WorksheetsFinancial Accounting - Final Exam MCQ
Total questions: 105
Worksheet time: 2hrs 45mins
Name
Class
Date
1.
There are two main approaches to a code of professional ethics: a rules-based ethical code and a code based upon a set of principles. Indicate whether the following statements are true or false.
a)
True - True
b)
False - True
c)
False - False
d)
True - False
2.
Which of the following best explains what is meant by ‘capital expenditure’?
a)
on non-current assets, including repairs and maintenance
b)
on expensive items over £10,000
c)
on items relating to owners’ capital
d)
on the acquisition of non-current assets, or improvement in their earning capacity
3.
According to the IASB’s Conceptual Framework, which of the following are enhancing qualitative characteristics?
a)
Materiality, understandability, measurability, reliability
b)
Consistency, prudence, measurability, verifiability
c)
Consistency, reliability, measurability, timeliness
d)
Comparability, understandability, timeliness, verifiability
4.
Which of the following statements best describes ethical guidance in the UK?
a)
Ethical guidance provides a set of rules which must be followed in all circumstances
b)
Ethical guidance provides a set of principles which can be applied at the discretion of the accountant
c)
Ethical guidance is a series of legal requirements
d)
Ethical guidance is a framework containing a combination of rules and principles, the application of which is dependent on the professional judgement of the accountant based on the specific circumstances
5.
Which of the following items should be treated as capital expenditure in the financial statements of a sole trader?
a)
£500 taken by the proprietor to buy himself a music system
b)
£800 spent on purchasing a new laptop to replace his secretary’s old one
c)
£150 paid to a painter for redecorating his office
d)
£2,000 on purchasing a machine for resale
6.
Which of the following is an aspect of relevance, according to the IASB’s Conceptual Framework?
a)
Neutrality
b)
Free from error
c)
Completeness
d)
Materiality
7.
According to IAS 1, Presentation of Financial Statements, compliance with IFRS Standards will normally ensure that:
a)
the entity’s financial statements are prepared on the assumption that it is a going concern
b)
the entity’s inventory is valued at net realisable value
c)
the entity’s assets are valued at their break-up value
d)
the entity’s financial position, financial performance and cash flows are presented fairly
8.
Which of the following is the best description of fair presentation in accordance with IAS 1, Presentation of Financial Statements?
a)
The directors of the company have stated that the financial statements are accurate and correctly prepared
b)
The financial statements are as accurate as possible given the accounting systems of the organisation
c)
The financial statements are accurate
d)
The financial statements are reliable in that they faithfully reflect the effects of transactions, other events and conditions
9.
Which of the following definitions of the going concern concept in accounting is consistent with the definition given in IAS 1, Presentation of Financial Statements?
a)
The directors expect the entity’s assets to yield future economic benefits
b)
Financial statements have been prepared on the assumption that the entity is solvent and would be able to pay all creditors in full in the event of being wound up
c)
The entity is able to pay its debts as and when they fall due
d)
The directors do not intend to liquidate the entity or to cease trading in the foreseeable future
10.
The directors of Lagon plc wish to omit an item from the company’s financial statements on the grounds that it is commercially sensitive. Information on the item would influence the users of the information when making economic decisions. According to IAS 1, Presentation of Financial Statements, the item is said to be:
a)
prudent
b)
understandable
c)
neutral
d)
material
11.
Which, if either, of these comments is correct? (1) According to the IASB’s Conceptual Framework, financial information must be either relevant or faithfully represented if it is to be useful. (2) Materiality means that only items having a physical existence may be recognised as assets.
a)
2 only
b)
Both of them
c)
Neither of them
d)
1 only
12.
Which of the following statements is correct?
a)
The ICAEW Code of Ethics applies to its members and employees of member firms only
b)
The ICAEW Code of Ethics applies to its members, employees of member firms, ICAEW students and all other members of UK accountancy bodies
c)
The ICAEW Code of Ethics applies to its members only
d)
The ICAEW Code of Ethics applies to its members, employees of member firms and ICAEW students
13.
Which of the following should be accounted for as capital expenditure?
a)
The repair of a window in a building
b)
The purchase of a vehicle by a garage for resale
c)
The annual cost of painting a factory floor
d)
Legal fees incurred on the purchase of a building
14.
The capital of a sole trader would change as a result of:
a)
a credit customer paying by bank transfer
b)
raw materials being purchased on credit
c)
personal petrol being paid for out of the business’s petty cash
d)
non-current assets being purchased on credit
15.
A sole trader purchases goods on credit. Which element(s) of the accounting equation will change due to this transaction?
a)
Capital and liabilities
b)
Assets and capital
c)
Assets only
d)
Assets and liabilities
16.
The purpose of the financial statement that lists an entity’s total assets and total capital and liabilities is to show:
a)
the amount the entity could be sold for as a going concern
b)
the financial performance of the entity over a period of time
c)
the amount the entity could be sold for in liquidation
d)
the financial position of the entity at a particular point in time
17.
