FA and Full Specimen Exam Answers Question | Correct Answer Marks | 1 Closing net assets + drawings — capital introduced — 2 opening net assets = net profit. Re-arranging the equation: Opening net assets — drawings + capital introduced + net profit = closing net assets 2 The exact amount of expenditure is reimbursed at intervals | 2 to maintain a fixed float 3 2 and 3 only 2 4 $331,760 2 po Trade Payables at 1 July 20X5 60,000 Cash paid to suppliers (802,800) Discounts received (2,960) Contra between payables and receivables (Z000) ledger Purchases (Balancing Figure) 331,760 Trade Payables 30 June 20X6 84,000 OR Trade Payables $ $ Cash Paid 302,800 | Balance 1 60,000 July 20X5 Discounts Received 2,960 Contra between 2,000 Purchases | 337,760 payables and (Balancing receivables ledger Figure) Trade Payables 30 84,000 June 20X6 301,760 301,760 5 ‘A cheque received from a customer was credited to cash 2 and correctly recognised in receivables — the correct entry should have been a debit to cash Rent received was included in the trial balance as a debit balance — rent received is a credit balanceCurrent assets: $22,240 Current liabilities: $nil Current) Current assets | liabilities $ $ (1) Employee Loan 12,000 (1) Loan Interest (12,000 x 240 2%) (@) Prepayment $9,000 x 6,000 a2 (@) Accrued income $4,000 000 22.240 $87,100 Current assets | $| Net profit 83,600 ‘Add back incorrect expense 18,000 Less depreciation (18,000 x 25%) (4,500) ‘Adjusted net profit (27.1001 | Xena Co is suffering from a worsening liquidity position in 20X9 - The current ratio (current assets : current liabilities) has decreased A statement of cash flows prepared using the direct method produces a different figure to net cash from operating activities from that produced if the indirect method is used — False Right issues of shares do not feature in a statement of cash flows - False A surplus on revaluation of a non-current asset will not appear as an item in a statement of cash flows — True A profit on the sale of a non-current asset will appear as an item under cash flows from investing activities in a statement of cash flows - False The profit on sale will be deducted from the profit before tax in the operating activities section of the statement of cash flows, The cash proceeds will appear under investing activities.70 $475,900 $] Rent received in advance 30 April 20X5 28,700 | Less: rent in arrears 30 April 20X5 (21,200) | ‘Add rent received in year 481,200 Less rent received in advance 30 April 20X6 (31,200) ‘Add rent in arrears 30 April 20X6 18.400 Rental income in statement of profit or loss 475,900 | 7 ‘A sole trader's financial statements are private, a company’s financial statements are sent to shareholders and may be publically filed A sole trader is fully and personally liable for any losses that the business might make 2 The analysis of financial statements using ratios provides: useful information when compared with previous performance or industry averages 3 $36,750 Dr 4 The useful lives of intangible assets capitalised in the financial statements Impairment losses written off intangible assets during the period These are required by IAS 38 Intangible Assets 15 Zonly Capitalised development expenditure is amortised over the period it is expected to generate economic benefits. Research expenditure is always written off as an expense to profit or loss6 $6,600 Electricity Expense Prepayment brought | 550 Profit or loss 6,600 forward (balancing figure) Cash paid 5,400 ‘Accrual carried 650 forward 6,600 6,600 7 $22,000 rrecoverable debt written off 37,000 debit | Decrease in allowance for receivables 15,000 credit | Expense in statement of profit or loss 22,000 debit | Workings: Trade receivables 30 June 20X6 (517,000 480,000 = 37,000) Allowance for receivables 5% x 480,000 (24,000 Allowance for receivables at 30 June 39,000 20X5 Decrease in allowance for receivables (15,000) 18 $437,830 $] List of balances on payable ledger 438,900 | (1) Contra (980) (2) Does not affect list of balances (3) Error on invoice posting (20) Reconciled list of balances to control 437,830 account The reconciled balance is reported in statement of financial position 19 Carriage inwards Depreciation of factory machinery 20 17060 Opening inventory ‘Add purchases Less closing inventory Cost of salesGross profit = 20% x $85,300 = $17,060 a Ordinary share capital: $225,000 Share premium account: $250,000 Ordinary | Shar share premium capital No of $ $ shares ‘At31 December | 500,000 125,000 100,000 20x4 Rights issue 750,000 at 62,500 ‘At $0.75 $0.25 187,500 750,000 Bonus 150.000 at 37,500 L500) $0.25 ‘At 31 December ___ 20x5 900,000 | 225,000 250,000 2 7 and 3 only Amortisation of development costs are expensed to profit or loss 23 $55,000 Depreciation $ $240,000 x 20% x 3/12 12,000 Disposal 60,000) $180,000 x 20% x 3/12 9,000 Purchase | 160,000 {$340,000 x 20% x 6/12 34,000 Depreciation for year ended 31 December 55,000 20x524 28% Hassan Co’s capital employed = Profit before interest and taxation Capital employed Capital employed = shareholders equity plus non current liabilities $10,200 $42,501 24% 25 Sales tax is an expense to the ultimate consumer of the goods purchased when the ultimate consumer is not registered for sales tax-True Sales tax is recorded as income in the accounts of the entity selling the goods- False 26 4,2,3and 4 Entries required to correct; $ $ (1) DR Suspense account 3,000 CR Ordinary Share Capital 3,000 Being shortfall in capital recorded $ $ (2) DR Planet asset account 2,800 DR Planet repairs 2,800 GR Suspense 5,600 Being correction of incorrect posting to incorrect account $ $ 3) DR Petty Cash 500 GR Suspense 500 Being correction of omission of Petty cash balance $ $ (@)DR Suspense 9,000 GR Motor Vehicle cost 9,000 Being correction of error in amount posted on purchase of car27 ‘Cannon Co should provide for the expected cost of the claim of $100,000 There is an 80% chance that Cannon Co will lose the claim — there is therefore an obligation and it is probable they will be required to settle the claim for $100,000 268 1015 $ Computer 390 ‘Additional memory Delivery Installa Capi The maintenance cost will be expensed to profit or loss and, as a sale tax registered trader, Gareth will reclaim the sales tax so it is not a cost to the business and should not be capitalised. 29 $3,670 balance at bank a Overdraft per bank statement (3,860) Less: unpresented cheques (9.160) (13,020) ‘Add : outstanding lodgements 16,690 | Cash at bank 3.670 30 Completeness Neutrality31 $307,100 Receivables ledger control account $ $] Opening balance | 308,600 | Cash received 147,200 from credit customers Credit sales 152,800 | Irrecoverable 4,900 debts written off Interest charged 2,400 | Contras against 4,600 on overdue credit balances in accounts payables ledger Closing balance | 307,100 463,800 463,800 32 Yes Yes Yes Yes All of these material events provide evidence of conditions that existed at the end of the reporting period and are therefore adjusting events in accordance with IAS 10 Events after the Reporting Period. 33 ‘$188,500 Date of issue and Quantity | Valued issues | Cost of purchase units issues Sale 1 November 400 | 400 at $190 76,000 Sale 15 April 250 | 250 at $190 47,500 Issued 650 Opening inventory 700 Closing inventory $0 | 50 at $190 9,500 Purchased 1 July 500 | 500 at $220 110,000 Purchased 1 300 | 300 at $230 69.000 February 188.500 a4 $32,400 Capital | = Asset - liabilities ‘Att January 20X8 156,560 | = 569,400 — 412,840 Capital introduced 65,000 Drawings ($800 x 12) (9,600) Profit (balancing 32,400 figure) At 31 December 20X8 244,360 | = 614,130 — 369,77036 Discounts received of $150 was extracted to the debit column of the trial balance. $150. Discounts received is a credit balance. The trial balance debits exceed the credits by $300 as there is an incorrect debit of $150 and also an omission on the credit side of MTQ 36 Task 4 (11 marks) Consolidated statement of profit or loss for the year ended 31 May 20X6 £°000 Revenue 8,400 + 3,200 1,500 Less : Cost of sales 4,600 + 1,700 — 1,500 + (30% x 500) Gross profit 5150 Less: Distribution costs 2010 (1500+510) ‘Administrative costs 1150 (700+450) Profit before tax 1990 Less : Tax 740 (600+140) Profit for the year 1250 ‘Attributable to: Equity owners of Keswick Co Group profit for the year — Non- controlling interest Non-controliing interest 80 (400 x 20%) Task 2 (4 marks) Significant influence No Control Yes Non-controlling interest Yes Greater than 50% of the equity shares being held by an investor | Yes 100% of the equity shares being held by an investor Yes Greater than 50% of the preference shares being held by an No investor 50% of all shares and debt being held by an investor No Greater than 50% of preference shares and debt being held by an__| No investorMTQ 37 Task 4 (4 marks) Buildings at costs Yes Buildings accumulated depreciation at 1 November 20X6 No Plant at cost Yes Plant accumulated depreciation at 1 November 20X6 No Bank balance Yes Revenue No. Net purchases No. Inventory at 1 November 20X6 No Cash Yes Trade payables Yes Trade receivables Yes ‘Administrative expenses No Allowance for receivables at 1 November 20X6 No. Retained earnings at 1 November 20X6 No Equity shares, $1 Yes ‘Share premium account Yes Task 2 (3 marks) Trade receivable No debit or credit ‘Administrative expenses Debit Allowance for receivables Credit Revenue: No debit or creditProfit or loss 6 thousand ‘000 Bi x 320 16 Brought forward 10 Increase 6 Task 3 (5 marks) ‘Administrative expenses No debit or credit Cost of sales Debi Buildings cost No debit or credit Plant cost No debit or credit Buildings accumulated depreciation Cre Plant accumulated depreciation Credit Buildings depreciation charge 37 thousand $(740,000 x 5%) Plant depreciation charge 22 thousand $(220,000 - 110,000) x 20% Task 4 (1.5 marks) Cost of sales 1225 thousand ‘Opening inventory | 160,000 Net purchases, 7,140,000 Closing inventory (75,000) Cost of sales 1.225.000 Task 5 (1.5 marks) Debit ‘Admi trative expenses Credit ‘Accrual ‘Adjustment value 10 thousand $(15,000 x 2/3)