FA2 TEST 1 NAME: .. TIME ALLOWED: 120 1. What transaction is recorded by the following journal entry?

Dr Legal fees $463 Cr Creditors control $463 A legal fees paid by cheque B an invoice issued to a lawyer C an invoice received from a lawyer D a credit note received from a lawyer 2. Which two of the following errors will be revealed by extracting a trial balance? i error of single entry ii error of commission iii error of omission iv error of transposition A i and iii B ii and iii C iii and iv D i and iv 3. Lance is entering an invoice in the payables day book. The invoice shows the following costs: Water treatment equipment $39,800 Delivery $ 1,100 Maintenance charge $ 3,980 Sales tax $ 7,854 Invoice total $52,734 What is the total value of capital expenditure on the invoice? A $39,800 B $40,900
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C $44,880 D $52,734 4. When Freds trial balance was extracted, the debit total was $400 less than the credit total. Which of the following errors could have caused this difference? A a sales invoice for $200 was debited to both the sales account and the receivables control account B a cheque received for $200 was entered twice in the nominal ledger C a cheque to a supplier for $200 was credited to both the expense account and the payables ledger control account D the purchases account had been undercast by $200 5. Which of the following are reasons for maintaining control accounts? i to simplify the preparation of final accounts ii to check the accuracy of postings iii to confirm the value of sales iv to assist in locating errors in posting A i ii and iii B i iii and iv C i ii and iv D ii iii and iv 6. Joans draft year end accounts were prepared including a prepayment for rent of $970. The prepayment should have been $1,170. When the error is corrected, how will net profit be affected? A net profit will decrease by $200 B net profit will increase by $200 C net profit will decrease by $1,170 D net profit will increase by $1,170 7. When posting an invoice for car repairs, $870 was entered on the correct side of the motor expenses account. The invoice was for $780. What correction should be made to the motor expenses account? A Debit $90
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B Credit $90 C Debit $1,650 D Credit $1,650 8. The balance on Amys receivables ledger control account in the nominal ledger is $100 more than the total of the listing of the balances on the personal accounts. Which one of the following treatments of an invoice for $100 could have caused this difference? A the invoice was entirely omitted B the invoice was entered on the credit side of the personal account C the invoice was not entered in the personal account D the invoice was entered twice in the personal account 9. How should the balance on the receivables ledger control account be reported in the final accounts? A as an expense B as a non-current asset C as a current asset D as a current liability 10. Colin allows for potential bad debts on the basis of the length of time the debt has been outstanding. The aged debtors analysis at 30 September 2003 and the allowances required are: Age of debt 0 30 days 31 59 days 60 days and over $ 56,800 37,700 14,900 Allowance required 1% of balances 20% of balances 75% of balances

At 1 October 2002, Colins doubtful debts allowance was $18,765 Which of the following should be reported in Colins income statement for the year to 30 September 2003? A a charge of $518 B a credit of $518 C a charge of $19,283 D a credit of $19,283
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11. Margaret checked her bank statement to the bank account in her nominal ledger and found the following reasons for the difference: i some cheques have not been lodged by her suppliers ii the bank credited a personal lodgement to her business account in error iii the bank debited fees on her account Which of the differences require an entry in the bank account in the nominal ledger? Ai B ii C iii D ii and iii 12. Alan prepared his draft year end accounts, but did not adjust these for a prepayment of $1,500 and an accrual of $400. How will Alans profit and net assets be affected by including the prepayment and the accrual? Net Profit will: A increase by $1,100 B reduce by $1,900 C increase by $1,100 D reduce by $1,900 Net assets will: reduce by $1,100 increase by $1,900 increase by $1,100 reduce by $1,900

13. In September 2003, Bridget took out a business development loan for $15,000. This is to be repaid in three equal instalments. The first instalment is due for payment on 1 January 2005. How will the outstanding balance be reported in Bridgets balance sheet at 30 November 2003? A $15,000 as a current liability B $5,000 as a current liability and $10,000 as a long term liability C $10,000 as a current liability and $5,000 as a long term liability D $15,000 as a long term liability 14. Adele runs a restaurant. In August 2003 she received a letter from a lawyer representing a customer who claims he suffered food poisoning after eating in the restaurant. The customer is claiming damages of $3,000. Adele offered to pay $300. Her lawyers advice is that in the event of the case going to court, she is likely to be required to pay $1,500.
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The solicitor also advised that the court case is unlikely to take place before April 2004. What amount should be provided for in respect of the claim in Adeles final accounts for the year ended 30 September 2003? A $nil B $300 C $1,500 D $3,000 15. In the year to 30 September 2003 Rena paid a total of $2,850 for business car expenses. This includes $350 which Rena paid from her personal funds. There was an opening accrual of $329 on the car expenses account and the closing accrual was $464. What is the charge for car expenses to be reported in Renas income statement for the year to 30 September 2003? A $2,365 B $2,635 C $2,715 D $2,985 The following information relates to questions 16 and 17: At 30 September 2003 Pamelas inventory was valued at $6,400 and her trial balance included the following balances: Debit $ Sales Purchases 29,500 Credit $ 45,000

