CA School of Accountancy’s Mock Exam

PAPER: Financial Accounting (FA)

TUTOR: Roshan Bhujel

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. Fred is a sole trader and has prepared a statement of financial position for the year ended 30 June
20X4. He has not introduced any capital during the year.

Which TWO of the following are required to calculate his net profit for the year ended 30 June 20X4?

1. Change in net assets for the year

2. Net cash outflow
3. Drawings
4. Dividend paid

2. Bella is preparing her statement of cash flows using the indirect method. The profit of $62,600
needs to be adjusted to arrive at 'Net cash from operating activities.' The following figures relate to
Bella's non-current assets:
$
Depreciation 11,400
Profit on disposal of plant and equipment 4,500
Proceeds on disposal of plant and equipment 7,700
Amortisation of intangible assets 2,100
Purchase of vehicles 10,200

What figure should be included in Bela's statement of cash flows for net cash from operating activities
given the above information?

1. $71,600
2. $71,500
3. $46,700
4. $80,600

3. What is the purpose of disclosure notes in the financial statements?

1. To present information about the basis of preparation and the specific accounting policies used
2. To disclose supporting information for items presented in the primary financial statements
3. To provide other information that is not presented in the primary financial statements, but is
necessary for an understanding of them

a) 1 and 3
b) 1, 2 and 3
c) 2 only
d) 1 and 2 only
4. On 1 May 20X1 Bobbin Co had a debit balance on its cash account of $5,830. During May the
following transactions took place:
$
Cash purchases 5,000
Credit purchases 4,200
Cash paid to credit suppliers 8,850
Cash Sales 8,000
Credit Sales 12,520
Cash received from credit customers 10,810
Cash refund from a supplier 210
Cash refund to a customer 305

What was the balance on Bobbin Co's cash account as at 31 May 20X1?

5. This is an extract from kamal's trial balance for the year end 30 June 20X8
$
Opening inventory 19,500
Closing inventory 22,250
Purchases 325,000
Carriage inwards 8,250
Distribution costs 28,125
Administration salaries 96,750
Depreciation 31,400

Depreciation expense is split equally between cost of sales and distribution expenses

What should be the cost of sales figure shown in Kamal's statement of profit or loss for year ended 30
June 20X8?

6. In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets which TWO of the
following terms are used in the definition of a provision?

1. Possible obligation
2. Certain amount
3. Liability
4. Uncertain Timing
7. The following extracts have been prepared from the financial statements of Bailey Co for the year
ended 31 December 20X2.

Statement of profit or loss extract: Statement of financial position:

$'000 &'000
Profit from operations 85,000 Non-current asseets 285,000
Finance cost (8,000) Current assets 100,000

Profit before tax 77,000 Non-current liabilities 104,000

Income tax expense (12,000) Current liabilities 45,000

Profit for the year 65,000

What is the return on capital employed for Bailey Co?

1. 19%
2. 27%
3. 25%
4. 22%

8. Which TWO of the following transactions could increase a company's cash balance?

1. issue of preference shares

2. Redemption of an outstanding loan
3. A rights issue of shares
4. A bonus issue of shares

9. When preparing a set of financial statements, at what stage in the process should the trial balance
be prepared?

1. After the first draft of the financial statements has been prepared
2. After the transactions have been entered into the books of prime entry
3. After the final financial statements have been prepared
4. After the ledger accounts have been balanced at the end of the accounting period
10. Antonio is sales tax registered, and uses cash to buy office stationery. The invoice shows the
following details.
$
Net expenditure 8
Sales tax 2
Total cost 10

Which of the following correctly records the payment of the invoice?

$
1. Dr Petty cash account 10
Cr Office stationery expense account 8
Cr Sales tax account (input sales tax) 2

2. Dr Office stationery expense account 10

Cr Petty cash account 10

3. Dr Office stationery expense account 10

Cr Petty cash account 8
Cr Sales tax account (input sales tax) 2

4. Dr Office stationery expense account 8

Dr Sales tax account (input tax) 2
Cr Petty cash account 10

11. Fiona has the following inventory at cost

1. Cups $300
2. Glasses $500
3. Crockery $825
The following information has been discovered
1. The cups have been damaged and have a net realizable value of $250
2. The glasses have a selling price of $600
3. The crockery has slight damage but if it is repaired at a total cost of $75, it can be sold for $700
What should be the value included for total inventory in Fiona's statement of financial position?
12. A company has a financial year end of 30 September 20X7 on 1 October 20X7 there was

1. A fall in the value of several foreign currencies, which significantly reduced the value of the company's
overseas assets
2. A serious fault discovered in some year end inventories, which made them worthless

According to IAS 10 Events After the Reporting Period, which of the above should be regarded as
adjusting events for the year to 30 September 20X7?

a) 2 only
b) 1 and 2
c) 1 only
d) Neither 1 or 2

13. Felix Co is preparing its financial statements for the year ended 30 November 20X2.

On 1 December 20X1 a motor van was purchased for $10,000. This was correctly recorded in the cash
account but had been debited to the administration expense account

The van is expected to be used by Felix Co for the next four years

Which of the following statements are true?

