ACCA
PAPER F3/FFA
FINANCIAL ACCOUNTING
STUDY QUESTION BANK
For Examinations to August 2015
®
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(i)
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Past ACCA examination questions are the copyright of the Association of Chartered Certified
Accountants and have been reproduced by kind permission.
(ii)
©2014 DeVry/Becker Educational Development Corp. All rights reserved.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
CONTENTS
Question
Page
Answer
Marks
1
1001
10
2
2
3
1001
1002
1003
8
9
12
4
1004
8
4
5
1004
1007
22
10
6
7
7
8
8
9
9
10
10
11
12
12
13
1008
1010
1013
1016
1019
1024
1026
1029
1031
1036
1039
1044
1048
22
21
24
23
35
10
14
7
40
23
27
30
10
14
15
15
1048
1049
1051
5
15
6
16
17
17
18
19
19
20
20
1051
1052
1054
1055
1057
1058
1059
1059
10
8
12
15
17
6
8
16
Date worked
CONTEXT OF FINANCIAL REPORTING
1
MCQs Context of financial reporting
FINANCIAL STATEMENTS
2
3
4
Jan Bartok
Tomas Maxim
MCQs Financial statements
ACCOUNTING SYSTEMS
5
MCQs Accounting systems
DOUBLE ENTRY BOOKKEEPING PRINCIPLES
6
7
Victor Borissov
MCQs Double entry bookkeeping principles
LEDGER ACCOUNTING AND THE TRIAL BALANCE
8
9
10
11
12
13
14
15
16
17
18
19
20
Roman
Petr
Grigory
Dana
A Patel
Bohm
Ivan Tombs
Viktor
Angelo
Stefan
R Rybin
Nixon
MCQs Ledger accounting
CREDIT TRANSACTIONS
21
22
23
Damien
Ricardo
MCQs Credit transactions
ACCRUALS AND PREPAYMENTS
24
25
26
27
28
29
30
31
Dino
A Crew
Tomasz
Pushkova
Scorcese
Tolstoy
Haertel
MCQs Accruals and prepayments
©2014 DeVry/Becker Educational Development Corp. All rights reserved.
Ali Niaz - ali.niaz298@gmail.com
(iii)
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
CONTENTS
Question
Page
Answer
Marks
Date worked
DEPRECIATION AND DISPOSAL OF NON-CURRENT ASSETS
32
33
34
35
36
37
Rookie
Alexander
Udot
Popov
Reuther
MCQs Depreciation and disposals
22
23
23
23
24
24
1061
1062
1062
1064
1065
1067
10
6
7
6
10
20
27
27
28
28
29
29
30
30
31
1071
1071
1072
1074
1075
1075
1077
1078
1079
6
6
7
9
8
10
8
10
16
33
33
34
34
36
1082
1083
1084
1084
1090
10
8
4
40
8
37
37
38
38
39
39
40
40
41
42
1090
1093
1097
1098
1099
1099
1100
1101
1107
1114
30
20
16
3
6
18
11
40
40
22
46
47
47
48
49
50
51
52
1117
1117
1118
1119
1120
1121
1121
1123
9
10
15
16
15
15
22
8
RECEIVABLES AND PAYABLES
38
39
40
41
42
43
44
45
46
Krol
Hyundai
Dinul
Pushkin
Ink Products
Adam
Strak
Frederik
MCQs Receivables and payables
INVENTORY
47
48
49
50
51
C3P0
Ogay
Ales
Period-end adjustments
MCQs Inventory
BOOKS OF PRIME ENTRY AND CONTROL ACCOUNTS
52
53
54
55
56
57
58
59
60
61
A Smit
Rebecca
Wooden Tops
Rubens
Zone
Hastings & Co
Zenkerova
Rankine
Henry Williams
MCQs Books of prime entry
CONTROL ACCOUNT RECONCILIATIONS
62
63
64
65
66
67
68
69
(iv)
Brabantia
Tartufo
Racy
Teletubby
Robin & Co
Showers
Hubert
MCQs Control account reconciliations
©2014 DeVry/Becker Educational Development Corp. All rights reserved.
Ali Niaz - ali.niaz298@gmail.com
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
CONTENTS
Question
Page
Answer
Marks
53
54
54
54
55
55
56
57
57
1123
1124
1124
1124
1125
1125
1126
1127
1127
8
5
6
8
8
12
15
15
8
58
59
59
60
61
62
63
63
65
66
68
1128
1129
1129
1130
1131
1133
1136
1137
1139
1141
1143
10
8
15
15
18
20
20
20
18
26
10
70
71
72
73
74
75
77
79
1144
1147
1148
1150
1153
1157
1160
1162
20
18
20
20
20
20
20
25
80
81
82
83
84
85
86
87
89
1163
1165
1166
1169
1172
1175
1177
1181
1183
9
20
20
20
20
20
20
20
20
Date worked
BANK RECONCILIATIONS
70
71
72
73
74
75
76
77
78
Talant
Pringle
White
Gorbachev
Jovanovich
North Star Company
Dealers
Geneva
MCQs Bank reconciliations
SUSPENSE ACCOUNTS
79
80
81
82
83
84
85
86
87
88
89
Yulia
Ogre
Groan
Blackwater Transport
Smetena Newsagents
Alpha
Cosy Comforts
Rafal Jaffa
XYZ
CND
MCQs Suspense accounts
BASIC ACCOUNTS PREPARATION
90
91
92
93
94
95
96
97
Jolanta
Gandalf
Maria
Federov
Heinz
Gammon
Stewart
Bowie
INCOMPLETE RECORDS
98
99
100
101
102
103
104
105
106
Cost structures
Lamdin
Leonardo
Deltic
Waldorf
Slate
Bennett
Botham
MCQs Incomplete records
©2014 DeVry/Becker Educational Development Corp. All rights reserved.
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(v)
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
CONTENTS
Question
Page
Answer
Marks
92
92
1185
1186
10
10
93
93
93
1187
1188
1189
17
14
12
95
95
95
1190
1191
1192
10
7
10
96
97
98
99
100
101
102
1192
1194
1195
1197
1199
1200
1201
20
12
18
12
20
11
14
104
104
104
105
1202
1203
1204
1205
12
12
12
10
106
106
1206
1206
12
10
108
108
109
1207
1208
1211
20
16
10
110
110
111
1211
1213
1214
20
10
10
Date worked
REGULATORY FRAMEWORK
107
108
IASB
MCQs Regulatory framework
CONCEPTUAL FRAMEWORK
109
110
111
Financial statements
Accounting concepts (ACCA J00)
MCQs Conceptual framework
IAS 1 PRESENTATION OF FINANCIAL STATEMENTS
112
113
114
Overall considerations
Current assets and liabilities
MCQs IAS 1
CAPITAL STRUCTURE AND FINANCE COSTS
115
116
117
118
119
120
121
Beta
Logo
Gamma
Sigma
Lark (ACCA J00)
Alpaca (ACCA J02)
MCQs Capital structure and finance costs
IAS 2 INVENTORIES
122
123
124
125
Retail inventory
Measurement of inventories
Bilda
MCQs IAS 2
IAS 18 REVENUE
126
127
Sale of goods and leisure facilities
MCQs IAS 18
IAS 16 PROPERTY PLANT AND EQUIPMENT
128
129
130
Depreciation and revaluation
Diamond (IAS 16) (ACCA J97)
MCQs IAS 16
IAS 38 INTANGIBLE ASSETS
131
132
133
(vi)
Research and development
Defer
MCQs IAS 38
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Ali Niaz - ali.niaz298@gmail.com
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
CONTENTS
Question
Page
Answer
Marks
Date worked
IAS 37 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
AND IAS 10 EVENTS AFTER THE REPORTING PERIOD
134
135
136
137
138
Eternity
Accounting treatments
Four events
MCQs IAS 37
MCQs IAS 10
112
112
113
114
115
1214
1215
1216
1217
1217
12
12
20
8
8
116
117
119
120
121
123
124
1218
1220
1222
1224
1225
1227
1229
14
18
16
20
11
15
10
126
127
128
129
130
130
131
132
1229
1231
1232
1234
1236
1237
1239
1240
10
12
12
12
10
10
12
12
133
135
136
137
1241
1242
1244
1245
12
20
12
10
IAS 7 STATEMENT OF CASH FLOWS
139
140
141
142
143
144
145
Antipodean
R2D2
Momi
Jane
C3P0
Tivoli
MCQs IAS 7
CONSOLIDATED FINANCIAL STATEMENTS
146
147
148
149
150
151
152
153
P&S
Happy and Sad
Faye
Honey
Humphrey
Happy
Bing and Crosby (ACCA D10)
MCQs Consolidated financial statements
INTERPRETATION OF FINANCIAL STATEMENTS
154
155
156
157
Alex
Solo
Darth
MCQs Interpretation of financial statements
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(vii)
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(viii)
©2014 DeVry/Becker Educational Development Corp. All rights reserved.
Ali Niaz - ali.niaz298@gmail.com
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 1 MCQs CONTEXT OF FINANCIAL REPORTING
1.1
Which of the following are features of any partnership?
A
B
C
D
1.2
Which of the following more of a disadvantage of operating as a sole trader as compared
with a partnership?
A
B
C
D
1.3
Making year-end adjustments to determine the financial results for the year
Collecting, analysing and summarising financial transactions
Recording actual transactions in monetary terms
Disclosure of transactions and events
Which of the following is NOT a component of financial statements?
A
B
C
D
1.5
Risk of personal bankruptcy
Limited access to finance
Responsibility for all liabilities
Requirements to keep accounting records
Which of the following distinguishes financial reporting from financial accounting?
A
B
C
D
1.4
Owner-management, joint liability
Limited liability, owner-management
Separate legal entity, limited liability
Joint liability, separate legal entity
A statement of comprehensive income
A statement of changes in equity
A cash flow forecast
Accounting policies and explanatory notes
Which of the following users of financial statements has least need of published financial
information?
A
B
C
D
Potential investors and their advisers
Directors and management
Employees and their representatives
Customers and suppliers
(10 marks)
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Ali Niaz - ali.niaz298@gmail.com
1
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 2 JAN BARTOK
The following information is available for Jan Bartok’s business for the year ended 31 December:
$
1,200
5,000
1,500
2,800
25,000
2,000
5,000
20,000
2,000
3,000
100
1,000
800
Bank overdraft
Trade receivables
Opening inventory
Motor vehicles
Sales revenue
Drawings
Opening capital
Purchases
Trade payables
Closing inventory
Cash in hand
Administration expenses
Wages
Required:
Prepare a statement of profit or loss for the year ended 31 December and a statement of financial
position at that date.
(8 marks)
Question 3 TOMAS MAXIM
The following information is available for Tomas Maxim’s business for the year ended 31 December.
He started his business on 1 January.
$
6,400
5,060
16,100
28,400
1,700
5,100
174
1,596
2,130
4,162
2,050
200
2,628
50
4,100
Trade payables
Trade receivables
Purchases
Sales revenue
Motor van
Drawings
Insurance
General expenses
Rent
Salaries
Inventory at 31 December
Sales returns
Cash at bank
Cash in hand
Capital introduced
Required:
Prepare a statement of profit or loss for the year ended 31 December and a statement of financial
position at that date.
(9 marks)
2
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 4 MCQs FINANCIAL STATEMENTS
4.1
Which of the following statements is correct?
A
B
C
D
4.2
Which one of the following is NOT a liability?
A
B
C
D
4.3
Purchases – closing inventory + opening inventory
Purchases – opening inventory + closing inventory
Opening inventory + purchases + closing inventory
Closing inventory + purchases – opening inventory
Which one of the following items of expenditure should be classified as capital
expenditure?
A
B
C
D
4.6
A lease of land
A registered trademark
Royalty receipts
An investment in a listed company
Which one of the following represents cost of goods sold in a statement of profit or loss?
A
B
C
D
4.5
Accrued expenses
Bank overdraft
Drawings
Trade payables
Which one of the following is an example of an intangible asset?
A
B
C
D
4.4
A non-current asset is a tangible asset
A non-current asset is initially recorded at cost
A non-current asset is depreciated annually
A non-current asset is owned
Service agreement costs for computer equipment
Installation costs for an air-conditioning system
Cost of a three-year manufacturer’s warranty
Purchases of cars for resale
Which one of the following items could properly be included in non-current tangible
assets in the statement of financial position of a manufacturing business?
A
$55,000 representing the use of the business’s own labour and material costs
incurred in constructing an extension to the warehouse
B
$45,000 representing the salary and occupancy costs of a manager whose main
function is to prepare, control and implement capital expenditure budgets
C
$25,000 spent in tracing and rectifying a serious fault in operating a production line
to restore it to normal efficiency
D
$35,000 incurred in an extensive market survey, the recommendations of which
may be implemented next year
(12 marks)
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3
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 5 MCQs ACCOUNTING SYSTEMS
5.1
Which one of the following statements concerning an accounting system is correct?
A
B
C
D
5.2
Which one of the following is an organisational objective?
A
B
C
D
5.3
To ensure that all assets are recorded in a register
To safeguard assets
To ensure that asset disposals are authorised
To ensure that access to assets is restricted
Which one of the following is a book of prime entry?
A
B
C
D
5.4
It includes informal as well as formal procedures
It ensures efficient operations
Its objective is to prevent and detect fraud and error
It maintains computerised records
Asset register
Inventory records
Receivables ledger
Journal
Which of the following documents will all be found in a typical sales system?
A
B
C
D
Standing order, goods despatch note, customer statement
Sales order, goods received note, remittance advice
Sales invoice, goods despatch note, remittance advice
Sales invoice, goods received note, customer statement
(8 marks)
Question 6 VICTOR BORISSOV
Victor Borissov won $10,000 in a national lottery and decided to set himself up as a computer
distributor, starting to trade on 1 April.
During April he made the following transactions:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Paid the $10,000 into a business bank account
Bought an Atari for $1,000 cash
Bought an Amstrad for $2,500 cash
Sold the Atari for $1,500 cash
Paid rent for his premises of $300 cash.
Bought an office desk and chair for $200 cash
Bought a Compaq for $4,000 cash
Sold the Amstrad for $3,250 cash
Drew $400 in cash from the business.
Required:
(a)
Show the accounting equation which results from EACH of these transactions.
(Note: Each transaction follows on from the one before.)
4
(9 marks)
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(b)
The following transactions were entered into during May:
(1)
(2)
(3)
(4)
(5)
(6)
Bought for cash a Legend ($3,000) and an Apple Mac ($2,500)
Sold the Legend for $4,500 cash
Received a telephone bill for $100 which he paid
Sold the Apple Mac for $1,800 cash
Drew $600 in cash from the business
Bought an IBM for $5,600 cash.
Required:
Show the accounting equation at 31 May after ALL the above transactions.
(c)
(6 marks)
Assuming the same transactions as in (b), prepare a statement of profit or loss for the
month ended 31 May and a statement of financial position at that date for Victor
Borissov’s business.
(7 marks)
(22 marks)
Question 7 MCQs DOUBLE ENTRY BOOKKEEPING PRINCIPLES
7.1
Which of the following principles underlie double entry bookkeeping?
A
B
C
D
7.2
Accounting equation, separate legal entity concept, duality concept
Accruals concept, accounting equation, business entity concept
Accounting equation, business entity concept, duality concept
Accruals concept, business entity concept, duality concept
Closing net assets can be found by using which of the following equations?
A
B
C
D
Opening capital + Profit + Drawings + Capital introduced
Opening capital + Profit – Drawings + Capital introduced
Opening capital – Profit + Drawings + Capital introduced
Opening capital – Profit – Drawings + Capital introduced
The following information relates to items 7.3 and 7.4:
A trader had the following items in his statement of financial position on 31 December 2013 and 2014:
2013
$
2,000
1,000
500
2,000
500
–
–
Land
Cars
Payables
Receivables
Cash
Closing inventory
Accrued expenses
2014
$
2,000
–
2,000
2,000
–
6,000
1,000
During the period the trader made drawings of $700.
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5
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
7.3
What was the trader’s profit for the year ended 31 December 2014?
A
B
C
D
7.4
What was the change in the above trader’s investment (in net assets) between 2013 and
2014?
A
B
C
D
7.5
$1,300
$2,700
$6,700
$7,700
$2,000
$2,700
$3,000
$4,000
Which ONE of the following is NOT an appropriation of profit?
A
B
C
D
Goods taken from a business by a sole trader for personal use
Interest payments to providers of finance
Dividends paid to shareholders
Salaries paid to partners
(10 marks)
Question 8 ROMAN
The following information relates to the first two months’ trading of Roman, who is in business as a
greengrocer. All transactions are on a cash basis.
1 January
15 January
23 January
31 January
Roman paid $350 into the business
Bought goods for $200
Paid motor expenses of $40
Sold goods for $300
5 February
7 February
8 February
21 February
28 February
Received $300 from Denis as a loan repayable in two years’ time
Purchased goods for $200
Sold goods for $150
Paid rent of $50
Sold goods for $300.
Required:
For EACH month:
(a)
(b)
(c)
(d)
Write up and close the relevant ledger accounts for the above transactions;
Extract a list of account balances;
Prepare a statement of profit or loss;
Draft a statement of financial position.
(9 marks)
(4 marks)
(5 marks)
(4 marks)
(22 marks)
6
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 9 PETR
Petr commenced trading in his bakery on 5 April. All his transactions were on a cash basis, as follows:
5 April
7 April
8 April
15 April
20 April
28 April
29 April
30 April
Introduced cash into the business of $300
Purchased goods for $200
Received loan from Tatiana of $250 repayable within twelve months
Purchased a motor van for $150
Sold goods for $350
Paid rent of $50
Repaid part of the loan $200
Drew cash from the business $60.
At 30 April Petr had $100 goods in hand.
Required:
(a)
Write up, balance and close the relevant ledger accounts for the above transactions.
(8 marks)
(b)
Prepare the list of account balances at 30 April.
(c)
Prepare the statement of profit or loss for the month ended 30 April and a statement of
financial position at that date.
(9 marks)
(4 marks)
(21 marks)
Question 10 GRIGORY
You are given the following information on the first month’s trading of Grigory, who is in business as a
second-hand furniture dealer. All transactions are on a cash basis.
1 January
2 January
3 January
4 January
10 January
13 January
20 January
24 January
27 January
30 January
31 January
Grigory paid $5,000 into the business
Bought a motor van for $600
Bought goods for $1,300
Received a loan from Sergei $1,000 repayable within twelve months
Paid expenses on the motor van of $200
Sold goods for $300
Sold goods for $500
Paid storage expenses $150
Repaid Sergei part of his loan $350
Withdrew cash from the business $175
Closing inventory was $800.
Required:
(a)
Write up the ledger accounts for the above transactions, including dates, descriptions
and balances.
(11 marks)
(b)
Prepare the trial balance at 31 January.
(c)
Prepare the statement of profit or loss for the month ended 31 January and a statement
of financial position at that date.
(9 marks)
(4 marks)
(24 marks)
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7
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 11 DANA
The following information relates to the first two months’ trading of Dana, who is in business as a
hairdresser. All transactions are on a cash basis.
2 March
16 March
24 March
29 March
6 April
8 April
9 April
22 April
30 April
Dana paid $525 into the business
Purchased supplies for $300
Paid miscellaneous expenses $60
Cash from customers $450
Received $450 from Radok as a loan repayable in two year’ time
Purchased supplies $300
Receipts from customers $225
Paid establishment costs $75
Receipts from customers $450.
Dana held no inventory at 30 April.
Required:
(a)
Write up and balance the ledger accounts for EACH month.
(9 marks)
(b)
Extract a trial balance for EACH month.
(4 marks)
(c)
Prepare a statement of profit or loss for the TWO months to 30 April.
(3 marks)
(d)
Prepare a statement of financial position at the end of EACH month.
(7 marks)
(23 marks)
Question 12 A PATEL
A Patel started business on 1 January and had the following monthly transactions:
1 January
2 January
3 January
4 January
5 January
6 January
8
Started the business with $10,000 in cash
Borrowed a sum of $4,000 in cash from C Sladek, $200 of which is
repayable on the first of every other month starting 1 February
Bought a motor van for cash $900
Bought goods for cash $2,300
Sold his entire inventory for $3,000 cash
Paid cash for motor running expenses of $250
1 February
2 February
3 February
4 February
5 February
6 February
28 February
Repaid $200 in cash to C Sladek
Withdrew $300 cash from the business for his own use
Bought a typewriter for $160 cash
Bought goods for cash $3,500
Sold goods for $3,200 cash
Took for his own consumption goods which had cost $280
Closing inventory was $720
1 March
2 March
3 March
31 March
Bought goods for cash $2,900
Sold goods for $2,625 cash
Paid cash for rent of premises $225
Closing inventory was $1,170.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Required:
(a)
Prepare for EACH month:
(i)
(ii)
(iii)
(iv)
(b)
the ledger accounts showing descriptions and balances;
a trial balance;
a statement of profit or loss for the year to date;
a statement of financial position.
(30 marks)
Close the relevant ledger accounts as at 31 March writing up the income and
expenditure account.
(5 marks)
(35 marks)
Question 13 BOHM
Bohm’s transactions were as follows:
1 January
5 January
7 January
9 January
10 January
11 January
12 January
13 January
14 January
Introduced cash
Purchased fixtures and fittings
Purchased goods on credit from Dvorak
Some goods returned damaged to Dvorak
Paid Dvorak amount due
Sold goods on credit to Jovanovich
Jovanovich returned unsuitable goods
Sold goods for cash
Jovanovich settled his account.
$
5,000
2,000
1,000
100
300
50
300
Required:
Write up and close the relevant ledger accounts.
(10 marks)
Question 14 IVAN TOMBS
The following information is available for the business of Ivan Tombs, a bookseller:
January
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Started business with $10,000 in business bank account
Made purchases for $200 cash
Further purchases for $400 on credit from Moore
Paid rent of $1,000 cash
Bought stationery for $60 cash
Bought an old van for $4,000 from Petros promising to pay later
Sold rare books to Greene for $1,000 cash
Paid Moore $140 cash
Sold book on credit to Doyle for $140
Bought more stationery for $40 cash
Paid cash of $150 for motor expenses
Paid Petros $1,000
Took $300 from the business to pay for living expenses
Received $100 from Doyle.
Required:
Show how these transactions would be recorded in the ledger accounts. Close the relevant
accounts.
(14 marks)
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9
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 15 VIKTOR
Viktor had the following transactions during January:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Introduced $1,000 cash as capital
Purchased goods on credit from ABC for $400
Paid monthly rent $40 and electricity $100
Purchased car for cash $200
Sold half of goods on credit to XYZ for $350
Drew $60 for his own expenses
Sold remainder of goods for cash $420.
Required:
Write up and close the relevant ledger accounts, including trading account and income and
expenditure account, necessary to record the above transactions.
(7 marks)
Question 16 ANGELO
The transactions described below concern the business of Angelo which retails biographies of famous
painters:
(1)
Invest $5,000 capital in business
(2)
Pay $300 cash for shop rent
(3)
Pay cash for 100 biographies of Cézanne @ $20 each
(4)
Sell 30 copies @ $30 each for cash
(5)
Buy a second hand van for $2,000
(6)
Pay $1,500 cash for 50 biographies of Dali
(7)
Sell, for cash, 30 copies of each title for $30 and $45 respectively
(8)
Receive $100 cash for sub-letting storage space
(9)
Purchase, on credit from The Bookworm, 40 biographies of El Greco @ $25 each
(10)
Receive, but do not pay, a telephone bill for $75
(11)
Sell:
10 copies of Cézanne @ $30 each, for cash
20 copies of Dali @ $45 each, on credit to Mr Salvador
15 copies of El Greco @ $40 each, on credit to Mr Quinn
(12)
Pay $500 to The Bookworm
(13)
Receive $600 from Mr Salvador
(14)
Pay the telephone bill
(15)
Receive $475 from Mr Quinn
(16)
Pay $300 to The Bookworm
(17)
Sell all remaining inventory for $1,800 cash to facilitate a move to bigger premises.
10
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Required:
(a)
Present each transaction in the form:
$
Dr
X
Name of a/c
Cr Name of a/c
$
X
(15 marks)
(b)
Write up the ledger accounts to reflect the double entries, recording credit transactions
in total accounts rather than individual accounts.
(8 marks)
(c)
Balance all the accounts.
(4 marks)
(d)
Extract a list of account balances (i.e. trial balance).
(4 marks)
(e)
Close the relevant accounts to an income and expenditure account in the general ledger.
(3 marks)
(f)
Draft a statement of profit or loss and statement of financial position.
(6 marks)
(40 marks)
Question 17 STEFAN
Stefan commenced trading on 1 November as a wine merchant. The following transactions relate to
November:
1 November
3 November
5 November
7 November
8 November
12 November
23 November
25 November
28 November
29 November
30 November
Paid cash into the business
Purchased goods from X on credit
Purchased goods from Y on credit
Purchased fixtures and fittings for cash
Sold goods to A on credit
Sold goods for cash
Withdrew cash from the business
Paid cash to Y
Paid cash to X
Received cash from A
Withdrew goods for own consumption (at cost)
$
3,000
400
350
560
500
400
100
300
400
400
20
Closing inventory amounted to $250.
Required:
(a)
Write up and balance the relevant ledger accounts for the above transactions. (11 marks)
(b)
Prepare the trial balance at 30 November.
(c)
Prepare a statement of profit or loss for the month ended 30 November and a statement
of financial position at that date.
(8 marks)
(4 marks)
(23 marks)
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11
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 18 R RYBIN
On 1 December R Rybin started business with $5,000 in cash. He purchased fixtures and fittings for
$1,000 cash.
His purchases on credit during the month were:
9 December
13 December
20 December
$
400
300
140
A Agladze
B Buczak
C Coke
His sales on credit during the month were:
10 December
14 December
29 December
$
600
800
300
D Didnko
E Ergo
F Fesan
Cash sales for the month were $100. Other payments were:
7 December
10 December
20 December
$
40
150
1,500
200
Rent
Electricity
Motor van
Stationery
On 31 December D Didnko settled his account in full, and Rybin paid Agladze and Buczak. On the
same date Rybin also bought a second-hand computer for $250 for use in the business, and withdrew
$100 from the business.
Inventory in hand at 31 December was $150.
Required:
(a)
Write up the ledger accounts, recording credit transactions in the accounts of
individuals.
(15 marks)
(b)
Prepare the trial balance at 31 December.
(c)
Prepare the statement of profit or loss for the month ended 31 December and a
statement of financial position at that date.
(8 marks)
(4 marks)
(27 marks)
Question 19 NIXON
Nixon is a retailer and on 1 January his assets were:
$
343
458
198
Cash in hand
Inventory
Furniture and fittings
Receivables
Smith
Harvey
Moon
12
18
39
26
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
His liabilities were to the following suppliers:
$
12
21
Rich
Max
His transactions during January were:
2 January
5 January
7 January
9 January
11 January
14 January
15 January
20 January
21 January
23 January
28 January
31 January
Goods sold to Harvey on credit
Paid wages
Bought goods on credit from Rich
Smith settled his account
Paid the amount owing to Max
Cash sales
Paid wages
Bought goods for cash
Paid Rich for balance owing on his account
Bought for cash a new office desk
Paid wages
Cash sales
Paid office expenses
Harvey paid on account
Cash sales
Paid wages
Cash sales
Inventory at cost was
$
124
12
150
64
14
75
32
17
110
3
25
84
15
30
374
Required:
(a)
Write up and close the relevant ledger accounts.
(18 marks)
(b)
Extract a trial balance at 31 January.
(c)
Prepare a statement of profit or loss for the month ended 31 January and a statement of
financial position at that date.
(8 marks)
(4 marks)
(30 marks)
Question 20 MCQs LEDGER ACCOUNTING
20.1
Which of the following is correct?
A
A debit entry will increase non-current assets
A debit entry will decrease drawings
A credit entry will increase payables
B
A debit entry will increase bank overdraft
A debit entry will decrease payables
A credit entry will increase profit
C
A credit entry will decrease drawings
A credit entry will increase profit
A credit entry will decrease non-current assets
D
A debit entry will increase profit
A credit entry will decrease drawings
A credit entry will increase bank overdraft
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13
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
20.2
20.3
Which of the following is the correct double entry for goods taken by a sole trader for
personal use?
A
Dr Drawings
Cr Purchases
B
Dr Drawings
Cr Sales
C
Dr Drawings
Cr Inventory
D
Dr Purchases
Cr Drawings
At the end of the year when ledger accounts have been closed, which one of the following
may have a credit balance?
A
B
C
D
20.4
Which one of the following errors should be detected by the extraction of a trial
balance?
A
B
C
D
20.5
Sales revenue account
Bank account
Inventory account
Income and expenditure account
An error of original entry
An error of omission
An error of principle
A transposition error
Which one of the following statements is correct?
A
B
C
D
A trial balance can only be extracted at the end of a reporting period
A trial balance does not prove that all transactions have been recorded
A trial balance proves the arithmetic accuracy of the books of account
Financial statements can be prepared directly from a trial balance
(10 marks)
Question 21 DAMIEN
Damien is a pet food wholesaler. His policy is to allow his credit customers a settlement discount of
3%. He receives from his suppliers, a discount of 5% if he settles their invoices within 30 days of
receipt and also occasionally receives a trade discount.
During March the following takes place:
(i)
Purchased goods on credit costing $260.
(ii)
Sold goods on credit for $500 to Felix.
(iii)
Was informed by his suppliers that he was eligible for a trade discount of 10%.
(iv)
Received cash from Felix, who took advantage of the discount offered.
(v)
Sent cash, in respect of the credit purchases made in March, to suppliers taking advantage of
the 5% discount offered.
14
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Required:
Write up a discounts ledger account.
(5 marks)
Question 22 RICARDO
Ricardo, a sole trader, had the following transactions for the month of June:
2 June
Sold goods to Claire for $8,500 on credit; offered a 5% quick settlement
discount.
13 June
Bought goods from Georgina for $12,000 on credit; Georgina offered a 7% quick
settlement discount.
14 June
Sold goods to Hywel for $9,000 after a 5% trade discount.
20 June
Sold goods to Jane for $6,000 cash.
21 June
Bought goods on credit for $4,500 from Andrew who offered a 2% quick
settlement discount.
22 June
Claire returned goods sold of $1,000.
24 June
(i)
Mandy bought goods worth $5,000 and was offered a 3% quick
settlement discount.
(ii)
Claire took advantage of Ricardo’s discount and paid the net amount due
after taking the discount offered.
(i)
Hywel settled the amount due in full.
(ii)
Ricardo paid Georgina the amount due after deducting the discount
offered.
25 June
27 June
Ricardo paid Andrew in full, after deducting the discount offered.
Required:
Prepare the relevant ledger accounts to record the above transactions, extract a trial balance at
27 June and close the relevant ledger accounts.
Your answer should clearly show transactions with individual customers and suppliers.
(15 marks)
Question 23 MCQs CREDIT TRANSACTIONS
23.1
Which of the following is the correct double entry for making a credit sale?
A
Dr Cash
Cr Sales
B
Dr Sales
Cr Trade receivables
C
Dr Trade receivables
Cr Sales
D
Dr Cash
Cr Trade receivables
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15
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
23.2
Which of the following statements is correct?
A
B
C
D
23.3
When a settlement discount is offered a sale is recorded at its full value
A settlement discount is also called a trade discount
A settlement discount allowed is recognised as income
When a trade discount is offered a sale is recorded at is full value
A purchase has been recorded on the receipt of goods obtained on credit terms.
Which of the following is the correct double entry to record the subsequent return to the
supplier of these goods?
A
Dr Trade payables
Cr Purchases
B
Dr Trade payables
Cr Sales returns
C
Dr Cash
Cr Trade payables
D
Dr Purchases
Cr Trade receivables
(6 marks)
Question 24 DINO
Dino started a business on 1 January 2014.
In the accounting year to 31 December 2014:
A new warehouse was acquired on 31 March 2014. On 21 April 2014, Dino received a water
usage demand for $1,000 for the 12 months to 31 March 2015. Payment was made, in full, on
30 April 2014.
In the accounting year to 31 December 2015:
An office extension was built. The water usage demand for the 12 months to 31 March 2016
was $1,600. Dino paid the full amount on 1 June 2015.
Required:
(a)
Write up the water usage ledger account for EACH of the two accounting years.
(6 marks)
(b)
Assuming now that payments were made annually in arrears (i.e. $1,000 on 31 March
2015 and $1,600 on 31 March 2016), write up the water usage ledger account for each of
the two accounting years.
(4 marks)
(10 marks)
16
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 25 A CREW
The following is an extract from the trial balance of A Crew at 31 December 2014:
Dr
$
560
900
380
590
260
2,970
Stationery
Rent
Rates (local property tax)
Lighting and heating
Insurance
Wages and salaries
Cr
$
There was stationery still in hand at 31 December 2014 which had cost $15.
Rent of $300 for the last three months of 2014 had not been paid and no entry has been made in the
books at all for it.
Of the rates, $280 was for the year ended 31 March 2015. The remaining $100 was for the three
months ended 31 March 2014.
Fuel had been delivered on 18 December 2014 at a cost of $15 and had been consumed before the end
of 2014. No invoice had been received for the $15 fuel in 2014 and no entry has been made in the
records of the business.
$70 of the insurance paid was in respect of insurance cover for the year 2015.
Nothing was owing to employees for wages and salaries at the close of 2014.
Required:
Record the above information in the relevant accounts for the year ended 31 December 2014.
Close the accounts.
(8 marks)
Question 26 TOMASZ
Tomasz is in business as an antique dealer. The trial balance of his business at 1 January was as
follows:
Dr
Cr
$
$
Capital
5,000
Cash
4,200
Motor van
600
Trade payable – A
200
Trade receivable – B
300
Rent prepaid
100
––––––
––––––
5,200
5,200
––––––
––––––
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17
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Cash transactions during the three months to 31 March were:
$
2,000
3,000
500
350
250
Purchases
Revenue
Drawings
Motor running expenses
Rent
At 31 March inventory was $700 and rent paid in advance amounted to $150.
Required:
(a)
Prepare the trial balance at 31 March.
(5 marks)
(b)
Prepare the statement of profit or loss for the period to 31 March and a statement of
financial position at that date.
(7 marks)
(12 marks)
Question 27 PUSHKOVA
The following list of account balances was extracted from the books of Pushkova at 30 April 2014:
Dr
$
Revenue
Purchases
Inventory 1 May 2013
Salaries and wages
Motor expenses
Rent
Rates (local property tax)
Insurances
Packing expenses
Lighting and heating expenses
Sundry expenses
Motor vehicles
Fixtures and fittings
Trade receivables
Trade payables
Cash at bank
Cash in hand
Drawings
Capital
Cr
$
18,955
12,556
3,776
2,447
664
456
120
146
276
665
115
2,400
600
4,577
3,045
3,876
120
2,050
––––––
34,844
––––––
12,844
––––––
34,844
––––––
Notes at 30 April
(1)
(2)
(3)
18
Expenses which have been prepaid – Rates $20; Insurance $35.
Expenses which are owing – Motor expenses $56; Rent $24; Sundry expenses $26.
Inventory $4,998.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Required:
From the list of balances and the notes prepare Pushkova’s statement of profit or loss for the year
ended 30 April 2014 and a statement of financial position at that date.
(15 marks)
Question 28 SCORCESE
A guest house makes up its accounts to 30 April annually. The proprietor, Mr Scorcese, informs you
that he has paid the following amounts during the year to 30 April 2014:
$
3,945
4,261
814
935
566
1,150
Wholesaler
Butcher
Building supplies (repairs)
Electricity
Gas
Wages
He also informs you that he has received $37,550 in cash from guests, of which $4,300 relates to
deposits paid in advance for holidays to be taken after 1 May 2014.
You discover on further investigation that invoices for April 2014 from the butcher and wholesaler,
amounting to $431 and $292, were received on 15 May. The electricity bill for the quarter ended 31
May 2014 totals $220 and the chambermaid is paid a week in arrears at $42 per week. Gas cylinders are
purchased in advance at $17 each and two remain unused at 30 April.
Required:
(a)
Calculate the amounts to be included in the statement of profit or loss for each of the
above items for the year ended 30 April 2014.
(12 marks)
(b)
Calculate the relevant amounts for the statement of financial position at 30 April 2014.
(5 marks)
(17 marks)
Question 29 TOLSTOY
Tolstoy owns a removal business and runs a small fleet of vans. He prepares his accounts to 31
December each year. The following transactions occur in relation to road tax and insurance for the year
2014:
1 January
1 April
1 May
1 July
The amount prepaid for road tax and insurance was $1,140.
He paid $840 road tax for the year ended 31 March 2015 on six of the vans.
He paid $3,540 insurance for all ten vans for the year ended 30 April 2015.
He paid $560 road tax for the other four vans for the year ended 30 June 2015.
Required:
Write up the account for “road tax and insurance” for the year ended 31 December 2014.
(6 marks)
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19
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 30 HAERTEL
Haertel owns various properties which he rents; some tenants pay in advance, some in arrears.
Similarly with his various borrowings the interest is paid in arrears and in advance.
During 2014 rent collected was $229,500 and interest charged to the income and expenditure account
was $52,500. Rents receivable and paid in advance together with amounts of interest prepaid and
payable at the ends of the reporting periods were as follows:
31 December
2014
$
40,500
15,300
5,600
7,000
Rents owed by tenants
Rents prepaid by tenants
Prepaid interest
Interest payable
2013
$
34,200
20,700
3,500
9,800
Required:
Write up, for the year ended 31 December 2014:
(a)
(b)
the rental income account;
interest expense account.
(8 marks)
Question 31 MCQs ACCRUALS AND PREPAYMENTS
The following information relates to items 31.1 – 31.3:
The rent, rates (local property tax) and insurance account in the books of Mahler for the year ended 30
June 2015 was as follows:
$
Opening balances at 1 July 2014
Rent accrued
200
Rates prepaid
150
Insurance prepaid
180
Payments made during the year ended 30 June 2015 were as follows:
10 August 2014
26 October 2014
2 November 2014
12 December 2014
17 April 2015
9 May 2015
31.1
$
300
600
350
400
400
350
Which of the following is the correct treatment for Mahler’s rent?
A
B
C
D
20
Rent, three months to 31 July 2014
Insurance, one year to 31 October 2015
Rates, six months to 31 March 2015
Rent, four months to 30 November 2014
Rent, four months to 31 March 2015
Rates, six months to 30 September 2015
Prepaid/(accrued)
at 30 June 2015
$
(200)
(300)
200
300
Transfer to income and expenditure
account for year to 30 June 2015
$
400
1,200
1,200
800
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
31.2
Which of the following is a correct treatment for Mahler’s rates?
A
B
C
D
31.3
Transfer to income and expenditure
account for year to 30 June 2015
$
850
700
850
675
Which of the following is a correct treatment for Mahler’s insurance?
A
B
C
D
31.4
Prepaid/(accrued)
at 30 June 2015
$
(175)
(150)
150
175
Prepaid/(accrued)
at 30 June 20152
$
200
180
(200)
(800)
Transfer to income and expenditure
account for year to 30 June 2015
$
580
780
600
580
You are given the following extract from an electricity account for the year ended 30 June
2014:
Electricity a/c
$
Balance b/d (standing charge)
Bank
Bank
Bank
Bank
74
394
427
507
670
$
Balance b/d (metred usage)
375
The last bill received and paid was for $670, comprising a standing charge of $180 for the
three months to 31 August 2014 and metered charges for the three months to 31 May 2014.
The charge for usage in June is expected to be $307, whilst the standing charge is to be
increased to $240 per quarter on all successive bills.
What is the charge for electricity in the income and expenditure account for the year
ended 30 June 2014?
A
B
C
D
31.5
$1,577
$1,844
$1,884
$1,944
In the year to 31 July 2014 Twiddle received $36,900 rental income. The amounts of rent
received in advance and due in arrears were as follows:
31 July 2014
$1,800
$1,350
Rent received in advance
Rent due in arrears
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31 July 2013
$1,950
$1,050
21
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
What figure for rental income should be recorded in the income and expenditure
account for the year ended 31 July 2014?
A
B
C
D
31.6
$36,450
$36,750
$37,050
$37,350
On 5 May 2014 Tomas pays a rent bill of $3,600 for the 18 months ended 30 June 2015.
What is the charge to the income and expenditure account and the amount to be carried
in the statement of financial position in respect of rent for the year ended 31 March
2015?
A
B
C
D
$2,400 with prepayment of $600
$2,400 with accrual of $1,200
$3,000 with accrual of $600
$3,000 with prepayment of $600
The following information relates to items 31.7 and 31.8:
A company owns three properties which it rents out. Rent amounts to $600 per quarter per property
due on 31 January, 30 April, 31 July and 31 October. The properties have been occupied throughout
the year to 31 December 2014. Two tenants pay in advance and one in arrears.
31.7
What are the balances for rent receivable at 31 December 2014?
A
B
C
D
31.8
Deferred income
$1,200
$600
$400
$200
Accrued income
$600
$1,200
$400
$800
What amount for rent receivable should be included in the income and expenditure
account for the year to 31 December 2014?
A
B
C
D
$1,800
$2,400
$6,600
$7,200
(16 marks)
Question 32 ROOKIE
Rookie bought a machine for $10,000 on 1 January 2014. He estimates a useful life of eight years and
a residual value of $800. Depreciation is to be calculated on a straight line basis.
Required:
(a)
Write up for 2014 and 2015 the:
(i)
(ii)
(iii)
(b)
Machinery account;
Accumulated depreciation account;
Depreciation expense account.
(6 marks)
Show how the machine would be presented in the statements of financial position as at
31 December 2014 and 31 December 2015.
(4 marks)
(10 marks)
22
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 33 ALEXANDER
Alexander purchased a van for $800 cash. He estimates that in four years it will have a scrap value of
$70.
Required:
Calculate the annual depreciation charge on:
(a)
(b)
the straight line method; and
the reducing balance method at the rate of 45%.
(2 marks)
(4 marks)
(6 marks)
Question 34 UDOT
Since he commenced business on 1 January 2012 Mr Udot has purchased for cash the following three
machines for his various manufacturing processes:
Date of purchase
Machine 1
Machine 2
Machine 3
20 January 2012
17 April 2013
11 July 2014
Cost
$
4,200
5,000
3,500
Rate of depreciation
25%
30%
35%
Udot’s policy is to charge a full year’s depreciation in the year of purchase irrespective of the date of
purchase. The reducing balance method is used to calculate depreciation.
Accounts are prepared to 31 December each year.
Required:
(a)
Prepare the machinery account and accumulated depreciation account showing the
charge to the depreciation account for each year.
(4 marks)
(b)
Show the extracts relevant to the statement of financial position for each year. (3 marks)
(7 marks)
Question 35 POPOV
Popov allows for depreciation on plant at 10% per annum on cost at the year end on a straight-line
basis. On 1 January 2014 plant at cost was $5,000; accumulated depreciation to date was $3,000. On 1
July 2014 he sold a machine for $1,500 which had cost $2,000 on 1 July 2011.
Required:
Prepare relevant ledger accounts for the year to 31 December 2014.
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(6 marks)
23
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 36 REUTHER
Reuther leases second-hand German sports cars, generally a standard model. He started business on 1
January 2012 and has decided to depreciate the cars on a straight line basis at 25% per annum on cost at
the year-end. During the years 2012 to 2015 the following purchases and sales of cars took place:
2012
Acquired 20 Porsche 924 Turbos at a cost of $18,600 each
2013
Purchased 6 Porsches for a total cost of $108,600
2014
Traded-in two of the cars acquired in 2012 and received an allowance of $9,000
each which was set against the purchase of a further two cars costing $19,800 each
2015
Replaced 15 cars purchased in 2012 with another 15, each of which cost $21,000.
A trade-in allowance totalling $48,000 was received.
Reuther prepares accounts to 31 December each year.
Required:
Prepare a vehicle account, an accumulated depreciation account, a depreciation expense account
and a disposals account for the years 2012 to 2015.
(10 marks)
Question 37 MCQs DEPRECIATION AND DISPOSALS
37.1
A company acquired a new minicomputer system for $50,000 on 1 November 2014. The
computer’s estimated useful life is five years, at the end of which it is expected to have a
scrap value of $4,550.
The company’s financial year ends on 31 March and straight-line depreciation is applied on a
time-apportioned basis.
What is the depreciation charge on the computer in profit or loss for the year to 31
March 2015?
A
B
C
D
37.2
$3,788
$4,167
$9,090
$10,000
The following information has been extracted from a company’s statements of financial
position:
31 December 2014
31 December 2013
Cost
Depreciation
Cost
Depreciation
$000
$000
$000
$000
Plant and equipment
176
34
143
21
During the year ended 31 December 2014 equipment which had an original cost of $16,000
and accumulated depreciation of $10,000 was sold.
24
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
What amounts should be shown for depreciation expense and purchase of plant and
equipment in the financial statements for the year ended 31 December 2014?
A
B
C
D
37.3
Depreciation
expense
$000
3
3
23
23
Purchase of plant
and equipment
$000
17
49
17
49
The following information relates to the disposal of two machines:
Cost
Selling price
Profit/(loss) on sale
Machine 1
$
120,000
90,000
30,000
Machine 2
$
140,000
80,000
(40,000)
What was the total carrying value of the machines sold?
A
B
C
D
37.4
$100,000
$160,000
$180,000
$240,000
The following information was disclosed in the financial statements of a company for the year
ended 31 December 2014:
2014
2013
$
$
Plant and equipment, cost
735,000
576,000
Less: accumulated depreciation
265,000
315,000
–––––––
–––––––
Carrying amount
470,000
261,000
–––––––
–––––––
During 2014:
Expenditure on plant and equipment was
Loss on the disposal of old plant was
Depreciation charge on plant and equipment was
$512,000
$107,000
$143,000
What were the sales proceeds received on the disposal of the old plant?
A
B
C
D
37.5
$53,000
$153,000
$246,000
$267,000
The following items have been extracted from the accounts of a company for the year ended
31 December 2014:
$
Depreciation charge
30,000
Profit on sale of tangible non-current assets
5,000
Proceeds from sale of tangible non-current assets
20,000
Purchase of tangible non-current assets
25,000
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25
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
If the carrying amount of tangible non-current assets was $110,000 on 31 December
2013, what was it on 31 December 2014?
A
B
C
D
37.6
$70,000
$80,000
$85,000
$90,000
Artur bought a car on 1 January 2012 for $10,000. On 1 July 2014 he accepted $3,500 tradein allowance on a new car. The new car cost $12,000. Artur depreciates all non-current
assets at a rate of 25% per annum on cost at the year end. He prepares accounts to 31
December each year.
What is the resulting under/over allowance for depreciation on the sale of the first car?
A
B
C
D
37.7
Under allowance of $1,500
Over allowance of $1,500
Under allowance of $5,000
Over allowance of $5,000
In Bryn’s accounts for the year ended 31 December 2014 there is a gain of $222 on the
disposal of a machine. This machine had been purchased on 1 October 2011 at a cost of
$3,000.
Bryn had sold the machine for cash on 30 June 2014 and his stated policy is to depreciate
plant and equipment on the reducing balance method at the rate of 20% per annum on a
monthly basis.
How much were the sale proceeds for the car?
A
B
C
D
$1,358
$1,642
$1,580
$1,864
The following information relates to questions 37.8 and 37.9:
On 1 January 2014 a company had plant and equipment with a cost of $150,000 and accumulated
depreciation thereon of $60,000. During the year ended 31 December 2014 the cost of plant additions
was $30,000 and plant was disposed of with a cost of $20,000 for $18,000. This plant was bought on
30 September 2012.
The depreciation policy is to make an allowance of 25% per annum on the reducing balance with a full
charge in the year of acquisition and none in the year of disposal.
37.8
What is the depreciation charge for the year ended 31 December 2014?
A
B
C
D
26
$27,188
$27,500
$27,891
$28,750
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
37.9
What is profit or loss on disposal of the plant?
A
B
C
D
37.10
$6,750
$8,000
$9,563
$13,000
A company has a number of items of equipment, which are depreciated at 25% per annum on
a reducing balance basis, with a full year’s charge in the year of acquisition and none in the
year of disposal.
On 1 June 2014 the equipment had a carrying amount of $10,951, and $6,929 on 31 May
2015. During the year, equipment with a cost of $5,000, bought on 1 July 2012, was sold.
What was the cost of new equipment during the year ended 31 May 2015?
A
B
C
D
$698
$978
$1,100
$3,013
(20 marks)
Question 38 KROL
The allowance for trade receivables brought forward on 1 January in the books of Krol was $86. Trade
receivables at 31 December amounted to $2,840 and irrecoverable debts to be written off totalled $115.
Krol wishes to carry forward an allowance of 5% of accounts receivable.
Required:
Write up:
(a)
(b)
the irrecoverable debts expense account; and
the allowance for receivables account.
(3 marks)
(3 marks)
(6 marks)
Question 39 HYUNDAI
The books of Hyundai reveal a receivables allowance of $206 brought forward on 1 January. Trade
receivables at 31 December amount to $2,440 and irrecoverable debts to be written off total $55. An
allowance amounting to 5% of trade receivables is required to be carried forward.
Required:
Write up the following accounts:
(a)
(b)
the irrecoverable debts expense account; and
the receivables allowance account.
(3 marks)
(3 marks)
(6 marks)
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27
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 40 DINUL
The following information is available for Dinul:
Year 1
(1)
(2)
(3)
(4)
1 January: Receivables allowance for doubtful debts of $860 standing in the books.
Irrecoverable debts written off during the year amounted to $1,000.
31 December: Trade receivables amount to $15,000.
An allowance of 7.5% of trade receivables is required.
Year 2
(1)
(2)
(3)
31 December: Trade receivables, before adjustments are $13,700.
Irrecoverable debts to be written off are $1,100.
An allowance of 7.5% of debts due is still considered necessary.
Required:
Show the journal entries to record the above and the irrecoverable debt and receivables
allowance ledger accounts.
(7 marks)
Question 41 PUSHKIN
Pushkin makes allowance for trade receivables at varying percentages based on an aged-debt analysis
and an assessment of general economic circumstances. The result of this policy for the last three years
is as follows:
Year to 31 December
Trade receivables at the year end (before
adjusting for any irrecoverable debts)
Estimated irrecoverable debts
Allowance
2012
$
2013
$
2014
$
196,860
1,860
5%
151,020
1,020
6%
216,020
6,020
7.5%
The allowance for trade receivables at 1 January 2012 was $10,000.
Required:
(a)
Write up the irrecoverable debts expense account and allowance for trade receivables
account for each of the three years.
(6 marks)
(b)
Show the extracts relevant to the statement of financial position for each of the three
years.
(3 marks)
(9 marks)
28
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 42 INK PRODUCTS
The trade receivables listing of Ink Products, as at 31 March 2015, has been analysed as follows:
Age of account
Amount
$
85,000
40,000
20,000
15,000
0 – 30 days
31 – 60 days
61 – 90 days
Over 90 days
Previous experience shows that, on average, the following proportions of debts will not be recovered:
31 – 60 days
61 – 90 days
Over 90 days
2%
5%
10%
Required:
(a)
Calculate the balance required on the trade receivables allowance account.
(5 marks)
(b)
Write up the trade receivables allowance account for the year to 31 March 2015
assuming a balance brought down of $1,100 as at 1 April 2014.
(3 marks)
(8 marks)
Question 43 ADAM
Adam commenced trading on 1 April 2012. He extracted the following list of balances from his sales
ledger as at 31 March 2013:
$
Forsythe
200
Ludlum
400
Others
6,300
––––––
6,900
––––––
In the year to 31 March 2013:
(1)
Forsythe emigrated leaving numerous debts.
(2)
Ludlum is disputing certain invoices, amounting to $100, which have been
outstanding for more than six months. Adam estimates that Ludlum will eventually
pay half the disputed amount.
In the year to 31 March 2014:
The sales ledger listing as at 31 March 2014 is as follows:
$
240
400
60
6,600
––––––
7,300
––––––
Collins
Le Carré
Ludlum
Others
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29
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(1)
Collins has been declared bankrupt and his debt is to be written off.
(2)
Le Carré is experiencing cash flow difficulties. Adam considers a 50% allowance
to be appropriate.
(3)
Adam is no longer supplying goods to Ludlum. The balance, which is in respect of
last year’s disputed invoices, is to be written off.
In the year to 31 March 2015:
(1)
(2)
(3)
Total receivables per the sales ledger listing are $7,500 as at 31 March 2015.
There are no debts requiring specific allowance.
$50 has been received from Collins.
Required:
Assuming that Adam requires a general allowance of 5%, write up the irrecoverable debt expense
and allowance accounts for the three years to 31 March 2015.
(10 marks)
Question 44 STRAK
At 30 June 2013 Strak’s trade receivables were $50,000. He decided to make an allowance based on
5% of account balances at the end of the reporting period. He made the first allowance at 30 June 2013.
The following relates to the years ended 30 June 2014 and 30 June 2015:
Year ended 30 June
2014
2015
$
$
Credit sales
480,000
550,000
Cash received from customers
432,000
560,600
Irrecoverable debts written off
6,000
2,000
Cash received in respect of an irrecoverable debt written off in
year ended 2014 (included in the cash received figure above)
600
Required:
Write up the following accounts:
(a)
(b)
(c)
the receivables account;
trade receivables allowance account; and
the irrecoverable debts expense account.
(2 marks)
(3 marks)
(2 marks)
(8 marks)
Question 45 FREDERIK
Frederick, a wholesaler, has the following information relating to the year ended 31 March 2015:
(a)
Sales are made on both cash and credit terms.
(b)
At 1 April 2014 trade receivable were $40,000 and the receivables allowance was 7.5% of
this amount.
(c)
Included in opening receivable was an amount of $4,000 relating to Lean which went into
liquidation on 2 January 2015.
(d)
Credit sales during the year were $195,600 and cash sales $87,800.
30
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(e)
Cash received from trade receivables amounted to $192,300.
(f)
Apart from Lean’s debt, $3,200 of other debts were found to be irrecoverable during the year.
(g)
The receivables allowance at the end of the year is to be 7.5% of year end trade receivables.
Required:
(a)
Write up the ledger accounts for the above transactions.
(7 marks)
(b)
Show the extracts relevant to the statement of financial position at 31 March 2015.
(3 marks)
(10 marks)
Question 46 MCQs RECEIVABLES AND PAYABLES
46.1
On 1 January 2014 a small company had a receivables allowance of $1,000. During 2014
debts of $600 were written off and $80 was paid by the liquidator of a company whose debts
had been written off completely in 2013. At the end of 2014 it was decided to adjust the
receivables allowance to $900.
What is the total expense for irrecoverable debts that should be included in profit or loss
for 2014?
A
B
C
D
46.2
$420
$580
$620
$780
A company has trade receivables totalling $16,000 after writing off irrecoverable debts of
$500, and an allowance brought forward of $2,000. The company wishes to carry forward an
allowance equal to 5% of trade receivables.
What will be the effect on profit of adjusting the allowance?
A
B
C
D
46.3
$700 decrease
$700 increase
$1,200 decrease
$1,200 increase
Pearl has trade receivables at the year end amounting to $150,000. An irrecoverable debt of
$3,500 is to be written off. Pearl has an opening allowance of $1,000 and wishes to maintain
an allowance of 5% of year-end accounts receivable.
What is the balance carried down on the receivables allowance account after dealing
with the above items?
A
B
C
D
$3,825
$6,325
$7,325
$10,825
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31
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
46.4
The trial balance of Offenbach showed year-end trade receivables of $122,000 at 31 March
2015, an opening general allowance of $2,980 and an opening specific allowance of $2,000.
After the extraction of the trial balance, it was decided to carry forward at 31 March 2015 a
specific allowance of 100% on an irrecoverable debt of $1,600 and a general allowance of 1%
of remaining accounts receivable. It was also decided to write off the debts amounting to
$2,000 which had been fully allowed for at 1 April 2014.
What is the total charge/(credit) to profit or loss in respect of irrecoverable debts for the
year ended 31 March 2015?
A
B
C
D
46.5
($176)
($196)
$1,184
$1,600
On 1 January 2014 Tipton’s accounts receivable were $10,000. The following relates to the
year ended 31 December 2014:
$
Sales
100,000
Cash receipts
90,000
Discounts allowed
1,800
Discounts received
1,700
Cash receipts include $2,000 in respect of a debt previously written off.
What is the carrying amount of trade receivables at 31 December 2014?
A
B
C
D
46.6
$18,200
$20,200
$20,300
$20,900
During the year ended 31 December 2014 Chocolate decreased its receivables allowance by
$600. An irrecoverable debt written off in the previous year amounting to $300 was
recovered in 2014.
If the profit of the year after accounting for the above items was $5,000, what would
have been the profit before accounting for the above items?
A
B
C
D
46.7
$4,100
$4,700
$5,300
$5,900
A company has an opening trade receivable allowance of $8,620 and opening trade
receivables of $463,271. You are given the following details as regards the year ended 31
August 2014:
Sales
Receipts from credit customers
$5,943,271
$5,217,000
Irrecoverable debts written off
Discounts allowed
$8,563
$3,271
(including $4,262 in respect of a debt
previously written off as irrecoverable)
A closing receivables allowance of 3% of year-end trade receivables is required.
32
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
What is the total charge to the income and expenditure account for the year to 31
August 2014 in respect of irrecoverable debts?
A
B
C
D
46.8
$26,839
$31,140
$39,664
$39,760
On 1 January 2014 Pierre’s accounts receivable were $5,000. The following relates to the
year ended 31 December 2014:
$
Revenue
100,000
Cash receipts
70,000
Discounts allowed
800
Discounts received
700
Irrecoverable debts
500
Cash receipts include $1,000 in respect of a debt previously written off.
What amount for accounts receivable should be shown in the statement of financial
position at 31 December 2014?
A
B
C
D
$33,700
$34,200
$34,700
$34,800
(16 marks)
Question 47 C3P0
The following information has been extracted from the inventory record for item C3P0:
Quantity
1 Jan
Balance
500
Cost $3,150
31 Jan
18 Feb
25 Mar
Received
Received
Received
1,000
1,000
1,000
@ $6.30
@ $6.30
@ $6.30
15 Apr
20 May
Sold
Sold
1,500
750
@ $7.40
@ $8.00
Required:
Prepare a trading account for the six months to 30 June.
(10 marks)
Question 48 OGAY
Ogay started business on 1 January 2013. At the end of his first year of trading he had closing
inventory of $5,000. During 2014 he traded continuously and at 31 December 2014 he had inventory
amounting to $7,500.
Sales for 2013 and 2014 were $120,000 and $155,000 respectively and purchases were $75,000 and
$110,000 respectively.
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33
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Required:
(a)
Write up the inventory account, purchases account and revenue account for the two
years.
(4 marks)
(b)
Prepare the trading account for EACH of the two years.
(4 marks)
(8 marks)
Question 49 ALES
At 31 December Ales had the following items of inventory:
Product
ABC
DEF
GHI
JKL
Total
cost
$
80
150
6
36
Quantity
20
10
6
12
Realisable
value
$
200
120
7
12
Estimated
cost of
realisation
$
20
10
2
1
Required:
Calculate the carrying value of inventory as it should appear in the statement of financial position
of Ales at 31 December.
(4 marks)
Question 50 PERIOD-END ADJUSTMENTS
(a)
Artur owns a small refuse collection business. To 31 October 2014 he had paid $420 for gas.
On 31 December 2014 he realised that he had not yet received his gas bill for the quarter to 31
January 2015. He estimates that the bill will be for $150 and makes an appropriate accrual.
On 21 January 2015 he decides that he could heat his business more cheaply using electricity,
and cancels his gas supply. He receives a final gas bill for the period to 21 January for $138.
Required:
Show the relevant ledger accounts and income and expenditure account extracts for
2014 and 2015.
(6 marks)
(b)
A company carries out a physical count on 31 December 2013 and counts inventory in its
warehouse that cost $10,000.
During the year ended 31 December 2014 the company makes $70,000 of sales and buys
$58,000 of supplies.
The company carries out a physical count for the year ended 31 December 2014 on 7 January
2015 and finds goods costing $15,000. In the six day intervening period there were sales of
$6,000 and deliveries of goods costing $8,000. The company operates with a gross profit
margin of 20%.
Required:
Record inventory in the relevant ledger accounts and prepare the trading account for
inclusion in the statement of profit or loss for the year ended 31 December 2014.
(8 marks)
34
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(c)
Felix bought a car four years ago for $50,000 and estimated its life to be five years. He now
buys a new car paying $50,000 in cash and receiving a part-exchange allowance of $15,000
on the old car which he trades in.
Required:
Show the individual journal entries for this transaction together with a disposals
account.
(6 marks)
(d)
Hnychuk commenced business on 1 January 2014.
On 1 January 2014 he bought three Peugeot cars for his salesmen at a cost of $80,000 each.
On 30 June 2014 one of the cars was written off in an accident. The insurance company paid
$65,000 in full and final settlement of the accident damage claim.
On 1 July 2014 he purchased a Fiat for $60,000.
On 1 January 2015 he decided to replace the vehicles. He part-exchanged the two remaining
Peugeots for new models, being allowed $50,000 each as part exchange and paying an
additional $40,000 each. He sold the Fiat for $50,000 and bought an Audi for $80,000 cash.
On 31 December 2015 the business went into liquidation and the cars were sold for a total of
$150,000.
Hnychuk had allowed depreciation at 25% on cost of assets at the year end (which is 31
December).
Required:
Show the depreciation expense, accumulated depreciation, cost and disposals accounts
for the two years.
(10 marks)
(e)
In his first year of trading to 31 December 2013 Lopez made credit sales of $200,000 and
received $150,000 from his credit customers.
At the end of the year he decided to write off Ludmila’s debt of $8,000, make a specific
allowance for Jozef’s debt totalling $3,500 and create a general allowance of 5% of remaining
trade receivables.
During his second year of trading he made sales on credit of $300,000 and received cash of
$280,000 including $4,000 from Ludmila. At 31 December 2014, he decided to write off
Jozef’s debt, and create a specific allowance against 50% of Chokin’s total debt of $6,000.
He decided that his general allowance should now be 8% of remaining accounts receivable.
In the year to 31 December 2015 Lopez made credit sales of $500,000 and received cash of
$400,000. Separate from this he also received a cheque from Chokin for $6,000.
At the year end he decided to create a specific allowance against Paulo’s debt of $50,000 and
maintain his general allowance at 8%.
Required:
For each of the above years show the trade receivables account, irrecoverable debt
expense account and receivables allowance account, and the statement of financial
position extracts for each year end.
(10 marks)
(40 marks)
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35
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 51 MCQs INVENTORY
51.1
Which of the following statements is correct concerning inventory records for a
manufacturing company?
A
B
C
D
51.2
Inventory records must be kept showing all receipts and issues
It is possible that a full physical count may not be required at any time
All inventory must be physically counted at the end of the financial year
Stock-checking is not required where continuous inventory records are kept
After the profit and loss of Santa had been prepared, some inventory was found at the back of
the warehouse which had been excluded from the physical count. The inventory had a value
of $100.
How does the necessary adjustment affect gross profit and assets?
A
B
C
D
51.3
Gross profit
Increase
Decrease
Increase
Decrease
Assets
Decrease
Decrease
Increase
Increase
Spain has incorrectly included closing inventory in its financial statements at $32,943 instead
of $37,642.
What is the result of the error and the necessary correction?
51.4
A
Profit is understated by $4,699
To correct: Dr Inventory $4,699, Cr Trading account $4,699
B
Profit is overstated by $4,699
To correct: Dr Inventory $4,699, Cr Trading account $4,699
C
Profit is overstated by $4,699
To correct: Dr Trading account $4,699, Cr Inventory $4,699
D
Profit is understated by $4,699
To correct: Dr Trading account $4,699, Cr Inventory $4,699
At the end of its accounting period a business erroneously excluded goods bought on credit
from its closing inventory. It also failed to record the purchase of those goods in its
accounting records.
The effect of these omissions is to understate which of the following?
A
B
C
D
Cost of sales and current assets
Gross profit and current liabilities
Current assets only
Current assets and current liabilities
(8 marks)
36
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 52 A SMIT
A Smit commenced business on 1 July with capital of $4,000 cash. On 3 July he rented an office and
warehouse for a quarterly rent of $200. Rent is payable half yearly on 31 March and 30 September. On
8 July he purchased a van for $2,600 cash. The following transactions subsequently took place.
(Assume they are for cash unless otherwise stated.)
10 July
17 July
21 July
23 July
24 July
31 July
Purchased goods on credit from Dijon $700
Paid wages $40
Purchased goods for $360
Sold goods on credit to Daulton $420
Paid wages $48
Paid wages $40
4 Aug
5 Aug
10 Aug
14 Aug
18 Aug
25 Aug
26 Aug
27 Aug
Sold goods on credit to Dewberry $150
Paid Dijon $670, allowing for $30 cash discount
Received $400 from Daulton, allowing $20 cash discount
Paid wages $60
Purchased goods on credit from Noir $2,200
Sold goods for $120
Received $120 from Dewberry
Paid wages $60
5 Sept
12 Sept
14 Sept
16 Sept
18 Sept
19 Sept
20 Sept
26 Sept
26 Sept
28 Sept
30 Sept
Sold goods on credit to Daulton $700
Paid wages $60
Received payment from Daulton $400
Sold goods for $310
Daulton paid $265 in full settlement of his account to date
Received loan from Blanche $1,000
Sold goods on credit to Daulton for $1,350
Paid wages $60
Paid Noir $2,040 in full settlement
Wrote off the remainder of Dewberry’s debt
Paid rent $400.
Required:
(a)
Write up the books of prime entry for the three months to 30 September. Monthly
totals are NOT required.
(20 marks)
(b)
Write up the accounts in the accounts receivable and accounts payable ledgers for the
three months to 30 September.
(10 marks)
(30 marks)
Question 53 REBECCA
Rebecca made the following transactions during January:
Credit purchases
2 Jan Jones
9 Jan Isaac
17 Jan Henry
19 Jan Mary
27 Jan David
$
37
73
61
62
81
Purchases returns
12 Jan Isaac
21 Jan Mary
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$
12
6
37
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Credit sales
7 Jan Smith
11 Jan Allan
13 Jan Wood
22 Jan Gilass
31 Jan Wall
$
40
31
43
20
37
Sales returns
12 Jan Smith
17 Jan Wood
$
7
13
Required:
(a)
Enter the above transactions in the relevant day books.
(4 marks)
(b)
Write up the relevant entries in the purchases, sales, purchase returns and sales returns
accounts.
(4 marks)
(c)
Show the personal accounts in the receivables and payables ledgers for each supplier
and customer.
(7 marks)
(d)
Write up the receivables and payables ledger control accounts.
(5 marks)
(20 marks)
Question 54 WOODEN TOPS
The following transactions were carried out by Wooden Tops during March:
1 March
3 March
6 March
7 March
9 March
14 March
17 March
24 March
29 March
Credit sales
Credit purchases
Receipts from debtors
Credit sales
Credit purchases
Payments to suppliers
Credit purchases
Credit sales
Receipts from debtors
S Collins
C Tiny
A Hogg
P Plod
R Top
V Micks
V Micks
P May
P Plod
$280
$720
$400
$444
$120
$124
$270
$284
$444
A Hogg
V Micks
P Rob
T Mop
V Micks
R Ede
R Top
P Park
P Rob
$740
$124
$600
$390
$290
$400
$324
$324
$124
P Rob
D Green
D Jip
R Ede
$724
$380
$1,284
$614
P Fish
S Wood
$560
$560
Required:
(a)
(b)
(c)
(d)
Write up the sales day book.
(4 marks)
Write up the purchases day book.
(4 marks)
Write up the cash book.
(4 marks)
Explain the postings which will be made from these day books at the end of March.
(4 marks)
(16 marks)
Question 55 RUBENS
The following information is extracted from the books of Rubens:
$
3,716
198
169
3,028
7,470
6,415
Cash paid to suppliers
Purchase returns
Discounts received
Purchases on credit
Opening payables ledger balances
Closing payables ledger balances
38
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Required:
Write up the payables ledger control account.
(3 marks)
Question 56 ZONE
The following information is extracted from the books of Zone for the month of January:
Credit purchases
Cash received from customers
Returns to suppliers
Irrecoverable debts written off
Receivable ledger balances 1 January
Payables ledger balances 1 January
Closing inventory
Credit sales
Returns from customers
Discounts allowed
Discounts received
Cash paid to suppliers
$
100,258
110,568
20,426
224
14,968
54,010
100,142
148,580
2,508
1,824
864
56,546
Required:
Prepare the receivables ledger control account and the payables ledger control account for the
month.
(6 marks)
Question 57 HASTINGS & CO
The following totals are taken from the books of Hastings & Co:
$
5,926
134
56
10,268
1 January 2014
Credit balance on payables ledger control account
Credit balance on receivables ledger control account
Debit balance on payables ledger control account
Debit balance on receivables ledger control account
31 December 2014
Credit sales
71,504
Credit purchases
47,713
Cash received from credit customers
69,872
Cash paid to suppliers
47,028
Receivables ledger balances written off as irrecoverable
96
Sales returns
358
Purchase returns
202
Discounts allowed
1,435
Discounts received
867
Payables ledger credit balances transferred to receivables ledger 75
Legal expenses charged to credit customers
28
Credit balance on receivables ledger control account
101
Debit balance on payables ledger control account
67
Allowances to customers for damaged goods retained
90
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39
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Required:
(a)
Prepare the payables ledger control account.
(9 marks)
(b)
Prepare the receivables ledger control account.
(9 marks)
(18 marks)
Question 58 ZENKEROVA
The following information relates to Zenkerova’s business for the month of January:
Opening cash balance
Closing cash balance
Cash expenses
Bankings
Drawings
Cash sales
Credit sales per invoices
$
200
100
1,500
8,000
2,450
4,500
7,500
Opening receivables
Closing receivables
Irrecoverable debts written off
Discounts allowed
$
920
840
90
140
Required:
Prepare a cash account and a receivables control account.
(11 marks)
Question 59 RANKINE
Rankine has been in business for a number of years as a greengrocer making up his annual accounts to
31 March.
At 1 April assets amounted to:
Fixtures and fittings
Inventory at cost
Cash in hand
$400
$1,500
$200
Transactions for the three months beginning 1 April were as follows:
40
1 April
2 April
3 April
4 April
5 April
Bought goods on credit from Thrush for $700
Bought goods on credit from Hawk for $950
Made cash sales of $600
Paid $600 cash to Thrush
Closing inventory at cost was $2,750
1 May
2 May
3 May
4 May
5 May
6 May
Sold goods on credit to Wasp for $850
Sold goods on credit to Ant for $660
Received $580 cash from Ant
Introduced fresh capital in cash $1,000
Paid Hawk $950 cash
Closing inventory at cost was $1,650
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
1 June
2 June
3 June
4 June
5 June
6 June
7 June
8 June
9 June
Returned goods to Thrush and received $50 credit
Paid $300 cash for rent of premises
Withdrew $500 cash for his own use
Issued a credit note for $80 to Ant for goods returned
Received $500 on account from Wasp
Sold further goods on credit to Ant for $770
Paid $100 cash for light and heat
Paid cash for goods supplied $175
Closing inventory at cost was $1,200.
Required:
Prepare the following for the three months ended 30 June:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Purchases and sales day books and returns day books;
Cash receipts and payments books;
General ledger accounts, including those for purchases and sales;
Payables and receivables ledger control accounts;
Cash control account;
Individual accounts in the payables and receivables ledgers;
A trial balance at 30 June;
A statement of profit or loss for the period; and
A statement of financial position at that date.
(4 marks)
(4 marks)
(7 marks)
(4 marks)
(2 marks)
(5 marks)
(4 marks)
(5 marks)
(5 marks)
(40 marks)
Question 60 HENRY WILLIAMS
Henry Williams commenced business on 1 February with cash at bank of $500. The following
transactions took place during the month:
$
1 February
Bought goods from W Martin
250
Purchased warehouse fittings for cash
40
2 February
Sold goods to T Crown
80
Drew cheque for personal cash
20
3 February
Paid W Martin on account
150
4 February
Sold goods to W Wilson
100
5 February
Received cheque from T Crown
77
Allowed him discount
3
6 February
Drew cheque for wages
7
8 February
Bought goods for cash
30
9 February
Sold goods to L Robinson
170
10 February
Purchased goods from F Pearson
130
11 February
Paid W Martin in settlement
95
Discount allowed by him
5
12 February
Paid carriage on goods sold
2
13 February
Drew cheque for wages
7
14 February
Bought goods from W Martin
150
Bought goods for cash
40
16 February
Sold goods to W Wilson
180
17 February
W Wilson paid on account
200
18 February
Purchased goods from H Wood
75
19 February
Sold goods for cash
92
20 February
Drew cheque for wages
7
21 February
Sent cheque to H Wood
72
Discount allowed by him
3
22 February
Sold goods to T Crown
130
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41
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
23 February
24 February
25 February
26 February
27 February
28 February
Bought goods from W Martin
Bought goods for cash
Sent cheque on account to W Martin
Received from T Crown on account
Drew cheque for wages
Paid electric lighting account
Paid rent
Williams drew for personal use
240
73
200
100
7
5
8
15
Inventory at cost at the end of the month amounted to $325. All cash received was paid into the bank
and all payments were made by cheque.
Required:
(a)
Write up the cash receipts and payments books.
(8 marks)
(b)
Write up the sales and purchases day books.
(8 marks)
(c)
Record the above transactions in the general ledger, payables ledger and receivables
ledger. You are NOT required to close the accounts.
(8 marks)
(d)
Extract a list of account at 28 February.
(e)
Prepare a statement of profit or loss for the month ended 28 February and a statement
of financial position at that date.
(12 marks)
(4 marks)
(40 marks)
Question 61 MCQs BOOKS OF PRIME ENTRY AND CONTROL ACCOUNTS
61.1
Which of the following is NOT a book of prime entry?
A
B
C
D
61.2
Journal
Sales day book
Receivables ledger
Cash book
An invoice to Radula has been entered in the sales day book as $350, when in fact the correct
amount was $530. The sales day book totals have been posted for the month and the
receivables ledger entries made.
Which of the following procedures should be adopted to correct the position?
42
A
Dr Receivables
$180
Cr Sales
$180
and reduce the balance shown as owing from Radula
B
Dr Sales
$180
Cr Receivables
$180
and reduce the balance shown as owing from Radula
C
Dr Receivables
$180
Cr Sales
$180
and increase the balance shown as owing from Radula
D
Dr Receivables
$180
Cr Sales
$180
and do not adjust the balance shown in Radula’s account
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
61.3
You are provided with the following information relating to a firm:
Accounts receivable opening balance
Cash received from credit customers
Cash sales
Credit sales
Irrecoverable debts written off
Discounts allowed
Discounts received
$000
84
380
16
432
10
9
5
What is the closing balance for accounts receivable?
A
B
C
D
61.4
$101,000
$117,000
$122,000
$127,000
You are provided with the following information relating to a business:
Accounts payable opening balance
Cash paid to credit suppliers
Cash purchases
Credit purchases
Credit notes received from suppliers
Discounts received
Discounts allowed
$000
180
490
19
530
11
8
10
What is the closing balance for accounts payables ?
A
B
C
D
61.5
$199,000
$201,000
$208,000
$212,000
The following amounts have been extracted from the books of Feidor in respect of the year to
30 September 2014:
Receivables ledger control at October 2013
Discounts received
Discounts allowed
Cash receipts from credit customers
Cash receipts from cash sales
Sales on credit
Dishonoured cheques
Sales returns
$100,000
$1,000
$404
$212,050
$8,256
$402,010
$75
$20,401
What should the balance on the receivables ledger control account at 30 September 2014
be?
A
B
C
D
$260,974
$268,634
$269,050
$269,230
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43
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
The following information relates to 61.6 to 61.8:
The following balances on account appeared in Midget’s general ledger at 31 October 2013:
$
63,158
32,000
3,158
Receivables ledger control account
Payables ledger control account
Allowance for trade receivables account
During the year to 30 September 2014 the following summarised transactions occurred:
$
Sales on credit
550,000
Purchases on credit
276,000
Sales returns
6,000
Purchases returns
4,000
Cash received from customers
(excluding an irrecoverable debt recovered)
514,268
Cash paid to suppliers
258,100
Discount allowed to customers
12,790
Discount received from suppliers
5,900
Irrecoverable debts written off
4,100
Amount recovered from customer whose debt had been written
off as irrecoverable in previous year
542
Customer and supplier accounts settled by setting off one against the other 4,000
The firm’s policy is to make a general allowance for trade receivables amounting to 5% of year-end
accounts receivable.
61.6
What is the balance on the receivable ledger control account at 30 September 2014?
A
B
C
D
61.7
What is the balance on the payables ledger control account at 30 September 2014?
A
B
C
D
61.8
$36,000
$40,000
$41,900
$45,900
What is the total charge to profit or loss for the year to 30 September in respect of
irrecoverable debts?
A
B
C
D
44
$71,958
$72,000
$72,542
$76,000
$4,000
$4,100
$4,542
$7,158
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
The following information relates to questions 61.9 and 61.10:
The summarised statement of financial position of a company on 31 December 2014 is as follows:
$
Non-current assets (carrying value)
Current assets
Trade receivables
Inventory
40,000
50,000
––––––
Total assets
$
20,000
90,000
_______
110,000
_______
Capital and reserves
Current liabilities
Bank overdraft
Trade payables
30,000
40,000
40,000
––––––
Total capital and liabilities
80,000
_______
110,000
_______
During the month of January 2015 transactions were as follows:
Sales
Purchases
Sales returns
Settlement discount allowed
Cash received from customers
Cash paid to suppliers
Irrecoverable debts written off
Sale of plant
$
36,000
20,000
3,000
3,000
25,000
15,000
3,000
20,000
All trading sales and purchases are on credit. On 31 January 2015 the company set up an allowance for
trade receivables of $6,000.
61.9
What is the balance in the company’s cash book on 31 January 2015?
A
B
C
D
61.10
$10,000 credit
$10,000 debit
$70,000 credit
$70,000 debit
What are the company’s net trade receivables that should be carried in its statement of
financial position at 31 January 2015?
A
B
C
D
$36,000
$39,000
$42,000
$45,000
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45
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
61.11
The following information relates to a business for the year ended 31 December 2014:
Trade receivables at 1 January 2014
Trade payables at 1 January 2014
Discounts received
Cash sales
Cash from credit customers
Irrecoverable debts to be written off
Discounts allowed
Returns inwards
Amounts paid to suppliers
Returns outwards
Credit sales
Receivables to be allowed for
(additional to those to be written off)
$
289,376
301,972
21,069
69,589
795,373
9,550
12,956
7,000
475,353
3,525
626,575
9,527
What is the balance on the trade receivables ledger control account at 31 December
2014?
A
B
C
D
$81,545
$91,072
$104,028
$101,501
(22 marks)
Question 62 BRABANTIA
The payables ledger control account of Brabantia is as follows:
$
Purchase returns
Cash book
31.12 Balance c/d
13,418
525,938
97,186
_______
$
1.1 Balance b/d
Purchases (purchases
day book)
636,542
_______
84,346
552,196
_______
636,542
_______
Balances extracted from the payables ledger totalled $96,238.
The following errors have been discovered:
(1)
The purchases day book was undercast by $6,000.
(2)
A cash account total of $10,858 was posted to the control account as $9,058.
(3)
A credit balance of $1,386 on the suppliers’ ledger had been set off against a customer’s
ledger debit balance but no entry had been made in the control accounts.
(4)
A debit balance of $40 in the list of individual supplier’s ledger balances had been extracted
as a credit balance.
(5)
A credit balance of $3,842 had been omitted from the list of balances.
46
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Required:
(a)
Correct the control account.
(5 marks)
(b)
Reconcile the sum of the balances extracted with the adjusted control account balance.
(4 marks)
(9 marks)
Question 63 TARTUFO
The following balances were extracted from the general ledger of Tartufo trial balance on 30 June:
Receivables ledger control account
Payables ledger control account
$30,434
$18,740
Neither of the control account balances agree with the lists of individual balances extracted from the
receivables and payables ledgers. The following errors were discovered:
(1)
Credit balances of $1,314 and debit balances of $72 in the payables ledger had been omitted
from the list of balances.
(2)
The sales day book had been overcast by $3,950.
(3)
A discount allowed to Chas of $40 had been posted to the credit of his account in the payables
ledger.
(4)
A transfer of $620 from Wilhelm’s account in the receivables ledger to the debit of his
account in the payables ledger had been made in April. No further entries had been made.
(5)
A page total in the purchases day book of $3,685 had been carried forward as $3,865.
(6)
Jenga had been debited for goods returned to him, totalling $340, but no other entries had been
made.
On correction of these errors the control accounts agreed with the lists of individual balances.
Required:
(a)
Write up the control accounts with any necessary adjustments.
(6 marks)
(b)
Prepare a reconciliation of the totals of the individual balances to determine the totals
originally extracted from the ledgers.
(4 marks)
(10 marks)
Question 64 RACY
The following information related to Racy for the year to 30 June 2015:
Extract from the payables ledger control account at 30 June 2015
Trade payables at 1 July 2014
Payments made to suppliers in respect of credit purchases
Credit purchases
Discounts received
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$
30,000
322,000
340,000
8,000
47
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
The bookkeeper has extracted a list of credit balances totalling $39,800. The listing included no debit
balances. When the accountant checked the ledger control account and suppliers’ listing the following
errors were found:
(1)
Purchases of goods totalling $1,500 were omitted from Roy’s account.
(2)
Discounts allowed of $500 had been debited to Joe’s account.
(3)
David’s account had been omitted from the list of balances; it totalled $2,000.
(4)
Discounts received of $3,500 had been entered in the control account but not in any of the
payables ledger accounts.
(5)
Cash of $50 paid to Freddie had been credited to his account, and a cheque paid to James for
$250 had been omitted from his ledger account.
(6)
During the year Racy had bought a typewriter for cash from one of its suppliers, Piax, which
went into liquidation. The cash paid of $50 had been entered in Piax’s account in the
payables ledger, even though the item was not a credit transaction.
Required:
(a)
Prepare the payables ledger control account for the year ended 30 June 2015.
(9 marks)
(b)
Prepare a statement reconciling the total per the list of individual supplier’s balances to
the balance per the control account.
(6 marks)
(15 marks)
Question 65 TELETUBBY
Teletubby had the following balances on its control accounts at 30 September 2014:
Receivables ledger control account
Payables ledger control account
$38,076
$30,887
Also on 30 September 2014 the net totals of the balances extracted from the receivables ledger were
$22,620 and from the payables ledger $21,805.
During the company’s audit the following errors were discovered to have occurred during the year to
September:
(1)
The sales returns of $7,164 and the purchases returns of $5,328 for June 2014 had been
posted to the credit side of the payables ledger control account and to the debit side of the
receivables ledger control account respectively.
(2)
In August 2014 the receivables ledger column of the debit side of the cash book had been
undercast by $1,000.
(3)
In January 2014 a contra for $681 had been credited to the receivables ledger control account
and debited to the payables ledger control account but no entries had been made in the
appropriate personal accounts.
(4)
On the listing of accounts receivable a credit balance of $316 had been listed as a debit
balance. A credit balance of $96 had been listed as $69 on the accounts payable listing.
48
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(5)
A cheque for $527 from a customer paid into the bank on 25 September 2014 was
dishonoured on 28 September 2014. It was re-presented and cleared on 4 October 2014. No
entry had been made in the accounting records for this item since 25 September 2014.
(6)
In March 2014 the total of cash receipts from credit customers, amounting to $27,342, was
posted to the debit of the payables ledger control account. At the same time the total of cash
paid to suppliers, amounting to $24,586, was posted to the credit of the receivables ledger
control account.
(7)
In extracting the balances from the receivables ledger a debit balance of $521 had been
overlooked.
Required:
Prepare statements
(a)
Reconciling the receivables ledger listing with the corrected receivables ledger control
account balance at 30 September 2014.
(8 marks)
(b)
Reconciling the payables ledger listing with the corrected payables ledger control
account balance at 30 September 2014.
(8 marks)
(16 marks)
Question 66 ROBIN & CO
The balance on the receivables ledger control account of Robin & Co on 30 September amounted to
$3,800 which did not agree with the net total of the list of receivables ledger balances at that date.
Errors were found and the appropriate adjustments, when made, balanced the books.
The items were as follows:
(1)
Debit balances in the receivables ledger, amounting to $103, had been omitted from the list of
balances.
(2)
An irrecoverable debt amounting to $400 had been written off in the receivables ledger but
had not been posted to the irrecoverable debts expense account or entered in the control
account.
(3)
An item of goods sold to Sparrow, $250, had been entered once in the sales day book but
posted to his account twice.
(4)
$25 discount allowed to Wren had been correctly recorded and posted in the books. This sum
had been subsequently disallowed, debited to Wren’s account, and entered in the discount
received column of the cash book.
(5)
No entry had been made in the control account in respect of the transfer of a debit of $70 from
Quail’s account in the receivables ledger to his account in the payables ledger.
(6)
The discount allowed column in the cash account had been undercast by $140.
Required:
(a)
Make the necessary adjustments in the receivable ledger control account and bring
down the corrected balance.
(8 marks)
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49
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Show the adjustments to the net total of the original list of balances to reconcile with the
amended balance on the receivables ledger control account.
(7 marks)
(15 marks)
Question 67 SHOWERS
Showers sells bathroom fittings on credit to most of its customers. In order to control its debt collection
system, the company maintains a trade receivables ledger control account. In preparing the accounts
for the year to 30 October 2014 the accountant discovers that the total of all the personal accounts in the
trade receivables ledger amounts to $12,802, whereas the control account balance discloses a balance of
$12,550.
Upon investigation the following errors were discovered:
(1)
Sales for the week ending 27 March 2014 amounting to $850 had been omitted from the
control account.
(2)
An account balance of $300 had not been included in the list of balances.
(3)
Cash received of $750 had been entered in a personal account as $570.
(4)
Discounts allowed totalling $100 had not been entered in the control account.
(5)
A personal account balance had been undercast by $200.
(6)
A contra item of $400 with the trade payables ledger had not been entered in the control
account.
(7)
An irrecoverable debt of $500 had not been entered in the control account.
(8)
Cash received of $250 had been debited to a personal account.
(9)
Discounts received of $50 had been debited to a customer’s ledger account.
(10)
Returns inwards valued at $200 had not been included in the control account.
(11)
Cash received of $80 had been credited to a personal account as $8.
(12)
A cheque for $300 received from a customer had been dishonoured by the bank, but no
adjustment had been made in the control account.
Required:
(a)
Prepare a corrected trade receivables control account, bringing down the amended
balance at 31 October 2014.
(b)
Prepare a statement showing the adjustments that are necessary to the list of personal
account balances so that it reconciles with the amended control account balance.
(15 marks)
50
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 68 HUBERT
Hubert maintains his accounts on a fully integrated computerised accounting system which produces
control accounts as an integral part of the double entry system. At the end of each month individual
sales and purchase ledger balances are reconciled automatically to the respective control accounts as a
pre-programmed control check.
Unfortunately Hubert was taken ill in the middle of August and his assistant input a number of entries
without the correct integration codes. Consequently the system has been unable to reconcile the control
accounts at the end of that month. The assistant has manually extracted the individual ledger balances,
and the net totals at 31 August are as follows:
Purchase ledger
Sales ledger
$3,556
$9,617
The assistant has also manually produced draft accounts for the six months to 31 August and provides
you with the following abridged trial balance:
Sales ledger control account
Purchase ledger control account
Profit per draft accounts
Sundry balances (net)
$
9,650
$
7,496
4,322
2,168
––––––
11,818
––––––
––––––
11,818
––––––
You have checked through the accounting records and discovered the following discrepancies:
(1)
The total for the purchases day book input total for August has been incorrectly shown as
$6,241 following a manual override. The total should have been $2,641.
(2)
An old debit balance of $28 in the purchase ledger had been written off during August as
irrecoverable. You discover that no entry had been input other than in the individual
supplier’s ledger account.
(3)
Discounts allowed for the month of August amounted to $671. An uncoded entry of these had
been made in the discount allowed column of the cash account but no other entry had been
made.
(4)
A payment of $260 on 14 August relating to the payment of a July purchases invoice had
been wrongly input in the cash account as wages.
(5)
During the month of August there had been a mix-up over goods supplied to a customer,
Dougal. The goods were invoiced for $62, despatched to Dougal and correctly entered in the
system on 5 August. Several items turned out to be defective and were returned by Dougal on
28 August. These goods, originally costing $14, were included in the original invoice of $62
at an amount of $17. No entry was made in the books as a result of the return of the goods
but they were manually input into the inventory account at $17. Owing to their damaged state
their net realisable value is estimated to be $5.
(6)
Hubert has received discounts during the month amounting to $280. However, these have
only been manually input to the individual suppliers’ accounts.
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51
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(7)
Certain discrepancies in the print-out of balances at 31 August have come to light, suggesting
a software error might also have occurred. You discover that:
(i)
debit balances on the sales ledger of $54 and $69 respectively had been completely
omitted from the listing;
(ii)
a credit balance on the purchase ledger of $71 had been listed as a debit balance of
$17;
(iii)
the total of debit entries on Hoppo’s account in the sales ledger had been overcast
by $90.
Required:
(a)
Manually adjust the sales and purchase ledger control accounts and show the
reconciliation of the closing balances with the aggregate of the individual balances
extracted from the purchase and sales ledgers.
(15 marks)
(b)
Compute a revised profit for the six month period to 31 August.
(7 marks)
(22 marks)
Question 69 MCQs CONTROL ACCOUNT RECONCILIATIONS
The following information relates to questions 69.1 to 69.3:
A company maintains control accounts in its general ledger.
69.1
An irrecoverable debt of $900 was written off an account in the receivables ledger, but not
recorded in the control account.
What corrective action is required?
A
B
C
D
69.2
Receivables ledger
control account
None
Dr $900
None
Cr $900
List of balances
Reduce total by $900
None
Increase total by $900
None
$479 was recovered from a customer. A 95% specific allowance had been made against this
account last year. Total cash received has been entered in the control account, but no entry
has been made in the customer’s account in the receivables ledger.
What is the correcting action?
A
B
C
D
52
Receivables ledger
control account
Dr $455
Cr $479
Cr $455
None
List of balances
Decrease total by $455
None
Increase total by $455
Decrease total by $479
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
69.3
The total figure for trade payables extracted from the suppliers’ ledger is $19,579.
The figure does not agree with the balance on the payables ledger control account. The
following errors have been identified:
(i)
A contra entry of $5,100 between a customer and a supplier has not been recorded
in the general ledger
(ii)
Discounts received of $3,110 had been recorded in the general ledger only.
What is the correct balance on the payables ledger control account?
A
B
C
D
69.4
$11,369
$14,479
$16,469
$21,569
On checking a list of balances of suppliers’ ledger accounts, it is found that the total is $2,250
more than the balance on the payables ledger control account.
Which of the following errors could, by itself, account for this difference?
A
B
C
D
The total of contra entries against receivables accounts is overstated by $1,125
Purchases day book has been overcast by $2,250
A credit note for $1,125 has been omitted from a supplier’s ledger account
