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ACF3CT10(D) INT Course Test 2 Questions

AC210-F3(CT2)INT

ACCA Fundamentals Level

Paper F3Financial Accounting

(International)

Course Test 2

Question Paper

Time allowed 1 hour

ALL TWENTY FIVE questions are compulsory and MUST be attempted

DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER

EXAMINATION CONDITIONS

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2 ACF3CT10(D) INT Course Test 2 Questions

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ACF3CT10(D) INT Course Test 2 Questions 3

ALL TWENTY FIVE questions are compulsory and MUST be

attempted

Please write your answer on lined paper with one answer per line

1 Cadillac Co pays local taxes in 10 equal instalments starting in May each year. The local taxes for the

year to 31 March 20X9 were $18,900. The business is preparing its financial statements for the year

ended 31 January 20X9.

What is the prepayment of local taxes at 31 January 20X9? $

(2 marks)

2 Matts accounts at 30 November 20X8 show a closing Trade Receivables balance of $29,000.

He wants to implement a general allowance of 2% of trade receivables at the year end but he has not

yet dealt with the following items:

He has discovered Duncan went bankrupt on 29/11/X8. His balance of $650 is included at the yearend.

Matt received $300 from Becks Limited, for a debt which he had written off on 26 May 20X7.

He wishes to specifically provide for 60% of the debt of $800 due from Cat.

What is the amount to be charged to the Income Statement in regard to Bad & Doubtful debts for the

year ended 30 November 20X8?

A $1410

B $1381

C $1981

D $1387 (2 marks)

3 A company's bank statement shows an overdraft of $2,605 at 31 March 20X9. The statement includes

bank charges of $46 which have not yet been recorded in the company's cash book. The statement

does not include cheques for $780 paid to suppliers, nor an amount of $320 received from a

customer; both of these amounts appear in the bank statement for April 20X9.

If the company prepares a statement of financial position at 31 March 20X9, what should the figure

for the bank overdraft be? $

(2 marks)

4 Cameron had receivables totalling $55,000 at the year end 30 June 20X9. He has decided to write off

two debts of $1,300 and $2,150 respectively and to make a specific allowance for $5,600. The

company's policy is to make a general allowance of 2%. The balance on this allowance at 1 July 20X8was $8,540.

What is the closing receivables allowance? $

(2 marks)

5 A company receives news that a major customer has been declared bankrupt. His debt had been

allowed for earlier in the year. The entries now required are

A Debit allowance for receivables, credit trade receivables

B Debit irrecoverable debts written off, credit trade receivables

C Debit irrecoverable debts written off, credit allowance for receivables

D Debit allowance for receivables, credit irrecoverable debts written off (2 marks)

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6 A gas accrual for $400 was treated as a prepayment in a sole trader's income statement. As a result

the profit was

A Understated by $800

B Understated by $400

C Overstated by $800

D Overstated by $400 (2 marks)

7 A business has received telephone bills as follows:

Date received Amount of bill Date paid

$Quarter to 30 November 20X7 December 20X7 739.20 January 20X8Quarter to 28 February 20X8 March 20X8 798.00 April 20X8Quarter to 31 May 20X8 June 20X8 898.80 June 20X8Quarter to 31 August 20X8 September 20X8 814.80 October 20X8Quarter to 30 November 20X8 December 20X8 840.00 January 20X9Quarter to 28 February 20X9 March 20X9 866.00 March 20X9

What is the charge for telephone in the income statement for the year ended 31 December 20X8?

$

(2 marks)

8 Anthony's business bank statement showed an overdrawn balance of $5,250 on 31 October 20X8.

When this was reconciled to the cash book, the following differences were noted:

$Unpresented cheques 1,070Uncleared lodgements 1,240Standing order for insurance premium not entered in the cash book 890Overdraft interest not recorded in the cash book 80

Credited in error to Anthony's account by the bank 300

What was the original balance on Anthony's cash book at 31 October 20X8? $

(2 marks)

9 When performing a reconciliation between the bank statement and a business cash book, which of the

following would require an entry into the cash book?

1 Deposits credited after date

2 Direct debit on bank statement only

3 Bank charges

4 Bank error

5 Cheque presented after date

A 2, 3 and 4

B 2 and 3

C 1 and 5

D All of them (2 marks)

10 As at 31 December 20X8 a company's bank statement shows an overdraft of $1,500. The statement

includes bank charges of $30 which have not yet been recorded in the company's cash book. On 29

December 20X8 the company had paid a cheque of $500 to a supplier and banked $200 received from

a trade receivable; neither of these items appear in the bank statement.

What should the bank balance on the company's statement of financial position be at 31 December20X8? $ (2 marks)

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11 Enigma has reduced its allowance for receivables by $600.

Which of the following statements is correct?

A Net profit increases by $600

B Gross profit increases by $600 (1 mark)

12 The trial balance of Putney and Co as at 31 May 20X9 includes the following:

$ $Receivables 40,235Allowance for receivables (a percentage based on past experience) 2,050

Subsequently a review of the receivables ledger reveals the following:

Debts totalling $985 are considered irrecoverable and are to be written off. There is some doubt over

the recoverability of another receivable, Carter, owing $1,400. The company wishes to make a specific

allowance for this. A percentage allowance of 2% of good debts is to be maintained.

