Fa2 Mock Test 2

Name: 1

When goods are sold to a customer on credit, what accounting entries should be made? Debit

A

Sales account

Credit Cash account

B Trade receivables account

Sales account

C

Cash account

Sales account

D

Sales account

Trade receivables account

2 At 1 November 2009, Arif had a prepayment of $820 for vehicle expenses. During the year to 31 October 2010 he recorded the following in relation to vehicle expenses: (i) invoices for $19,630; and (ii) credit notes for $255. He has extracted his trial balance before calculating his closing accruals and prepayments. What is the correct debit balance for vehicle expenses on his trial balance at 31 October 2010? A

$20,705

B $19,375 C

$20,195

D

$18,555

3 Shari is carrying out the reconciliation between the balance on her trade payables control account in her general ledger and the list of balances in her purchase ledger. She has found the following errors: (i) a credit balance on a supplier’s account has been listed as a debit balance; (ii) an invoice was recorded in the purchase day book for the wrong value; and (iii) no record has been made of discount received from a supplier. Which of these errors require an entry in the trade payables control account in the general ledger? A

(i), (ii) and (iii)

B (i) and (ii) only C

(ii) and (iii) only

D

(i) and (iii) only

1

4 Davindra is reconciling the total of the list of balances from her sales ledger to the balance on the trade receivables control account. The total of the list of balances is $25,627. She has discovered two errors: (i) a customer’s account has been overcast by $99; and (ii) an invoice for $89 has been treated as a credit note. What is the corrected total of the list of balances from her sales ledger? A

$25,617

B $25,350 C

$25,439

D

$25,706

5 Jacinta is preparing her statement of financial position at 31 October 2010. The last electricity invoice she received was for $858. This was for the three months to 31 August 2010. Jacinta assumes that electricity costs are constant throughout the year. How should the accrual for electricity be reported in Jacinta’s statement of financial position at 31 October 2010? A

as a current liability of $286

B as a current liability of $572 C

as a current asset of $286

D

as a current asset of $572

6

Vernon thinks the following mistakes may have been made in his accounting records:

(i) a credit sale was recorded at the wrong value in the sales day book; and (ii) a cheque issued to a credit supplier was debited to the purchases account. The credit entry was made correctly. Which of the mistakes will be revealed by extracting a trial balance? A

(i) only

B (ii) only C

both (i) and (ii)

D

neither (i) nor (ii)

7 Which of the following statements is correct? A

financial statements of a sole trader must be prepared by a qualified accountant

B financial statements do not provide useful information to lenders 2

C

all the information needs of the owner are met by the financial statements

D

financial statements are intended to meet the needs of a number of user groups

8 Veronica took out a bank loan for $60,000 on 30 September 2010, and agreed to repay $2,000 of capital per month starting on 31 October 2010, but actually made the first repayment on 12 November 2010. How should the outstanding capital on the loan be reported on her statement of financial position at 31 October 2010? Current liability

Non-current liability

$24,000

$34,000

B $24,000

$36,000

C

$26,000

$34,000

D

$26,000

$32,000

A

9 Floyd calculated that his profit for the year was $65,285. He then found that he had treated an accrual of $189 as a prepayment. When he corrects the error, what is his revised profit for the year? A

$65,096

B $65,474 C

$64,907

D

$65,663

18 As defined in the IASB’s ‘Framework for the preparation and presentation of financial statements’, which qualitative characteristic of financial reporting requires accounting information to be ‘free from material error and bias’? A

comparability

B understandability C

relevance

D

reliability

10 At 1 November 2009 the value of Claudia’s net assets was $127,554. At 31 October 2010 the value was $174,529. During the year to 31 October 2010 Claudia introduced $35,000 of capital and her drawings were $17,150. What was Claudia’s profit for the year to 31 October 2010? A

$64,825

B $29,125 C

$11,975 3

D

$46,975

11 In the year to 31 October 2010, Vlad’s sales were $142,200, all of which were made at a mark-up of 20%. His opening inventory value was $5,400 and his closing inventory value was $3,600. What was the value of Vlad’s purchases in the year to 31 October 2010? A