A supplier’s ledger account with a debit balance of $1,125 has been treated as a
credit balance
(8 marks)
Question 70 TALANT
Talent’s cash book, for the month of October, was as follows:
Cash book
$
1 Oct
10 Oct
17 Oct
28 Oct
Balance
Ambrosia
Bertram
Crisp
2,250
508
616
735
$
2 Oct
14 Oct
19 Oct
Grenadine
Holly
Ivan
476
285
367
The statement received from the bank on 5 November showed the following:
Date
Details
Withdrawals
1 OCT
2 OCT
4 OCT
12 OCT
16 OCT
17 OCT
17 OCT
28 OCT
28 OCT
Balance from sheet no. 42
GRENADINE
RICHMOND DC (D/D)
AMBROSIA
HOLLY
CHARGES (SEPT)
BERTRAM
PPI PLC (DIVIDEND)
BUILDING SOCIETY (S/O)
31 OCT
Balance to sheet no. 44
Deposits
476
370
508
285
52
626
126
280
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Balance ($)
2,250
1,774
1,404
1,912
1,627
1,575
2,201
2,327
2,047
2,047
53
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
The bank does not make mistakes.
Required:
Adjust the cash book and prepare a bank reconciliation statement as at 31 October.
(8 marks)
Question 71 PRINGLE
On 30 June the cash account of Pringle’s business showed a balance at bank of $1,500. The bank
statements showed that cheques for $70, $90 and $100 had not been presented for payment and that
deposits totalling $210 had not been cleared. The balance on the bank statement at 30 June was $1,550.
Required:
Prepare a bank reconciliation statement.
(5 marks)
Question 72 WHITE
On 30 November the bank account of White, according to the cash account, was overdrawn to the
extent of $16. On the same date the bank statement showed a balance in favour of White of $6.
An examination of the cash account and bank statement reveals the following:
(1)
Two cheques paid into the bank on 30 November were not recorded on the bank statement
until 1 December.
Black
Green
(2)
$40
$60
Three cheques issued prior to 30 November were not presented to the bank for payment until
after that date.
002404
002407
002408
$20
$32
$70
Required:
Prepare a bank reconciliation statement at 30 November.
(6 marks)
Question 73 GORBACHEV
The cash account of Gorbachev showed a debit balance of $204 on 31 March. A comparison with the
bank statements revealed the following:
$
(1)
Cheques drawn but not presented
3,168
(2)
Amounts paid into the bank but not credited
(3)
Entries in the bank statements not recorded in the cash account
(i)
(ii)
(iii)
(4)
54
723
Standing order
Interest on bank deposit account
Bank charges
35
18
14
Balance on the bank statement at 31 March
2,618
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Required:
(a)
Show the appropriate adjustments required in the cash account of Gorbachev bringing
down the correct balance at 31 March.
(5 marks)
(b)
Prepare a bank reconciliation statement at that date.
(3 marks)
(8 marks)
Question 74 JOVANOVICH
The balance in Jovanovich’s cash account at 30 June showed an asset of $1,660; his bank statement
showed a balance of $450 but he was unable to determine from the statement whether the balance was
in hand or overdrawn. On reconciling the cash account he discovers the following:
(1)
The debit side of the cash account had been undercast by $200.
(2)
A total on the receipts side of the cash account of $2,475 had been brought forward as $4,275.
(3)
A cheque received by Jovanovich for $220 had been dishonoured (i.e. refused by the paying
bank).
(4)
Bank charges of $24 and standing orders totalling $160 had been omitted from the cash
account.
(5)
Unpresented cheques totalled $520 and uncleared deposits $626.
Required:
(a)
(b)
Write up an adjusted cash account.
Prepare a bank reconciliation statement at 30 June.
(5 marks)
(3 marks)
(8 marks)
Question 75 NORTH STAR COMPANY
The following is a summary from the cash account of the North Star Company:
Cash account
$
Opening balance b/d
Receipts
2,814
30,146
______
$
Payments
Closing balance c/d
32,960
______
31,040
1,920
______
32,960
______
On investigation you discover the following:
(1)
Bank charges of $70 shown on the bank statement have not been entered in the cash account.
(2)
A cheque drawn for $94 has been entered in error as a receipt in the cash account.
(3)
A cheque for $36 has been returned by the bank marked “refer to drawer” but it has not been
written back in the cash account.
(4)
An error has occurred in that the opening balance in the cash account should have been
carried down as $2,940.
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55
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(5)
Three cheques paid to suppliers for $428, $740 and $60 have not yet been presented to the
bank.
(6)
The final entry in the paying-in book shows $3,084 being paid in which has not yet been
credited to the account by the bank .
(7)
The bank has debited a cheque for $144 in error to the company’s account.
(8)
The bank statement shows an overdrawn balance of $248.
Required:
(a)
Show the adjustments required in the cash account.
(7 marks)
(b)
Prepare a bank reconciliation statement.
(5 marks)
(12 marks)
Question 76 DEALERS
On 30 April 2015 the bank account of Dealers, according to the cash account, was overdrawn to the
extent of $1,062. On the same date the bank statement showed a balance in favour of Dealers of
$2,149.
An examination of the cash account and bank statements reveals the following:
(1)
In carrying forward the page totals in the cash account, the total of the credit side on one page
amounting to $10,502 has been carried forward at $10,052.
(2)
A bank deposit of $698 made on 30 April 2015 was not recorded on the bank statement until
1 May 2015.
(3)
A hire purchase payment of $91 made by standing order had not been entered in the cash
account.
(4)
A cheque payment of $94 had been entered twice in the cash account.
(5)
Bank charges amounting to $57 had not been entered in the cash account.
(6)
On 29 April 2015 the bank credited an amount of $341 received by trader’s credit, but the
advice was not received by Dealers until 1 May 2015.
(7)
On 15 April 2015 the bank credited the sum of $1,560 to Dealers in error.
(8)
A receipt paid into the bank by Dealers on 20 April 2015 was dishonoured on 28 April 2015,
but no entry has been made in the books of Dealers. The sum involved was $100.
(9)
Certain cheques issued prior to 30 April 2015 were not presented to the bank for payment
until after that date.
Required:
(a)
Show the appropriate adjustments required in the cash account of Dealers, bringing
down the correct balance on 30 April 2015.
(9 marks)
(b)
Prepare a bank reconciliation statement at that date.
(6 marks)
(15 marks)
56
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 77 GENEVA
The following is a summary of the cash account of Geneva for the month of December:
Cash account
$
Receipts
Balance c/f
1,469
554
______
$
Balance b/f
Payments
2,023
______
761
1,262
______
2,023
______
All receipts are banked and payments made by cheque.
On investigation you discover the following:
(1)
Bank charges of $136 entered on the bank statement had been omitted from the cash account.
(2)
Cheques drawn amounting to $267 had not been presented to the bank for payment.
(3)
Cheques received totalling $762 had been entered in the cash account and paid into the bank,
but had not been credited by the bank until January.
(4)
A cheque for $22 had been entered as a receipt in the cash account instead of as a payment.
(5)
A cheque for $25 had been debited by the bank in error.
(6)
A cheque received for $80 had been returned by the bank and marked “No funds available”;
no adjustment had been made in the cash account.
(7)
All dividends receivable are credited directly to the bank account; during December amounts
totalling $62 were credited by the bank and no entries made in the cash account.
(8)
A cheque drawn for $6 had been incorrectly entered in the cash account as $66.
(9)
The balance brought forward should have been $711, not $761.
(10)
The bank statement at 31 December showed an overdraft of $1,162.
Required:
(a)
(b)
Show the adjustments required in the cash account.
Prepare a bank reconciliation statement at 31 December.
(9 marks)
(6 marks)
(15 marks)
Question 78 MCQs BANK RECONCILIATIONS
78.1
Which one of the following would create a timing difference to be recognised in the
preparation of a bank reconciliations?
A
B
C
D
Unpresented cheques
Cash book errors
Standing orders
Bank charges
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57
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
78.2
Which one of the following would NOT be an adjustment to the cash book in carrying
out a bank reconciliation?
A
B
C
D
Outstanding lodgements
Credit transfers
Direct debits
Bank interest
The following information relates to items 78.3 and 78.4:
A company is preparing its bank reconciliation at 31 December 2014. The following receipts and
payments have been entered into the cash account:
Date of cash book entry
78.3
Date entered on
bank statement
Amount
$
Receipts
31 December 2014
30 December 2014
2 January 2015
2 January 2015
2 January 2015
31 December 2014
31 December 2015
4 January 2015
17,432
18,243
24,241
25,489
Payments
28 December 2014
31 December 2014
6 January 2015
5 January 2015
30 December 2014
2 January 2015
9 January 2015
29 December 2014
10,947
8,976
24,742
7,489
What amount will appear on the bank reconciliation as uncleared deposits?
A
B
C
D
78.4
$85,405
$41,673
$35,675
$17,432
What amount will appear on the bank reconciliation as unpresented cheques?
A
B
C
D
$8,976
$16,474
$32,008
$52,163
(8 marks)
Question 79 YULIA
The difference on the trial balance of Yulia’s business whereby the debit column exceeded the credit by
$56 has been transferred to a suspense account. The following errors had been made:
(1)
Purchase of goods from A Malkov for $120 had been credited to the account of H Malkov.
(2)
Sale of goods to A Harkal for $27 had been credited to his account.
(3)
Sale of plant for $190 had been credited to sales.
(4)
Sale of goods to D Herman entered in day book as $120, but debited to his account as $12.
(5)
Sales day book undercast by $200.
(6)
A balance for rent payable accrued as $30 in previous period has not been brought forward in
the current period.
58
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(7)
Petty cash balance, $12, omitted from the list of account balances.
The company does not maintain control accounts in respect of its receivables and payables ledgers.
Required:
(a)
Prepare the journal entries necessary to correct errors (1) to (7) above.
(7 marks)
(b)
Write up and clear the suspense account.
(3 marks)
(10 marks)
Question 80 OGRE
Ogre does not maintain separate control accounts for its receivables and payables ledgers, keeping
individual supplier and customer accounts in the general ledger, but posting day book totals to the
various income and expense accounts.
The credit column of the computerised trial balance of Ogre exceeded the debit column by $940 and a
suspense account was automatically opened to record the difference together with an error report. The
following errors were subsequently discovered and after these were corrected the books balanced:
(1)
The manual sales returns day book was undercast by $90 and input into the system.
(2)
Goods sold for $120 in respect of account no. 10591 were input to account no. 10951 in the
receivables ledger.
(3)
Light and heat of $420 accrued due at the end of the previous year had been manually
reversed in the current year as a debit balance in the expense account.
(4)
A sales invoice of $350 had been correctly input in the sales day book account but a software
error led to its posting to the customer’s account as $530.
(5)
The discounts column in the manual discounts allowed book totalled $980 and this total was
input as a credit to the discounts received account as $890.
Required:
Write up the suspense account.
(8 marks)
Question 81 GROAN
The list of account balances of Groan at 31 December did not balance and a suspense account was
opened to record the difference. On a subsequent examination of the books the following errors were
found, and after their correction the books balanced:
(1)
The purchases day book was overcast by $200.
(2)
A prepayment for telephone rental of $45 at the end of the previous year had been reversed as
a credit balance of $54 in the current year in the expense account.
(3)
The discounts column in the cash payments book totalled $620 and had been posted to the
debit of discounts account.
(4)
Titus had supplied goods to the company amounting to $430. He had also been supplied with
goods by Groan totalling $310. It was decided that the latter amount be set against the
balance due to Titus on the payables ledger, but the transfer had in fact been made to Trite’s
account in the payables ledger.
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59
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(5)
A payment for salaries and wages in the cash account for $740 had been posted to the credit
of salaries account in the nominal ledger as $470.
(6)
A cheque for $55 received from a customer, Bouncer, had been correctly entered in the
relevant accounts and duly paid into the bank, but was dishonoured on presentation. No
entries had been made in the books of Groan to record the dishonoured cheque. (The cheque
was subsequently honoured on re-presentation on 10 January.)
The company does not maintain control accounts in respect of its payables and receivables ledgers.
Required:
(a)
Prepare the journal entries necessary to correct errors (1) to (6) above.
(9 marks)
(b)
Write up the entries in the suspense account to determine the original difference.
(6 marks)
(15 marks)
Question 82 BLACKWATER TRANSPORT
At the end of January a trial balance extracted from the books of Blackwater Transport did not balance
and a suspense account was opened with a debit balance of $294. The following matters were
discovered:
(1)
$468 had been received during January from a customer who owed $480. No entry had been
made for the $12 outstanding but it had been decided to treat it as a cash discount.
(2)
Returns to suppliers in January were posted correctly to individual accounts but were
incorrectly totalled. The total was overstated by $200 and was posted to the returns account.
(3)
A bank statement drawn up to 31 January showed a credit balance of $240; the cash account
in the trial balance showed an overdraft of $174. The difference comprised the following:
(i)
A direct debit of $140 (for subscriptions) not entered in the books of account
(ii)
A payment to a supplier in the cash book showing as $240 instead of $420; the
amount was also entered as $240 in the supplier’s account
(iii)
Unpresented cheques of $654
(iv)
An addition error in the cash account for the rest of the difference.
(4)
A cheque for $326 was received from a previously written-off debt. It was correctly entered
in the cash account but not posted elsewhere.
(5)
An account receivable with a balance of $360 was not included when the trial balance was
extracted.
(6)
A credit note for $10 sent to a customer had been posted to the wrong side of the customer’s
account receivable.
The individual trade accounts receivable and payable form part of the double entry.
Required:
Show the correcting journal entries necessary. Include a bank reconciliation in your workings.
(15 marks)
60
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 83 SMETENA NEWSAGENTS
The bookkeeper has produced the following statement of financial position at 31 December for
Smetena Newsagents:
$
$
Non-current assets
72,208
Current assets
Inventory
18,826
Trade receivables
26,216
Drawings
8,260
Suspense account
3,830
Cash
700
______
57,832
_______
130,040
_______
Capital account
Loan – L Franks 12%
Trade payables
Bank overdraft
Profit for year
50,224
20,000
26,782
14,634
18,400
_______
130,040
_______
Jan Smetena, the proprietor, is unhappy with the draft statement of financial position and asks you to
revise it. You discover the following:
(1)
The suspense account balance represents the difference on the trial balance.
(2)
The purchases day book total for October of $4,130 was posted to the purchases account as
$4,310 although the correct entry was made to the payables ledger control account.
(3)
Inventory sheets were overcast by $2,000.
(4)
Cash should be $110.
(5)
Fixtures and fittings account balance of $4,600 has been omitted from the trial balance.
(6)
Interest for a half year on the loan account has not been paid and no allowance has been made
for it.
Required:
(a)
Show the journal entries to correct the above errors.
(6 marks)
(b)
Write up the suspense account.
(5 marks)
(c)
Draw up a revised statement of financial position at 31 December. Clearly show the
adjustments to profit.
(7 marks)
(18 marks)
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61
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 84 ALPHA
After completing a draft statement of profit or loss for the year ended 30 June 2015 of Alpha, the
following balances remained and a suspense account entry was required for the difference which had
arisen:
Dr
$
70,000
Non-current assets at cost
Accumulated depreciation
Share capital
Retained earnings
Inventory at cost
Receivables ledger control account
Payables ledger control account
Balance at bank
Suspense account
Cr
$
46,500
40,000
15,000
16,000
13,780
7,200
1,740
7,180
–––––––
108,700
–––––––
–––––––
108,700
–––––––
During the audit the following errors were found:
(1)
A rent payment in April of $500 had been debited to the receivables ledger control account.
(2)
A contra of $1,500 between the receivable and payables ledger control accounts had not been
made.
(3)
Discounts allowed of $750 had not been recorded by the company.
(4)
A cheque for $3,220 was sent to a customer in February. This was a refund to the customer
for faulty goods that the customer had paid for. The refund had been entered in the cash book
but no other entry made. Correct entries to the sales returns and receivables control accounts
were made when the goods were originally returned to Alpha.
(5)
A payment of $1,460 for telephone expenses had not been posted to the ledger account
although cash had been credited.
(6)
The sales day book had been overcast in September 2014 by $250.
(7)
A payment from Sigma for $2,500 for cash sales had been credited to the control account as
well as the sales account.
(8)
No entries had been made for bank charges of $2,120 incurred by the company which
appeared on its bank statement.
Required:
Prepare:
(a)
(b)
(c)
(d)
the necessary journal entries for the above transactions;
a statement of adjusted retained earnings;
a corrected list of account balances at 30 June 2015; and
a statement of financial position at 30 June 2015.
(8 marks)
(4 marks)
(4 marks)
(4 marks)
(20 marks)
62
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 85 COSY COMFORTS
While you are preparing the annual accounts of Cosy Comforts for the year 2014, the following matters
have to be taken into account at 31 December:
(1)
The accrual for discounts allowed to customers, which at present has a balance of $229.53,
needs to be reduced to $157.40.
(2)
Debts totalling $64.80 are now known to be irrecoverable and must be written off. However,
an amount of $21.44 written off as an irrecoverable debt in the previous year has now been
recovered in full, but the cheque has just been paid into the bank but not posted to the
accounts.
(3)
Due to an oversight a discount has been allowed to a credit customer on the gross invoiced
amount of $80 at the rate of 10%. A rate of 6% should have been used.
(4)
Electricity accrued amounts to $36.71 while insurance premiums of $22.45 have been
prepaid.
(5)
In October 2014 the employees of the business received a general wages increase backdated
to July 2014. There are now amounts of wages arrears, totalling $126.55, payable to former
employees who left shortly before the wages award was announced and who have not yet
been traced. It has been decided that the wage packets will be opened and the cash paid back
into the bank until those ex-employees can be found.
(6)
Amounts earned by employees in the last week of December 2014 but not due to be paid until
January 2015, comprise wages $464.12 and salaries $301.70.
(7)
During 2014 the exterior of the warehouse was repainted at a cost of $5,000. The whole of
this amount was wrongly debited to premises account. It is the policy of Cosy Comforts to
charge depreciation on the closing balances of non-current assets and this has already been
done. The annual rate of depreciation on premises is 2%, calculated on the straight-line basis
and assuming no residual value.
(8)
In December 2014 Cosy Comforts had bought goods on credit from Conbrec for $452.10 and
sold goods on credit to that same company for $163.04. These sums have been correctly
posted to their respective accounts. These accounts are to be settled in contra at 31 December
2014 and remaining balance by cheque in January 2015.
Required:
Prepare suitable entries in the journal of Cosy Comforts to record each of the above matters at 31
December 2014.
(20 marks)
Question 86 RAFAL JAFFA
The trial balance of Rafal Jaffa, as produced by his bookkeeper, includes the following:
Sales ledger control account
Purchase ledger control account
Suspense account (debit balance)
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$
110,172
78,266
2,315
63
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
You have been given the following information:
(a)
The sales ledger debit balances total $111,111 and the credit balances total $1,234.
(b)
The purchase ledger credit balances total $77,777 and the debit balances total $1,111.
(c)
The sales ledger includes a debit balance of $700 for business X, and the purchase ledger
includes a credit balance of $800 relating to the same business X. Only the net amount will
eventually be paid.
(d)
Included in the credit balance on the sales ledger is a balance of $600 in the name of H Patel.
This arose because a sales invoice for $600 had earlier been posted in error from the sales day
book to the debit of the account of M Patel in the purchase ledger.
(e)
An allowance of $300 against some damaged goods had been omitted from the appropriate
account in the sales ledger. This allowance had been included in the control account.
(f)
An invoice for $456 had been entered in the purchase day book as $654.
(g)
A cash receipt from a credit customer for $345 had been entered in the cash book as $245.
(h)
The purchase day book had been overcast by $1,000.
(i)
The bank balance of $1,200 had been included in the trial balance, in error, as an overdraft.
(j)
The bookkeeper had been instructed to write off $500 from customer Y’s account as an
irrecoverable debt, and to reduce the trade receivables allowance by $700. By mistake,
however, he had written off $700 from customer Y’s account and increased the allowance by
$500.
(k)
The debit balance on the insurance account in the general ledger of $3,456 had been included
in the trial balance as $3,546.
Required:
(a)
Record corrections in the control and suspense accounts.
(8 marks)
(b)
Reconcile, as far as the information permits, the sales ledger control account with the
sales ledger balances, and the purchase ledger control account with the purchase ledger
balances.
(9 marks)
(c)
Comment on your findings and any action you now recommend.
(3 marks)
(20 marks)
64
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 87 XYZ
You are presented with the following draft financial statement of position for XYZ at 30 September
2014:
Cost
Depreciation Carrying
amount
$
$
$
ASSETS
Non-current assets
Plant
Vehicles
150,000
20,000
_______
60,000
10,000
______
90,000
10,000
_______
170,000
_______
70,000
______
100,000
Current assets
Inventories
Trade receivables
Cash
10,000
20,000
500
______
Total assets
30,500
_______
130,500
_______
EQUITY AND LIABILITIES
Capital and reserves
Capital
Profit for the year
Suspense account
20,000
53,600
44,900
______
Current liabilities
Trade payables
118,500
12,000
_______
130,500
_______
Upon investigation you discover the following errors:
(1)
The balance on the trade receivables allowance account at 1 October 2013 had been credited
to profit or loss. The balance of the account at that date was $1,800.
(2)
The allowance against trade receivables should have been made equal to 10% of trade
receivables at 30 September 2014.
(3)
Depreciation is charged on plant at a rate of 20% per annum on cost, and on vehicles at a rate
of 50% per annum on the reduced balance. The depreciation for the year to 30 September
2014 has been correctly charged to profit for that year, but no adjustments have been made
elsewhere.
(4)
The closing inventories amounted to $12,000, but the amount shown on the statement of
financial position was the opening inventories.
(5)
A transposition error had understated sales by $900.
(6)
A new motor vehicle costing $5,000 had been included in motor expenses.
company’s policy not to charge any depreciation in the year of acquisition.
(7)
Drawings amounting to $10,000 had been debited to profit or loss.
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It is the
65
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(8)
Discounts allowed of $1,000 had been credited to the profit or loss and discounts received
amounting to $1,500 had been debited to the profit or loss.
(9)
A loan of $5,000 had been credited to profit or loss.
(10)
Trade payables had been understated by $10,000.
Required:
Prepare XYZ’s corrected statement of financial position at 30 September 2014. A working
showing how the suspense account is cleared should be included.
Note XYZ does not maintain control accounts.
(18 marks)
Question 88 CND
The bookkeeper has prepared a preliminary trial balance of CND for the year ended 31 December as
follows:
$
$
Capital account
110,000
Retained earnings at 1 January
50,000
Bank loan
30,458
Trade receivables and payables
77,240
60,260
Cash in hand and bank overdraft
1,000
5,036
Inventories at 1 January
108,000
Non-current assets at cost and accumulated depreciation
at 31 December
161,879
60,943
Depreciation for the year
15,000
Purchases and revenues
300,297
400,000
Returns
4,370
4,630
Discounts allowed and received
9,760
6,740
Wages and salaries (net)
15,146
Payments of tax on wages and salaries
5,988
Payments of social security contributions
1,766
Tax on wages and salaries payable at 1 January
900
Proceeds of sale of non-current assets
2,000
Rent and insurance
18,036
Postage, telephone and stationery
3,009
Repairs and maintenance
2,124
Advertising
4,876
Packing materials
924
Motor expenses
2,000
Sundry expenses
1,000
Loan interest
4,000
Accrued expenses
6,478
Suspense account
1,030
–––––––
–––––––
737,445
737,445
–––––––
–––––––
When the bookkeeper discovered that the preliminary trial balance did not balance he made it do so by
opening a suspense account and entering the required amount on the appropriate side. A subsequent
investigation shows the following mistakes have been made:
66
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(1)
A loan to the business of $10,000 from the owner’s brother, X, has been added to capital.
(2)
Accrued interest on the bank loan of $458 has been credited to the bank loan account instead
of being treated as a current liability.
(3)
Bank charges of $1,000 have been completely omitted from the books.
(4)
Non-current assets with an original cost of $11,879 and accumulated depreciation of $10,943
have been sold for $2,000. This amount is shown as a separate item in the trial balance, and
no entries have been made in the asset or accumulated depreciation accounts. Any surplus or
deficit on sale should be shown in a separate account.
(5)
Deductions of $6,088 for personal tax and $1,766 for social security contributions, retirement
benefits, etc, were made from employees’ wages and salaries during the year. No entries have
been made for these items.
(6)
In addition to allowing discount of $240 and receiving discount of $260, various customers’
and suppliers’ accounts amounting to $10,000 were set off by contra. No entries whatever
have been made in respect of these items.
(7)
Trade receivables amounting to $2,000 are irrecoverable and need to be written off.
(8)
A debt of $1,000 written off as irrecoverable in a previous year has been recovered in full.
The amount has been credited to the personal account and deducted from the trade receivables
ledger control account.
(9)
Goods returned from a customer of $630 have been correctly entered into the personal
account, but by mistake were entered in the returns outwards journal.
(10)
A payment for stationery of $234 was correctly entered in the cash book but debited in the
ledger as $243.
(11)
A payment of $76 for packing materials has been correctly entered in the cash book, but no
other entry has been made.
(12)
A payment of $124 for advertising has been debited to repairs and maintenance.
(13)
A cheque payment of $26 for insurance has been recorded in all accounts as $62.
(14)
A page in the purchase account correctly totalled $125,124 was carried forward to the top of
the next page as $125,421.
All entries other than those given above are to be assumed to have been made correctly.
Required:
(a)
Show the correcting entries in journal form (i.e. showing accounts and amounts debited
and credited but no supporting narrative is required) in respect of each of the mistakes
mentioned above.
(16 marks)
(b)
Show the trial balance of the company at 31 December after these corrections have been
made. A working showing how the suspense account is cleared should be included.
(10 marks)
Control accounts are not maintained.
(26 marks)
Note
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67
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 89 MCQs SUSPENSE ACCOUNTS
89.1
The sales day book of a company is undercast by $500. The company does not maintain
control accounts.
What journal entry is required to correct the error?
A
Dr
Sales a/c
Cr
Customer (receivable) a/c
B
Dr
Sales a/c
Cr
Suspense a/c
C
Dr
Customer (receivable) a/c
Cr
Sales a/c
D
Single entry:
Cr
Sales a/c
The following information relates to items 89.2 to 89.5:
The trial balance of Bishopsgate does not balance. The bookkeeper has entered the difference in a
suspense account, and then discovers several errors. Bishopsgate does not maintain control accounts.
For each of items 89.2 to 89.5 select the entry which corrects the error.
89.2
A cheque paid to Knight for $100 had been entered on the credit side of his account payable.
A
B
C
D
89.3
Debit
Knight a/c
Suspense a/c
Knight a/c
Suspense a/c
$
100
100
200
200
$
100
100
200
200
Discounts allowed to a customer of $79 had been correctly entered in the personal account,
but had been credited to the discounts received account as $97.
Debit
68
Credit
Suspense a/c
Knight a/c
Suspense a/c
Knight a/c
$
Credit
$
A
Discounts allowed
176
Suspense a/c
176
B
Suspense a/c
176
Discounts allowed
176
C
Discounts received
Discounts allowed
Suspense a/c
176
D
Suspense a/c
97
79
176
Discounts allowed
Discounts received
79
97
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
89.4
89.5
$52 owed by K Chess had been correctly written off in the irrecoverable debts expense
account, but had been credited against K Checke’s account payable as $25.
Debit
$
Credit
$
A
K Checke
Suspense a/c
25
27
K Chess
52
B
K Chess
52
K Checke
Suspense a/c
25
27
C
K Checke
K Chess
25
52
Suspense a/c
77
D
Suspense a/c
77
K Checke
K Chess
25
52
The purchase for $1,666 of a car for use in the business had been debited to the sales account.
Debit
$
Credit
$
A
Car a/c
1,666
Sales a/c
1,666
B
Car a/c
1,666
Suspense a/c
1,666
C
Car a/c
Sales a/c
1,666
1,666
Suspense a/c
3,332
D
Car a/c
Suspense a/c
1,666
1,666
Sales a/c
3,332
(10 marks)
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69
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 90 JOLANTA
The following list of account balances was extracted from the books of Jolanta, a retailer, at
31 December 2014:
Due to suppliers
Allowance for trade receivables
Revenue
Opening inventory
Leasehold premises at cost
Accumulated amortisation of premises to 31 December 2014
Delivery vans at cost
Accumulated depreciation of vans to 31 December 2014
Purchases
Carriage outwards
Due from customers
Loan advanced by Joanna
Returns inwards
Closing inventory
Returns outwards
Rent
Salesmen’s salaries and commission
Interest on loan
Vehicle running expenses
Bank overdraft
Carriage inwards
Accountancy and audit
Trade discounts received
Light and heat
General expenses
Jolanta – Capital account
Irrecoverable debts account
Suspense account
Amortisation of leasehold for 2014
Depreciation of delivery vans for 2014
$
14,500
$
1,200
93,200
14,300
45,000
9,000
21,600
15,600
51,400
350
35,700
4,100
1,050
15,200
950
2,550
8,200
250
3,650
21,100
2,150
1,600
400
1,300
900
30,000
50
7,400
9,000
2,000
_______
_______
206,850
_______
206,850
_______
Required:
(a)
Redraft the list of account balances.
(8 marks)
(b)
Prepare a statement of financial position at 31 December 2014 together with a statement
of profit or loss for the period ended on that date.
(12 marks)
(20 marks)
70
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 91 GANDALF
On 1 April 2014 Gandalf started a business with capital of $20,000 which he paid into a business
account.
The following is a summary of the cash transactions for the first year:
Amounts from customers
Salary of assistant
Cash paid to suppliers for purchases
Purchase of motor van on 31 March 2015
Gandalf’s drawings during the year
Electricity payments
Rent for the year
Postage and stationery
$
34,628
4,000
20,700
8,000
4,800
1,120
2,200
700
The following further information is relevant:
(1)
At the end of the year Gandalf was owed $8,512 by his customers and owed $11,344 to his
suppliers.
(2)
Gandalf promised his assistant a bonus of $800. At 31 March 2015 this had not been paid.
(3)
At 31 March 2015 there was inventory of $8,514 and Gandalf owed $340 for electricity for
the last quarter of the year.
(4)
As the van was acquired in the last day of March, Gandalf has decided not to charge any
depreciation for the year.
Required:
Prepare a statement of profit or loss for the year ended 31 March 2015 and a statement of
financial position at that date.
(18 marks)
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71
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 92 MARIA
The following information relates to the business of Maria for the year ended 31 December 2014:
$
Capital account, 1 January 2014
Freehold properties at cost
Furniture and fittings at cost
Motor cars at cost
Accumulated depreciation to 1 January 2014
Freehold properties
Furniture and fittings
Motor cars
Inventory 1 January 2014
Purchases
Sales
Salaries
Rent
Office expenses
Motor expenses
Drawings
Allowance for receivables 1 January 2014
Loan
Trade receivables
Trade payables
Bank balance
$
13,640
7,500
2,000
6,300
450
800
2,370
6,740
54,520
79,060
8,760
1,170
3,950
3,790
4,800
600
4,000
9,240
10,040
2,190
_______
_______
110,960
_______
110,960
_______
You are also supplied with the following information:
(1)
Inventory at 31 December 2014 was $7,330.
(2)
Rent paid in advance at 31 December 2014 amounted to $250.
(3)
Allowance for trade receivables is to be made equal to 5% of accounts receivable at
31 December 2014.
(4)
Depreciation is to be charged for the year at the following annual rates calculated on cost at
the year end:
Freehold properties
Furniture and fittings
Motor cars
(5)
1%
10%
20%
Interest on the loan at 5% per annum is to be provided.
Required:
Prepare a statement of profit or loss for the year ended 31 December 2014 and a statement of
financial position at that date.
(20 marks)
72
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 93 FEDEROV
The following is the trial balance extracted from the books of Federov at 31 December 2014:
$
Capital
Loan account
Drawings
Freehold premises
Furniture and fittings – cost and accumulated
depreciation at 1 January
Plant and machinery – cost and accumulated
depreciation at 1 January
Inventory at 1 January
Cash at bank
Allowance for trade receivables
Purchases
Revenue
Irrecoverable debts
Irrecoverable debts recovered
Trade receivables
Trade payables
Bank charges
Rent
Returns inwards
Returns outwards
Salaries
Wages
Travelling expenses
Carriage inwards
Trade discounts allowed
Trade discounts received
General expenses
Gas, electricity and water
Carriage outwards
Travellers’ salaries and commission
Printing and stationery
$
20,000
2,000
1,750
8,000
700
200
8,000
8,000
650
2,500
740
86,046
124,450
256
45
20,280
10,056
120
2,000
186
135
3,500
8,250
1,040
156
48
138
2,056
2,560
546
5,480
640
_______
_______
160,264
_______
160,264
_______
The following matters should be taken into account:
(1)
Inventory at 31 December 2014 was $7,550.
(2)
Federov’s son works in the business, receiving an annual salary of $500, which had been
included in the drawings.
(3)
Interest on the loan at 5% per annum had not been paid at 31 December 2014.
(4)
Rent includes $250 for premises paid in advance for the half year to 31 March 2015.
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73
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(5)
Depreciation is to be charged at the following rates on the reducing balance basis:
Plant and equipment by 10% per annum
Furniture and fittings by 5% per annum
(6)
The allowance for receivables is to be maintained at 3% of trade account receivable balances.
Required:
Prepare the statement of profit or loss for the year ended 31 December 2015 and the statement of
financial position at that date.
(20 marks)
Question 94 HEINZ
Heinz is a master builder. His trial balance at 31 December 2014 was as follows:
Capital account at 1 January 2014
Trade receivables
Rents and insurance (excluding van insurance)
Aggregate depreciation on furniture and equipment to 1 January 2014
Purchases of goods for resale
Drawings by owner
Trade payables
Allowance for receivables
Inventory (goods for resale) at 1 January 2014
Running costs of delivery vans
Furniture and equipment at cost
Revenue
Advertising
Delivery vans at cost
Discounts received
Salesmen’s wages and salaries
Lighting and heating
Accumulated depreciation on delivery vans to 1 January 2014
Irrecoverable debts written off
Audit and professional charges
Cash at bank and in hand
Postage, telephone, stationery and office expenses
$
23,521
9,600
838
1,440
58,677
2,500
7,432
377
6,934
416
7,600
68,213
1,375
3,000
1,206
5,262
991
750
76
43
5,148
479
The following adjustments are to be made:
(1)
Inventory (goods for resale) at 31 December 2014 amounted to $7,832.
(2)
Depreciation is to be charged on cost at 10% per annum on furniture and equipment, and 25%
per annum on delivery vans.
(3)
Prepayments at 31 December 2014 were:
$
60
91
58
Rent
Insurance
Delivery van insurance
74
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(4)
Accrued expenses at 31 December 2014 were:
Rent
Electricity
Repairs to delivery vans
Audit fee
Telephone
(5)
$
100
27
39
105
28
Other inventories at 31 December 2014 were:
Coke for heating purposes
Stationery
$
217
98
(6)
During the year goods for resale costing $3,224 were destroyed by fire and his claim had been
agreed with the insurance company, although it had not been paid at the year end or entered in
Heinz’s books. These goods were not included in inventory in (1) above.
(7)
The allowance for receivables is to be made equal to 5% of trade receivables, excluding the
amount from the insurance company.
Required:
Prepare a statement of profit or loss for the year ended 31 December 2014 and a statement of
financial position at that date.
(20 marks)
Question 95 GAMMON
The following is a list of balances taken from the books of Gammon, a butcher, at 31 December 2014:
Revenue
Insurance
Plant repairs
Rent
Motor van
Plant
Purchases
Wages
Inventory at 1 January 2014
Discount allowed to customers
Motor van expenses
Shop fittings
General expenses
Capital account – debit balance 1 January 2014
Receivables
Payables
Cash in hand
Drawings (cash)
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$
34,468
480
210
1,478
980
1,560
22,321
3,467
1,655
437
819
1,020
815
537
1,324
3,370
212
1,820
75
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Additional information
(1)
The difference in the trial balance is the bank balance at 31 December 2014.
(2)
Inventory at 31 December 2014 amounted to $1,123.
(3)
During the year the motor van, which at 1 January 2014 had a written-down value of $436,
was sold for $220 and a new van purchased for $764.
(4)
Depreciation is to be charged on the reducing balance method at the following rates (a full
year’s depreciation being charged on assets purchased during the year):
Motor van
Plant
Shop fittings
25%
15%
5%
(5)
Goods taken by Gammon for personal use cost $128.
(6)
Adjustments are to be made for
Insurance prepaid
Motor expenses accrued
Plant repairs accrued
(7)
$65
$46
$24
The motor van account is analysed as follows:
Written-down value of van at 1 January
Less Sale proceeds from sale of van
$
436
(220)
___
216
764
___
Add Cost of new motor van
980
___
Required:
Prepare a statement of profit or loss for the year ended 31 December 2014 and a statement of
financial position at that date.
(20 marks)
76
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 96 STEWART
Stewart is a sole trader, supplying building materials to local builders. He prepares his accounts to 30
June each year. At 30 June 2015, his trial balance was as follows:
Dr
$
Capital at 1 July 2014
Purchases and sales
Returns
Discounts
Building materials at 1 July 2014
Packing materials purchased
Distribution costs
Rent and insurance
Telephone
Car expenses
Wages
Allowance for receivables at 1 July 2014
Heat and light
Sundry expenses
Delivery vehicles – cost
Delivery vehicles – depreciation at 1 July 2014
Equipment – cost
Equipment – depreciation at 1 July 2014
Trade receivables and payables
Loan
Loan repayments
Bank deposit account
Bank current account
324,500
2,300
1,500
98,200
12,900
17,000
5,100
3,200
2,400
71,700
Cr
$
55,550
625,000
1,700
2,500
1,000
1,850
6,700
112,500
35,000
15,000
95,000
5,000
82,000
10,000
6,400
15,000
26,500
________
________
817,750
————
817,750
————
The following additional information at 30 June 2015 is available:
(i)
Inventory of building materials
Inventory of packing materials
$75,300
$700
There was also an unpaid invoice of $200 for packing materials received and consumed
during the year.
(ii)
Prepayments:
–
(iii)
$450
Accrued expenses:
–
–
(iv)
rent and insurance
heat and light
telephone
$400
$500
Wages include $23,800 cash withdrawn by Stewart.
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77
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(v)
Trade receivables have been analysed as follows:
Current month
30 to 60 days
60 to 90 days
over 90 days
$
60,000
20,000
12,000
3,000
and allowance is to be made for trade receivables as follows:
30 to 60 days
60 to 90 days
over 90 days
1%
2.5%
5% (after writing off $600)
(vi)
Sundry expenses include $3,500 for Stewart’s personal tax bill.
(vii)
The loan was taken out some years ago, the final payment is due on 31 March 2016. The
figure shown in the trial balance for “loan repayments” includes interest of $800 for the year.
(viii)
The bank deposit account was opened on 1 January 2015 as a short-term investment; interest
is credited at 31 December annually; the average rate of interest since opening the account has
been 6% per annum.
(ix)
At 1 July 2014, Stewart decided to bring one of his family cars, valued at $8,000, into the
business. No entries have been made in the business books for its introduction.
(x)
Depreciation is to be charged as follows:
–
–
–
20% on cost for delivery vehicles
25% on the reducing balance for the car
25% on the reducing balance for the equipment
Required:
(a)
Prepare a statement of profit or loss for the year ended 30 June 2015.
(b)
Prepare a statement of financial position at 30 June 2015.
(12 marks)
(8 marks)
(20 marks)
78
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 97 BOWIE
Mr Bowie is a sole trader and prepares his accounts to 30 September each year. At 30 September 2014,
his trial balance is as follows:
Dr
$
Plant and machinery
– cost
– depreciation at 1 October 2013
Office equipment
– cost
– depreciation at 1 October 2013
Inventory at 1 October 2013
Purchases and sales
Selling expenses
Heat and light
Wages and salaries
Printing and stationery
Telephone and fax
Rent and insurances
Trade receivables and payables
Allowance for receivables at 1 October 2013
Bank
Petty cash
Drawings
Capital at 1 October 2013
Suspense account
Cr
$
125,000
28,000
45,000
15,000
31,000
123,000
12,000
8,000
19,000
6,000
6,000
4,000
35,000
194,000
33,000
4,000
3,000
1,000
22,000
169,000
3,000
_______
_______
443,000
_______
443,000
_______
The following additional information at 30 September 2014 is available:
(i)
Closing Inventory goods for resale
(ii)
Prepayments:
–
–
(iii)
$53,000
telephone and fax rental
rent and insurance
$1,000
$1,000
wages and salaries
$5,000
Accruals:
–
(iv)
Specific irrecoverable debts to be written off amount to $3,000.
(v)
Allowance for receivables to be amended to 5% of receivable balances, after adjusting for
irrecoverable debts written off.
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79
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(vi)
(vii)
The following book-keeping errors are discovered:
–
the purchase of an item of inventory has been debited to the office equipment
account, cost $1,200.
–
the payment of $1,300 to a trade payable has been recorded by debiting the bank
account and crediting the trade payables account
–
a payment of rent of $1,500 has been credited to the bank and credited to the rent
account.
The figure in the trial balance for the bank balance is the balance appearing in the cash book,
prior to the reconciliation with the bank statement. Upon reconciliation, it is discovered that:
–
–
(viii)
unpresented cheques amount to $3,000; and
bank charges not entered in the ledgers amount to $4,000.
Depreciation on non-current assets is to be charged as follows:
–
–
plant and machinery
office equipment
10% on cost
331/3 % on the reducing balance at the end of the year.
Required:
(a)
Show the journal entries and suspense account to correct the bookkeeping errors
identified in note (vi). (Narrative descriptions are not required)
(5 marks)
(b)
Prepare a statement of profit or loss for the year ended 30 September 2014.
(c)
Prepare a statement of financial position at 30 September 2014.
(12 marks)
(8 marks)
(25 marks)
Question 98 COST STRUCTURES
(a)
A greengrocer made sales during the year of $49,200. Opening inventory amounted to
$3,784 and year-end inventory was $5,516. During the year he purchased for cash goods
which cost $38,632.
Required:
Determine the gross profit and calculate the gross profit percentage as a percentage of
sales value.
(3 marks)
(b)
A rival has made sales of $50,100 at a fixed mark-up of 25%. Closing inventory was valued at
$5,438 and he purchased goods during the year amounting to $38,326.
Required:
Determine the value of the opening inventory.
80
(3 marks)
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(c)
A local store makes sales at a fixed gross profit of 10% on sales value. Sales during the year
amounted to $186,460; closing inventory was $16,800 and represents an increase of 25% over
the value of the opening inventory.
Required:
Determine the cost of purchases during the year.
(3 marks)
(9 marks)
Question 99 LAMDIN
Lamdin retired from his employment abroad and returned to this country, where he purchased a small
kiosk.
He took over the business on 1 July 2014, acquiring the existing inventory at a valuation of $1,142; the
rest of the purchase price was apportioned as to $1,500 for fixtures and fittings and the balance for
goodwill.
The following day he acquired a second-hand computer and accounts package at a knock-down price of
$80. Unfortunately it failed to live up to expectations and crashed during the print-out of his year-end
accounts, having only printed a summary listing of payments from the till. Other than this, the only
records available were his bank statements and a number of vouchers. Surplus cash was banked during
the year.
A summary of his bank account for the year ended 30 June 2015 shows the following:
Cash introduced
Bankings from shop
Loan from mother (long-term)
(interest at 5% pa)
$
5,000
16,427
1,000
______
Purchase of business
Purchase of accounts computer
Rent (15 months to
30 September 2015)
Rent (9 months to
31 March 2015)
Electricity
Purchases for resale
Private cheques
Balance 30 June 2015
22,427
———
$
3,192
80
500
84
92
14,700
1,122
2,657
______
22,427
———
The computer print-out was as follows:
$
1,606
742
156
520
Cash purchases for resale
Staff wages
Sundry shop expenses
Cash drawings
On 30 June 2015 inventory, measured at cost, amounted to $1,542, amounts due from customers $74,
and cash in hand amounted to $54. Depreciation is to be allowed on fixtures and fittings at a rate of
10%.
Accounts outstanding on 30 June 2015 were purchases $470, and rent of $120 for the year ended 31
March 2016.
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81
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Required:
Prepare Lamdin’s statement of profit or loss for the year ended 30 June 2015 and a statement of
financial position at that date.
(20 marks)
Question 100 LEONARDO
Leonardo is in business but does not keep proper books of account. In order to prepare his income and
expenditure account for the year ended 31 December 2014 you are given the following information:
1 Jan 2014
$
1,310
268
712
116
Inventory on hand
Receivables
Payables for goods
Payables for expenses
31 Dec 2014
$
1,623
412
914
103
In addition you are able to prepare the following summary of his cash and bank transactions for the
year:
Cash account
$
Balance 1 January
Shop takings
Cheques cashed
62
4,317
200
______
$
Payments into bank
Purchases
Expenses
Drawings
Balance 31 December
4,579
———
3,050
316
584
600
29
______
4,579
———
Bank account
$
Balance 1 January
Cheques from customers
Cash paid in
840
1,416
3,050
______
$
Cash withdrawn
Purchases
Expenses
Drawings
Delivery van (purchased
1 September)
Balance 31 December
5,306
———
200
2,715
519
400
900
572
______
5,306
———
In addition Leonardo says that he had taken goods for personal consumption and estimates that those
goods cost $100.
In considering accounts receivable Leonardo suggests that an allowance be made of 5% of amounts due
after writing off a specific irrecoverable debt of $30.
Depreciation on the delivery van is to be allowed at 20% per annum.
82
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Required:
Prepare the statement of profit or loss and a statement of financial position at 31 December 2014.
(20 marks)
Question 101 DELTIC
You are approached by a new client, Deltic, who is coming to the end of his first year’s trading. He has
not kept proper books and records but, after discussing matters with him, the following information
comes to light concerning the year ended 30 September 2014:
(1)
He set up in business when he won $200,000 on the national lottery. He invested the money
in the bank and set up in business as a retailer of lingerie.
(2)
He banks his takings periodically after payment of the following amounts:
Wages
Cleaning
Sundries
Personal expenses
$75 per week
$10 per week
$15 per week
$25 per week
Cash in hand at the end of the year was $250.
(3)
A summary of his bank statements reveals the following:
Capital introduced
Bankings
$
200,000
125,750
________
$
Purchase of leasehold premises 150,000
Purchase of vans
6,000
Telephone
896
Rent
1,682
Payments to suppliers
86,232
Wages
15,282
Repairs
3,637
Personal expenses
323
Balance c/d
61,698
________
325,750
————
325,750
————
An unpresented cheque of $385 for repairs was still outstanding.
(4)
Other assets and liabilities at 30 September 2014 were as follows:
Inventory
Trade receivables
Trade payables
Accrued expense – telephone
Prepaid expense– rent
$
6,400
10,350
29,957
125
258
(5)
Depreciation is to be allowed on the van at 25% of its cost. The leasehold is for 50 years.
(6)
Deltic estimates that his gross profit percentage is 25%, and also informs you that he does not
keep a record of the goods he took for his own use.
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83
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Required:
Prepare a statement of profit or loss for the year ended 30 September 2014 and a statement of
financial position at that date.
(20 marks)
Question 102 WALDORF
Waldorf had retired from the army some years ago to run a grocery business in the country. On 1
October 2014 his assistant failed to report for work and it was later discovered that he had disappeared
taking the contents of the cash till with him.
An analysis of Waldorf’s bank statements for the year ended 31 December 2014 revealed the following:
Receipts
Balance b/f
Personal tax refund
Bankings
$
280
1,000
16,720
______
Payments
Suppliers
Rent
Car maintenance
Insurance
Drawings
Bank charges
Balance c/f
$
13,600
800
400
200
2,500
100
400
______
18,000
———
18,000
———
A statement of affairs produced by Waldorf comprised the following:
31 December
2014
2013
$
$
3,200
3,600
3,400
4,000
1,200
900
150
90
30
20
Nil
380
120
110
Motor car (Carrying amount)
Fixtures (Carrying amount)
Inventory
Trade receivables
Rent prepaid
Cash
Trade payable
A rough cash book kept by Waldorf showed the following:
$
1,800
250
300
2,400
21,550
Assistant’s wages
Sundry expenses
Cash purchases
Drawings
Cash received from customers
A footnote recorded that discounts received and discounts allowed were $200 and $300 respectively.
The insurance company agreed to admit the claim for loss of cash upon production of a full set of
accounts.
Required:
Prepare a statement of profit or loss for the year ended 31 December 2014 and a statement of
financial position at that date.
(20 marks)
84
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 103 SLATE
Slate, who has been in business as a builder since 1 January 2014, received a request from the tax
authorities for his first year’s accounts.
He had not kept proper records of his business transactions, but was able to supply the following
information:
(1)
All cheques received for work done had been paid into the bank, whilst cash receipts had been
used for paying cash expenses.
(2)
From bundles of receipts and a wages notebook some of the cash expenses for the year
appeared to have been as follows:
$
Wages and social insurance
3,346
Materials
1,400
Electricity
56
General expenses
14
(3)
Drawings were estimated at $18 per week, out of which Slate had paid the rent of his
builder’s yard of $2 per week. His own social insurance contributions had been included in
wages and social insurance and totalled $65 for the year.
(4)
On 1 April he purchased a van for $856. His mother lent him $400 for the deposit, and the
balance was payable by twelve monthly instalments of $38 each commencing on 1 June. The
loan from his mother had not been repaid at the end of the year.
(5)
A summary of his bank account showed the following:
Balance 1 January 2014
Bankings
$
150
9,204
______
Materials
Van expenses
General expenses
Cheques drawn for cash
Cement mixer
Van instalments
Private cheques
Balance 31 December 2014
9,354
———
$
4,790
342
110
3,100
200
266
342
204
______
9,354
———
(6)
On 31 December 2014 inventory (materials) amounted to $560, cash in hand $10, trade
receivables $1,200, trade payables for materials $149, and outstanding van expenses $36.
There was no work in progress on 31 December 2014.
(7)
Depreciation of $108 is to be allowed on the van and $50 on the cement mixer.
Required:
Prepare Slate’s statement of profit or loss for the year ended 31 December 2014 and a statement
of financial position at that date.
(20 marks)
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85
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 104 BENNETT
Bennett is a grocer who had not kept a full set of books. The following was a summary of his bank
statements for the year ended 31 December 2014:
$
35,170
Amounts credited by bank
———
35,170
———
$
Balance 1 January 2014
892
Payments for trade payables
30,500
Rent
475
Fixtures
100
Lighting and heating
210
General expenses
800
Loan interest
120
Drawings
900
Customers’ cheques dishonoured
180
Balance 31 December 2014
993
———
35,170
———
You are given the following information:
(1)
Trading receipts consisted partly of cash and partly of cheques. During the year Bennett paid
$2,950 for wages and $140 for sundry expenses out of his cash takings,. He kept $3 a week
and maintained a balance of $20 in the till for change. The balance of his takings was paid
into the bank.
(2)
Cheques drawn payable to trade payables, but not presented at 1 January 2014, amounted to
$280, and at 31 December 2014 to $320.
(3)
All dishonoured cheques were re-presented and honoured during the year.
(4)
The loan interest was paid to Brough who had lent Bennett $4,000 some years ago at a rate of
interest of 3% per annum. The interest was duly paid half-yearly on 31 March and 30
September, and the loan was still outstanding at the end of the year.
(5)
Discounts allowed by suppliers amounted to $480 and those allowed to customers were $520.
(6)
Account balances:
1 Jan 2014
$
4,500
2,800
Inventories
Trade receivables
86
Accrued general expenses
Rent paid in advance
Fixtures valued at
240
40
2,800
Trade payables
Amounts due for lighting and heating
1,800
80
31 Dec 2013
$
5,800
3,200 (including $200 to be
written off as irrecoverable)
190
50
2,550 (including those
purchased during year)
2,200
70
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Required:
Prepare:
(a)
(b)
(c)
a statement of Bennett’s capital at 1 January 2014;
a statement of profit or loss for the year ended 31 December 2014; and
a statement of financial position at that date.
(4 marks)
(9 marks)
(7 marks)
(20 marks)
Question 105 BOTHAM
Botham received a legacy of $20,000 on 1 January 2014 and on that date purchased a small retail
business. The completion statement from the solicitor revealed the following:
Freehold shop property
Goodwill
Inventories
Trade receivables
Shop fixtures
Insurance in advance to 31 March 2014
$
10,000
2,000
1,600
400
2,600
100
______
16,700
———
The legacy was used to discharge the amount due on completion and the balance was paid into a newly
opened business bank account.
Botham had not kept proper records of his business transactions but was able to supply the following
information:
(1)
A summary of the cash till rolls showed his shop takings for the year to be $25,505; this
includes all cash received from customers including those at 1 January 2014.
(2)
The takings had been paid periodically into the bank after payment of the following cash
expenses:
$
Wrapping materials
525
Staff wages
3,423
Purchases for resale
165
Petrol and oil
236
(3)
Personal cash drawings were estimated at $20 per week and goods taken for own use at $2 per
week.
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87
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(4)
A summary of the bank statements showed the following:
Legacy – residual balance
Sale of fixtures purchased at
1 January 2014 but not
required (cost $200;
depreciation Nil)
Loan from Robin at 10% pa
Cash banked
$
3,300
______
$
Purchases for resale
14,863
Motor expenses
728
Delivery van (cost –1 April 2014) 1,200
General expenses
625
Loan interest (six months to
30 September)
100
Private cheques
1,329
Electricity
228
Insurance (year to 31 March 2015) 500
Balance per statement at
31 December 2014
5,757
______
25,330
———
25,330
———
130
2,000
19,900
A cheque drawn on 28 December 2014 of $125 for goods purchased was presented to the
bank on 4 January 2015.
(5)
During the year $223 of irrecoverable debts arose. The trade receivables at 31 December
2014 amounted to $637, in respect of which a $100 allowance should be made.
(6)
At 31 December 2014 there were:
$
2,360
53
358
50
100
180
Inventories
Store of wrapping materials
Trade payables – purchases
Electricity accrued
Accountancy fees accrued
Cash float in till
(7)
The difference arising on the cash account was discussed with Botham but remained
unexplained and was dealt with in an appropriate manner.
(8)
Depreciation is to be allowed at the rate of 10% per annum on the fixtures and at the rate of
20% on the van.
Required:
Prepare a statement of profit or loss for the year ended 31 December 2014 and a statement of
financial position at that date.
(20 marks)
88
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 106 MCQs INCOMPLETE RECORDS
106.1
A company’s physical inventory counting took place on 25 March 2015 and the inventory
was measured at $175,260. The company’s year end is 31 March 2015. In the intervening
period goods valued at $5,952 were received and returns to suppliers were valued at $2,520.
Sales in the period amounted to $17,500 and a gross profit percentage on sales of 20% is
always obtained. You discover that goods out on sale or return, at a sale price of $15,000,
have been omitted from the physical count.
What value should be placed on inventory at 31 March 2015?
A
B
C
D
106.2
$164,692
$176,192
$176,692
$178,692
The draft statement of financial position of a company at 31 May 2015 includes current assets
as follows:
Inventory
Trade receivables
$50,000
$130,000
Trade receivables include goods sent on sale or return at selling price of $15,000 (cost
$12,000). These remained unsold at 31 May 2015.
What amount should appear in the financial statements as at 31 May 2015?
A
B
C
D
106.3
Inventory
Trade receivables
$62,000
$62,000
$65,000
$65,000
$115,000
$118,000
$115,000
$118,000
You are provided with the following information relating to a business:
Receivables opening balance
Receivables closing balance
Cash received from credit customers
Irrecoverable debts written off
Discounts allowed
Cash sales
$000
120
84
361
12
6
18
What was total revenue for the period?
A
B
C
D
$343,000
$349,000
$355,000
$361,000
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89
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
106.4
The following information relates to a company for the year ended 31 December 2014:
$
22,490
Cash received from credit customers
Contra with supplier who is also a
customer on payables ledger
Increase in allowance for receivables
Receivables at 1 January 2014
Receivables at 31 December 2014
910
600
7,290
7,870
What figure for revenue should be recorded in the income and expenditure account for
the year ended 31 December 2014?
A
B
C
D
106.5
$24,580
$23,980
$22,760
$22,160
The following information relates to a business for the year ended 30 June:
$000
180
132
33
Revenue
Purchases
Opening inventory
Sales were all made at a uniform gross profit margin of 20%.
What is the cost of closing inventory?
A
B
C
D
106.6
$15,000
$21,000
$30,000
$45,000
A company’s annual physical inventory count took place on 6 January 2015. Inventory value
on this date was $38,750. During the period from 31 December 2014 to 6 January 2015 the
following events occurred:
$
Sales
5,740
Purchases
3,990
The mark-up is 25% on cost.
What is the cost of the company’s inventory on 31 December 2014?
A
B
C
D
90
$39,352
$39,065
$38,435
$38,148
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
106.7
The following information relates to a business for the year ended 31 March 2015:
Revenue
Purchases
Opening inventory
$000
300
230
55
The business achieves a gross profit percentage of 20% on all sales.
What is the cost of closing inventory?
A
B
C
D
106.8
$35,000
$45,000
$65,000
$75,000
The following information relates to a wholesale business:
$
Inventory at cost 31 December 2014
(excluding goods on sale or return)
Revenue (including $8,000 goods on sale or return
of which half have been sold by the retailer by
31 December 2014)
27,500
95,000
The goods sent out on sale or return were at cost price plus 25%.
What amounts should be shown in the financial statements at 31 December 2014?
A
B
C
D
106.9
Revenue
$87,000
$87,000
$91,000
$91,000
Inventory
$33,500
$33,900
$30,500
$30,700
The memorandum discounts column in the cash receipts book has been undercast by $270.
What correcting entry is required?
A
Dr
Cr
Receivables ledger control a/c
Discounts allowed
B
Dr
Cr
Discounts allowed
Receivables ledger control a/c
C
Dr
Cr
Payables ledger control a/c
Discounts received
D
Dr
Cr
Discounts received
Payables ledger control a/c
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91
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
106.10
On 30 June 2015 a business had net assets of $74,000 compared with $62,000 on 1 July 2014.
During the year ended 30 June 2015 the proprietor drew $11,000 out of the business and the
business paid his annual subscription to the proprietor sports club of $2,000.
What was the profit made by the business for the year ended 30 June 2015?
A
B
C
D
$1,000
$12,000
$25,000
$27,000
(20 marks)
Question 107 IASB
(a)
State the objectives of the International Accounting Standards Board (IASB). (3 marks)
(b)
Distinguish between a “Discussion Paper” and an “Exposure Draft” of an International
Financial Reporting Standard (IFRS).
(4 marks)
(c)
Outline THREE steps taken by the IASB to ensure consistent interpretation of IFRSs.
(3 marks)
(10 marks)
Question 108 MCQs REGULATORY FRAMEWORK
108.1
Which body has sole responsibility and authority to issue an International Financial
Reporting Standard?
A
B
C
D
108.2
Which body provides guidance on financial reporting issues that are no specifically
address in IFRS?
A
B
C
D
108.3
92
the International Financial Reporting Standards Foundation
the International Financial Reporting Standards Interpretations Committee
the International Accounting Standards Board
the IFRS Advisory Council
the International Financial Reporting Standards Foundation
the International Financial Reporting Standards Interpretations Committee
the International Accounting Standards Board
the IFRS Advisory Council
What is the objective of the International Accounting Standards Board?
A
To harmonise International Financial Reporting Standards with national accounting
standards
B
To create accounting standards which meet the needs of emerging economies
C
To develop, in the public interest, a single set of high quality, understandable global
accounting standards
D
To provide a forum for participation by other interested parties that require
transparent and comparable information
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
108.4
Which one of the following is the responsibility of an audit committee?
A
B
C
D
108.5
To monitor the integrity of the financial statements
To present a balanced and understandable assessment of the company’s position
To maintain a sound system of internal control (including risk management)
To ensure that adequate accounting records are kept for the preparation of financial
statements
The board of directors is collectively responsible for ensuring that:
(1)
(2)
(3)
financial statements are prepared in accordance with local GAAP;
adequate accounting records are kept;
financial statements are filed according to law.
Which of these responsibilities can be delegated to the finance director?
A
B
C
D
1 and 2 only
1 and 3 only
2 and 3 only
1, 2 and 3
(10 marks)
Question 109 FINANCIAL STATEMENTS
(a)
Briefly describe the scope and application of the International Accounting Standard
Board’s “Framework”.
(5 marks)
(b)
Identify FOUR users of financial statements and their information needs.
(6 marks)
(c)
State the objective of financial statements.
(2 marks)
(17 marks)
Question 110 ACCOUNTING CONCEPTS
Define the following accounting concepts and give for each one an example of its application:
(a)
(b)
(c)
(d)
(e)
Accruals;
Substance over form;
Consistency (see note below);
Duality;
Prudence.
(3 marks)
(3 marks)
(3 marks)
(2 marks)
(3 marks)
Note: Your answer to (c) should include a brief explanation of the circumstances in which the
consistency concept should not be applied.
(14 marks)
Question 111 MCQs CONCEPTUAL FRAMEWORK
111.1
What is the principal purpose of the IASB’s “Conceptual Framework for Financial
Reporting”?
A
B
C
D
To assist users in interpreting information contained in financial statements
To assist preparers of financial statements in applying standards
To assist national standard setting bodies in developing national standards
To assist the Board of the IASB in developing and reviewing standards
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93
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
111.2
Which of the following statements concerning the IASB’s “Framework” is correct?
A
B
C
D
111.3
What is the underlying assumption for the preparation of general purpose financial
statements?
A
B
C
D
111.4
Accrual accounting
Going concern
Materiality
Prudence
Which of the following are the fundamental qualitative characteristics that make
information provided in financial statements useful to users?
A
B
C
D
111.5
It is an International Accounting Standard
It does not define elements of financial statements
It specifies criteria for recognising items in financial statements
It specifies standards for measurement and disclosure of items in financial statements
Comparability and Faithful represesentation
Faithful represesentation and Relevance
Relevance and Understandability
Understandability and Comparability
Some qualities of useful information in financial statements are:
(1)
(2)
(3)
(4)
Accuracy
Completeness
Materiality
Neutrality
Which of these qualities contribute to the attribute of faithful representation?
A
B
C
D
111.6
1, 2 and 3 only
1, 2 and 4 only
1, 3 and 4 only
2, 3 and 4 only
Which one of the following statements concerning the recognition of an item in financial
statements is correct?
A
B
C
D
An item must be recognised if it meets the definition of an element
An item can be recognised even if can only be depicted in words
Disclosure in the notes may be used as an alternative to recognition
An item can only be recognised if its value can be measured reliably
(12 marks)
94
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 112 OVERALL CONSIDERATIONS
IAS 1 Presentation of Financial Statements sets out overall considerations for the presentation of
financial statements.
Required:
Explain what you understand by the following terms:
(a)
(b)
(c)
(d)
(e)
Fair presentation;
Accounting policies;
Going concern;
Accruals accounting;
Materiality.
(10 marks)
Question 113 CURRENT ASSETS AND LIABILITIES
(a)
Explain why inventories are classified as current assets.
(2 marks)
(b)
List six items which would be classified as current liabilities.
(3 marks)
(c)
State the circumstances in which current assets and liabilities should be offset. (2 marks)
(7 marks)
Question 114 MCQs IAS 1
114.1
In which one of following circumstance can “fair presentation” in accordance with IFRS
be presumed?
A
B
C
D
114.2
the financial statements comply with IFRS
IFRS has been appropriately applied with additional disclosures where necessary
IFRS has been applied in so far that it does not conflict with local GAAP
the financial statements provide relevant, reliable, comparable and understandable
information
The management of ZiZi intends to liquidate the company in the last quarter of 2015.
On what basis should the financial statements for the year ended 30 June 2014 be
prepared?
A
B
C
D
114.3
Going concern with no specific disclosure of material uncertainties
Going concern with specific disclosure of material uncertainties
On a basis other than going concern with disclosure of that fact
On a basis other than going concern with disclosure of that fact and reasons
Which of the following statements is correct?
A
B
C
D
Materiality depends on the size of an omission or misstatement
Material items may be aggregated with similar items in the financial statements
Immaterial items need not be presented separately
Immaterial items can be aggregated in the financial statements but not in the notes
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95
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
114.4
What comparative information must be disclosed in accordance with IAS 1
“Presentation of Financial Statements”?
A
B
C
D
114.5
All numerical and narrative information for the previous period
All numerical information only
Previous period narrative which is relevant to the current period
Previous period statement of financial position and statement of comprehensive
income only
In which financial statements will dividends paid during the year be presented?
A
B
C
D
Cash flow statement and statement of comprehensive income
Cash flow statement and statement of changes in equity
Statement of financial position and statement of changes in equity
Statement of comprehensive income and statement of financial position
(10 marks)
Question 115 BETA
The following trial balance has been extracted from the books of account of Beta at 31 March 2015:
Administrative expenses
Called up share capital (ordinary shares of $1 fully paid)
Trade receivables
Bank overdraft
Income tax (overprovision in previous year)
Provision for retirement benefit costs
Distribution costs
Non-current asset investments
Investment income
Plant and equipment
At cost
Accumulated depreciation (at 31 March 2015)
Retained earnings (at 1 April 2014)
Purchases
Inventories (at 1 April 2014)
Trade payables
Revenue
Interim dividend paid
$000
210
$000
600
470
80
25
180
420
560
75
750
220
240
960
140
260
1,950
120
———
3,630
———
———
3,630
———
Additional information
(1)
Inventories at 31 March 2015 were valued at $150,000.
(2)
Depreciation charges for the year amounting to $27,000 and $5,000 have been included in
distribution costs and administrative expenses, respectively,
(3)
The income tax rate is 33%.
(4)
The income tax expense based on the profit is estimated to be $54,000.
(5)
The provision for retirement benefit costs is to be increased by $16,000. The increase should
be charged to administrative expenses. No retirement benefits are expected to be paid for the
foreseeable future.
96
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(6)
The company’s authorised share capital consists of 1,000,000 ordinary shares of $1 each.
(7)
A final dividend of $0.50 per share was declared on 31 March 2015.
(8)
There were no purchases or disposals of any non-current assets during the year.
Required:
Insofar as the information permits, prepare the company’s statement of profit or loss for the year
to 31 March 2015, a statement of financial position at that date and a statement of changes in
equity. Include additional information on the nature of expenses, classes of tangible assets and
share capital in suitable notes.
An accounting policies note is not required.
(20 marks)
Question 116 LOGO
Logo, a public company, has an authorised share capital of 500,000 $1 ordinary shares. At 1 January
2014 the issued share capital was 100,000 $1 ordinary shares. On 31 March 2014 the company issues a
further 100,000 ordinary shares at $1.50 each.
On 30 September 2014 there is a bonus issue of 1 ordinary share for every 5 held.
Required:
(a)
(b)
Record the above transactions in the books of Logo.
(5 marks)
Show extracts relevant to the statement of financial position at 31 December 2014 (and
notes thereto) and the statement of changes in equity.
(7 marks)
(12 marks)
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97
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 117 GAMMA
The list of balances of Gamma shows the following balances at 31 December 2014:
Dr
$000
Issued share capital (600,000 shares)
Share premium
General reserve
Retained earnings 1 January 2014
Inventory (goods for resale) at 1 January 2014
Revenue
Purchases
Purchases returns
Sales returns
Carriage outwards
Warehouse wages
Sales representatives salaries
Administrative wages
Warehouse plant and equipment – cost
Accumulated depreciation – 1 January 2014
Delivery vehicle hire
Distribution expenses
Administrative expenses
Directors’ salaries
Rents receivable
Trade receivables
Cash at bank
Trade payables
Cr
$000
300
20
20
50
60
1,000
540
26
28
28
80
60
40
126
50
20
10
30
30
16
380
110
______
60
______
1,542
———
1,542
———
You are informed that
–
Inventory (goods for resale) at 31 December 2014 amounted to $100,000.
–
There were no additions to non-current assets during the year.
–
Annual depreciation $22,000 on warehouse plant and equipment should be allowed and
$10,000 for administrative equipment.
–
Income tax for 2014 should be taken as $50,000.
–
There is one sales director, a finance director and an administration director who earn equal
salaries.
–
A dividend of 10 cents per share is proposed on 31 December 2014.
Required:
Prepare the statement of financial position and statement of profit or loss for the year ended 31
December 2014, with notes, in accordance with IAS 1 “Presentation of Financial Statements”.
Your answer should be as complete and informative as possible within the limits of the
information given to you. An accounting policy note is NOT required.
(18 marks)
98
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 118 SIGMA
Sigma is a quoted company with an authorised share capital of 500,000 participating shares of $1. The
company prepares its accounts as at 31 March each year and the list of balances, before final
adjustments, extracted on 31 March 2015 showed:
$000
Share capital, issued and fully paid $1 ordinary
Retained earnings as on 1 April 2014
6% Loan debentures (secured on factory)
Factory Cost at 1 April 2014
400
Accumulated depreciation 1 April 2014
Plant and equipment Cost at 1 April 2014
160
Accumulated depreciation 1 April 2014
Additions in year
20
Payables and accrued expenses
Inventory as on 31 March 2015
320
Receivables
200
Prepayments
160
Balance at bank
180
Profit for the year (subject to the following information)
_
Proceeds from sale of plant
______
$000
400
122
120
222
24
______
1,440
———
1,440
———
152
60
340
You are given the following information in relation to the financial statements for the year to 31 March
2015:
(1)
The loan debentures are repayable at par in six equal annual instalments commencing 31
December 2015.
(2)
Annual depreciation is calculated as follows:
Factory
Plant and equipment
–
–
2% on cost
20% reducing balance
A full year’s depreciation is charged in the year of acquisition, none in the year of disposal.
(3)
Plant disposed of originally cost $32,000. Accumulated depreciation was $6,000.
(4)
A dividend of 20 cents was declared on 31 March 2015.
Required:
Prepare the statement of financial position and statement of changes in equity as at 31 March
2015 to comply with IAS 1 “Presentation of Financial Statements”. The tangible assets note
ONLY is required. (Note: All calculations should be made to the nearest $000.)
(12 marks)
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99
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 119 LARK
Lark is a manufacturing business compiling its financial statements for the year to 31 March each year.
An extract from the company’s list of account balances at 31 March 2015 is given below:
$000
Sales revenue
Inventory at 1 April 2014
Raw materials
1,060
Work in progress
590
Finished goods
2,180
Purchases – raw materials
7,100
Staff costs
5,170
Other expenses
4,290
Interest expense
500
Property – cost
4,000
– accumulated depreciation, 1 April 2014
Plant and equipment – cost
2,900
– accumulated depreciation, 1 April 2014
$000
20,000
1,800
700
The following further information is available:
(1)
Inventory at 31 March 2015
$000
1,150
650
2,090
Raw materials
Work in progress
Finished goods
(2)
During the year, the company constructed plant for use in its own factory at a cost of
$400,000. The plant was brought into use on 1 October 2014. No entry has yet been made to
record this.
(3)
Depreciation is to be allowed as follows:
Buildings
Plant and equipment
2% per year on cost
15% per year on the reducing balance basis
Proportionate depreciation is charged on new non-current assets acquired during the year.
(4)
The income tax expense for the year is estimated to be $360,000. The tax rate applicable to
the company is 30%.
(5)
Accruals and prepayments at 31 March 2015
Staff costs
Insurance
Miscellaneous expenses
Prepayments
$000
Accruals
$000
810
20
280
Required:
(a)
100
Prepare the company’s statement of profit or loss for the year ended 31 March 2015,
using the classification of expenses by nature method as in IAS 1 “Presentation of
Financial Statements”.
(16 marks)
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(b)
IAS 1 requires a company to produce, as a separate component of its financial statements, a
statement of changes in equity.
State FOUR items which could appear in the statement of changes in equity.
(4 marks)
(20 marks)
Question 120 ALPACA
The following information is available about the balances and transactions of Alpaca:
Balances at 30 April 2015
Non-current assets – cost
– accumulated depreciation
Inventories
Receivables
Cash at bank
Payables
Issued share capital – ordinary shares of $1 each
Retained earnings
10% Loan notes
Loan note interest owing
$000
1,000
230
410
380
87
219
400
818
200
10
Transactions during year ended 30 April 2015
Sales revenue
Purchases
Expenses
Interest on loan notes paid during year
$000
4,006
2,120
1,640
20
Issue of 100,000 $1 ordinary shares at a premium of 50c per share.
There were no purchases or sales of non-current assets during the year.
Adjustments at 30 April 2015:
(1)
(2)
Depreciation of $100,000 is to be allowed for.
Receivables totalling $20,000 are to be written off.
Balances at 30 April 2015:
(1)
(2)
(3)
(4)
Inventory
Receivables (before writing off debts shown above)
Cash at bank
Trade payables
$000
450
690
114
180
Required:
Prepare the statement of financial position of Alpaca as at 30 April 2015 using the format in
IAS 1 “Presentation of Financial Statements” as far as the information available allows.
Note: A formal statement of profit or loss is not required, but your answer should include a
working showing your computation of the retained earnings figure in the statement of financial
position. (This working carries 4 of the 11 marks available in all.)
(11 marks)
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101
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 121 MCQs CAPITAL STRUCTURE AND FINANCE COSTS
121.1
121.2
Which of the following would cause a company’s profit for the year to increase?
A
Issue of 100,000 ordinary shares at a premium of 2%
B
Revaluation of a freehold property from $70,000 to $100,000
C
Disposal of a fork lift truck which originally cost $15,000 and has a carrying
amount of $9,250 for $8,500
D
Receipt of $25 from a customer previously written off as irrecoverable
A company’s assets and liabilities at the beginning and end of a year were:
Non-current assets (Carrying amount)
Current assets
Payables and accrued expenses
Liability for taxation
Issued equity shares of $1
Share premium
Reserves
Dividends payable
1 January
$
100,000
120,000
30,000
20,000
100,000
5,000
50,000
15,000
31 December
$
150,000
110,000
40,000
18,000
125,000
10,000
?
20,000
During the year the company issued a further 25,000 shares at $1.20 whilst cash payments of
$20,000 for dividends and $22,000 for taxation were made.
What was the company’s profit before taxation for the year?
A
B
C
D
121.3
$36,000
$39,000
$42,000
$48,000
A company has 50,000 $1 cumulative 8% preferred shares and 100,000 50 cent ordinary
shares. As at 1 January 2014 its preferred shareholders have not received any dividend for the
previous five years, and only half their entitlement in the year preceding that. For the year
ended 31 December 2014, the company wishes to pay a dividend of $20,000 to its ordinary
shareholders.
What will be the total amount of dividends declared for the year?
A
B
C
D
102
$26,000
$40,000
$42,000
$46,000
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
121.4
The following share capital information is available for a company:
Authorised Issued share
$
$
2,000,000
1,000,000
500,000
250,000
25 cent ordinary shares
6% 50 cent preferred shares
In addition to providing for the preferred dividend for a financial year, an ordinary dividend
of 2 cents per share is payable.
What is the total amount of dividends for the year?
A
B
C
D
121.5
Which of the following is NOT a category of cash flow identified in IAS 7 “Statement of
Cash Flows”?
A
B
C
D
121.6
$35,000
$95,000
$110,000
$190,000
Servicing activities
Investing activities
Financing activities
Operating activities
The carrying amount of non-current assets of a company at 1 July 2014 was $260,000 and at
30 June 2015 was $281,000. During the year ended 30 June 2015 assets, which had cost
$20,000 on 31 December 2013, were sold for $9,000.
Non-current assets are depreciated at 10% per annum on the reducing balance basis, with no
charge in the year of acquisition and a full year’s charge in the year of disposal.
What was the cost of non-current assets acquired during the year to June 2015?
A
B
C
D
121.7
Which of the following would result in an increase in cash flow?
A
B
C
D
121.8
$23,000
$63,000
$65,000
$67,000
Issue of bonus shares
Depreciation charge
Revaluation of an asset
Rights issue
On 31 December 2014 the income tax liability of a company was $29,500 (2013: $25,300).
The tax charge for the year ended 31 December 2014 was $32,000.
What figure for taxation should be included in the statement of cash flows for the year
ended 31 December 2014?
A
B
C
D
$27,800
$29,500
$32,000
$36,200
(14 marks)
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103
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 122 RETAIL INVENTORY
A retailer has the following purchases and sales of a particular product line:
Units
purchased
2 December
16 December
30 December
14 January
28 January
11 February
100
60
70
50
80
40
Purchase
price per unit
$
500
503
506
509
512
515
Units
sold
60
80
50
70
50
40
Selling
price per unit
$
530
528
526
524
522
520
At 31 December the physical inventory was 150 units. The cost of inventories is determined on a FIFO
basis. Selling and distribution costs amount to 5% of selling price and general administration expenses
amount to 7% of selling price.
Required:
(a)
(b)
State THREE reasons why the net realisable value of inventory may be less than cost.
(3 marks)
Calculate to the nearest $ the value of inventory at 31 December:
(i)
(ii)
(iii)
at cost;
at net realisable value;
at the amount to be included in the financial statements in accordance with
IAS 2 “Inventories”.
(9 marks)
(12 marks)
Question 123 MEASUREMENT OF INVENTORIES
IAS 2 Inventories prescribes the accounting treatment for inventories under the historical cost system.
Required:
(a)
Briefly explain how IAS 2 requires the following to be dealt with:
(i)
(ii)
(iii)
(b)
fixed production overheads;
the determination of the lower of cost and net realisable value;
the identification of costs when there are large numbers of items which are
ordinarily interchangeable.
(8 marks)
State FOUR disclosure requirements of IAS 2 in respect of inventories.
(4 marks)
(12 marks)
Question 124 BILDA
Bilda processes and sells a single product. Purchases of raw material during the year were made at a
regular rate of 1,000 tonnes at the beginning of each week. The price was $100 per tonne on 1 January
2014 and was increased to $150 per tonne on 1 July 2014, remaining constant from then until the end of
the year, 31 December 2014. In addition to this price a customs duty of $10 per tonne was paid
throughout the year, and transport from the docks to the factory cost $20 per tonne.
Variable costs of processing were $25 per tonne and the fixed production costs were $30,000 per week.
One tonne of raw material is processed into one tonne of finished product and sold at a delivered price
of $240 per tonne. Average delivery costs to customers were $7.50 per tonne.
104
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
At the beginning of the year there were no inventories and at the end of the year there were 5,000
tonnes of raw material and 2,000 tonnes of finished product. It is expected that the costs and prices
current at 31 December 2014 will continue during 2015.
Required:
(a)
Draft an accounting policy statement on inventories for the company to include in its
annual accounts.
(4 marks)
(b)
Calculate the value of inventories at 31 December 2014 using the FIFO basis under
IAS 2.
(8 marks)
(12 marks)
Question 125 MCQs IAS 2
125.1
125.2
Which of the following statements is correct?
A
Carriage inwards and outwards are both expenses which can be validly included in
establishing the cost of inventory
B
Carriage inwards is an expense but carriage outwards is sundry income so only
carriage inwards can be included in the valuation of inventory
C
Carriage inwards and outwards are both expenses, but only carriage inwards can be
validly included where appropriate in the valuation of inventory
D
Carriage inwards and outwards are both expenses, but only carriage outwards can
be validly included where appropriate in the valuation of inventory
On 1 January 2014 Uba acquired goods for sale in the ordinary course of business for
$105,000, including $5,000 refundable purchase taxes. The supplier usually sells goods on
30 days’ interest-free credit. However, as a special promotion, the purchase agreement for
these goods provided for payment to be made in full on 31 December 2014. In acquiring the
goods carriage costs of $2,000 were incurred: these were due on 31 January 2014. Uba’s cost
of capital is 10% per annum.
At what amount should Uba measure the cost of these goods (to the nearest $00)?
A
B
C
D
125.3
$92,900
$92,700
$92,000
$90,900
Bumi had 120 units of an item in inventory which were purchased some time ago at a cost of
$1,200. Immediately before the end of the financial year 20 units were sold for $180. Shortly
after the year end a further 20 units were sold for $170 with $20 being incurred in delivering
the items to the customer.
At what amount should the items in inventory at the end of the financial year be
included in the financial statements?
A
B
C
D
$750
$800
$850
$900
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105
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
The following information relates to items 125.4 and 125.5:
On 1 January Mobi purchased 100 units of goods for resale for $100,000. On 1 March 20 further units
were bought for $20,400. On 1 August 30 units were sold for $33,000.
125.4
What is the cost of the remaining inventory using the first-in, first-out (FIFO) formula?
A
B
C
D
125.5
$91,800
$90,400
$90,000
$87,400
If Mobi used the average cost method instead of FIFO what would be the effect on inventory
valuation and reported profit?
A
B
C
D
Inventory valuation
Increased
Increased
Decreased
Decreased
Reported profit
Increased
Decreased
Increased
Decreased
(10 marks)
Question 126 SALE OF GOODS AND LEISURE FACILITIES
“Revenue is the gross inflow of economic benefits arising in the course of ordinary activities when
those inflows result in increases is equity, other than increases relating to contributions from equity
participants.”
IAS 18 Revenue should be applied to revenue arising from the sale of goods, the rendering of services
and the use by others of entity assets.
Required:
(a)
State the criteria which must be met before revenue is recognised in respect of the sale of
goods.
(5 marks)
(b)
An entity provides sports and leisure facilities. It charges a fixed annual subscription, payable
in advance, which entitles members to use most of the facilities of the entity (e.g. gym,
swimming pool). Additional fees are payable for specific activities (e.g. sauna, squash courts)
as used.
Describe how the entity should recognise revenue from membership subscriptions and
additional activities.
(7 marks)
(12 marks)
Question 127 MCQs IAS 18
127.1
A company receives income from:
(1)
(2)
(3)
(4)
106
the sale of non-current assets;
the provision of services to clients;
surplus cash funds placed on deposit;
property rentals.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
From which of these sources must revenue be recognised under IAS 18 “Revenue”?
A
B
C
D
127.2
To which source of revenue should the percentage of completion method be applied?
A
B
C
D
127.3
1, 2 and 3 only
1, 2 and 4 only
1, 3 and 4 only
2, 3 and 4 only
Sale of goods
Rendering of services
Interest
Royalties
Bara sold 10 items of merchandise with a list price of $100 each to a customer on normal
credit terms of 30 days interest-free credit. Bara offers a 20% trade discount on all such sales.
10 days after the sale the customer paid Bara $750, which was accepted in full and final
settlement of the amount due. $40 of the amount received is in respect of sales tax collected
by Bara on behalf of the tax authority.
At what amount should Bara measure revenue from the sale of these items?
A
B
C
D
127.4
Which one of the following conditions must be met for revenue from the sale of goods to
be recognised?
A
B
C
D
127.5
$710
$750
$760
$800
The amount of revenue is fixed
All associated costs have been incurred
It is certain that the goods will be paid for
Significant risks and rewards of ownership have been transferred
IAS 18 Revenue prescribes the accounting treatment for the following revenues:
(1)
(2)
(3)
(4)
Royalty income
Dividend income
Revenue from the sale of goods
Revenue from the rendering of services
Which of these revenues can be recognised on an accrual basis in accordance with
IFRS?
A
B
C
D
1, 2 and 3 only
1, 2 and 4 only
1, 3 and 4 only
2, 3 and 4 only
(10 marks)
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107
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 128 DEPRECIATION AND REVALUATION
An entity has a head office and two warehouses, from which it conducts its business. The head office
building and gardens are maintained to a high standard. During the year one of the warehouses was
extended to provide additional storage space at a cost of $120,000 and $67,000 was spent on repairing
storm damage to the roof of the other warehouse.
The directors are considering including one of the warehouses in the statement of financial position at
market value, which is substantially in excess of cost.
Required:
(a)
Explain the factors to be taken into account when calculating depreciation on the head
office.
(5 marks)
(b)
Explain how the amounts spent on the warehouses during the year should be treated.
(4 marks)
(c)
Comment on the acceptability of the directors’ proposal that the warehouse should be
included at market value.
(6 marks)
(d)
State the specific disclosures necessary when items of property, plant and equipment are
stated at revalued amounts.
(5 marks)
(20 marks)
Question 129 DIAMOND (IAS 16)
Diamond is a trading company making up its accounts regularly to 31 December each year. At 1
January 2013 the following balances existed in the records of Diamond:
$000
Land – cost
1,000
Buildings – cost
500
Aggregate depreciation charged on buildings to 31 December 2012
210
Office equipment – cost
40
Aggregate depreciation charged on office equipment to 31 December 2012
24
The company’s depreciation policies are as follows:
Land – no depreciation
Buildings – depreciation charged at 2% per annum on cost on the straight line basis.
Office equipment – depreciation charged at 12½% per annum on the straight line basis.
A full year’s depreciation is charged in the year of acquisition of all assets and none in the year of
disposal.
During the two years to 31 December 2014 the following transactions took place:
(1)
108
Year ended 31 December 2013:
(i)
10 June
Office equipment purchased for $16,000. This equipment was to
replace some old items which were given in part exchange. Their
agreed part exchange value was $4,000. They had originally cost
$8,000 and their carrying value was $1,000. The company paid the
balance of $12,000 in cash.
(ii)
8 October
An extension was made to the building at a cost of $50,000.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(2)
Year ended 31 December 2014:
1 March
Office equipment which had cost $8,000 and with a written-down value
of $2,000 was sold for $3,000.
In preparing financial statements at 31 December 2014 it was decided to revalue the land upwards by
$200,000 to reflect a recent survey.
Required:
(a)
Write up the necessary ledger accounts to record these transactions for the TWO years
ended 31 December 2014. (Separate cost (or valuation) and aggregate depreciation
accounts are required; do not combine cost and depreciation in a single account.)
(11 marks)
(b)
Explain the purpose of depreciation according to IAS 16 “Property, Plant and
Equipment”, and the factors that should be taken into account in assessing the amount
of depreciation required each year.
(5 marks)
(16 marks)
Question 130 MCQs IAS 16
130.1
IAS 16 “Property, Plant and Equipment” defines a number of terms with the meaning
specified. For example, “the amount at which an asset is recognised after deducting any
accumulated depreciation ...”.
Which term does this define?
A
B
C
D
130.2
At what amount is a revalued asset included in the statement of financial position in
accordance with IAS 16?
A
B
C
D
130.3
Carrying amount
Depreciable amount
Recoverable amount
Residual value
Fair value
Market value
Replacement value
Revalued amount
Which of the following statements concerning the revaluation of property, plant and
equipment is correct?
A
B
C
D
If any asset is revalued all assets must be revalued
Revalued assets must be revalued annually
Revaluations must be carried out by an independent valuer
Fair value may be estimated if a market value cannot be determined
The following information relates to items 130.4 and 130.5:
On 1 January 2014 Amco acquired a building for $1,000,000. At 31 December 2014 management
made the following assessments about the building as at that date:



its useful life is 40 years from the date of acquisition;
its residual value is expected to be $200,000;
its fair value is $1,300,000.
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109
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
130.4
What is the carrying amount of the building at 31 December 2014 under the cost model?
A
B
C
D
130.5
$1,000,000
$980,000
$975,000
$780,000
What is the carrying amount of the building at 31 December 2014 and the depreciation
charge for the year to 31 December under the revaluation model?
A
B
C
D
Carrying amount
$1,300,000
$1,300,000
$1,272,500
$1,267,500
Depreciation charge
$Nil
$20,000
$27,500
$32,500
(10 marks)
Question 131 RESEARCH AND DEVELOPMENT
“Expenditure on research costs should be recognised as an expense when it is incurred … An
intangible asset arising from development is recognised if, and only, if, an entity can demonstrate all of
the following …”
IAS 38 Intangible assets
Required:
(a)
Explain why expenditure on research is treated differently from expenditure on
development.
(4 marks)
(b)
State the criteria to be demonstrated for expenditure on development to be recognised
as an intangible asset.
(6 marks)
(c)
An entity has incurred the following costs prior to commercial production of a new pollution
filter for use on commercial vehicles:
Marketing awareness campaign
Patent royalty payable to inventor of filter
Salaries of staff testing filter prototypes
$50,000
$12,000
$38,500
State, with reasons, which costs should be included in the internally-generated
intangible asset.
(4 marks)
(d)
Describe how and when development expenditure should be amortised.
(6 marks)
(20 marks)
Question 132 DEFER
Your client, a limited liability company, wishes to defer expenditure on development activities where
possible and for as long as possible. The finance director has asked for your advice on what procedures
to set up in order to identify relevant expenditure and comply with best accounting practice.
Required:
Draft the contents of a letter to the finance director of the company which addresses his concerns.
(10 marks)
110
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 133 MCQs IAS 38
133.1
IAS 38 provides examples of research and development activities, for example:
(1)
(2)
(3)
(4)
formulating new products;
testing pre-production prototypes;
designing tools involving new technology;
constructing a pilot plant.
Which of these examples are development activities?
A
B
C
D
133.2
In what circumstance should straight-line amortisation be applied to an intangible
asset?
A
B
C
D
133.3
1, 2 and 3 only
1, 2 and 4 only
1, 3 and 4 only
2, 3 and 4 only
If a pattern of consumption cannot be determined reliably
If its residual value is assumed to be zero
If the amortisation expense will be included in the carrying amount of another asset
If its useful life depends on the useful life of other assets which are amortised or
depreciated on a straight-line basis
A company has incurred the following costs in operating a pilot plant for the manufacture of a
new product:
(1)
(2)
(3)
(4)
amortisation of a licence granted to manufacture the product
expenditure on material consumed in the operation of the plant
costs incurred in training staff to operate equipment in the plant;
depreciation of equipment in the pilot plant.
Which of these examples are development activities?
A
B
C
D
133.4
1, 2 and 3 only
1, 2 and 4 only
1, 3 and 4 only
2, 3 and 4 only
Which ONE of the following statements concerning the accounting treatment of
research and development expenditure is true, according to IAS 38 “Intangible Assets”?
A
Development costs which have been recognised as an asset must be amortised over
a period not exceeding five years.
B
Expenditure on development projects that has been capitalised must be amortised on
a straight-line basis.
C
To decide whether development costs qualify for asset recognition, it is necessary to
consider only technical feasibility and commercial viability.
D
Research expenditure, other than capital expenditure on research facilities, should
be recognised as an expense in the period in which it is incurred.
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111
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
133.5
Agar commenced a research and development project in 2011. $20,000 was expensed in
2011 and a further $30,000 in 2012. In 2013 the project was completed after incurring further
expenditure of $40,000. The intangible asset created is a formula for a medical cure which
was patented on 31 December 2013 for 10 years at an additional cost of $10,000.
Management is of the opinion that the useful life of the formula is five years and that the
patent could be sold now for an amount in excess of $100,000.
What is the maximum amount at which the intangible asset can be carried in Agar’s
statement of financial position for the year ended 31 December 2014?
A
B
C
D
$40,000
$45,000
$80,000
$100,000
(10 marks)
Question 134 ETERNITY
Eternity is finalising its accounts for the year ended 31 December 2014. The following events have
arisen since the year end and the financial director has asked you to comment on the final accounts:
(1)
At 31 December 2014 trade receivables included a figure of $250,000 in respect of Wico. On
8 March 2015, when the current debt was $200,000, Wico went into receivership. Recent
correspondence with the receiver indicates that no amounts will be paid to unsecured creditors.
(2)
On 15 March 2015 Eternity sold its former head office building for $2.7 million. At the year
end the building was unoccupied and carried at a value of $3.1 million.
(3)
Inventories at the year end included $650,000 of a new electric tricycle. In January 2015 the
EC declared the tricycle to be unsafe and prohibited it from sale. An alternative market, in
Bolivia, is being investigated, although the current price is expected to be cost less 30%.
(4)
Future, an overseas subsidiary was nationalised in February 2015. The overseas authorities
have refused to pay any compensation. The net assets of Future have been valued at
$200,000 at the year end.
(5)
Freak floods caused $150,000 damage to a branch of Eternity in January 2015. The branch
was fully insured.
(6)
On 1 April 2015 Eternity announced a 1 for 1 rights issue aiming to raise $15 million.
Required:
Comment on the accounting treatment of the matters described above.
(12 marks)
Question 135 ACCOUNTING TREATMENTS
You have been asked to advise on the appropriate accounting treatment for the following situations
arising in the books of various companies. The year end in each case can be taken as 31 December
2014 and you should assume that the amounts involved are material in each case.
(1)
112
At the year end there was a debit balance in the books of a company for $15,000, representing
an estimate of the amount receivable from an insurance company for an accident claim. In
February 2015, before the directors had agreed the final draft of the published accounts, the
amount of the claim was finally settled as $18,600.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(2)
A company has an item of equipment which cost $400,000 in 2011 and was expected to last
for 10 years. At the beginning of the 2014 financial year the carrying amount was $280,000.
It is now thought that the company will soon cease to make the product for which the
equipment was specifically purchased. Its recoverable amount is only $80,000 at 31
December 2014.
(3)
On 30 November an entity entered into a legal action defending a claim for supplying faulty
equipment. The company’s solicitors advise that there is a 20% probability that the claim will
succeed. The amount of the claim is $500,000.
(4)
An item has been produced at a manufacturing cost of $1,800 against a customer’s order at an
agreed price of $2,300. The item was in inventories at the year end awaiting delivery
instructions. In January 2015 the customer was declared bankrupt and the most reasonable
course of action seems to be to make a modification to the unit, costing approximately $300,
which is expected to make it marketable with other customers at a price of about $1,900.
(5)
At 31 December a company has a total potential liability of $1 million for warranty work on
contracts. Past experience shows that 10% of these costs are likely to be incurred, that 30%
may possibly be incurred but that the remaining 60% is highly unlikely to be incurred.
Required:
For each of the above situations outline the accounting treatment you would recommend and give
the reasoning of principles involved. The accounting treatment should refer to entries in the
books and/or the year-end financial statements as appropriate.
(12 marks)
Question 136 FOUR EVENTS
“An entity should adjust the amounts recognised in its financial statements to reflect adjusting events
after the reporting period.
“An entity should not prepare its financial statements on a going concern basis if management
determined after the balances sheet date either that it intends to liquidate the entity or to cease trading,
or that it has no realistic alternative but to do so.”
(a)
State, with reasons, which of the following events occurring after the reporting period
provide additional evidence of conditions existing at the end of the reporting period:




(b)
bankruptcy of a customer who owed money to the entity at year end;
flood damaging inventories held at year end;
receipt of long term loan from bank;
issue of credit note for goods sold before year end.
(6 marks)
On 18 July, a company discovers that significant inventories stored at a remote warehouse
have never been included in the financial statements due to a repeated oversight.
Required:
Advise how these inventories should be treated and disclosed in the financial statements
at 30 June.
(5 marks)
(c)
Distinguish between an event after the reporting period and a contingent liability.
(4 marks)
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113
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(d)
State the details to be disclosed in respect of contingent liabilities.
(3 marks)
(e)
State the TWO circumstances in which IAS 1 “Presentation of Financial Statements”
requires certain additional disclosures in respect of going concern.
(2 marks)
(20 marks)
Question 137 MCQs IAS 37
137.1
Which of the following defines a provision in accordance with IAS 37?
A
B
C
D
137.2
A liability of uncertain timing or amount
A possible obligation arising from past events that is of uncertain timing or amount
An adjustment to the carrying amount of assets
A present obligation which is not recognised
An entity is required to measure a provision at the best estimate of the amount required to
settle the obligation at the reporting date.
Which one of the following estimates will give a best estimate when a provision involves
a large population of items?
A
B
C
D
137.3
One which weights all possible outcomes according to their probabilities
The mid-point of a discrete range of possible values
The individual most likely outcome
An amount higher or lower than the individual most likely outcome if other possible
outcomes are mostly higher or lower
Inspire is the defendant in a patent infringement lawsuit. Inspire’s lawyers believe the there is
a 30% chance that the court will dismiss the case and Inspire will not have to make any payout. However, if the court rules in favour of the claimant, they believe that there is a 20%
chance that Inspire will be required to pay damages of $200,000 (the amount sought by the
claimant) and an 80% chance that damages will be $100,000 (the amount that was recently
awarded by the same judge in a similar case). The court is expected to rule sometime in 2013
and there is no indication that the claimant will settle out of court.
What is the best estimate of the provision for the lawsuit that should be recognised in
Inspire’s statement of financial position at 31 December 2014 in accordance with
IAS 37?
A
B
C
D
137.4
114
$Nil
$100,000
$120,000
$200,000
At 31 December 2014 Oberon is pursuing a claim against an insurance company through legal
processes. The court is expected to rule later in 2015. At the reporting date Oberon’s legal
advisers believe there is a 70% chance that Oberon will win the case. Furthermore, they
believe that there is a 20% chance that Oberon will be awarded $200,000 (the amount it is
seeking) and an 80% chance of an award of $100,000 (the amount that was recently awarded
by the same judge in a similar case).
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
How should this event be treated in Oberon’s financial statements for the year ended 31
December 2014?
A
B
C
D
As an asset measured at $200,000
As an asset measured at $100,000
As a contingent asset
It should not be included in the financial statements
(8 marks)
Question 138 MCQs IAS 10
138.1
138.2
Which of the following material events occurring after the end of the reporting period
are adjusting events?
(1)
(2)
(3)
(4)
Sales of inventory for less than cost
Payment received from a customer whose debt had been written off
Sale of a subsidiary company
A flood in the warehouse destroying inventory
A
B
C
D
1 and 2
2 and 3
3 and 4
1 and 4
On 15 March 2015 Fumi authorised for issue its financial statements for the year ended 31
December 2014. On 10 March 2015 the entity’s factory and several items of equipment were
damaged in an earthquake. The damage is estimated to cost $700,000 of which $450,000 is
expected to be covered under insurance policies.
How should this material event have been included in Fumi’s financial statements for
the year ended 31 December 2014?
A
B
C
D
138.3
Which of the following events between the balance sheet date and the date the financial
statements are authorised for issue must be adjusted in the financial statements?
A
B
C
D
138.4
As a provision of $700,000
As a provision of $250,000
As a contingent liability of $700,000 and a contingent asset of $250,000
As a note disclosure of the event
Declaration of ordinary dividends
Decline in market value of investments
Discovery of a fraud revealing that inventory had been stolen
Announcement of a major restructuring
On 15 March 2015 Ramin authorised for issue its annual financial statements for the year
ended 31 December 2014. On 10 March 2015 Ramin’s factory, equipment and inventory
were damaged in an earthquake. The damage is uninsured and management has determined
that Ramin is unable to continue trading.
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115
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
On what basis should Ramin’s financial statements for the year ended 31 December
2014 have been prepared?
A
On a going concern basis with a note disclosing the earthquake as a non-adjusting
event
B
On a basis other than going concern with a statement of that fact and a note
disclosing the earthquake as the reason
C
On a going concern basis with adjustments for the damage including write-downs of
the assets
D
On a going concern basis with no reference to the earthquake as it is not an
adjusting event
(8 marks)
Question 139 ANTIPODEAN
The statements of financial position of Antipodean at the end of two consecutive financial years were:
Non-current assets (carrying amount)
Premises
Equipment
Motor vehicles
31 December 2014
$
$
37,000
45,800
18,930
______
Investments
Current assets
Inventory
Trade receivables and prepayments
Short-term investments
Cash and bank balances
19,670
11,960
4,800
700
______
37,130
________
75,040
(6,500)
25,200
(15,130)
______
Non-current liabilities
Interest-bearing borrowings
Current liabilities
Trade payables and accrued expenses 32,050
Bank overdraft
28,200
______
59,680
17,000
______
76,680
27,500
14,410
3,600
1,800
______
163,860
————
Closing capital
47,310
________
123,990
————
67,940
4,000
15,300
(12,200)
______
78,610
75,040
25,000
28,000
60,250
________
163,860
————
116
38,000
17,600
4,080
______
126,730
Total assets
Capital and reserves
Opening capital
Capital introduced/(withdrawn)
Profit/(loss) for year
Drawings
101,730
25,000
_______
31 December 2013
$
$
20,950
–
______
20,950
________
123,990
————
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Profit for the year ended 31 December 2014 ($25,200) is after accounting for:
$
Depreciation
Premises
Equipment
Motor vehicles
Profit on disposal of equipment
Loss on disposal of motor vehicle
Interest payable
1,000
3,000
3,000
430
740
3,000
The carrying amounts of the assets at the date of disposal were:
$
5,200
2,010
Equipment
Motor vehicles
Interest accrued at 31 December 2014 is $400.
Required:
Prepare a statement of cash flows for the year ended 31 December 2014 in accordance with IAS 7
“Statement of Cash Flows”. Assume that short-term investments are cash equivalents.
(14 marks)
Question 140 R2D2
The financial statements of R2D2 at 30 June were as follows:
2015
$
2014
$
$
$
22,000
(4,000)
——— 18,000
12,000
(1,000)
———
11,000
5,000
(2,250)
———
5,000
(2,000)
———
ASSETS
Non-current assets
Property cost
Depreciation
Plant and equipment
Cost
Depreciation
Current assets
Inventories
Trade receivables
Cash and cash equivalents
16,000
9,950
–
———
Total assets
2,750
———
20,750
25,950
———
46,700
———
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11,000
2,700
1,300
———
3,000
———
14,000
15,000
———
29,000
———
117
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
$
$
$
$
EQUITY AND LIABILITIES
Capital and reserves
Equity capital
Retained earnings
Non-current liabilities
Loan
Current liabilities
Operating overdraft
Trade payables
Income tax payable
Accrued interest
11,000
8,000
1,800
700
———
Total equity and liabilities
3,000
16,200
———
19,200
3,000
3,800
———
6,800
6,000
10,000
21,500
———
46,700
———
–
11,000
1,000
200
———
12,200
———
29,000
———
Statements of profit or loss (extracts)
2015
$
15,400
(1,000)
———
14,400
(2,000)
———
12,400
———
Operating profit
Financing cost (Interest)
Profit before tax
Income tax expense
Profit for the year
2014
$
5,900
(1,400)
———
4,500
(1,500)
———
3,000
———
Equipment with a carrying amount $250 was sold at the beginning of 2015 for $350. This equipment
had originally cost $1,000.
In recent years, no dividends have been paid.
Required:
Prepare a statement of cash flows, under the indirect method, for the year ended 30 June 2015.
(18 marks)
118
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 141 MOMI
The following are the summarised accounts of Momi at 31 December 2013 and 2014 respectively:
2013
$000
Non-current assets
Plant and equipment
Fixtures and fittings
2014
$000
$000
2,086
1,381
———
3,467
Current assets
Inventory
Trade receivables
Short term investment
Cash
1,292
713
1,050
197
———
Total assets
Capital and reserves
Equity capital
Share premium
Retained earnings (Note)
3,252
———
6,719
———
2,103
1,296
———
3,399
1,952
1,486
600
512
———
4,200
800
431
———
5,431
Current liabilities
Income tax payable
Trade payables
Dividends payable
257
899
132
———
Total equity and liabilities
1,288
———
6,719
———
$000
4,550
———
7,949
———
4,500
900
1,180
———
6,580
312
903
154
———
1,369
———
7,949
———
Statement of profit or loss (extracts) for the year ended 31 December 2014
$000
1,381
(310)
———
1,071
———
Profit before taxation
Income tax expense
Profit for the year
Note:
Retained earnings
$000
Balance at 1 January
Profit for period
Dividends – paid
– payable
168
154
——
Balance at 31 December
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$000
431
1,071
(322)
———
1,180
———
119
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
You are informed that:
(1)
plant and equipment with a carrying amount of $184,000 was disposed of for $203,000,
whilst a new item of plant was purchased for $312,000;
(2)
fixtures and fittings with a carrying amount of $100,000 were disposed of for $95,000;
depreciation on fixtures and fittings amounted to $351,000.
Required:
Prepare a statement of cash flows for the year ended 31 December 2014 in accordance with IAS 7
“Statement of Cash Flows”.
(16 marks)
Question 142 JANE
The statements of financial position of Jane at 31 December 2014 and 2013 were as follows:
Reference
to notes
Assets
Non-current assets
Property, plant and equipment
Investments at cost
1
2
Current assets
Inventory
Trade and other receivables
Cash
Total assets
Equity and liabilities
Capital and reserves
Issued capital
Share premium
Revaluation surplus
Retained earnings
Non-current liabilities: 10% Loan notes
Current liabilities
Trade and other payables
Bank overdraft
Dividends payable
3
4
5
6
Total equity and liabilities
120
Year ended 31 December
2014
2013
$000
$000
1,100
50
_____
730
100
_____
1,150
_____
830
_____
110
180
30
_____
80
110
20
_____
320
______
210
______
1,470
———
1,040
———
380
300
200
190
_____
300
200
100
200
_____
1,070
_____
800
_____
150
100
80
130
40
_____
70
40
30
_____
250
______
140
______
1,470
———
1,040
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Notes:
(1)
Property, plant and equipment: During the year property, plant and equipment with a
carrying amount of $80,000 were sold for $60,000. The depreciation charge for the year on
all property, plant and equipment held at the end of the year was $100,000.
(2)
Investments which cost $50,000 were sold during the year for $40,000.
(3)
Issued capital: Jane’s issued capital at 31 December 2013 consisted of 300,000 ordinary
shares of $1 each. Another 80,000 shares were issued during 2014 at a price of $2·25 per
share.
(4)
Revaluation surplus: Jane’s property was revalued upwards by $100,000 during the year.
(5)
10% Loan notes: $50,000 of 10% loan notes was issued on 1 January 2014. All interest to 31
December 2014 has been paid.
(6)
Dividends: The dividends payable are on Jane’s equity share capital. No other dividends
were paid.
Required:
Prepare Jane’s statement of cash flows for the year ended 31 December 2014 complying with
IAS 7 “Statement of Cash Flows” as far as possible. Ignore taxation.
(20 marks)
Question 143 C3P0
The statements of profit or loss and statements of financial position of C3P0 for two consecutive
financial years are shown below:
Statements of profit or loss
Revenue
Cost of sales
Gross profit
Distribution and administration expenses
Interest
Profit for the year
2013
$
200,000
(100,000)
–––––––
100,000
(50,000)
–––––––
50,000
(10,000)
–––––––
40,000
–––––––
2014
$
200,000
(120,000)
–––––––
80,000
(47,000)
–––––––
33,000
(13,000)
–––––––
20,000
–––––––
Only one dividend is declared each year which is paid in the following year. No sales of non-current
assets have occurred during the relevant period. Ignore taxation.
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121
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statements of financial position
31 December 2013
Cost Accumulated Carrying
depreciation amount
$
$
$
Non-current assets
Land
Buildings
Plant
Investments
Current assets
Inventories
Trade receivables
Bank
Cost
$
31 December 2014
Accumulated Carrying
depreciation amount
$
$
43,000
50,000
10,000
_______
–
10,000
4,000
______
43,000
40,000
6,000
______
63,000
90,000
11,000
_______
–
11,000
5,000
______
63,000
79,000
6,000
_______
103,000
_______
14,000
______
89,000
164,000
_______
16,000
______
148,000
50,000
55,000
40,000
3,000
______
98,000
________
80,000
65,000
50,000
–
______
237,000
————
Capital
Issued shares of $1 each
Share premium
Revaluation surplus (land)
Retained earnings
40,000
12,000
–
25,000
______
Non-current liabilities
10% loan borrowings
Current liabilities
Trade payables
Bank overdraft
Dividend payable
77,000
343,000
————
50,000
14,000
20,000
25,000
______
100,000
40,000
–
20,000
______
60,000
________
237,000
————
115,000
________
109,000
150,000
60,000
4,000
20,000
______
84,000
________
343,000
————
Required:
Prepare a statement of cash flows for the year ended 31 December 2014 using the direct method of
IAS 7 “Statement of Cash Flows”.
(11 marks)
122
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 144 TIVOLI
Tivoli manufactures brass tubas. You have been asked by a client to investigate the company with a
view to a possible takeover and replacement of the product with plastic electronic tubas.
You have managed to obtain copies of the last two years’ accounts (for the years ended 31 December
2014 and 2013). The statements of financial position and profit or loss for these years are set out
below:
Statements of financial position
2014
$000
$000
ASSETS
Non-current assets
Land and buildings
Cost
Depreciation
2,160
(180)
———
Plant and equipment
Cost
Depreciation
1,350
(450)
———
Motor vehicles
Cost
Depreciation
750
(360)
———
Current assets
Inventory
Trade receivables
Cash and cash equivalents
1,980
1,500
(150)
———
1,350
900
900
(300)
———
600
390
———
3,270
262
180
115
——
Total assets
2013
$000
$000
600
(240)
———
360
———
2,310
161
120
60
——
557
———
3,827
———
341
———
2,651
———
2,100
95
———
2,195
1,500
36
———
1,536
900
240
450
360
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Ordinary shares of $1 each
Retained earnings
Non-current liabilities
10% debentures
8% redeemable preferred shares of $1 each
Current liabilities
Operating overdraft
Trade payables
Income tax payable
Dividends payable
138
63
175
116
——
78
36
111
80
——
492
———
3,827
———
Total equity and liabilities
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305
———
2,651
———
123
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statements of profit or loss
2014
2013
$000
$000
$000
$000
4,500
3,750
(1,800)
(1,200)
———
———
2,700
2,550
900
900
1,350
1,335
———
(2,250) ———
(2,235)
———
———
450
315
(100)
(80)
———
———
350
235
(175)
(111)
———
———
175
124
———
———
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit
Financing cost (interest)
Profit before tax
Income tax expense
Profit after tax
Notes
(1)
During 2014 some plant, which had cost $250,000 and had been depreciated by $180,000,
was sold for $100,000.
(2)
Included in trade payables is a closing accrual for interest of $20,000 ($10,000 in 2013).
(3)
Included in trade payables is a supplier for plant purchases of $10,000.
(4)
The preferred shares were redeemed at the beginning of the year.
(5)
The company does not pay interim dividends.
Required:
Prepare a statement of cash flows for the year ended 31 December 2014 using the indirect
method. Your answer should comply as far as possible with the requirements of IAS 7
“Statement of Cash Flows”. Notes are not required.
(15 marks)
Question 145 MCQs IAS 7
145.1
124
Which of the following items might appear in a company’s cash flow statement?
(1)
(2)
(3)
(4)
Disposal proceeds from the sale of a director’s car
The theft of items of inventory
Recovery of a debt previously written off
Dividends received
A
B
C
D
1, 2 and 3 only
1, 2 and 4 only
1, 3 and 4 only
2, 3 and 4 only
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
145.2
Which one of the following would be classified under investing activities in a statement
of cash flows prepared in accordance with IAS 7?
A
B
C
D
145.3
145.4
Repayment of a loan made to another company
Repayment of a loan from a bank
Proceeds from a new issue of shares
Dividend payments to shareholders
Which of the following items might appear in a company’s statement of cash flows?
(1)
(2)
(3)
(4)
Proposed dividends
Rights issue of shares
Bonus issue of shares
Repayment of loan
A
B
C
D
1 and 3
2 and 4
1 and 4
2 and 3
An extract from a cash flow statement prepared by a trainee accountant is shown below.
Net profit before taxation
Adjustment for: Interest expense
Operating profit before working capital changes
Decrease in inventories
Increase in receivables
Increase in payables
Cash generated from operations
$m
31
(6)
–––
25
4
(5)
(7)
–––
17
–––
Another trainee has criticised it on the following grounds:
(1)
(2)
(3)
(4)
Interest expense should have been added, not deducted
Decrease in inventories should have been deducted, not added.
Increase in receivables should have been added, not deducted.
Increase in payables should have been added, not deducted
Which of the criticisms are correct?
A
B
C
D
145.5
2 and 4
2 and 3
1 and 3
1 and 4
A draft cash flow statement contains the following calculation of net cash inflow from
operating activities:
$m
Operating profit
38
Depreciation
6
Decrease in inventories
(9)
Decrease in trade and other receivables
15
Decrease in trade payables
12
–––
Net cash inflow from operating activities
62
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125
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Assuming the narratives to be correct, what should be the net cash inflow from
operating activities after correcting errors in the draft cash flow statement?
A
B
C
D
$20 m
$26 m
$50 m
$56 m
(10 marks)
Question 146 P & S
P acquired 80% of the capital of S on 1 January 2014. At the year end 31 December 2014 the two
companies have the following statements of financial position:
P
$
Investment in S
Other assets
Share capital
Share premium
Retained earnings
1 January 2014
Profit for year 2014
S
$
4,000
8,000
———
12,000
———
$
4,000
———
4,000
———
6,000
–
4,000
2,000
———
$
1,000
500
1,500
1,000
———
6,000
———
12,000
———
2,500
———
4,000
———
Notes
1.
Non-controlling interest is valued at fair value on acquisition, which was $1,000 on 1 January
2014.
2.
There has been no change in S’s share capital during the year.
Required:
Prepare the consolidated statement of financial position of the P group as at 31 December 2014.
(10 marks)
126
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 147 HAPPY AND SAD
Happy acquired 90% of the share capital of Sad on 1 January 2011 when the balance on retained
earnings was $10,000 and there was no revaluation surplus.
Their respective statements of financial position as at 31 December 2014 are as follows:
Non-current assets
Tangible
Investment in Sad
Current assets
Share capital ($1 ordinary shares)
Revaluation surplus
Retained earnings
Current liabilities
Happy
$
Sad
$
135,000
30,000
————
165,000
57,000
————
222,000
————
60,000
–
————
60,000
46,000
————
106,000
————
50,000
50,000
90,000
————
190,000
32,000
————
222,000
————
15,000
15,000
50,000
————
80,000
26,000
————
106,000
————
Non-controlling interest is valued at fair value on acquisition. The market price of Sad’s shares are a
good indicator of fair value. On 1 January 2011 the market price of Sad’s shares was $2.00.
At the year end Sad is holding $2,000 of inventory purchased from Happy. Happy sells goods at cost
plus 25%.
Required:
Prepare the consolidated statement of financial position of the Happy group as at 31 December
2014.
(12 marks)
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127
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 148 FAYE
Statements of financial position at 31 December 2014
Assets
Long-term assets
Tangible assets
Investments: Shares in Garbo at cost
Current assets
Equity and liabilities
Capital and reserves
Called up share capital ($1 ordinary shares)
Share premium account
Retained earnings
Long-term liabilities
8% Debenture loans
Current liabilities
Faye
$
Garbo
$
33,000
15,000
20,000
–
5,000
———
53,000
———
15,000
———
35,000
———
12,000
5,000
7,000
———
24,000
4,000
–
12,000
———
16,000
20,000
9,000
———
53,000
———
9,000
10,000
———
35,000
———
On 1 January 2012 Faye acquired 3,000 shares in Garbo. At that date the balance on Garbo’s retained
earnings was $8,000.
The fair value of Garbo’s land on 1 January 2012 was $1,500 higher than its carrying value.
Non-controlling interest is valued at fair value. On 1 January 2012 the fair value was measured at
$5,000.
Required:
Prepare the consolidated statement of financial position of Faye as at 31 December 2014.
(12 marks)
128
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 149 HONEY
The following are summaries of the financial statements of Honey and its subsidiary, Sugar, for the
year ended 30 June 2014:
Statements of financial position
Honey
Sugar
Assets
$
$
Non-current assets
Tangible assets
27,000
12,500
Investments: 2,000 ordinary shares in Sugar at cost
2,000
———
———
29,000
12,500
Current assets
25,000
12,000
———
———
54,000
24,500
———
———
Shareholders’ equity and liabilities
Shareholders’ equity
Called up share capital ($1 ordinary share)
20,000
3,000
Share premium account
6,000
–
Retained earnings
9,000
14,000
———
———
35,000
17,000
Non-current liabilities: 10% Debenture loan
12,000
–
Current liabilities
7,000
7,500
———
———
54,000
24,500
———
———
The fair value of non-controlling interest on acquisition was $1,000.
Honey acquired its shares in Sugar more than five years ago when the balance on the retained earnings
was $nil. There was no goodwill on acquisition.
Statements of comprehensive income
Honey
$
24,000
(9,000)
———
15,000
(2,300)
(1,500)
(1,200)
———
10,000
(3,000)
———
7,000
———
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Interest payable and similar charges
Profit before taxation
Income tax expense
Profit for the year
Sugar
$
30,000
(11,000)
———
19,000
(1,300)
(2,700)
–
———
15,000
(5,000)
———
10,000
———
Required:
Prepare the consolidated statement of comprehensive income and the consolidated statement of
financial position of Honey for the year ended 30 June 2014.
(12 marks)
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129
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Question 150 HUMPHREY
The following are the statements of comprehensive income for the year ended 30 September 2014 of
Humphrey and its subsidiary Stanley:
Humphrey Stanley
$000
$000
Sales
1,100
400
Cost of sales
(600)
(240)
——–
—–
Gross profit
500
160
Distribution costs
(60)
(50)
Administration costs
(65)
(55)
Investment income
20
5
Interest
(25)
(6)
——–
—–
Profit before tax
370
54
Taxation
(160)
(24)
——–
—–
Profit for the year
210
30
——–
—–
The following information is relevant:
(1)
Humphrey acquired 80% of Stanley many years ago, when the reserves of that company
were $5,000.
(2)
Total intra-group sales in the year amounted to $100,000, Humphrey selling to Stanley.
(3)
At the year end the statement of financial position of Stanley included inventory purchased
from Humphrey. Humphrey had taken a profit of $2,000 on this inventory.
(4)
The investment income of Humphrey includes $16,000 in respect of a dividend paid by
Stanley during the year.
Required:
Prepare a consolidated statement of comprehensive income for the year ended 30 September
2014.
(10 marks)
Question 151 HAPPY
The following statements of comprehensive income were prepared for the year ended 31 March 2015
for Happy and its subsidiary, Sleepy:
Happy
Sleepy
$
$
Revenue
303,600
217,700
Cost of sales
(143,800)
(102,200)
———–
———–
Gross profit
159,800
115,500
Operating expenses
(71,200)
(51,300)
Other income: Dividends receivable from quoted investments
2,800
1,200
———
———
Profit before tax
91,400
65,400
Income tax
(46,200)
(32,600)
———
———
Profit for the year
45,200
32,800
———
———
On 30 November 2014 Happy acquired 75% of the issued ordinary capital of Sleepy.
130
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Profits of both companies are deemed to accrue evenly over the year.
Required:
(a)
Prepare the consolidated statement of comprehensive income for the year ended 31
March 2015.
(7 marks)
(b)
Explain the extent to which Sleepy’s results should be included in the consolidated
statement of comprehensive income.
(3 marks)
(10 marks)
Question 152 BING AND CROSBY
The summarised statements of profit or loss of Bing and Crosby, for the year ended 31 October 2014,
are provided below. Bing acquired 3,600,000 ordinary shares in Crosby for $5,250,000 on 1 November
2013 when the retained earnings of Crosby were $300,000. On the same date, Bing also acquired 40%
of Crosby’s loan notes of $400,000.
Statements of profit or loss for the year ended 31 October 2014
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Finance costs
Income from Crosby: Loan note interest
Dividends
Profit before tax
Income tax expense
Profit for the year
Bingo
$000
9,600
(5,550)
–––––
4,050
(1,050)
(1,650)
–
10
150
–––––
1,510
(600)
–––––
910
–––––
Crosby
$000
3,900
(2,175)
–––––
1,725
(480)
(735)
(25)
–
–
–––––
485
(120)
–––––
365
–––––
The following information is also available:
(1)
Crosby’s total share capital consists of 6,000,000 ordinary shares of $1 each.
(2)
It is group policy to value the non-controlling interest at fair value. The fair value of the noncontrolling interest at the acquisition date was $3,200,000.
(3)
During the year ended 31 October 2014, Bing sold goods costing $200,000 to Crosby for
$300,000. At 31 October 2014, 50% of these goods remained in Crosby’s inventory.
Required:
(a)
Calculate the goodwill arising on the acquisition of Crosby.
(b)
Prepare the consolidated statement of profit or loss for Bing for the year ended 31
October 2014.
(6 marks)
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(2 marks)
131
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(c)
Define an “associate” relationship and give three examples that might demonstrate that
such a relationship exists.
(4 marks)
(12 marks)
Question 153 MCQs CONSOLIDATED FINANCIAL STATEMENTS
153.1
X has a 40% shareholding in each of the following three companies:
P:
Q:
R:
X has the right to appoint or remove a majority of the directors of P.
X has significant influence over the affairs of Q.
X has the power to govern the financial and operating policies of R.
Which of these companies are subsidiaries of X for financial reporting purposes?
A
B
C
D
153.2
P and R only
Q and R only
P and Q only
P, Q and R
Holder acquired 150,000 $1 ordinary shares in Sub on 1 March 2014 at a cost of $300,000.
Sub’s retained earnings at 1 March 2014 were $36,000 and its issued ordinary share capital
was $200,000. Non-controlling interest is valued at fair value on acquisition, which was
$100,000. Sub’s retained earnings today have increased to $60,000.
How much goodwill arises on consolidation?
A
B
C
D
153.3
$99,000
$123,000
$140,000
$164,000
Wolf acquired 80,000 $1 ordinary shares in Fox on 1 April 2014 at a cost of $177,000. Fox’s
retained earnings at that date were $50,000 and its issued ordinary share capital was
$100,000. Fair value of non-controlling interest on acquisition was $52,000 and the fair value
of Fox’s land on acquisition was $10,000 higher than its carrying value.
How much goodwill arises on consolidation?
A
B
C
D
153.4
$57,000
$67,000
$69,000
$79,000
Vaynor an incorporated entity acquired 40,000 ordinary shares in Yarlet some years ago.
Extracts from the statements of financial position of the two companies as on 30 April 2015
were:
Vaynor
Yarlet
$000
$000
Ordinary shares of $1 each
500
50
Retained earnings
90
70
At acquisition Yarlet had retained earnings of $30,000.
Ignore goodwill.
132
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
What are the consolidated retained earnings of Vaynor on 30 April 2015?
A
B
C
D
153.5
$90,000
$122,000
$146,000
$160,000
During the year Frodo sold goods for a sales price of $168,000 to its wholly-owned
subsidiary Bilbo. These goods were sold by Frodo at a mark-up of 50% on cost. On 31
December Bilbo still had $36,000 worth of these goods in inventory.
What adjustment for unrealised profit should be made in Frodo’s consolidated financial
statements?
A
B
C
D
153.6
$12,000
$18,000
$24,000
$36,000
Tomas owns 65% of the shares in Drew. Drew owes Tomas $5,000. Tomas has receivables
of $300,000 and Drew has receivables of $130,000.
What are the consolidated receivables for Tomas?
A
B
C
D
$435,000
$425,000
$381,250
$379,500
(12 marks)
Question 154 ALEX
Artur has provided his son, Alex, with all the capital required in the setting up of a business on 1 April
2013 and its subsequent development. Alex has now produced the following summarised accounts as a
basis for discussing the progress of the business with his father.
Statements of profit or loss
Year ended 31 March
2014
2015
$000
$000
100
140
(60)
(90)
——
——
40
50
(32)
(51)
——
——
8
(1)
——
——
Revenue
Cost of sales
Gross profit
Less Expenses
Profit/(loss)
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133
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statements of financial position
Non-current assets
Net current assets
Inventory
Trade receivables
Bank balance/(overdraft)
Less Trade payables
Capital employed
At 1 April
2013
$000
70
——
At 31 March
2014
$000
70
——
At 31 March
2015
$000
80
——
5
–
13
(3)
——
15
——
7
11
2
(5)
——
15
——
8
24
(4)
(8)
——
20
——
85
——
85
——
100
——
Alex is keen for his father to increase the capital employed in the business and has drawn his father’s
attention to the following matters revealed in the accounts.
(1)
A $15,000 increase in net capital employed can be linked with a $40,000 increase in revenue
during the past year.
(2)
The rate of inventory turnover during the past year has been 12 as compared with 10 in the
previous year.
(3)
The increase in fixed overheads last year is due to the renting of larger premises. However,
these new premises would be adequate for a turnover of $200,000.
Artur is not pleased with the results of his son’s business.
Alex can easily obtain employment offering a salary of $10,000 per annum and Artur can obtain 10%
from a bank deposit account.
Required:
(a)
Calculate for each of the years ended 31 March 2014 and 2015 FOUR financial ratios
which draw attention to matters which could give Artur cause for concern. State clearly
the formula or basis for each ratio used.
(8 marks)
(b)
Outline THREE reasons for closing the business and ONE reason in favour of its
continuance.
(4 marks)
(12 marks)
134
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Question 155 SOLO
You are given summarised results of Solo, an electrical engineering business, as follows:
Statements of profit or loss
Year ended 31 December
2014
2013
$000
$000
60,000
50,000
42,000
34,000
–––––––
–––––––
18,000
16,000
15,500
13,000
–––––––
–––––––
2,500
3,000
2,200
1,300
–––––––
–––––––
300
1,700
350
600
–––––––
–––––––
(50)
1,100
–––––––
–––––––
Revenue
Cost of sales
Gross profit
Distribution and administration expenses
Finance costs
Profit before tax
Income tax expense
(Loss)/profit after tax
Statements of financial position
31 December 2014
$000
$000
Non-current assets
Property, plant and equipment
Intangible
12,000
500
______
Current assets
Inventories
Trade receivables
Cash
14,000
16,000
500
______
Equity
Issued capital
Share premium
Revaluation surplus
Retained earnings
12,500
30,500
______
31 December 2013
$000
$000
11,000
–
______
13,000
15,000
500
______
43,000
———
1,900
3,300
2,000
6,750
______
Long-term liabilities
Interest-bearing borrowings
Current liabilities
Trade payables
13,950
11,000
28,500
______
39,500
———
1,900
3,300
2,000
8,400
______
14,600
6,000
5,500
23,050
______
19,400
______
43,000
———
39,500
———
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135
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Required:
(a)
Calculate the following ratios for both years
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vi)
(vii)
(b)
current ratio OR quick ratio;
inventory turnover (days);
receivables turnover (days);
payables turnover (days);
gross profit % OR net profit % (before taxation);
return on equity;
return on capital employed (ROCE)
leverage (equity to assets).
(14 marks)
Comment on the liquidity and profitability of the company.
(6 marks)
(20 marks)
Question 156 DARTH
The following are the summarised accounts for Darth for the year ending 30 September 2014, together
with comparative figures for the previous year:
Statements of financial position
2013
$000
Tangible non-current assets
– at cost less depreciation
Current assets:
Inventories
Trade receivables
Cash at bank
$000
40,145
40,210
12,092
______
Non-current liabilities: 10% debentures
32,604
2,473
1,785
______
92,447
______
$000
12,700
50,455
43,370
5,790
______
99,615
______
97,442
———
112,315
———
9,920
30,820
______
9,920
40,080
______
40,740
19,840
50,000
19,840
36,862
______
97,442
———
136
$000
4,995
Equity
Issued capital
Retained earnings
Current liabilities
Trade payables
Income tax
Dividends payable
2014
37,230
3,260
1,985
______
42,475
______
112,315
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Summarised statements of profit or loss
2013
$000
486,300
–––––––
17,238
1,984
–––––––
15,254
5,734
–––––––
9,520
–––––––
Revenue
Operating profit
Finance costs
Profit before tax
Income tax
Profit after tax
2014
$000
583,900
–––––––
20,670
1,984
–––––––
18,686
7,026
–––––––
11,660
–––––––
Required:
(a)
Calculate, for each year, TWO ratios for each of the following user groups, which are of
particular significance to them:
(i)
(ii)
(b)
suppliers;
internal management.
(8 marks)
Comment briefly on the changes, between the two years, in the ratios calculated in (a)
above.
(4 marks)
(12 marks)
Question 157 MCQs INTERPRETATION OF FINANCIAL STATEMENTS
157.1
Which of the following factors could cause a company’s gross profit percentage on sales
to fall below the expected level?
(1)
Overstatement of the opening inventory valuation.
(2)
The incorrect inclusion in purchases of invoices relating to goods received from
suppliers in the following period.
(3)
The incorrect inclusion in sales of invoices relating to goods despatched to
customers in the following period.
(4)
Increased discounts received from suppliers.
A
B
C
D
1 and 2
1 and 3
2 and 4
3 and 4
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137
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
157.2
A company’s statement of profit or loss for the year showed:
Operating profit
Loan note interest
Profit for year
$m
88
(8)
–––
80
–––
The company’s capital structure at the year end is:
Ordinary share capital
Share premium account
Retained earnings
10% Loan notes
$m
200
80
120
80
What is the company’s return on capital employed?
A
B
C
D
157.3
16⅔%
18⅓%
20%
22%
The following is an extract from the statement of profit or loss of a business for the ended 30
September 2014:
$000
$000
Revenue
54,000
Opening inventory
12,000
Purchases
36,000
less: Closing inventory
8,000
40,000
––––––
––––––
Gross profit
14,000
––––––
To the nearest day, how many days’ sales are held in the closing inventory?
A
B
C
D
157.4
138
54
61
73
81
Which of the following factors would cause a company’s gearing ratio to fall?
(1)
(2)
(3)
(4)
A 1 for 1 bonus issue of ordinary shares.
A 1 for 2 rights issue of ordinary shares.
An issue of loan notes.
An upward revaluation of land and buildings.
A
B
C
D
1 and 2
1 and 3
2 and 4
3 and 4
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
157.5
Which of the following statements about accounting ratios and their interpretation are
correct?
(1)
A highly-geared company is less able to survive a downturn in profit than an
ungeared company.
(2)
A high price earnings ratio usually indicates that the market expects the company’s
profits to rise.
(3)
All companies should try to achieve a current ratio of 2:1.
A
B
C
D
1 and 2 only
1 and 3 only
2 and 3 only
All three statements are correct
(10 marks)
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139
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
140
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 1 MCQs CONTEXT OF FINANCIAL REPORTING
Item Answer Justification
1.1
A
Although some types of partnership may have a separate legal entity status in certain
jurisdictions this is not a general feature.
1.2
B
A partnership can usually raise more money than an individual. Risk of personal
bankruptcy also arises in a partnership and all partners are jointly liable for all
liabilities. There are few requirements for record-keeping for a sole trader (e.g. for
tax purposes) and this is less onerous than would be needed in partnership (e.g. to
determine profit share).
1.3
D
Financial reporting concerns the presentation of financial statements including
disclosure in accordance with a financial reporting framework. It is wider than
accounting for transactions.
1.4
C
Although a statement of cash flows is a financial statement (i.e. a report of historic
cash flow activities) a cash flow forecast is a management tool (e.g. to project future
finance requirements).
1.5
B
Directors and management will have access to more information and on a timelier
basis than is published.
Answer 2 JAN BARTOK
Statement of profit or loss for the year ended 31 December
$
Revenue
Cost of sales
Opening inventory
Purchases
$
25,000
1,500
20,000
———
21,500
(3,000)
——— (18,500)
———
6,500
Less: Closing inventory
Gross profit
Less: Expenses
Administration
Wages
1,000
800
———
Profit for the year
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(1,800)
———
4,700
———
1001
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of financial position at 31 December
$
Tangible non-current assets
Motor cars
Current assets
Inventory
Trade receivables
Cash in hand
$
2,800
3,000
5,000
100
———
8,100
———
10,900
———
Total assets
Capital account
Capital at 1 January
Retained earnings
5,000
4,700
———
9,700
(2,000)
———
7,700
Less: Drawings
Current liabilities
Bank overdraft
Trade payables
1,200
2,000
———
3,200
———
10,900
———
Total capital and liabilities
Answer 3 TOMAS MAXIM
Statement of profit or loss for the year ended 31 December
$
Revenue
Less: Returns
Purchases
Less: Closing inventory
16,100
(2,050)
——— (14,050)
———
14,150
Gross profit
Less: Expenses
Salaries
Rent
Insurance
General expenses
4,162
2,130
174
1,596
———
Profit for the year
1002
$
28,400
(200)
———
28,200
(8,062)
———
6,088
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Statement of financial position at 31 December
$
Tangible non-current assets
Motor van
Current assets
Inventory
Trade receivables
Cash (2,628 + 50)
$
1,700
2,050
5,060
2,678
———
9,788
———
11,488
———
Total assets
Capital account
Capital introduced
Retained earnings
4,100
6,088
———
10,188
(5,100)
———
5,088
Less: Drawings
Current liabilities
Trade payables
6,400
———
11,488
———
Answer 4 MCQs FINANCIAL STATEMENTS
Item Answer Justification
4.1
B
A non-current assets may be intangible. Land is not generally depreciable. An asset
by definition must be controlled (which does not necessitate ownership).
4.2
C
Drawings are an appropriation of profit – they are not a financial obligation.
4.3
B
Leased land and investments are tangible assets. Royalty receipts are income.
4.4
A
Closing inventory is not sold and so reduces cost of sales.
4.5
B
Installation costs are incurred in putting the asset into first use. Servicing costs are
revenue in nature. A manufacturer’s warranty is not a capital cost of an asset
acquired (but rather a prepayment for future possible repair costs). As the cars are
purchased for resale they are inventory items (i.e. revenue expenditure).
4.6
A
Self-constructed assets are capitalised in the same way as if they had been purchased.
The manager’s salary, etc is clearly a revenue expense (relating to day-to-day
operations). Costs of repairs are expensed also. A market survey is a research cost
which must be expensed when incurred because of the uncertainty of future economic
benefits (more on this later).
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1003
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 5 MCQs ACCOUNTING SYSTEMS
Item
Answer Justification
5.1
A
Not all procedures will be formal. An accounting system of itself does not ensure
efficient operations (although a sound accounting system will be necessary to this
objective). The prevention and detection of fraud and error is just one management
objective (and so not the sole objective of a sound accounting system). Accounting
records are just one aspect of an accounting system and may be manual.
5.2
B
This is the objective concerning assets at an organisation level. (The other objectives
are subsidiary internal control objectives which contribute to the organisational
objective.)
5.3
D
Whereas the journal is a book of original entry, ledgers and registers are additional,
subsidiary records.
5.4
C
A standing order is an instruction to a bank to make regular payments of fixed
amount. A goods received note is found in a purchases system. A remittance advice
may accompany a receipt from a customer or a payment to a supplier. A sales order,
sales invoice, goods despatch note and customer statement are all relevant to a sales
system.
Answer 6 VICTOR BORISSOV
(a)
April transactions
(1)
Introduction of capital
$
Cash
(2)
10,000
———
$
Capital
Purchase of Atari
$
Inventory
Cash
(3)
1,000
9,000
———
10,000
———
$
Capital
Purchase of Amstrad
Inventory
Cash
3,500
6,500
———
10,000
———
$
Capital
10,000
———
10,000
———
Sale of Atari
$
Inventory
Cash
1004
10,000
———
10,000
———
$
(4)
10,000
———
2,500
8,000
———
10,500
––——
$
Capital
Profit
10,000
500
———
10,500
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(5)
Rent payment
$
Inventory
Cash
(6)
2,500
7,700
———
10,200
———
$
Capital
Profit
Purchase of desk
$
Tangible non-current assets
Inventory
Cash
(7)
200
2,500
7,500
———
10,200
———
$
Capital
Profit
Purchase of Compaq
Tangible non-current assets
Inventory
Cash
200
6,500
3,500
———
10,200
———
$
Capital
Profit
10,000
200
———
10,200
———
Sale of Amstrad
$
Non-current assets
Inventory
Cash
(9)
10,000
200
———
10,200
———
$
(8)
10,000
200
———
10,200
———
200
4,000
6,750
———
10,950
———
$
Capital
Profit
10,000
950
———
10,950
———
Drawings
$
Non-current assets
Inventory
Cash
200
4,000
6,350
$
Capital
Profit
Less: Drawings
———
10,550
———
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10,000
950
———
10,950
(400)
———
10,550
———
1005
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Accounting equation at 31 May
$
Tangible non-current assets
Inventory (Compaq and IBM)
Cash (W)
200
9,600
850
$
Capital, 1 May
Profit
10,550
700
———
11,250
(600)
———
10,650
———
Less: Drawings
———
10,650
———
WORKING
Cash
Balance at 1 May
Cash receipts $(4,500 + 1,800)
Less: Cash payments $(3,000 + 2,500 + 100 + 600 + 5,600)
Balance at 31 May
(c)
$
6,350
6,300
———
12,650
(11,800)
———
850
———
Statement of profit or loss for the month ended 31 May
$
Revenue $(4,500 + 1,800)
Opening inventory
Purchases $(5,500 + 5,600)
4,000
11,100
———
15,100
(9,600)
———
Less: Closing inventory
Gross profit
Less: Telephone expense
Profit for the period
1006
$
6,300
(5,500)
———
800
(100)
———
700
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Statement of financial position at 31 May
$
Tangible non-current assets
Current assets
Inventory
Cash
9,600
850
———
Total assets
Capital account
Capital at 1 May
Add: Profit for the period
$
200
10,450
———
10,650
———
10,550
700
———
11,250
(600)
———
10,650
———
Less: Drawings
Total capital
Answer 7 MCQs DOUBLE ENTRY BOOKKEEPING PRINCIPLES
Item
Answer Justification
7.1
C
Accruals concept underlies the basis of preparation of financial statements, not double
entry bookkeeping principles. Bookkeeping is based on the concept of a separate
business entity which may not be a separate legal entity (e.g. sole trader).
7.2
B
Net assets are increased by the introduction of capital and making profit. Drawings
are an appropriation of profit which reduce net assets.
7.3
B
$
5,000
2,700
(700)
———
7,000
———
Opening net assets
Add: Profit (al fig)
Less: Drawings
Closing net assets
7.4
A
Either 7,000 – 5,000 = 2,000 or
2,700 – 700 = 2,000
7.5
B
Payments to owners of a business in their capacity as owners are appropriations
(including salaries of partners). Drawings by sole traders are an appropriation of
profit whether money or “in-kind” (e.g. goods). Interest payments are a finance cost
to the business (i.e. an expense). (Interest paid to a partner for a loan to a partnership
is also an expense as the partner receives it in the capacity of a finance provider.)
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1007
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 8 ROMAN
(a)
Ledger accounts
Cash a/c
$
1 Jan
31 Jan
Capital a/c
Sales a/c
$
350
300
15 Jan
23 Jan
31 Jan
Purchases a/c
Motor expenses a/c
Balance c/d
——
650
——
1 Feb
5 Feb
8 Feb
28 Feb
Balance b/d
Loan a/c (Denis)
Sales a/c
Sales a/c
1 Mar Balance b/d
410
300
150
300
———
1,160
———
7 Feb Purchases a/c
21 Feb Rent a/c
28 Feb Balance c/d
200
40
410
——
650
——
200
50
910
———
1,160
———
910
Capital a/c
$
31 Jan
Balance c/d
410
——
410
——
28 Feb
Balance c/d
610
——
610
——
$
1 Jan
31 Jan
Cash a/c
I & E a/c
350
60
——
410
——
1 Feb Balance b/d
28 Feb I & E a/c
410
200
——
610
——
1 Mar Balance b/d
610
Loan a/c
$
28 Feb
Balance c/d
300
——
$
5 Feb Cash a/c
1 Mar Balance b/d
1008
300
——
300
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Motor expenses a/c
$
23 Jan
Cash a/c
40
—
$
31 Jan
I & E a/c
40
—
Purchases a/c
$
$
15 Jan
Cash a/c
200
——
31 Jan
Trading (or I & E) a/c
200
——
7 Feb
Cash a/c
200
——
28 Feb Trading (or I & E) a/c
200
——
Rent a/c
$
21 Feb
Cash a/c
$
50
—
28 Feb I & E a/c
50
—
Sales a/c
$
31 Jan
Trading (or I & E) a/c
300
——
28 Feb
Trading (or I & E) a/c
450
$
31 Jan
Cash a/c
300
——
8 Feb Cash a/c
28 Feb Cash a/c
150
300
——
450
——
——
450
——
(b)
List of account balances at 31 January and 28 February
31 January
Dr
Cr
$
$
410
350
–
40
200
–
300
——
——
650
650
——
——
Cash
Capital
Loan
Motor expenses
Purchases
Rent
Revenue
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28 February
Dr
Cr
$
$
910
410
300
–
200
50
450
——— ———
1,160
1,160
——— ———
1009
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(c)
Statements of profit or loss for the months ended 31 January and 28 February
31 January
$
300
(200)
——
100
Revenue
Less: Purchases
Gross profit
Less: Expenses
Motor expenses
Rent
(40)
(50)
——
200
——
——
60
——
Profit for the period
(d)
28 February
$
450
(200)
——
250
Statements of financial position as at 31 January and 28 February
31 January
$
Current asset
Cash
Capital
Capital b/f
Introduced
Add: Profit for month
Capital c/f
Non-current liability
Loan
28 February
$
410
——
910
——
–
350
60
——
410
410
–
200
——
610
–
——
300
——
410
——
910
——
Answer 9 PETR
(a)
Cash at bank a/c
$
5 Apr
8 Apr
20 Apr
Capital a/c
Loan a/c
Revenue a/c
300
250
350
$
7 Apr
15 Apr
28 Apr
29 Apr
30 Apr
30 Apr
Purchases a/c
Motor van a/c
Rent a/c
Loan a/c
Drawings a/c
Balance c/d
——
900
——
1 May Balance b/d
1010
200
150
50
200
60
240
——
900
——
240
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Capital a/c
$
30 Apr
30 Apr
Drawings a/c
Balance c/d
60
440
——
500
——
$
5 Apr Bank a/c
30 Apr I & E a/c (profit)
1 May Balance b/d
300
200
——
500
——
440
Tutorial note: Because Petr is a sole trader there is no requirement to distinguish a fixed
amount of capital introduced and retained earnings. However, separate accounts could be
kept.
Purchases a/c
$
7 Apr
Bank a/c
200
——
$
30 Apr Trading a/c
200
——
Loan a/c
$
29 Apr
30 Apr
Bank a/c
Balance c/d
$
200
50
——
250
——
8 Apr Bank a/c
250
——
250
——
1 May Balance b/d
50
Motor van a/c
$
15 Apr
Bank a/c
150
——
1 May Balance b/d
$
30 Apr Balance c/d
150
——
150
Rent a/c
$
28 Apr
Bank a/c
50
—
$
30 Apr I & E a/c
50
—
Revenue a/c
$
30 Apr
Trading a/c
350
——
$
20 Apr Bank a/c
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350
——
1011
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Drawings a/c
$
30 Apr
(b)
Bank a/c
60
—
$
30 Apr Capital a/c
List of account balances at 30 April
Dr
$
240
Cash at bank
Capital
Purchases
Loan
Motor van
Rent
Revenue
Drawings
(c)
60
—
Cr
$
300
200
50
150
50
350
60
——
700
——
——
700
——
Statement of profit or loss for the month ended 30 April
$
Revenue
Purchases
Less: Closing inventory (see note)
$
350
200
(100)
——
Cost of sales
(100)
——
250
Gross profit
Less: Expenses
Rent
(50)
——
200
——
Profit for the period
Tutorial note: It should be noted that there is a final adjustment to the list of balances at this
stage in respect of closing inventory. The double entry is a credit to cost of sales and a debit to
the inventory account. The balance on the inventory account will then appear in the statement
of financial position.
1012
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Statement of financial position as at 30 April
$
Tangible non-current assets
Motor van
Current assets
Inventory
Cash
$
150
100
240
——
340
——
490
——
Total assets
Capital account
Introduced
Add: Profit for the period
300
200
——
500
(60)
——
440
Less: Drawings
Current liabilities
Loan
50
——
490
——
Total capital and liabilities
Answer 10 GRIGORY
(a)
Cash at bank a/c
$
1 Jan
4 Jan
13 Jan
20 Jan
Capital a/c
Loan a/c (Sergei)
Revenue a/c
Revenue a/c
5,000
1,000
300
500
$
2 Jan
3 Jan
10 Jan
24 Jan
27 Jan
30 Jan
31 Jan
Motor van a/c
Purchases a/c
Motor expenses a/c
Storage expenses a/c
Loan a/c
Drawings a/c
Balance c/d
———
6,800
———
1 Feb
Balance b/d
600
1,300
200
150
350
175
4,025
———
6,800
———
4,025
Capital a/c
$
31 Jan
Balance c/d
5,000
———
5,000
———
$
1 Jan
Bank a/c
1 Feb Balance b/d
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5,000
———
5,000
———
5,000
1013
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Motor van a/c
$
2 Jan
Bank a/c
1 Feb
Balance b/d
600
——
$
31 Jan
Balance c/d
600
——
600
Purchases a/c
$
3 Jan
Bank a/c
1 Feb
Balance b/d
1,300
———
$
31 Jan
Balance c/d
1,300
———
1,300
Loan a/c
$
27 Jan
31 Jan
Bank a/c
Balance c/d
350
650
———
1,000
———
$
4 Jan
Bank a/c
1,000
———
1,000
———
1 Feb Balance b/d
650
Motor van expenses a/c
$
10 Jan
1 Feb
Bank a/c
Balance b/d
200
——
$
31 Jan
Balance c/d
200
——
200
Revenue a/c
$
31 Jan
Balance c/d
800
$
13 Jan
20 Jan
Bank a/c
Bank a/c
——
800
——
1 Feb Balance b/d
300
500
——
800
——
800
Storage expenses a/c
$
24 Jan
1 Feb
1014
Bank a/c
Balance b/d
150
——
$
31 Jan
Balance c/d
150
——
150
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Drawings a/c
$
30 Jan
1 Feb
(b)
Bank a/c
175
——
Balance b/d
$
31 Jan
Balance c/d
175
Trial balance at 31 January
Dr
$
4,025
Cash at bank
Capital
Motor van
Purchases
Loan
Motor van expenses
Revenue
Storage expenses
Drawings
(c)
175
——
Cr
$
5,000
600
1,300
650
200
800
150
175
———
6,450
———
———
6,450
———
Statement of profit or loss for the month ended 31 January
$
Revenue
Purchases
Less: Closing inventory
$
800
1,300
(800)
———
Cost of goods sold
(500)
——
300
Gross profit
Less: Expenses
Motor van expenses
Storage expenses
200
150
——
Loss for the period
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(350)
——
(50)
——
1015
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of financial position as at 31 January
$
Tangible non-current assets
Motor van
Current assets
Inventory
Cash
$
600
800
4,025
———
4,825
———
5,425
———
Total assets
Capital account
At 1 January
Less: Loss for the period
5,000
(50)
———
4,950
(175)
———
4,775
Less: Drawings
Current liability
Loan
650
———
5,425
———
Total capital and liabilities
Answer 11 DANA
(a)
Cash at bank a/c
$
2 Mar Capital a/c
29 Mar Revenue a/c
525
450
$
16 Mar Purchases a/c
24 Mar Sundry expenses a/c
31 Mar Balance c/d
300
60
615
——
975
——
8 Apr Purchases a/c
22 Apr Establishment costs a/c
30 Apr Balance c/d
300
75
1,365
——
975
——
1 Apr
6 Apr
9 Apr
30 Apr
Balance b/d
Loan a/c (Radok)
Revenue a/c
Revenue a/c
1 May Balance b/d
1016
615
450
225
450
———
1,740
———
———
1,740
———
1,365
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Capital a/c
$
$
31 Mar Balance c/d
525
——
2 Mar Bank a/c
525
——
30 Apr
525
——
1 Apr Balance b/d
525
——
1 May Balance b/d
525
Balance c/d
Loan a/c
$
30 Apr
Balance c/d
450
——
$
6 Apr Bank a/c
1 May Balance b/d
450
——
450
Sundry expenses a/c
$
24 Mar Bank a/c
$
60
——
31 Mar Balance c/d
60
——
1 Mar Balance b/d
60
——
30 Apr Balance c/d
60
——
1 May Balance c/d
60
Purchases a/c
$
16 Mar Bank a/c
1 Apr
8 Apr
300
——
Balance b/d
Bank a/c
300
300
——
600
——
1 May Balance b/d
600
$
31 Mar Balance c/d
300
——
30 Apr Balance c/d
600
——
600
——
Establishment costs a/c
$
22 Apr
Bank a/c
75
—
1 May Balance b/d
$
30 Apr Balance c/d
75
——
75
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1017
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Revenue a/c
$
31 Mar Balance c/d
30 Apr
450
——
Balance c/d
1,125
———
1,125
———
$
29 Mar Bank a/c
1 Apr Balance b/d
9 Apr Bank a/c
30 Apr Bank a/c
1 May
(b)
450
225
450
———
1,125
———
Balance c/d
1,125
Trial balances at 31 March and 30 April
$
615
Cash at bank
Capital
Loan
Sundry expenses
Purchases
Establishment costs
Revenue
31 Mar
$
525
–
60
300
–
——
975
——
(c)
450
——
450
——
975
——
30 Apr
$
$
1,365
525
450
60
600
75
1,125
——— ———
2,100
2,100
——— ———
Statement of profit or loss for the two months ended 30 April
$
Sales
Less: Purchases
Gross profit
Less: Expenses
Miscellaneous expenses
Establishment costs
60
75
——
(135)
——
390
——
Profit for the period
1018
$
1,125
(600)
——
525
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(d)
Statements of financial position as at 31 March and 30 April
Current assets
Cash
Capital introduced
Capital b/f
Add: Profit for month
Non-current liabilities
Loan
31 Mar
$
30 Apr
$
615
——
1,365
———
525
–
90
——
615
–
615
300
———
915
–
——
615
——
450
———
1,365
———
Answer 12 PATEL
(a)(i) and (b)
Cash at bank a/c
$
1 Jan
2 Jan
5 Jan
Capital a/c
Loan a/c
Revenue a/c
10,000
4,000
3,000
$
3 Jan
4 Jan
6 Jan
31 Jan
Motor van a/c
Purchases a/c
Motor expenses a/c
Balance c/d
900
2,300
250
13,550
———
17,000
———
1 Feb
2 Feb
3 Feb
4 Feb
28 Feb
Loan a/c
Drawings a/c
Office equipment a/c
Purchases a/c
Balance c/d
200
300
160
3,500
12,590
———
16,750
———
———
17,000
———
1 Feb
5 Feb
Balance b/d
Revenue a/c
13,550
3,200
———
16,750
———
1 Mar
2 Mar
Balance b/d
Revenue a/c
12,590
2,625
1 Mar Purchases a/c
2 Mar Rent a/c
31 Mar Balance c/d
———
15,215
———
1 Apr
Balance b/d
2,900
225
12,090
———
15,215
———
12,090
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1019
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Capital a/c
$
$
31 Jan
Balance c/d
10,000
———
1 Jan
28 Feb
Balance c/d
10,000
———
1 Feb Balance b/d
10,000
———
580
10,520
———
11,100
———
1 Mar Balance b/d
31 Mar I & E a/c
10,000
1,100
———
11,100
———
1 Apr Balance c/d
10,520
31 Mar Drawings a/c
31 Mar Balance c/d
Bank a/c
10,000
———
Loan a/c
$
31 Jan Balance c/d
4,000
———
1 Feb Bank a/c
28 Feb Balance c/d
200
3,800
———
4,000
———
31 Mar Balance c/d
3,800
———
$
2 Jan
Bank a/c
4,000
———
4,000
———
1 Mar Balance b/d
3,800
———
1 Apr Balance b/d
3,800
Motor van a/c
$
3 Jan Bank a/c
900
——
31 Jan
Balance c/d
900
——
1 Feb
Balance b/d
900
——
28 Feb Balance c/d
900
——
1 Mar Balance b/d
900
——
31 Mar Balance c/d
900
——
1 Apr
1020
$
Balance b/d
900
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Purchases a/c
$
4 Jan
Bank a/c
1 Feb
4 Feb
Balance b/d
Bank a/c
$2,300
———
2,300
3,500
$
31 Jan
Balance c/d
6 Feb Drawings a/c
28 Feb Balance c/d
280
5,520
———
5,800
———
31 Mar I & E a/c
8,420
———
8,420
———
———
5,800
———
1 Mar Balance b/d
1 Mar Bank a/c
5,520
2,900
———
8,420
———
$2,300
——
Revenue a/c
$
31 Jan
Balance c/d
3,000
———
28 Feb
Balance c/d
6,200
———
6,200
———
31 Mar I & E a/c
8,825
———
8,825
———
$
5 Jan
Bank a/c
3,000
———
1 Feb
5 Feb
Balance b/d
Bank a/c
3,000
3,200
———
6,200
———
1 Mar
2 Mar
Balance b/d
Bank a/c
6,200
2,625
———
8,825
———
Motor expenses a/c
$
$
6 Jan
Bank a/c
250
——
31 Jan
Balance c/d
250
——
1 Feb
Balance b/d
250
——
28 Feb Balance c/d
250
——
1 Mar Balance b/d
250
——
31 Mar I & E a/c
250
——
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1021
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Drawings a/c
$
2 Feb
6 Feb