1. Profit before tax is understated by $10,000

2. Profit before tax is understated by $7,500
3. Profit before tax is overstated by $7,500
4. Non-current assets are understated by $10,000
5. Non-current assets are understated by $7,500

a) 2 and 5
b) 2 and 4
c) 1 and 5
d) 3 and 5

14. A company calculates its accounts payable payment period as follows:

Closing trade payables

х 365
Credit Purchases

Which of the following factors will cause the accounts payables payment period in days to be higher
compared to previous years?
1. An extension of the credit period offered to its customers
2. Poor long-term financial management resulting in the use of extended trade credit from suppliers
3. Two major suppliers offering a significant cash discount for early payment
a) 2 and 3 only
b) 1 and 3 only
c) 2 only
d) 1,2 and 3

15. 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.
What journal would record the revaluation on at 1 January 20X6?

1. Dr Revaluation surplus $85,000

Cr Accumulated depreciation $80,000
Cr Non-current asset cost $5,000
2. Dr Non-current asset cost $5,000
Cr Revaluation surplus $5,000
3. Dr Non-current asset cost $5,000
Dr Accumulated depreciation $80,000
Cr Revaluation Surplus $85,000
4. Dr Non-current asset cost $5,000
Dr Accumulated depreciation $70,000
Cr Revaluation surplus $75,000

16. Jessica's expenses for the year ended 31 December 20X4 included the following
1. $10,200 for a year's insurance cover running from 1 April 20X4
2. Electricity invoices totaling $10,600 during the year. On 8 February 20X5 she received an invoice for
$2,800 covering electricity for the period 1 December 20X4 to 31 January 20X5
3. An agreed accountant's fee of $2,700 to prepare the accounts for 20X4. $1,000 was paid in September
20X4 and the remainder was due to be paid in April 20X5
What will be the net effect of the adjustments for accruals and prepayments on Jessica's profit for the
year ended 31 December 20X4?
1. $550 Increase
2. $550 Decrease
3. $1,550 Decrease
4. $1,550 Increase
17. A business acquired a motor vehicle on 1 July 20X6 for $100,000, when it was estimated to have a
useful life of three years and a residual value of $10,000. On 1 July 20X7, it was considered that the
estimated useful life will be extended by a further two years but that there would be no residual value
at the end of the vehicle's life. The business uses the straight-line method of depreciation for all non-
current assets.
What is the depreciation charge for the year ended 30 June 20X8?

18. Which TWO of the following ratios would help the owner of a business understand its
profitability?
1. Inventory days
2. Current ratio
3. Interest cover
4. Return on capital employed
5. Gross margin
6. Gearing

19. Which TWO of the following are credit entries in ledger accounts?
1. An increase in drawings
2. A reduction in a liability
3. A reduction in an asset
4. An increase in capital

20. Which TWO of the following does IAS 2 Inventories allow to be included in the value of inventory?

1. Product advertising costs

2. Production manager's salary
3. Finance manager's salary
4. Depreciation of factory
21. Which TWO of the following could be considered a role of International Financial Reporting
Standards?

1. To help provide comparability of accounting treatments internationally

2. To provide a legally binding framework to be adhered to internationally
3. To provide guidance for the preparation of the financial statements
4. To ensure all financial information is accurately recorded in the financial records of a business entity

22. The following figures are from Lucy's statement of financial position for the year ended 31 December
20X5:

Land and buildings 735,000

Loan stock 20X9 75,000
Trade payables 225,000
Trade receivables 200,000
Overdraft 35,000
Prepayments 54,000
Accruals 23,000
Inventory 25,000
Loan repayable 30 June 20X6 45,000

What are Lucy's CURRENT liabilities?

