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Course Examination 2

ACCA PAPER F3

Financial Accounting (International Stream)

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ACCA Fundamentals Level

Paper F3Financial Accounting

(International Stream)


Question Paper

Time allowed 2 hours

ALL FIFTY questions are compulsory and MUST be attempted

Instructions:

Please attempt this exam under test conditions and attach the frontsheet complete with your name and

address to your script. The completed package should be sent to BPP Professional Education.

Take a few moments to review the notes on the inside of this page titled, Get into good exam habits now!

before attempting this exam.

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

EXAMINATION CONDITIONS

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Get into good exam habits now!

Take a moment to focus on the right approach for this exam.

Effective exam technique

The following steps are recommended for answering multiple choice and objective test questions.

Step 1 Note downhow longyou should allocate to each question. For this paper you will beanswering 50 questions in 120 minutes, so you will be spending on average 2.5 minutes on

each 2 mark question and 1 minute on each 1 mark question. Remember however that you will

not be expected to spend an equal amount of time on each of them and that some can be

answered instantly but others will take time to work out.

Step 2 Attempt each question. Read the question thoroughly.

Step 3 To answer a multiple choice question read the four options and see if one matches your own

answer. Be careful with numerical questions, as the distracters are designed to match answersthat incorporate common errors.

Step 4 If you are unsure of your answer.

Re-read the question to ensure that you understand it and are answering the

requirement

Eliminate any obviously wrong answers

Consider which of the remaining answersis the most likelyto be correct and select

the option

Step 5 If you are still unsure, continue to the next question. Likewise if you are nowhere nearworking out which option is correct after a couple of minutes, leave the question and comeback to it later.

Step 6 Revisit questions you are uncertain about. When you come back to a question after a breakyou often find you are able to answer it correctly straight away. If you are still unsure have a

guess. You are not penalised for incorrect answers, so never leave a question unanswered!

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3

ALL FIFTY questions are compulsory and MUST be

attempted

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

1 Which of the following is not an acceptable basis for inventory valuation under IAS 2?

A Last in first out

B Standard cost

C Average cost

D First in first out (2 marks)

2 Which of the following material items must be disclosed on the face of the income statement?

(i) Profit on sale of an operation

(ii) Write off of an irrecoverable bad debt arising from the liquidation of an overseas customer

(iii) Costs of a fundamental reorganisationA (i) only

B (i) and (iii)

C (i) and (ii)

D (ii) and (iii) (2 marks)

3 The following are all current assets: trade receivables, inventory, prepaid expenses and bank deposit

account.

If they are placed in order of decreasing liquidity, their order will be:

A Bank deposit account, prepaid expenses, trade receivables, inventory

B Trade receivables, bank deposit account, prepaid expenses, inventoryC Inventory, trade receivables, prepaid expenses, bank deposit account

D Prepaid expenses, bank deposit account, trade receivables, inventory (2 marks)

4 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)

5 A company has prepared draft accounts for the year ended 31 March 20X9 incorporating themanaging director's bonus of 4% of net profit.

It has now been discovered that the draft accounts omitted trade discounts allowed to customers of

$100, cash discounts allowed from suppliers of $400 and a rent prepayment of $200.

What is the adjustment required to the income statement in respect of these errors?

A $480 Cr

B $680 Cr

C $500 Cr

D $630 Cr (2 marks)

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6 IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires that material contingent

assets and liabilities, existing at the balance sheet date, 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)

7 In a company's cash flow statement, a revaluation of non-current assets during the year will be

A Shown as an adjustment to operating profit

B Entirely excluded

C Disclosed under capital expenditureD Shown as a cash inflow (2 marks)

8 A trader has budgeted sales for the coming year of $275,000. He achieves a constant mark-up of 25%

on cost. He plans to reduce his inventory level by $14,000 over the year. His purchases for the year

will be

A $211,000

B $239,000

C $206,000

D $254,000 (2 marks)

9 Disaster's trial balance shows a trade receivables account balance of $50,000. However, noadjustment 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?