What is the irrecoverable debt expense to be included in the income statement for the year ended 31

May 20X9?

A $757

B $2385

C $1140

D $1092 (2 marks)

13 Which one of the following is correct regarding the recording of an Accrual and a Prepayment in the

first instance?

A An Accrual decreases an expense and a Prepayment increases an expense

B An Accrual increases an expense and a Prepayment decreases an expense

C An Accrual and a Prepayment both increase an expenseD An Accrual and a Prepayment both decrease an expense (2 marks)

14 Broken Limited sets up a warranty provision each year, and last year it was $250,000. Historically they

have found 65% of televisions have no faults, 25% have minor faults and the remainder have to be

replaced.

The associated costs based on this years sales would be:

All Minor repairs $450,000

All replaced $900,000

What would be the double entry made in regards to the warranty provision this year?

A DR Warranty Expense $202500 CR Warranty Provision $202,500B DR Warranty Provision $220500 CR Warranty Expense $202500

C DR Warranty Provision $47500 CR Warranty Expense $47500

D DR Warranty Expense $47500 CR Warranty Provision $47500 (2 marks)

15 A local taxes (rates) prepayment of $475 was treated as an accrual in preparing a trader's income

statement. As a result, his profit was

A Understated by $950

B Overstated by $950

C Understated by $475

D Overstated by $475 (2 marks)

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16 IAS 37 Provisions, Contingent Liabilities and Contingent Assetsrequires that material contingent

assets and liabilities, existing at the end of the reporting period, should be treated as follows:

A Contingent assets and contingent liabilities must always be disclosed in the financial

statements

B Contingent assets must always be accrued and contingent liabilities must always be disclosed

in the financial statements

C Contingent liabilities must always be disclosed (unless remote) and contingent assets must

sometimes be disclosed in the financial statements

D Contingent liabilities must always be either accrued or disclosed and contingent assets must

always be disclosed in the financial statements (2 marks)

17 Disaster's trial balance shows a trade receivables account balance of $50,000. However, no

adjustment has been made for the following items.

$3,250 from J Crisis & Sons who have gone into liquidation, the amount is considered

irrecoverable debts of $500 + $1,500 which are to be specifically allowed for

cash received from P Chaos of $2,500 which had previously been written off

cash received from T Ruin of $1,700 which had previously been allowed for

What is the revised trade receivables account balance? $

(2 marks)

18 Arthur sets up his demolition business from scratch on 1 January 20X9. During the year he:

(a) Buys a warehouse

(b) Pays legal expenses on the purchase(c) Buys three wrecking machines

(d) Rents office premises

(e) Builds an extension to the warehouse

(f) Pays wages

(g) Repairs the warehouse roof

(h) Writes off a damaged machine

Which items represent capital expenditure?

A (a), (b), (c) and (e)

B (a), (b), (c), (e), (g) and (h)

C (a) and (c)

D All of them (2 marks)

19 For Morgan the direct cost of production of each unit of inventory is $46 (including carriage inwards

of $11 and import duties of $1 on the raw materials element). Production overheads amount to $15

per unit. Currently the goods can only be sold if they are modified at a cost of $17 per unit. The selling

price of each modified unit is $80 and selling costs are estimated at 10% of selling price.

At what value should each unmodified unit of inventory be included in the statement of financial

position? $

(2 marks)

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20 The cashbook of Danger Limited showed a debit balance brought down of $1740 at 31 July 20X9.

The cash book showed cheques paid to suppliers that had not yet cleared totalling $360, and cheques

received from customers not yet cleared of $180. On reconciliation, the bank statement showed a

cleared cheque paid to a supplier of $90 had been recorded on the debit side of the cash book at $60.

What balance was shown on the bank statement at 31 July 20X9 before reconciliation?

$

(2 marks)

21 A sole trader who runs a newsagent's business makes up his accounts each year to 31 May. His rent

is payable quarterly in advance on 1 January, 1 April, 1 July and 1 October. Local taxes (rates) are

paid in arrears.

His annual rental for the calendar years 20X6 and 20X7 was $4,800 and $5,400 respectively but on 1

January 20X8 this was increased to $6,600 per annum. During the year ended 31 May 20X8 he paid

$4000 for rates. He had the following amounts in his accounts:

Year ended 31 May 20X6 Accrued rates $400

Year ended 31 May 20X7 Accrued rates $600

He also received a bill on 5th July 20X8 for $600 for the period 1 April 20X8 to 30 June 20X8.

In preparing his accounts for the year ended 31 May 20X8, what would be the charge to the income

statement from his rent and local taxes account? $

(2 marks)

22 Which regulatory body is responsible for issuing guidance on how to apply International Financial

Reporting Standards and how to account for new Financial Reporting Issues?