23. Mattie Co has a research project, A and a development project, B. During 20X5, materials of $40,000
for project A and $30,000 for project B were purchased and used. The project manager was paid a salary
of $40,000 and spent 60% of her time on project A and the remainder working on project B.
According to IAS 38 Intangible Assets, if the capitalization criteria are met, what is the amount of
development cost to be capitalized by Mattie Co in 20X5?
1. $30,000
2. $110,000
3. $46,000
4. $70,000
24. Which of the following is a characteristic of faithful representation in accordance with the
Conceptual Framework of Financial Reporting?
1. Comparability
2. Prudence
3. Verifiability
4. completeness

25. At 31 December 20X0, Juan's list of individual receivables ledger balances totalled $230,450 and his
accounts receivables ledger control account balance was $229,730. Two errors were then identified.
Where would each of the following errors require an adjustment?
In the receivables In the individual In both
ledger control receivables ledger
account only balances only
A customer cheque for $768 had been
returned by the bank and no entries had been
made to reflect this
Cash received of $360 had been debited to a
customer's individual account and treated
correctly in the general ledger

26. Smith receives a bank statement which shows an overdrawn balance of $3,500. Whilst carrying out a
reconciliation of the cash book to the bank statement balance, the following points came to light:
1. Cheques sent to suppliers for $4,019 have not been presented to the bank at the date of the bank
statement
2. A payment of $75 has been paid out of the bank account due to a bank error
After using the above to prepare the bank reconciliation, what amount should be shown in the
statement of financial position for the bank overdraft?

27. Which TWO of the following should be included in a statement of profit or loss?

1. Drawings taken from the business

2. Employees salaries for the year
3. Capital introduced
4. Rent received for the year
5. Trade receivables
6. Bank overdraft
28. Which TWO of the following types of error should be identified by performing the trade
receivables control account reconciliation?
1. Omission of a balance from the list of credit customers balances
2. Allocation of sales invoices to the wrong customer
3. Incorrect calculation of the sales invoice total before posting to the sales day book and customer
account
4. Addition errors in the total column of the sales daybook

29. Yakuci sells all goods on credit and is currently preparing its financial statements for the year ended
31 December 20X6. From the records that have been kept, the following information is available:
1. Trade receivables at the start of the year were $102,400
2. Trade receivables at the end of the year were $133,900
3. Discounts allowed to credit customers were $3,400 for the year (not expected to be taken when
invoice was first issued)
4. Cash received from credit customers was $124,600 for the year
5. The profit mark-up on goods sold was 25% throughout the year
What was the gross profit for the year?
1. $31,900
2. $39,875
3. $38,175
4. $30,540

30. SPC Co purchased a piece of equipment to use within the business. The invoice showed
$
Net 50,000
Sales tax at 20% 10,000
Gross 60,000
The sales tax is irrecoverable
SPC Co also incurred delivery costs of $2,870, installation costs of $5,400 and staff training costs of
$1,800
What is the total amount to be recognized on the statement of financial position for the piece of
equipment?
1. $58,270
2. $50,000
3. $60,070
4. $68,270
31. The trial balance of Darwin does not agree and a suspense account has been opened for the
difference. On investigation, it was discovered there was only one error. The opening prepayment for
rent of $250 had been credited to the rent expense account.
What journal is needed to correct this?
1. Dr Suspense account $500 Cr Rent expense $500
2. Dr rent expense $250 Cr Suspense account $250
3. Dr Suspense account $250 Cr Rent expense $250
4. Dr Rent expense $500 Cr Suspense account $500

32. Kalla Co had a bank ledger account balance of $22,750 (debit) at 1 January 20X1. During the year to
31 December 20X1, Kalla Co had receipts of $117,500 and received a loan of $11,000 Kalla Co made
payments to suppliers for purchases and expenses of $119,250.
What is the balance on Kalla Co's bank ledger account at 31 December 20X1?
1. $13,500 Dr
2. $32,000 Cr
3. $32,000 Dr
4. $13,500 Cr

33. Which of the following errors would give rise to a suspense balance on a business' trial balance?
1. A credit purchase of $690 had been entered in the purchases account correctly but had been entered
in the payables account as $960
2. Cash received from a credit customer of $200 had been incorrectly recorded as $400 in the relevant
accounts of
3. A credit sale for $500 had been debited to the account of J Smith and should have been entered in the
account of B smith
4. The purchase of a motor van for $10,000 for making deliveries had been entered in the motor
expenses account