A $52,200

B $50,200C $49,250

D $45,050 (2 marks)

10 Harry has been unable to calculate his business' profit or loss for the year ended 31 December 20X8

as fire destroyed most of his accounting records. He has, however, been able to provide the following

information.

(1) Net assets at 31 December 20X7 were $23,000 and $32,500 at 31 December 20X8

(2) He introduced capital during the year of $4,000 cash

(3) He took cash drawings of $2,500 and goods with a selling price of $800, the cost of the goods

was $750.

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What was Harry's profit or loss for the year ended 31 December 20X8?

A $8,750 profit

B $1,750 loss

C $9,800 profit

D $2,750 loss (2 marks)

11 A trial balance fails to agree by $1,000. which one of the following errors could by itself account for

the discrepancy?

A A non-current asset costing $500 had been credited to the purchases account

B A rent payment of $500 had been debited to a non-current asset account

C A $1,000 cheque received from a customer, F Bloggs, had been credited to J Bloggs account

in the payables ledger

D A $1,000 cheque paid to a supplier had been credited to the suppliers account in the payables

ledger

(2 marks)

12 Martello Co has proposed dividends of $10,000 after the balance sheet date. What is the correcttreatment according to IAS 10?

A Adjust for the dividends

B Disclose in a note to the financial statements

C Do nothing (1 mark)

13 Extracts from a company's balance sheets show the following non-current assets

30 June20X6 20X7

$ $

Intangible assetsDevelopment expenditure 60,000 95,000

Property, plant and equipmentFreehold 750,000 1,230,000Plant and machinery 320,000 370,000Fixtures and fittings 105,000 90,000

The expenditure for the year on development projects had been $55,000. The building element of the

freehold was depreciated by $6,000 and then revalued on 30 June 20X7 by $95,000. Plant and

machinery with a NBV of $14,000 was disposed of in November 20X6 for $8,000. Depreciation on the

other plant and machinery for the year amounted to $37,000. Depreciation of $35,000 has been

charged on fixtures and fittings.

What is the total figure included in the reconciliation of profit before tax to cash flows from operating

activities?

A $84,000

B $90,000

C $92,000

D $104,000 (2 marks)

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14 Blacksmith disposes of assets with a net book value of $21,000 for $30,000 in March 20X4. In the

cash flow statement for that year this will be reflected as

Profit before tax reconciliation Cash inflow investing activities

A $(9,000) $30,000

B $9,000 $30,000

C $(21,000) $30,000D $21,000 $30,000 (2 marks)

15 D, E and F are in partnership, sharing profits in the ratio 5:3:2 respectively, after charging salaries for

E and F of $24,000 each per year.

On 1 July 2000 they agreed to change the profit-sharing ratio 3:1:1 and to increase E's salary to

$36,000 per year, F's salary continuing unchanged.

For the year ended 31 December 2000 the partnership profit amounted to $480,000.

Which of the following correctly states the partners' total profit shares for the year?

D E F

A $234,000 $136,800 $109,200B $213,000 $157,800 $109,200C $186,000 $171,600 $122,400D $237,600 $132,000 $110,400

(2 marks)

16 Pauline's hairdressing business has opening net assets at 1.1.20X1 of $21,000. Her closing net assets

at 31.12.20X1 are $36,000. During the year Pauline paid herself wages of $25,000 and paid into the

business $12,000 left to her in her granny's will. How much profit did she make in 20X1?

A $27,000

B $33,000C $28,000

D $14,000 (2 marks)

17 The IASB has the power to enforce compliance with IASs/IFRSs. Is this statement?

A True

B False (1 mark)

18 The following information is available for the year ended 31 December 20X1 for Ski, a well-run

company:

$

Opening cash 1,000Closing cash 2,000

Opening balance on the trade payables control account 8,000

Closing balance on the trade payables control account 10,000

Opening balance on the trade receivables control account 12,000

Closing balance on the trade receivables control account 14,000

Cash paid to trade accounts payable in the period 9,000

Opening inventory 6,000

Closing inventory 7,000

Mark-up on cost - 10%

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Assuming the information above is complete, what was the sales for the period?

