Quiz 5 – CFAB 4

1. C 6. A 11. A 16. 952,750 21. 2057.12 26. B

2. A 7. D 12. B 17. C 22. D A 27. A
3. C 8. F F T T 13. C 18. B 23. D 28. A
4. A 9. D 14. 86,000 19. A 24. A 29. A
5. B 10. C 15 A 20. B 25. 79,000 30. B

1. Which ONE of the following is NOT an objective of the IFRS Foundation?

A Through the IASB, develop a single set of globally accepted IFRSs
B Promote the use and rigorous application of IFRSs
C Ensure IFRSs focus primarily on the needs of global, multi-national organisations
D Bring about the convergence of national accounting standards and IFRSs
2. The following totals appear in the day books for March 20X8.
£
Sales day book 40,000
Purchases day book 20,000
Returns inwards day book 2,000
Returns outwards day book 4,000
Opening and closing inventories are both £3,000. What is the gross profit for March 20X8?
A £22,000
B £24,000
C £20,000
D £18,000

3. At 30 Nov 20X5 Jenny had a bank loan of £8,500 and a balance of £678 in hand in her
bank account.
How should these amounts be recorded on Jenny's opening trial balance at 1 December 20X5?
A DEBIT £7,822
B CREDIT £7,822
C CREDIT £8,500 and DEBIT £678
D DEBIT £8,500 and CREDIT £678

1
4. At 31 October 20X6 Roger's trial balance included the following balances:
£
Machinery at cost 12,890
Accumulated depreciation 8,950
Inventory 5,754
Trade receivables 11,745
Trade payables 7,830
Bank overdraft 1,675
Cash at bank 150
What is the value of Roger's current assets at 31 October 20X6?
A £17,649
B £17,499
C £15,974
D £13,734

5. Which of the following statements is/are TRUE or FALSE?

1 Cash purchases are recorded in the purchases day book.
2 The sales day books is used to keep a list of invoices received from suppliers.
A Both statements are TRUE
B Both statements are FALSE
C Statement 1 is TRUE and statement 2 is FALSE
D Statement 1 is FALSE and statement 2 is TRUE

6. Information relating to Lauren Co's transactions for the month of May 20X4 is
shown below:
Sales (including VAT) £ 140,000*
Purchases (net of vAT) 65,000
VAT is charged at a flat rate of 20%. Lauren Co's VAT account had a zero balance at the
beginning of the month and at the end of the month.
* Lauren Co's sales for the month of £140,000 included £20,000 of sales exempt from VAT
What was the total VAT paid to regulatory authorities at the end of May 20X4 (to the nearest £)?
A £7,000
B £20,000
C £23,333
 D £13,000
7. A business commenced with capital in cash of £1,000. Inventory costing £800 plus VAT is
purchased on credit, and half is sold for £1,000 plus VAT, the customer paying in cash at once.
The VAT rate is 20%.
What would the accounting equation after these transactions show?
A Assets £1,800 less Liabilities £200 equals Capital £1,600
B Assets £2,200 less Liabilities £1,000 equals Capital £1,200
C Assets £2,600 less Liabilities £800 equals Capital £1,800
D Assets £2,600 less Liabilities £1,000 equals Capital £1,600