Bank a/c
Purchases a/c
$
300
280
——
580
——
1 Mar Balance b/d
580
——
28 Feb Balance c/d
580
——
580
——
31 Mar Capital a/c
580
——
Office equipment a/c
$
3 Feb
Bank a/c
1 Mar Balance b/d
1 Apr
Balance b/d
$
160
——
28 Feb Balance c/d
160
——
160
——
31 Mar Balance c/d
160
——
160
Rent a/c
$
3 Mar Bank a/c
225
——
$
31 Mar I & E a/c
225
——
(Trading and) Income and expenditure a/c
$
31 Mar Purchases a/c
8,420 †
31 Mar Balance c/d (gross profit) 1,575 *
———
9,995
———
31 Mar Motor expenses a/c
250
31 Mar Rent a/c
225
31 Mar Transfer capital a/c
(profit)
1,100
———
1,575
———
$
31 Mar Revenue a/c
31 Mar Transfer inventory
31 Mar Balance b/d
8,825 †
1,170 †
———
9,995
———
1,575 *
———
1,575
———
† Alternatively may be recorded in a separate trading a/c and the gross profit transferred to the I
& E a/c.
* Balancing here can be omitted.
1022
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Inventory a/c
$
31 Mar Transfer I & E a/c
1 Apr
Balance b/d
$
1,170
———
31 Mar Balance c/d
1,170
———
1,170
Tutorial note: Inventory only needs to be brought into the ledger a/cs at a period end when I
& E a/cs are closed and profit for the period is determined. It was not specifically asked for but
is shown for completeness.
(ii)
Trial balances
Cash at bank
Capital
Loan
Motor van
Purchases
Sales
Motor expenses
Drawings
Office equipment
Rent
31 January
Dr
Cr
$
$
13,550
10,000
4,000
900
2,300
3,000
250
28 February
Dr
Cr
$
$
12,590
10,000
3,800
900
5,520
6,200
250
580
160
31 March*
Dr
Cr
$
$
12,090
10,000
3,800
900
8,420
8,825
250
580
160
225
——— ——— ——— ——— ——— ———
17,000 17,000 20,000 20,000 22,625 22,625
——— ——— ——— ——— ——— ———
* Extracted before ledger a/cs closed.
(iii)
Statements of profit or loss (cumulative) for the months ended
Revenue
Opening inventory
Purchases
Less: Closing inventory
Gross profit
Less: Expenses
Motor expenses
Rent
31 January
28 February
31 March
$
$
$
$
$
$
3,000
6,200
8,825
–
–
–
2,300
5,520
8,420
–
(720)
(1,170)
———
(2,300) ———
(4,800) ———
(7,250)
———
———
———
700
1,400
1,575
(250)
–
———
450
———
Profit/(loss)
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(250)
–
———
1,150
———
(250)
(225)
———
1,100
———
1023
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(iv)
Statements of financial position
31 January
$
$
Tangible non-current assets
Motor van
Office equipment
Current assets
Inventory
Bank
28 February
$
$
900
–
———
900
–
13,550
———
Total assets
Capital account
At start of month
Add: Retained earnings
Less: Drawings
Non-current liabilities
Loan
Current liabilities
Loan
31 March
$
$
900
160
———
1,060
720
12,590
———
900
160
———
1,060
1,170
12,090
———
13,550
———
14,450
———
13,310
———
14,370
———
13,260
———
14,320
———
10,000
450
———
10,450
–
———
10,450
10,000
1,150
———
11,150
(580)
———
10,570
10,000
1,100
———
11,100
(580)
———
10,520
2,800
2,600
2,600
1,200
———
14,450
———
1,200
———
14,370
———
1,200
———
14,320
———
Tutorial note: With the exception of inventory (and retained earnings) all the amounts are as
per the trial balance.
Answer 13 BOHM
Bank a/c
$
1 Jan
13 Jan
14 Jan
1024
Capital a/c
Sales a/c
Jovanovich’s a/c
5,000
300
250
———
5,550
———
Balance b/d
2,650
———
$
5 Jan
10 Jan
14 Jan
Fixtures and fittings a/c
Dvorak’s a/c
Balance c/d
2,000
900
2,650
———
5,550
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Capital a/c
$
14 Jan
Balance c/d
$
5,000
———
1 Jan
Bank a/c
Balance b/d
5,000
———
5,000
Fixtures and fittings a/c
$
5 Jan
Bank a/c
Balance b/d
$
2,000
———
14 Jan
Balance c/d
2,000
———
2,000
Purchases a/c
$
7 Jan
Dvorak’s a/c
$
1,000
———
14 Jan
Trading a/c
1,000
———
Purchases returns a/c
$
14 Jan
Trading a/c
$
100
——
9 Jan
Dvorak’s a/c
100
——
Tutorial note: Purchases returns may alternatively be credited to the purchases account and the net
amount transferred to the trading a/c.
Dvorak’s a/c
$
9 Jan
10 Jan
Purchases returns a/c
Bank a/c
100
900
———
1,000
———
$
7 Jan
Purchases a/c
1,000
———
1,000
———
Sales a/c
$
14 Jan
Trading a/c
600
$
11 Jan
13 Jan
Jovanovich’s a/c
Bank a/c
——
600
——
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300
300
——
600
——
1025
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Sales returns a/c
$
12 Jan
Jovanovich’s a/c
$
50
——
14 Jan
Trading a/c
50
——
Jovanovich’s a/c
$
11 Jan
Sales a/c
$
300
12 Jan
14 Jan
Sales returns a/c
Bank a/c
——
300
——
50
250
——
300
——
Tutorial note: Sales returns may alternatively be debited to the sales revenue a/c and the net amount
transferred to the trading a/c.
Answer 14 IVAN TOMBS
Bank a/c
$
(1)
(7)
(14)
$
Capital a/c
10,000
Sales a/c (cash sale to Greene) 1,000
Doyle’s a/c
100
(2)
Purchases a/c
(4)
Rent a/c
(5)
Stationery a/c
(8)
Moore’s a/c
(10)
Stationery a/c
(11)
Motor expenses
(12)
Petros’s a/c
(13)
Drawings
Balance c/d
———
11,100
———
Balance b/d
200
1,000
60
140
40
150
1,000
300
8,210
———
11,100
———
8,210
Capital a/c
$
Balance c/d
10,000
———
$
(1)
Bank
Balance b/d
1026
10,000
———
10,000
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Purchases a/c
$
(2)
(3)
Bank a/c
Moore’s a/c
$
200
400
——
600
——
Trading a/c
600
——
600
——
Moore’s a/c
$
(8) Bank a/c
Balance c/d
$
140
260
——
400
——
(3) Purchases a/c
400
——
400
——
Balance b/d
260
Rent a/c
$
(4)
Bank a/c
$
1,000
———
I & E a/c
1,000
———
Stationery a/c
$
(5) Bank a/c
(10) Bank a/c
$
60
40
——
100
–—
I & E a/c
100
——
100
——
Petros’ a/c
$
(12) Bank a/c
Balance c/d
1,000
3,000
———
4,000
———
$
(6) Van a/c
4,000
———
4,000
———
Balance b/d
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3,000
1027
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Van a/c
$
(6)
Petros’s a/c
Balance b/d
$
4,000
———
Balance c/d
4,000
———
4,000
Sales a/c
$
Trading a/c
$
1,140
(7) Bank a/c
(9) Doyle’s a/c
———
1,140
———
1,000
140
———
1,140
———
Doyle’s a/c
$
(9)
Sales a/c
140
$
(14) Bank a/c
Balance c/d
——
140
–—
Balance b/d
100
40
——
140
——
40
Motor expenses a/c
$
(11) Bank a/c
150
——
$
I & E a/c
150
——
Drawings a/c
$
(13) Bank a/c
Balance b/d
1028
300
——
$
Balance c/d
300
——
300
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 15 VIKTOR
Bank a/c
$
(1)
(7)
Capital a/c
Sales a/c
$
1,000
420
(5) Rent a/c
(3) Electricity
(4) Motor car a/c
(6) Drawings
Balance c/d
———
1,420
———
Balance b/d
40
100
200
60
1,020
———
1,420
———
1,020
Capital a/c
$
Drawings a/c
Balance c/d
60
1,170
———
1,230
———
$
Bank a/c
Transfer I & E a/c (profit)
Balance b/d
1,000
230
———
1,230
———
1,170
Purchases a/c
$
(2)
ABC
400
——
$
Trading a/c
400
——
ABC a/c
$
Balance c/d
400
——
$
(2) Purchases a/c
Balance b/d
400
——
400
Tutorial note: Alternatively profit can be carried down in the I & E a/c or transferred to retained
earnings or other “accumulated profit” a/c.
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1029
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Sales a/c
$
Trading a/c
770
$
(5) XYZ
(7) Bank a/c
——
770
——
350
420
——
770
——
Electricity a/c
$
(3)
Bank a/c
100
——
$
I & E a/c
100
——
Rent a/c
$
(3)
Bank a/c
40
——
$
I & E a/c
40
——
Motor car a/c
$
(4)
Bank a/c
200
——
$
Balance c/d
200
——
XYZ a/c
$
(5)
Sales a/c
Balance b/d
350
——
$
Balance c/d
350
——
350
Drawings a/c
$
(6)
1030
Bank a/c
60
——
$
Transfer to capital a/c
60
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Trading a/c
$
Purchases
Transfer I & E a/c (gross profit)
400
370
——
770
——
$
Sales
770
——
770
——
Income & expenditure a/c
$
Electricity
Rent
Transfer capital a/c (profit)
100
40
230
——
370
——
$
Transfer trading a/c
370
——
370
——
Tutorial note: Requirement specified the accounts rather than the statement of profit or loss.
Answer 16 ANGELO
(a)
Double entries
$
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Dr
Dr
Dr
Dr
Dr
Dr
Dr
Dr
Dr
Cash a/c
Cr
Capital a/c
5,000
5,000
Rent expense a/c
Cr
Cash a/c
300
Purchases a/c
Cr
Cash a/c
2,000
Cash a/c
Cr
Sales a/c
900
Motor vehicle a/c
Cr
Cash a/c
2,000
Purchases a/c
Cr
Cash a/c
1,500
Cash a/c
Cr
Sales a/c
2,250
300
2,000
900
2,000
1,500
2,250
Cash a/c
Cr
Rental income a/c
100
Purchases a/c
Cr
Trade payables a/c
1,000
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$
100
1,000
1031
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
$
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
Dr
Dr
Dr
Dr
Dr
Dr
Dr
Dr
Dr
Telephone a/c
Cr
Trade payables a/c
$
75
75
Cash a/c
Trade receivables a/c
Cr
Sales a/c
300
1,500
1,800
Trade payables a/c
Cr
Cash a/c
500
Cash a/c
Cr
Trade receivables a/c
600
500
600
Trade payables a/c
Cr
Cash a/c
75
75
Cash a/c
Cr
Trade receivables a/c
475
Trade payables a/c
Cr
Cash a/c
300
475
300
Cash a/c
Cr
Sales a/c
1,800
1,800
(b), (c) & (e) Ledger accounts
Cash a/c
$
$
(1)
(4)
(7)
(8)
(11)
(13)
(15)
(17)
Capital
Sales
Sales
Rental income
Sales
Receivables (Salvador)
Receivables (Quinn)
Sales
5,000
900
2,250
100
300
600
475
1,800
______
(2)
Rent expense
(3)
Purchases (Cézanne)
(5)
Motor vehicle
(6)
Purchases (Dali)
(12) Payables (Bookworm)
(14) Payables (telephone)
(16) Payables (Bookworm)
Balance c/d
11,425
______
11,425
______
Balance b/d
300
2,000
2,000
1,500
500
75
300
4,750
______
4,750
Capital a/c
$
Balance c/d
5,000
_____
$
(1) Cash
5,000
_____
5,000
_____
Balance b/d
1032
5,000
_____
5,000
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Rent expense a/c
$
(2) Cash
$
300
____
Balance c/d
300
____
Balance b/d
300
300
____
300
____
Transfer to I & E a/c
300
Purchases a/c
$
(3) Cash (Cézanne)
(6) Cash (Dali)
(9) Payables (Bookworm)
$
2,000
1,500
1,000
_____
Balance c/d
4,500
_____
Balance b/d
4,500
4,500
_____
4,500
_____
Transfer to I & E a/c
4,500
Sales a/c
$
Balance c/d
6,750
_____
$
(4)
(7)
(11)
(17)
Cash
Cash
Cash/Receivables
Cash
6,750
_____
Transfer to I & E a/c
6,750
900
2,250
1,800
1,800
_____
6,750
_____
Balance b/d
6,750
Non-current asset (Van) a/c
$
(5) Cash
2,000
_____
$
Balance c/d
2,000
_____
Balance b/d
2,000
_____
2,000
_____
2,000
Rental income a/c
$
Balance c/d
100
____
$
(8)
Cash
100
____
Transfer to I & E a/c
100
100
____
100
___
Balance b/d
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100
1033
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Trade receivables (total) a/c
$
(11) Sales
Balance b/d
1,500
$
(13) Cash (Salvador)
(15) Cash (Quinn)
Balance c/d
_____
600
475
425
_____
1,500
_____
1,500
_____
425
Trade payables (total) a/c
$
(12) Cash (Bookworm)
(14) Cash (Telephone)
(16) Cash (Bookworm)
Balance c/d
500
75
300
200
_____
$
(9)
(10)
Purchases (El Greco)
Telephone
1,000
75
_____
1,075
_____
1,075
_____
Balance b/d
200
Telephone a/c
$
(10)
Trade payables
75
___
$
Balance c/d
75
___
Balance b/d
75
75
___
75
___
Transfer to I & E a/c
75
(Trading and) Income and expenditure a/c
$
Purchases
Rent expense
Telephone
Balance (= Profit)
4,500
300
75
1,975
_____
$
Sales
Rental income
_____
6,850
_____
1034
6,750
100
6,850
_____
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(d)
List of account balances
Dr
$
4,750
Cash
Capital
Rent expense
Purchases
Sales (Revenue)
Non-current asset
Rental income
Trade receivables
Trade payables
Telephone
(f)
Cr
$
5,000
300
4,500
6,750
2,000
100
425
200
75
______
______
12,050
———
12,050
———
Statement of profit or loss
Sales
Less:
$
6,750
Cost of goods sold
Purchases
4,500
______
Gross profit
Sundry income
2,250
100
_____
2,350
Less:
Other expenses
Rent
Telephone
300
75
____
375
———
1,975
———
Profit for the period
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1035
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of financial position
$
Non-current assets
Van
$
2,000
Current assets
Trade receivables
Cash
425
4,750
______
5,175
———
7,175
———
Total assets
$
Capital
Profit for the year
5,000
1,975
_____
Proprietor’s interest
Current liabilities
Trade payables
6,975
200
———
7,175
———
Total equity and liabilities
Answer 17 STEFAN
(a)
Bank a/c
$
1 Nov Capital a/c
12 Nov Sales a/c
29 Nov A’s a/c
3,000
400
400
$
7 Nov
23 Nov
25 Nov
28 Nov
30 Nov
Fixtures and fittings a/c
Drawings a/c
Y’s a/c
X’s a/c
Balance c/d
———
3,800
———
1 Dec Balance b/d
560
100
300
400
2,440
———
3,800
———
2,440
Purchases a/c
$
3 Nov X’s a/c
5 Nov Y’s a/c
1 Dec Balance b/d
1036
400
350
——
750
——
$
30 Nov Drawings a/c
30 Nov Balance c/d
20
730
——
750
——
730
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
X’s a/c
$
28 Nov Bank a/c
$
400
——
3 Nov Purchases a/c
400
——
Y’s a/c
$
25 Nov Bank a/c
30 Nov Balance c/d
$
300
50
——
350
——
5 Nov Purchases a/c
350
——
350
——
1 Dec Balance b/d
50
Fixtures and fittings a/c
$
7 Nov Bank a/c
$
560
——
1 Dec Balance b/d
30 Nov Balance c/d
560
——
560
Sales a/c
$
30 Nov Balance c/d
$
900
——
900
——
8 Nov A’s a/c
12 Nov Bank a/c
1 Dec Balance b/d
500
400
——
900
——
900
A’s a/c
$
8 Nov Sales a/c
500
$
29 Nov Bank a/c
30 Nov Balance c/d
——
500
——
1 Dec Balance b/d
400
100
——
500
——
100
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1037
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Drawings a/c
$
23 Nov Bank a/c
30 Nov Purchases a/c
100
20
——
120
——
1 Dec Balance b/d
120
$
30 Nov Balance c/d
120
——
120
——
Capital a/c
$
$
1 Nov Bank a/c
30 Nov Balance c/d
3,000
3,000
———
3,000
———
———
3,000
———
1 Dec Balance b/d
(b)
Trial balance at 30 November
Dr
$
2,440
Cash at bank
Capital
Purchases
Trade payables (Y)
Fixtures and fittings
Sales
Trade receivables (A)
Drawings
(c)
3,000
3,000
730
50
560
900
100
120
———
3,950
———
———
3,950
———
Statement of profit or loss for the month ended 30 November
$
Sales
Purchases
Less: Closing inventory
730
(250)
——
Gross profit
1038
Cr
$
$
900
(480)
——
420
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Statement of financial position at 30 November
$
Non-current assets
Fixtures and fittings
Current assets
Inventory
Trade receivables
Cash
$
560
250
100
2,440
———
2,790
———
3,350
———
Total assets
Capital account
Capital introduced
Add: Profit for the month
3,000
420
———
3,420
(120)
———
3,300
Less: Drawings
Current liabilities
Trade payables
50
———
3,350
———
Total capital and liabilities
Answer 18 R RYBIN
(a)
Bank a/c
$
1 Dec Capital a/c
31 Dec Didnko’s a/c
31 Dec Sales a/c
5,000
600
100
$
1 Dec
7 Dec
10 Dec
10 Dec
20 Dec
31 Dec
31 Dec
31 Dec
31 Dec
31 Dec
Fixtures and fittings a/c
Rent a/c
Electricity
Motor van a/c
Stationery a/c
Agladze’ a/c
Buczak’s a/c
Office equipment a/c
Drawings a/c
Balance c/d
———
5,700
———
1 Jan
Balance b/d
1,000
40
150
1,500
200
400
300
250
100
1,760
———
5,700
———
1,760
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1039
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Agladze’s a/c
$
31 Dec Bank a/c
400
——
$
9 Dec Purchases a/c
400
——
Buczak’s a/c
$
31 Dec Bank a/c
300
——
$
13 Dec Purchases a/c
300
——
Coke’s a/c
$
31 Dec Balance c/d
140
——
$
20 Dec Purchases a/c
1 Jan
Balance b/d
140
——
140
Didnko’s a/c
$
10 Dec Sales a/c
600
——
$
31 Dec Bank a/c
600
——
Drawings a/c
$
31 Dec Bank a/c
1 Jan
Balance b/d
100
——
$
31 Dec Balance c/d
100
——
100
Ergo’s a/c
$
14 Dec Sales a/c
1 Jan
Balance b/d
800
——
$
31 Dec Balance c/d
800
——
800
Electricity a/c
$
10 Dec Bank a/c
1 Jan
1040
Balance b/d
150
——
$
31 Dec Balance c/d
150
——
150
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Office equipment a/c
$
31 Dec Bank a/c
1 Jan
$
250
——
Balance b/d
31 Dec Balance c/d
250
——
250
Fixtures and fittings a/c
$
1 Dec
Bank a/c
1 Jan
Balance b/d
$
1,000
———
31 Dec Balance c/d
1,000
———
1,000
Fesan’s a/c
$
29 Dec Sales a/c
1 Jan
$
300
——
Balance b/d
31 Dec Balance c/d
300
——
300
Motor van a/c
$
10 Dec Bank a/c
1 Dec Balance b/d
$
1,500
———
31 Dec Balance c/d
1,500
———
1,500
Purchases a/c
$
9 Dec Agladze’s a/c
13 Dec Buczak’s a/c
20 Dec Coke’s a/c
1 Jan
$
400
300
140
——
840
——
Balance b/d
31 Dec Balance c/d
840
——
840
——
840
Rent a/c
$
7 Dec Bank a/c
1 Jan
40
——
Balance b/d
$
31 Dec Balance c/d
40
——
40
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1041
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Sales a/c
$
31 Dec Balance c/d
1,800
———
1,800
———
$
10 Dec
14 Dec
29 Dec
31 Dec
Didnko’s a/c
Ergo’s a/c
Fesan’s a/c
Bank a/c
1 Jan
Balance b/d
600
800
300
100
———
1,800
–——
1,800
Stationery a/c
$
20 Dec Bank a/c
1 Jan
200
——
Balance b/d
$
31 Dec Balance c/d
200
——
200
Capital a/c
$
31 Dec Balance c/d
5,000
———
$
1 Dec Bank a/c
1 Jan
(b)
Balance b/d
5,000
Trial balance at 31 December
Dr
$
1,760
Cash at bank
Capital
Drawings
Coke
Ergo
Electricity
Office equipment
Fixtures and fittings
Fesan
Motor van
Purchases
Rent
Sales
Stationery
1042
5,000
———
Cr
$
5,000
100
140
800
150
250
1,000
300
1,500
840
40
1,800
200
———
6,940
———
———
6,940
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(c)
Statement of profit or loss for the month ended 31 December
$
Revenue
Purchases
Less: Closing inventory
$
1,800
840
(150)
——
Cost of sales
(690)
———
1,110
Gross profit
Less: Expenses
Electricity
Rent
Stationery
150
40
200
——
Profit for the period
(390)
———
720
———
Statement of financial position at 31 December
$
Non-current assets
Fixtures and fittings
Office equipment
Motor van
$
1,000
250
1,500
———
2,750
Current assets
Inventory
Trade receivables (800 + 300)
Cash in hand
150
1,100
1,760
———
3,010
———
5,760
———
Total assets
Capital account
Capital introduced
Profit for month
5,000
720
———
5,720
(100)
———
5,620
Less: Drawings
Current liabilities
Trade payable
140
———
5,760
———
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1043
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 19 NIXON
(a)
Bank a/c
$
1 Jan
7 Jan
11 Jan
21 Jan
23 Jan
28 Jan
31 Jan
Balance b/d
Smith’s a/c
Sales a/c
Sales a/c
Harvey’s a/c
Sales a/c
Sales a/c
343
18
64
110
25
84
30
$
5 Jan
9 Jan
14 Jan
14 Jan
15 Jan
20 Jan
21 Jan
23 Jan
28 Jan
31 Jan
Wages a/c
Max’s a/c
Wages a/c
Purchases a/c
Rich’s a/c
Fixtures and fittings a/c
Wages a/c
Office expenses a/c
Wages a/c
Balance c/d
——
674
——
1 Feb
Balance b/d
12
21
14
75
162
32
17
3
15
323
——
674
——
323
Capital a/c
$
31 Jan
Balance c/d
1,091
———
1,091
———
$
1 Jan
31 Jan
Balance b/d
I & E a/c
1,049
42
———
1,091
———
1 Feb
Balance b/d
1,091
Fixtures and fittings a/c
$
1044
1 Jan
20 Jan
Balance b/d
Bank a/c
198
32
——
230
——
1 Feb
Balance b/d
230
$
31 Jan
Balance c/d
230
——
230
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Sales a/c
$
31 Jan
Trading a/c
412
$
2 Jan
11 Jan
21 Jan
28 Jan
31 Jan
Harvey’s a/c
Bank a/c
Bank a/c
Bank a/c
Bank a/c
——
412
——
124
64
110
84
30
——
412
——
Wages a/c
$
5 Jan
14 Jan
21 Jan
28 Jan
Bank a/c
Bank a/c
Bank a/c
Bank a/c
12
14
17
15
——
58
——
$
31 Jan
I & E a/c
58
——
58
——
Purchases a/c
$
5 Jan
14 Jan
Rich’s a/c
Bank a/c
150
75
——
225
——
$
31 Jan
Trading a/c
225
——
225
——
Office expenses a/c
$
23 Jan
Bank a/c
3
—
$
31 Jan
I & E a/c
3
—
Receivables – Smith’s a/c
$
1 Jan
Balance b/d
18
—
$
7 Jan
Bank a/c
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18
—
1045
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Receivables – Harvey’s a/c
$
1 Jan
2 Jan
Balance b/d
Sales a/c
39
124
——
163
——
1 Feb
Balance b/d
138
$
23 Jan
31 Jan
Bank a/c
Balance c/d
25
138
——
163
——
Receivables – Moon’s a/c
$
1 Jan
Balance b/d
26
—–
1 Feb
Balance b/d
26
$
31 Jan
Balance c/d
26
——
Payables – Rich’s a/c
$
15 Jan
Bank a/c
162
$
1 Jan
5 Jan
Balance b/d
Purchases a/c
——
162
——
12
150
——
162
——
Payables – Max’s a/c
$
9 Jan
Bank a/c
21
——
$
1 Jan
Balance b/d
21
——
Inventory a/c
$
1046
$
1 Jan
Balance b/d
458
——
31 Jan
Trading a/c
458
——
31 Jan
Trading a/c
374
——
31 Jan
Balance c/d
374
——
1 Feb
Balance b/d
374
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(b)
Trial balance (extracted before the ledger accounts were closed)
Dr
$
323
Cash at bank
Capital
Fixtures and fittings
Sales
Wages
Purchases
Office expenses
Receivables
Harvey
Moon
Inventory
(c)
Cr
$
1,049
230
412
58
225
3
138
26
458
———
1,461
———
———
1,461
———
Statement of profit or loss for the month ended 31 January
$
Revenue
Opening inventory
Purchases
$
412
458
225
——
683
(374)
——
Less: Closing inventory
Cost of goods sold
(309)
——
103
Gross profit
Less: Expenses
Wages
Office expenses
58
3
——
Profit for the period
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(61)
——
42
——
1047
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of financial position at 31 January
$
Non-current assets
Fixtures and fittings
Current assets
Inventory
Trade receivables (138 + 26)
Cash
$
230
374
164
323
——
Capital account
At 1 January
Add: Profit for the period
861
———
1,091
———
1,049
42
———
1,091
———
Answer 20 MCQs LEDGER ACCOUNTING
Item
Answer Justification
20.1
C
20.2
A
Purchases will be reduced to reflect the removal of goods (at cost). No sale is
recognised. Double-entries are not made to the inventory account for transactions
involving goods. Inventory is effectively unsold purchases and dealt with as a periodend adjustment (see later).
20.3
B
A bank account may be overdrawn and hence a liability. Sales revenue is an income
item which is closed to the income and expenditure account (so does not have a
balance) which in turn is closed with a transfer to retained earnings (so does not have
a balance). The balance on the inventory account at the end of the year must
represent an asset (i.e. debit balance).
20.4
D
Of the errors suggested only a transposition error will create a difference between
credit and debit entries.
20.5
B
Errors of omission are not detected by the trial balance. It can be extracted at any
time. It does not prove the arithmetic accuracy of the books (e.g. as well as omissions
there could be compensating errors). Financial statements cannot be prepared directly
from a trial balance as further adjustments will be required.
Answer 21 DAMIEN
Discounts a/c
$
Discount allowed to Felix
(3%  $500)
$
15
Discount received from suppliers
(5%  $260 – settlement only)
I & E a/c
——
15
——
13
2
——
15
——
Tutorial note: Total net expense to I & E as result of discounts = $2.
1048
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 22 RICARDO
Revenue a/c
$
27 Jun
Trading a/c
$
28,500
———
28,500
———
2 Jun
14 Jun
20 Jun
24 Jun
Claire – receivable a/c
Hywel – receivable a/c
Cash a/c
Mandy – receivable a/c
8,500
9,000
6,000
5,000
———
28,500
———
Sales returns
$
22 Jun
Claire – receivable
$
1,000
———
27 Jun
Trading a/c
1,000
———
Tutorial note: Sales returns may alternatively be debited to the sales revenue a/c.
Purchases a/c
13 Jun
21 Jun
Georgina – payable a/c
Andrew – payable a/c
$
12,000
4,500
———
16,500
———
$
27 Jun
Trading a/c
16,500
———
16,500
———
Cash a/c
20 Jun
24 Jun
25 Jun
Sales a/c
Claire – receivable
Hywel – receivable
Bal b/d
$
6,000
7,125
9,000
———
22,125
———
25 Jun
27 Jun
27 Jun
Georgina – payable
Andrew – payable
Balance c/d
$
11,160
4,410
6,555
———
22,125
———
6,555
Discounts allowed a/c
24 Jun
Claire – receivable
$
375
——
375
——
27 Jun
I & E a/c
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$
375
——
375
——
1049
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Discounts received a/c
$
27 Jun
I & E a/c
930
——
930
——
25 Jun
27 Jun
Georgina – payable
Andrew – payable
$
840
90
——
930
——
Claire – receivable a/c
2 Jun
Sales a/c
$
8,500
22 Jun
24 Jun
24 Jun
Sales returns
Cash a/c
Discounts allowed a/c
———
8,500
———
$
1,000
7,125
375
———
8,500
———
Hywel – receivable a/c
14 Jun
Sales a/c
$
9,000
———
25 Jun
Cash a/c
$
9,000
———
Mandy – receivable a/c
24 Jun
Sales a/c
Balance b/d
$
5,000
———
27 Jun
Balance c/d
$
5,000
———
5,000
Georgina – payable a/c
$
25 Jun
25 Jun
Cash a/c
Discounts received a/c
11,160
840
———
12,000
———
$
13 Jun
Purchases a/c
12,000
———
12,000
———
Andrew – payable a/c
$
27 Jun
27 Jun
1050
Cash a/c
Discounts received a/c
4,410
90
———
4,500
———
$
21 Jun
Purchases a/c
4,500
———
4,500
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Trial balance at 27 June
Dr
$
Revenue
Purchases
Cash
Sales returns
Mandy – receivable
Discounts allowed
Discounts received
Cr
$
28,500
16,500
6,555
1,000
5,000
930
375
———
29,430
———
———
29,430
———
Answer 23 MCQs CREDIT TRANSACTIONS
Item
Answer Justification
23.1
C
23.2
A
A settlement discount is given for prompt payment so it is not recognised until
payment is received (when the discount allowed is recognised as expense). When a
trade discount is given a sale is recorded at the net amount.
23.3
A
Both purchases and trade payables will be reduced initially. Only if the goods had
been paid for will there be a subsequent recording of a cash refund received (or a
subsequent payment to the same supplier may be reduced accordingly).
Answer 24 DINO
(a)
Water usage a/c
$
30.4.2014 Cash
1,000
_____
$
I & E a/c (W1)
31.12.2014 Balance c/d
1,000
_____
1.1.2015
1.6.2015
Balance b/d
Cash
250
1,600
_____
1,000
_____
31.1.2015
I & E a/c
Balance c/d (W2)
1,850
_____
1.1.2016
Balance b/d
750
250 
_____
1450 
400
_____
1,850
_____
400
 denotes balancing figure.
WORKINGS
(1)
(2)
Expense for period 1.4 – 31.12.2014: 9/12  1,000 = $750
3 months prepaid: 3/12  1,600 = $400
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1051
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Water usage a/c
$
$
750 
_____
31.12.2014 Balance c/d
I & E a/c
750
_____
750
_____
31.3.2015 Cash
31.12.2015 Balance c/d
750 †
_____
1.1.2015
1,000
1,200
_____
Balance b/d
I & E a/c
750
1,450 †
_____
2,200
_____
2,200
_____
1.1.2016
Balance b/d
1,200
† Tutorial note: The I & E a/c charges must be the same as determined in (a)!
Answer 25 A CREW
Stationery a/c
$
31 Dec Balance per TB
$
560
31 Dec
31 Dec
I & E a/c
Balance c/d
——
560
——
1 Jan Balance b/d
545
15
——
560
——
15
Rent a/c
$
31 Dec Balance per TB
31 Dec Balance c/d
$
900
300
———
1,200
———
31 Dec
I & E a/c
1,200
———
1,200
———
1 Jan
Balance b/d
300
Rates a/c
31 Dec Balance per TB
$
380
31 Dec
31 Dec
I & E a/c
Balance c/d
——
380
——
1 Jan Balance b/d
1052
$
310
70
——
380
——
70
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Lighting and heating a/c
31 Dec Balance per TB
31 Dec Balance c/d
$
590
15
——
605
——
31 Dec
I & E a/c
$
605
——
605
——
1 Jan
Balance b/d
15
Insurance a/c
31 Dec Balance per TB
$
260
31 Dec
31 Dec
I & E a/c
Balance c/d
——
260
——
1 Jan Balance b/d
$
190
70
——
260
——
70
Wages and salaries a/c
31 Dec Balance per TB
$
2,970
———
31 Dec
I & E a/c
$
2,970
———
Tutorial note: As an alternative to c/d on the individual expense a/cs they may be transferred to
prepayment & accrued expense ledger a/cs as follows:
Prepayments a/c
$
31 Dec Stationery
31 Dec Rates
31 Dec Insurance
1 Jan Balance b/d
15
70
70
——
155
——
$
31 Dec
Balance c/d
155
——
155
——
155
Accrued expenses a/c
$
31 Dec Balance c/d
315
——
315
——
$
31 Dec
31 Dec
1 Jan
Rent
Light and heat
Balance b/d
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300
15
——
315
——
315
1053
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 26 TOMASZ
(a)
Trial balance at 31 March
Dr
$
Capital
Cash at bank (W)
Motor van
Trade payable A
Trade receivable B
Rent
Purchases
Revenue
Drawings
Motor running expenses
Cr
$
5,000
4,100
600
200
300
350
2,000
3,000
500
350
———
8,200
———
———
8,200
———
WORKING
Bank a/c
$
Balance b/d
Revenue a/c
4,200
3,000
$
Purchases a/c
Drawings a/c
Motor running expenses a/c
Rent a/c
Balance c/d
———
7,200
———
(b)
Statement of profit or loss for the three months ended 31 March
$
Revenue
Purchases
Less: Closing inventory
2,000
(700)
———
Gross profit
Less: Expenses
Motor running expenses
Rent (350 – 150)
350
200
———
Profit for the period
1054
2,000
500
350
250
4,100
———
7,200
———
$
3,000
(1,300)
———
1,700
(550)
———
1,150
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Statement of financial position at 31 March
$
Non-current assets
Motor van
Current assets
Inventory
Trade receivables
Prepayment
Cash
$
600
700
300
150
4,100
———
5,250
———
5,850
———
Total assets
Capital account
At 1 January
Add: Profit for the period
5,000
1,150
———
6,150
(500)
———
5,650
Less: Drawings
Current liabilities
Trade payables
200
———
5,850
———
Total capital and liabilities
Answer 27 PUSHKOVA
Statement of profit or loss for the year ended 30 April 2014
$
Revenue
Opening inventory
Purchases
$
18,955
3,776
12,556
———
16,332
(4,998)
———
Less: Closing inventory
Cost of sales
(11,334)
———
7,621
Gross profit
Less: Expenses
Insurance
Lighting and heating
Motor expenses
Packing expenses
Rates
Rent
Salaries
Sundry expenses
111
665
720
276
100
480
2,447
141
———
Profit for the year
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(4,940)
———
2,681
———
1055
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of financial position at 30 April 2014
$
Non-current assets
Fixtures and fittings
Motor vehicles
600
2,400
———
3,000
Current assets
Inventory
Trade receivables
Prepayments ($20 + $35)
Bank
Cash
4,998
4,577
55
3,876
120
———
13,626
———
16,626
———
Total assets
Capital account
Opening capital
Add: Profit for year
$
12,844
2,681
———
15,525
(2,050)
———
13,475
Less: Drawings
Current liabilities
Trade payables
Accrued expenses ($56 + $24 + $26)
3,045
106
———
Total capital and liabilities
1056
$
3,151
———
16,626
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 28 SCORCESE
Profit or loss
$
Income Per question
Less: Received in advance
$
37,550
Statement of financial position
Prepaid Accrued Deferred
expense expense income
$
$
$
(4,300)
——— 33,250
———
Expenses
Wholesaler
Per question
Add: Accrual
Butcher
Per question
Add: Accrual
3,945
292
———
4,237
4,261
431
———
4,692
Building supplier
Per question
4,300
292
431
814
Electricity
Per question
Add: Accrual (2/3  220)
935
147
———
Gas
Per question
Less: Prepayment
566
(34)
———
Wages
Per question
Add: Accrual
1,150
42
———
147
1,082
34
532
42
1,192
———
12,549
———
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——
34
——
——
912
——
———
4,300
———
1057
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 29 TOLSTOY
Road tax and insurance a/c
2014
1 Jan
1 Apr
1 May
1 Jul
2015
1 Jan
$
Balance b/d
Bank a/c
Bank a/c
Bank a/c
1,140
840
3,540
560
———
6,080
———
Balance b/d
2014
I & E a/c
31 Dec Balance c/d (W1)
$
4,410 (al)
1,670
———
6,080
———
1,670
Prepayment a/c *
2014
$
31 Dec
Road tax & insurance
2015
1 Jan
Balance b/d
1,670
———
1,670
2014
31 Dec Balance c/d
2015
1 Jan Road tax & insurance
(reversal of prepayment)
$
1,670
———
1,670
WORKINGS
(1)
Prepayment at the end of the year
Motor tax on six vans paid 1 April (3/12  $840)
Insurance of ten vans paid 1 May (4/12  $3,540)
Motor tax on four vans paid 1 July (6/12  $560)
$
210
1,180
280
———
1,670
———
PROOF (not necessary)
Charge for the year
$
1,140
630
2,360
280
———
4,410
———
Prepayment
Motor tax (9/12  $840)
Insurance (8/12  $3,540)
Motor tax (6/12  $560)
Tutorial note: Alternative the balance c/d and balance b/d can be shown as a transfer to and from a
prepayment a/c which would be presented as *.
1058
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 30 HAERTEL
Tutorial note: Although daunting there is only one missing figure for each a/c. As long as the amounts
given are posted to the correct sides, the right answer will follow. This principle, of using T a/cs to
determine missing information, will be encountered frequently in your studies.
(a)
Rental income a/c
2014
$
2014
1 Jan
Accrued income reversal 34,200
I & E a/c (al fig)
241,200
31 Dec Transfer Deferred income 15,300
————
290,700
————
2015
1 Jan Accrued income reversal 40,500
(b)
$
1 Jan
Deferred income reversal
Cash a/c
31 Dec Transfer Accrued income
2015
1 Jan
Deferred income reversal
20,700
229,500
40,500
————
290,700
————
15,300
Interest expense a/c
2014
$
1 Jan
Prepayment reversal
Bank a/c (al fig)
31 Dec Transfer Accrued
expenses
2015
1 Jan
Prepayment reversal
2014
3,500
57,400
$
1 Jan
Accrual reversal
I & E a/c
31 Dec Transfer Prepayments
7,000
———
67,900
———
5,600
9,800
52,500
5,600
———
67,900
———
2015
1 Jan
Accrual reversal
7,000
Tutorial note: The other side of the entries that are reversals and transfers would be to
accruals/prepayments accounts. These are not shown as they are not asked for and
unnecessary to arrive at a solution. Consider that under the “traditional” method, where
separate accounts for the accruals/prepayments are not required, the entries that are shown in
this solution as “reversals” and “transfers” would simply be the balances brought forward and
carried forward, respectively.
Answer 31 MCQs ACCRUALS AND PREPAYMENTS
Item
Answer Justification
31.1
B
Rent a/c
$
Cash
300
Cash
400
Cash
400
Closing accrual (3 months  $100) 300
———
1,400
———
$
Accrual reversed
I & E a/c
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200
1,200
———
1,400
———
1059
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
31.2
D
Rates a/c
$
31.3
$
Prepayment reversed
Cash
Cash
150
350
350
——
850
——
I & E a/c
Closing prepayment
(3/6  $350)
A
Insurance a/c
$
31.4
180
600
——
780
——
C
Electricity a/c
I & E a/c
Closing prepayment (4/12  $600)
$
2,072
307
———
2,379
———
31.5
D
175
——
850
——
$
Prepayment reversed
Cash
Debits (per Q)
Closing accrual
675
580
200
——
780
——
$
Credits (per Q)
I & E a/c
Closing prepayment (2/3  $180)
375
1,884
120
———
2,379
———
Rental income
$
Accrued income reversed (or b/d) 1,050
I & E a/c (al fig)
37,350
Deferred income (or c/d)
1,800
———
40,200
———
$
Deferred income reversed (or b/d) 1,950
Cash received
36,900
Accrued income (or c/d)
1,350
———
40,200
———
31.6
A
I & E a/c = 12/18  $3,600 = $2,400
3
31.7
C
2  $600 received 31 October in advance for 3 months to 31 January  2  $200 =
$400 deferred income (income received “belonging” to the next accounting period).
/18  $3,600 = $600 prepaid
$600 received 31 January in arrears for 3 months to 31 January  $400 accrued
income (earned but not received) at 31 December.
31.8
1060
D
$600  3  4 = $7,200
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 32 ROOKIE
(a)(i)
Machinery a/c
$
$
1.1.2014 Cash (or payable)
10,000
______
31.12.2014
Balance c/d
10,000
_____
1.1.2015
Balance b/d
10,000
_____
31.12.2015
Balance c/d
10,000
_____
1.1.2016
Balance b/d
10,000
(ii)
Accumulated depreciation a/c
$
31.12.2014 Balance c/d
$
1,150
_____
(W1)
Depreciation expense
1.1.2015
31.12.2015 Balance c/d
2,300
_____
Balance b/d
Depreciation expense
2,300
_____
1,150
1,150
_____
2,300
_____
1.1.2016
(iii)
1,150
_____
Balance b/d
2,300
Depreciation expense a/c
$
$
Accumulated depreciation a/c
1,150
_____
31.12 2014
To I & E a/c
1,150
_____
Accumulated depreciation a/c
1,150
_____
31.12 2015
To I & E a/c
1,150
_____
WORKING
$[10,000 – 800] ÷ 8 = $1,150
(b)
Presentation in statements of financial position
End of reporting
period
31.12.2014
31.12.2015
Cost
$
10,000
10,000
Depreciation
$
(1,150)
(2,300)
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Carrying value
$
8,850
7,700
1061
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 33 ALEXANDER
(a)
Straight line method
Depreciation charge per annum
=
Cost of asset - Scrap value
Estimated useful life
=
800  70
4
= $182.50, i.e. $183
Tutorial note: Depreciation is an accounting estimate therefore rounding is acceptable.
Greater accuracy is unnecessary and should be avoided.
(b)
Reducing balance method
Depreciation charge is
Year 1
Year 2
Year 3
Year 4
$800  45%
$(800 – 360)  45%
$(800 – (360 + 198))  45%
$(800 – (360 + 198 + 109))  45%
=
=
=
=
$360
$198
$109
$60
Answer 34 UDOT
(a)
Machinery a/c
$
2012
20 Jan
1062
Cash a/c
4,200
———
2013
1 Jan
17 Apr
Balance b/d
Cash a/c
4,200
5,000
———
9,200
———
2014
1 Jan
11 Jul
Balance b/d
Cash a/c
9,200
3,500
———
12,700
———
2015
1 Jan
Balance b/d
12,700
2012
31 Dec Balance c/d
$
4,200
———
2013
31 Dec Balance c/d
9,200
———
9,200
———
2014
31 Dec Balance c/d
12,700
———
12,700
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Accumulated depreciation a/c
$
2012
31 Dec Balance c/d
1,050
———
2013
31 Dec Balance c/d
3,337
———
3,337
———
2014
31 Dec Balance c/d
6,203
———
6,203
———
31 Dec Depreciation expense
a/c (W1)
2013
1 Jan Balance b/d
31 Dec Depreciation expense
a/c (W2)
2014
1 Jan Balance b/d
31 Dec Depreciation expense
a/c (W3)
2015
1 Jan
(b)
$
2012
1,050
———
1,050
2,287
———
3,337
———
3,337
2,866
———
6,203
———
Balance b/d
6,203
Statement of financial position at 31 December (extracts)
Tangible non-current assets
2012
Machinery
2013
Machinery
2014
Machinery
Cost
Depreciation
$
$
Carrying
value
$
4,200
_____
1,050
_____
3,150
_____
9,200
_____
3,337
_____
5,863
_____
12,700
_____
6,203
_____
6,497
_____
WORKINGS
(1)
2012 depreciation
$4,200  25%
(2)
$1,050
———
2013 depreciation
$
1,500
787
———
2,287
———
$5,000  30%
$(4,200 – 1,050)  25%
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1063
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(3)
2014 depreciation
$
1,225
1,050
591
———
2,866
———
$3,500  35%
$(5,000 – 1,500)  30%
$(4,200 – 1,050 – 787)  25%
Answer 35 POPOV
Plant a/c
$
2014
1 Jan
Balance b/d
5,000
$
2014
1 Jul
31 Dec
Disposal a/c
Balance c/d
———
5,000
———
2,000
3,000
———
5,000
———
2015
1 Jan
Balance b/d
3,000
Accumulated depreciation a/c
$
2014
31 Dec Disposal a/c
Balance c/d
600
2,700
———
3,300
———
$
2014
1 Jan
31 Dec
Balance b/d
I & E a/c (charge for year)
3,000
300
———
3,300
———
2015
1 Jan
Balance b/d
2,700
Disposal a/c
$
2014
1 Jul
Plant a/c
31 Dec I & E a/c (profit on disposal)
2,000
100
———
2,100
———
$
2014
1 Jul
31 Dec
Bank a/c
Depreciation a/c (W)
1,500
600
———
2,100
———
WORKING
Three years’ depreciation: 3 × 10% × $2,000 = $600
Tutorial note: In the statement of profit or loss the profit on disposal may be off-set against the
depreciation expense (as it represents a previous over allowance).
1064
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 36 REUTHER
Vehicle a/c
2012
Cash
2013
Balance b/d
Cash
2014
Balance b/d
Disposals (allowance)
Cash (al fig)
2015
Balance b/d
Disposals (allowance)
Cash (al fig)
2016
Balance b/d
$
372,000
————
372,000
108,600
————
480,600
————
480,600
18,000
21,600
————
520,200
————
483,000
48,000
267,000
————
798,000
————
2012
Balance c/d
2013
Balance c/d
2014
Disposals
Balance c/d
2015
Disposals
Balance c/d
$
372,000
————
480,600
————
480,600
————
37,200
483,000
————
520,200
————
279,000
519,000
————
798,000
————
519,000
Accumulated depreciation a/c
2012
Balance c/d
2013
Balance c/d
2014
Disposals
Balance c/d
2015
Disposals
Balance c/d
$
93,000
————
213,150
————
213,150
————
18,600
315,300
————
333,900
————
209,250
235,800
————
445,050
————
2012
Depreciation a/c (25%  $372,000)
2013
Balance b/d
Depreciation a/c (25%  $480,600)
2014
Balance b/d
Depreciation a/c (25%  $483,000)
2015
Balance b/d
Depreciation a/c (25%  $519,000)
2016
Balance b/d
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$
93,000
————
93,000
120,150
————
213,150
————
213,150
120,750
————
333,900
————
315,300
129,750
————
445,050
————
235,800
1065
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Depreciation a/c
$
2012
Charge for depreciation
93,000
———
2013
$
2012
I & E a/c
93,000
———
2013
Charge for depreciation
120,150
————
2014
I & E a/c
120,150
————
2014
Charge for depreciation
120,750
————
2015
I & E a/c
120,750
————
2015
Charge for depreciation
129,750
————
I & E a/c
129,750
————
Disposals a/c
$
2014
Vehicle a/c
37,200
$
2014
Accumulated depreciation (W1)
Vehicle a/c (allowance against car)
Loss on disposal
———
37,200
———
2015
18,600
18,000
600
———
37,200
———
2015
Vehicle a/c
279,000
Accumulated depreciation (W2)
Vehicle a/c (allowance)
Loss on disposal
————
279,000
————
209,250
48,000
21,750
————
279,000
————
WORKINGS
(1)
Depreciation on 2014 disposals
2 years @ 25%  $37,200 = $18,600
(2)
Depreciation on 2015 disposals
3 years @ 25%  $279,000 = $209,250
1066
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 37 MCQs DEPRECIATION AND DISPOSALS
Item
Answer Justification
37.1
A
Annual depreciation (straight line) =
$50,000  $4,550
= $9,090
5
Time apportioned charge (rounded) = 5/12  $9,090 = $3,788 (rounded)
37.2
D
Non-current asset cost a/c
$000
Balance b/d
Purchase (al fig)
143
49
——
192
——
$000
Disposals
Balance c/d
16
176
——
192
——
Accumulated depreciation a/c
$000
Disposals
Balance c/d
37.3
10
34
——
44
——
C
Machine 2
$
90,000
60,000
———
30,000
———
80,000
120,000
———
(40,000)
———
Profit/(loss) on sale
A
Balance b/d
Depreciation (al fig)
Machine 1
$
Selling price
Carrying value (al fig)
37.4
$000
Total
$
180,000
Plant a/c (at carrying amount)
$
Balance b/d
Additions
21
23
——
44
——
261,000
512,000
$
Disposals (al fig)
Depreciation charge
Balance c/d
————
773,000
————
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160,000
143,000
470,000
————
773,000
————
1067
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Disposal a/c
$
Carrying value
160,000
$
Loss on disposal
Proceeds (al fig)
————
160,000
————
37.5
D
107,000
53,000
————
160,000
————
Non-current assets (at carrying amount)
$
Balance b/d
Purchases
110,000
25,000
$
Depreciation
Disposals
Balance c/d
————
135,000
————
37.6
A
30,000
15,000
90,000
————
135,000
————
Disposals a/c
$
Asset cost
10,000
$
Asset – accumulated
depreciation
Trade-in (proceeds)
Underallowance for depreciation
———
10,000
———
37.7
D
Disposals a/c
$
Asset cost
Overallowance
3,000
222
$
Asset – accumulated
depreciation (W)
Sale proceeds (al fig)
———
3,222
———
1068
5,000
3,500
1,500
———
10,000
———
1,358
1,864
———
3,222
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
$
Asset cost – 1 October 2011
Depreciation three months to 31 December 2011
Depreciation 1 January to 31 December 2012
Depreciation 1 January to 31 December 2013
Depreciation six months 1 January to 30 June 2014
Carrying value at 30 June 2014
37.8
Accumulated
depreciation
$
3,000
(150)
———
2,850
(570)
———
2,280
(456)
———
1,824
(182)
———
1,642
———
A
150
570
456
182
———
1,358
———
$
150,000
(60,000)
30,000
(20,000)
8,750
_______
Cost b/fwd
Accumulated depreciation b/fwd
Cost of additions
Cost of disposals
Depreciation eliminated on disposals (W)
108,750
_______
25%  $108,750 =
27,188
______
WORKING
Cost
Depreciation 2012  25%
$
20,000
(5,000)
______
2013  25%
15,000
(3,750)
______
11,250
______
2014 – none as year of disposal
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Depreciation
$
5,000
3,750
_____
8,750
_____
1069
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
37.9
A
$
20,000
(8,750)
______
Cost
Less: Accumulated depreciation
37.10
Carrying amount
Less: Proceeds
11,250
(18,000)
______
Profit/(loss) on sale
6,750
______
C
Plant and equipment (carrying value)
$
Bal b/fwd
$
10,951
Depreciation on assets
disposed of (W1)
Additions (al fig)
($825  100/75)
2,188
Cost of assets disposed of
5,000
Depreciation on assets
b/fwd (W2)
2,035
Depreciation on additions
($1,100 – $825)
Bal c/fwd
1,100
––––––
14,239
––––––
275
6,929
––––––
14,239
––––––
WORKINGS
(1)
Cost
Depreciation
31 May 2013
31 May 2014
(2)
Depreciation
$
1,250
938
––––––
2,188
––––––
Depreciation on assets b/fwd at 1 June 2014
Carrying amount b/fwd
Less: Carrying amount of assets sold
1070
$
5,000
(1,250)
––––––
3,750
(938)
––––––
2,812
––––––
10,951
(2,812)
––––––
8,139  25% 2,035
––––––
––––––
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 38 KROL
(a)
Irrecoverable debts expense a/c
$
31 Dec Trade receivables a/c
31 Dec Allowance
(b)
115
50
——
165
——
$
31 Dec I & E a/c
165
——
165
——
Allowance for receivables a/c
$
31 Dec Balance c/d
2,725 (W)  5%
136
——
136
——
$
1 Jan Balance b/d
31 Dec Debts expense a/c
86
50
——
136
——
WORKING
Trade receivables a/c
$
31 Dec Balance c/d
2,840
$
31 Dec Debt expense
31 Dec Balance c/d
———
2,840
———
1 Jan
Balance b/d
115
2,725
———
2,840
———
2,725
Tutorial note: Although a “T” a/c looks excessive as a working it is a good technique to remember the
double entries and to deal with complicated questions.
Answer 39 HYUNDAI
(a)
Irrecoverable debts expense a/c
$
31 Dec Trade receivables a/c
31 Dec I & E a/c
55
32
——
87
——
$
31 Dec Allowance a/c
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87
——
87
——
1071
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Allowance for receivables a/c
$
31 Dec Debts expense a/c
87
31 Dec Balance c/d
$(2,440 – 55)  5%
$
1 Jan
Balance b/d
206
119
——
206
——
——
206
——
Tutorial note: Remember that the irrecoverable debt expense for a year can be “negative”; in
the event of a reduction in the allowance required (as illustrated here), or if there is a
significant recovery of amounts previously written off or allowed for.
Answer 40 DINUL
Journal
Dr
$
Year 1
Irrecoverable debts expense a/c
Trade receivables a/c
Cr
$
1,000
1,000
Irrecoverable debts written off during the year
Irrecoverable debts expense a/c
Allowance for trade receivables a/c
265
265
Increase in allowance (to 7.5% of $15,000)
I & E a/c
Irrecoverable debts expense a/c
1,265
1,265
Write off of irrecoverable debts expense
Year 2
Irrecoverable debts expense a/c
Trade receivables a/c
1,100
1,100
Irrecoverable debts written off at 31 December
Allowance for trade receivables a/c
Irrecoverable debts expense a/c
180
180
Reduction in allowance (to 7.5% of $12,600)
I & E a/c
Irrecoverable debts expense a/c
920
920
Debts written off to I & E
1072
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Irrecoverable debts expense a/c
$
Year 1
Debts written off
31 Dec Allowance
Year 2
31 Dec Trade receivables a/c
$
1,000
265
———
1,265
———
31 Dec
1,100
31 Dec
31 Dec
I & E a/c (al)
1,265
———
1,265
———
Allowance
I & E a/c (al)
———
1,100
———
180
920
———
1,100
———
Allowance a/c
$
Year 1
31 Dec Balance c/d ($15,000  7.5%)
1,125
———
1,125
———
$
1 Jan
31 Dec
Balance b/d
Debts expense a/c (al)
860
265
———
1,125
———
Year 2
31 Dec Debts expense a/c (al)
31 Dec Balance c/d
$(13,700 – 1,100)  7.5%
180
1 Jan
Balance b/d
945
———
1,125
———
1,125
———
1,125
———
Tutorial note: See how the “T” a/cs work out the charge to I & E by incorporating the movement on the
allowance account.
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1073
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 41 PUSHKIN
(a)
Allowance for trade receivables a/c
$
2012
31 Dec Debts expense (al)
Balance c/d
250
9,750
———
10,000
———
2013
$
2012
1 Jan
Balance b/d
10,000
———
10,000
———
2013
31 Dec Debts expense a/c
Balance c/d
750
9,000
———
9,750
———
2014
1 Jan
Balance b/d
9,750
———
9,750
———
2014
31 Dec Balance c/d
15,750
———
15,750
———
1 Jan Balance b/d
31 Dec Debts expense a/c
9,000
6,750
———
15,750
———
2015
1 Jan
Balance b/d
15,750
Irrecoverable debts expense a/c
$
2012
31 Dec Trade receivables a/c
1,860
2012
31 Dec Allowance
I & E a/c (al)
———
1,860
———
2013
250
1,610
———
1,860
———
2013
31 Dec Trade receivables a/c
1,020
31 Dec Allowance
I & E a/c (al)
———
1,020
———
2014
31 Dec Trade receivables a/c
Allowance
1074
$
750
270
———
1,020
———
2014
6,020
6,750
———
12,770
———
31 Dec I & E a/c (al)
12,770
———
12,770
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(b)
Statement of financial position at 31 December (extracts)
2012
$
Current assets
Trade receivables
Less: Allowance for trade receivables
2013
$
2014
$
195,000 150,000 210,000
9,750
9,000
15,750
———— ———— ————
185,250 141,000 194,250
———— ———— ————
Answer 42 INK PRODUCTS
(a)
Allowance required
$40,000
$20,000
$15,000
(b)
@ 2%
@ 5%
@ 10%
=
=
=
$
800
1,000
1,500
––––––
3,300
––––––
Trade receivables allowance a/c
$
31.3.2015 Balance c/d
$
1.4.2014 Balance b/d
(2) Debts expense (al)
3,300
_____
3,300
_____
1,100
2,200
_____
3,300
_____
1.4.2015 Balance b/d (per (a))
3,300
Answer 43 ADAM
Allowance for trade receivables a/c
$
31.3.2013 Balance c/d (W1)
365
___
$
(2)
Debts expense
365
___
31.3.2014 Balance c/d (W2)
530
___
365
___
1.4.2013
(2)
Balance b/d
Debts expense
530
___
(2)
Debt expense
31.3.2015 Balance c/d (W3)
155 ()
375
___
365 ()
___
365
165 ()
___
530
___
1.4.2014
Balance b/d
530
___
530
___
530
___
1.4.2015
Balance b/d
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375
1075
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Irrecoverable debt expense a/c
$
(1)
(2)
Write off – Forsythe
Allowance a/c
$
200
365
____
31.3.2013
To I & E a/c
____
565
____
(1)
(3)
(2)
Write off – Collins
Write off – Ludlum
Allowance a/c
240
60
165
____
565
____
31.3.2014
To I & E a/c
465
____
31.3.2015 To I & E a/c
205
____
565
465
____
465
____
(3) Collins (CB receipt)
(2) Allowance a/c
205
____
50
155
____
205
____
Tutorial note: When Adam receives $50 from Collins there will be no balance on Collins’ a/c against
which to allocate it so it has been credited to the expense a/c. Alternatively, if Adam credited the $50 to
the trade receivables a/c the debt would have to be reinstated i.e:
Dr
Trade receivables
Cr
Irrecoverable debt expense
WORKINGS
(1)
Allowance required 31.3.2013
Specific allowance (Ludlum):
General allowance:
½ × $100
5% × $6,300
=
=
$
50
315
___
365
___
(2)
Allowance required 31.3.2014
Specific allowance (Le Carré)
General allowance:
½ × $400
5% × $6,600
=
=
$
200
330
___
530
___
(3)
Allowance required 31.3.2015
General allowance:
5% × $7,500
=
$
375
___
Tutorial note: The Q does not expressly state what happened to Le Carré. However, since “there are
no debts requiring specific allowance”, presumably Le Carré’s debt (if any) is considered good.
1076
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 44 STRAK
(a)
Trade receivables a/c
$
1 Jul 2013
Balance b/d
Sales
$
50,000
480,000
————
530,000
————
Cash
432,000
Irrecoverable debts 6,000
30 Jun 2014 Balance c/d
92,000
————
530,000
————
1 Jul 2014
Balance b/d
92,000
Sales
550,000
Debt “reinstated”
600
————
642,600
————
Cash
560,600
Irrecoverable debts 2,000
30 Jun 2015 Balance c/d
80,000
————
642,600
————
1 Jul 2015
Balance b/d
80,000
Tutorial note: If cash received in 2014/15 had not included the debt recovered (i.e. if the
recovery had been recognised when it was received) the double entry would be:
Dr
Cash
Cr
(b)
Irrecoverable debt expense
Trade receivables allowance a/c
$
30 Jun 2014
Balance c/d (W2)
4,600
———
4,600
———
30 Jun 2015
30 Jun 2015
Debts expense (al) 600
Balance c/d (W3)
4,000
———
4,600
———
$
1 Jul 2013 Balance b/d (W1)
30 Jun 2014 Debts expense (al)
1 Jul 2014
Balance b/d
2,500
2,100
———
4,600
———
4,600
———
4,600
———
1 Jul 2015
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Balance b/d
4,000
1077
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(c)
Irrecoverable debts expense a/c
$
30 Jun 2014
Trade receivables
(write off)
Allowance
(increase)
Trade receivables
(write off)
$
30 Jun 2014 I & E a/c
8,100
6,000
2,100
———
8,100
———
2,000
———
8,100
———
Trade receivables
recovery
30 Jun 2015 Allowance
(reduction)
30 Jun 2015 I & E a/c
———
2,000
———
600
600
800
———
2,000
———
WORKINGS
(1)
(2)
(3)
Allowance at 30 June 2013 = 5%  $50,000 = $2,500
Allowance at 30 June 2014 = 5%  $92,000 = $4,600
Allowance at 30 June 2015 = 5%  $80,000 = $4,000
Answer 45 FREDERIK
(a)
Trade receivables a/c
$
2014
1 Apr Balance b/d
2015
31 Mar Sales a/c
40,000
195,600
$
2014
2 Jan
Irrecoverable debts
(Lean)
31 Mar Bank a/c
Debts expense
Balance c/d
————
235,600
————
1 Apr
Balance b/d
4,000
192,300
3,200
36,100
————
235,600
————
36,100
Allowance a/c
2014
$
2014
31 Mar Irrecoverable debts
Balance c/d
(7½%  $36,100)
292
1 Apr
$
Balance b/d
(7½%  $40,000)
2,708
———
3,000
———
3,000
———
3,000
———
2015
1 Apr
1078
Balance b/d
2,708
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Tutorial note: In this case the allowance is simply a percentage of the balance on the trade
receivables a/c (i.e. a general allowance).
Irrecoverable debts expense a/c
$
2015
2 Jan Receivables a/c (Lean)
31 Mar Receivables a/c
$
2015
4,000
3,200
———
7,200
———
31 Mar Allowance a/c
I & E a/c
292
6,908
———
7,200
———
Sales a/c
$
2015
31 Mar Trading a/c
$
2015
283,400
31 Mar Receivables a/c
Bank a/c
195,600
87,800
———
283,400
———
———
283,400
———
Bank a/c (extract)
$
2015
31 Mar Sales a/c
Receivables a/c
(b)
87,800
192,300
Statement of financial position at 31 March 2015 (extract)
Current assets
Trade receivables
Less: Allowance
$
$
36,100
(2,708)
———
33,392
Answer 46 MCQs RECEIVABLES AND PAYABLES
Item
Answer Justification
46.1
A
Charges to I & E account
$
Irrecoverable debts written off in year
Irrecoverable debt recovered
Decrease in allowance $(1,000 – 900)
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600
(80)
(100)
——
420
——
1079
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
46.2
D
Allowance for receivables
$
Irrecoverable debt a/c
Balance c/d ($16,000  5%)
1,200
800
———
2,000
———
$
Balance b/d
2,000
———
2,000
———
Therefore $1,200 increase in profit.
46.3
C
Receivables
$
Balance b/d
150,000
$
Irrecoverable debt expense
Balance c/d
————
150,000
————
Balance b/d
3,500
146,500
————
150,000
————
146,500
Allowance for receivables
$
Balance c/d (5%  146,500)
7,325
———
7,325
———
$
Balance b/d
Irrecoverable debt expense
Balance b/d
46.4
B
7,325
Receivables
$
Per TB
1,000
6,325
———
7,325
———
122,000
$
Debt write off
Balance c/d
————
122,000
–———
2,000
120,000
————
122,000
————
Receivables allowance
$
Receivables
Irrecoverable debt expense
Balance c/d (W)
1080
2,000
196
2,784
———
4,980
———
$
Balance b/d (2,000 + 2,980)
4,980
———
4,980
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Irrecoverable debt expense
$
I & E a/c
196
——
$
Allowance
196
——
WORKING
Specific allowance
General allowance = $(120,000 – 1,600)  1%
46.5
B
=
=
1,600
1,184
——
2,784
——
Receivables a/c
$
Balance b/d
Sales
Debt reinstated
46.6
A
$
10,000
Receipts
100,000
Discounts allowed
2,000
Balance c/f
————
112,000
————
Irrecoverable debts a/c
$
I & E a/c
900
$
Decrease in allowance
Irrecoverable debt recovered
——
900
——
Profit (before irrecoverable debts)
B
Irrecoverable debts a/c
$
Written off
Increase in allowance
600
300
——
900
——
$
5,000
(900)
———
4,100
———
Profit (after irrecoverable debts)
Irrecoverable debts – increase profit
46.7
90,000
1,800
20,200
————
112,000
————
8,563
26,839
———
35,402
———
$
Irrecoverable debts recovered
I & E a/c (balancing amount)
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4,262
31,140
———
35,402
———
1081
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Allowance for receivables a/c
$
Balance c/d (3%  $1,181,970)
35,459
———
35,459
———
$
Balance b/d
Irrecoverable debts a/c (al)
8,620
26,839
———
35,459
———
Receivables a/c
$
Balance b/d
Sales
Irrecoverable debt recovered
463,271
5,943,271
4,262
—————
6,410,804
—————
46.8
C
$
Cash
5,217,000
Irrecoverable debts written off
8,563
Discounts allowed
3,271
Balance c/d
1,181,970
—————
6,410,804
—————
Receivable ledger control a/c
$
Balance b/d
Revenue
Irrecoverable debts recovered
5,000
100,000
1,000
$
Receipts
Discounts allowed
Irrecoverable debts (w/o)
Balance c/d
————
106,000
————
70,000
800
500
34,700
————
106,000
————
Answer 47 C3P0
Trading account
For the six months to 30 June
$
Revenue ((1,500 @ 7.40) + (750 @ 8.00))
Opening inventory
Purchases (3,000 @ 6.30)
3,150
18,900
______
22,050
(7,875)
______
Closing inventory (1,250 @ 6.30)
Gross profit
1082
$
17,100
(14,175)
______
2,925
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 48 OGAY
(a)
Inventory a/c
$
2013
31 Dec Trading a/c
5,000
———
2014
$
2013
31 Dec Balance c/d
5,000
———
2014
1 Jan Balance b/d
31 Dec Trading a/c
5,000
7,500
———
12,500
———
31 Dec Trading a/c
31 Dec Balance c/d
5,000
7,500
———
12,500
———
2015
1 Jan
Balance b/d
7,500
Purchases a/c
$
2013
Cash/Payables
75,000
———
2014
$
2013
31 Dec Trading a/c
75,000
———
2014
Cash/Payables
110,000
———
31 Dec Trading a/c
110,000
———
Revenue a/c
$
2013
31 Dec Trading a/c
120,000
———
2014
31 Dec Trading a/c
(b)
$
2013
Cash/receivables
120,000
———
Cash/receivables
155,000
———
2014
155,000
———
Trading accounts for the year ended
31 December 2013
$
$
Revenue
Opening inventory
Purchases
Less: Closing inventory
31 December 2014
$
$
120,000
155,000
–
75,000
______
5,000
110,000
_______
75,000
(5,000)
______
115,000
7,500
_______
Cost of goods sold
70,000
______
107,500
______
Gross profit
50,000
———
47,500
———
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1083
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 49 ALES
Stock valuation at 31 December
All items must be valued at the lower of cost or net realisable value (NRV).
$
80
110
5
11
___
ABC (at cost)
DEF (at NRV)
GHI (at NRV)
JKL (at NRV)
Carrying value at 31 December
206
___
Answer 50 PERIOD-END ADJUSTMENTS
(a)
Artur
Gas a/c
$
Cash
31.12.2014 Accrued expense a/c
420
100
——
520
——
$
31.12.2014 I & E a/c
1.1.2015
Cash
138
——
138
——
31.12.2015
520
——
520
——
Accrued expense
(“reversal”)
I & E a/c
100
38
——
138
——
Tutorial note: Alternatively the accrual can simply be c/d and b/d on the expense a/c – in
which case the liability account for the statement of financial position which follows is not
required.
Accrued expenses a/c
$
31.12.2014 Balance c/d
1.1.2015
Gas a/c
(“reversal”)
$
100
——
31.12.2014 Gas a/c
100
——
100
——
1.1.2015
100
——
Balance b/d
Income and expenditure account extracts
Less: Expenses
Gas
1084
2015
$
2014
$
38
520
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(b)
Physical count
Inventory a/c
$
2014
1.1
31.12
2015
1.1
Balance b/d
From trading a/c
Balance b/d
10,000
11,800
———
21,800
———
$
2014
To trading a/c
31.12
Balance c/d (W)
10,000
11,800
———
21,800
———
11,800
Trading (and income and expenditure) a/c
$
Opening inventory
Purchases
Gross profit c/d
10,000
58,000
13,800
———
81,800
———
$
Sales
Closing inventory
70,000
11,800
———
81,800
———
Trading account for the year ended 31 December 2014
$
Revenue
Cost of sales
Opening inventory
Purchases
Closing inventory (W)
$
70,000
10,000
58,000
(11,800)
——— (56,200)
———
13,800
———
Gross profit
WORKING
Inventory at 7 January 2015
Less: Deliveries
Add back Sales at cost ($6,000  80%)
Inventory at 31 December 2014
$
15,000
(8,000)
4,800
———
11,800
———
Tutorial note: Closing inventory must be valued based on actual physical inventory. In this case it is
“rolled-back” from a physical count after the reporting period. It is inappropriate to calculate gross profit
based on the profit margin and calculate closing inventory as the balancing figure. Actual inventory will
be less because it is subject to physical loss that is not counted (e.g. due to damage or theft).
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1085
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(c)
Felix
Annual depreciation = $10,000 ($50,000 ÷ 5)
Therefore, four years’ accumulated depreciation = $40,000.
Journals
$
Dr Disposals a/c
Cr Cost a/c
50,000
Dr Accumulated depreciation a/c
Cr Disposals a/c
40,000
Dr Cost of new car
Cr Disposals a/c
15,000
Dr Cost of new car
Cr Cash
50,000
$
40,000