Inventory at 1 October 2002 5,700 Carriage inwards Postage Wages Advertising Other expenses 750 340 6,000 1,900 2,500

16. What is Pamelas gross profit? A $4,710

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B $15,110 C $15,450 D $16,200 17. What sum will be reported as expenses in Pamelas income statement? A $10,400 B $10,740 C $11,490 D $17,190 18. Albert does not keep full accounting records. His last accounts show that his capital balance was $42,890. At the year end he calculated that his assets and liabilities are: $ Non-current assets Inventory Receivables Payables Bank overdraft 41,700 9,860 7,695 4,174 5,537

On reviewing his calculations, you note that he did not include $258 of unpaid invoices for expenses. What is the value of Alberts closing capital? A $49,286 B $49,544 C $60,360 D $60,876 19. In the last twelve months, Jennas capital balance increased by $6,798. In the year her drawings totalled $14,600 and she introduced additional capital of $2,900. What is Jennas net profit or loss for the year? A $4,902 loss B $18,498 loss C $4,902 profit D $18,498 profit
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20. When goods are sold to a customer on credit, what accounting entries should be made? Debit A B C D Sales account Trade receivables account Cash account Sales account
21.

Credit Cash account Sales account Sales account Trade receivables account

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
22.

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 suppliers 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
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23.

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 customers 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
24.

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 Jacintas 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 25. 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)
26.

At 31 October 2010, Jemma was owed $138,644 by her customers. She has calculated that her receivables allowance should be $2,600.

How should receivables be reported in Jemmas statement of financial position at 31 October 2010?
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A as a current asset of $136,044 B as a current asset of $138,644 and a current liability of $2,600 C as a current liability of $136,044 D as a current liability of $138,644 and a current asset of $2,600
27.

At 1 December 2009 Giordis receivables allowance was $1,488. At 30 November 2010 the balance on his trade receivables account was $231,860. He has decided that balances totalling $2,437 are irrecoverable and should be written off and that his receivables allowance should be revised to 075% of the remaining balances.

What amount should be charged to Giordis income statement for receivables expense in the year to 30 November 2010 (calculated to the nearest $1)? A $1,721 B $2,204 C $2,670 D $233
28.

Eoghan charges depreciation on machinery at a rate of 20% per annum on the reducing balance basis. In the year to 30 November 2009 he had incorrectly treated capital expenditure of $5,000 as revenue expenditure. The error has not yet been corrected.

How is his profit for the year to 30 November 2010 affected by the error? A understated by $800 B understated by $1,000 C overstated by $800 D overstated by $1,000
29.

Under the terms of a warranty, Bev has agreed to pay compensation to a customer. As they cannot agree on the value of the compensation, they have agreed to submit the dispute to arbitration. It is not clear when the arbitration hearing will take place, but Bevs legal advisor has told her that it will not be before January 2011. The legal advisor has also estimated the likely final settlement.

How should the claim be dealt with in Bevs statement of financial position at 31 October 2010? A it can be ignored until the dispute has finally been settled B included in trade payables as a current liability C included in trade payables as a non-current liability
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D a provision should be recognised 30. 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 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
31.

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 A B C D $24,000 $24,000 $26,000 $26,000 Non-current liability $34,000 $36,000 $34,000 $32,000

32. Elma is preparing her extended trial balance. Which column(s) should closing inventory be extended into? Income statement A B C D Debit Credit No entry Credit
33.

Statement of financial position Credit Debit Debit No entry

Jan has extended and totalled the entries on her extended trial balance, but has not yet calculated the profit or loss for the year. The total of each column is: Income statement Debit $275,654 Credit $263,864 Statement of financial position Debit $275,573 Credit $287,363

What is Jans profit or loss for the year? A $23,499 profit B $23,499 loss
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C $11,790 profit D $11,790 loss

34.

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
35.

