During the year ended 30 June 20X8, a new computer system was purchased by carnation Co at a cost of $65,000 additional installation costs of $4,750 and staff training costs of $6,500 were incurred in the same financial year. Computer are depreciated on a reducing balance basis at 20% per annum, with a full year charged in the year of purchase.

What is the depreciation charge for the year ending 30 June 20X8?

On 1 May 20X6 the machine was disposed of for $9,000. Foxglove Co charges depreciation of machinery on a straight line basis with a proportional charge in the years of acquisition and disposal.

Foxglove Co has a year end of 31 December.

What would be the profit or loss on disposal of the machine?

The financial statements are used by different user groups for different reasons.

For each user group what is their primary area of interest?

Rectangle Co has the following information available for the year ended 31 October 20X7 :

What is the total divided proposed to be paid?

Alison’s business charges sales tax of 15% on sales of goods and a zero rate of sales tax on sales of services during the first quarter Alison sold goods of $92,000 and services of $32,000. She also made purchases of $65,000. All figures are net of sales tax. Sales tax of 15% is reclaimable on all purchases.

What is the net amount of sales tax that Alison owes at the end of the first quarter?

When performing his year end inventory count Theodore accidentally counted goods that were in the dispatch area waiting to be delivered to customers. The goods had a cost of $50,000 and were dispatched prior to the year end.

What impact does this uncorrected error have on profit and assets at the year end? 

Which of the following are characteristics of a limited liability company?

(1)   There are two or more owners who work in the business and share the profits between them by agreement

(2)   The owner or owners hold shares in the business which entitle them to vote at general meetings

(3)   The business is recognised in law as a separate legal entity to its owners.

Maya does not keep detailed accounting record . Her opening inventory was $17,200 and her closing inventory was $14,800. During the year purchases were $122,000 and purchase returns were $2,800 Maya’s mark up on cost is 20%.

What are Maya’s sales for the year?

The following events occurred after 31 December 20X5, Ravine Co’s year end date, but before the financial statement were authorised for issue on 1 march 20X6;

(1)   A computer introduced a new product which meant that a material amount of Ravine Co’s inventory at 31 December 20X5 became obsolete

(2)   There was a fire at Ravine Co’s factory. The plant ,which had a carrying amount of $750,000, was destroyed. The going concern concept is still considered to be application to Ravine Co.

In accordance with IAS 10 Events after the Reporting period, how should these events be classified in ravine Co’s financial statements for the year to 31 December 20X5?

Which Two of the following items should be debit balances on a trial balance? 

a.  Discounts received

b. Accumulated depreciation

c. Loan to customer

d. Irrevocable debt expense

Which of the following is correct?

In accordance with IAS 37 provisions , contingent liabilities and contingent Assets ,are the following statements true or false?

a.      If a provision is for a single item, it should equate to an amount that reflects the best estimate of the expenditure.....      true       false

b.      An entity should disclose a contingent liability, unless the possibility of an outflow of future economic benefits is remote ..... true     False

In accordance with IAS 2 inventories, which of  the following items must be included in a disclosure note with in the financial statements

(1) The total carrying amount of inventory and the carrying amount in each classification of inventory

(2) The amount of any write - down of inventory recognised as an expense in the period

(3)The accounting policies adopted in measuring inventory

There are a number of accounting ratios that can be calculated to review the position and performance of an entity. They cover the areas of profitability, liquidity, efficiency and financial position

Which combination of ratios would cover all four of these areas?

Pentagon Co is preparing its financial statements for the year ended 30 November 20X2

On 1 December 20X1 a motor van was purchased for $10,000. This was correctly recorded in the cash account but had been debited to the administration expense account.

The van is expected to be used by Pentagon Co for the next four years.

Which of the following statements are true?

 (1) Profit before tax is understated by $10,000

(2) Profit before tax is understated by $7,500

(3) Profit before tax is overstated by $7,500

(4) Non-current assets are understated by $10,000

(5) Non-current assets are understated by $7,500

Which TWO of the following users of financial statements would be interested in the interest cover ratio?

A. A manager responsible for the control of the operating costs

B. An investor concerned about the amount of equity dividend he will receive

C. A member of the public concerned with environmental issues

D. A bank when deciding whether to renew a loan arrangement

Some years ago Cassidy set up a small airline, Cassidy Airways, as a limited liability company.

According to IAS 38 Intangible Assets, which TWO of the following are intangible non-current assets of the airline that could be capitalized by Cassidy Airways?

A. Research project into non-combustible fuel

B. Expenditure on staff costs of training pilots

C. License for Cassidy Airways to take off from a specific airport

D. A patent for the design of an airline seat that only Cassidy airways can use

Which TWO of the following errors would lead to the creation of a suspense account?

A. An invoice for insurance debited to the heat and light account

B. Vehicle repairs invoice debited to the non-current assets account

C. Cash sales recorded in the cash book and nowhere else

D. An overdraft debited to the trial balance.

Which TWO of the following accounting errors would lead to the trial balance not balancing and a suspense account being required?

A. The purchase of a computer for $5,000, which is for business use, had been incorrectly debited to the purchases account, but correctly recorded in cash

B. A credit purchase for $2,500 had been debited to the purchases account as $5,200 and credited to the accounts payable ledger control account as $5,200

C. The stationery account had been understated by $1,000

D. An accrued expense had been entered correctly in the expense account, but shown in the trial balance as a prepayment.

Chang sold goods to a customer on credit for $1,800 including sales tax. The sales tax rate is 20%.

Which of the following is the correct journal to record this transaction in the general ledger?

The trial balance of Barnacle Co does not agree by $2,000. Barnacle Co maintains sales and purchases ledger control accounts.

Which of the following errors could by itself account for the difference?

On 1 July 20X8, Honour Co took out a $10m bank loan Bank interest rates during the remainder of 20X8 were as follows.

    Per annum rates

1 July – 30 September            10%

1 October – 31 December          11%

What should be the finance charge for the bank loan shown in Honour Co's financial statements for the year ended 31 December 20X8?

In accordance with IAS 2 Inventories which of the following should be included in the cost of work in progress inventory?

(1) Carriage inwards
(2) Settlement discounts received
(3) Production labour
(4) Cost to complete

Which of the following statements describes what the retained earnings balance represents in the statement of financial position?

A business began operations with $800 in the cash till During the first year, all sales were cash sales and $42,000 was banked Before making any bankings, sundry expenses of $200 per month were paid from the cash till and the owner also withdrew $400 per month from the cash till for living expenses. The cash in the till at the end of the first year was $300

What is the cash sales figure for the first year of operations?

Scott has a credit balance of $500 as per his bank statement for September 20X1

What does this balance represent?

This is an extract from Axel's trial balance for the year end 30 June 20X8:

Depreciation expense is split equally between cost of sales and distribution expenses.

What should be the cost of sales figure shown in Axel's statement of profit or loss for year ended 30 June 20X8?

When preparing a bank reconciliation, which TWO of the following reconciling items will require an adjustment to the bank balance in the ledger accounts?