A $12,100

B $11,000

C $10,000

D $6,600 (2 marks)

19 Which of the following errors could result in a suspense account being required to 'balance' the trial

balance (list of account balances)?

A Cash received from credit customers treated as a cash sale

B A supplier's invoice for $32 recorded as $23 in the purchases account

C Payments to suppliers of $647 recorded as $674 in the payables ledger

D One page omitted from the purchase day book (2 marks)

20 A company's issued share capital consists of $100,000 in 5% $1 preference shares and $50,000 in

50c ordinary shares. Its net profit for the year was $176,000 and the directors paid an ordinary

dividend for the year of 10c per share. What is the company's retained profit for the year?

A $166,000

B $161,000

C $171,000

D $168,500 (2 marks)

21 The equity capital of a limited liability company comprises

A Ordinary share capital, preference share capital and retained earnings

B Ordinary share capital

C Ordinary share capital and retained earnings

D Preference share capital (2 marks)

22 Which of the following would be a non-adjusting event after the balance sheet date when preparing

financial statements at 30 September 20X0 according to IAS 10, Events after the balance sheet date?

A An insurance claim is agreed on 10 October 20X0 for compensation for a fire in September

which destroyed part of the warehouse inventory

B A decision is made on 9 October 20X0 to sell the group's major trading activities in South

Africa

C Inventory valued at $30,000 is judged no longer saleable

D Notification received on 11 October 20X0 that a customer owing $50,000 as at 30 September

20X0 has gone into liquidation (2 marks)

23 Arthur sets up his demolition business from scratch on 1 January 20X1. 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

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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)

24 Bill, a sole trader, set up business on 1 October 20X0 with $30,000 of his own money. During the year

to 30 September 20X1 he won $50,000 on the lottery and paid $30,000 of this into his business. He

took cash drawings of $5,000 during the year and at 30 September 20X1 the net assets of the

business totalled $59,000.

What was the profit or loss of the business for the year ended 30 September 20X1?

A $4,000 profit

B $6,000 profit

C $16,000 loss


25 For Morgan the prime 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 balance sheet?

A $48

B $55

C $64

D $61 (2 marks)

26 If a shareholder in a limited liability company sells his shares to another private investor, for less thanhe paid for them, the share capital of the company will

A Decrease by the nominal value of the shares

B Increase by the nominal value of the shares

C Increase by the amount received for the shares

D Remain unchanged (2 marks)

27 According to IAS 2, inventories should be valued at the lower of cost and

A Net realisable value

B Net book value (1 mark)

28 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 each year in two equal instalments on 1 April and 1 October.

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. Local taxes for the last three years have been

as follows:

$Year commencing 1 April 20X6 3,600Year commencing 1 April 20X7 3,900Year commencing 1 April 20X8 4,500

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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?

A $10,000

B $9,900

C $5,000

D $12,250 (2 marks)

29 A van for sale on a motor dealer's forecourt is shown as a non-current asset in the motor dealer's

balance sheet. Is this statement?

A True

B False (1 mark)

30 Extracts from the financial statements of Hamilton are set out below:

INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 20X1$'000 $'000

Revenue

300Cost of sales (150)

Gross profit 150Profit on sale of non-current assets 75

225Expenses 15Depreciation 30

(45)Net profit 180

Balances at 31 December20X0 20X1

$'000 $'000Net current assets 70 50

The figure in the cash flow statement of Hamilton for the year ended 31 December 20X1 in respect of

net cash flow from operating activities would be how much?