A business can make a profit and yet have a decreased bank balance. Which of the following might cause this to happen?
a)
The lengthening of the period of credit given to customers
b)
The charging of depreciation in the statement of profit or loss
c)
The lengthening of the period of credit taken from suppliers
d)
The sale of non-current assets at a loss
18.
A sole trader is £5,000 overdrawn at her bank and receives £1,000 from a credit customer in respect of its account. Which element(s) of the accounting equation will change due to this transaction?
a)
Assets and liabilities
b)
Liabilities only
c)
Assets only
d)
Assets, liabilities and capital
19.
A sole trader sells goods for cash for £500 which had cost £300. Which element(s) of the accounting equation will change due to this transaction?
a)
Assets only
b)
Assets and liabilities
c)
Capital and liabilities
d)
Assets and capital
20.
A sole trader borrows £10,000 from a bank. Which element(s) of the accounting equation will change due to this transaction?
a)
Asset and liabilities
b)
Assets only
c)
Assets and capital
d)
Capital and liabilities
21.
The accounting equation can be written as:
a)
Opening capital + profit – drawings – liabilities = assets
b)
Assets – liabilities – opening capital + drawings = profit
c)
Assets + profits – drawings – liabilities = closing capital
d)
Assets – liabilities – drawings = opening capital + profit
22.
A sole trader increases the business’s number of motor vehicles by adding his own car to the business’s fleet. Which element(s) of the accounting equation will change due to this transaction?
a)
Capital only
b)
Assets only
c)
Assets and liabilities
d)
Assets and capital
23.
George purchases goods on credit from Hardeep for £1,000. £100 of these goods are defective and George returns them to Hardeep. What document would Hardeep issue to George in respect of the returned goods?
a)
Invoice
b)
Remittance advice
c)
Delivery note
d)
Credit note
24.
Which two of the following are source documents that contain information that will be entered into a business’s accounting system?
a)
Delivery note to a customer
b)
Goods received note
c)
Cheque payment to a supplier
d)
Invoice to a customer, Purchase order to a supplier
25.
Which of the following is a source document that would be entered into the accounting system?
a)
Debit note
b)
Credit note
c)
Sales order
d)
Purchase order
26.
Which of the following best explains the imprest system of petty cash?
a)
Each month an equal amount of cash is transferred into petty cash.
b)
The petty cash total must never fall below the imprest amount.
c)
Petty cash must be kept under lock and key.
d)
The exact amount of petty cash expenditure is reimbursed at intervals to maintain a fixed float.
27.
On 1 April Amara had a balance of £100 (the imprest amount) in petty cash. At the end of April, she has vouchers totalling £38, a receipt for a refund for stationery of £4 and a note to say that an employee was reimbursed £12 in respect of postage costs but no voucher was issued. How much does Amara need to reinstate her imprest balance at 30 April?
a)
£54
b)
£46
c)
£66
d)
£34
28.
The petty cash float in a business has an imprest amount of £200. At the end of March vouchers in the petty cash box totalled £136 and the amount of cash remaining in the box was £54. Which of the following explains the difference?
a)
Two vouchers totalling £10 were prepared in error in respect of postage stamps purchased.
b)
An employee was given £10 too little when making a petty cash claim.
c)
voucher for £10 was put in the box but no payment was made to the employee.
d)
petty cash voucher for £10 is missing.
29.
Oscar downloads his bank transaction report for the day. The report shows a cash payment of £412 which the computerised accounting system has not been able to match to a transaction. The unmatched payment is most likely the result of:
a)
the purchase of a new laptop for £412
b)
payment to a regular credit supplier for an invoice totalling £412
c)
the payment of net wages of £412 which is consistent with the payroll ledger
d)
a receipt from a credit customer in respect of an invoice for £450 on which a prompt payment discount of £38 was taken
30.
The following data has been extracted from the payroll records of Kleen Ltd for the month of February 20X1. The wage expense for the month is:
£
PAYE 17,000
Employer’s NIC 7,500
Employees’ NIC 6,000
Cash paid to employees 50,000
a)
£50,000
b)
£56,000
c)
£74,500
d)
£80,500
31.
A business has the following payroll costs for a month:
What is the net amount paid to employees for the month?
£
Gross pay 112,450
Income tax deducted 15,800
Employees’ national insurance 9,810
Employer’s national insurance 11,200
a)
£102,640
b)
£91,440
c)
£75,640
d)
£86,840
32.
A business paid out £12,450 in net wages to its employees. In respect of these wages, the following amounts were shown in the statement of financial position.
£
PAYE payable 2,480
National Insurance payable
– employees’ 1,350
– employer’s 1,500
No other deductions were made.
Employees’ gross wages, before deductions, were:
a)
£27,450
b)
£16,280
c)
£12,450
d)
£17,780
33.
A business has the following payroll costs for a month:
£
Gross pay 38,600
PAYE 5,400
Employees’ national insurance 3,100
Employer’s national insurance 3,500
What is the wages cost to the business for the month?
a)
£38,600
b)
£42,100
c)
£50,600
d)
£47,100
34.
Which of the following would require a debit entry in the payables account?
a)
Early settlement discounts given to customers
b)
Cash purchases total
c)
Output VAT
d)
Payments made to suppliers
35.