8. Identify whether each of the following statements about the valuation of inventory are true or
false, according to IAS 2 Inventories.
1. Inventory items are normally to be valued at the higher of cost and net realisable value. F
2. The cost of goods manufactured by an entity will include materials and labour only.
Overhead costs cannot be included F
3. LIFO (last in, first out) cannot be used to value inventory T
4. Selling price less estimated profit margin may be used to arrive at cost if this gives a
reasonable approximation to actual cost T
9. A company with an accounting date of 31 October carried out a physical check of
inventory on 4 November 20X3, leading to an inventory value at cost at this date of £483,700.
Between 1 November 20X3 and 4 November 20X3 the following transactions took place:
1 Goods costing £38,400 were received from suppliers.
2 Goods that had cost £14,800 were sold for £20,000.
3 A customer returned, in good condition, some goods which had been sold to him in October for
£600 and which had cost £400.
4 The company returned goods that had cost £1,800 in October to the supplier, and received
a credit note for them.
What figure should appear in the company's financial statements at 31 October 20X3 for
closing inventory, based on this information?
A £458,700
B £505,900
C £508,700
 D £461,500
10. In preparing its financial statements for the current year, a company's closing
inventory was understated by £300,000.
What will be the effect of this error if it remains uncorrected?
A The current year's profit will be overstated and next year's profit will be understated.
B The current year's profit will be understated but there will be no effect on next year's profit.
C The current year's profit will be understated and next year's profit will be overstated.
D The current year's profit will be overstated but there will be no effect on next year's profit.
11. The inventory value for the financial statements of Q for the year ended 31 December
20X4 was based on an inventory count on 4 January 20X5, which gave a total inventory value of
£836,200. Between 31 December and 4 January 20X5, the following transactions took place:
£
Purchases of goods 8,600
Sales of goods (profit margin 30% on sales) 14,000
Goods returned by Q to supplier 700
What adjusted figure should be included in the financial statements for inventories at
31 December 20X4?
A £838,100
B £853,900
C £818,500
D £834,300
12. A company has decided to switch from using the FIFO method of inventory
valuation to using the average cost method (AVCO).
In the first accounting period where the change is made, opening inventory valued by the FIFO
method was £53,200. Closing inventory valued by the AVCO method was £59,800.
Total purchases and during the period were £136,500. Using the continuous AVCO method,
opening inventory would have been valued at £56,200.
What is the cost of materials that should be included in the SOPL for the period?
A £129,900
B £132,900
C £135,900
 D £140,100
13. Which one of the following statements about the use of a continuous inventory system is
INCORRECT?
A In a retail organisation, a continuous inventory system can be used to keep track of the
quantity of each stock item available in its distribution centres.
B Under continuous inventory, the cost of each receipt of inventory and the cost of each issue
from inventory is recorded individually.
C A continuous inventory system removes the need for periodic physical inventory counts.
D Both the FIFO and average cost (AVCO) methods of pricing inventory may be used within a
continuous inventory system.
14. W bought a new printing machine. The machine was purchased for £80,000. The
installation costs were £5,000 and the employees received training on how to use the machine, at
a cost of £2,000. Before using the machine to print customers' orders, a test was undertaken and
the paper and ink cost £1,000.
What should be the cost of the machine in the company's statement of financial position?
£ 86,000

15. A business purchased a motor car on 1 July 20X3 for £20,000. It is to be depreciated at 20
per cent per year on the straight line basis, assuming a residual value at the end of five years of
£4,000, with a proportionate depreciation charge in the years of purchase and disposal.
The £20,000 cost was correctly entered in the cash book but posted to the debit of the motor
vehicles repairs account.
How will the business profit for the year ended 31 December 20X3 be affected by the error?
 Depreciation chia đôi cho kỳ hạn 6 tháng
A Understated by £18,400
B Understated by £16,800
C Overstated by £18,400
D Overstated by £16,800 (2 marks)
16. The inventory value for the financial statements of Global Co for the year ended 30 June
20X3 was based on a inventory count on 7 July 20X3, which gave a total inventory value of
£950,000. Between 30 June and 7 July 20X3, the following transactions took place.
£
Purchase of goods 11,750
Sale of goods (mark up on cost at 15%) 14,950
Goods returned by Global Co to supplier 1,500
What figure should be included in the financial statements for inventories at 30 June 20X3?
£ 952,750

17. Which of the following costs may be included when arriving at the cost of finished
goods inventory for inclusion in the financial statements of a manufacturing
company?
1 Delivery inwards
2 Delivery outwards
3 Depreciation of factory plant
4 Finished goods storage costs
5 Factory supervisors' wages
A 1 and 5 only
B 2, 4 and 5 only
C 1, 3 and 5 only
D 1, 2, 3 and 4 only (2 marks)
18.The closing inventory at cost of a company at 31 January 20X3 amounted to £284,700.
The following items were included at cost in the total:
1. 400 coats, which had cost £80 each and normally sold for £150 each. Owing to a defect
in manufacture, they were all sold after the reporting date at 50% of their normal price.
Selling expenses amounted to 5% of the proceeds.
2. 800 skirts, which had cost £20 each. These too were found to be defective. Remedial work
in February 20X3 cost £5 per skirt, and selling expenses for the batch totalled £800. They were
sold for £28 each.
What should the inventory value be according to IAS 2 Inventories after considering the
above items?
A £276,400
B £281,200
C £282,800
D £329,200
19. A company values its inventory using the first in, first out (FIFO) method.
At 1 May 20X2 the company had 700 engines in inventory, valued at £190 each.
During the year ended 30 April 20X3 the following transactions took place:
20X2,1 July: Purchased 500 engines at £220 each
1 November Sold 400 engines for £160,000
20X3, 1 February: Purchased 300 engines at £230 each
15 April: Sold 250 engines for £125,000
What is the value of the company's closing inventory of engines at 30 April 20X3?
A £188,500
B £195,500
C £166,000
D None of these figures
20. The information below relates to inventory item Z.
March 1: 50 units held in opening inventory at a cost of £40 per unit
17: 50 units purchased at a cost of £50 per unit
31: 60 units sold at a selling price of £100 per unit
Under AVCO, what is the value of inventory held for item Z at the end of March 31?
A £4,000
B £1,800
C £2,000
D £2,500
21. A firm has the following transactions with its product R.
1 Jan 20X1: Opening inventory: nil
1 Feb 20X1: Buys 10 units at £300 per unit
11 Feb 20X1: Buys 12 units at £250 per unit
1 April 20X1: Sells 8 units at £400 per unit
1 Aug 20X1: Buys 6 units at £200 per unit
1 Dec 20X1: Sells 12 units at £400 per unit
The firm uses periodic weighted average cost (AVCO) to value its inventory.
What is the inventory value at the end of the year? (Give your answer to 2 decimal places)
£ 2057.12
22. What is the purpose of charging depreciation in financial statements?
A To allocate the cost of a non-current asset over the accounting periods expected to benefit
from its use
B To ensure that funds are available for the eventual replacement of the asset
C To reduce the cost of the asset in the statement of financial position to its estimated market
value
D To account for the 'wearing-out' of the asset over its life (2 marks)