A $180,000

B $150,000

C $165,000

D $155,000 (2 marks)

31 There is $100 in the cash till at the year end for Demon, but the accountant had discovered that some

cash has been stolen. At the beginning of the year there was $50 in the cash till and receivables were

$2,000. Total sales for the year were $230,000. Receivables at the end of the year were $3,000.

Cheques banked from credit sales were $155,000, and cash sales of $50,000 have been banked.

How much cash was stolen during the year?

A $23,950

B $24,050 (1 mark)

32 On 1 January 20X0 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 20X4 the machine was sold for

$30,000.

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What is the profit or loss on disposal?

A $3,000 loss

B $7,000 profit

C $3,000 profit


33 An extract from a business' income statement is:$ $

Sales 115,200Opening inventory 21,000Purchases 80,000

101,000Closing inventory 5,000

96,00019,200

What is the mark up achieved?

A 20%

B 16.6% (1 mark)

34 A company's share capital consists of 20,000 25c ordinary shares all of which were issued at a

premium of 20%. The market value of the shares is currently 70c each.

What would the balance on ordinary share capital be?

A $14,000

B $6,000

C $5,000 (1 mark)

35 On 30 April 20X1 part of the inventory of Neutron, a limited liability company, was destroyed by fire.The following information is available.

Inventory at 1 April 20X1 $99,600

Purchases for April 20X1 $177,200

Sales for April 20X1 $260,000

Inventory at 30 April 20X1 undamaged items $64,000

Standard gross profit percentage on sales 30%

Based on this information, the cost of the inventory destroyed is how much?

A $35,000

B $30,600

C $38,750D $30,800 (2 marks)

36 The current liabilities of A includes the following:

20X8 20X7

Taxation payable $25,000 $20,000

The tax charge in the income statement for the year ended 20X8 is $27,000.

What figure would the cash flow statement for the year ended 20X8 show for taxation paid?

A $32,000

B $22,000 (1 mark)

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37 A car has a list price of $23,500 but the garage gives the company a trade discount of $2,350. In

settlement the garage accepts a cheque for $18,000, together with an old company car on which it

grants a trade-in allowance of $3,150. The amount to be capitalised by the company is how much?

A $21,150

B $23,500 (1 mark)

38 Adam, a sole trader has net assets at 31 December 20X1 of $65,250. During the year he made a loss

of $3,000, he took inventory for his own use of $850 and removed cash of $2,250. If he introduced

capital of $5,000 during the year, what was the capital as at 1 January 20X1?

A $62,250

B $71,350

C $66,350

D $65,250 (2 marks)

39 A company purchased a car for $18,000 on 1 January 20X0.

The car was traded in on 1 January 20X2. The new car has a list price of $30,000 and the garageoffered a part-exchange allowance of $5,000.

The company provides depreciation on cars using the reducing balance method at a rate of 25%.

What profit or loss on disposal will be recognised in the income statement for the year ended 31

December 20X2?

A $5,125 loss

B $5,125 profit

C $7,250 profit


40 The following occurrence might explain the existence of a credit balance on an individual customersaccount:

The bookkeeper posted a total from the returns inwards book to the receivables control account twice

by mistake.

A True

B False (1 mark)

41 The NBV of B's property, plant and equipment is $51,000 at 1 January 20X5 and $100,000 at 31

December 20X5. A motor vehicle costing $20,000 was purchased during the year and land was

revalued by $43,000. What is the depreciation expense for the year?

A $26,000B $7,000

C $13,000

D $14,000 (2 marks)

42 Which of the following errors would result in a trial balance imbalance?

(i) The discounts allowed balance was listed as a credit on the trial balance?

(ii) Drawings for the last month of the year had been posted to the sundry expenses account

(iii) A contra settlement had been recorded only in the receivables and payables ledgers

A (iii) only

B (i) only

C (i) and (ii)D (i), (ii) and (iii) (2 marks)

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43 When no partnership agreement exists which of the following applies?