What transaction is represented by the entries: Debit rent, Credit landlord?
a)
The receipt of rental income by the business
b)
The receipt of an invoice for rent payable by the business
c)
The issue of an invoice for rent to a tenant
d)
The payment of rent by the business
36.
Winn Ltd has opening trade payables of £24,183 and closing trade payables of £34,655. Purchases for the period totalled £254,192 of which £31,590 related to cash purchases. Total payments recorded in the payables ledger for the period were:
a)
£243,720
b)
£212,130
c)
£233,074
d)
£264,664
37.
In double-entry bookkeeping, which of the following statements is true?
a)
Debit entries decrease income and increase assets.
b)
Credit entries decrease liabilities and increase income.
c)
Credit entries decrease expenses and increase assets.
d)
Debit entries decrease expenses and increase assets.
38.
Richard is a VAT registered trader whose sales and purchases carry VAT at the standard rate of 20%. Richard sells a customer goods on credit for £4,800 exclusive of VAT. What is the double entry to record this?
a)
Debit Receivables £5,760, Credit Sales £4,800, Credit VAT £960
b)
Debit Receivables £4,800, Credit Sales £4,000, Credit VAT £800
c)
Debit Sales £4,000, Debit VAT £800, Credit Receivables £4,800
d)
Debit Sales £4,800, Debit VAT £960, Credit Receivables £5,760
39.
A business which is registered for VAT received the following invoice from one of its VAT registered suppliers: A further discount of £50 will be allowed if payment is received within 14 days. Invoice: 7035 Date: 20 December 20X0 £ Goods: 100 @ £10 1,000 Less trade discount (50) 950 Assume the business is not expected to make the payment within 14 days and the VAT rate is 20%. What amount of VAT should have been charged on the invoice?
a)
£180
b)
£200
c)
£210
d)
£190
40.
Which of the following correctly describes credit terms of 2/10, n/30?
a)
two percent discount for early payment is available if the invoice is paid within ten days of the date of sale.
b)
two percent discount for early payment is available if the invoice is paid before the tenth day of the month following the month the sale.
c)
ten percent discount for early payment is available if the invoice is paid within two days of the date of the invoice.
d)
two percent discount for early payment is available if the invoice is paid after the tenth day, but before the thirtieth day of the invoice date.
41.
What is the correct double entry to record an invoice raised to a credit customer who is not expected to take advantage of an early settlement discount?
a)
Debit Revenue, Credit Payables
b)
Debit Receivables, Credit Revenue
c)
Debit Payables, Credit Revenue
d)
Debit Revenue, Credit Receivables
42.
Crimson plc paid an invoice from a credit supplier and took advantage of the early settlement discount offered. When the invoice was received and recorded, Crimson plc did not expect to take the discount. The journal entry to record the payment of the invoice is:
a)
Debit Payables, Credit Cash at bank account
b)
Debit Cash at bank account, Debit Purchases, Credit Payables
c)
Debit Payables, Credit Purchases, Credit Cash at bank account
d)
Debit Cash at bank account, Credit Purchases, Credit Payables
43.
After transferring the balances on all income and expense ledger accounts to the profit and loss ledger account, the total credits in the profit and loss ledger account exceed the total debits by £4,000. Which two of the following statements about Anchor Ltd are correct?
a)
Anchor Ltd has made a profit for the year of £4,000.
b)
To begin to calculate the closing capital account balance, Anchor Ltd should credit the capital account and debit the profit and loss ledger account with £4,000.
c)
The opening balance on the profit and loss ledger account for the next reporting period is £4,000 credit.
d)
Anchor Ltd has made a loss for the year of £4,000.
44.
The following are balances on the accounts of Luigi, a sole trader, as at the end of the current financial year and after all entries have been processed and the profit for the year has been calculated.
£
Non-current assets 85,000
Trade receivables 7,000
Trade payables 3,000
Bank loan 15,000
Accumulated depreciation, non-current assets 15,000
Inventory 4,000
Accruals 1,000
Prepayments 2,000
Bank overdraft 2,000
What is the balance on Luigi’s capital account?
a)
£64,000
b)
£62,000
c)
£66,000
d)
£59,000
45.
Which of the following would be a credit balance in the trial balance?
a)
Delivery outwards
b)
Purchases
c)
Drawings
d)
Bank overdraft
46.
Which of the following statements concerning the preparation of financial statements is true?
a)
The balances on asset and liability accounts are summarized in an additional ledger account known as the statement of financial position ledger account.
b)
The statement of profit or loss ledger account is a list of all the balances extracted from the business’s accounts.
c)
Loss for the year is a credit entry in the statement of profit or loss ledger account.
d)
The balances on income and expense accounts are brought down at the end of the accounting period to be carried forward to the next accounting period.
47.
Which of the following would be classified as a non-current asset?
a)
Prepayments
b)
Receivables
c)
Cash
d)
Land
48.
