MOCK TEST 2

1. Which of the following items should be treated as revenue items in an entity's financial
statements?
(1) Payment of local property tax
(2) Purchase of premises
(3) Alteration of premises to configure them to be ready for use in the business
(4) External audit fee
A (1) and (2) only
B (2) and (3) only
C (3) and (4) only
D (1) and (4) only

2. Ned is considering two issues in the course of preparing his financial statements:
Issue 1: Non-current assets are carried at cost less depreciation.
Issue 2: Expenses incurred, but for which invoices have not yet been received, are
included in the financial statements.
Which accounting characteristic or principle is relevant to each of these issues?
A Issue 1: Verifiability; Issue 2 Accruals
B Issue 1: Accruals; Issue 2 Verifiability
C Both issues: Verifiability
D Both issues: Accruals

3. A sole trader takes out a loan of £5,000 from the bank.

Which element(s) of the accounting equation will change due to this transaction?
A Assets and liabilities only
B Assets and capital only
C Capital and liabilities only
D Assets only

4. Meghan downloads a transaction report showing her bank transactions for the day. The
report shows a payment of £860, which the computerised accounting system has not been
able to match to a transaction.
Which of the following transactions is most likely to have resulted in the payment of £860?
A A bank transfer received from a credit customer to settle an invoice
B An amount paid to purchase new office furniture
C An amount withdrawn to restore the petty cash to its imprest amount of £100
D A bank transfer paid to an electricity supplier in respect of the monthly invoice received

5. Identify whether the following statements are true or false.

Statement 1: A credit balance of £100 brought down on George's receivables ledger in
Guy's accounting records means that George owes money to Guy.
Statement 2: A debit balance of £500 on Guy's drawings account means that Guy has
withdrawn £500 in the period.
A Statement 1 is true and Statement 2 is false
B Statement 1 is false and Statement 2 is true
C Both statements are true
D Both statements are false

6. The total of the profit or loss items in Mike's final trial balance are £35,640 for the debit
balances and £27,560 for the credit balances.
What entry does Mike need to make in the profit and loss ledger account to transfer his
profit or loss for the period to retained earnings?
A Cr £8,080 profit for the period
B Cr £8,080 loss for the period
C Dr £8,080 profit for the period
D Dr £8,080 loss for the period

7. Alasdair's business bank statement showed an overdrawn balance of £5,800 on 31 May 20X7.
When this was reconciled to the cash at bank account, the following differences were noted:
£
Bank charges not recorded in cash at bank account 30
Standing order for local property tax not entered in cash at bank account 300
Outstanding lodgements 1,300
Credited in error to Alasdair's account by the bank 100
What was the original credit balance on Alasdair's cash at bank account at 31 May 20X7?
A £4,600
B £4,270
C £5,200
D £4,870

8. Which two of the following matters require an adjustment to the figure for cash at bank
account appearing in Justine's draft statement of financial position as at 30 June 20X5,
rather than being reconciling items between the adjusted cash at bank account balance
and the bank statement balance as at that date?
A Bank charges had been debited by the bank but had not been recorded in the cash at
bank account
B A number of cheques drawn by Justine in June remained unpresented at the year end
C A cheque paid into the bank on 30 June 20X5 did not appear on the statement
D A cheque had been returned unpaid on 30 June 20X5 but Justine had not been
notified of this by the bank

9. An extract from a business's statement of profit or loss is as follows:

££
Sales 70,000
Opening inventory 10,300
Purchases 42,300
Closing inventory 2,600

What is the mark up applied?

A 71.4%
B 47.3%
C 40.0%
D 28.6%

10. Brooker paid £130,800 to credit suppliers during the year ended 31 December 20X5. At
the beginning of the year payables totalled £11,750 and at the end they totalled £12,750.
The value of closing inventory was £8,200. Cash purchases were £2,800. The cost of sales
for the year was £148,000.
What was the value of opening inventory?
A £21,600
B £24,400
C £22,400
D £23,200

11. Your firm values inventory using the AVCO method. At 1 June 20X7 there were 100 units in
inventory valued at £10 each. On 12 June, 50 units were purchased for £12 each, and a
further 50 units were purchased for £15 each on 20 June. On 21 June, 160 units were sold
for £20.00 each.
What is the value of closing inventory at 30 June 20X7?
A £470
B £2,350
C £493
D £1,880

12. On 1 April 20X7 Midge's allowance for receivables stood at £5,558. During the year:
(1) Cash of £900 was received from a credit customer whose debt had been written off
many years ago.
(2) A debt of £2,100 was deemed irrecoverable and was to be written off.
At 31 March 20X8 Midge determined that the allowance for receivables needed to be
£7,170.
What is the charge for irrecoverable debts expense in Midge's statement of profit or loss for
the year ended 31 March 20X8?
A £3,712
B £2,812
C £1,612
D £712

13.