A Profits are shared equally

B Interest on capital is calculated at 5%

C Interest on loans is calculated at 10%

D None of the above (2 marks)

44 A company has prepared draft accounts for the year ended 31 March 20X9 incorporating the

managing director's bonus of 5% of net profit.

It has now been discovered that the draft accounts omitted trade discounts allowed to customers of

$100, cash discounts allowed from suppliers of $600 and a telephone accrual of $200.

What is the adjustment required to income statement in respect of these errors?

A $570 Cr

B $665 Cr

C $285 Cr

D $350 Cr (2 marks)

45 Which of the following items should be treated as capital expenditure in the accounts of a sole trader?

A $500 drawings made by the proprietor to buy himself a colour television

B $150 paid to a painter for decorating his office

C $2,000 on purchasing a micro-computer for resale

D $200 spent on purchasing a new typewriter to replace his secretary's old one (2 marks)

46 The following information relates to a company's year ended 31 December 20X5.

Opening balance on receivables control account $21,000Closing balance on receivables control account $28,000

Irrecoverable debts $17,000Sales (including sales tax at 17 %) $103,500

The amount of cash received from customers was:

A $113,500

B $63,975

C $79,500

D $66,000 (2 marks)

47 A sales tax registered trader has recorded the following transactions during the accounting period.

$

Standard rated sales 200,000Purchases 150,000

Included in purchases are the purchases of a motor car for $20,000, a photocopier for $8,000 and

entertaining expenses of $5,000. Sales tax is not recoverable on the motor car or entertainment

expenses.

All figures are given inclusive of sales tax at 17.5%.

How much input tax can be reclaimed by the trader?

A $22,340

B $21,875

C $18,617

D $23,975 (2 marks)

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48 The trial balance of Z failed to agree, the totals being: debit $836,200

credit $819,700

A suspense account was opened for the amount of the difference and the following errors were found

and corrected:

1 The totals of the cash discount columns in the cash book had not been posted to the discount

accounts. The figures were discount allowed $3,900 and discount received $5,100.

2 A cheque for $19,000 received from a customer was correctly entered in the cash book but

was posted to the customer's account as $9,100.

What will be the remaining balance on the suspense be afterthe correction of these errors?

A $25,300 credit

B $7,700 credit

C $27,700 debit

D $5,400 credit (2 marks)

49 The IASB's Frameworkgives five qualitative characteristics which make financial information reliable.These five characteristics are:

A Prudence, consistency, understandability, faithful representation, substance over form

B Accruals basis, going concern concept, consistency, prudence, true and fair view

C Faithful representation, neutrality, substance over form, completeness, consistency

D Substance over form, faithful representation, neutrality, prudence, completeness

(2 marks)

50 With respect to sales tax which of the following statements is correct?

A Sales tax is charged on purchases and sales after trade discounts and before settlement

discounts.

B Exempt and zero rated supplies have the same tax effect.

C Sales tax is not reclaimable on capital expenditure.

D Sales tax is charged on purchases and sales after trade discounts and after settlement

discounts. (2 marks)

End of Question Paper

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Student self-assessment

Having completed this exam, take a few minutes to consider what you did well and what you found difficult.

Use this as a basis to focus your future study on effectively improving your performance.

Common problems Future emphasis if you answer Yes

Timing and planning

Did you finish too early? Y/N Go back and check your answers, especially those you were

unsure of.

Did you overrun? Y/N Focus on allocating your time better.

Practise questions under strict timed conditions.

If you get behind move on.

Content

Did you struggle with:

Interpreting the questions? Y/N Learn subject jargon (look at key terms in your Study Text).

Read questions carefully.

Practise as many questions as possible.

Understanding the subject? Y/N Review your notes/text.

Work through easier examples first.

Classroom students please contact your tutor for further help.

Home Study students please contact ACCA queries for further

help ([email protected]).

Remembering the notes/text? Y/N Quiz yourself constantly as you study. You need to develop

your memory as well as your understanding of a subject.

