Tutorial-8

MOCK EXAM 2 II QUESTIONS

ALL 50 questions are compulsory and MUST be attempted.

1 Tony returned items to his supp li er of office stationery, and his supplier sent him a credit note.

What entries are required in Tony's general ledger?

DEBIT CREDIT
0 Goods for resale - returns Payables control account
0 Payables control account Goods for resale - returns
0 Office stationery Payables control account
0 Payables control account Office stationery (2 marks)
- - - ·---
2 On 10 May, Amanda bought goods for resale. Her suppl ier allowed her a credit period of 30 days. To
date, the goods have not been so ld .

On 10 May, how is Amanda's accounting equation affected by the transaction?

Assets Liabilities Capital
0 Unchanged Increased Reduced
0 Increased Increased Unchanged
0 Increased Unchanged Reduced
0 Reduced Reduced Unchanged (2 marks)
--- -- - ----- - - - -·- ·----
3 On 1 June 20X8, Suzy had an accrual of $422 for electricity. During the year she paid invoices with a
total value of $2,859, and received a refund of $86.

What balance should be included in Suzy's trial balance at 31 May 20X9 for electricity expense?

$L-I_ ____. (2 marks)

- -- ----
4 Gary bought a new machine. The invoice included costs for:

(i) Insta ll ation charges

(ii) Routine maintenance for the first year of operation
(iii) Testing the machine prior to operation

Which of the costs are asset expenditure?

0 (i), (ii) and (iii)
0 (i) and (ii) only
0 (i) and (iii) only
0 (ii) and (iii) only (2 marks)

5 When Imogen's trial balance was extracted, the total of the debit balances was $95 greater than the
total of the credit balances. Imogen then discovered that the entry for a cash sale for $95 had been
made correctly in the sales account, but was recorded on the wrong side of the cash account.

After the error is corrected, what should the balance on the suspense account be?
0 Nil
0 $95 debit
0 $95 credit
0 $285 credit (2 marks)

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 6 Adrian has purchased goods on credit with a list price of $17,000. The supplier offered a 5% trade
discount. Adrian intends to pay within 10 days in order to take advantage of a further 3% discount on
list price.
What are the correct accounting entries for this transaction in Adrian's records?
0 DEBIT purchases $15,640 CREDIT payables $15,640
0 DEBIT purchases $16,150 CREDIT payables $16,150
0 DEBIT purchases $16,150 CREDIT payables $15,640 CREDIT discounts received $510
0 DEBIT purchases $16,150 CREDIT payables $15,665 CREDIT discounts received $485
(2 marks)

7 Kris has correctly completed the reconciliation between the balance on the payables control account in
his general ledger, and the list of balances from the payables ledger.

Are the following statements correct or incorrect?

Correct Incorrect
(i) The reconciliation confirms that the balance 0 0
on each supplier's account is correct.
(ii) The reconciliation provides confirmation that 0 0
the balance on the payables control account is
correctly stated.
(2 marks)

8 The bank account in Alan's general ledger has a credit balance of $113 .
The difference between this balance and the balance on his bank statement is due to the following:

(i) Alan incorrectly recorded the value of a cheque paid to a supplier for $127 as $172.
(ii) A lodgement of $107 has still to be credited by the bank.
(iii) The bank charged interest of $25 on his overdraft.

After updating the bank account in Alan's general ledger, which of the above items should appear as
an adjustment on the reconciliation statement?
0 (i) only
0 (ii) only
0 (i) and (ii) only
0 (i), (ii) and (iii) (2 marks)

9 The bank account in Trish's general ledger has a credit balance of $358.

The difference between this balance and the balance on her bank statement is due to the following:
(i) Trish incorrectly recorded the value of a cheque paid to a supplier for $245 as $254.
(ii) A lodgement of $283 has still to be credited by the bank.
(iii) The bank charged interest of $104 on her overdraft.

What is the corrected credit balance on the bank account in Trish's general ledger?

$._1_ __.. (2 marks)

10 Emily's draft accounts report a profit of $11,855. However, an accrual of $398 was treated as a
prepayment, and a prepayment of $480 was incorrectly recorded as $522.
What is the correct profit?
0 $11,017
0 $11,415
0 $11,499
0 $12,693 (2 marks)

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 MOCK EXAM 2 II QUESTIONS

11 What journal entry is needed to write off an irrecoverable receivables balance?

0 DEBIT Receivables
CREDIT Irrecoverable debt expense

0 DEBIT Irrecoverable debt expense

CREDIT Receivables

0 DEBIT Receivables al lowance

CREDIT Irrecoverab le debt expense

0 DEBIT Irrecoverable debt expense

CREDIT Receivables al lowance (2 marks)
--- -- ---
12 At 1 May 20X8 Trevor's receivables allowance was $1,468. At 30 April 20X9, the total ba lance on his
receivables ledger was $88,463 . This includ es a balance of $563 which is irrecoverable. Trevor
determines that his receivables allowance at 30 April 20X9 should be equivalent to 2% of the remaining
balances.
How should the movement in the receivables allowance be reported in the statement of profit or loss?
0 A charge of $290
0 A credit of $290
0 A charge of $1,758
0 A credit of $1,758 (2 marks)