 Carrying value
 of old car


15,000
Deemed proceeds
50,000
50,000
Dr Disposals a/c
Cr I & E a/c
5,000
5,000
Profit on disposal
Disposals a/c
$
Cost
I & E a/c (profit)
(d)
50,000
5,000
———
55,000
———
$
Accumulated depreciation
Cost of new car
40,000
15,000
———
55,000
———
Hnychuk
Motor vehicle cost a/c
$
2014
1.1
1.7
Cash (Peugeots)
Cash
240,000
60,000
———
300,000
———
2015
1.1.
Balance b/d
220,000
Part exchange (Peugeots)
Cash (Peugeots)
Cash (Audi)
1086
100,000
80,000
80,000
———
480,000
———
2014
Disposals (crash)
31.12 Balance c/d
$
80,000
220,000
———
300,000
———
2015
Disposals
220,000
Disposals
260,000
———
480,000
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Accumulated depreciation
$
2014
31.12
$
2014
Balance c/d
55,000
———
55,000
———
Disposals
55,000
———
55,000
———
2015
2015
1.1
Depreciation
(25%  $220,000)
Balance b/d
55,000
———
55,000
———
55,000
———
55,000
———
Depreciation expense a/c
2014 (same for 2015)
Accumulated depreciation
$
55,000
———
55,000
———
$
2014
I & E a/c
55,000
———
55,000
———
Disposals a/c
$
2014
Cost (Peugeot)
80,000
$
2014
31.12
Cash (insurance)
I & E a/c (loss)
2015
Account depreciation 55,000
Part exchange
(Peugeots)
100,000
Cash (Felix)
50,000
Cash
150,000
Loss on disposals
125,000
———
480,000
———
———
80,000
———
2015
Cost
220,000
Cost
260,000
———
480,000
———
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65,000
15,000
———
80,000
———
1087
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(e)
Lopez
Trade receivables
$
2013
Sales revenue
200,000
$
2013
Cash receipts
Debt expense (w/o)
31.12
Balance c/d
————
200,000
————
2014
1.1
2015
1.1
Balance b/d
Sales revenue
Debt expense
(Ludmila)
42,000
300,000
4,000
————
346,000
————
Balance b/d
Sales revenue
62,500
500,000
2014
Cash receipts
Debt expense (w/o)
31.12
Balance c/d
2015
Cash receipts
Cash (Chokin)
31.12
Balance c/d
————
562,500
————
2016
1.1
Balance b/d
150,000
8,000
42,000
————
200,000
————
280,000
3,500 (2)
62,500
————
346,000
————
400,000
6,000 (3)
156,500
————
562,500
————
156,500
Tutorial notes:
1088
(1)
If the receipt from Ludmila was not included in the $280,000 but had been recognised
as a receipt from a customer with whom Lopez is no longer trading, it could have
been credited directly to the irrecoverable debt expense a/c (as a recovery).
(2)
It is unnecessary to adjust the write-off of Jozef’s balance against the allowance a/c
just because it had previously been allowed for. The allowance previously made is
effectively “released” to the expense a/c because it is no longer required.
(3)
Because Chokin’s debt has only been allowed for but not written off it would be
wrong to make a “reinstatement” adjustment.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Irrecoverable debt expense a/c
$
2013
Trade receivables (Ludmila)
Allowance
2014
Trade receivables (Jozef)
Allowance
2013
8,000
5,425
———
13,425
———
3,500
2,095
———
5,595
———
2015
Allowance
$
51,000
———
31.12 I & E a/c
13,425
———
13,425
———
2014
Trade receivables (Ludmila)
31.12 I & E a/c
4,000
1,595
———
5,595
———
2015
31.12 I & E a/c
51,000
———
Allowance a/c
$
2013
31.12 Balance c/d (W1)
5,425
———
2014
31.12 Balance c/d (W2)
7,520
$
2013
Irrecoverable debt expense
5,425
———
2014
1.1 Balance b/d
Irrecoverable debt expense
5,425
2,095
———
7,520
———
———
7,520
———
2015
31.12 Balance c/d (W3)
58,520
———
58,520
———
2015
1.1 Balance b/d
Irrecoverable debt expense
7,520
51,000
———
58,520
———
WORKINGS
(1)
Allowances year 1
Specific (Jozef)
General 5%  $(42,000 – 3,500)
(2)
$
3,500
1,925
——
5,425
——
Allowances year 2
Specific (Chokin) (50%  6,000)
General 8%  $(62,500 – 6,000)
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3,000
4,520
——
7,520
——
1089
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(3)
Allowances year 3
$
Specific (Paulo)
General 8%  ($156,500 – 50,000)
50,000
8,520
———
58,520
———
Statement of financial position (extracts)
31 December
2013
2014
2015
$
$
$
42,000
62,500 156,500
(5,425) (7,520) (58,520)
——— ———
——–
36,575
54,980 97,980
——— ———
——–
Trade receivables
Less: Allowance for trade receivables
Answer 51 MCQs INVENTORY
Item
Answer Justification
51.1
B
A full physical count may only be necessary where a stock-checking system is not
effective.
51.2
C
Inventory found increases assets. Profit must be increased also (as cost of goods sold
is reduced).
51.3
A
Closing inventory has been undervalued therefore Dr Inventory (asset in the
statement of financial position). Understating inventory overstates cost of goods sold
and therefore understates profit.
51.4
D
Purchases understated
Closing inventory (trading account) understated
Trade payables understated
Inventory (asset) understated


No net effect on
cost of sales and profit
Answer 52 A SMIT
(a)
Books of prime entry
CASH BOOK RECEIPTS
Receivables Cash
ledger
sales
$
$
Date
Narrative
Total
$
1.7
10.8
25.8
26.8
14.9
16.9
18.9
19.9
Smit
Daulton
Cash
Dewberry
Daulton
Cash
Daulton
Blanche
4,000
400
120
120
400
310
265
1,000
____
____
____
6,615
——
1,185
——
430
——
1090
Capital
$
Loan
$
Discounts
allowed
$
4,000
400
20
120
120
400
310
265
35
____
1,000
____
___
4,000
——
1,000
——
——
55
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
CASH BOOK PAYMENTS
Date
Narrative
Total
$
8.7
17.7
21.7
24.7
31.7
5.8
14.8
27.8
12.9
26.9
26.9
30.9
Van
Wages
Purchases
Wages
Wages
Dijon
Wages
Wages
Wages
Wages
Noir
Rent
Total
2,600
40
360
48
40
670
60
60
60
60
2,040
400
____
6,438
——
Payable
ledger
$
Cash
purchases
$
Wages Non-current Rent
asset
$
$
$
Discounts
received
$
2,600
40
360
48
40
670
30
60
60
60
60
2,040
160
____
____
____
____
2,710
——
360
——
368
——
2,600
——
400
___
___
400
190
——
——
SALES DAY BOOK
Date
Customer
Invoice
$
23.7
4.8
5.9
20.9
Daulton
Dewberry
Daulton
Daulton
420
150
700
1,350
____
2,620
——
PURCHASES DAY BOOK
Date
Supplier
Invoice
$
10.7
18.8
Dijon
Noir
700
2,200
____
2,900
——
JOURNAL
Dr
Irrecoverable debt expense a/c
Cr
Trade receivables ledger control a/c
$30
$30
Being Dewberry’s irrecoverable debt written off.
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1091
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Memorandum ledgers
Receivables ledger accounts
Daulton
$
23.7
5.9
20.9
SDB
SDB
SDB
420
700
1,350
$
10.8
––––––
400
20
400
265
35
1,350
––––––
2,470
———
2,470
———
14.9
18.9
30.9
1.10
Balance b/d
CB receipt
Discount allowed
CB receipt
CB receipt
Discount allowed
Balance c/d
1,350
Dewberry
$
4.8
SDB
150
$
26.8
28.9
CB receipt
Irrecoverable debt write-off
––––
120
30
––––
150
——
150
——
Payables ledger accounts
Dijon
$
5.8
CB payment
Discount received
670
30
––––
$
10.7
PDB
700
––––
700
——
700
——
Noir
$
26.9
CB payment
Discount received
2,040
160
––––––
$
18.8
PDB
––––––
2,200
———
2,200
———
1092
2,200
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 53 REBECCA
(a)
Purchases day book (PDB)
Date
2 Jan
9 Jan
17 Jan
19 Jan
27 Jan
Narrative
Invoice no
Total
$
37
73
61
62
81
——
314
——
Credit note no
Total
$
12
6
—
18
—
Jones
Isaac
Henry
Mary
David
Purchases returns day book (PRDB)
Date
12 Jan
21 Jan
Narrative
Isaac
Mary
Sales day book (SDB)
Date
7 Jan
11 Jan
13 Jan
22 Jan
31 Jan
Narrative
Invoice no
Total
$
40
31
43
20
37
——
171
——
Credit note no
Total
$
7
13
——
20
——
Smith
Allan
Wood
Gilass
Wall
Sales returns day book (SRDB)
Date
12 Jan
17 Jan
Narrative
Smith
Wood
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1093
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Purchases a/c
$
31 Jan
Jan PDB
$
314
Purchases returns a/c
$
$
31 Jan
Jan PRDB
18
Sales a/c
$
$
31 Jan
Jan SDB
171
Sales returns a/c
$
31 Jan
(c)
Jan SRDB
$
20
Payables ledger (memorandum)
Jones
$
31 Jan
Balance c/d
37
—
$
2 Jan
PDB
37
—
1 Feb Balance b/d
37
Isaac
$
12 Jan
31 Jan
PRDB
Balance c/d
12
61
—
73
—
$
9 Jan
PDB
73
—
73
—
1 Feb Balance b/d
61
Henry
$
31 Jan
1094
Balance c/d
61
—
$
17 Jan
PDB
61
—
1 Feb Balance b/d
61
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Mary
$
21 Jan
31 Jan
PRDB
Balance c/d
6
56
—
62
—
$
19 Jan
PDB
62
—
62
—
1 Feb Balance b/d
56
David
$
31 Jan
Balance c/d
81
—
$
27 Jan
PDB
81
—
1 Feb Balance b/d
81
Receivables ledger (memorandum)
Smith
$
7 Jan
SDB
40
$
12 Jan
21 Jan
SRDB
Balance c/d
—
40
—
1 Feb
Balance b/d
7
33
—
40
—
33
Allan
$
11 Jan
1 Feb
SDB
31
—
Balance b/d
31
$
31 Jan
Balance c/d
31
—
Wood
$
13 Jan
Sales SDB
43
$
17 Jan
31 Jan
SRDB
Balance c/d
—
43
—
1 Feb
Balance b/d
13
30
—
43
—
30
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1095
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Gilass
$
22 Jan
1 Feb
SDB
20
—
Balance b/d
20
$
31 Jan
Balance c/d
20
—
Wall
$
31 Jan
1 Feb
SDB
37
—
Balance b/d
37
(d)
$
31 Jan
Balance c/d
37
—
Payables ledger control a/c
$
Jan
31 Jan
PRDB
Balance c/d
18
296
——
314
——
$
Jan
PDB
314
——
314
——
1 Feb Balance b/d
296
Receivables ledger control a/c
$
Jan
SDB
171
$
Jan
31 Jan
SRDB
Balance c/d
——
171
——
1 Feb
1096
Balance b/d
20
151
——
171
——
151
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 54 WOODEN TOPS
(a)
Sales day book
Date
Particulars
1 Mar
Collins
Hogg
Rob
Plod
Mop
Jip
May
Park
Wood
7 Mar
24 Mar
(b)
Total
$
280
740
724
444
390
1,284
284
324
560
———
5,030
———
Invoice no
Total
$
720
124
380
120
290
614
270
324
560
———
3,402
———
Purchases day book
Date
Particulars
3 Mar
Tiny
Micks
Greene
Top
Micks
Ede
Micks
Top
Fish
9 Mar
17 Mar
(c)
Invoice no
Cash book
Receipts
Date
6 Mar
29 Mar
Particulars
Total
$
400
600
444
124
———
1,568
———
A Hogg
P Rob
P Plodd
P Rob
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Receipts from debtors
$
400
600
444
124
———
1,568
———
1097
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Payments
(d)
Date
Particulars
14 Mar
V Micks
R Ede
Total
$
124
400
——
524
——
Payments to suppliers
$
124
400
——
524
——
At the end of March total purchases of $3,402 will be debited to the purchases a/c and credited
to the payables ledger control a/c in the general ledger. The individual invoices will be credited
to the individual supplier’s accounts.
Total sales of $5,030 will be credited to the sales a/c and debited to the receivables ledger
control a/c in the general ledger. The individual sales invoices will be debited to the individual
customer’s accounts.
Total payments of $524 will be credited to the cash a/c and debited to the payables ledger
control a/c. The individual payments will be debited to the individual supplier’s accounts.
Total receipts of $1,568 will be debited to the cash a/c and credited to the receivables ledger
control a/c. The individual receipts will be credited to the individual customer’s accounts.
Answer 55 RUBENS
Payables ledger control a/c
$
Purchase returns (PRDB total)
Discounts received (total of
discount column in CPB)
Cash
Balance c/d
198
$
Balance b/d
Purchases (PDB total)
169
3,716
6,415
———
10,498
———
———
10,498
———
Balance b/d
1098
7,470
3,028
6,415
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 56 ZONE
Receivables ledger control a/c
$
Balance b/d
Credit sales
$
14,968
148,580
Sales returns
Cash
Discounts allowed
Irrecoverable debts written off
Balance c/d
————
163,548
————
Balance b/d
2,508
110,568
1,824
224
48,424
————
163,548
————
48,424
Payables ledger control a/c
$
Purchases returns
Cash
Discounts received
Balance c/d
$
20,426
56,546
864
76,432
————
154,268
————
Balance b/d
Purchases
54,010
100,258
————
154,268
————
Balance b/d
76,432
Answer 57 HASTINGS & CO
(a)
Payables ledger control a/c
$
2014
1.1 Balance b/d
Cash
Purchases returns a/c
Discounts received a/c
Receivables ledger control a/c
(contra)
56
47,028
202
867
31.12 Balance c/d (al fig)
5,478
———
53,706
———
2014
1.1 Balance b/d
Purchases a/c
(PDB total)
$
5,926
47,713
75
2015
1.1 Balance b/d
67
31.12 Balance c/d
2015
1.1 Balance b/d
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67
———
53,706
———
5,478
1099
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Receivables ledger control a/c
$
2014
1.1 Balance b/d
Sales a/c (total from SDB)
Legal expenses a/c
31.12 Balance c/d
2014
10,268
71,504
28
101
———
81,901
———
2015
1.1 Balance b/d
9,841
$
1.1 Balance b/d
Bank a/c
Irrecoverable debts a/c
Sales returns a/c
(SRDB total)
Discounts allowed a/c (total of
discount column in CB)
Payables ledger control a/c
(contra)
Allowances a/c
134
69,872
96
31.12 Balance c/d (al fig)
9,841
———
81,901
———
2015
1.1 Balance b/d
358
1,435
75
90
101
Answer 58 ZENKEROVA
Cash a/c
$
Balance b/d
Sales – cash
Cash re credit sales (al fig)
200
4,500
7,350
$
Expenses
Bankings
Drawings
Balance c/d
———
12,050
———
Balance b/d
1,500
8,000
2,450
100
———
12,050
———
100
Receivables control a/c
$
Balance b/d
Credit sales
920
7,500
$
Cash received
Discounts allowed
Debts written off
Balance c/d
———
8,420
———
Balance b/d
1100
7,350
140
90
840
———
8,420
———
840
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 59 RANKINE
(a)
Purchases day book
Date
1 Apr
2 Apr
Description
Invoice no
Total
$
Thrush
Hawk
700
950
———
1,650
———
Sales day book
Date
1 May
2 May
6 Jun
Description
Invoice no
Total
$
Wasp
Ant
Ant
850
660
770
———
2,280
———
Purchases returns day book
Date
1 Jun
Description
Credit note no
Total
Thrush
$50
——
Sales returns day book
Date
4 Jun
(b)
Description
Credit note no
Total
Ant
$80
——
Cash receipts book
Date
3 Apr
3 May
4 May
5 Jun
Details
Bank Receivables Cash Sundry
ledger
sales
$
$
$
$
600
600
580
580
1,000
1,000
500
500
——— ———
—— ———
2,680
1,080
600
1,000
——— ———
—— ———
Cash sales
Ant
Capital
Wasp
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1101
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Cash payments book
(c)
Date
Details
4 Apr
5 May
2 Jun
3 Jun
7 Jun
8 Jun
Thrush
Hawk
Rent
Drawings
Light and heat
Cash purchases
Bank
Payables Cash
Rent
ledger purchases
$
$
$
$
600
600
950
950
300
300
500
100
175
175
——— ———
——
——
2,625
1,550
175
300
——— ———
——
——
Drawings Light
and heat
$
$
500
100
——
500
——
——
100
——
General ledger
Tutorial note: For completeness these accounts have been closed at the end of the period. The
trial balance in (g) is extracted before the accounts are closed.
Fixtures and fittings a/c
$
1 Apr
Balance b/d
400
——
1 Jul
Balance b/d
400
$
30 Jun
Balance c/d
400
——
Sales a/c
$
30 Jun
Trading a/c
2,880
———
2,880
———
$
3 Apr Cash sales
30 Jun Sales (SDB)
600
2,280
———
2,880
———
Purchases a/c
$
8 Jun
30 Jun
Cash purchases
Purchases (PDB)
175
1,650
———
1,825
———
$
30 Jun
Trading a/c
1,825
———
1,825
———
Purchases returns a/c
$
$
30 Jun
30 Jun
1102
Trading a/c
50
——
Credit purchases
returns (PRDB)
50
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Sales returns a/c
$
30 Jun
Credit sales returns
(SRDB)
$
80
—
30 Jun
Trading a/c
80
—
Rent a/c
$
2 Jun
CPB
300
——
$
30 Jun
I & E a/c
300
——
Drawings a/c
$
3 Jun
CPB
500
——
$
30 Jun
Capital a/c
500
——
Light and heat a/c
$
7 Jun
CPB
100
——
$
30 Jun
I & E a/c
100
——
Capital a/c
$
30 Jun
30 Jun
Drawings a/c
Balance c/d
500
2,925
———
3,425
———
$
1 Apr Balance b/d
4 Apr Cash
30 Jun I & E a/c *
1 Jul
Balance b/d
2,100
1,000
325
———
3,425
———
2,925
* from completed statement of profit or loss (part (h)).
(d)
Receivables ledger control a/c
$
30 Jun
SDB
2,280
$
30 Jun
SRDB
CRB
Balance c/d
———
2,280
———
1 Jul
Balance b/d
80
1,080
1,120
———
2,280
———
1,120
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1103
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Payables ledger control a/c
$
30 Jun
CPB
PRDB
Balance c/d
1,550
50
50
———
1,650
———
$
30 Jun
Balance b/d
50
Cash control a/c
$
(f)
1,650
———
1,650
———
1 Jul
(e)
PDB
1 Apr
30 Jun
Balance b/d
CRB
200
2,680
———
2,880
———
1 Jul
Balance b/d
255
$
30 Jun
CPB
Balance c/d
2,625
255
———
2,880
———
Payables ledger (memorandum)
Thrush a/c
$
4 Apr CPB
Jun PRDB
30 Jun Balance c/d
600
50
50
——
700
——
$
1 Apr
PDB
700
——
700
——
1 Jul
Balance b/d
50
Hawk a/c
$
5 May
1104
CPB
950
——
$
2 Apr
PDB
950
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Receivables ledger (memorandum)
Wasp a/c
$
1 May
SDB
$
850
5 Jun
30 Jun
CRB
Balance c/d
500
350
——
850
——
——
850
——
1 Jul
Balance b/d
350
Ant a/c
$
2 May
6 Jun
SDB
SDB
660
770
$
3 May CRB
4 Jun SRDB
30 Jun Balance c/d
580
80
770
———
1,430
———
———
1,430
———
1 Jul
(g)
Balance b/d
770
Trial balance at 30 June
Dr
$
255
400
1,500
Cash
Fixtures and fittings
Inventory
Capital
Sales
Purchases
Purchases returns
Sales returns
Rent
Drawings
Light and heat
Trade payables
Trade receivables
Cr
$
3,100
2,880
1,825
50
80
300
500
100
50
1,120
———
6,080
———
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———
6,080
———
1105
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(h)
Statement of profit or loss for the three months ended 30 June
$
$
$
2,880
(80)
———
2,800
Sales revenue
Less: Sales revenue returns
Opening inventory
Purchases
Less: Purchase returns
1,500
1,825
(50)
———
Less: Closing inventory
Cost of goods sold
Gross profit
Less: Expenses
Rent
Light and heat
1,775
———
3,275
(1,200)
———
300
100
——
Profit for the period
(2,075)
———
725
(400)
———
325
———
Tutorial note: Separate disclosure of returns is NOT a requirement and it suffices to record
sales and purchases net of returns in financial accounts.
(i)
Statement of financial position at 30 June
$
Non-current assets: Fixtures and fittings
Current assets
Inventory
Trade receivables
Cash
1,200
1,120
255
———
Capital account
Capital at 1 April
Add: Cash introduced
Profit for the period
2,575
———
2,975
———
2,100
1,000
325
———
3,425
(500)
———
2,925
50
———
2,975
———
Less: Drawings
Current liabilities: Trade payables
Total capital and liabilities
1106
$
400
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 60 HENRY WILLIAMS
(a)
Cash receipts and payments books
Receipts
Feb
1
5
17
19
26
Capital introduced
T Crown
W Wilson
Cash sales
T Crown
Discount
Bank
Capital
$
$
$
500
77
200
92
100
——
969
——
500
3
——
3
——
Cash sales Receivables
ledger
$
$
77
200
92
——
500
——
——
92
——
100
——
377
——
Payments – see next page
(b)
Sales day book
Date
2 Feb
4 Feb
9 Feb
16 Feb
22 Feb
Details
Invoice no
T Crown
W Wilson
L Robinson
W Wilson
T Crown
Total
$
80
100
170
180
130
——
660
——
Purchases day book
Date
1 Feb
10 Feb
14 Feb
18 Feb
23 Feb
Details
Invoice no
W Martin
F Pearson
W Martin
H Wood
W Martin
Total
$
250
130
150
75
240
——
845
——
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1107
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Payments
Feb
1
2
3
6
8
11
12
13
14
20
21
24
25
27
28
28
28
Fittings
Drawings
W Martin
Wages
Purchases
W Martin
Carriage
Wages
Purchases
Wages
H Wood
Purchases
W Martin
Wages
Lighting
Rent
Drawings
Discounts
Bank
Purchases
Wages
Carriage
Lighting
Rent
$
$
$
$
$
$
$
5
3
——
8
——
40
20
150
7
30
95
2
7
40
7
72
73
200
7
5
8
15
——
778
——
Payables
ledger
$
Fixtures
$
Drawings
$
40
20
150
7
30
95
2
7
40
7
72
73
200
7
5
8
——
143
——
——
28
——
1108
——
2
——
——
5
——
——
8
——
——
517
——
——
40
——
15
——
35
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(c)
General ledger
Tutorial note: As the question specifically stated that the accounts were not to be closed,
they have merely been balanced
Capital a/c
$
28 Feb
Balance c/d
$
500
——
Feb CRB
1 Mar Balance b/d
500
——
500
Carriage a/c
$
Feb
CPB
2
—
1 Mar Balance b/d
2
$
28 Feb Balance c/d
2
—
Drawings a/c
$
Feb
CPB
35
—
1 Mar Balance b/d
35
$
28 Feb Balance c/d
35
—
Discounts allowed a/c
$
Feb
CRB
3
—
1 Mar Balance b/d
3
$
28 Feb Balance c/d
3
—
Discounts received a/c
$
28 Feb
Balance c/d
8
—
$
Feb
CPB
8
—
1 Mar Balance b/d
8
Fixtures a/c
$
Feb
1 Mar
CPB
40
—
Balance b/d
40
$
28 Feb Balance c/d
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40
—
1109
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Lighting a/c
$
Feb
CPB
1 Mar
Balance b/d
5
—
$
28 Feb Balance c/d
5
—
5
Purchases a/c
$
Feb
1 Mar
CPB
PDB
Balance b/d
143
845
——
988
——
$
28 Feb Balance c/d
988
——
988
——
988
Rent a/c
$
Feb
CPB
1 Mar
Balance b/d
8
—
$
28 Feb Balance c/d
8
—
8
Sales a/c
$
28 Feb
Balance c/d
$
Feb
CRB
SDB
1 Mar
Balance b/d
752
——
752
——
92
660
——
752
——
752
Wages a/c
$
1110
Feb
CPB
28
—
1 Mar
Balance b/d
28
$
28 Feb Balance c/d
28
—
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Payables ledger control a/c
$
Feb
28 Feb
CPB
Discounts received
Balance c/d
$
517
8
320
——
845
——
Feb
PDB
845
——
845
——
1 Mar
Balance b/d
320
Receivables ledger control a/c
$
Feb
SDB
660
$
Feb CRB
Discounts allowed
28 Feb Balance c/d
——
660
——
1 Mar
Balance b/d
377
3
280
——
660
——
280
Cash control a/c
$
28 Feb
Receipts
969
$
28 Feb Payments
Balance c/d
——
969
——
1 Mar Balance b/d
778
191
——
969
——
191
Receivables ledger (memorandum)
T Crown
$
2 Feb
22 Feb
SDB
SDB
80
130
$
5 Feb
5 Feb
26 Feb
28 Feb
CRB
Discount allowed
CRB
Balance c/d
——
210
——
1 Mar Balance b/d
77
3
100
30
——
210
——
30
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1111
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
W Wilson
$
4 Feb
16 Feb
SDB
SDB
100
180
——
280
——
1 Mar Balance b/d
$
17 Feb CRB
28 Feb Balance c/d
200
80
——
280
——
80
L Robinson
$
9 Feb
SDB
1 Mar
Balance b/d
170
——
$
28 Feb Balance c/d
170
——
170
Payables ledger (memorandum)
W Martin
$
3 Feb
11 Feb
11 Feb
25 Feb
28 Feb
CPB
CPB
Discount received
CPB
Balance c/d
150
95
5
200
190
——
640
——
$
1 Feb PDB
14 Feb PDB
23 Feb PDB
250
150
240
——
640
——
1 Mar Balance b/d
190
F Pearson
$
28 Feb
Balance c/d
130
——
$
10 Feb PDB
1 Mar Balance b/d
130
——
130
H Wood
$
21 Feb
1112
CPB
Discount received
72
3
——
75
——
$
18 Feb PDB
75
——
75
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(d)
List of general ledger account balance at 28 February
Dr
$
Capital
Carriage
Drawings
Discounts allowed
Discounts received
Fixtures
Lighting
Purchases
Rent
Sales
Wages
Trade payables
Trade receivables
Cash at bank
2
35
3
8
40
5
988
8
752
28
320
280
191
———
1,580
———
Receivables ledger balances
T Crown
W Wilson
L Robinson
———
1,580
———
Payables ledger balances
$
(e)
Cr
$
500
30
80
170
——
280
——
$
W Martin
F Pearson
H Wood
190
130
–
——
320
——
Statement of profit or loss for the month ended 28 February
$
Revenue
Purchases
Less: Closing inventory
988
(325)
——
Gross profit
Less: Expenses
Wages
Carriage
Lighting
Discounts (net) $(3 – 8)
Rent
Profit for the period
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28
2
5
(5)
8
——
$
752
(663)
——
89
(38)
——
51
——
1113
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of financial position at 28 February
$
Non-current assets: Fixtures
Current assets
Inventory
Trade receivables
Cash at bank
325
280
191
——
Total assets
$
40
796
——
836
——
$
Capital account
Capital introduced
Add: Profit for month
500
51
——
551
(35)
——
516
320
——
836
——
Less: Drawings
Current liabilities: Trade payables
Total capital and liabilities
Answer 61 MCQs BOOKS OF PRIME ENTRY AND CONTROL ACCOUNTS
Item
Answer Justification
61.1
C
61.2
C
61.3
B
Both the personal account in the receivables ledger plus the double entry posted
from the totals must be corrected.
Receivables
$000
Balance b/d
Credit sales
84
432
$000
Cash received
Irrecoverable debts written off
Discounts allowed
Balance c/d
——
516
——
1114
380
10
9
117
——
516
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
61.4
B
Payables
$000
Cash paid
Credit notes
Discounts received
Balance c/d
61.5
D
490
11
8
201
——
710
——
$000
Balance b/d
Credit purchases
——
710
——
Receivables ledger control a/c
$
Balance b/f
Sales
Dishonoured cheques
100,000
402,010
75
$
Discounts allowed
Cash
Sales returns
Balance c/f
———
502,085
———
61.6
B
Balance b/d
Sales
Irrecoverable debt recovered
63,158
550,000
542
$
Sales returns
Cash
Discount allowed
Debts written off
Cash
Contras
Balance c/d
————
613,700
————
A
6,000
514,268
12,790
4,100
542
4,000
72,000
————
613,700
————
Payables ledger control a/c
$
Purchase returns
Cash
Discounts received
Contras
Balance c/d
404
212,050
20,401
269,230
———
502,085
———
Receivables ledger control a/c
$
61.7
180
530
4,000
258,100
5,900
4,000
36,000
————
308,000
————
$
Balance b/d
Purchases
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32,000
276,000
————
308,000
————
1115
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
61.8
A
Allowance a/c
$
Balance c/d (5%  $72,000)
3,600
———
3,600
———
$
Balance b/d
Irrecoverable debt a/c
3,158
442
———
3,600
———
Irrecoverable debts expense a/c
$
Receivables (w/o)
Allowance
61.9
A
4,100
442
———
4,542
———
$
Irrecoverable debt recovered
I & E a/c
Cash book
$
Receivables
Plant sale proceeds
Balance c/d
61.10
A
25,000
20,000
10,000
———
55,000
———
$
Balance b/d
Payables
40,000
15,000
———
55,000
———
Receivables a/c
$
Balance b/d
Sales
40,000
36,000
$
Sales returns
Discounts
Cash
Irrecoverable debts
Balance c/d
———
76,000
———
3,000
3,000
25,000
3,000
42,000
———
76,000
———
$
42,000
(6,000)
———
36,000
———
Trade receivables
Less: Allowance
Net receivables
1116
542
4,000
———
4,542
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
61.11
B
Receivables ledger control a/c
$
1.1 Balance b/fwd
Credit sales
289,376
626,575
$
Cash
Irrecoverable debt expense
Returns
Discounts allowed
31.12. Balance c/fwd
_______
795,373
9,550
7,000
12,956
91,072
_______
915,951
_______
915,951
_______
Answer 62 BRABANTIA
(a)
Payables ledger control a/c
$
Cash (2)
Contra – receivables ledger (3)
31.12 Balance c/d
1,800
1,386
100,000
————
103,186
————
$
31.12 Balance b/d
PDB undercast (1)
97,186
6,000
————
103,186
————
1.1 Balance b/d
(b)
100,000
Reconciliation with list of balances
$
96,238
(80)
3,842
———
100,000
———
Total per list of balances
Debit balance extracted as a credit (4) (2  40)
Balance omitted (5)
Adjusted balance per control account
Tutorial note: It is always very reassuring in an exam to be able to see that you have got the right
answer. However, you may not always be given the total of the list of balances – see the next question!
Answer 63 TARTUFO
(a)
Receivables ledger control a/c
$
Balance b/d
30,434
$
SDB overcast (2)
Contra with payables ledger (4)
Balance c/d
———
30,434
———
Balance b/d
3,950
620
25,864
———
30,434
———
25,864
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1117
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Payables ledger control a/c
$
Contra with receivables ledger (4)
620
Transposition error (5)
180
Purchases returns (6)
340
Balance c/d
17,600
———
18,740
———
$
Balance b/d
18,740
———
18,740
———
Balance b/d
(b)
17,600
Individual balances
$
25,904
(40)
———
25,864
———
Receivables ledger (extracted total) (al fig)
Discount allowed (3)
Corrected balance (as per control account)
$
Payables ledger (extracted total) (al fig)
Add: Credit balances omitted (1)
Less: Debit balance omitted (1)
Discount allowed (3)
72
40
——
Corrected balance (as per control account)
$
16,398
1,314
(112)
———
17,600
———
Answer 64 RACY
(a)
Payables ledger control a/c
$
30.6.2015 Cash
Discounts received
Balance c/d
322,000
8,000
40,000
————
370,000
————
$
1.7.2014 Balance b/d
Purchases
————
370,000
————
1.7.2015 Balance b/d
1118
30,000
340,000
40,000
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(b)
Statement reconciling the balance per the list of balances to the ledger control
account balance
$
$
Total per suppliers listing
39,800
1,500
Add: Goods omitted from Roy’s account (1)
Discounts allowed debited to payables’ ledger not
credited to debtors’ ledger (2)
500
David’s account omitted (3)
2,000
Error in posting to Piax account (6)
50
———
4,050
———
43,850
3,500
Less: Discounts received omitted (4)
Cash paid to Freddie’s account posted to wrong side ($50  2) (5) 100
Cheque paid to James omitted (5)
250
———
(3,850)
———
Balance per payables ledger control account
40,000
———
Answer 65 TELETUBBY
(a)
Statement reconciling the receivables ledger listing to the corrected receivable ledger
control account balance
$
$
Balance per receivables ledger listing
22,620
Add: Debt reinstated due to dishonoured cheque (5)
527
Customer balance omitted (7)
521
——
1,048
Less: Payables ledger contra (3)
Credit balance listed as a debit balance ($316  2) (4)
Balance per receivables ledger control account (W1)
(b)
681
632
——
(1,313)
———
22,355
———
Statement reconciling the payables ledger listing to the corrected payables ledger
control account balance
$
Balance per payables ledger listing
21,805
27
Add: Credit balance wrongly listed $(96 – 69) (4)
Less: Receivables ledger contra (3)
(681)
———
Balance per payables ledger control account (W2)
21,151
———
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1119
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
WORKINGS
(1)
Receivables ledger control a/c
$
Balance b/d
Cash (dishonoured cheque) (5)
Cash (payments) (6)
38,076
527
24,586
$
Sales returns a/c (1)
Purchase returns a/c (1)
Cash (undercasting) (2)
Cash (receipts) (6)
Balance c/d
———
63,189
———
Balance b/d
(2)
7,164
5,328
1,000
27,342
22,355
———
63,189
———
22,355
Payables ledger control a/c
$
Sales returns a/c (1)
Purchase returns a/c (1)
Cash (payments) (6)
Balance c/d
7,164
5,328
24,586
21,151
———
58,229
———
$
Balance b/d
Cash (receipts) (6)
30,887
27,342
———
58,229
———
Balance b/d
21,151
Answer 66 ROBIN & CO
(a)
Receivables ledger control a/c
$
30 Sep
Balance b/d
Discounts allowed (4)
(Wren)
3,800
25
———
3,825
———
1 Oct
(b)
Balance b/d
$
30 Sep Irrecoverable debts a/c (2) 400
Payables ledger control a/c (5)
70
Discount allowed (6)
140
Balance c/d
3,215
———
3,825
———
3,215
List of receivables ledger balances
Original total (al fig)
Add: Debit balances previously omitted (1)
Less: Item posted twice to Sparrow’s account (3)
Amended total per receivables ledger control account
1120
$
3,362
103
———
3,465
(250)
———
3,215
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 67 SHOWERS
(a)
Trade receivables ledger control a/c
$
2014
31 Oct
Balance as originally extracted
Omission of sales (1)
Cheque dishonoured (12)
12,550
850
300
———
13,700
———
1 Nov Balance b/f
(b)
$
2014
31 Oct
Omission of discounts allowed (4) 100
Contra with payables ledger (6)
400
Irrecoverable debt (7)
500
Returns inwards omitted (10)
200
Balance c/f
12,500
———
13,700
———
12,500
Trade receivables ledger – Balances at 31 October 2014
$
Total as originally extracted
Add
Balance omitted (2)
Undercasting of balance (5)
Less
300
200
——
Cash received – correction of transposition (3)
Cash received – incorrectly debited ( 2) (8)
Discounts received – entered in a customer’s account (9)
Error in crediting cash received $(80 – 8)
180
500
50
72
——
Amended trade receivables ledger account balance at 31 October 2014
$
12,802
500
———
13,302
(802)
———
12,500
———
Answer 68 HUBERT
(a)
Sales ledger control a/c
$
Balance per trial balance
9,650
$
(3) Discount allowed
(5) Credit note outstanding
Corrected balance c/d
———
9,650
———
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671
17
8,962
———
9,650
———
1121
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Purchase ledger control a/c
$
(1) Overstatement of purchases
day book input total
(4) Payment mis-input
(6) Discounts received
Corrected balance c/d
3,600
260
280
3,384
———
7,524
———
$
Balances per trial balance
(2) Debit balance written off
7,496
28
———
7,524
———
List out of individual ledger balances
Sales ledger
$
$
–
+
Balances as originally extracted
(3)
Discount allowed
(4)
Payment mis-classified
(5)
Credit note outstanding
(7i)
Balance omitted
(7i)
Balance omitted
(7ii)
Balance wrongly extracted
(7iii)
Overcast on Hoppo’s a/c
9,617
3,556
671
260
17
54
69
88
90
——
778
Totals as amended (agreeing with control accounts)
(b)
Purchase ledger
$
$
–
+
———
9,740
(778)
———
8,962
———
——
260
———
3,644
(260)
———
3,384
———
$
–
$
+
Amendments to profit for the six months to 31 August
Profit (per manual draft accounts)
(1)
Overstatement of PDB total
(2)
Debit balance written off
(3)
Discount allowed – August
(4)
Payment mis-classified
(5)
Credit note due
(5)
Write-down of inventory
(6)
Discount received
4,322
3,600
28
671
260
17
12
——
728
Profit as revised
280
———
8,462
(728)
———
7,734
———
Tutorial note: Adjustment to profit statements are covered in detail in the session on suspense a/cs.
1122
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 69 MCQs CONTROL ACCOUNT RECONCILIATIONS
Item
Answer Justification
69.1
D
Credit receivables ledger control account $900 to reduce amounts due so the figure is
in line with the list of balances.
69.2
D
As an allowance does not reduce receivables, crediting receivables with all cash
received, including that from debts against which an allowance has already been made,
is correct.
69.3
C
$
19,579
Balance per purchase ledger
Less: Discounts received
(not recorded in the purchase ledger)
(3,110)
______
16,469
______
There is no need to adjust for the contra entry as that has already been deducted in
the payables ledger.
69.4
D
Option A could partially explain the difference, but is insufficient, in itself, at $1,125.
Option B increases the size of the difference and is, therefore, incorrect. Option C will
narrow the difference but, again, cannot account for it in itself. Option D provides a
full explanation by reducing the list of balances by $2,250 through correcting the
treatment of a debit balance of $1,125.
Answer 70 TALANT
Cash book
$
$
1 Oct
10 Oct
17 Oct
28 Oct
28 Oct
31 Oct
Balance b/d
Ambrosia
Bertram
Crisp
Dividend (PPI)
____
476
285
367
52
370
280
2,415
____
4,245
——
4,245
——
2,250
508
626
735
126
Balance b/d
2 Oct
14 Oct
19 Oct
28 Oct
28 Oct
28 Oct
31 Oct
Grenadine
Holly
Ivan
Charges
Richmond DC
Building Society
Balance c/d
2,415
Bank statement reconciliation
(as at 31 October)
$
Balance per bank statement
Add: (1) Outstanding deposit
Less: (2) Unpresented cheque
2,047
735
(367)
____
Revised balance per the cash book
2,415
——
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1123
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 71 PRINGLE
Bank reconciliation statement at 30 June
$
1,550
210
———
1,760
(260)
———
1,500
———
Balance per bank statement
Add: Uncleared deposits
Less: Unpresented cheques (70 + 90 + 100)
Balance per cash account
Answer 72 WHITE
Bank reconciliation statement at 30 November
$
Balance per bank statement
Add: Uncleared deposits (40 + 60)
6
100
——
106
(122)
——
(16) o/d
——
Less: Unpresented cheques (20 + 32 + 70)
Balance per cash account
Answer 73 GORBACHEV
(a)
Cash a/c
$
Balance b/d
Interest on deposit a/c
204
18
$
Standing order
Bank charges
Balance c/d
——
222
——
Balance b/d
(b)
173
Bank reconciliation statement at 31 March
$
2,618
723
———
3,341
(3,168)
———
173
———
Balance per bank statement
Add: Outstanding deposits
Less: Unpresented cheques
Balance per cash account
1124
35
14
173
——
222
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 74 JOVANOVICH
(a)
Cash a/c
$
Balance b/d
Undercast cash a/c
Balance c/d
1,660
200
344
———
2,204
———
$
Transposition error
Dishonoured cheque
Bank charges
Standing orders
Balance b/d
(b)
1,800
220
24
160
———
2,204
———
344
Bank reconciliation statement at 30 June
$
(450)
626
——
176
(520)
——
(344) o/d
——
Balance per bank statement
Add : Uncleared deposits
Less: Unpresented cheques
Balance per cash account
Answer 75 NORTH STAR CO
(a)
Cash a/c
$
Balance b/d
Error in b/d balance
1,920
126
———
2,046
———
Balance b/d
$
Bank charges
70
Cheque drawn – shown as receipt
188
Cheque “refer to drawer”
36
Balance c/d
1,752
———
2,046
———
1,752
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1125
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Bank reconciliation statement
$
Balance per bank statement
Add: Uncleared deposits
Bank error
$
(248)
3,084
144
———
Less: Unpresented cheques
428
740
60
——
Balance per cash account
3,228
———
2,980
(1,228)
———
1,752
———
Answer 76 DEALERS
(a)
Cash a/c
$
Cheque entered twice
Traders’ credits
Balance c/d
94
341
1,325
———
1,760
———
$
Balance b/d
Undercast error in page c/f
Standing order
Bank charges
Dishonoured cheque
Balance b/d
(b)
1,325
Bank reconciliation statement at 30 April 2015
$
2,149
698
———
2,847
(1,560)
———
1,287
(2,612)
———
(1,325)
———
Balance per bank statement
Add: Uncleared deposits
Less: Cheque credited in error by bank
Less: Unpresented cheques (al fig)
Balance per cash account (overdraft)
1126
1,062
450
91
57
100
———
1,760
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 77 GENEVA
(a)
Cash a/c
$
Dividends received
Cheque drawn correction (66 – 6)
Overstatement of opening balance
Balance c/d
62
60
50
642
——
814
——
$
Balance b/d
Bank charges
Cheque receipt correction (2 × 22)
Dishonoured cheque
Balance b/d
(b)
554
136
44
80
——
814
——
642
Bank reconciliation statement at 31 December
$
Balance per bank statement
Add: Uncleared deposits/lodgements
Cheque debited in error by bank
Less: Unpresented cheques
Balance per cash account (overdraft)
762
25
——
$
(1,162)
787
———
(375)
(267)
———
(642)
———
Answer 78 MCQs BANK RECONCILIATIONS
Item
Answer Justification
78.1
A
There are only two items which create timing difference between when they are
recorded in the cash book and when they are recorded by the bank – unpresented
cheques and outstanding lodgements.
78.2
A
Only timing differences and bank errors are reconciling items. The cash book must
be adjusted for all other items.
78.3
D
Receipts paid in to the bank before the year end, clearing the bank after the year end.
78.4
A
Cheque payments drawn before the year end, clearing the bank after the year end.
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1127
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 79 YULIA
(a)
Journal entries
Dr
$
H Malkov’s a/c
A Malkov’s a/c
Cr
$
120
120
(1) Correction of posting to incorrect personal a/c
A Harkal’s a/c
Suspense a/c
54
54
(2) Correction of posting to wrong side of personal a/c
Revenue a/c
Disposal a/c
190
190
(3) Correction of error of principle – sales proceeds of plant previously posted to revenue
a/c
D Herman’s a/c
Suspense a/c
108
108
(4) Correction of posting $12 rather than $120
Suspense a/c
Revenue a/c
200
200
(5) Correction of undercast of sales day book
Suspense a/c
Rent payable a/c
30
30
(6) Amount of accrued expense not brought forward on the a/c
Petty cash a/c (not posted)
Suspense a/c
12
12
(7) Balance omitted from trial balance
(b)
Suspense a/c
$
Revenue a/c (5)
Rent payable a/c (6)
200
30
$
Difference on TB
A Harkal’s a/c (2)
D Herman’s a/c (4)
Petty cash a/c (7)
——
230
——
1128
56
54
108
12
——
230
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 80 OGRE
Suspense a/c
$
Balance b/d
Light and heat a/c (3)
Customer’s a/c (4)
940
840
180
———
1,960
———
$
Sales returns a/c (1)
Discounts received a/c (5)
Discounts allowed a/c (5)
90
890
980
———
1,960
———
Answer 81 GROAN
(a)
Journal entries
Dr
$
Suspense a/c
Purchases a/c
Cr
$
200
200
(1) Correction of overcast of purchase day book
Telephone a/c
Suspense a/c
99
99
(2) Correction of posting to the wrong side of the telephone a/c
Suspense a/c
Discounts a/c
1,240
1,240
(3) Correction of posting to the wrong side of the discounts a/c
Titus’s a/c
Trite’s a/c
310
310
(4) Correction of posting to incorrect personal a/c
Salaries a/c
Suspense a/c
1,210
1,210
(5) Correction of posting to the wrong side of the salaries a/c
Bouncer’s a/c
Bank a/c
55
55
(6) Reversal of a cash receipt entry on dishonouring of the cheque
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1129
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Suspense a/c
$
Purchases a/c (1)
Discounts a/c (3)
200
1,240
$
Telephone a/c (2)
Salaries a/c (5)
Original difference (al fig)
99
1,210
131
———
1,440
———
———
1,440
———
Answer 82 BLACKWATER TRANSPORT
Dr
$
Discounts allowed
Customer a/c
(1)
12
12
Agreed treatment of outstanding balance on customer’s a/c
Purchase returns
Suspense a/c
(2)
200
200
Correction of overstatement of total returns
Subscriptions
Cash at bank
(3(i))
Cr
$
140
140
Direct debit not previously posted
Supplier a/c
Cash at bank
180
180
(3 (ii)) Correction of transposition error
Cash at bank (W2)
Suspense a/c
80
80
(3 (iv)) Correction of addition error in the cash a/c
Suspense a/c
Irrecoverable debts
(4)
326
326
Posting of irrecoverable debt recovered only entered in the cash book
Receivables per trial balance
Suspense a/c
(5)
360
360
Inclusion of account receivable balance omitted when trial balance taken
Suspense a/c
Customer a/c
(6)
1130
20
20
Correction of misposting of allowance to customer
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
WORKINGS
(1)
Bank reconciliation at 31 January
$
240
(654)
——
(414) o/d
——
Balance per bank statement
Less: Unpresented cheques (3 (iii))
Balance per cash account
(2)
Cash a/c
$
Addition error (al fig)
80
Adjusted balance c/d (W1)
414
——
494
——
$
Balance per trial balance
Subscriptions a/c (3(i))
Supplier’s a/c (3(ii))
174
140
180
——
494
——
Answer 83 SMETENA NEWSAGENTS
(a)
Journal entries
Dr
$
Suspense a/c
Purchases a/c
Cr
$
180
180
(2) Correction of amount posted to purchases a/c arising from transposition error
Income & expenditure a/c (closing inventory)
Inventory per statement of financial position
2,000
2,000
(3) Correction of overcasting of inventory-sheets
Suspense a/c
Cash a/c
590
590
(4) Correction of overstatement of cash in hand
Fixtures and fittings a/c
Suspense a/c
4,600
4,600
(5) Correction of omission from the trial balance of fixtures and fittings (see tutorial note)
Interest a/c (I& E)
Accrued expenses a/c
1,200
1,200
(6) Accrual for interest due on loan not yet provided for
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1131
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Tutorial note: There is no double-entry correction to be made in the fixtures and fitting
account itself – only in correcting the trial balance (which has omitted the balance). An
alternative approach is to say that there is no double entry and instead to present the
suspense a/c with the “correct” difference on the suspense a/c which would be $770 Dr (i.e.
$3,830 Cr – $4,600 Dr).
(b)
Suspense a/c
$
Difference in TB
Purchases (2)
Cash in TB (4)
(c)
3,830
180
590
———
4,600
———
$
Fixtures and fittings omitted
from TB (5)
———
4,600
———
Statement of financial position at 31 December
$
Non-current assets
Current assets
Inventory
Trade receivables
Cash
$
$
76,808
16,826
26,216
110
———
43,152
———
119,960
———
Total assets
Opening capital
Add: Profit (W)
50,224
15,380
———
65,604
(8,260)
———
57,344
Less: Drawings
Non-current liabilities
Loan – L Franks
20,000
Current liabilities
Bank overdraft
Trade payables
Accrued expenses
14,634
26,782
1,200
———
Total capital and liabilities
1132
4,600
42,616
———
119,960
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
WORKING
Adjustment to profit
$
+
Profit per draft statement of financial position
Less: Overstated closing inventory (3)
Interest on loan a/c (6)
Add: Overstated purchases (2)
$
–
$
18,400
2,000
1,200
———
3,200
180
——
(3,020)
———
15,380
———
Answer 84 ALPHA
(a)
Journal entries
Dr
$
Rent a/c (or I & E a/c)
Receivables ledger control a/c
Cr
$
500
500
(1) Correction of posting to the receivables ledger control a/c
Payables ledger control a/c
Receivables ledger control a/c
1,500
1,500
(2) Contra between the receivables & payables ledger control a/cs
Discounts allowed a/c (or I & E a/c)
Receivables ledger control a/c
750
750
(3) Inclusion of discounts allowed in the a/cs
Receivables ledger control a/c
Suspense a/c
3,220
3,220
(4) Posting to the receivables ledger control a/c of cash to clear a credit balance on the
receivables ledger
Telephone a/c (or I & E a/c)
Suspense a/c
1,460
1,460
(5) Posting of a payment to the telephone a/c
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1133
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Dr
$
Sales a/c (or I & E a/c)
Receivables ledger control a/c
Cr
$
250
250
(6) Correction of the overcast of the sales day book
Receivables ledger control a/c
Suspense a/c
2,500
2,500
(7) Correction of a double posting of cash sales
Bank charges a/c (or I & E a/c)
Bank a/c
2,120
2,120
(8) Inclusion of bank charges in the a/cs
(b)
Statement of adjusted retained earnings
$
Per trial balance
Less: Rent
Discounts allowed
Telephone
Sales revenue
Bank charges
500
750
1,460
250
2,120
———
Adjusted retained earnings
(c)
(5,080)
———
9,920
———
Corrected list of account balances
Dr
$
70,000
Non-current assets at cost
Accumulated depreciation
Share capital
Retained earnings (part (b))
Inventory at cost
Receivables (W)
Payables $(7,200 – 1,500)
Balance at bank $(1,740– 2,120)
1134
$
15,000
Cr
$
46,500
40,000
9,920
16,000
16,500
5,700
380
———— ————
102,500 102,500
———— ————
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(d)
Statement of financial position at 30 June 2015
Cost Depreciation
$
$
$
70,000 46,500
23,500
——— ———
Tangible non-current assets
Current assets
Inventory
Trade receivables (W)
16,000
16,500
———
32,500
———
56,000
———
Total assets
Capital and reserves
Share capital
Retained earnings
40,000
9,920
———
49,920
Current liabilities
Bank overdraft
Trade payables
380
5,700
———
Total equity and liabilities
6,080
———
56,000
———
WORKING
Receivables ledger control account
$
Per list of balances
Less: Rent
Contra
Discounts allowed
SDB overcast
500
1,500
750
250
———
Add: Cheque
Cash sales
3,220
2,500
———
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$
13,780
(3,000)
———
10,780
5,720
———
16,500
———
1135
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
The suspense a/c is shown below for completeness.
Suspense a/c
$
TB difference
7,180
$
RLCa/c (4)
Telephone expense
RLCa/c (7)
3,220
1,460
2,500
———
7,180
———
———
7,180
———
Answer 85 COSY COMFORTS
No
Details
Dr
$
(1)
Accrual for discount allowed to customers
Discount allowed
72.13
Cr
$
72.13
Reduction in accrual for discount
(2(i))
Irrecoverable debts
Trade receivables
64.80
64.80
Irrecoverable debts written off
(2(ii))
Bank
Irrecoverable debts
21.44
21.44
Receipt of debt previously written off as irrecoverable
(3)
Trade receivables
Discount allowed
3.20
3.20
Correction of amount of discount allowed to customer (4%  80)
(4(i))
Prepayments
Insurance
22.45
22.45
Prepayment of insurance
(4(ii))
Electricity
Accrued expenses
36.71
36.71
Electricity accrual
1136
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
No
Details
Dr
$
(5)
Cash
Unclaimed wages (liability)
Cr
$
126.55
126.55
Unclaimed wage arrears to be banked
(6)
Wages
Salaries
Accrued expenses
464.12
301.70
765.82
Wages and salaries accrued
(7(i))
Repairs and renewals
Premises
5,000.00
5,000.00
Repairs incorrectly capitalised
(7(ii))
Accumulated depreciation
Depreciation (I & E a/c)
100.00
100.00
Elimination of depreciation charged on incorrectly capitalised repairs
(8)
Trade payables
Trade receivables
163.04
163.04
Purchase ledger contra with sales ledger
Answer 86 RAFAL JAFFA
(a)
Control and suspense accounts
Sales ledger control
$
(j)
Per trial balance
Y – excess amount written off
110,172
200
$
(c)
(g)
Contra purchase ledger
Cash book error
Balance c/d
————
110,372
————
Balance c/d
700
100
109,572
————
110,372
————
109,572
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1137
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Purchase ledger control
$
(c)
(g)
(h)
Contra sales ledger
PDB invoice error
PDB overcast
Balance c/d
$
700
198
1,000
76,368
———
78,266
———
Per trial balance
78,266
———
78,266
———
Balance b/d
76,368
Suspense
$
(k)
Per trial balance
Insurance
Balance b/d
(b)
$
2,315
90
———
2,405
———
(i)
Bank balance
Balance c/d
2,400
5
———
2,405
———
5
Ledger reconciliations
Sales ledger list of balances
Dr
$
111,111
Per listing
(c)
Contra purchase ledger X
(d)
H Patel – correction
(e)
Allowance
(g)
Cash book error
(j)
Customer Y – excess amount written off
600
300
100
200
———— ———
111,911
2,334
(2,334)
————
109,577
(109,572)
———
5
———
Revised net total
Per control account
Difference
1138
Cr
$
1,234
700
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Purchase ledger list of balances
Dr
$
1,111
700
Per listing
(c)
Contra sales ledger X
(d)
M Patel – error
(e)
PDB invoice error
600
198
———
2,009
Revised net total
Per control account
Difference
(c)
Cr
$
77,777
———
78,377
(2,009)
———
76,368
(76,368)
———
Nil
———
Comment
The purchase ledger control account now reconciles to the list of balances. However, there is
a difference of $5 between the balance on the sales ledger control account and the revised net
balances extracted from the sales ledger. There is also a $5 balance remaining on suspense
account. This would suggest that the remaining trial balance error is to be found in the sales
ledger control account. The entries in this account should be rechecked.
Answer 87 XYZ
Corrected statement of financial position at 30 September 2014
Cost Depreciation
$
$
Carrying
value
$
ASSETS
Non-current assets
Plant
Vehicles
150,000 90,000
25,000 15,000
———– ———–
175,000 105,000
———– ———–
Current assets
Inventories
Trade receivables
Less: Allowance
60,000
10,000
———
70,000
12,000
20,000
(2,000)
——— 18,000
500
———
Cash
30,500
———
100,500
———
Total assets
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1139
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
CAPITAL AND LIABILITIES
Capital and reserves
Capital
Profit for the year (W1)
$
20,000
63,500
———
83,500
(10,000)
———
73,500
Less: Drawings
Non-current liabilities
Loan
5,000
Current liabilities
Trade payables
22,000
———
100,500
———
WORKINGS
(1)
Adjustment to profit for the year
$
Balance per draft statement of financial position
Add (5) Understatement of sales owing to transposition error
(6) Motor vehicle debited in error
(7) Drawings incorrectly debited
(8) Discounts received debited instead of being credited ( 2)
900
5,000
10,000
———
Less
(1) Receivables allowance incorrectly credited to net profit
(2) Increase in the receivables allowance (10% of trade
debtors at 30 September 2014)
(8) Discounts allowed credited instead of being debited ( 2)
(9) Loan incorrectly credited
200
2,000
5,000
———
(9,000)
———
63,500
———
Suspense a/c
$
(3)
(5)
(8)
(10)
1140
3,000
18,900
———
72,500
1,800
Adjusted profit for the year
(2)
$
53,600
Depreciation omitted
$(5,000 + 30,000)
Sales omitted
Discounts received
Trade payables omitted
35,000
900
3,000
10,000
———
48,900
———
$
Original balance
(4)
Inventories omitted
(8)
Discounts allowed
44,900
2,000
2,000
———
48,900
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 88 CND
(a)
Correcting entries
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Dr
$
Capital a/c
Loan a/c X
Marking
guide
Cr
$
10,000
Bank loan a/c
Accrued expenses a/c
Bank charges a/c
Bank overdraft a/c
Depreciation of non-current assets a/c
Disposals a/c
Non-current assets a/c
Disposals a/c
Gain on sale a/c
Wages and salaries a/c (6,088 + 1,766)
Payments of personal tax a/c
Payments of social security a/c, etc
Taxation & social security payable a/c
1,064
1
7,854
5,988
1,766
1½
100
1,000
Suspense a/c
Purchases a/c
1
11,879
Trade receivables a/c
Irrecoverable debts recovered a/c
Bank overdraft a/c
Insurance a/c
1,000
1,064
2,000
Advertising a/c
Repairs and maintenance a/c
1
10,943
936
Irrecoverable debts a/c
Trade receivables a/c
Packing materials a/c
Suspense a/c
458
1,000
10,260
240
Suspense a/c
Postage, telephone and stationery a/c
1
458
Trade payables a/c
Discounts allowed a/c
Trade receivables a/c
Discount received a/c
Sales returns a/c
Purchases returns a/c
Suspense a/c
10,000
10,240
260
1½
2,000
1
1,000
1
1,260
1
9
1
76
1
124
1
36
1
630
630
9
76
124
36
297
297
1
___
16
___
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1141
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Trial balance at 31 December
Dr
$
Capital account $(110 – 10)
Retained earnings at 1 January
Bank loan $(30,458 – 458)
Loan account – X
Trade receivables$ (77,240 – 10,240 – 2,000 + 1,000)
Trade payables $(60,260 – 10,260)
Cash in hand
Bank overdraft $(5,036 + 1,000 – 36)
Inventories at 1 January
Non-current assets at cost $(161,879 – 11,879)
Accumulated depreciation at 31 December
Depreciation for the year
Purchases $(300,297 – 297)
Revenues
Returns
Discounts allowed $(9,760 + 240)
Discounts received $(6,740 + 260)
Wages and salaries (gross) $(15,146 + 7,854)
Taxation on wages and salares payable $(900 + 100)
Rent and insurance $(18,036 – 36)
Postage, telephone and stationery $(3,009 – 9)
Repairs and maintenance $(2,124 – 124)
Advertising $(4,876 + 124)
Packing materials $(924 + 76)
Motor expenses
Sundry expenses
Debenture interest
Bank charges
Irrecoverable debts
Irrecoverable debts recovered
Accrued expenses $(6,478 + 458)
Surplus on asset disposal $(2,000 – (11,879 – 10,943))
Cr
$
100,000
50,000
30,000
10,000
66,000
50,000
1,000
6,000
108,000
150,000
50,000
15,000
300,000
5,000
10,000
400,000
4,000
¼ each
Dr/Cr
7,000
23,000
1,000
18,000
3,000
2,000
5,000
1,000
2,000
1,000
4,000
1,000
2,000
max 8
1,000
6,936
1,064
———– ———–
717,000 717,000
———– ———–
WORKING
Suspense a/c
$
Original balance
(10) Stationery transposition
error
(14) Purchases transposition
error
1142
1,030
9
$
(9) Goods returned
misposting
(11) Materials payment
omitted
297
———
1,336
———
1,260
76
———
1,336
———
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½ each
Dr/Cr
entry
max 2
___
10
___
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 89 MCQs SUSPENSE ACCOUNTS
Item
Answer Justification
89.1
D
Because the company does not maintain control accounts the individual customers’
accounts have been debited with $500 more than has been credited to sales.
Therefore sales must be credited with $500. As there is no option offered to debit a
suspense a/c also it must be assumed that the error has been discovered before
creating a suspense a/c.
89.2
C
Knight’s a/c should have been debited $100 so debit now 2  $100 = $200 to
correct.
89.3
C
Reversal of incorrect posting to discounts received.
89.4
A
K Chess’s a/c has not yet been credited (A or D). K Checker’s a/c should not have
been credited therefore debit.
89.5
A
This is simply a mis-posting of the right amount to the wrong a/c so has no bearing
on the suspense a/c.
Tutorial note: As there is no mention of the credit side of the entry it should be
assumed that it has been correctly posted to payables/cash.
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1143
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 90 JOLANTA
(a)
List of account balances at 31 December 2014
Dr
$
Trade payables
Allowance for irrecoverable trade receivables
Revenue
Opening inventory
Leasehold premises at cost
Accumulated amortisation to 31 December 2014 (9,000 + 9,000)
Delivery vans at cost
Accumulated depreciation to 31 December 2014 (15,600 + 2,000)
Purchases
Carriage outwards
Trade receivables
Loan advanced by Joanna
Returns inwards
Returns outwards
Rent
Salesmen’s salaries and commission
Interest on loan
Vehicle running expenses
Bank overdraft
Carriage inwards
Accountancy and audit
Trade discounts received
Light and heat
General expenses
Capital account
Irrecoverable debts account
Amortisation of leasehold for 2014
Depreciation of delivery vans for 2014
1144
Cr
$
14,500
1,200
93,200
14,300
45,000
18,000
21,600
17,600
51,400
350
35,700
4,100
1,050
950
2,550
8,200
250
3,650
21,100
2,150
1,600
400
1,300
900
30,000
50
9,000
2,000
——–— ——–—
201,050 201,050
——–— ———–
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(b)
Statement of profit or loss for the year ended 31 December 2014
$
$
Revenue
Less: Returns inwards
Opening inventory
Purchases (51,400 – 400)
Less: Returns outwards
$
93,200
(1,050)
———
92,150
14,300
51,000
(950)
——— 50,050
2,150
———
66,500
(15,200)
——— (51,300)
———
40,850
Carriage inwards
Less: Closing inventory
Gross profit
Less: Expenses
Establishment costs
Rent
Light and heat
Amortisation
Administration and general costs
Accountancy and audit
General expenses
Selling and distribution costs
Carriage outwards
Salesmen’s salaries and commission
Vehicle running expenses
Depreciation on vans
Financial costs
Loan interest
Irrecoverable debts
Profit for the year
2,550
1,300
9,000
———
12,850
1,600
900
———
2,500
350
8,200
3,650
2,000
———
14,200
250
50
———
350
———
(29,850)
———
11,000
———
Tutorial note: It is worth noting that in relation to the “function of expense” method IAS 1
states “this method can provide more relevant information to users … but allocating costs to
functions may require arbitrary allocations and involve considerable judgement”. For
example, although irrecoverable debts here have been attributed to finance costs (i.e. the
responsibility of the finance department for not having been able to recover) they could just
as well be allocated to distribution (as in selling and distribution) or administration.
Discounts received in this question are specified as “trade” and therefore adjusted against
purchases. However, prompt payment discounts are an aspect of financing and so could be
allocated to finance costs.
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1145
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of financial position at 31 December 2014
Cost Depreciation
$
$
Tangible non-current assets
Leasehold premises
Delivery vans
45,000
21,600
———
66,600
———
Current assets
Inventory
Trade receivables
Less: Allowance for trade receivables
18,000
17,600
———
35,600
———
$
27,000
4,000
———
31,000
15,200
35,700
1,200
———
34,500
———
49,700
———
80,700
———
Total assets
$
Capital account
Capital at 1 January 2014
Add: Profit for the year
30,000
11,000
———
41,000
Non-current liability
Loan from Joanna
4,100
Current liabilities
Bank overdraft
Trade payables
21,100
14,500
———
Total capital and liabilities
1146
35,600
———
80,700
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 91 GANDALF
Statement of profit or loss for the year ended 31 March 2015
$
Revenue (34,628 + 8,512)
Less: Cost of goods sold
Purchases (20,700 + 11,344)
Closing inventory
Gross profit
Less: Expenses
Assistant’s salary (including bonus)
Electricity (1,120 + 340)
Rent
Postage and stationery
$
43,140
32,044
(8,514)
——— (23,530)
———
19,610
4,800
1,460
2,200
700
———
Profit for the year
(9,160)
———
10,450
———
Statement of financial position at 31 March 2015
$
Non-current assets – motor van
Current assets
Inventory
Trade receivables
Cash (W)
$
8,000
8,514
8,512
13,108
———
30,134
———
38,134
———
Capital account
Capital at 1 April 2014
Profit for the year
20,000
10,450
———
30,450
(4,800)
———
25,650
Less: Drawings
Current liabilities
Trade payables
Accrued charge for electricity
Bonus owed
11,344
340
800
———
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12,484
———
38,134
———
1147
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
WORKING
Cash balance at 31 March 2015
$
Capital introduced
From customers
Less: Paid to suppliers
Salary
Motor van
Drawings
Electricity
Rent
Postage
20,700
4,000
8,000
4,800
1,120
2,200
700
———
$
20,000
34,628
———
54,628
(41,520)
———
13,108
———
Answer 92 MARIA
Statement of profit or loss for the year to 31 December 2014
$
Revenue
Cost of sales
Opening inventory
Purchases
$
79,060
6,740
54,520
———
61,260
(7,330)
——— (53,930)
———
25,130
Closing inventory
Gross profit
Less: Expenses
Salaries
Rent $(1,170 – 250)
Office expenses
Motor expenses
Trade receivables allowance written back (W)
Loan interest (5%  $4,000)
Depreciation
Freehold properties
Fixtures and fittings
Motor vans
8,760
920
3,950
3,790
(138)
200
75
200
1,260
———
Profit for the year
1148
$
1,535
———
(19,017)
———
6,113
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Statement of financial position at 31 December 2014
Cost
$
Tangible non-current assets
Freehold properties
Furniture and fittings
Motor vans
7,500
2,000
6,300
———
15,800
———
Current assets
Inventory
Trade receivables
Less: Allowance for trade receivables (W)
Depreciation
$
$
525
1,000
3,630
———
5,155
———
6,975
1,000
2,670
———
10,645
7,330
9,240
(462)
———
Prepayments
Bank balance
8,778
250
2,190
———
18,548
———
29,193
———
Capital account
Capital at 1 January 2014
Add: Profit for year
13,640
6,113
———
19,753
(4,800)
———
14,953
Less: Drawings
Non-current liabilities: Loan
4,000
Current liabilities
Trade payables
Accrued expenses
10,040
200
———
10,240
———
29,193
———
WORKING
Allowance for trade receivables a/c
$
I & E a/c (allowance no longer
required)
Balance c/d (5%  $9,240)
$
Balance b/d
138
462
——
600
——
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600
——
600
——
1149
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 93 FEDEROV
Statement of profit or loss for the year ended 31 December 2014
$
$
Revenue $(124,450 – 186 – 48)
Cost of goods sold
Opening inventory
Purchases $(86,046 – 135 – 138)
$
124,216
8,000
85,773
———
93,773
156
———
93,929
7,550
———
Carriage inwards
Less: Closing inventory
Gross profit
Less: Expenses
Establishment costs
Rent (W1)
Gas, electricity and water
Depreciation
Plant and equipment 10%  $(8,000 – 2,500)
Furniture and fittings 5%  $(700 – 200)
(86,379)
———
37,837
1,875
2,560
550
25
——
Administration and general costs
Salaries (W2)
Wages
Printing and stationery
General expenses
Selling and distribution expenses
Travellers’ salaries and commission
Travellers’ expenses
Carriage outwards
Finance costs
Bank charges
Loan interest (W4)
Irrecoverable debts expense (W6)
575
———
5,010
4,000
8,250
640
2,056
———
14,946
5,480
1,040
546
———
7,066
120
100
79
———
Profit for the year
1150
$
299
———
(27,321)
———
10,516
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Statement of financial position at 31 December 2014
Cost Depreciation
$
$
Non-current assets
Freehold premises
Plant and equipment
Fixtures and fittings
8,000
8,000
700
———
16,700
———
–
3,050
225
———
3,275
———
$
8,000
4,950
475
———
13,425
$
Current assets
Inventory
Trade receivables (net)
$(20,280 – 608) (W5)
Prepayments
Cash at bank
7,550
19,672
125
650
———
27,997
———
41,422
———
Total assets
Capital account
Capital at 1 January 2014
Add: Profit for the year
20,000
10,516
———
30,516
(1,250)
———
29,266
Less: Drawings (W3)
Non-current liabilities
Loan
2,000
Current liabilities
Trade payables
Loan interest/accrued expenses
10,056
100
———
Total capital and liabilities
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10,156
———
41,422
———
1151
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
WORKINGS
(1)
Rent a/c
$
Per TB
2,000
———
2,000
———
(2)
$
I & E a/c
Balance c/d (3/6  $250)
Salaries a/c
$
Per TB
Drawings a/c (transfer)
3,500
500
———
4,000
———
(3)
$
I & E a/c
Drawings a/c
Per TB
1,750
$
Salaries a/c (transfer)
Balance c/d
———
1,750
———
(4)
500
1,250
———
1,750
———
Loan interest a/c
$
Balance c/d (5%  $2,000)
100
——
$
I & E a/c
100
——
Allowance for trade receivables
$
Irrecoverable debt expense
Balance c/d (3%  $20,280)
1152
4,000
———
4,000
——–
$
(5)
1,875
125
———
2,000
———
132
608
——
740
——
$
Balance b/d
740
——
740
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Irrecoverable debts expense
(6)
$
Written off (receivables)
256
$
Recovered
Decrease in allowance
I & E a/c
45
132
79
——
256
——
——
256
——
Answer 94 HEINZ
Statement of profit or loss for the year ended 31 December 2014
$
Revenue
Cost of goods sold
Opening inventory
Purchases (W8)
$
$
68,213
6,934
55,453
———
62,387
(7,832)
——— (54,555)
———
13,658
Less: Closing inventory
Gross profit
Less: Expenses
Establishment costs
Rents and insurance (W3)
Lighting and heating (W5)
Administration and general costs
Postages, telephone, stationery and office expenses (W7)
Audit and professional charges (W6)
Depreciation on fixtures (W1)
Selling and distribution costs
Running costs of delivery van (W4)
Depreciation on vans (W2)
Advertising
Salesmen’s wages and salaries
Financial costs
Irrecoverable debts
Allowance for trade receivables (W9)
Discounts received
Profit for the year
©2014 DeVry/Becker Educational Development Corp. All rights reserved.
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787
801
———
1,588
409
148
760
———
1,317
397
750
1,375
5,262
———
7,784
76
103
(1,206)
———
(1,027)
———
(9,662)
———
3,996
———
1153
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of financial position at 31 December 2014
Cost Depreciation (W1/2)
$
$
$
Tangible non-current assets
Furniture and equipment
Delivery vans
7,600
3,000
———
10,600
———
Current assets
Inventory
Trade receivables
Less: Allowance for receivables (W9)
2,200
1,500
———
3,700
———
5,400
1,500
———
6,900
7,832
9,600
(480)
———
Insurance claim
Prepayments and sundry receivables (60+91+58+217+98)
Cash at bank and in hand
9,120
3,224
524
5,148
———
25,848
———
32,748
———
Total assets
Capital account
Capital at 1 January 2014
Add: Profit for the year
23,521
3,996
———
27,517
(2,500)
———
25,017
Less: Drawings
Current liabilities
Trade payables
Accrued expenses (100 + 27 + 39 + 105 + 28)
7,432
299
———
Total capital and liabilities
7,731
———
32,748
———
WORKINGS
(1)
Depreciation a/c – furniture and equipment
$
Balance c/d
1154
2,200
———
2,200
———
$
Balance per TB
I & E a/c (10%  $7,600)
1,440
760
———
2,200
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(2)
Depreciation a/c – delivery vans
$
Balance c/d
(3)
1,500
———
1,500
———
$
Balance per TB
I & E a/c (25%  $3,000)
750
750
———
1,500
———
Rents and insurance a/c
$
Per TB
Rent accrual
(4)
838
100
——
938
——
$
I & E a/c
Rent prepayment
Insurance prepayment
787
60
91
——
938
——
Delivery van running costs a/c
$
Per TB
Repairs accrual
(5)
416
39
——
455
——
$
I & E a/c
Insurance prepayment
397
58
——
455
——
Lighting and heating a/c
$
Per TB
Electricity accrual
(6)
991
27
———
1,018
———
$
I & E a/c
Coke prepayment
801
217
———
1,018
———
Audit & professional charges a/c
$
Per TB
Audit fee accrual
43
105
——
148
——
$
I & E a/c
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148
——
148
——
1155
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(7)
Postage, telephone, stationery and office expenses a/c
$
Per TB
Telephone accrual
479
28
——
507
——
(8)
$
I & E a/c
Stationery prepayment
Purchases a/c
$
Per TB
58,677
$
Insurance company a/c
Trading a/c
———
58,677
———
(9)
3,224
55,453
———
58,677
———
Allowance for trade receivables a/c
$
Balance c/d (5%  $9,600)
1156
409
98
——
507
——
480
——
480
——
$
Balance per TB
I & E a/c
377
103
——
480
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 95 GAMMON
Statement of profit or loss for the year ended 31 December 2014
$
Revenue
Cost of sales
Opening inventory
Purchases (22,321 – 128)
Loss on disposal/depreciation underallowed (W3)
Profit for the year
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$
34,468
1,655
22,193
———
23,848
(1,123)
——— (22,725)
———
11,743
Less: Closing inventory
Gross profit
Less: Expenses
Insurance $(480 – 65)
Plant repairs $(210 + 24)
Rent
Wages
Discount allowed
Motor van expenses $(819 + 46)
General expenses
Depreciation
Motor van (W2)
Plant ($1,560  15%)
Shop fittings ($1,020  5%)
$
415
234
1,478
3,467
437
865
815
191
234
51
——
476
216
———
(8,403)
———
3,340
———
1157
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of financial position at 31 December 2014
$
Non-current assets
Plant (1,560 – 234)
Shop fittings (1,020 – 51)
Motor van (764 – 191)
1,326
969
573
———
2,868
Current assets
Inventory
Trade receivables
Prepayments
Cash in hand
1,123
1,324
65
212
———
Total assets
Capital account
Capital at 1 January 2014
Add: Profit for the year
2,724
———
5,592
———
(537)
3,340
———
2,803
(1,948)
———
855
Less: Drawings $(1,820 + 128)
Current liabilities
Bank overdraft (W1)
Trade payables
Accrued expenses $(46 + 24)
1,297
3,370
70
———
Total capital and liabilities
1158
$
4,737
———
5,592
———
©2014 DeVry/Becker Educational Development Corp. All rights reserved.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
WORKINGS
(1)
Trial balance at 31 December 2014
$
Revenue
Insurance
Plant repairs
Rent
Motor van
Plant
Purchases
Wages
Inventory at 1 January
Discounts allowed
Van expenses
Shop fittings
General expenses
Capital account
Receivables
Payables
Cash in hand
Drawings
Bank overdraft (difference)
480
210
1,478
980
1,560
22,321
3,467
1,655
437
819
1,020
815
537
1,324
3,370
212
1,820
———
39,135
———
(2)
$
34,468
1,297
———
39,135
———
Motor van a/c (at carrying value)
$
Per TB
980
Disposal a/c (proceeds of van sold) 220
———
1,200
———
(3)
$
Disposal a/c (book value – van sold) 436
Balance c/d
764
———
1,200
———
Motor van depreciation a/c
$
Balance c/d (25%  $764)
(4)
191
——
$
I & E a/c
191
——
Motor van disposal a/c
$
Motor van a/c
436
$
Bank a/cs (proceeds)
I & E a/c (depreciation
underallowance)
——
436
——
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Ali Niaz - ali.niaz298@gmail.com
220
216
——
436
——
1159
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 96 STEWART
(a)
Statement of profit or loss for the year ended 30 June 2015
$
Revenue (625,000 – 2,300)
Opening inventory
Purchases (24,500 –1,700)
Closing inventory
$
622,700
98,200
421,000
(75,300)
_______
Cost of sales
(345,700)
________
Gross profit
Discount received
Bank interest (15,000 × 6% × 6/12)
277,000
2,500
450
________
279,950
Packing materials (12,900 – 700 + 200)
Discount allowed
Distribution costs
Rents and insurances (5100 – 450)
Telephone (3,200 + 500)
Car expenses
Wages (71,700 – 23,800)
Heat and light (1,850 + 400)
Sundry expenses (6,700 – 3,500)
Irrecoverable debt
Decrease in trade receivables allowance (W1)
Loan interest
Depreciation
– Delivery vehicle (112,500 × 20%)
– Car (8,000 × 25%)
– Equipment (15,000 – 5,000) × 25%
12,400
1,500
17,000
4,650
3,700
2,400
47,900
2,250
3,200
600
(380)
800
22,500
2,000
2,500
_______
Profit for the year
1160
(123,020)
________
156,930
————
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
WORKING
Trade receivables allowance
Age
Amount
30 – 60
60 – 90
90 +
20,000
12,000
3,000 – 600
%
Allowance
1
2.5
5
Closing allowance
Opening allowance
Decrease in allowance
(b)
200
300
120
620
1,000
380
Statement of financial position as at 30 June 2015
$
Non-current assets
Delivery vehicles
Car
Equipment
$
$
112,500
8,000
15,000
_______
57,500
2,000
7,500
______
55,000
6,000
7,500
______
135,500
_______
67,000
______
68,500
Current assets
Inventory
Packing materials
Trade receivables (94,400 – 620)
Prepayments
Interest receivable
Bank deposit
Bank current
75,300
700
93,780
450
450
15,000
26,500
______
212,180
________
280,680
————
Opening capital
Capital introduced
Profit for year
Drawings (23,800 + 3,500)
55,550
8,000
156,930
(27,300)
_______
Closing capital
193,180
Current liabilities
Trade payables
Accruals (400 + 500 + 200)
Loan
82,000
1,100
4,400
______
87,500
________
280,680
————
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1161
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 97 BOWIE
(a)
Journal entries
Dr
(i)
(ii)
(iii)
Purchases
Office equipment
1,200
Trade payable
Bank
2,600
Rent
Suspense
3,000
Cr
1,200
2,600
3,000
Suspense a/c
$
Bal b/d
(b)
3,000
$
Rent
3,000
Statement of profit or loss for the year ended 30 September 2014
$
Revenue
Opening inventory
Purchases (123,000 + 1,200)
31,000
124,200
_______
155,200
(53,000)
_______
Closing inventory
Cost of sales
(102,200)
________
Gross profit
91,800
Selling expenses
Heat and light
Wages and salaries (19,000 + 5,000)
Printing and stationary
Telephone and fax (6,000 – 1,000)
Rents and insurances (4,000 + 3,000 – 1,000)
Irrecoverable debt
Decrease in allowance for irrecoverable debts
[(4,000 – (32,000 × 5%)]
Bank charges
Depreciation
– Plant and machinery (125,000 × 10%)
– Office equipment (45,000 – 1,200 – 15,000) × 1/3
Profit for the year
1162
$
194,000
12,000
8,000
24,000
6,000
5,000
6,000
3,000
(2,400)
4,000
12,500
9,600
______
(87,700)
______
4,100
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(c)
Statement of financial position as at 30 September 2014
$
Non-current assets
Plant and machinery
Office equipment
$
$
125,000
43,800
_______
40,500
24,600
_______
84,500
19,200
168,800
_______
65,100
_______
103,700
Current assets
Inventory
Trade receivables [(35,000 – 3,000) – 1,600]
Prepayments
Cash
53,000
30,400
2,000
1,000
_______
86,400
________
190,100
————
Opening capital
Profit for year
Drawings
169,000
4,100
(22,000)
_______
Closing capital
151,100
Current liabilities
Trade payables (33,000 – 2,600)
Accruals
Bank overdraft (3,000 – 2,600 – 4,000)
30,400
5,000
3,600
_______
39,000
________
190,100
————
Answer 98 COST STRUCTURES
(a)
Greengrocer
%
Sales revenue
Less Cost of goods sold
Opening inventory
Purchases
100
$
$
49,200
3,784
38,632
———
42,416
(5,516)
(75) ——— (36,900)
——
———
25
12,300
——
———
Less Closing inventory
Gross profit
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1163
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Rival
Sales revenue
Cost of goods sold (
100
 $50,100 = $40,080)
125
Gross profit
%
$
125
50,100
(100)
(40,080)
——
25
——
———
10,020
———
Opening inventory (al fig)
Purchases
7,192
38,326
———
45,518
(5,438)
———
40,080
———
Less Closing inventory
Cost of goods sold
(c)
Local store
Sales revenue
Cost of goods sold
Gross profit (10%  $186,460)
Opening inventory (
100
 $16,800)
125
$
100
(90)
——
10
——
186,460
(167,814)
———
18,646
———
13,440
Purchases (al fig)
171,174
————
184,614
(16,800)
————
167,814
————
Closing inventory
Cost of goods sold
1164
%
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 99 LAMDIN
Statement of profit or loss for the year ended 30 June 2015
$
Revenue $(74 + 16,427 + 3,024 + 54)
Opening inventory
Purchases $(14,700 + 1,606 + 470)
$
19,579
1,142
16,776
———
17,918
(1,542)
——— (16,376)
———
3,203
Closing inventory
Gross profit
Less Expenses
Rent $(500 – 100)
Rent $(84 + 30)
Electricity
Wages
Sundry expenses
Depreciation (10%  $1,580)
Loan interest (5%  $1,000)
400
114
92
742
156
158
50
———
Profit
(1,712)
———
1,491
———
Statement of financial position at 30 June 2015
$
Non-current assets
Intangible – Goodwill
Tangible – Fixtures and fittings $(1,500 + 80 – 158)
Current assets
Inventory
Receivables
Prepayments
Bank
Cash in hand
$
550
1,422
———
1,972
1,542
74
100
2,657
54
———
4,427
———
6,399
———
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1165
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
$
Capital account
Capital introduced
Profit for the year
$
5,000
1,491
———
6,491
(1,642)
———
4,849
Drawings $(1,122 + 520)
Non-current liability
Loan
1,000
Current liabilities
Trade payables
Accrued expenses $(30 + 50)
470
80
———
Total capital and liabilities
550
———
6,399
———
Answer 100 LEONARDO
Statement of profit or loss for the year ended 31 December 2014
$
Revenue (W2)
Opening inventory
Add Purchases (W3)
1,310
3,133
———
4,443
(1,623)
———
Less Closing inventory
Gross profit
Expenses (W4)
Irrecoverable debts (W6)
Depreciation (W7)
1,090
49
60
———
Profit
1166
$
5,877
(2,820)
———
3,057
(1,199)
———
1,858
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Statement of financial position at 31 December 2014
$
$
Non-current asset
Delivery van, at cost
Less Depreciation (W7)
$
900
(60)
———
840
Current assets
Inventory
Receivables
Less Allowance for receivables (W6)
1,623
382
(19)
——
Cash at bank
Cash in hand
363
572
29
———
2,587
———
3,427
———
Total assets
Capital account
At 1 January 2014 (W1)
Add Profit for year
1,652
1,858
———
3,510
(1,100)
———
2,410
Less Drawings (W5)
Current liabilities
Trade payables
Accrued expenses
914
103
——
Total capital and liabilities
1,017
———
3,427
———
WORKINGS
(1)
Opening statement of affairs
Inventory
Receivables
Cash
Bank
Less Payables $(712 + 116)
Capital at 1 January 2014
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$
1,310
268
62
840
———
2,480
(828)
———
1,652
———
1167
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(2)
Total sales (receivables) a/c
$
Balance b/d
Revenue for year (al fig)
268
5,877
$
Cheques receipts from customers
Irrecoverable debt written off
Cash takings
Debtors c/d (412 – 30)
———
6,145
———
Balance b/d
(3)
382
Total purchases (payables) a/c
$
Cash
Bank
Balance c/d
316
2,715
914
———
3,945
———
$
Balance b/d
Drawings
Purchases for year (al fig)
Balance b/d
(4)
712
100
3,133
———
3,945
———
914
Expenses
$
Cash
Bank
Balance c/d
584
519
103
———
1,206
———
$
Balance b/d
I & E a/c
(5)
116
1,090
———
1,206
———
Balance b/d
103
Drawings
$
Purchases
Cash a/c
Bank a/c
1168
1,416
30
4,317
382
———
6,145
———
100
600
400
———
1,100
———
$
Balance c/d (or trf capital)
1,100
———
1,100
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(6)
Irrecoverable debts a/c
$
Bad debt (w/off receivables)
Allowance a/c
(5%  $382) (increase)
(7)
30
$
I & E a/c
49
19
——
49
——
——
49
——
Depreciation
20%  $900  4/12 = $60
Answer 101 DELTIC
(a)
Statement of profit or loss for the year ended 30 September 2014
%
100
Revenue (W8)
Opening inventory
Purchases (al fig)
Closing inventory
$
$
142,850
–
113,538
(6,400)
————
Cost of sales
(107,138)
———
35,712
(75)
—
25
—
Gross profit
Expenses
Cleaning
Sundries
Depreciation
Van
Leasehold premises
Telephone (W4)
Wages (W3)
Rent (W5)
Repairs (W7)
520
780
1,500
3,000
1,021
19,182
1,424
4,022
———
Profit
©2014 DeVry/Becker Educational Development Corp. All rights reserved.
Ali Niaz - ali.niaz298@gmail.com
(31,449)
———
4,263
———
1169
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Statement of financial position at 30 September 2014
Non-current assets
Leasehold premises
Van
Cost
$
Depn
$
150,000
6,000
———
156,000
———
3,000
1,500
———
4,500
———
Current assets
Inventory
Trade receivables
Prepayment (W5)
Cash at bank
Cash in hand
$
147,000
4,500
———
151,500
6,400
10,350
258
61,313
250
———
78,571
———
230,071
———
Total assets
Capital account
Capital introduced
Add Profit
200,000
4,263
———
204,263
(4,274)
———
199,989
Less Drawings (W2)
Current liabilities
Trade payables
Accrued expenses (W4)
29,957
125
———
Total capital and liabilities
30,082
———
230,071
———
WORKINGS
(1)
Cash
$
Balance b/d
Total cash receipts (al fig)
Nil
132,500
$
Wages ($75  52)
Cleaning ($10  52)
Sundries ($15  52)
Drawings ($25  52)
Bank
Balance c/d
————
132,500
————
1170
3,900
520
780
1,300
125,750
250
————
132,500
————
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(2)
Drawings
$
Cash
Bank
Total purchases (W6)
$
1,300
323
2,651
———
4,274
———
(3)
Balance c/d (or trf capital)
4,274
———
4,274
———
Wages
$
Cash
Bank
$
3,900
15,282
———
19,182
———
(4)
I & E a/c
19,182
———
19,182
———
Telephone
$
Bank
Balance c/d
$
896
125
———
1,021
———
(5)
I & E a/c
1,021
———
1,021
———
Rent
$
Bank
1,682
$
I & E a/c
Balance c/d
———
1,682
———
(6)
1,424
258
———
1,682
———
Total purchases (payables)
$
Bank
Balance c/d
86,232
29,957
————
116,189
————
$
Trading a/c
Goods for own use (al fig)
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113,538
2,651
————
116,189
————
1171
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(7)
Repairs
$
Bank
Bank
(8)
3,637
385
———
4,022
———
$
I & E a/c
4,022
———
4,022
———
Total sales (receivables)
$
Trading a/c (al fig)
142,850
$
Cash (W1)
Balance c/d
132,500
10,350
————
142,850
————
————
142,850
————
Answer 102 WALDORF
Statement of profit or loss for the year ended 31 December 2014
$
Revenue (W4)
Cost of sales
Opening inventory
Purchases (W3)
900
14,110
———
15,010
(1,200)
——— (13,810)
———
8,100
Closing inventory
Gross profit
Less Expenditure
Rent $(800 + 20 – 30)
Car maintenace
Insurance
Bank charges
Assistant’s wages
Discounts (net) $(300 – 200)
Sundry expenses
Depreciation
Car
Fixtures
790
400
200
100
1,800
100
250
400
600
———
Profit
1172
$
21,910
(4,640)
———
3,460
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Statement of financial position at 31 December 2014
$
Non-current assets
Motor car
Fixtures
$
3,200
3,400
———
6,600
Current assets
Inventory
Trade receivables and prepayments $(150 + 30)
Insurance company claim (W2)
Bank
1,200
180
460
400
———
2,240
———
8,840
———
Total assets
Capital account b/f (W1)
Add Capital introduced (see Tutorial note)
9,160
1,000
———
10,160
3,460
———
13,620
(4,900)
———
8,720
Profit for the period
Less Drawings $(2,500 + 2,400)
Current liabilities
Trade payables
120
———
8,840
———
Total capital and liabilities
WORKINGS
(1)
Statement of affairs as at 31 December 2013
$
3,600
4,000
900
90
20
280
380
———
9,270
(110)
———
9,160
———
Motor car
Fixtures
Inventory
Receivables
Prepayments
Bank
Cash
Less Trade payables
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1173
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(2)
Cash a/c
$
Balance b/f
Customers’ receipts
380
21,550
$
Wages
Sundry expenses
Purchases
Drawings
Bankings
Defalcation (theft!)
———
21,930
———
(3)
1,800
250
300
2,400
16,720
460
———
21,930
———
Total purchases (payables)
$
Cash
Bank
Discounts received
Balance c/d
(4)
300
13,600
200
120
———
14,220
———
$
Balance b/f
Purchases
110
14,110
———
14,220
———
Total sales (receivables)
$
Balance b/f
Sales
90
21,910
$
Receipts
Discounts allowed
Balance c/f
———
22,000
———
21,550
300
150
———
22,000
———
Tutorial note: Waldorf is a sole trader – thus he will be taxed on his earnings. This is one of the
differences between sole traders (and partnerships) and limited liability companies. A limited liability
company is a separate legal entity that is subject to tax which is expensed in profit or loss (and included
in liabilities if unpaid). In this question the tax refund is Waldorf’s and by paying it into his business’s
bank account he is effectively introducing capital.
1174
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 103 SLATE
Statement of profit or loss for the year ended 31 December 2014
$
Work done (= Revenue) (W3)
Direct expenses
Materials (W2)
Wages and social insurance $(3,346 – 65)
Van expenses
Running costs $(342 + 36)
Depreciation
Miscellaneous expenses
Electricity
Depreciation of cement mixer
Rent
General expenses $(14 + 110)
$
$
13,066
5,779
3,281
———
9,060
378
108
———
486
56
50
104
124
———
334
———
Profit for the year
(9,880)
———
3,186
———
Statement of financial position at 31 December 2014
Fixed asssets
Van
Cement mixer
Current assets
Inventory
Trade receivables
Balance at bank
Cash in hand (W1)
Cost
$
Depn
$
856
200
———
1,056
———
108
50
——
158
——
$
748
150
———
898
560
1,200
204
10
——
1,974
———
2,872
———
Total assets
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1175
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
$
Capital account
Capital introduced
Add Profit for the year
$
150
3,186
———
3,336
(1,239)
———
2,097
Less Drawings $(832 + 65 + 342)
Non-current liability
Loan account – Mother
400
Current liabilities
Trade creditors
Accrued expenses
Van instalments (5  38)
149
36
190
———
375
———
2,872
———
WORKINGS
(1)
Cash a/c
$
Bank a/c (cash from bank)
Work done a/c (al fig =
takings)
3,100
2,662
$
Wages a/c (3,346 – 65)
Drawing a/c (private SSC)
Materials a/c
Electricity a/c
General expenses a/c
Drawings a/c 52 @ $16
Rent a/c c 52 @ $2
Balance c/d (cash in hand)
———
5,762
———
(2)
Materials a/c
$
Cash a/c
Bank a/c
Balance c/d (liability)
1176
3,281
65
1,400
56
14
832
104
10
———
5,762
———
1,400
4,790
149
———
6,339
———
$
I & E a/c
Balance c/d (inventory)
5,779
560
———
6,339
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(3)
Work done a/c
$
I & E a/c
13,066
$
Bank a/c (bankings)
Cash a/c
Balance c/d
9,204
2,662
1,200
———
13,066
———
———
13,066
———
Answer 104 BENNETT
Tutorial note: Incomplete records can be mastered if you adopt a systematic approach, as explained in
the Study System. To get sales and purchases, start with the cash account and then move on to the total
accounts. Many incomplete records questions require the use of these “collection” accounts to find
missing balances.
(a)
Capital at 1 January 2014
Assets Liabilities
$
$
Operating overdraft
Cash in till
Inventories
Trade receivables
Brough’s loan
Principal
Accrued interest
Accrued general expenses
Rent in advance
Fixtures
Trade payables
Accrued light and heat
Marking
guide
1,172 †
20 †
4,500 *
2,800 *
* for all 2
4,000 †
30 †
240
† ½ each
2
40 *
2,800 *
———
10,160
Net assets – Capital account
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1,800 *
80*
———
7,322
———
(7,322)
———
2,838
———
__
4
__
1177
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Statement of profit or loss for the year ended 31 December 2014
Presn 1/2
$
Revenue (W2)
Opening inventory
Purchases (W3)
$
39,156
4,500
31,420
———
35,920
(5,800)
——— (30,120)
———
9,036
Less Closing inventory
Gross profit
Establishment costs
Rent (475 + 40 – 50)
Light and heat (210 – 80 + 70)
465
200
———
Administrative expenses
Wages
Depreciation of fixtures (2,880 + 100 – 2,550)
Sundry expenses (140 + 800 – 240 + 190)
Financing costs
Loan interest
Irrecoverable debt
Discounts (net) (520 – 480)
2,950
350
890
———
120
200
40
———
Profit for the year
1178
$
1
/3
1
/2
/2
1
665
1
/3
/2
1
1
4,190
1
/3
/3
1
/3
1
360
———
(5,215)
———
3,821
———
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21/2
1
/3
1
1 /2
__
9
__
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(c)
Statement of financial position at 31 December 2014
$
$
Presn 1
ASSETS
Non-current assets
Tangible assets at cost less depreciation
Fixtures
Current assets
Inventories
Trade receivables
Prepayment
Cash (993 – 320 + 20)
2,550
½



