700 47,320 35,230 32,760 IEW\SMPLE Page 9 of 14

10 Sample Paper for new 13. ark 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, sales commission of 10% has not yet been paid. In the adjustments columns on the extended trial balance ark plc should make TWO entries of 1,755: E F ebit the accruals account ebit the prepayments account ebit the distribution costs account redit the distribution costs account redit the prepayments account redit the accruals account 14. rindal plc acquired five apartments on 1 June 20X4 and immediately rented them out to different tenants. rindal 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 extended trial balance 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 rindal plc's income statement for the year ended 31 May 20X5? 19,620 22,850 26,080 37, Franz plc is a manufacturer. Its 12 month reporting period ends on 31 July and it adopts the average cost (VO) method of inventory usage and valuation. t 1 ugust 20X4 it held inventory of 2,400 units of the material Zobdo, valued at each. In the year to 31 July 20X5 there were the following inventory movements of Zobdo: 14 November 20X4 Sell 900 units 28 January 20X5 Purchase 1,200 units for 20,100 7 May 20X5 Sell 1,800 units What was the value of Franz plc's closing inventory of Zobdo at 31 July 20X5? 11,700 9,000 15,075 35,100 IEW\SMPLE Page 10 of 14

11 Sample Paper for new 16. Sam plc's income statement for the year ended 31 ecember 20X4 showed a net profit of 83,600. It was later found that 18,000 paid for the purchase of a van on 1 January 20X4 had been debited to motor expenses account. It is the company's policy to depreciate vans at 25% per year. What is the net profit after adjusting for this error? 106,100 70,100 97, , On 1 pril 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 pril 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? 5,150 loss 7,835 profit 2,665 loss 6,250 loss 18. iamond Ltd issues 250,000 equity shares with a nominal value of 2 each at a price of 3.55 each for cash. Which of the following sets of entries would be made to record this transaction? redit ank 887,500, ebit Share capital 500,000, ebit Share premium 387,500 ebit ank 887,500, redit Share capital 250,000, redit Share premium 637,500 ebit ank 887,500, redit Share capital 500,000, redit Share premium 387,500 redit ank 887,500, ebit Share capital 250,000, ebit Share premium 637,500 IEW\SMPLE Page 11 of 14

12 Sample Paper for new 19. Which THREE of the following could be found in the financial statements of a partnership? E Fixed assets Share premium rawings ividends paid Profit for the year 20. Leonard's initial trial balance as at 30 pril 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: ebit the capital account redit the capital account ebit the other expenses account redit the other expenses account 21. Helen, John and hris 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 hris 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: ebit 3,750 ebit 16,250 redit 3,750 redit 16,250 IEW\SMPLE Page 12 of 14

13 Sample Paper for new 22. The credit column total on Santi plc's initial trial balance exceeds the debit column total by 78 so a suspense account is opened. djustments are entered in the adjustments columns of the extended trial balance as follows: debits 144 and credits 173. None of these adjustments is entered in the suspense account. What is the balance on the suspense account that remains to be cleared? 107 credit 107 debit 49 debit 49 credit 23. t 31 ecember 20X4 the total of lunt plc's payables ledger balances was 29,800, but this did not agree with the payables control account balance at that date. orrection of the following items subsequently completed the payables ledger reconciliation: 1 The payables ledger column in one page of the cash book had been totalled at 2,950. The correct total was 2, debit balance in the payables ledger of 153 had been listed as a credit balance. What was the original balance on lunt plc's control account, and what was the corrected balance? Original balance 29,854, corrected balance 29,494 Original balance 30,466, corrected balance 30,106 Original balance 29,134, corrected balance 29,494 Original balance 29,746, corrected balance 30,106 IEW\SMPLE Page 13 of 14

14 Sample Paper for new 24. Which of the following assertions about cash flow statements is/are correct? 1 cash flow statement prepared using the direct method produces a different figure for net cash flow from operating activities to that produced when the indirect method is used. 2 Rights issues of shares do not feature in cash flow statements. 3 bonus issue will not appear as an item in a cash flow statement. 4 profit on the sale of a fixed asset will appear as an item under apital Expenditure in a cash flow statement. 1 and 4 2 and 3 3 only 2 and n extract from a cash flow statement prepared by a trainee accountant is shown below. ash flows from operating activities m Net profit before taxation 28 djustments for: epreciation (9) Operating profit before working capital changes 19 ecrease in stocks 13 Increase in debtors (4) Increase in creditors (8) ash generated from operations 10 Which of the following criticisms of this extract are correct? 1 epreciation charges should have been added, not deducted 2 ecrease in stocks should have been deducted, not added. 3 Increase in debtors should have been added, not deducted. 4 Increase in creditors should have been added, not deducted 2 and 4 2 and 3 1 and 3 1 and 4 IEW\SMPLE Page 14 of 14