A sole trader had trade receivables of £2,700 at 1 May. During May, he made cash sales of £7,200, credit sales of £16,500 and received £15,300 from his credit customers. The balance on his trade receivables account at the end of May was:
a)
£3,900
b)
£1,500
c)
£8,700
d)
£11,100
49.
Violet had an opening trade payables balance of £3,450 on 1 December. During the month of December, she sold goods totalling £6,780 to customers on credit, purchased goods totalling £5,100 from suppliers on credit and made cash purchases of £400. She also received £3,900 from credit customers and made payments to credit suppliers of £4,200. What was the balance on Violet’s trade payables account at the end of December?
a)
£4,750
b)
£6,330
c)
£4,350
d)
£2,550
50.
Plym plc is a VAT registered retailer. All transactions attract VAT at the rate of 20%. For the year to 30 June 20X7, Plym plc made purchases of £69,600 including VAT and made sales of £89,400 excluding VAT. There was no change in the figures for opening and closing inventory in the statements of financial position as at 30 June 20X6 and 20X7. What was Plym plc’s gross profit for the year ended 30 June 20X7?
a)
£19,800
b)
£4,900
c)
£31,400
d)
£16,500
51.
Gerrard Ltd is registered for VAT. In the month of April, it sells goods to customers for a total of £89,436 excluding VAT and purchases goods from suppliers for a total of £86,790 including VAT. What is the net amount shown in Gerrard Ltd’s VAT account at the end of April?
a)
£3,422 credit
b)
£2,452 debit
c)
£3,422 debit
d)
£2,452 credit
52.
A business preparing its financial statements for the year to 31 October pays rent quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The annual rent was increased from £48,000 to £60,000 from 1 March 20X4. What figure should appear for rent in the statement of profit or loss for the year ended 31 October 20X4 and in the statement of financial position as at that date?
a)
Statement of profit or loss: £56,000; Statement of financial position: £5,000
b)
Statement of profit or loss: £52,000; Statement of financial position: £5,000
c)
Statement of profit or loss: £56,000; Statement of financial position: £10,000
d)
Statement of profit or loss: £55,000; Statement of financial position: £10,000
53.
A rent prepayment of £960 was treated as an accrual in a sole trader’s statement of profit or loss at the year end. As a result, the profit was:
a)
understated by £1,920
b)
understated by £960
c)
overstated by £1,920
d)
overstated by £960
54.
During 20X4, Bibi paid a total of £60,000 for rent, covering the period from 1 October 20X3 to 31 March 20X5. What figures in respect of rent should be included in the financial statements for the year ended 31 December 20X4?
a)
Statement of profit or loss: £50,000; Statement of financial position: £15,000 Accrual
b)
Statement of profit or loss: £40,000; Statement of financial position: £15,000 Prepayment
c)
Statement of profit or loss: £40,000; Statement of financial position: £10,000 Prepayment
d)
Statement of profit or loss: £50,000; Statement of financial position: £10,000 Accrual
55.
A company pays rent quarterly in arrears on 1 January, 1 April, 1 July and 1 October each year. The rent was increased from £90,000 per year to £120,000 per year as from 1 October 20X2. What rent expense and accrual should be included in the company’s financial statements for the year ended 31 January 20X3?
a)
Rent expense: £100,000; Accrual: £20,000
b)
Rent expense: £97,500; Accrual: £20,000
c)
Rent expense: £97,500; Accrual: £10,000
d)
Rent expense: £100,000; Accrual: £10,000
56.
A company has sublet part of its offices and in the year ended 30 November 20X3 the rent receivable was:
Until 30 June 20X3 £8,400 per year
From 1 July 20X3 £12,000 per year
Rent was received quarterly in advance on 1 January, April, July, and October each year. What amounts should appear in the company’s financial statements for the year ended 30 November 20X3?
a)
Statement of profit or loss: £9,900; Statement of financial position: £2,000 in other payables
b)
Statement of profit or loss: £9,900; Statement of financial position: £1,000 in other payables
c)
Statement of profit or loss: £9,600; Statement of financial position: £1,000 in other payables
d)
Statement of profit or loss: £9,600; Statement of financial position: £2,000 in other receivables
57.
A business compiling its financial statements for the year to 31 July each year pays rent quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The annual rent was increased from £60,000 per year to £72,000 per year as from 1 October 20X3. What figure should be included as the rent expense in the statement of profit or loss for the year ended 31 July 20X4?
a)
£70,000
b)
£69,000
c)
£62,000
d)
£63,000
58.
At 1 July 20X4 a company had prepaid insurance of £8,200. On 1 January 20X5 the company paid £38,000 for insurance for the year to 30 September 20X5. What figures should be included for insurance in the company’s financial statements for the year ended 30 June 20X5?
a)
Statement of profit or loss: £39,300; Statement of financial position: Prepayment £9,500
b)
Statement of profit or loss: £45,200; Statement of financial position: Prepayment £0
c)
Statement of profit or loss: £36,700; Statement of financial position: Prepayment £9,500
d)
Statement of profit or loss: £39,300; Statement of financial position: Prepayment £0
59.