23. At 31 December 20X2 a company's receivables totalled £400,000 and an allowance for
receivables of £50,000 had been brought forward from the year ended 31 December
20X1.
It was decided to write off debts totalling £38,000. The allowance for receivables was to be
adjusted to the equivalent of 10% of the receivables.
What charge for receivables expense should appear in the company's SOPL for the year ended 31
December 20X2?
A £74,200
B £51,800
C £28,000
D £24,200
24. At 1 July 20X2 the receivables allowance of Q was £18,000.
During the year ended 30 June 20X3 debts totalling £14,600 were written off. The receivables
allowance required was to be £16,000 as at 30 June 20X3. What amount should appear in Q's
statement of profit or loss for receivables expense for the year ended 30 June 20X3?
A £12,600
B £16,600
C £48,600
D £30,600
25. You are given the following information:
Receivables at 1 January 20X3 £10,000
Receivables at 31 December 20X3 £9,000
Total receipts during 20X3 (including cash sales of £5,000) £85,000
What is the figure for sales on credit during 20X3?
£ 79,000
26. A supplier sends you a statement showing a balance outstanding of £14,350. Your own
records show a balance outstanding of £14,500.
Which one of the following could be the reason for this difference?
A The supplier sent an invoice for £150 which you have not yet received.
B The supplier has allowed you £150 cash discount which you had omitted to enter in your
ledgers.
C You have paid the supplier £150 which he has not yet accounted for.
D You have returned goods worth £150 which the supplier has not yet accounted for.

27. Your payables control account has a balance at 1 October 20X8 of £34,500 credit.
During October, credit purchases were £78,400, cash purchases were £2,400 and payments
made to suppliers, excluding cash purchases, and after deducting settlement discounts of £1,200,
were £68,900. Purchase returns were £4,700.
What was the closing balance?
A £38,100
B £40,500
C £47,500
D £49,900
28. A receivables ledger control account had a closing balance of £8,500. It contained a
contra to the payables ledger of £400, but this had been entered on the wrong side of the
control account.
What should be the correct balance on the control account?
A £7,700
DEBIT B
£8,100 DEBIT
C £8,400
DEBIT
D £8,900 DEBIT (2 marks)
29. Which of the following items could appear on the credit side of a receivables
ledger control account?
1 Cash received from customers
2 Irrecoverable debts written off
3 Increase in allowance for receivables
4 Sales
 5 Credits for goods returned by customers
6 Cash refunds to customers
A 1, 2, and 5
B 1, 2, 3 and 6
C 3, 4 and 5
D 4 and 6
30. An inexperienced bookkeeper has drawn up the following receivables ledger
control account:
RECEIVABLES LEDGER CONTROL ACCOUNT
£ £
Opening balance 180,000 Credit sales 190,000
Cash from credit customers 232,200 Irrecoverable debts written off 1,500
Sales returns 8,000 Contras against payables 2,400
Cash refunds to credit customers 3,300 Closing balance (balancing figure) 229,600
423,500 423,500
What should the closing balance be after correcting the errors made in preparing the account?
A £130,600
B £129,200
C £142,400
D £214,600