34. Would the following items be adjusted through retained earnings in the statement of financial
position?
Yes No
Ordinary dividends paid
The revaluation of a non-current asset
35. During the year ended 31 December 20X6 Jane wrote off irrecoverable debts of $2,700, resulting in
trade receivables of $150,000 at 31 December 20X6. She wishes to make an allowance for receivables
equivalent to 4% of outstanding balances, and has an allowance for receivables brought forward at 1
January 20X6 of $5,000.
What should the total receivables expense in the statement of profit or loss for the year ended 31
December 20X6 be?
36. The following are the summarized statements of financial position of two companies, Sylan and Tor,
as the end of year 31 December 20X8
Assets Sylan Tor
Non-current assets $m $m
Property, plant and equipment 60 30
Investments, at cost 39 5
99 35
Current assets
Inventories 30 20
Trade receivables 40 25
Other current assets 15 5
85 50
Total assets 184 85

Equity and liabilities

Equity
Ordinary share capital ($1 shares) 70 30
Retained earnings 64 25
134 55
Current liabilities
Trade payables 35 25
Other current liabilities 15 5

Total equity and liabilities

Sylan purchased 80% of the ordinary share capital of Tor for $39m several years ago. The retained
earnings or Tor at the date of acquisition were $15m and the non-controlling interest had a fair value of
$8m.
During the year to 31 December 20X8 Sylan sold inventory costing $13m to Tor for $18m. Tor still had to
sell 20% of this inventory as at 31 December 20X8. Tor also had invoices outstanding in respect of these
purchases totalling $6m.

TASK-1 (2 marks)

Which of the following is an indicator of one company being a subsidiary of another?

Yes No
Having significant influence in a company
Buying more than 50% of its inventory from a company
Owning more than 50% of the voting rights in a company
Owning 30% of the shares in a company

TASK-2 (13 marks)

Complete the consolidated statement of financial position for Sylan as at 31 December 20X8.

Sylan- Consolidated statement of financial position

Assets
Non-current assets $m
Intangible asset goodwill
Property, plant and equipment
Investments, at cost

Current assets
Inventories (option-1)
Trade receivables
Other current assets

Total assets

Equity and liabilities

Equity attributable to owners of the parent company
Ordinary share capital ($1 shares)
Retained earnings (option-2)
Non-controlling interest
Total equity
Current Liabilities
Trade payables
Other current liabilities

Total equity and liabilities

Option – 1
a. 30+20-unrealised profit in inventories b. 30+20 c. 30+16 d. 30+16-unrealised profit in inventories
Option – 2
a. 64 + 8 – 1 b. 64 + 10 – 1 c. 64 + 8 – 5 d. 64 + 8
37. Marja Co's trial balance at 30 April 20X6 was
Dr Cr
$'000 $'000
Property, plant and equipment, carrying amount (note1) 2,887
Patent, at cost (note 1) 80
Bank 113
Revenue 10,200
Cost of sales 7,845
Inventory at 30 April 20X6 111
Cash 66
Taxation, overprovision for previous year (note 2) 26
10% loan note (note 3) 360
Trade payables 565
Trade receivables 1,700
Operating expenses (including depreciation) 1,015
Allowance for receivables 30
Retained earnings at May 20X5 530
Ordinary shares (nominal value $1) (note 4) 1,000
Share premium account (note 4) 220
Suspense account (note 4) 640
Provision for legal damages 80
Dividend paid 60
Total 13,764 13,764
Additional information as at 30 April 20X6:
1) Although depreciation on the property plant and equipment has been appropriately accounted for,
no amortization has been charged on the plant. The patent cost $80,000 and had an estimated useful
life of five years when it was purchased on 1 May 20X5.
2) Taxation for the year ended 30 April 20X6 is estimated to be $267,000. No amounts have been paid in
respect of the current year tax liability.
3) The 10% loan note was issued on 1 March 20X6. Interest is payable every six months in arrears. The
first interest is due to be paid on 1 September 20X6.
4) On 1 February 20X6 a rights issue of one for five ordinary shares was made and fully subscribed. The
rights price was $3.20 a share. The bank account was debited correctly and a suspense account was
temporarily credited with the proceeds. This should now be corrected
TASK – 1 (13 marks)
Prepare the Statement of financial position as at 30 April 20X6.
Marja Co
Statement of financial position as at 30 April 20X6

Assets $'000 $'000

Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventory
Trade receivables
Cash and bank
Total current assets
Total assets

Equity and Liabilities

Ordinary shares
Share premium
Retained earnings
Total equity
Long term liabilities
Loan notes

Current liabilities
Trade payables
Provision for legal damages
Loan interest accrual
Taxation
Bank Overdraft

Total equity and liabilities

TASK-2 (2 marks)
If Marja Co had NOT paid the dividend of $60,000 during the year, what would be the effect on profit
for the year and retained earnings?
Increase ($) Decrease($) No effect
Profit for the year ended 30 April 20X6
Retained earnings as at 30 April 20X6