An organization’s year end is 30 September. On 1 January 20X6 the organization took out a loan of £100,000 with annual interest of 12%. The interest is payable in equal instalments on the first day of April, July, October and January in arrears. How much should be charged to the statement of profit or loss for the year ended 30 September 20X6, and how much should be accrued on the statement of financial position?
a)
Statement of profit or loss: £9,000; Statement of financial position: £3,000
b)
Statement of profit or loss: £6,000; Statement of financial position: £3,000
c)
Statement of profit or loss: £9,000; Statement of financial position: £0
d)
Statement of profit or loss: £12,000; Statement of financial position: £3,000
60.
A business sublets part of its office accommodation. The rent is received quarterly in advance on 1 January, 1 April, 1 July and 1 October. The annual rent has been £24,000 for some years, but it was increased to £30,000 from 1 July 20X5. What amounts for this rent should appear in the company’s financial statements for the year ended 31 January 20X6?
a)
Statement of profit or loss: £27,000; Statement of financial position: £2,500 accrued income
b)
Statement of profit or loss: £27,500; Statement of financial position: £5,000 accrued income
c)
Statement of profit or loss: £27,000; Statement of financial position: £2,500 deferred income
d)
Statement of profit or loss: £27,500; Statement of financial position: £5,000 deferred income
61.
The year end of Murphy plc is 30 November 20X1. The company pays for its gas by a standing order of £600 per month. It had an opening accrual of £400 and a closing accrual of £500. What is the correct charge for gas to be included in Murphy plc’s statement of profit or loss for the year ended 30 November 20X1?
a)
£7,300
b)
£7,100
c)
£7,200
d)
£7,400
62.
At 31 December 20X8 Blue Anchor plc has an insurance prepayment of £250. During 20X9 they pay £800 in respect of various insurance contracts. The closing accrual for insurance is £90. What is the charge for insurance that should be included in the statement of profit or loss for the year ended 31 December 20X9?
a)
£960
b)
£460
c)
£800
d)
£1,140
63.
At 31 March 20X7, accrued rent payable was £300. During the year ended 31 March 20X8, rent paid was £4,000, including an invoice for £1,200 for the quarter ended 30 April 20X8. What is the statement of profit or loss charge for rent payable for the year ended 31 March 20X8?
a)
£3,900
b)
£3,300
c)
£4,100
d)
£4,700
64.
Constains plc has an insurance prepayment of £320 at 31 March 20X2. During the year ended 31 March 20X2 Constains plc paid two insurance bills, one for £1,300 and one for £520. What was the insurance prepayment at 31 March 20X1 if the charge for insurance for the year was £1,760?
a)
£260
b)
£200
c)
£320
d)
£380
65.
The annual insurance premium for Boost Ltd for the period 1 July 20X6 to 30 June 20X7 is £13,200, which is 10% more than the previous year. Insurance premiums are paid on 1 July. What is the statement of profit or loss charge for insurance for the year ended 31 December 20X6?
a)
£12,000
b)
£12,600
c)
£13,200
d)
£14,520
66.
A gas accrual for £400 at the year end was treated as a prepayment in a business’s statement of profit or loss. As a result the profit was:
a)
overstated by £800
b)
understated by £400
c)
overstated by £400
d)
understated by £800
67.
At 31 December 20X2 the following matters require inclusion in a company’s financial statements: (1) On 1 January 20X2 the company made a loan of £12,000 to an employee, repayable on 30 April 20X3, charging interest at 2% per year. On the due date she repaid the loan and paid the whole of the interest due on the loan to that date. (2) The company has paid insurance £9,000 in 20X2, covering the year ending 31 August 20X3. (3) In January 20X3 the company received rent from a tenant £4,000 covering the six months to 31 December 20X2. For these items, what total figures should be included in the company’s statement of financial position at 31 December 20X2?
a)
Current assets: £22,240; Current liabilities: £0
b)
Current assets: £22,000; Current liabilities: £240
c)
Current assets: £10,240; Current liabilities: £0
d)
Current assets: £16,240; Current liabilities: £6,000
68.
A business has an accrual for electricity at 1 January 20X7 of £215 and has paid electricity bills of £3,420 during the year to 31 December 20X7. At 31 December 20X7 there is an accrual for electricity of £310. What is the electricity charge to be included in the statement of profit or loss for the year ended 31 December 20X7?
a)
£3,325
b)
£2,895
c)
£3,515
d)
£3,945
69.
A business has paid £10,400 of insurance premiums during the year ended 31 March 20X7. At 1 April 20X6 there was an insurance prepayment of £800 and at 31 March 20X7 there was a prepayment of £920. What is the insurance charge in the statement of profit or loss for the year ended 31 March 20X7?
a)
£10,520
b)
£8,680
c)
£10,400
d)
£10,280
70.
Krim plc paid local property tax of £6,495 on 31 May 20X7 in respect of the three months ending 31 August 20X7. What adjustment must Krim plc make to the administrative expenses ledger account for the year ended 30 June 20X7?
a)
debit £2,165
b)
credit £2,165
c)
debit £4,330
d)
credit £4,330
71.