5,800
3,000
50
693
———
1
1
9,543
———
12,093
———
Total assets
CAPITAL AND LIABILITIES
Capital account
At 1 January 2014 (per (a))
Add Profit for the year (per (b))
Less Drawings (156 + 900)
Non-current liabilities
Loan – Brough
Current liabilities
Trade and other payables (2,200 + 190 + 70 + 30)
Total capital and liabilities
2,838
3,821
———
6,659
(1,056)
———
5,603
½
½
4,000
½
2,490
———
12,093
———
1
1
__
7
__
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1179
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
WORKINGS
(1)
Cash and bank a/cs
Cash
$
Bank
$
Balance b/f
20
Cash (bankings)
Sales (cash takings) 38,416
———
38,436
———
Cash
$
Balance b/f (892 + 280)
Purchases
(30,500 – 280 + 320)
Rent
Fixtures
Light and heat
General expenses
140
Loan interest
Drawings (52  $3)
156
Sales (dishonoured
cheques)
Wages
2,950
Bankings
35,170
Balance c/f
20
Balance c/f (993 – 320)
———
38,436
———
35,170
———
35,170
———
Bank
$
1,172
30,540
475
100
210
800
120
900
180
673
———
35,170
———
Tutorial note: This working is not specifically required therefore no marks are awarded to it.
Marks for workings are NOT to
be double counted
(2)
Sales (or total receivables) a/c
$
Balance b/f
Bank a/c
(dishonoured cheques)
Trading a/c (al fig)
(3)
2,800
180
39,156
———
42,136
———
$
Cash a/c (takings) (W1)
Discounts allowed a/c
Irrecoverable debts a/c
Balance c/f
½ each
Dr/Cr
(excl bals)
 2½
Purchases (or total payables) a/c
$
Bank a/c
Discounts received a/c
Balance c/f
1180
38,416
520
200
3,000
———
42,136
———
30,540
480
2,200
———
33,220
———
$
Balance b/f
Trading a/c (al fig)
1,800
31,420
———
33,220
———
½ each
Dr/Cr
(excl bals)
 1½
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 105 BOTHAM
(a)
Statement of profit or loss for the year ended 31 December 2014
$
Revenue (W1)
Opening inventory
Purchases $(15,346 (W2) + 165 – 104)
Less Closing inventory
Gross profit
Expenses
Selling and distribution costs
Wages
Wrapping materials $(525 – 53)
Motor expenses $(728 + 236)
Irrecoverable debts $(223 + 100)
Depreciation of van ($1,200  20%  9/12)
Administrative expenses
Insurance $(500 – 125 + 100)
General expenses
Electricity $(228 + 50)
Depreciation of fixtures $(2,600 – 200)  10%
Loss on disposal of fixtures $(200 – 130)
Loan interest $(100 + 50)
Accountancy costs
Profit for the year
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$
25,965
1,600
15,407
———
17,007
(2,360)
——— (14,647)
———
11,318
3,423
472
964
323
180
———
475
625
278
240
70
150
100
———
(5,362)
(1,938)
———
4,018
———
1181
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
Statement of financial position at 31 December 2014
Cost
$
ASSETS
Non-current assets
Intangible
Goodwill
Tangible
Freehold property
Fixtures $(2,600 – 200)
Delivery van
2,000
10,000
2,400
1,200
———
15,600
———
Current assets
Inventories
Trade receivables $(637 – 100)
Prepayments $(125 + 53)
Cash $(5,757 – 125) + 180
Depn
$
–
–
240
180
——
420
——
$
2,000
10,000
2,160
1,020
———
15,180
2,360
537
178
5,812
———
8,887
———
24,067
———
Total assets
$
CAPITAL AND LIABILITIES
Capital
Capital at 1 January 2014
Profit for the year
$
20,000
4,018
———
24,018
(2,509)
———
Drawings $(1,040 + 104 + 1,329 + 36 (W3))
21,509
Non-current liabilities
Loan
2,000
Current liabilities
Trade and other payables (358 + (50 + 50 + 100))
Total capital and liabilities
558
———
24,067
———
WORKINGS
(1)
Trade receivables control a/c
$
Balance b/f
Sales (al)
400
25,965
$
Cash received
Irrecoverable debt
Balance c/f
———
26,365
———
Balance b/f
1182
25,505
223
637
———
26,365
———
637
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(2)
Trade payables control a/c
$
Bank
Bank (unpresented cheque)
Balance c/f
14,863
125
358
———
15,346
———
$
Credit purchases (al)
15,346
———
15,346
———
Balance b/f
(3)
358
Cash a/c
$
Cash received
25,505
$
Wrapping materials
Staff wages
Purchases for resale
Petrol and oil
Drawings ($20  52)
Cash banked
Balance c/f
Difference (drawings) (al)
———
25,505
———
525
3,423
165
236
1,040
19,900
180
36
———
25,505
———
Answer 106 MCQs INCOMPLETE RECORDS
106.1
106.2
106.3
106.4
106.5
C
A
D
B
B
106.6
106.7
106.8
106.9
106.10
A
B
D
B
C
WORKINGS
$
+
106.1
Inventory as at 25 March
Purchases
Returns
Sales ($17,500  80%)
Goods on sale or return ($15,000  80%)
$
–
175,260
5,952
2,520
14,000
12,000
————
193,212
(16,520)
————
176,692
————
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———
16,520
1183
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
106.2
Inventory
$
Per draft statement of financial position
Adjustment for goods on sale or return
50,000
12,000
———
62,000
———
Per financial statements
106.3
Trade receivables
$
130,000
(15,000)
————
115,000
————
Receivables control a/c
$000
Balance b/d
Credit sales (al fig)
120
343
$000
Cash
Irrecoverable debts
Discounts allowed
Balance c/d
——
463
——
361
12
6
84
——
463
——
$000
Credit sales
Cash sales
343
18
——
361
——
Total sales
106.4
Receivables control a/c
$
Balance b/d
Sales (al fig)
7,290
23,980
$
Cash
Contra
Balance c/d
22,490
910
7,870
———
31,270
———
———
31,270
———
$000
106.5
Opening inventory
Purchases
Closing inventory (al fig)
Cost of sales ($180,000 
33
132
(21)
——
80
)
100
144
——
$
106.6
Inventory value on 6 January 2015
Add Sales ($5,740  100/125)
Less Purchases
38,750
4,592
(3,990)
———
39,352
———
Inventory value on 31 December 2014
1184
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
$
106.7
Opening inventory
Purchases
Closing inventory (al fig)
Cost of sales ($300,000  80/100)
$
106.8
Revenue
Per question
Less Goods not sold ($8,000  50%)
Inventory
Per question
Add Goods not sold ($4,000  100/125)
106.9
55,000
230,000
(45,000)
————
240,000
————
95,000
(4,000)
———
91,000
———
27,500
3,200
———
30,700
———
Discounts in the cash receipts book are discount allowed (to customers).
$
106.10
Net assets 1 July 2014
Profit (al fig)
Less Drawings
Cash
Subscription
62,000
25,000
(11,000)
(2,000)
———
74,000
———
Net assets 30 June 2015
Answer 107 IASB
(a)
Objectives of IASB

To develop, in the public interest, a single set of high quality, understandable and
enforceable global accounting standards that require high quality, transparent and
comparable information in financial statements to help users make economic
decisions.

To promote the use and rigorous application of those standards.

To promote and facilitate adoption of International Financial Reporting Standards
(IFRSs), through the convergence of national accounting standards and IFRSs
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1185
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(b)
(c)
Discussion Paper v Exposure Draft (ED) of an IFRS

The publication of a discussion paper (or “discussion document”) is not a
mandatory step in the IASB’s due process. An exposure draft is mandatory.

The purpose of a discussion paper is to set out a comprehensive overview of the
issue and preliminary views. Thus an ED supersedes the discussion paper.

The discussion paper discusses the alternative solutions considered and invites
comment on their acceptance or rejection. An ED summarises the IASB’s
considerations in issuing it, in a “basis for conclusions”.

A discussion paper is published following approval by a simple majority vote of the
IASB. An ED requires the approval of at least 10 of the board’s 16 members.

The exposure period (i.e. period during which comments are invited) for a draft
statement is usually120 days. The comment period of an ED is also generally 120
days however this may be reduced to 30 days on urgent matters.
Steps taken by IASB
To ensure consistent interpretation of IASs

On-going comparability and improvements projects – resulting in:
(i)
the revision of IASs with all “alternative accounting treatments” having
now been eliminated; and
(ii)
disclosure requirements being reviewed in the context of the “Conceptual
Framework”.

Publication of a “statement of principles” and discussion papers – to make IASB’s
intentions clear.

Issue of a newsletter “Insight” – provides regular updates and explains technical
decisions.

Issue of interpretations by the International Financial Reporting Interpretations
Committee (IFR IC).
Answer 108 MCQs REGULATORY FRAMEWORK
Item Answer Justification
108.1
C
108.2
B
108.3
C
It is the IFRS Advisory Council which provides a forum and the other objectives are
rather a by-product of the IASB’s main objective. (Although IASB takes account of
the needs of emerging economies – it is not a specific objective to meet such needs.)
108.4
A
An audit committee’s responsibilities fulfil a monitoring and review function. The
other responsibilities are those of the board of the directors.
108.5
D
All these responsibilities may be delegated (with oversight by the audit committee).
1186
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 109 FINANCIAL STATEMENTS
(a)
Conceptual Framework
Scope
The Conceptual Framework for Financial Reporting deals with:

the objective of financial statements;

the qualitative characteristics that determine usefulness of information in financial
statements;

the definition, recognition and measurement of elements from which financial
statements are constructed;

concepts of capital and capital maintenance.
1 each
Application
(b)

The framework applies to the financial statements of all commercial, industrial and
business reporting entities, whether public or private.

A reporting entity is an entity for which there are users who rely on financial
statements as their major source of financial information about it.
1
1
__
max 5
__
Users and their information needs
Investors

Providers of capital (and their advisers) are concerned with the risk and return of
their investment. They need information:


for decision-making (buy, hold or sell?);
to assess the entity’s ability to pay dividends.
Employees

Employees (and their representative groups) are interested in information about the
stability and profitability of their employers.

They are also interested in information to assess the entity’s ability to provide
remuneration, retirement benefits and employment opportunities.
Lenders

Lenders need information to determine whether loans and interest will be paid when
due.
Suppliers and other trade creditors

Suppliers are interested in determining whether amounts owing to them will be paid
when due. The interest of trade creditors is likely to be over a shorter period than
lenders (unless dependent upon the continuation of the entity as a major customer).
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1187
½ each
user + 1
each
user’s
needs
4
 6
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Customers

Customers are interested in the continuance of an entity, especially when they have
a long-term involvement with, or are dependent on, the entity.
Governments and their agencies, regulatory authorities

Governments and their agencies are interested in the allocation of resources and,
therefore, the activities of entities. They require information to regulate activities,
determine taxation policies and as the basis for national income and similar
statistics.
Public

(c)
The public may be interested in an entity’s contribution to the local economy, recent
developments in its prosperity and range of activities.
The objective of financial statements
The objective of financial statements is to provide information about the financial position,
performance and changes in financial position of an entity that is useful to a wide range of
users in making economic decisions.
Financial statements also show the results of management’s stewardship (i.e. management’s
accountability for the resources entrusted to it).
2
1
__
max 2
__
____
13
____
Answer 110 ACCOUNTING CONCEPTS
(a)
Accruals
The accruals concept is that revenue and costs are recognised as they are earned or incurred,
not as money is received or paid. It also means that expenses are recognised in profit or loss
on the basis of a direct association between the costs incurred and the earning of specific
items of income (matching).
Example: Rent due but not paid is recognised as an expense of the period to which it relates
and set against revenue for the same period.
(b)
Substance over form
When there is a difference between the real effect of a transaction (substance) and its legal
form (form), the real effect should be recognised in the financial statements rather than the
legal form provided this is legally possible.
Example: An asset being acquired on hire purchase terms will be recognised as an asset with
an associated liability despite the fact that the legal ownership of the asset does not pass until
the last instalment due under the agreement is paid.
1188
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(c)
Consistency
The presentation and classification of items in the financial statements should be retained
from one period to the next unless:



there is a significant change in the nature of the operations;
a change will result in a more appropriate presentation of events or transactions;
a change is required by a new accounting standard.
Example: Depreciation rates should remain the same from period to period unless there is
clear evidence that changed circumstances require them to be changed.
(d)
Duality
The recording of every transaction must reflect the fact that two accounts are affected by that
transaction.
Example: The receipt of cash from a credit customer requires the recording of an increase in
cash and an equal decrease in the customer’s receivables ledger balance.
(e)
Prudence
In preparing financial statements, allowance is made for all known liabilities, including those
based on estimates because exact information is not available. Prudence also means that
revenue and profits are not included in profit or loss until their realisation is reasonably
certain.
Example: An allowance for doubtful debts should be created out of profits whenever the
realisation of all trade receivables in full is uncertain.
Answer 111 MCQs CONCEPTUAL FRAMEWORK
Item Answer Justification
111.1
D
This is the principal purpose.
111.2
C
The Framework is not a standard. It does define elements and specifies recognition
criteria.
111.3
B
Going concern is the only “underlying assumption” according to The Conceptual
Framework for Financial Reporting (i.e. going concern can always be assumed
without being explicitly stated).
111.4
B
Faithful representation and relevance are the two fundamental qualitative
characteristics. Comparability and understandability are two enhancing
characteristics.
111.5
B
Materiality is an aspect of relevance based on the nature and/or magnitude of items
of information in a financial report.
111.6
D
An item must meet the recognition criteria (which include reliable measurement) as
well as the definition of an element. Disclosure is never an alternative to
recognition.
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1189
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 112 OVERALL CONSIDERATIONS
(a)
(b)
(c)
Fair presentation

IAS 1 Presentation of Financial Statements requires that general purpose financial
statements should “present fairly” the financial position, financial performance and
cash flows of an entity.

Fair presentation is achieved by:
1190

selecting and applying appropriate IFRSs;

presenting information, including accounting policies, in a manner which
provides relevant, reliable, comparable and understandable information;

providing such additional disclosures as necessary.
Accounting policies

Accounting policies are the specific principles, bases, conventions, rules and
practices adopted by an entity in preparing and presenting financial statements.

Accounting policies should be selected and applied so that financial statements
comply with IFRSs (where applicable).

In the absence of a specific IFRS management should develop an accounting policy
that provides the most useful information to users.
max 2
Going concern

The going concern basis assumes that an entity will continue in operation for the
foreseeable future (i.e. at least, but not limited to, 12 months from the end of the
reporting period).

Management is responsible for:

(d)
max 2
max 2

assessing the entity’s ability to continue as a going concern and preparing
financial statements on a going concern basis;

disclosing material uncertainties which may affect the going concern
concept.
When financial statements are not prepared on a going concern basis, that fact
should be disclosed, together with the basis on which the financial statements are
prepared and the reason for departing from the going concern concept.
Accrual accounting

An entity should prepare its general purpose financial statements (except statements
of cash flows) under the accrual basis of accounting.

Under this basis assets, liabilities, equity, income and expenses are:

recognised when they occur (not as cash or its equivalent is received or
paid); and

recorded in the accounting records and reported in the financial statements
of the periods to which they relate.
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max 2
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(e)
Materiality

A material is “material” if its non-disclosure could influence the economic decisions
of users taken on the basis of financial statements.

Material items require separate presentation in financial statements.

Immaterial amounts are aggregated with amounts of a similar nature or function (on
face of financial statements or in notes) and need not be presented separately.

IFRSs apply only to material items.
max 2
___
10
___
Answer 113 CURRENT ASSETS AND LIABILITIES
(a)
Inventories classified as current assets

An asset is classified as “current” when it is:

expected to be realised, or is intended for sale or consumption, in the
normal course of the operating cycle; or

held primarily for trading purposes; or

expected to be realised within 12 months after the reporting period; or

cash or a cash equivalent which is not restricted in use.
1
Inventories are usually included in current assets in their entirety although they may include
items that are not expected to be realised within one year.
(b)
max 2
Items classified as current liabilities







1
__
__
Banks overdrafts
The current portion of interest-bearing liabilities
Trade payables
Provision for income taxes payable (and other current tax liabilities)
Deferred revenues and advances from customers
Provisions falling due within 12 months
Accrued expenses
½ each
__
max 3
__
(c)
Circumstances for offset

Assets and liabilities should not be offset except when required or permitted by an
IFRS.