A Standards Advisory Council

B International Financial Reporting Interpretations Committee

C International Accounting Standards Board (1 mark)

23 On 1 January 20X4 Goblin bought a machine for $63,000. It was estimated that the machine's useful

life would be 7 years and its residual value $7,000. Two years later the useful life was revised to four

remaining years with a residual value of $7,000. At 31 December 20X8 the machine was sold for

$30,000. Goblin charges a full years depreciation in the year of acquisition and no depreciation in the

year of disposal.

What is the profit or loss on disposal?

A $3,000 loss

B $7,000 profit

C $3,000 profitD $7,000 loss (2 marks)

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24 A sole trader is preparing her accounts for the year ended 30 June 20X9. During the year she paid the

following invoices for rent:

Amount Date paid

Invoice 25 $250 28 June 20X8

Invoice 26 $100 2 July 20X8

Invoice 27 $350 4 October 20X8Invoice 28 $500 1 January 20X9

Invoice 29 $300 1 May 20X9

The Balance sheet as at 30 June 20X8 showed a rent prepayment of $150. At 30 June 20X9 there was

accrued rent of $200.

What is the correct charge for rent in her income statement for the year ended 30 June 20X9?

A $1850

B $900

C $1300

D $1600 (2 marks)

25 A business held the following goods in inventory as at 31 December 20X7:

Manufacturing

costs incurred

Costs to

complete

Expected selling &

distribution costs

Expected selling

prices$ $ $ $

Type A 1,700 1,000 140 2,900Type B 2,200 1,200 170 3,400Type C 2,500 500 170 3,800

6,400 2,700 480 10,100

At what total value should this inventory be shown in the company's statement of financial position?

$

(2 marks)

BPP House, Aldine Place, London W12 8AA

Tel: 0845 0751 100 (for orders within the UK)

Tel: +44 (0)20 8740 2211

Fax: +44 (0)20 8740 1184

www.bpp.com/learningmedia

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ACF3CT10(D) INT Course Test 2 Solutions

AC210-F3(CT2)INT

ACCA Fundamentals Level

Paper F3Financial Accounting

(International)

Course Test 2

Suggested solutions and guidance

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2 ACF3CT10(D) INT Course Test 2 Solutions

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ACF3CT10(D) INT Course Test 2 Solutions 3

Answers

1 $1,260$

9 instalments paid ($1,890 9) 17,010

Charge for 10 months ($18,900 10/12) (15,750)Prepayment 1,260

2 B

Bad and Doubtful Debts

$ $

Duncan 650 Becks 300

60% x 800

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8 $4,410 credit

Cash Book

$ $

Balance c/d 5,380 Balance b/d 4,410Standing order 890

Interest 805,380 5,380

$Balance per bank statement (5,250)Less unpresented cheques (1,070)Add uncleared lodgements 1,240Less bank error (300)Balance per amended cash book (5,380)

9 B

10 $1,800 credit

$Balance per bank statement (1,500)Less unpresented cheque (500)Add unrecorded lodgement 200

(1,800)

11 A This $600 reduction will be credited back to the irrecoverable debts expense account and so

increase net profit.

12 $1,092

$ $

Irrecoverable debt w/o 985Specific allowance 1,400Percentage allowance:Receivables 40,235Irrecoverable debts w/o (985)Specific allowance (1,400)

(37,850)

2% provision c/f 757Allowance b/f (2,050)Decrease in percentage allowance (1,293)

1,092

13 B

14 C

25% $450,000 + (100% - 65% - 25%) $900,000 = $202,500Existing provision ($250,000)Reduction in provision required $47,500

15 A It was debited instead of credited, so the effect is doubled.

16 C Contingent liabilities must be disclosed

Contingent assets are only disclosed if they are probable.

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17 $45,050

$Balance per trial balance 50,000Less irrecoverable debt written off (3,250)Less cash received from T Ruin (1,700)

45,050Note: P. Chaos will either be adjusted to irrecoverable debts or (if over one year ago) as income

received from irrecoverable debts in the income statement

18 A Legal expenses on the purchase can be capitalised

19 $55$

CostDirect cost 46Production overheads 15

61

Net realisable value $Sales price 80Less modification costs (17)Less selling costs (80 x 10%) (8)

55

Lower $55.

20 $1770

Cashbook

$ $

Balance Brought down 1,740 Cheque correction 150

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22 B

23 C 1.1.20X4 cost $63,000

Depreciation charge =7

$7,000$63,000 = 8,000

NBV after two years 31.12.X5 = $47,000

Useful life revised to four years

Depreciation =4

$7,000$47,000 = $10,000

NBV 31.12.X7 = $47,000 $20,000 = $27,000

$Proceeds 30,000Less NBV (27,000)Profit 3,000

24 D$

Cash paid in year 100350500300

1250Prior year Prepayment 150Current year Accrual 200

1600

25 $6,230

Cost NRV Lower

$ $ $A 1,700 1,760 1,700B 2,200 2,030 2,030C 2,500 3,130 2,500

6,230

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BPP House, Aldine Place, London W12 8AA

Tel: 0845 0751 100 (for orders within the UK)

Tel: +44 (0)20 8740 2211

Fax: +44 (0)20 8740 1184

www.bpp.com/learningmedia

Documents

CE_F3i_002