A business preparing its financial statements for the year to 31 October pays rent quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The annual rent was increased from £48,000 to £60,000 from 1 March 20X4. What figure should appear for rent in the statement of profit or loss for the year ended 31 October 20X4 and in the statement of financial position as at that date?
a)
Statement of profit or loss: £56,000; Statement of financial position: £5,000
b)
Statement of profit or loss: £52,000; Statement of financial position: £5,000
c)
Statement of profit or loss: £56,000; Statement of financial position: £10,000
d)
Statement of profit or loss: £55,000; Statement of financial position: £10,000
72.
A rent prepayment of £960 was treated as an accrual in a sole trader’s statement of profit or loss at the year end. As a result, the profit was:
a)
understated by £1,920
b)
understated by £960
c)
overstated by £1,920
d)
overstated by £960
73.
During 20X4, Bibi paid a total of £60,000 for rent, covering the period from 1 October 20X3 to 31 March 20X5. What figures in respect of rent should be included in the financial statements for the year ended 31 December 20X4?
a)
Statement of profit or loss: £50,000; Statement of financial position: £15,000 Accrual
b)
Statement of profit or loss: £40,000; Statement of financial position: £15,000 Prepayment
c)
Statement of profit or loss: £40,000; Statement of financial position: £10,000 Prepayment
d)
Statement of profit or loss: £50,000; Statement of financial position: £10,000 Accrual
74.
A company pays rent quarterly in arrears on 1 January, 1 April, 1 July and 1 October each year. The rent was increased from £90,000 per year to £120,000 per year as from 1 October 20X2. What rent expense and accrual should be included in the company’s financial statements for the year ended 31 January 20X3?
a)
Rent expense: £100,000; Accrual: £20,000
b)
Rent expense: £97,500; Accrual: £20,000
c)
Rent expense: £97,500; Accrual: £10,000
d)
Rent expense: £100,000; Accrual: £10,000
75.
A company has sublet part of its offices and in the year ended 30 November 20X3 the rent receivable was:
Until 30 June 20X3 £8,400 per year
From 1 July 20X3 £12,000 per year
Rent was received quarterly in advance on 1 January, April, July, and October each year. What amounts should appear in the company’s financial statements for the year ended 30 November 20X3?
a)
Statement of profit or loss: £9,900; Statement of financial position: £2,000 in other payables
b)
Statement of profit or loss: £9,900; Statement of financial position: £1,000 in other payables
c)
Statement of profit or loss: £9,600; Statement of financial position: £1,000 in other payables
d)
Statement of profit or loss: £9,600; Statement of financial position: £2,000 in other receivables
76.
A business compiling its financial statements for the year to 31 July each year pays rent quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The annual rent was increased from £60,000 per year to £72,000 per year as from 1 October 20X3. What figure should be included as the rent expense in the statement of profit or loss for the year ended 31 July 20X4?
a)
£70,000
b)
£69,000
c)
£62,000
d)
£63,000
77.
At 1 July 20X4 a company had prepaid insurance of £8,200. On 1 January 20X5 the company paid £38,000 for insurance for the year to 30 September 20X5. What figures should be included for insurance in the company’s financial statements for the year ended 30 June 20X5?
a)
Statement of profit or loss: £39,300; Statement of financial position: Prepayment £9,500
b)
Statement of profit or loss: £45,200; Statement of financial position: Prepayment £0
c)
Statement of profit or loss: £36,700; Statement of financial position: Prepayment £9,500
d)
Statement of profit or loss: £39,300; Statement of financial position: Prepayment £0
78.
An organization’s year end is 30 September. On 1 January 20X6 the organization took out a loan of £100,000 with annual interest of 12%. The interest is payable in equal instalments on the first day of April, July, October and January in arrears. How much should be charged to the statement of profit or loss for the year ended 30 September 20X6, and how much should be accrued on the statement of financial position?
a)
Statement of profit or loss: £9,000; Statement of financial position: £3,000
b)
Statement of profit or loss: £6,000; Statement of financial position: £3,000
c)
Statement of profit or loss: £9,000; Statement of financial position: £0
d)
Statement of profit or loss: £12,000; Statement of financial position: £3,000
79.
A business sublets part of its office accommodation. The rent is received quarterly in advance on 1 January, 1 April, 1 July and 1 October. The annual rent has been £24,000 for some years, but it was increased to £30,000 from 1 July 20X5. What amounts for this rent should appear in the company’s financial statements for the year ended 31 January 20X6?
a)
Statement of profit or loss: £27,000; Statement of financial position: £2,500 accrued income
b)
Statement of profit or loss: £27,500; Statement of financial position: £5,000 accrued income
c)
Statement of profit or loss: £27,000; Statement of financial position: £2,500 deferred income
d)
Statement of profit or loss: £27,500; Statement of financial position: £5,000 deferred income
80.
The year end of Murphy plc is 30 November 20X1. The company pays for its gas by a standing order of £600 per month. It had an opening accrual of £400 and a closing accrual of £500. What is the correct charge for gas to be included in Murphy plc’s statement of profit or loss for the year ended 30 November 20X1?
a)
£7,300
b)
£7,100
c)
£7,200
d)
£7,400
81.