As defined in the IASBs 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

36.

At 1 November 2009 the value of Claudias 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 Claudias profit for the year to 31 October 2010? A $64,825 B $29,125 C $11,975 D $46,975
37.

In the year to 31 October 2010, Vlads 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 Vlads purchases in the year to 31 October 2010? A $120,300 B $116,700 C $111,960
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D $118,500 38. A trial balance is made up of a list of debit balances and credit balances. Which of the following statements is correct? A every debit balance represents an expense B assets are represented by debit balances C liabilities are represented by debit balances D income is included in the list of debit balances 39. Which of the following errors should be detected by preparing a trial balance? A a credit entry made on the debit side of the correct account B a credit entry made on the credit side of the wrong account C a transaction for which no entries were made D a transaction entered in the general ledger twice 40. After Toni prepared her draft accounts she discovered that she had incorrectly classified an item of revenue expenditure as capital expenditure. When the error is corrected, how will her net profit and capital be affected? Net profit A B C D increased reduced increased reduced Capital reduced increased increased reduced

The following information relates to questions 41 and 42: While carrying out the reconciliation of the balance on the payables control account in the general ledger with the list of balances from the payables ledger, Celine discovered the following errors: (i) a payment of $1,700 in full settlement of a balance of $1,714 was correctly recorded on the suppliers account, but only $1,700 was posted to the control account. (ii) the total of the purchase day book was understated by $900. (iii) a suppliers credit note was incorrectly recorded in the daybook as an invoice. (iv) no entries were made to record an arrangement to offset a balance of $620 against a balance in the receivables ledger. 41. Which of the above errors require a correcting entry in the general ledger?
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A (i) and (ii) only B (ii) and (iii) only C (iii) and (iv) only D (i), (ii), (iii) and (iv) 42. Which of the above errors should be dealt with as an adjustment to the list of balances from the suppliers ledger? A (i) and (ii) only B (ii) and (iii) only C (iii) and (iv) only D (i), (ii), (iii) and (iv)
43.

When Nicola extracted her trial balance, the total of the debit balances exceeded the total of the credit balances by $1,000. She opened a suspense account to make the two totals equal. She then discovered that an invoice received for property repairs for $1,500 was entered as $500 on the credit side of the property repairs account.

What is the revised balance on the suspense account when Nicola corrects this error? A nil B $2,000 debit C $2,000 credit D $3,000 credit
44.

Minnie calculated that her receivables allowance at 30 April 2007 should be $890. At 30 April 2006, her receivables allowance was $770.

How should the movement in the receivables allowance be recorded in Minnies income statement? A a charge of $890 B a credit of $890 C a charge of $120 D a credit of $120
45.

Chris is completing his extended trial balance. The value of closing inventory has been recorded in the adjustment columns.

Into which columns should the entries for closing inventory be extended? A Income statement debit and income statement credit
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B Balance sheet debit and balance sheet credit C Income statement debit and balance sheet credit D Income statement credit and balance sheet debit
46.

When he closed his ledger accounts at 30 April 2007 Luthers wages expense account had a debit balance of $87,963. Luther also had to make an accrual of $1,268 for outstanding wages.

What is Luthers opening balance for wages at 1 May 2007? A $1,268 debit B $1,268 credit C $87,963 debit D $87,963 credit
47.

During May 2007, Sarahs purchases were $126,500, and her sales were $150,000. Sarahs gross profit is 20% of sales. The value of her inventory at 1 May 2007 was $12,500.

What is the value of Sarahs inventory at 31 May 2007? A $6,000 B $11,000 C $14,000 D $19,000
48.

At 31 May 2006 Daves capital balance was $96,578. During the year to 31 May 2007, his drawings were $25,764. At 31 May 2007 his capital balance was $104,864.

What was Daves profit for the year to 31 May 2007? A $8,286 B $17,478 C $34,050 D $70,814
49.

Carol has prepared the following reconciliation of the balance on the payables ledger control account in her general ledger with the list of balances on the payables ledger: $

Total of list of balances

86,579
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Balance omitted from list

1,385

Balance on control account

87,964

What should be reported in Carols balance sheet for trade payables? A a current asset of $86,579 B a current liability of $86,579 C a current asset of $87,964 D a current liability of $87,964
50.

George is preparing the general ledger journal entry to write off an irrecoverable debt. He knows that the debit entry should be made in the receivables expense account.

In which general ledger account should the credit entry be made? A Sales account B Bank account C Receivables account D Receivables allowance account

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