Mock MCQ & SFQ's Flashcards
On 1 September 2012 a business had inventory of £380,000, During the month, sales totalled £650,000 and purchases £480,000. On September 2012 a fire destroyed some of the inventory. The undamaged goods in inventory were valued at £220,000. The business operates with a standard gross profit margin of 30%.
Based on this information, what is the cost of the inventory destroyed in the fire?
Sales (100%) 650,000
O.I. 380,000
+P 480,000
860,000
C.I ?
COS (70%) 455,000
G.P. (30%) 195,000
860,000 - 455,000 = 405,000
405,000 - 220,000 = 185,000
ANSWER 185,000
A company has the following transactions:
1 - Goods in inventory that had cost £1,000 were sold for £1,500 cash.
2 - A credit customer whose £500 debt had been written off paid the amount in full
3 - The company paid credit suppliers £1,000
What will be the combined effect of these transactions on the company’s total working capital (current assets less current liabilities)?
Answer :Increase of £1,000
Because
1 - Increase £500
2 - Increase £500
3 - No effect as assets (bank) will decrease by £1,000 and liabilities (payables) will also decrease by £1,000
In times of rising prices, what effect does the use of the historical cost concept have on a company’s asset values and profit?
Asset values understated and profit overstated
A and B are in partnership, sharing profits in the ratio 3:2 and preparing their accounts to 30 June each year. On 1 Jan 2012 C joined the partnership and the profti sharing ratio became A 40%, B 30% and C 30%.
Profits for the year ended 30 June 2012 were:
6 months ended 31 Dec 2011: £300,000
6 months ended 30 June 2012: £450,000
An irrecoverable debt of £50,000 was written off in the six months to 30 June in computing the £450,000 profit. It was agreed that this expense should be borne by A and B only, in their original profit - sharing ratios.
What is A’s total profit share for the year ended 30 June 2012?
ANSWER: £350,000
6 months to 31 Dec
3/5 x 300,000 = 180,000
6 months to 30 June
450,000 + 50,000 = 500,000
40% x 500,000 = 200,000
180,000 + 200,000 - (3/5 x 50,000) = £350,000
At 1 July 2011 a company’s allowance for receivables was £48,000.
At 30 June 2012 trade receivables amounted to £838,000. It was decided to write off £72,000 of these debts and adjust the allowance for receivables to £60,000.
What are the final amounts for invlusion in the company’s statement of financial position?
ANSWER: Trade Receivables : £766,000
Alowance for Receivables : £60,000
Net Balance : £706,000
TR = 838,000 - 72,000 = 766,000 AfR = increased by £12,000 to £60,000
A trader’s net profit for the year may be computed by using what formulae?
CC + D - CI - OC
Which of the following statements are correct?
1 - A company;s authorised share capital must be included in its published statement of financial position as part of the shareholders’ funds.
2 - If a company makes a bonus issue of ordinary shares, the total shareholders’ interest (share capital plus reserves) remains unchanged.
3 - A company’s statement of changes in equity must include the proceeds of any share issue during the period.
4 - A company must disclose its significant accounting policies by note to its financial statements.
2 - If a company makes a bonus issue of ordinary shares, the total shareholders’ interest (share capital plus reserves) remains unchanged.
3 - A company’s statement of changes in equity must include the proceeds of any share issue during the period.
4 - A company must disclose its significant accounting policies by note to its financial statements.
Which of the following characteristics of financial information contribute to reliability, according to the IASB's Framework for the Preparation and Presentation of Financial Statements? 1 - Completeness 2 - Prudence 3 - Neutrality 4 - Faithful representation
All four items
Details of a company’s insurance policy are shown below:
Premium for year ended 31 March 2012 paid April 2011: £10,800
Premium for year ended 31 March 2013 paid April 2012: £12,000
What figures should be included in the company’s financial statements for the year ended 30 June 2012?
ANSWER: Statement of Comprehensive Income: £11,100
Statement of Financial Position: £9,000 prepayment (Dr)
SCI: 9/12 x 10,800 + 3/12 x 12,000 = 11,100
SFP: prepayment of 9/12 x 12,000 = 9,000
Which of the following statements about Bank Reconciliations are correct?
1 - In preparing a bank reconciliation, unpresented cheques must be deducted from a balance of cash at bank shown in the bank statement.
2 - A cheque from a customer paid into the bank but dishonoured must be corrected by making a debit entry in the cash book.
3 - An error by the bank must be corrected by an entry in the cash book.
4 - An overdraft is a debit balance in the bank statement.
1 - In preparing a bank reconciliation, unpresented cheques must be deducted from a balance of cash at bank shown in the bank statement.
4 - An overdraft is a debit balance in the bank statement.
At 30 June 2011 the capital and reserves of Mermaid, a limited liability company were:
Share capital
Ordinary shares of £1 each: £100m
Share premium account: £80m
During the year ended 30 June 2012, the following transactions took place:
1 Sept 2011 a bonus issue of one ordinary share for every two held, using the share premium account.
1 January 2012 a fully subrscibed rights issue of two ordinary shares for every five held at that date, at £1,50 per share.
What would the balances on each account be at 30 June 2012? (Share capital account and share premium account)
ANSWER: Share capital: £210m
Share premium account: £60m
USE T-ACCOUNTS.
Look for working in Answer booklet if stuck!
Which of the following errors would cause a trial balance not to balance?
1 - An error in the addition in the cash book
2 - Failure to record a transaction at all
3 - Cost of a motor vehicle debited to motor expenses account. The cash entry was correctly made.
4 - Goods taken by the proprietor of a business recorded by debiting purchases and creditings drawings account.
1 - An error in the addition in the cash book
How should interest charged on partners’ drawings be dealt with in partnership financial statements?
Think about the appropriation account.
Added to profit in allocating the profit among the partners
All the sales made by a retailer are for cash and her sale prices are fixed by doubling cost. Details recorded of her transactions for Sept 2012 are as follows:
1 Sept Inventories : £40,000
30 Sept Purchases for month: £60,000
Cash banked for sales for month: £95,000
Inventories: 50,000
Which of the following conlusions could seperately be drawn from this information?
1 - £5,000 cash has been stolen from the sales revenue prior to banking
2 - Goods costing £5,000 have been stolen
3 - Goods costing £2,500 have been stolen
4 - Some goods costing £2,500 have been sold at cost price
1 - £5,000 cash has been stolen from the sales revenue prior to banking
4 - Some goods costing £2,500 have been sold at cost price
Sales should be (40,000 + 60,000 - 50,000) x 2 = £100,000. Therefore either £5,000 cash has been stolen or goods ccosting £2,500 have been stolen.
A company owes a number of properties which are rented to tennants. The following information is available for the year ended 30 June 2009:
30 June 2008: Rent in Advance: £134,600
Rent in Arrears: £4,800
30 June 2009: Rent in Advance: £144,400
Rent in Arrears: £8,700
Cash received from tennants in the year ended 30 June 2009 was £834,600.
All rent in arrears was subsequently received.
What figure should appear in the company’s statement of comprehensive income for rent receivable in the year ended 30 June 2009?
ANSWER: £828,700
USE T-ACCOUNTS!
Look up workings in Answer booklet.