At 31 December 20X8 Blue Anchor plc has an insurance prepayment of £250. During 20X9 they pay £800 in respect of various insurance contracts. The closing accrual for insurance is £90. What is the charge for insurance that should be included in the statement of profit or loss for the year ended 31 December 20X9?
a)
£960
b)
£460
c)
£800
d)
£1,140
82.
At 31 March 20X7, accrued rent payable was £300. During the year ended 31 March 20X8, rent paid was £4,000, including an invoice for £1,200 for the quarter ended 30 April 20X8. What is the statement of profit or loss charge for rent payable for the year ended 31 March 20X8?
a)
£3,900
b)
£3,300
c)
£4,100
d)
£4,700
83.
A business has opening inventory of £7,200 and closing inventory of £8,100. Purchases for the year were £76,500, delivery inwards was £50 and delivery outwards was £180. What is the correct amount for cost of sales?
a)
£75,550
b)
£75,650
c)
£75,830
d)
£77,450
84.
Muse plc began trading on 1 January 20X8 and had zero inventories at that date. During 20X8 it made purchases of £455,000, incurred delivery inwards of £24,000, and delivery outwards of £29,000. Closing inventories at 31 December 20X8 were £52,000. What is the correct amount for cost of sales for the year ended 31 December 20X8?
a)
£427,000
b)
£432,000
c)
£531,000
d)
£456,000
85.
Boomerang Co had 200 units in inventory at 30 November 20X1 valued at £800. During December it made the following purchases and sales. 2 Dec 20X1 Purchased 1,000 @ £5.00 each. 5 Dec 20X1 Sold 700 @ £7.50 each. 12 Dec 20X1 Purchased 800 @ £6.20 each. 15 Dec 20X1 Purchased 300 @ £6.60 each. 21 Dec 20X1 Sold 400 @ £8.00 each. 28 Dec 20X1 Sold 500 @ £8.20 each. Which of the following is the closing inventory amount using FIFO?
a)
£3,500
b)
£4,340
c)
£4,620
d)
£4,460
86.
At its year end Crocodile plc has 6,000 items of product A costing £10 per unit, and 2,000 items of product B costing £5 per unit. The following information is available: Product A – 500 are defective and can only be sold at £8 each. Product B – 100 are to be sold for £4.50 each with selling expenses of £1.50 each. What figure should be shown in Crocodile plc’s statement of financial position for inventory?
a)
£68,800
b)
£68,950
c)
£70,000
d)
£57,000
87.
Mickey Ltd has calculated the cost of inventory using AVCO. At 1 June 20X8 there were 60 units in inventory at a cost of £12 each. On 8 June, 40 units were purchased for £15 each, and a further 50 units were purchased for £18 each on 14 June. On 21 June, 75 units were sold for £20.00 each. What is the cost of closing inventory at 30 June 20X8?
a)
£900
b)
£1,010
c)
£1,125
d)
£1,110
88.
Which of the following statements about inventory for the purposes of the statement of financial position is correct?
a)
Include inward delivery costs, Exclude production overheads
b)
Exclude inward delivery costs, Include production overheads
c)
Include inward delivery costs, Include production overheads
d)
Exclude inward delivery costs, Exclude production overheads
89.
What will be the effect of understating the current year’s closing inventory on a company’s financial statements if the error remains uncorrected?
a)
The current year’s profit will be understated but there will be no effect on next year’s profit.
b)
The current year’s profit will be overstated and next year’s profit will be understated.
c)
The current year’s profit will be understated and next year’s profit will be overstated.
d)
None of the above
90.
An inventory record has been extracted from the computerised accounting system. It shows the following details. 1 February 50 units in inventory at a cost of £40 per unit. 7 February 100 units purchased at a cost of £45 per unit. 14 February 80 units sold. 21 February 50 units purchased at a cost of £50 per unit. 28 February 60 units sold. What is the cost of inventory at 28 February using the FIFO method?
a)
£2,950
b)
£2,700
c)
£2,500
d)
£2,450
91.
What will be the effect of understating the current year’s closing inventory on a company’s financial statements if the error remains uncorrected?
a)
The current year’s profit will be overstated and next year’s profit will be understated.
b)
The current year’s profit will be understated but there will be no effect on next year’s profit.
c)
The current year’s profit will be understated and next year’s profit will be overstated.
d)
None of the above
92.
The closing inventory of Epsilon amounted to £284,000 at cost at the year end of 30 September 20X1. This total includes the following two inventory lines. (1) 500 items which had cost £15 each and which were included at £7,500. These items were found to have been defective at the date of the statement of financial position. Remedial work after that date cost £1,800 and they were then sold shortly afterwards for £20 each. Selling expenses were £400. (2) 100 items which had cost £10 each. After the date of the statement of financial position they were sold for £8 each, with selling expenses of £150. What amount should be shown in Epsilon’s statement of financial position for inventory?
a)
£283,650
b)
£284,350
c)
£284,650
d)
£291,725
93.