13 If Kate receives $258 for a debt which was written off in a previous year, how will her financial
statements for that year be affected by the receipt?
0 Her receivables balance will be red1:1ced by $258
0 Her receivables balance will be increased by $258
0 Her profit will be reduced by $258
0 Her profit will be increased by $258 (2 marks)

14 Since Petra commenced trading, the cost of the items she sells has increased. Petra is trying to decide
how her profit for the year will be affected by the method she uses to value her inventory.
Which of the following statements is correct?
0 First-in first-out will report a lower profit than weighted average
0 Weighted average will report a lower profit than first-in first-out
0 Profit for the year is unaffected by the method of inventory valuation
0 Petra should value inventory on the basis that reports the lowest profit (2 marks)

15 The profit made by a business in 20X1 was $88,500 . The proprietor injected new capita l of $25,500
during the year and withdrew a monthly salary of $1,250 .
If net assets at the end of 20Xl were $237,750, what was the proprietor's capital at the beginning of
the year?
0 $108,750
0 $138,750
0 $159,750
0 $315,750 (2 marks)

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 16 The totals of Kara's extended trial balance are :
Statement of profit or loss Statement of financial position
DEBIT CREDIT DEBIT CREDIT
$122,182 $113,528 $122,173 $130,827
What is Kara's result for the year ?
0 A loss of $8,645
0 A profit of $8,645
0 A loss of $8,654
0 A profit of $8,654 (2 marks)

17 Ed and Hilary are in partnership. Their draft statement of profit or loss reports a profit for the year of
$75,862. However, interest on drawings (Ed $2,754; Hilary $3,156) and interest on a loan from Hilary
($1,346) have not been included.
What is the correct profit for the year?
0 $68,606
0 $74,516
0 $75,862
0 $80,426 (2 marks)

18 Catherine and Graham are in partnership, sharing profits and losses in the ratio 3:2. The partnership
statement of profit or loss for the year to 31 May 20X9 reported a loss of $8,650.
During the year to 31 May 20X9, the partner's drawings were:
Catherine $30,000
Graham $26,000
What is the movement in the balance on Graham's current account in the year to 31 May 20X9?
0 $22,540 increase
0 $22,540 decrease
0 $29,460 increase
0 $29,460 decrease (2 marks)

19 In the year to 30 November 20X2 Ina's sales were $437,050, and her cost of sales was $349,640 .
What were her gross profit margin and mark up?
20% 25%
Margin 0 0
Mark up 0 0
(2 marks)

20 In the year to 31 May 20X9 Carol's sales were $174,820, and her cost of sales was $139,856. The
value of her opening inventory was $11,844 and the value of her closing inventory was $13,328.
What was the value of her purchases?
0 $138,372
0 $141,340
0 $173,336
0 $176,304 (2 marks)

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 MOCK EXAM 2 II QUESTIONS

21 Estelle has prepared the following journal entry:

DEBIT Cash $500

CREDIT T Simpkins $500
What is the correct narrative for the journal entry?
0 Cash sale toT Simpkins
0 Cash purchase from T Simpkins
0 Cash paid toT Simpkins
0 Cash received from T Simpkins (2 marks)

22 On checking his ledger entries, Ade found the following errors:

(i) An invoice from a supplier has not been recorded.

(ii) The debit entry of $500 for repairs has been correctly recorded, but the cred it entry was recorded
as $50.

Which of the above errors would cause a difference between the total of the debit balances and the
total of the credit balances when the trial balance is extracted?
Difference No difference
Error (i) 0 0
Error (ii) 0 0
(2 marks)

23 Which of the following statements describes the qualitative characteristic 'relevance'?

0 Information which is free from material error
0 Information which is unbiased
0 Information which influences the decisions of a user
0 Information which can easi ly be understood (2 marks)
- -- ----- -- ----------- ---
24 In the year to 30 November 20X9, Lui accounted for $7,000 of expend iture on machinery repairs as the
cost of a new machine. Lui depreciates machinery on a straight-line basis over 10 years and charges
depreciation for a full year in the year an asset is acquired .

What is the effect of the error on Lui's profit for the year to 30 November 20X9?
0 Understated by $6,300
0 Und erstated by $7,700
0 Overstated by $6,300
0 Overstated by $7,700 (2 marks)
---------- --~

25 In the financial year ended 31 October 20X9, Edita sold a car for $5,600 . The car had been bought in
January 20X6 for $14,000 . Ed ita depreciates motor vehicles on the reducing ba lance basis at a rate of
25% per annum. She charges a full year's depreciation in the year an asset is bought, and no
depreciation in the year it is so ld .