Off-setting must represent the expectation of the realisation of the asset.
1
1
__
2
__
7
__
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1191
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 114 MCQs IAS 1
Item Answer Justification
114.1
B
Additional disclosure must be provided when compliance with a specific
requirement in IFRS is insufficient for users to understand the impact of a particular
transaction or event.
114.2
D
Reasons as well as the fact must be stated. The period for assessing going concern
is not limited to 12 months.
114.3
C
Materiality depends also on nature. Material items are presented separately.
Immaterial items may be aggregated in the notes also.
114.4
C
Previous period numerical information is not required if permitted by an IFRS (e.g.
the reconciliation of non-current assets movements is not required to be restated
under IAS 16). Financial statements for the two previous periods is a minimum and
some comparative disclosure in the notes will be required.
114.5
B
As the dividend is paid it will be included in the statement of cash flows. As an
appropriation of profit it is included in the statement of changes in equity (never in
the statement of comprehensive income).
Answer 115 BETA
Statement of profit or loss for the year ended 31 March 2015
$000
Notes
Revenue
Cost of sales $(140 + 960 – 150)
1,950
(950)
———
1,000
75
(420)
(226)
———
429
(29)
———
400
———
Gross profit
Other income
Distribution costs
Administrative expenses $(210 + 16)
Profit before tax
Income tax expense
1
4
Profit for the year
Statement of financial position at 31 March 2015
Notes
ASSETS
Non-current assets
Property, plant and equipment
Investments
150
470
——
Total assets
$000
530
560
———
1,090
2
Current assets
Inventories
Trade receivables
1192
$000
620
———
1,710
———
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
EQUITY AND LIABILITIES
Capital and reserves
Issued capital
Retained earnings
600
220
———
820
3
Non-current liabilities
Retirement benefit obligations
196
Current liabilities
Trade and other payables
Operating overdraft
Income tax payable
Dividend (declared)
260
80
54
300
——
Total equity and liabilities
694
———
1,710
———
Statement of changes in equity for the year ended 31 March 2015
Share
capital
$000
600
Balance at 31 March 2014
Profit for the year
Dividends (300 + 120)
——
600
——
Balance at 31 March 2015
Retained
earnings
$000
240
400
(420)
——
220
——
Total
$000
840
400
(420)
——
820
——
Notes to the financial statements for the year to 31 March 2015
(1)
Operating expenses
Profit is stated after charging
$000
32
16
——
$000
Depreciation
Retirement benefit costs
(2)
Tangible assets
Plant and equipment
Cost at 1 April 2014 and 31 March 2015
Accumulated depreciation
At 31 March 2014
Charge for the year
750
——
188
32
——
220
——
At 31 March 2015
Carrying amount at 31 March 2015
530
——
Carrying amount at 31 March 2014
562
——
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1193
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(3)
(4)
Share capital
Number of authorised shares of nominal value $1 each
1,000,000
————
Number of shares issued and fully paid
600,000
————
Taxation expense
$000
Estimated income tax charge for current year
Less: Overprovision in previous year
54
(25)
———
29
———
Charge for year
Answer 116 LOGO
(a)
Ordinary share a/c
$
Balance c/f
240,000
———–
240,000
———–
$
Balance b/f
100,000
Cash
100,000
Share premium a/c (bonus issue) 40,000
———–
240,000
———–
Balance b/f
240,000
Share premium a/c
$
Ordinary share a/c
Balance c/f
40,000
10,000
———
50,000
———
$
Cash (ordinary shares)
50,000
———
50,000
———
Balance b/f
(b)
10,000
Statement of financial position extracts at 31 December 2014
$
Capital and reserves
Issued shares
Reserves (share premium)
1194
240,000
10,000
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Statement of changes in equity for the year ended 31 December 2014
Balance at 1 January 2014
Issue of ordinary shares
Bonus issue (capitalisation)
Balance at 31 December 2014
Share
capital
$
100,000
100,000
40,000
———
240,000
———
Share
premium
$
Total
$
100,000
150,000
–
———
250,000
———
50,000
(40,000)
———
10,000
———
Notes to the accounts
2014
Share capital
Number of authorised shares – ordinary $1 each
Number of shares issued and fully paid
– ordinary
2013
500,000
500,000
240,000
100,000
Answer 117 GAMMA
Statement of financial position as at 31 December 2014
Notes
Non-current assets
Plant and equipment $(126 – 50 – 32)
Current assets
Inventories (goods for resale)
Trade receivables
Cash
$000
Presn 1
$000
44
1
100
380
110
___
½



1½



1½
590
____
634
——
Capital and reserves
Issued capital
Share premium
General reserve
Retained earnings (50 + 134)
3
Current liabilities
Trade payables
Income tax
300
20
20
184
___
60
50
__
1
524
1
110
____
634
——
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__
max 5½
__
1195
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of profit or loss for the year ended 31 December 2014
$000
Note
Presn 1
Revenue (1,000 – 28)
Cost of sales (W)
972
(474)
___
Gross profit
Other operating income
Distribution costs (W)
Administrative expenses (W)
498
16
(230)
(100)
____
½
1½
1
184
(50)
____
½
Profit before tax
Income tax expense
5
Profit after tax
134
——
Notes to the accounts
(1)
Accumulated depreciation
1 January
Annual depreciation
31 December
Carrying amount
max 5½
__
2014
$000
126
___
2013
$000
126
___
50
32
__
x
x
__
82
__
50
__
44
—
x
—
2014
2013
600,000
———
600,000
———
max 3
Share capital
Number of 50 cent shares issued and fully paid
(3)
__
Plant and equipment
Cost
(2)
½
1½
1
Dividends
Proposed dividend of
Proposed dividend per share
$60,000
10 cents
1
½
Tutorial note: As the dividend is merely proposed at the end of the reporting period it cannot
be accounted for as a liability, but must be disclosed in accordance with IAS 1.
(4)
1196
Profit before taxation
Profit is stated after charging the following items:
2014
$000
Depreciation of tangible assets
Staff costs $(80 + 60 + 40)
Directors’ remuneration
32
180
30
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1½
max 18
____
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
WORKING
Cost of sales
$000
Opening inventory
Purchases
Purchases returns
Carriage outwards
Warehouse wages
Salespersons’ salaries
Administrative wages
Delivery vehicle hire
Distribution expenses
Administrative expenses
Directors’ salaries
Closing inventory
Depreciation
Distribution
costs
$000
Administrative
expenses
$000
60
540
(26)
28
80
60
40
20
10
10
30
20
____
22
____
10
____
474
——
230
——
100
——
(100)
Answer 118 SIGMA
Statement of financial position as at 31 March 2015
Presn ½
Note
Non-current assets
Property, plant and equipment (W1)
$000
315
1
Current assets
Inventories
Trade receivables
Prepayments
Cash
320
200
160
180
–––
Total assets
Capital and reserves
Issued capital
Retained earnings (per statement of changes in equity)
400
235
–––
Non-current liabilities
Loan debentures (5/6  $120,000)
Current liabilities
Trade payables and accrued expenses
Loan debentures (1/6  $120,000)
Dividend payable
Total equity and liabilities
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$000
340
20
80
–––
1




1
860
–––––
1,175
–––––
715
¼
½
100
½
¼
½
½
360
–––––
1,175
–––––
__
5
__
1197
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Statement of changes in equity for the year ended 31 March 2015
Balance at 1 April 2014
Profit for the year (W2)
Dividends (20%  $400,000)
Balance at 31 March 2015
Share
capital
$000
Retained
earnings
$000
Total
$000
Presn ½
400
522
193
(80)
____
½
1½
½
____
122
193
(80)
____
400
——
235
——
635
——
Land and
buildings
$000
Plant and
equipment
$000
400
–
–
___
160
20
(32)
___
560
20
(32)
___
400
___
148
___
548
___
Notes to the accounts
(1)
__
3
__
Tangible assets
Cost
At 1 April 2014
Additions
Disposals
At 31 March 2015
Accumulated depreciation
At 1 April 2014
Eliminated on disposals
Charge for the year (W1)
152
At 31 March 2015
Carrying amount at 31 March 2015
Presn ½
Total
$000
8
___
60
(6)
19
__
212
(6)
27
___
160
___
73
__
233
___
240
——
75
——
315
——
WORKINGS
1½
2
___
4
___
12
___
(1)
Depreciation
Factory 2% of $400,000
Plant and equipment (20%  (148 – (60 – 6)) = 18.8 
$000
8
19 (to nearest 000)
__
27
—
(2)
Profit for the period
$000
Per list of balances
Less: Depreciation (W1)
Loss on sale (W3)
27
2
––
$000
222
29
____
193
——
1198
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(3)
Disposal of plant
$000
Proceeds
Cost
Less: Depreciation
32
6
__
Loss on sale
$000
24
26
__
2
__
Answer 119 LARK
(a)
Statement of profit or loss for the year ended 31 March 2015
Sales revenue
Changes in inventories of finished goods and work in progress
Work performed by the enterprise and capitalised
Raw materials used (7,100 + 1,060 – 1,150)
Staff costs (5,170 + 810)
Depreciation expenses (80 + 330 + 30)
Other expenses (4,290 + 280 – 20)
(b)
$000
20,000
(30)
400
(7,010)
(5,980)
(440)
(4,550)
______
Profit from operations
Finance cost
2,390
(500)
______
Profit before tax
Income tax expense
1,890
(360)
______
Profit for the year
1,530
______
Items in the statement of changes in equity






Profit for the year;
Dividends (distributions of profit);
Revaluation surplus;
Issue of share capital;
Share premium;
Changes in accounting policy.
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1199
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 120 ALPACA
Statement of financial position as at 30 April 2015
ASSETS
Non-current assets: cost
accumulated depreciation
Current assets:
Inventories
Receivables
Cash at bank
$000
$000
1,000
330
––––––
670
450
670
114
––––––
EQUITY AND LIABILITIES
Capital and reserves
Issued capital
Share premium
Retained earnings (W1)
1,234
––––––
1,904
––––––
500
50
964
––––––
1,514
Non-current liabilities
10% Loan notes
200
Current liabilities
Payables
Interest accrued
180
10
––––––
190
––––––
1,904
––––––
WORKING
(1)
Retained earnings
$000
Balance at 30 April 2014
Sales revenue
Purchases
Expenses
Opening inventories
Closing inventories
Interest payable
Depreciation
Irrecoverable debts written off
2,120
1,640
410
450
20
100
20
––––––
4,310
Balance at 30 April 2015
1200
$000
818
4,006
––––––
5,274
4,310
––––––
964
––––––
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 121 MCQs CAPITAL STRUCTURE AND FINANCE COSTS
121.1
D
121.2
C
The premium on the issue of shares must be put to share premium account. The gain on
revaluation of the property must be recognised in other comprehensive income and
accumulated in a revaluation surplus (in the statement of changes in equity). The
disposal of the truck results in a reduction in profit.
$
Opening net assets
$(100,000 + 120,000 – 30,000 – 20,000 – 15,000)
Closing net assets
$(150,000 + 110,000 – 40,000 – 18,000 – 20,000)
Increase
Add:
Dividends appropriated (20 – 15 + 20)
Tax charge (22 – 20 + 18)
Less:
121.3
Proceeds of share issue
D
B
26,000
20,000
–––––––
46,000
–––––––
$
Preferred dividend (250,000  6%)
Ordinary dividend (1m  4  0.02)
121.5
182,000
–––––––
27,000
25,000
20,000
–––––––
72,000
30,000
–––––––
42,000
–––––––
$
Preferred dividend
Annual (50,000  8% = 4,000
6.5  4,000)
Ordinary dividend
121.4
155,000
15,000
80,000
–––––––
95,000
–––––––
A
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1201
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
121.6
C
Non-current assets (at carrying amount)
$
B/fwd
260,000
Disposal – depreciation
(10%  $20,000)
Additions (al)
121.7
D
$
2,000
65,000
–––––––
327,000
–––––––
Disposal – cost
20,000
Depreciation charge for year
(10%  $260,000)
26,000
C/fwd
281,000
–––––––
327,000
–––––––
This is because a rights issue of shares requires shares to be purchased for
consideration, by shareholders.
(A is not a cash flow as a bonus issue is the issue of shares for no consideration. B is
not a cash flow as depreciation is a charge, on profits, for accounting purposes, but not
an actual flow of cash from the business. C is not a cash flow, because the revaluation
of a non-current asset does not require the receipt or expenditure of cash. It is an
accounting device.)
121.8
A
The figure required is that of tax paid.
Income tax
$
Paid (al)
C/fwd
$
27,800
29,500
––––––
57,300
––––––
B/fwd
I & E a/c
25,300
32,000
––––––
57,300
––––––
Answer 122 RETAIL INVENTORY
(a)
Reasons why net realisable value may be less than cost




(b)(i)
Damage
Obsolescence (wholly or in part)
Declining selling prices
Increasing cost of completion/costs of making sale.
1 each
max 3
___
Cost on a FIFO basis
Date purchased
30 December
16 December
2 December
Units
Per unit
$
Cost
$
70
60
20
506
503
500
35,420
30,180
10,000
_________
75,600
———
1202
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1
1
1½

3½
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(ii)
Net realisable value (NRV)
NRV = selling price less selling and distribution costs = selling price  95%
Date sold
Units
14 January
28 January
11 February
70
50
30
Per unit
$
NRV
$
497.80
495.90
494.00
34,846
24,795
14,820
1½
1½
1½
_________

4½
74,461
———
(c)
Amount to be include in financial statements
Lower of cost and net realisable value
$74,461
1
___
9
____
Answer 123 MEASUREMENT OF INVENTORIES
(a)
12
____
IAS 2 “Inventories” requirements
Overheads
The Standard requires inventories to be measured at the lower of cost and net realisable value.
The term “cost” includes “cost of conversion” (where appropriate). “Cost of conversion”
includes “the systematic allocation of fixed and variable production overheads”. Fixed
production overheads are indirect costs of production that remain relatively constant
regardless of the volume of production (e.g. depreciation and maintenance of factory
buildings and equipment, and the cost of factory management and administration).
max 3
Lower of cost and net realisable value (NRV)
Inventories are usually written down to NRV on an item by item basis.
circumstances it may be appropriate to group similar or related items.
In some
max 2
Specific identification of costs is inappropriate where there are large numbers of items which
are ordinarily interchangeable (e.g. indistinguishable components). The cost of such
inventories should be assigned by using the first-in, first-out (FIFO) or weighted average cost
formulas.
max 3
Identification of costs
(b)
8
__
Disclosure requirements of IAS 2




__
Accounting policies used in measuring inventories including the cost formula used.
The total carrying amount and the carrying amount in appropriate classifications.
The carrying amount of inventories carried at net realisable value.
The carrying amount of inventories pledged as security for liabilities.
1 each
___
4
___
12
____
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1203
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 124 BILDA CO
(a)
Accounting policies extract
Inventories
(b)

Raw materials are valued at purchase cost including freight, duty and other charges
necessary to bring the inventory to the factory.
1

Production cost includes direct production costs and an appropriate proportion of
production overheads and factory depreciation.
1

Movements in raw materials inventory are accounted for using the FIFO (first-in,
first-out) method.
1

An allowance is established when the net realisable value (i.e. estimated realisable
value less costs to sell) of inventory items is lower than the values calculated above.
(i)
Raw material
Purchase price – latest
Carriage inwards
Customs duty
5,000 units @
Price
per tonne
$
150.00
20.00
10.00
———
180.00 =
———
4
___
Calculation of inventory valuation at 31 December 2014
First-in, first-out (FIFO) basis
1
___
Inventory
value
$
900,000
3
(Assuming net realisable value is higher)
(i)
(ii)
Inventroy value b/fwd
Finished goods
Cost per tonne
Raw material price
Variable processing costs
Fixed production cost (W)
Net realisable value
Selling price per tonne
Less: Delivery costs
2,000 tonnes at lower amount
1204
900,000
$
180.00
25.00
33.19
———
238.19
———
240.00
(7.50)
———
232.50
———
232.50
465,000
————
1,365,000
————
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3
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
WORKING
Production costs per tonne
(i)
Normal level of production
Total purchases 52  1,000
Less Raw materials inventory
Tonnes
52,000
(5,000)
———
47,000
———
Total production for 2014
Normal activity level (assuming even production
throughout the year) 1/52  47,000 tonnes/week
(ii)
903.846
Fixed production costs per tonne
Total production costs per week
Normal weekly production (30,000 ÷ 903.846 tonnes)
$30,000
$33.19 per tonne
2
___
8
___
12
Tutorial note
____
An alternative assumption would be that purchases of 1,000 tonnes per week represent the anticipated
normal activity level, in which case the fixed production cost would be
$30,000
= $30 per tonne
1,000 tones
Tutorial note: It would not be appropriate to allocate these costs based on operating capacity (i.e.
1,500 tonnes) since, based on the facts given, the normal level of purchases is constant at 1,000 tonnes
each week.
Answer 125 MCQs IAS 2
Item Answer Justification
125.1
C
Carriage costs are delivery/couriering/postage costs, etc. Inwards means on goods
received; outwards means on goods dispatched. Both are an expense. Costs of
dispatch to customers and a distribution cost and not an inventory cost.
125.2
A
Cost net of tax is $100,000. Since this is not paid for a year this is equivalent to
$100,000 ÷ 1.1 = $90,909. The carriage costs would not be discounted for 30 days
credit. So total cost is $92,909.
125.3
A
There are 100 units in inventory at the end of the year. The net realisable value of
20 units is $150 ($170 - $20). Therefore the total inventory value is $750.
125.4
B
70 units @ $1,000 and 20 units @ $1,020 remain = $90,400
125.5
D
As the cost of goods is increasing the average cost of the goods sold is higher than
under FIFO.
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1205
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 126 SALE OF GOODS AND LEISURE FACILITIES
(a)
Criteria for revenue recognition

(b)
The significant risks and rewards of ownership have been transferred to the buyer.
This usually coincides with transfer of legal title or passing of possession.
2

Neither continuing managerial involvement nor effective control over goods sold is
retained.
1

The amount of revenue can be measured reliably.
1

It is probable that economic benefits associated with the transaction will flow to
entity.
1

Costs incurred (or to be incurred) in respect of the transaction can be measured
reliably.
1
__
max 5
__
Revenue recognition
Membership subscriptions
The entity is performing a contractually agreed task (providing sports and leisure facilities)
over an agreed period of time (one year). As the outcome of the transaction can be reliably
estimated (fixed subscription), revenue should be recognised by reference to the state of
completion of the transaction at the end of the reporting period.
2
The state of completion of the transaction must be assessed for each member. For example, if
a member joined 5 months before the entity’s year end, 5/12 of that member’s subscription
should be regarded as revenue of the period.
1
1
2
Additional activities
Revenue should be recognised for all transactions completed by year end. For example,
charges for squash courts used before year end should be recorded as revenue of the period.
1
1
___
max 7
___
Answer 127 MCQs IAS 18
12
___
Item Answer Justification
127.1
D
127.2
B
127.3
C
Revenue measurement takes into account trade discounts (and volume rebates).
Bara expected to receive $800 of which $40 is not an economic benefit to Bara (the
sales tax). The prompt payment discount allowed to the customer is an expense, not
a reduction in revenue recognised.
127.4
D
Revenue does not have to be fixed to be “measured reliably”. Costs must also be
measured reliably but may still be to be incurred. Economic benefits (payment from
customer) must be probable rather than guaranteed.
127.5
C
A dividend is recognised in full when the right to receive it is established.
1206
Disposal proceeds are income but not revenue.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 128 DEPRECIATION AND REVALUATION
(a)
Factors to consider then calculating depreciation on head office

The property comprises land and buildings. These are separable assets and are
accounted for separately even where they are acquired together.
1

Land normally has an unlimited life and therefore is not depreciated.
1

Buildings have a limited life and are therefore depreciable assets.
1

As each accounting period can be expected to benefit equally from the use of the
building, straight line depreciation will be appropriate.
1

(b)
As the property is maintained to a high standard, its useful life and/or residual value
will be extended, reducing the charge for depreciation each period.
1
__
5
Warehouse expenditure
__
The costs of extending the warehouse ($120,000) should be added to the carrying amount of
the property. This is because future economic benefits associated with the extension would
be expected to be received by the entity.
1
1
The costs of repairing the roof ($67,000) should be charged as an expense of the period.
These costs merely maintain future benefits and do not increase the economic benefits.
1
1
__
(c)
(d)
4
Warehouse valuation
__
IAS 16 Property, Plant and Equipment allows property (also plant and equipment) to be
carried at a revalued amount, being fair value at the date of the revaluation less any
subsequent accumulated depreciation. For property, fair value is market value for existing
use and this is normally estimated by professionally qualified valuers.
1
1
1
1
However, the entire class of asset to which the warehouse belongs is required to be revalued
(e.g. both warehouses or all land and buildings). It would therefore not be acceptable to
selectively revalue just one of the warehouses.
1
Once revalued, the directors will be obliged to keep any revaluations up to date so that the
carrying amount does not differ materially from fair value. The frequency of future
revaluations will therefore depend on movements in the property market and could range
from annually to once every three to five years.
1

1
__
max 6
Disclosure requirements for items stated at revalued amounts





1
__
The basis used to revalue the asset(s).
The effective date of the revaluation.
Whether an independent valuer was involved.
The nature of any indices used to determine replacement cost.
The carrying amount of each class of asset that would have been included in the
financial statements had the assets been carried at cost less depreciation.
The revaluation surplus, indicating the movement for the period and any restrictions
on the distribution of the balance to shareholders.
1
1
1
1
1
2
___
max 5
___
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1207
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 129 DIAMOND (IAS 16)
(a)
Ledger accounts
Land – Cost or valuation
$000
2013
1 Jan Balance
2014
1 Jan Balance
31 Dec Revaluation gain
1,000
_____
$000
2013
31 Dec Balance
2014
1,000
200
_____
31 Dec Balance
1,200
_____
2015
1 Jan Balance
1,000
_____
1,200
_____
1,200
_____
1,200
Buildings - cost
$000
$000
2013
1 Jan Balance
8 Oct Cash
500
50
___
2013
31 Dec Balance
___
550
___
2014
1 Jan Balance
2015
1 Jan Balance
1208
550
___
550
550
___
2014
31 Dec Balance
550
___
550
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Buildings - depreciation
$000
2013
31 Dec Balance
2014
31 Dec Balance
221
$000
2013
1 Jan Balance
31 Dec Profit or loss
___
210
11
___
221
___
221
___
2014
1 Jan Balance
31 Dec Profit or loss
___
221
11
___
232
___
232
___
232
2015
1 Jan Balance
232
Office equipment – cost
2013
1 Jan Balance
10 June Cash
Disposal
$000
40
12
4
___
2013
10 June Disposal
31 Dec Balance
8
48
___
56
___
2014
1 Jan Balance
$000
56
___
2014
1 Mar Disposal
31 Dec Balance
___
8
40
___
48
___
48
___
48
2015
1 Jan Balance
40
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1209
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Office equipment – depreciation
$000
2013
10 June Disposal
31 Dec Balance
2014
1 Mar Disposal
31 Dec Balance
7
23
___
30
___
6
22
___
28
___
$000
2013
1 Jan Balance
31 Dec Profit or loss
2014
1 Jan Balance
31 Dec Profit or loss
2015
1 Jan Balance
24
6
___
30
___
23
5
___
28
___
22
Office equipment – disposal
$000
2013
10 Jun Cost
31 Dec Profit or loss
2014
1 Mar Cost
31 Dec Profit or loss
8
3
___
11
___
8
1
___
$000
2013
10 June Depreciation.
Cost
2014
1 Mar
7
4
___
11
___
Depreciation
Cash – proceeds of sale
9
___
6
3
___
9
___
Revaluation surplus
$000
(b)
2014
31 Dec
Land
$000
200
Purpose of depreciation
In order for the financial statements to reflect properly all the costs of the entity for the period,
it is necessary for there to be a charge against income in respect of the use of all non-current
assets which have finite useful economic lives. The purpose of depreciation is thus mainly to
ensure that the cost or valuation of a non-current asset is spread fairly over the years
benefiting from its use and charged to profit or loss as with any other period costs such as
labour and materials.
The following factors should be taken into account when assessing depreciation:
1210

the carrying amount of the asset (cost or valuation);

the expected useful economic life to the business, having due regard to the
incidence of obsolescence;

the estimated residual value of the net asset at the end of its useful economic life in
the business.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 130 MCQs IAS 16
Item Answer Justification
130.1
A
130.2
D
Revalued amount is the fair value at the date of the revaluation less any subsequent
accumulated depreciation (and impairment losses).
130.3
D
Only assets in the same class are required to be revalued. Revaluations should be
sufficiently regular but frequency is not stipulated in IAS 16. There is no
requirement for valuations to be undertaken independently (though this will be
disclosed if applicable). Depreciated replacement cost and income approaches are
methods of estimating fair value.
130.4
B
Depreciable amount is $800,000 ($1,000,000 – $200,000). Annual depreciation is
$20,000. Therefore carrying amount is $980,000 ($1,000,000 – $200,000).
130.5
A
The carrying amount will be fair value as at the reporting date. The depreciation
charge will be based on carrying amount in the first year (i.e. cost).
Answer 131 RESEARCH AND DEVELOPMENT
(a)
Why different treatment




(b)
For research (or the research phase of an internal project) it is not possible to
demonstrate that an intangible asset exists that will generate probable future
economic benefits. Therefore expenditure is always recognised as an expense when
it is incurred.
For development (or the development phase of an internal project), in some
instances, it can be demonstrated that an intangible asset exists that will generate
probable future economic benefits. This is because development is further
advanced than research.
Development costs are therefore recognised as an intangible asset from the point in
time when they meet certain criteria that indicate that future economic benefits are
probable.
If research cannot be distinguished from development, expenditure is treated as
research.
Criteria for asset recognition
1
1
1
1
1
1
__
max 4
__
ALL of the following must be DEMONSTRATED:
1

Technical feasibility of completing the intangible asset.
1

Intention to complete the intangible asset and use or sell it.
1

Ability to use or sell it.
1

The existence of a market for the output of the intangible asset.
1

Availability of adequate technical, financial and other resources to complete the
development and use or sell the intangible asset.
1
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1211
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK

(c)
Ability to measure reliably the attributable expenditure during development.
Development costs
1
__
max 6
__
Marketing awareness campaign
Exclude – selling costs cannot be directly attributed or allocated on a reasonable basis to
development activities.
½+1
Patent royalty payable to inventor of filter
Include – expenditure represents a direct cost of a service consumed in development
activities.
½+1
Salaries of staff testing filter prototypes
(d)
Include – expenditure on testing pre-production prototypes is a typical development activity.
½+1
Amortisation
max 4
__
__
How



The depreciable amount (e.g. cost) of an intangible with a finite useful life shall be
allocated on a systematic basis over its useful life.
The method used should reflect the pattern in which the related economic benefits
are consumed. If that pattern cannot be determined reliably, the straight-line
method should be used.
1
1
The determination of useful life will depend on such factors as



1
typical produce life cycles for the asset; and
technological obsolescence.
1
Intangible assets with indefinite useful lives are not amortised but will be tested
annually for any impairment in their value.
When

Amortisation commences when the asset is available for use.
1

Amortisation (period and method) should be reviewed at least at each financial year
end, and changed if useful life or the pattern of consumption of economic benefits is
significantly changed.
1
1
1
___
max 6
___
20
___
1212
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 132 DEFER
Tutorial note: Note the letter style in this answer, which looks to apply the principles of IAS 38 rather
than simply regurgitate them.
Deferred development expenditure
Thank you for your enquiry in which you requested advice concerning the procedures which should be
introduced in order to identify the cost of an intangible asset arising from development and ensure
compliance with best accounting practice. My recommendations are based on IAS 38 Intangible Assets.
IAS 38 requires that development expenditure be recognised as an asset if, and only if, certain criteria
are demonstrated. Research costs, and development costs which do not meet all the criteria should be
recognised as an expense when they are incurred. Accordingly my recommendations are as follows.
Guidelines to distinguish research based activities from development activities
IAS 38 defines development as the application of research findings (or other knowledge) to a plan or
design to produce new or substantially improved materials, products, processes, etc. On the other hand,
research is work undertaken to gain new scientific or technical knowledge and understanding.
IAS 38 criteria for asset recognition to be satisfied for identified development costs
These criteria, which must be demonstrated, are set out in the Standard. For example, there must be an
intention to complete and use or sell the intangible asset. If any of the criteria are not satisfied you must
write off the expenditure.
If, however, all the criteria are demonstrated, then the expenditure must be deferred (i.e. capitalised).
Amortisation period and method for development expenditure recognised as an asset
IAS 38 requires that an intangible asset with a finite life must be amortised on a systematic basis over
its useful life. In determining useful life, reference should be made to such factors as expected usage of
the asset, typical product life cycles, technical obsolescence and expected competition. Where there are
rapid changes in technology (e.g. computer software) useful life is likely to be very short.
The straight-line method should be used unless another method better reflects the pattern in which the
asset’s economic benefits are consumed.
If the asset has an indefinite useful life then the intangible is not amortised, instead it is tested annually
for impairment with any fall in value being charged to profit or loss.
IAS 38 disclosure requirements
IAS 38 requires that the financial statements disclose:

useful lives or amortisation rates and amortisation methods;

gross carrying amount and accumulated amortisation at beginning and end of period;

a reconciliation of the carrying amount at the beginning and end of the period showing
additions, etc;

the aggregate amount of research and development expenditure recognised as an expense
during the period.
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1213
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Procedures to be implemented
These might include:

using a chart of accounts to allocate staff costs, overheads, equipment, outside services, etc, to
projects;

formal notification by project managers to the finance department when a development phase
takes over from a research phase;

undertaking feasibility studies to determine the economic viability of planned or actually
development expenditure;

keeping a history of projections of useful lives against actual useful lives to justify using long
lives;

establishing criteria for impairment testing including monitoring of actual economic benefits
against projections/
Answer 133 MCQs IAS 38
Item Answer Justification
133.1
D
133.2
A
Residual value (if any) will affect the amount to be amortised but not the method.
The useful life of other assets may affect the useful life an intangible asset but not
the amortisation method applied to it. Whether or not the amount amortised is
expenses or capitalised in another asset it irrelevant to the method.
133.3
B
Staff training costs can never be recognised as an intangible asset (as the control
criteria are not met).
133.4
D
IAS 38 does not specify any period of amortisation so not A. Other bases are
permitted (e.g. unit of production) so not B. Additional criteria must be considered
(e.g. adequate finance and management’s intentions) so not C.
133.5
A
The amounts previously expensed cannot be reinstated at a later date. The only
costs which can be capitalised are $40,000 (maximum) and $10,000. Thus $50,000
would be amortised on a straight-line basis (in the absence of further information).
Answer 134 ETERNITY CO
(1)
This event requires adjustment under IAS 10 Events After the Reporting Period as it clarifies
the situation of the trade receivable at the year end. Consequently trade receivables should be
written down by $200,000 either by writing off the irrecoverable debt or making an allowance
for non-recovery of this amount.
Tutorial note: Just because some cash has been received after the reporting period does not
mean that as at the end of the reporting period a customer was not in financial difficulties.
The point that is being illustrated here is that the amount to be allowed or written-off is the
unrecoverable portion. It is assumed here, because the question does not specify, that all of
the $200,000 relates to amounts owing at the reporting date. If, for example, Wico had
settled the $250,000 but then been sold another $200,000 of goods, no allowance or write-off
could be made.
1214
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(2)
Although accounts would not normally be amended to reflect disposals of non-current assets
after the reporting period, the event should be disclosed in the notes. However, in this case
the sale price is evidence of a permanent fall in the value of the building at the year end and,
unless it can be shown that the fall in value arose from post year end circumstances, the
accounts should be adjusted to $2.7 million.
(3)
This event provides further evidence as to the net realisable value of the electric tricycles at
the year end, and should be adjusted for. The remaining unsold year end inventories should
be written down to net realisable value, which should include allowance for all anticipated
costs of transporting the tricycles to Bolivia. Prudence may dictate a write down to scrap
value if the Bolivia option appears unlikely to arise.
(4)
Government actions, such as a nationalisation, after the reporting period should not be
adjusted for but disclosed in the notes to the financial statements. Full provision for the loss
arising from the nationalisation would only be made in the 31 December 2014 accounts if the
going concern assumption was not appropriate.
(5)
The flood could be disclosed in the notes. However, as the branch is fully insured, it is
unlikely that a material loss will arise. Therefore, as non-disclosure may not affect the users
of financial statements, disclosure of the flood may be considered unnecessary.
(6)
Under IAS 10 the share issue should not be adjusted for but disclosed in the notes to the
financial statements. Non-disclosure would clearly affect the ability of users to make proper
evaluations and decisions, since, for example, the rights issue affects earnings per share (and
market value).
Answer 135 ACCOUNTING TREATMENTS
(1)
Trade and other receivables would be increased to $18,600 for inclusion in the published
accounts. Though the final figure was not known until after 31 December, the event provides
further evidence of a condition that existed at the end of the reporting period.
(2)
Reduce the asset to its “recoverable amount” as at 31 December 2014. The impairment in
value must be charged to profit and loss and may be disclosed separately as it is a material
amount.
(3)
The existence of a possible obligation depends on a future event – the legal outcome. In
accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, such a
contingent liability should not be recognised (i.e. cannot be provided). A 20% chance of
success indicates a possibility that the claim will succeed (i.e. less than probable). A note to
the financial statements should disclose the contingent liability, stating




the nature of the contingency
an estimate of the financial effect, i.e. $500,000 loss (less expected tax relief)
the uncertain factors affecting the future outcome
the possibility of any reimbursement (e.g. recourse to manufactures or insurance).
(4)
Include the item in inventories at the net realisable value of $1,600 ($1,900 – $300) as this is
less than cost. The net realisable value allows for anticipated extra costs and assumes that no
profit or loss will be made on eventual disposal.
(5)
The company should make a provision for $100,000 (i.e. should recognise 10% as a liability).
However, the possible obligation (30%) is a contingent liability which should not be
recognised but disclosed (IAS 37). The disclosure is as in (3) except that the financial effect is
$300,000 (30%  $1 million). The remaining 60% should be ignored as the likelihood of
liability is remote.
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1215
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Tutorial note: In (3) above it is not appropriate to provide for 20%  $500,000 (i.e. $100,000). An
expected value is only appropriate where there are a number of similar obligations (as with product
warranties (5)).
Answer 136 FOUR EVENTS
(a)
Additional evidence
Bankruptcy of a customer who owed money to the entity at year end
Provides additional evidence of doubts about financial position of customer (and therefore
recoverability of trade receivable) existing at the end of the reporting period.
Flood damaging inventories held at year end
This does not provide additional evidence of the physical state of inventory (and
recoverability of its cost) as at the end of the reporting period.
Receipt of long term loan from bank
This does not provide additional evidence. The asset (cash) and liability (loan) did not
exist at the end of the reporting period.
½ for each
Y/N to
additional
evidence
1 for
identifying
condition
4
__
6
__
Issue of credit note for goods sold before year end
This provides additional evidence of a cancellation of a sale and corresponding trade
receivable existing at the end of the reporting period.
(b)
Omission of significant inventories
The oversight constitutes an error (i.e. the financial statements of one or more prior periods
can no longer be considered reliable at the date of their issue).
1
The opening balance of retained earnings should be adjusted for the prior year effect and the
comparative information restated (unless it is impracticable to do so).
1
1
1
Disclosure



The nature of the error
The amount of correction for current period and prior period(s)
The fact that comparative info has been restated (or impracticable).
1
1
1
___
max 5
(c)
___
Event after the reporting period

Event occurs (and final outcome is known) before the date on which the financial
statements are approved.
1

Event may relate to conditions which existed at the end of the reporting period
(“adjusting event”) or may relate to conditions which did not exist at that date
(“non-adjusting event”).
1
Contingent liability

1216
A possible obligation arising from past events whose existence will be confirmed
only by the occurrence or not-occurrence of one or more uncertain future events; or
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1
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)

(d)
1
__
4
__
Disclosure of contingent liabilities




(e)
A present obligation which is not recognised because an outflow of resources is not
probable, or cannot be measured with sufficient reliability.
The nature of the contingent liability.
A best estimate of the financial effect
Uncertainties that may affect the future outcome (amount or timing of cash flow).
The possibility of any reimbursement.
Circumstances for going concern disclosure per IAS 1
1
1
1
1
__
3
___

The financial statements are not prepared on a going concern basis.
1

Management is aware of material uncertainties related to events or conditions that may
cast significant doubt upon the entity’s ability to continue as a going concern.
1
__
2
__
20
Answer 137 MCQs IAS 37
___
Item Answer Justification
137.1
A
An allowance which adjusts the carrying amount of an asset is not a provision
within the meaning of IAS 37. The other statements concern contingent liabilities.
137.2
A
This expected value is the best estimate for a large population of items (e.g.
warranties). The mid-point would only be suitable for a continuous range of
possible outcomes where each outcome is equally likely (i.e. as an approximation to
the expected value). The other estimates are suitable when measuring a single
obligation.
137.3
B
As it is more likely than not than some payout will be made (70% chance) a
provision must be made. This is a single obligation for which $100,000 is (by far)
the most likely outcome. (An expected value does not provide a suitable best
estimate in this case.)
137.4
C
70% is probable but not virtually certain, so an asset cannot be recognised in the
statement of financial position but disclosed as a contingent asset. (It is not
necessary to specify a best estimate for this disclosure as the possible outcomes and
their relative probabilities can be described.)
Answer 138 MCQs IAS 10
Item Answer Justification
138.1
A
Sales proceeds at less than cost of inventory provide evidence that inventory should
be written down. Recovery of a debt written off means that it was not bad and so
should be instated. The subsidiary existed at the year end and its subsequent sale
does not change that fact. The damage caused by the flood did not exist at the end
of the reporting period.
138.2
D
The condition (quake damage) did not exist at the end of the reporting period.
There is no liability (actual or contingent) to be included in the 2014 financial
statements.
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1217
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
138.3
C
The discovery of the fraud has revealed that inventory does not exist and so should
be adjusted (written off).
138.4
B
Although the earthquake is non-adjusting the going concern basis is no longer
appropriate.
Answer 139 ANTIPODEAN
Statement of cash flows for the year ended 31 December 2014
$
Cash flows from operating activities
Profit before taxation
Adjustments for
Depreciation
Net loss on disposals
Interest expense
$
Presn 1
25,200
1
7,000
310
3,000
______
1
1
1
Operating profit before working capital changes
Decrease in trade receivables
Decrease in inventories
Increase in trade payables
35,510
2,450
7,830
10,700
______
½
½
½
Cash generated from operations
Interest paid $(3,000 – 400)
56,490
(2,600)
______
1
53,890
Net cash from operating activities
Cash flows from investing activities
Purchase of long-term investments $(25,000 – 17,000)
Purchase of equipment and cars $(36,400 (W1) + 19,860 (W2))
Proceeds from sale of equipment and cars (W3)
(8,000)
(56,260)
6,900
______
1
4
2
(57,360)
Net cash used in investing activities
Cash flows from financing activities
Capital and other drawings
Borrowings repayment
(21,630)
(3,000)
______
1
1
Net cash used in financing activities
(24,630)
______
Net decrease in cash and cash equivalents
(28,100)
Cash and cash equivalents at beginning of period $(3,600 + 1,800)
5,400
______
Cash and cash equivalents at end of period $(4,800 + 700 – 28,200)
(22,700)
———
1218






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1½
___
18
___
STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
WORKINGS
Equipment (carrying amount)
(1)
$
Bal b/d
17,600
Additions ()
36,400
——–
54,000
——–
(2)
$
Disposal
Depreciation
Bal c/d
5,200
3,000
45,800
——–
54,000
——–
Motor vehicles (carrying amount)
$
Bal b/d
4,080
Additions ()
19,860
——–
23,940
——–
(3)
$
Disposal
Depreciation
Bal c/d
2,010
3,000
18,930
——–
23,940
——–
Disposals
$
Equipment
Motor vehicle
Profit on disposal (equipment)
5,200
2,010
430
——–
7,640
——–
$
Loss on disposal (vehicles)
Proceeds ()
740
6,900
——–
7,640
——–
Tutorial note: Alternatively, consider 2 separate disposal a/cs.
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1219
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 140 R2D2 CO
Statement of cash flows for the year ended 30 June 2015
$
Cash flows from operating activities
Profit before tax
Adjustments for
Depreciation $(3,000 + 1,000)
Profit on sale of fixed assets (W3)
Interest expense
$
14,400
4,000
(100)
1,000
———
19,300
(5,000)
(7,250)
(3,000)
———
4,050
(500)
(1,200)
———
Operating profit before working capital adjustments
Increase in inventories
Increase in trade receivables
Decrease in trade payables
Cash generated from operations
Interest paid (W5)
Income taxes paid (W4)
Net cash from operating activities
2,350
Cash flows from investing activities
Purchase of property
Purchase of plant and equipment (W1)
Proceeds from sale of plant and equipment (W3)
(10,000)
(1,000)
350
———
Net cash used in investing activities
(10,650)
Cash flows from financing activities
Part repayment of loan
(4,000)
———
Net cash used in financing activities
(4,000)
———
(12,300)
Net decrease in cash and cash equivalents
1,300
———
(11,000)
———
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of period
WORKINGS
Plant and equipment – Cost
(1)
$
Bal b/d
Additions ()
1220
5,000
1,000
——–
6,000
——–
$
Disposal
Bal c/d
1,000
5,000
——–
6,000
——–
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(2)
Plant and equipment – Accumulated depreciation
$
Disposal
Bal c/d
(3)
750
2,250
——–
3,000
——–
$
Bal b/d
Depreciation charge for year ()
2,000
1,000
——–
3,000
——–
Plant and equipment – Disposals
$
Cost
Profit on sale
1,000
100
——–
1,100
——–
(4)
$
Accumulated depreciation
Proceeds
750
350
——–
1,100
——–
Tax payable
$
Cash paid ()
Bal c/d
(5)
1,200
1,800
——–
3,000
——–
$
Bal b/d
Charge to profit or loss
1,000
2,000
——–
3,000
——–
Interest payable
$
Cash paid ()
Bal c/d
500
700
——–
1,200
——–
$
Bal b/d
Charge to profit or loss
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200
1,000
——–
1,200
——–
1221
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 141 MOMI CO
Statement of cash flows for the year ended 31 December 2014
$000
Cash flow from operating activities
Profit before tax
Adjustments for
Depreciation charges $(111 + 351) (W1, W2)
Profit on sale of equipment (W1)
Loss on sale of fixtures (W2)
$000
1,381
462
(19)
5
———
1,829
(660)
(773)
4
——
400
(255)
——
Operating profit before working capital adjustments
Increase in inventories
Increase in trade receivables
Increase in trade payables
Cash generated from operations
Income tax paid (W3)
Net cash from operating activities
145
Cash flows from investing activities
Purchase of plant and equipment $(312 + 366) (W1, W2)
Proceeds from sale of plant and equipment $(203 + 95) (W1, W2)
(678)
298
——
Net cash used in investing activities
(380)
Cash flows from financing activities
Equity dividends paid (W4)
Proceeds from issuance of ordinary share capital
(300)
400
——
100
———
(135)
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year $(1,050 + 197)
Cash and cash equivalents at end of year $(600 + 512)
1,247
———
1,112
———
WORKINGS
(1)
Plant and equipment (at carrying amount)
$000
Balance b/f
Bank – purchase
2,086
312
$000
P & E – disposal
Depreciation (al fig)
Balance c/f
——–
2,398
——–
1222
184
111
2,103
——–
2,398
——–
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Plant and equipment – Disposal
$000
P & E – carrying amount
Depreciation – gain on disposal
(2)
184
19
——
203
——
$000
Cash – proceeds
203
——
203
——
Fixtures and fittings (at carrying amount)
$000
Balance b/f
Bank – purchase (al fig)
1,381
366
$000
F + F – disposal
Depreciation
Balance c/f
——–
1,747
——–
100
351
1,296
——–
1,747
——–
Fixtures and fittings – Disposal
$000
F + F – carrying amount
100
$000
Cash – proceeds
Depreciation – loss on disposal
——
100
——
(3)
95
5
——
100
——
Tax payable
$000
Bank – tax paid (al fig)
Balance c/f
255
312
——
567
——
(4)
$000
Balance b/f
Profit or loss
257
310
——
567
——
Dividends payable
$000
Bank – dividends paid (al fig)
Balance c/f
300
154
——
454
——
$000
Balance b/f
Profit or loss
132
322
——
454
——
Tutorial note: The principles of incomplete records questions and sound logic should assist you in
producing the necessary workings to determine the missing information.
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1223
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 142 JANE
Statement of cash flows for the year ended 31 December 2014
Reference
to workings
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Loss on sale of plant
Loss on sale of investments
Interest expense
1
1
$000
30
100
20
10
15
___
Operating profit before working capital changes
Increase in inventories
Increase in trade receivables
Increase in trade payables
175
(30)
(70)
10
___
Cash generated from operating activities
Interest paid
85
15
___
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds of sale:
property, plant and equipment
investment
2
Cash flows from financing activities
Proceeds from issuance of share capital
Proceeds from issuance of loan notes
Dividends paid
180
50
(30)
___
Net cash from financing activities
Net decrease in cash
3
70
(450)
60
40
____
Net cash used in investing activities
$000
(350)
200
––––
(80)
––––
WORKINGS
(1)
Calculation of profit for the year
$000
45
Profit from operations
Interest paid (10% × 150,000)
(15)
––––
30
(40)
––––
(10)
––––
Profit for the year
Dividends
Retained profit for year (200 – 190)
1224
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(2)
Property, plant and equipment account
$000
Balance
Revaluation surplus
Assets purchased
730
100
450
$000
Depreciation
Carrying amount of items sold
100
80
Balance
(3)
_____
1,100
_____
1,280
_____
1,280
_____
Movement on cash
Balance at 1 January 2014
Balance at 31 December 2014
(20 – 40)
(30 – 130)
(20)
(100)
____
Movement for year
(80)
____
Answer 143 C3P0
Statement of cash flows for the year ended 31 December 2014
$
Cash flows from operating activities
Cash receipts from customers (W1)
Cash paid to suppliers and employees (W2)
Cash generated from operations
Interest paid
Dividends paid*
1½
3
35,000
(13,000)
(20,000)
______
½
½
2,000
(41,000)
(30,000)
______
1½
½
(71,000)
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issued shares (10,000 + 2,000)
Proceeds from long-term borrowings
Presn 1
190,000
(155,000)
_______
Net cash from operating activities
Cash flows from investing activities
Purchase of property and plant (40,000 + 1,000)
Purchase of investments
$
12,000
50,000
______
1
½
Net cash from financing activities
62,000
______
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January 2014
(7,000)
3,000
______
Cash and cash equivalents at 31 December 2014
(4,000)
———





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___
11
* Could be shown as a financing cash flow.
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1
___
1225
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
WORKINGS
(1)
Receipts from sales
Receivables control
$
$
Balance b/d
Sales
40,000
200,000
_______
Cash receipts (al fig)
Balance c/d
240,000
————
(2)
190,000
50,000
________
240,000
————
Payments
Payables and wage control
$
Cash paid (al fig)
Depreciation *
Balance c/d
(3)
$
155,000
2,000
60,000
________
Balance b/d
40,000
Purchases re cost of sales (W3) 130,000
Expenses
47,000
________
217,000
————
217,000
————
Cost of sales
$
Opening inventory
Purchases and wages
55,000
130,000
________
$
Cost of sales
Closing inventory
185,000
————
120,000
65,000
________
185,000
————
* Alternatively, depreciation could be adjusted against cost of sales.
1226
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 144 TIVOLI
Statement of cash flows for the year ended 31 December 2014
Cash flows from operating activities
Adjustments for profit before tax
Depreciation charges (W1)
Profit on sale of plant
Interest expense
Operating profit before working capital adjustments
Increase in inventories
Increase in trade receivables
Increase in trade and other payables (W3)
Cash generated from operations
Interest paid (W2)
Income taxes paid
$000
350
480
(30)
100
——
900
(101)
(60)
7
——
746
(90)
(111)
——
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment (W1)
Proceeds from sale of plant
545
(1,500)
100
——–
Net cash used in investing activities
Cash flow from financing activities
Equity dividends paid $(80 – 19)
Preferred dividend paid (8%  $240)
Proceeds from issuance of share capital
Proceeds from long-term borrowings
Redemption of preferred shares
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year $(60 – 78)
Cash and cash equivalents at end of year $(138 – 115)
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$000
(1,400)
(61)
(19)
600
450
(120)
——–
850
——
(5)
(18)
——
(23)
——
1227
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
WORKINGS
(1)
Non-current assets and depreciation
Plant and equipment
$000
Balance b/f
Additions (bal)
900
700
——–
1,600
——–
$000
Disposals
Balance c/f
Additions for year
250
1,350
——–
1,600
——–
$000
Plant and equipment $(700 – 10)
Land and buildings $(2,160 – 1,500)
Motor vehicles $(750 – 600)
690
660
150
——–
1,500
——–
Accumulated depreciation
$000
Disposals
Balance c/f
180
450
——
630
——
$000
Balance b/f
Charge (bal)
Charge for year
$000
Plant and equipment (as above)
Land and buildings $(180 – 150)
Motor vehicles $(360 – 240)
(2)
300
330
——
630
——
330
30
120
——
480
——
Interest paid
Interest expense
$000
Cash paid
Balance c/d
1228
90
20
——
110
——
$000
Balance b/d
Profit or loss
10
100
——
110
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(3)
Trade and other payables
Per question
Less Interest accrual
Plant creditor
2014
$
2013
$
63,000
(20,000)
(10,000)
———
33,000
———
36,000
(10,000)
–
———
26,000
———
Movement = $7,000 increase
Answer 145 MCQs IAS 7
Item Answer Justification
145.1
C
145.2
A
Dividends received may be classified as investing (or operating) but dividends paid
are financing (or operating). Repayment of a bank loan and proceeds from a share
issue are financing cash flows.
145.3
B
The proposing of dividends and issuing of bonus shares are not cash flow
transactions.
145.4
D
145.5
D
Per draft
Decrease in inventories should be added, not deducted (2 × 9)
Decrease in payables should be deducted, not added (2 × 12)
$m
62
18
(24)
–––
56
Answer 146 P & S
Consolidated statement of financial position as at 31 December 2014
Goodwill (W2)
Other assets (8,000 + 4,000)
Share capital
Retained earnings (W4)
Non-controlling interest (W3)
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$
2,000
12,000
———
14,000
———
6,000
6,800
———
12,800
1,200
———
14,000
———
1229
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
WORKINGS
(1)
S net assets
Reporting
date
$
1,000
500
2,500
———
4,000
———
Share capital
Share premium
Retained earnings
(2)
$
1,000
200
———
1,200
———
Retained earnings
$
6,000
800
———
6,800
———
P as per question
Share of S post-acquisition (80% × 1,000)
1230
$
4,000
1,000
(3,000)
———
2,000
———
Non-controlling interest
Fair value on acquisition
Share of post-acquisition profits (1,000 × 20%)
(4)
$
1,000
500
1,500
———
3,000
———
Postacquisition
$
–
–
1,000
———
1,000
———
Goodwill
Fair value of consideration
Fair value of non-controlling interest on acquisition
Less: Fair value of net assets on acquisition
(3)
Acquisition
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 147 HAPPY AND SAD
Consolidated statement of financial position as at 31 December 2014
Non-current assets
Goodwill (W2)
Tangible (135,000 + 60,000)
$
8,000
195,000
————
203,000
Current assets (57,000 + 46,000 – 400)
102,600
————
305,600
————
Share capital
Revaluation surplus
Retained earnings
50,000
63,500
125,600
————
239,100
8,500
————
247,600
58,000
————
305,600
————
Non-controlling interest
Total equity
Current liabilities (32,000 + 26,000)
WORKINGS
(1)
S net assets
Reporting
date
$
15,000
15,000
50,000
———
80,000
———
Share capital
Revaluation surplus
Retained earnings
(2)
Acquisition
$
15,000
–
10,000
———
25,000
———
Postacquisition
$
–
15,000
40,000
———
55,000
———
Goodwill
$
Fair value of consideration
30,000
Fair value of non-controlling interest on acquisition (15,000 × 10% × $2) 3,000
Less: Fair value of net assets of subsidiary on acquisition
(25,000)
———
8,000
———
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1231
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(3)
Non-controlling interest
Fair value on acquisition (W2)
Share of post-acquisition profits (55,000 × 10%)
(4)
3,000
5,500
———
8,500
———
Unrealised profit
$
400
Profit in goods sold ($2,000 × 25/125)
Profit is 25% of cost price, $2,000 is the selling price, therefore profit is calculated as 25/125
(not 25%)
(5)
Revaluation surplus
$
50,000
13,500
———
63,500
———
Happy as per question
Share of Sad post-acquisition (90% × 15,000)
(6)
Retained earnings
$
90,000
(400)
36,000
———
125,600
———
Happy as per question
Unrealised profit (W4)
Share of Sad post-acquisition (90% × 40,000)
Answer 148 FAYE
Consolidated statement of financial position as at 31 December 2014
$
Assets
Long-term assets
Tangible assets (33,000 + 20,000 + 1,500)
Intangible assets – goodwill
54,500
6,500
———
61,000
20,000
———
81,000
———
Current assets (5,000 + 15,000)
1232
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Equity and liabilities
Capital and reserves
Called up share capital
Share premium account
Retained earnings (W5)
12,000
5,000
10,000
———
27,000
6,000
———
33,000
Non-controlling interest (W4)
Total equity
Long-term liabilities
8% Debenture loans (20,000 + 9,000)
Current liabilities (9,000 + 10,000)
29,000
19,000
———
81,000
———
WORKINGS
(1)
Group structure
Faye
75%
Garbo
(2)
Net assets of Garbo
Reporting
date
$
4,000
1,500
12,000
———
17,500
———
Share capital
Fair value land adjustment
Retained earnings
(3)
Acquisition
$
4,000
1,500
8,000
———
13,500
———
Postacquisition
$
–
–
4,000
Goodwill
Fair value of consideration
Fair value of non-controlling interest on acquisition
Less: Fair value of net assets acquired (100% (W2))
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$
15,000
5,000
(13,500)
———
6,500
———
1233
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(4)
(5)
Non-controlling interest
Fair value on acquisition
Garbo (25%  4,000 (W2))
5,000
1,000
———
6,000
———
Retained earnings
$
Faye
Garbo (75%  4,000 (W2))
7,000
3,000
——–
10,000
——–
Answer 149 HONEY
Consolidated statement of financial position as at 30 June 2014
$
Assets
Non-current assets
Tangible assets (27,000 + 12,500)
39,500
Current assets (25,000 + 12,000)
37,000
———
76,500
———
Equity and liabilities
Shareholders’ equity
Called up share capital
Share premium account
Retained earnings (W4)
20,000
6,000
18,333
———
44,333
5,667
———
50,000
12,000
14,500
———
76,500
———
Non-controlling interest (W3)
Non-current liabilities
Current liabilities
1234
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Consolidated statement of comprehensive income for the year ended 30 June 2014
$
54,000
(20,000)
———
34,000
(3,600)
(4,200)
(1,200)
———
25,000
(8,000)
———
17,000
———
Revenue (24,000 + 30,000)
Cost of sales (9,000 + 11,000)
Gross profit
Distribution costs (2,300 + 1,300)
Administrative expenses (1,500 + 2,700)
Interest payable and similar charges
Profit before taxation
Income tax expense (3,000 + 5,000)
Profit for the year
Profit attributable to:
Owners of Honey
Non-controlling interest (⅓  10,000)
13,667
3,333
———
17,000
———
Profit for the year
Extract from SOCIE
Retained earnings brought forward (2,000 + (⅔  4,000))
Profit for the year attributable to owners of Honey
4,666
13,667
———
18,333
———
Retained earnings carried forward
WORKINGS
(1)
S net assets
Reporting
date
$
3,000
14,000
———
17,000
———
Share capital
Retained earnings
(2)
$
3,000
–
———
3,000
———
Postacquisition
$
–
14,000
———
14,000
———
Goodwill
Fair value of consideration
Fair value of non-controlling interest on acquisition
Less: Fair value of net assets on acquisition
(3)
Acquisition
$
2,000
1,000
(3,000)
———
–
———
Non-controlling interest
Fair value on acquisition
Share of post-acquisition profits (14,000 × 1/3)
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$
1,000
4,667
———
5,667
———
1235
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
(4)
Retained earnings
$
9,000
9,333
———
18,333
———
P as per question
Share of S post-acquisition (2/3 × 14,000)
Answer 150 HUMPHREY
Consolidated statement of comprehensive income for the year ended 30 September 2014
$000
1,400
(742)
——–
658
(110)
(120)
9
(31)
——–
406
(184)
——–
222
——–
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Investment income
Interest
Profit before tax
Taxation
Profit for the year
Non-controlling interest (W3)
Owners of Humphrey
6
216
——–
222
——–
WORKINGS
(1)
Group structure
Humphrey
80%
Stanley
1236
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(2)
Consolidated statement of comprehensive income
Humphrey
Revenue
Cost of sales – per Q
– provision for unrealised profit
Distribution
Administration
Investment income (20 – 16)
Interest payable
Tax
$000
1,100
(600)
(2)
(60)
(65)
4
(25)
(160)
Profit for the year
(3)
Stanley Adjust- Consolment
idated
$000
$000
$000
400
(100)
1,400
(240)
100
–
–
(742)
(50)
(110)
(55)
(120)
5
9
(6)
(31)
(24)
(184)
—–
30
—–
Non-controlling interest
$000
6
——
20%  30,000 (W2 or as per question)
Answer 151 HAPPY
(a)
Consolidated statement of comprehensive income for the year ended 31 March 2015
$
376,167
(177,867)
———–
198,300
(88,300)
3,200
———–
113,200
(57,067)
———
56,133
———
Revenue
Cost of sales
Gross profit
Operating costs
Investment income
Profit before tax
Income tax
Profit for the year
Attributable to:
Non-controlling interest (W3)
Shareholders of P
Profit
(b)
2,733
53,400
———
56,133
———
Time apportionment
The results of a subsidiary are included in the consolidated accounts from the date control is
achieved.
Happy acquired 75% of the issued ordinary capital of Sleepy on 30 November 2014. This is
the date on which control passed and hence the date from which the results of Sleepy should
be reflected in the consolidated statement of comprehensive income.
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1237
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
All reserves earned by Sleepy in the four months since that date are post-acquisition reserves.
The remaining previous eight months’ profit from 1 April to 30 November 2014 are all preacquisition reserves and will be included in the calculation of goodwill on consolidation.
WORKINGS
(1)
Group structure
Happy
75% (acquired 30 Nov 2010 so 4/12 in)
Sleepy
(2)
Consolidation schedule
Happy
Sleepy
Adjust- Consolidated
ment
4
12
$
$
303,600
72,567
(143,800) (34,067)
(71,200) (17,100)
2,800
400
(46,200) (10,867)
———
10,933
———
Sales revenue
Cost of sales
Operating costs
Investment income
Tax
Profit
(3)
$
–
–
$
376,167
(177,867)
(88,300)
3,200
(57,067)
Non-controlling interest
25%  $10,933
2,733
——–
Tutorial note:
Alternative calculation for profit for Sleepy (W2)
Profit for the year per question 32,800 
4
$10,933
12
———
1238
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 152 BING AND CROSBY
(a)
Goodwill on acquisition of Crosby
$000
Fair value of consideration
Fair value of non-controlling interest
Less: Fair value of assets at acquisition:
Share capital
Retained earnings
Goodwill on acquisition
(b)
(6,300)
–––––
2,150
–––––
Consolidated statement of profit or loss for the year ended 31 October 2014
Revenue (9,600 + 3,900 – 300)
Cost of sales (5,550 + 2,175 – 300 + (50% × 100))
Gross profit
Distribution costs (1,050 + 480)
Administrative expenses (1,650 + 735)
Finance cost (25 – 10)
Profit before tax
Income tax expense (600 + 120)
Profit for the year
Profit attributable to:
Owners of the parent
Non-controlling interest (365 × 40%)
(c)
6,000
300
–––––
$000
5,250
3,200
$000
13,200
(7,475)
–––––
5,725
(1,530)
(2,385)
(15)
–––––
1,795
(720)
–––––
1,075
–––––
929
146
–––––
1,075
–––––
Associates
An associate is defined as an entity over which the investor has significant influence and that
is not a subsidiary (nor an interest in a joint venture). Significant influence can be determined
by the holding of voting rights (usually shares) in the entity. If an investor holds 20% to 50%
of the voting power of the investee, then the investor will usually have significant influence
over the investee, unless it can be clearly demonstrated this is not the case.
The following are examples that might demonstrate the existence of significant influence:





A representative of the investor on the board of directors of the investee.
The participation by the investor in the policy making process of the investee.
Material transactions between investee and investor.
The interchange of management personnel between the two companies.
The provision of essential technical information by the investor to the investee.
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1239
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 153 MCQs CONSOLIDATED FINANCIAL STATEMENTS
153.1
A
153.2
D
X has control over both P (through control over directors) and R (through power
over operating and financial policies). X only has significant influence over Q
which would therefore be an associate of X not a subsidiary.
$000
Cost of shares
Non-controlling interest on acquisition
$000
300
100
____
400
Net assets acquired
Share capital
Retained earnings
200
36
____

(236)
____
164
____
153.3
C
$000
Cost of shares
Non-controlling interest on acquisition
$000
177
52
___
229
Net assets acquired
Share capital
Retained earnings
Fair value adjustment (land)
100
50
10
___

(160)
___
69
___
153.4
B
$000
90
32
___
Vaynor
Yarlet ((70 – 30) × 80%)
Consolidated retained earnings
153.5
122
___
A
$000
168
112
——
56
——
Sales value
Cost of sales
Profit
1240
%
150
100
——
50
——
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Tutorial note: Mark-up is “on cost”. If cost is 100%, profit is 50% and sales
value 150%.
Unrealised profit in inventory is $36,000 × 50/150 = $12,000
153.6
B
$000
300
130
(5)
––––
425
––––
Tomas’s receivables
Drew’s receivables
Less: Inter-company (due from Tomas)
Answer 154 ALEX
(a)
Four financial ratios
31 March
2014
2015
40%
35.7%
Gross profit percentage
Gross profit
 100
Sales revenue
Net profit percentage
Net profit
 100
Sales revenue
8%
– 0.7%
9.4%
– 1%
 8

 100 
 85

 1

 100 

 100

2 each ratio
including
those not
given here
Return on capital employed
Profit before interest and tax
 100
Capital employed
Average period of credit allowed to customers
Closing trade receivables
Credit sales revenue
$11,000
 365
$100,000
$24,000
 365
$140,000
= 40 days
= 63 days
___
8
(b)
___
Reasons for closing the business



Artur can obtain 10% per annum from a bank deposit account. This represents a
better return on capital than his son’s business, which earned 9.4% during the year
ended 31 March 2014.
1½
Alex can obtain employment earning $10,000 per annum. His business does not
seem to be able to provide him with a salary at present. Therefore, it would benefit
him financially to take up the offer of employment.
1½
The financial ratios calculated indicate that the results of the business are
deteriorating. Therefore, it may be better to close it down now.
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1241
1
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
The financial ratios calculated show that the business has deteriorated considerably.
The gross profit percentage has decreased. Furthermore, the credit period allowed
to customers has risen from 40 days to 63 days, indicating that Alex needs to keep a
tighter control on the business.

1½
Reason in favour of its continuance
Artur may have a sound business plan and ideas for expanding sales revenue
considerably in future years, leading to increased profitability.

1
___
4
___
12
Answer 155 SOLO
(a)
____
Ratios
2013
(i)
Current ratio
30,500: 23,050 = 1.3:1
28,500: 19,400 = 1.5 1
OR
Quick ratio
16,500: 23,050 = 0.7:1
15,500: 19,400 = 0.8:1
(ii)
Inventory turnover (days)
14,000
 365 = 122 days
42,000
13,000
 365 = 140 days
34,000
(iii)
Receivables turnover (days)
(iv)
Payables turnover (days)
(v)
Gross profit %
OR
Net profit % (before tax)
(vi)
Return on equity
(vii) ROCE
16,000
60,000
 365 = 97 days
23,050
 365 = 200 days
42,000
18,000
 100 = 30%
60,000
300
60,000
 100 = 0.5%
(50)
 100 = (0.4)%
13,950
2,500
 100 = 12.5%
13,950  6,000
(viii) Leverage (Debt/Equity)
1242
2014
6,000
 100 = 43.0%
13,950
15,000
 365 = 110 days
50,000
19,400
 365 = 208 days
34,000
16,000
 100 = 32%
50,000
1,700
 100 = 3.4%
50,000
1,100
 100 = 7.5%
14,600
3,000
 100 = 14.9%
14,600  5,500
5,500
= 37.7%
14,600
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
(b)
Comments

Liquidity (measured by current and quick ratios) has fallen slightly. Although, the
cash (asset) position has so far been maintained an overdraft facility may be needed.

As inventories are not particularly slow-moving (being turned over approximately
three times a year) the fact that the quick ratio is half the current ratio is not a cause
for concern.

Revenue has increased by 20% although investment in property, plant and
equipment has increased by only 9%. This suggests an increase in both volume and
prices. However, cost of sales has increased by more than sales (23.5%) so:


gross profit has increased by 12½%;
gross profit percentage has fallen (marginally).

A major problem for Solo is its small net profit margin. Distribution and admin
expenses have increased by 19% (almost as much as the increase in revenue). The
small reduction in gross profit percentage and the increase in interest (70%) have
reduced net profit percentage to just ½%.

Reduction in inventory turnover (by 18 days) is consistent with an increased volume
of sales.

Credit control has improved suggesting that the increase in revenue has not been
generated by sales to risky (uncreditworthy) customers.

Tightening of credit control has helped to maintain the cash at bank position.

On average Solo is still taking twice the credit period (i.e. nearly 6 months) from
suppliers that it is granting to customers. However, suppliers are being paid slightly
earlier (by 8 days) in 2014 than in 2013.

Although the return on capital employed has fallen only marginally (from 14.9% to
12.5%) return on equity is now negative. This is due to the significant increase in
finance costs.
Tutorial note: It goes beyond the scope of 6 marks to speculate why the finance costs should
be so much more in the current year. But, for example, the level of interest-bearing
borrowings might have been higher during the year than at the year end (and/or lower during
the previous year). And/or the company many have operated a bank overdraft facility during
the year which is not reflected in the year-end statements of financial position.
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1243
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
Answer 156 DARTH
(a)
Ratios
(i)
Supplier ratios
2013
2014
92,447
36,862
99,615
42,475
= 2.5
= 2.3
92,447  40,145
36,862
99,615  50,455
42,475
= 1.4
= 1.2
15,254
 100%
40,740
18,686
 100%
50,000
= 37.4%
= 37.4%
Revenue
486,300
583,900
Non - current assets
4,995
12,700
= 97 times
= 46 times
Current ratio =
Quick ratio =
(ii)
Current assets
Current liabilities
Current assets - inventory
Current liabilities
Management ratios
Return on capital employed =
Profit before tax
Issued capital and reserves
Long-term asset turnover =
(b)
1244
Comments

The current ratio is decreasing but Darth is still “flush with funds”. The quick ratio
(measure of the company’s immediate liquidity) is also decreasing and at a faster
rate due to the increasing investment in inventory. The reduction in cash at bank
($6.3m) reflects the financing of long-term assets. This is an improvement on 2013
as $12m cash should not be earning as good a return (i.e. interest receivable) for
shareholders as investment in long-term assets and working capital (i.e. earning
profits).

Return on capital employed has remained constant. The ratio of turnover to noncurrent assets has halved due to the high investment ($7.7m) in non-current assets.
This investment should help increase turnover and profitability in future years.
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STUDY QUESTION BANK – FINANCIAL ACCOUNTING (F3/FFA)
Answer 157 MCQs INTERPRETATION OF FINANCIAL STATEMENTS
Item Answer Justification
157.1
A
The amount of the overstatement in opening inventory (1) will be an additional cost
in the current period, hence gross profit would fall. (2) will charge to profit costs
that relate to the next period. (Note that the goods are not in inventory at the period
end, hence cost of sales is overstated.) (3) would inflate sales and hence increase
profit. (4) would reduce costs of purchase and hence increase profit also.
157.2
B
ROCE =
157.3
C
8
 365 = 73 days
40
157.4
C
157.5
A
88
= 181/3 %
200  80  120  80
Gearing = Debt/Equity (or Debt/(Equity + Debt). (1) Bonus issue has no effect. (2)
increases equity. (3) The issue of debt increases financial leverage. (4) increases
equity.
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1245
FINANCIAL ACCOUNTING (F3/FFA) – STUDY QUESTION BANK
1246
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