Bouncy Balls plc has 40 units of its special spongy balls in inventory as at 30 November 20X7. The product costs £5 per unit to manufacture and can be sold for £15 per unit. Half of the units in inventory at the year end have been damaged and will require rectification work costing £10 per unit before they can be sold. Selling costs are £1 per unit. What is the value of inventory at 30 November 20X7?
a)
£180
b)
£200
c)
£600
d)
£160
94.
The closing inventory of Stacks plc amounted to £58,200 excluding the following two inventory lines: (1) 200 items which had cost £15 each. These items were found to be defective at the year-end date. Rectification work after that date amounted to £1,200 for the batch, after which they were sold for £17.50 each, with selling expenses totalling £300 for the batch. (2) 400 items which had cost £2 each. All were sold after the year-end date for £1.50 each, with selling expenses of £200 for the batch. What amount for inventory should be shown in the statement of financial position of Stacks plc?
a)
£61,600
b)
£60,600
c)
£61,000
d)
£62,000
95.
When calculating the cost of inventory, which of the following shows the correct method of arriving at cost?
a)
Include inward delivery costs, Include production overheads
b)
Exclude inward delivery costs, Exclude production overheads
c)
Include inward delivery costs, Exclude production overheads
d)
Exclude inward delivery costs, Include production overheads
96.
A trader who sets her selling prices by adding 50% to cost, only managed to achieve a mark-up of 45%. Which of the following factors could account for the shortfall?
a)
The value of the opening inventories had been overstated.
b)
Sales were lower than expected.
c)
The closing inventories of the business were higher than the opening inventories.
d)
Goods taken from inventories by the proprietor were recorded by debiting drawings and crediting purchases with the cost of the goods.
97.
The gross profit margin is 20% where:
a)
cost of sales is £100,000 and sales are £120,000
b)
cost of sales is £100,000 and sales are £125,000
c)
cost of sales is £80,000 and gross profit is £16,000
d)
cost of sales is £80,000 and sales are £96,000
98.
Which of the following factors could cause a company’s gross profit margin to fall below the expected level?
a)
Overstatement of closing inventories
b)
The incorrect inclusion in purchases of invoices relating to goods supplied in the following period
c)
The inclusion in sales of the proceeds of sale of non-current assets
d)
Increased cost of delivery borne by the company on goods sent to customers
99.
For many years Wrigley plc has experienced rising prices for raw material X and has kept constant inventory levels. It has always used the AVCO method to arrive at the cost of inventory. What would the result be if Wrigley plc had always used the FIFO method in each successive year’s financial statements?
a)
Lower cost of sales and higher closing inventory
b)
Lower cost of sales and lower closing inventory
c)
Higher cost of sales and lower closing inventory
d)
Higher cost of sales and higher closing inventory
100.
During the year ended 31 March 20X4 Boogie plc suffered a major fire at its factory, in which inventory that had cost £36,000 was destroyed. An insurance payment of 80% of the cost has been agreed but not received at the year end. Which of the following correctly completes the journal entry to take account of these matters?
a)
Debit Administrative expenses £36,000, Credit Purchases £36,000, Credit Other income £28,800
b)
Debit Administrative expenses £7,200, Credit Purchases £36,000
c)
Debit Administrative expenses £36,000, Credit Purchases £28,800, Credit Revenue £36,000
d)
None of the above
101.
Percy plc started trading on 1 April 20X4 and made a loss in the year to 31 March 20X5. The cost of inventory shown in Percy plc’s statement of financial position at 31 March 20X5, using the AVCO basis, was £6,420. Had the FIFO basis been used, the cost would have been £8,080. What is the effect of adopting the FIFO basis?
a)
decreases losses and decrease current assets by £1,660
b)
increase current assets and decrease losses by £1,660
c)
increase capital and decrease current assets by £1,660
d)
None of the above
102.
Small plc uses a perpetual inventory system and has received the following information: 1 November 20X7 Inventory: 300 units @ £5 each. 9 November 20X7 Purchases: 400 units @ £6 each. 15 November 20X7 Sales: 250 units @ £10 each. 20 November 20X7 Purchases: 200 units @ £7 each. 25 November 20X7 Sales: 300 units @ £10 each. Which of the following is the value of closing inventory at 30 November 20X7 using the FIFO method?
a)
£156
b)
£204
c)
£192
d)
£144
103.
Which of the following statements is correct regarding the cost of inventory?
a)
Exclude inward delivery costs, Include production overheads
b)
Include inward delivery costs, Include production overheads
c)
Include inward delivery costs, Exclude production overheads
d)
Exclude inward delivery costs, Exclude production overheads
104.
What will be the effect of understating the current year’s closing inventory on a company’s financial statements if the error remains uncorrected?
a)
The current year’s profit will be understated but there will be no effect on next year’s profit.
b)
The current year’s profit will be overstated and next year’s profit will be understated.
c)
The current year’s profit will be understated and next year’s profit will be overstated.
d)
None of the above
105.
In a statement of financial position, where would closing inventory be shown?
a)
Current assets
b)
Current liabilities
c)
Non-current liabilities
d)
Non-current assets
100 %
