FA - Interim Mock

A limited liability company's trial balance does not balance. The totals are:

Debit $384,030 Credit $398,580

A suspense account is opened for the difference.

Which of the following pairs of errors could clear the balance on the suspense account when corrected?

• Debit side of cash book undercast by $10,000; $6,160 paid for rent correctly entered in the cash book but entered in the rent account as $1,610.

• Debit side of cash book overcast by $10,000; $1,610 paid for rent correctly entered in the cash book but entered in the rent account as $6,160.

• Debit side of cash book undercast by $10,000; $1,610 paid for rent correctly entered in the cash book but entered in the rent account as $6,160.

• Debit side of cash book overcast by $10,000; $6,160 paid for rent correctly entered in the cash book but entered in the rent account as $1,610.

Which of the following statements are correct?

(i) A liability is a present obligation, arising from past events, the settlement of which is expected to result in an outflow of economic resources.

(ii) An uncertain liability may be called a provision.

(iii) A contingent liability should be disclosed in the notes to the financial statements.

• (i) only

• (i) and (ii) only

• (ii) and (iii) only

• (i), (ii) and (iii)

Alpha buys goods from Beta. At 30 June 20X5 Beta's account in Alpha's records showed $5,700 owing to Beta. Beta submitted a statement to Alpha as at the same date showing a balance due of $5,200.

Which one of the following could account fully for the difference?

• Alpha has sent a cheque to Beta for $500 which has not yet been received by Beta.

• The credit side of Beta's account in Alpha's records has been undercast by $500.

• An invoice for $250 from Beta has been treated in Alpha's records as if it had been a credit note.

• Beta has issued a credit note for $500 to Alpha which Alpha has not yet received.

Which of the following statements about intangible assets are correct?

1 If certain criteria are met, research expenditure must be recognised as an intangible asset.

2 The notes to the financial statements should disclose the gross carrying amount and the accumulated amortisation at the beginning and the end of the period for each class of intangible asset.

3 Intangible assets must be amortised over their useful life.

• 2 and 3 only

• 1 and 3 only

• 1 and 2 only

• All three statements are correct.

Which of the following material events that took place after the reporting date, but before the financial statements were approved, are non-adjusting when applying IAS 10 Events after the reporting period?

(i) Inventory held at the reporting date was sold for less than cost.

(ii) Capital raised by issuing shares at a premium.

(iii) A company reorganisation which results in discontinuing a line of activity producing 25% of its profit.

(iv) The settlement of a claim for compensation from a former employee wrongly dismissed just before the reporting date.

• (i) and (ii)

• (i), (iii) and (iv)

• (i) and (iii) only

• (ii) and (iv)

Sigma's bank statement shows an overdrawn balance of $38,600 at 30 June 20X5. A check against the company's cash book revealed the following differences:

1 Bank charges of $200 have not been entered in the cash book.

2 Lodgements recorded on 30 June 20X5 but credited by the bank on 2 July $14,700.

3 Cheque repayments entered in cash book but not presented for payment at 30 June 20X5 $27,800.

4 A cheque payment to a supplier of $4,200 charged to the account in June 20X5 recorded in the cash book as a receipt.

Based on this information, what was the cash book balance before any adjustments?

• $43,100 overdrawn

• $16,900 overdrawn

• $60,300 overdrawn

• $34,100 overdrawn

The plant and machinery cost account of a company is shown below. The company's policy is to charge depreciation at 20% on the straight line basis, with proportionate depreciation in years of acquisition and disposal.

What should be the depreciation charge for the year ended 31 December 20X5?

• $67,000

• $70,000

• $64,200

• $68,600

Which of the following are correct?

1 The statement of financial position value of inventory should be as close as possible to net realisable value.

2 The valuation of finished goods inventory must include production overheads.

3 Production overheads included in valuing inventory should be calculated by reference to the company's normal level of production during the period.

4 In assessing net realisable value, inventory items must be considered separately, or in groups of similar items, not by taking the inventory value as a whole.

• 1 and 2 only

• 3 and 4 only

• 1 and 3 only

• 2, 3 and 4

Which of the following events after the reporting period would normally qualify as adjusting events according to IAS 10 Events after the reporting period?

1. The bankruptcy of a credit customer with a balance outstanding at the end of the reporting period

2. A decline in the market value of investments

3. The declaration of an ordinary dividend

4. The determination of the cost of assets purchased before the end of the reporting period

• 1, 3, and 4

• 1 and 2 only

• 2 and 3 only

• 1 and 4 only

A company's trial balance failed to agree, and a suspense account was opened for the difference.

Subsequent checking revealed that discounts allowed $13,000 had been credited to discounts received account and an entry on the credit side of the cash book for the purchase of some machinery $18,000 had not been posted to the plant and machinery account.

Which two of the following journal entries would correct the errors?

• 1 and 4

• 2 and 5

• 2 and 4

• 3 and 5