What is the profit or loss on disposal of the car (to the nearest $1)?
0 $306 loss
0 $306 profit
0 $2,100 loss
0 $2, 100 profit (2 marks)
------
26 When completing the extended trial balance, in which column should the balance for receivables
allowance be included?
0 Statement of profit or loss debit
0 Statement of profit or loss credit
0 Statement of financial position debit
0 Statement of financial position credit (2 marks)

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 27 Eva opened a suspense account with a debit balance of $99. She then discovered that:

(i) When recording a cash sale for $9 only the credit entry was made; and
(ii) The balance on the sales account was under-cast by $90.

When these errors are corrected, what is the debit balance on the suspense account?
0 Nil
0 $18
0 $180
0 $198 (2 marks)

28 When completing the reconciliation between the balance on the receivables control account in the
general ledger and the total of the list of balances from the personal ledger, Emir discovered that a credit
note for $47 issued to a customer had been entered in the customer's personal account as an invoice.

How will the total value of the list of balances change when the error is corrected?
0 Increase by $4 7
0 Increase by $94
0 Reduce by $47
0 Reduce by $94 (2 marks)
----------- -- .
29 Gilda is preparing her bank reconciliation statement for May 20XO . The balance on the bank account in
her general ledger is currently $4,782 credit. She has discovered the following:

(i) Her bank charged fees of $365 in May.

(ii) She has outstanding cheques totalling $1,745.
(iii) She has an outstanding lodgeme~t of $1,519.

Once the above items are taken into account, what should the balance on her bank account in the
general ledger be?
0 $3,402 Credit
0 $4,417 Credit
0 $5,147 Credit
0 $6,527 Credit (2 marks)

30 On checking his draft financial statements, Ricardo noted that he had omitted an accrual for $754 and
a prepayment for $388.

By how much is the value of his current assets understated?

0 $388
0 $366
0 $754
0 $1' 142 (2 marks)

31 Jerome's receivables ledger has balances totalling $57,840. He has decided to write off an irrecoverable
debt of $320. His receivables allowance at the last year-end was $1,368. He has calculated that this
should be revised to $1,247.

What is the resulting charge to Jerome's statement of profit or loss?

0 $199
0 $441
0 $1,567
0 $1,688 (2 marks)

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 MOCK EXAM 2 II QUESTIONS

32 At 31 October 20X6, Lalia had a bank overdraft of $3,681 and a bank loan of $16,800. The bank loan
is due to be repaid by three payments of $5,600 on 1 April 20X7, 1 April 20X8 and 1 April 20X9.

How should these amounts be reported in Lalia's statement of financial position at 31 October 20X6?
Current liabilities Non -current liabilities
0 $3,681 $16,800
0 $3,681 $11,200
0 $9,281 $11,200
0 $20,481 Nil (2 marks)

33 Why is it important that a business distinguishes between current and non-current liabilities in its
statement of financial position?
0 So the owners know how much is owed by the business at all times .

0 So that users of the financial statements can assess the ability of the business to continue as a
going concern.

0 So that users of the financial statements can assess the level of business debt due for repayment
within a fairly short time.

0 So that the owners know how much money can be withdrawn from the business at a given time .
(2 marks)

34 Lois has always maintained up to date financial records because she knows they are important for both
internal and external use.

Which of the following external users would use Lois's financial statements to assess the ability of the
business to maintain a healthy cash position in the long term?
0 Lois
0 A bank that Lois has applied for a loan with
0 A supplier who Lois purchased goods from recently
0 Tax authorities (2 marks)

35 Consider the following statements about going concern.

Which of the statements is/are correct?

Correct Not correct
(i) Financial statements must always be 0 0
prepared on the going concern basis.
(ii) If a business is not considered to be a 0 0
going concern, financial statements
should not be prepared.
(2 marks)

36 Simon and Tariq were equal partners in a business, each with capital of $40,000. It was agreed that
Vanessa should join the partnership, with all three partners sharing profits equally. For the purpose of
admitting the new partner, the value of the goodwill of the business was agreed at $60,000, but
goodwill would not be maintained in the accounts. Vanessa introduced capital of $22,000 to the
business.

What was the balance on the capital accounts of Simon after the admission of Vanessa to the
partnership?
0 $2,000
0 $40,000
0 $50,000
0 $70,000 (2 marks)

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 37 At 30 November 20X9, Marek's trial balance includes the following balances:

$ $
Inventory at 1 December 20X8 17,558
Trade receivables 31,749
Prepayments 3,629
Trade payables 24,928
Accruals 5,291
Bank account 1,827
Receivables allowance at 1 December 20X8 683
Inventory at 30 November 20X9 is valued at $18,736, and the receivables allowance is to be adjusted
to $744.

