ICAEW CFAB - Accounting - Chapter 14 Quiz

Y Ltd purchased plant on 1 January 20X0 for £38,000. The payment for the plant was correctly entered recorded in the cash at bank account but was incorrectly debited to the plant repairs account. Y Ltd charges depreciation on the straight line basis at 20% per annum.

Requirement

How will Y’s profit for the year ended 31 March 20X0 be affected by the error?

• Understated by £30,400

• Understated by £36,100

• Understated by £38,000

• Overstated by £1,900

The closing stock of X Ltd was £116,400 excluding the following two stock lines:

• 400 items which cost £4 each, but which were expected to sell for £3 each, with selling expenses of £200 in total.

• 200 different items which had cost £30 each, but which are defective. Rectification work will cost

£1,200, after which they can be sold for £35 each, with selling expenses totalling £300.

Requirement

What amount will appear on X Ltd’s balance sheet for stock?

• £122,300

• £121,900

• £122,900

• £123,300

At 1 January 20X0 the capital structure of Q Limited was as follows:

Issued share capital 1,000,000 equity shares of 50p each: £500,000

Share premium account: £300,000

On 1 April 20X0 the company made an issue of 200,000 50p shares at £1.30 each, and on 1 July the company made a 1 for 4 bonus issue.

Requirement

Which of the following correctly states the company’s share capital and share premium account at 31 December 20X0? (Refer image)

• Option 1

• Option 2

• Option 3

• Option 4

W Ltd bought a new printing machine at a cost of £80,000. The installation costs were £5,000 and the employees received training on how to use printing machines at a cost of £2,000. A regulatory test to ensure the machine functioned safely cost £1,000.

Requirement

What is the cost of the machine in the company’s balance sheet?

• £80,000

• £85,000

• £86,000

• £88,000

The electricity account for the year ended 30 June 20X1 was as follows:

Opening balance for electricity accrued at 1 July 20X0: £300

Payments made during the year:

1 August 20X0 for three months to 31 July 20X0: £600

1 November 20X0 for three months to 31 October 20X0: £720

1 February 20X1 for three months to 31 January 20X1: £900

30 June 20X1 for three months to 30 April 20X1: £840

Requirement

Which of the following is the appropriate entry for electricity?

• Accrued at 30 June 20X1: £Nil

  Charge to profit and loss account year ended 30 June 20X1: £3,060

• Accrued at 30 June 20X1: £460

  Charge to profit and loss account year ended 30 June 20X1: £3,320

• Accrued at 30 June 20X1: £560

  Charge to profit and loss account year ended 30 June 20X1: £3,320

• Accrued at 30 June 20X1: £560

  Charge to profit and loss account year ended 30 June 20X1: £3,420

The year end of M Ltd is 30 November 20X1. The company pays for its gas by a standing order of £600 per month. On 1 December 20X0 the statement from the gas supplier showed that M Ltd had overpaid by £200. M Ltd received gas bills for the four quarters commencing on 1 December 20X0 and ending on 30 November 20X1 for £1,300, £1,400, £2,100 and £2,000 respectively.

Requirement

Which of the following is the correct charge for gas in M Ltd’s profit and loss account for the year ended 30 November 20X1?

• £6,800

• £7,000

• £7,200

• £7,400

Teasdale Ltd, whose year end is 31 December, bought a car on 1 January 20X0 for:

Cost: £10,000

Road tax: £150

Total: £10,150

The car was depreciated at 25% per annum reducing balance then traded in for a replacement vehicle on 1 January 20X3 at an agreed value of £5,000.

Requirement

What was the profit on disposal of the car?

• £718

• £781

• £1,788

• £1,836

Which of the following items does not appear under the heading ‘reserves’ on the balance sheet of a company applying UK GAAP?

• Share premium account

• Retained profits

• Debentures

• Other reserves

Which of the following statements regarding a company preparing its profit and loss account under UK GAAP is correct?

• The Companies Act 2006 defines the expenses which are reported under ‘cost of sales'.

• ‘Depreciation’ appears as a separate heading in the profit and loss account.

• Interest payable is deducted from profit after taxation.

• Bad debts are included under one of the statutory expense headings (usually administrative expenses).

At the end of its first year of trading on 30 June 20X7 Lindman Ltd’s net assets are £324,854. It has 25p share capital of £100,000 issued at 50p each, and a retained profits reserve of £59,854.

Requirement

In relation to Lindman Ltd’s balance sheet which of the following statements could be true?

• It has share premium of £115,000

• It has other reserves of £65,000

• It has share capital of £200,000

• It has other reserves of £115,000