What amount should be recorded for telephone expenses in the statement of profit or loss
for the year ended 31 December 20X6?
A £1,388.10
B £1,266.70
C £1,522.80
D £1,401.30

14. Rachel owns a number of properties which she rents out to tenants. She prepares her
financial statements to 30 June each year. As at 1 July 20X6 her total annual rental income
for the year was expected to be £54,000. However, on 1 November she raised the rent
across all her properties by 10% with immediate effect. At the beginning of the year Rachel
was owed £8,100 by her tenants, and during the year she received £72,000 from her
tenants.
What is the amount due to or from Rachel at 30 June 20X7?
A £6,300 due to Rachel
B £6,300 due from Rachel
C £9,900 due to Rachel
D £9,900 due from Rachel

15. An asset register showed a total carrying amount of £81,770. A non-current asset costing
£12,000 had been sold for £3,000, making a loss on disposal of £1,600. No entries had
been made in the asset register for this disposal.
The correct balance on the asset register is:
A £86,370
B £69,770
C £78,770
D £77,170

16.
The company's policy is to charge depreciation monthly at 20% per year on the straight line
basis.
What is the journal entry to record the depreciation charge for the reporting period ended
30 September 20X7?
A Dr Depreciation expense £33,980; Cr Accumulated depreciation £33,980
B Dr Accumulated depreciation £33,980; Cr Depreciation expense £33,980
C Dr Depreciation expense £31,180; Cr Accumulated depreciation £31,180
D Dr Accumulated depreciation £28,780; Cr Depreciation expense £28,780

17. Argonaut purchased a machine for £63,000 on 1 January 20X5. It has no residual value and
an estimated useful life of seven years. It is depreciated using the straight-line method. On
31 December 20X8, the company carried out an impairment review and determined that
the value in use of the machine is £21,000 and the fair value less disposal costs is £24,000.
What amount will be charged to profit or loss in respect of the machine in the year ended
31 December 20X8?
A £9,000
B £12,000
C £21,000
D £15,000

18.

What is the correct profit for the year after making any necessary corrections in respect of
the machine?
A £44,360
B £44,800
C £44,000
D £43,720

19.
 What are the balances on each account at 30 June 20X7?
Share Share
Capital premium
£m £m
A 160 72
B 160 32
C 192 72
D 192 32

20. The following transactions occurred during a company's reporting period:

(1) A non-current liability was paid in full.
(2) A substantial amount was written off as irrecoverable debts.
(3) Depreciation was charged on non-current assets.
(4) A non-current asset was sold at its carrying amount.
Which of these transactions result in expense items appearing in the company's draft
statement of profit or loss?
A (1) and (2) only
B (2) and (3) only
C (3) and (4) only
D (1) and (4) only

The following information for Michael plc is relevant for questions 21 to 23.
 During the year, Michael plc paid £390,000 for a new piece of machinery.

21. What is the cash generated from operations?

A £401,000 inflow
B £426,000 inflow
C £434,000 inflow
D £409,000 inflow

22. What is the net cash inflow or outflow arising from the purchase and sale of non-current
assets?
A £390,000 outflow
B £375,000 outflow
C £211,000 outflow
D £366,000 outflow

23. What is the change in net debt for the year?

A £15,000 increase
B £15,000 decrease
C £35,000 decrease
D £35,000 increase

24.

What is Davina's total profit share?

A £67,200
B £69,200
C £70,000
D £70,700

25. Madelaine, Mary and Anna are in partnership, sharing profits equally. Each partner has
contributed capital of £20,000, and Mary has made a loan of £105,000 to the partnership.
Interest of 5% is payable on all capital and loan balances outstanding at the end of each
year. Profit for the year after loan interest is £90,000.
Which two of the following make up Mary's total appropriation of profit for the year?
A Interest on capital of £1,000
B Interest on capital of £6,250
C Profit share of £29,000
D Profit share of £30,000
E Profit share of £27,250
F Profit share of £31,750