$120,300

B $116,700 C

$111,960

D

$118,500

12 Zhou sells building materials. One of his suppliers agreed to accept some building materials in settlement of an outstanding balance due by Zhou. In which of Zhou’s general ledger accounts should entries be made? A

trade receivables and trade payables

B trade payables and bank C

sales and trade payables

D

sales and trade receivables

13 When goods are sold on credit at a profit, what is the effect on the assets and liabilities of the seller? Assets

Liabilities

increase

do not change

B do not change

do not change

C

do not change

reduce

D

reduce

do not change

A

14 Ricardo pays to rent car parking spaces outside his office. On occasions, he is able to sublet these. During the year to 30 April 2010, the following entries were recorded in his rental ledger account: –

rent paid $4,853;

–

an additional invoice for $150; and

–

cash of $822 received from subletting the parking spaces.

What is the net balance on the rental ledger account that should be included in Ricardo’s trial balance at 30 April 2010?

4

A

$3,881 debit

B $3,881 credit C

$4,181 debit

D

$4,181 credit

15 Which body issues International Financial Reporting Standards? A

The International Federation of Accountants

B The International Accounting Standards Board

16

C

The International Accounting Standards Committee

D

The Standards Advisory Council

Which of the following will require an entry in a suspense account? (i) a customer paid $190 to settle an invoice with a value of $109; (ii) the debit and credit totals of the trial balance did not agree. A

(i) only

B (ii) only C

both (i) and (ii)

D

neither (i) nor (ii)

17 When carrying out the reconciliation between the balance on the trade payables control account in the general ledger and the list of balances in the personal ledger, you discovered that: (i) a supplier’s balance of $890 had been included in the list of balances as $980; (ii) a supplier’s invoice for $220 had been entered in the purchases day book as $202. Which of these errors require an entry in the general ledger? A

both (i) and (ii)

B neither (i) nor (ii) C

(i) only

D

(ii) only

18 Before making any adjustments, the balance on the bank account in Freema’s general ledger is $2,564 credit. She knows that to complete her bank reconciliation, she needs to deal with the following: (i) a cheque for $420 has not been presented at the bank; (ii) a lodgement for $1,200 has not been credited on her bank statement; and 5

(iii) she has not recorded bank charges of $470. What overdraft balance should be reported on Freema’s statement of financial position? A

$1,784

B $2,094 C

$2,254

D

$3,034

19 Which of the following statements is correct? A

a prepayment arises when an expense is incurred before it is paid

B an accrued expense is recorded when the payment is made C

prepaid expenses reduce the value of assets

D

accrued expenses increase the value of liabilities

The following information relates to questions 20 and 21: At 31 May 2010, Shelina was owed $38,286 by her customers, and her receivables allowance was $1,157. She wishes to write off a balance of $178 as irrecoverable. At 31 May 2009, her receivables allowance was $1,284. 20 What charge should be reported in Shelina’s income statement for the year to 31 May 2010 for receivables expense? A

$51

B $305 C

$1,157

D

$1,335

21 What value should be reported in Shelina’s statement of financial position at 31 May 2010 for receivables? A

$36,951

B $37,129 C

$37,307

D

$38,235

22 Cameron makes capital repayments of $558 on 10th of each month on a bank loan. At 31 May 2010 the capital balance on the loan was $18,414. How should the loan be reported in Cameron’s statement of financial position at 31 May 2010? 6

A

Current liability

Non-current liability

nil

$18,414

B $18,414

nil

C

$6,696

$11,718

D

$11,718

$6,696

23

On checking his ledger entries, Ade found the following errors: (i) an invoice from a supplier has not been recorded; and

(ii) the debit entry of $500 for repairs has been correctly recorded, but the credit 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? A

(i) only

B (ii) only C

both (i) and (ii)

D

neither (i) nor (ii)

Which of the following statements describes the qualitative characteristic ‘relevance’?

24

A

information which is free from material error

B information which is unbiased C

information which influences the decisions of a user

D information which can easily be understood 25 Eva opened a suspense account with a debit balance of $99. She then discovered that: –

when recording a cash sale for $9 only the credit entry was made; and

–

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? A

nil

B $18 C

$180

D

$198

7