Note here any thoughts on your performance which could help you on the big day.

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ACF3CE07(INT)

AC27 F3(2) (INT)

ACCA Fundamentals Level

Paper F3Financial Accounting

(International Stream)


Suggested solutions and guidance

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Guidance on improving your exam performance

To help improve your performance you should focus on these key areas.

1 Terminology

This paper tests your understanding of a large number of key terms and definitions. Learning as manyof these as you can will help save you time in the exam which you can use to answer questions that

require more thought. Your Study Text provides you with assistance by highlighting these terms and

definitions.

2 Question spotting

Avoid the temptation to question spot or to assume certain areas of the syllabus will be examined in a

particular way. Ensure you are able to answer questions across the syllabus in a number of question

styles as this will maximise the number of questions that you will be able to attempt successfully.

3 What went wrong?

OK, you're not going to get 100% correct, but pay attention when you consistently get certain areas of

the syllabus wrong. This is your cue to revise these areas fully, learn from your mistakes, AND NEVER

REPEAT THEM!

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3

Answers

1 A IAS 2 does not permit the use of LIFO.

2 B

3 A A bank deposit account is already cash, but inventory must be sold and receivables pay theirbalance due before cash is received.

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

5 A

$Profit adjustmentDiscounts allowed (100)Discounts from suppliers 400Rent prepayment 200Increase in profit 500$500 @ 4% (20)

480 Cr

6 C Contingent liabilities must be disclosed

Contingent assets are only disclosed if they are probable.

7 B Revaluations do not involve cash movements.

8 C

$

Cost of sales = 275,000 125

100 220,000

Less reduction in inventory (14,000)206,000

9 D$

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

45,050

Note: 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

10 A Using the accounting equation$

Net assets at 31.12.X8 32,500

$

Opening capital 23,000(= opening net assets)Capital introduced 4,000Profit (balancing figure) 8,750Drawings (2,500 + 750) (3,250)

32,500

Goods drawn by proprietor are taken at cost

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11 A In Options B and C the double entry has been preserved, even though not in the correct

accounts. In Option D the trial balance discrepancy would be $2,000 ($1,000 credited instead

of $1,000 debited). In Option A the $500 is credited to purchase instead of being debited to

non-current assets, and the discrepancy is therefore 2 x $500 = $1,000

12 B

13 D

INTANGIBLE FREEHOLDb/f 60 b/f 750

Amort 20 Reval 95 Depn 6Addn 55 Addn 391

c/f 95 c/f 1,230115 115 1,236 1,236

PLANT & MACHINERY FIXTURES AND FITTINGSb/f 320 b/f 105 Depn 35

Disposals 14Depn 37 Addn 20 c/f 90Addn 101 c/f 370 .

421 21 125 125

Items which would be shown in the reconciliation

$'000Depreciation/amortisation (20 + 6 + 37 + 35) 98Loss on disposal of plant and machinery (8 - 14) 6

104

14 A The $9,000 profit on disposal will be deducted from profit before tax to arrive at net cash flow

from operating activities.

15 A

D E F

$ $ $Salaries 30,000 24,000PSR to 1.7.20X0 (240,000 24,000) 5:3:2 108,000 64,800 43,200PSR to 31.12.20X0 (240,000 30,000) 3:1:1 126,000 42,000 42,000

234,000 136,800 109,200

16 C 36,000 21,000 12,000 + 25,000

17 B The IASB has no power of enforcement.

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18 BPurchases $Cash paid 9,000Trade payables b/f (8,000)Trade payables c/f 10,000

11,000

Cost of salesOpening inventory 6,000Purchases 11,000

17,000Closing inventory (7,000)

10,000

Sales100

110 10,00011,000

19 B C will only affect the payables ledger and A and D will not cause an imbalance.

20 B 176,000 (100,000 5%) (50,000 2 10c)

21 C Preference shares are not equity capital.

22 B A, C and D are adjusting events.

B is a post year-end decision not clarifying the balance sheet position and is therefore non-

adjusting.

