FA exam

A. Boots has total receivables outstanding at 31 December 20X2 of $28,000. He believes that about 1% of these balances will not be collected and wishes to make an appropriate allowance. Before this date, he has not made any allowance for receivables at all. On 31 December 20X3 his trade receivables amount to $40,000. His experience during the year has convinced him that an allowance of 5% should be made. What accounting entries should A. Boots make on 31 December 20X3 in the SFP? 

• Receivables $40000 Bad debts $2000

• Receivables $45000 Bad debts $2500

• Receivables $35000 Bad debts $2000

• Receivables $30000 Bad debts $2200

At 31 December 20X2 a company's receivables totaled $400,000 and an allowance for receivables of $50,000 had been brought forward from the year ended 31 December 20X1. It was decided to write off debts totaling $38,000. The allowance for receivables was to be adjusted to the equivalent of 10% of the receivables. What charge for receivables expense should appear in the company's statement of profit or loss for the year ended 31 December 20X2?

• $74,200

• $51,800

•  $28,000

• $24,200

A company has been notified that a receivable has been declared bankrupt. The company had previously made a specific allowance for this debt. Which of the following is the correct double entry?

• DR Irrecoverable debts account

  CR Account receivable

• DR Account receivable

  CR Irrecoverable debts account

• DR Allowance for receivables

  CR Account receivable

• DR Account receivable

  CR Allow for receivables

The following bank reconciliation statement has been prepared by an inexperienced bookkeeper at 31 December 20X5.

Bank reconciliation statement:

Balance per bank statement (overdrawn) 38,640

Add: lodgements not credited 19,270

Less: unpresented cheques 14,260

Balance per cash book 43,650

What should the final cash book balance be when all the above items have been properly dealt with?

• $43,650 overdrawn

• $72,170 overdrawn

• $33,630 overdrawn

• $5,110 overdrawn

When doing bank reconciliation, adjustments have to be made for timing differences. Which one of these constitutes a timing difference?

• Unposted direct debits

• Unpresented cheques

• Bank charges

• Dishonoured cheques

Deep Blue Sea developed a new material from which the next generation of wetsuits will be made. This special material will ensure that swimmers are kept warmer than ever. The costs incurred meet the capitalization criteria and by the 31 December 20X5 year-end $250,000 have been capitalised. The wetsuits are expected to generate revenue for five years from the date that commercial production commences on 1 January 20X6. What amount is charged to the statement of profit or loss in the year ended 31 December 20X6?

• $50,000 

• NIL

• $100,000

• $250,000

Which of the following statements about research and development expenditure are correct?

1) Research expenditure, other than capital expenditure on research facilities, should be recognized as an expense as incurred.

2) In deciding whether development expenditure qualifies to be recognized as an asset, it is necessary to consider whether there will be adequate finance available to complete the project.

3) Development expenditure recognized as an asset must be amortized over a period not exceeding five years

• 1 and 3

• 1 and 2

• 2 and 3

• 1, 2 and 3

Which of the following statements about research and development expenditure are correct according to IAS38 Intangible Assets?

1) If certain conditions are met, an enterprise may decide to capitalise development expenditure.

2) Research expenditure, other than capital expenditure on research facilities, must be written off as incurred.

3) Capitalised development expenditure must be amortised over a period not exceeding 5 years.

4) Capitalised development expenditure must be disclosed in the statement of financial position under intangible non-current assets.

• 1, 2 and 4

• 3 and 4

• 2 and 4

• 1 and 3

Sales returns of $460 have inadvertently been posted to the purchase returns, although the correct entry has been made to the accounts receivable control.

A suspense account needs to be set up for how much?

• $640 debit

• $920 credit

• $460 credit

• $920 debit

When two digits in an amount are accidentally recorded the wrong way round, there is an… 

• Error of transposition

• Error of commission

• Error of principle

• Error of omission