What value should be reported on Marek's statement of financial position at 30 November 20X9 for
current assets?
0 $51,543
0 $52,192
0 $52,253
0 $53,370 (2 marks)

38 Which of the following correctly calculates closing capital?

0 Capital introduced + Drawings - Profit + Opening capital
0 Capital introduced- Drawings + Profit + Opening capital
0 Capital introduced + Drawings + Profit + Opening capital
0 Capital introduced- Drawings - Profit- Opening capital (2 marks)

39 When carrying out a reconciliation between the non-current assets in her asset register and the assets
which she can physically identify, Wilma could not find one of the assets which is recorded in her asset
register.

She thinks this could be because:

(i) No record was made on the register when the asset was sold.
(ii) The supplier's invoice has not yet been received.

Which of the reasons may explain the discrepancy?

0 (i) only
0 (ii) only
0 Both (i) and (ii)
0 Neither (i) nor (ii) (2 marks)

40 Wasim has prepared the following receivables reconciliation:

$
Total of list of balances 19,738
Discount not recorded in personal account (29)
Balance on receivables control account 19,709
Invoice not recorded in day book 1,627
21,336
Contra with payables ledger not recorded (2,628)
18,708

What value should be reported in Wasim's statement of financial position for receivables?
0 $18,708
0 $19,709
0 $19,738
0 $21,336 (2 marks)

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 MOCK EXAM 2 II QUESTIONS

41 Matt's financial year ended on 30 June 20X3. He pays the rental charge on his business's premises
quarterly in advance. The rental expense is the same each quarter. The last payment was $3,600 and
this covered the three months to 31 August 20X3.

Matt's accounts for the year ended 30 June 20X3 will include which of the following?
0 A prepayment of $1,200
0 A prepayment of $2,400
0 An accrual of $1,200
0 An accrual of $2,400 (2 marks)

42 Amrita's inventory of books at 31 August has been valued at their cost value of $26,720 . However, this
figure includes some books that have missing pages due to an error made at the printers. These books
originally cost $5,450 and Amrita has decided to offer these for sale at 20% of their original cost in
order to try and get rid of them quickly.

What will be the value of closing inventory in Amrita's accounts at 31 August?

0 $26,720
0 $21,270
0 $22,360
0 $25,630 (2 marks)

43 Barry's house building company has land and property of $565,000, an overdraft of $2,000, a bank
loan of $55,000, trade payables of $18,750 and inventory of $30,500.

What is the capital balance?

$ . _ _ I_ _____.
(2 marks)

44 When Simran prepared her year-end bank reconciliation, she found that the balance on her bank
statement did not agree to the bank account in her general ledger. When she investigated further, she
found the following:

(i) The bank had charged her a fee of $22 for going overdrawn.

(ii) A cheque of $1,040 had not been lodged by the owner of the property she rented for her
business.

Which of the reasons require an entry in the bank account in the general ledger?
0 (i) only
0 (ii) only
0 Both (i) and (ii)
0 Neither (i) nor (ii) (2 marks)

45 Which TWO of the following are conditions required for recognition of a provision in the accounts?

D The amount can be measured reliably

D Payment is probable

D A possible obligation exists

D Payment is possible (2 marks)

46 Which TWO of the following costs are including in the calculation of gross profit?

D Stationery expenses

D Carriage inwards

D Maintenance of delivery vans

D Factory wages (2 marks)

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 47 Which of the following relates to asset expenditure?
0 Maintenance of a refrigeration system
0 Purchase of two second-hand delivery vehicles
0 Cost of repairs of photocopiers
0 Insurance cost of building owned by the business (2 marks)

48 Which TWO of the following errors will not be revealed by extracting a trial balance?

D Error of transposition

D Error of reversal

D Error of principle

D Error of single entry (2 marks)

------------------------------ - - --------
49 At 1 April 20X3 Sandra had 125 units of a particular line of inventory. These were valued at $140 per
unit. During April, the purchases and sa les of the item were as follows:

Date Purchases Sales

7 April 75 units
16 April 90 units at $143 per unit
21 April 105 units
24 April 125 units $138 per unit
28 April 95 units

Sandra values her inventory using the first in, first out (FIFO) method .

What is the value of Sandra's inventory-at 30 April 20X3?

0 $8,970
0 $9,100
0 $9,106
0 $9,104 (2 marks)

50 Which accounting concept describes items whose omission or misstatement in the financial
statements would affect the economic decisions of users?
0 Business entity
0 Consistency
0 Materiality
0 Accruals (2 marks)

(Total = 100 marks)

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