23 A Legal expenses on the purchase can be capitalised

24 A$

Net assets 1.10.X0 30,000Capital introduced 30,000Drawings (5,000)profit 4,000

59,000

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25 B$

CostPrime cost 46Production overheads 15

61

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

55

Lower $55.

26 D

27 A

28 B $4,000 local taxes + $5,900 rent = $9,900.Rent

$1 June 20X7 to 31 December 20X7 = 7/12 $5,400 3,1501 January 20X8 to 31 May 20X8 = 5/12 $6,600 2,750

5,900Local taxes

$1 June 20X7 to 31 March 20X8 = 10/12 $3,900 3,2501 April 20X8 to 31 May 20X8 = 2/12 $4,500 750

4,000

29 B The van would be shown under inventory as the dealer trades in motor vehicles.

30 D$'000

PBT 180Profit on sale of non-current asset (75)Depreciation 30Movement in net current assets (20)

155

31 A

CASH$ $

B/d 50 Bank 50,000Cash sales 74,000 Theft 23,950

C/d 10074,050 74,050

RECEIVABLES$ $

B/d 2,000 Bank 155,000Credit sales () 156,000 C/d 3,000

158,000 158,000

Total sales 230,000

Credit sales (156,000)

Cash sales 74,000

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32 C 1.1.20X0 cost $63,000

Depreciation charge =7

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

NBV after two years 31.12.X1 = $47,000

Useful life revised to four years

Depreciation =4

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

NBV 31.12.X3 = $47,000 $20,000 = $27,000$

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

33 A

96,000

19,200 100 = 20%

34 C 20,000 25c = $5,000

35 D$

Theoretical gross profit 30% $260,000 78,000Actual gross profit:$260,000 $99,600 $177,200 + $64,000 47,200Shortfall missing inventory 30,800

36 B

TAXATION PAYABLE

$ $tax paid 22,000 Balance b/d 20,000Balance c/d 25,000 Income statement 27,000

47,000 47,000

37 A$

Price paid 18,000Trade in allowance 3,150

21,150

38 C Net assets = capital$'000

Capital at 1.1.X1 (balancing figure) 66,350Additional capital 5,000

71,350Drawing (cash) (2,250)

(inventory) (850)Loss (3,000)Net assets @ 31.12.X1 65,250

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39 A$

Cost 18,00020X0 Depreciation 18,000 25% (4,500)

13,50020X1 Depreciation 13,500 25% (3,375)NBV @ date of disposal 10,125Proceeds 5,000Loss on disposal (5,000 10,125) 5,125

40 B The error has been made in the control account. This has no effect on the individual customer

account in the receivables ledger.

41 D

PROPERTY, PLANT AND EQUIPMENT$ $

Balance b/d 51,000 Depreciation expense 14,000Additions 20,000 Bal c/d 100,000

Revaluation 43,000114,000 114,000

42 B

43 D Unlike the UK Partnership Act, IFRSs do not set down any rules for shares in partnership

profits.

44 CProfit adjustment

$Discounts allowed (100)Discounts from suppliers 600

Telephone accrual (200)Increase in profit 300Adjustment to bonus $300 @ 5% (15)

285 Cr

45 D

46 C Opening balance + sales (including sales tax) cash received irrecoverable debts = closing

balance

21,000 + 103,500 cash received 17,000 = 28,000

107,500 cash received = 28,000

cash received = 79,500

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47 C $

Input tax

Purchases 150,000

Less: motor car (20,000)

entertaining (5,000)

125,000

Tax included @ 17.5% = $125,000 117.5

17.5= $18,617

48 D$

Suspense account 16,500Discount allowed 3,900Discount received (5,100)Transposition of cash received (9,900)

5,400

49 D

50 D

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Documents

CE_F3i_002.pdf