F3 Revision Mock Exam

1. At 1 January 2009, the capital structure of Q, a limited liability company, was as follows:

Share capital: (1,000,000 ordinary shares of 50c each) $500,000

Share premium $300,000

On 1 April 2009 the company made an issue of 200,000 50c shares at $1.30 each, and on 1 July made a bonus issue of 1 share for every 4 in issue at the time, using the share premium account for this purpose.

Which of the following correctly states the company’s share capital and share premium accounts at 

2. The accounts of Mandy plc for the year ended 31 December 2011 include the following information:

What is the quick ratio?

3. An item of inventory was purchased for $500. It is expected to be sold for $1,200 although $250 will need to be spent on it in order to achieve the sale. To replace the same item of inventory would cost $650.

How should the inventory be valued in the accounts?

4. Billy sold some goods on sale or return terms for $10,000 in June 2011. Their cost to Billy was $3,600. The transaction has been treated as a credit sale in Billy’s financial statements for the year ended 30 June 2011. In July 2011 the customer accepted half of the goods and returned the other half in good condition.

Which adjustments, if any, should be made to the financial statements?

5. Your business values inventory using the average cost method. At 1 October 2008 there were 60 units in inventory valued at $12 each. On 8 October, 40 units were purchased at $15 each, and a further 50 units were purchased for $18 each on 14 October. On 21 October, 75 units were sold for $1,200.

The value of the closing inventory at 31 October 2008 was:

6. Orange made sales of $463,680 during the year ended 30 September 2011. Inventory decreased by $31,680 over the year, and all sales were made at a mark up of 42%.

What was the cost of purchases during the year to the nearest $1,000?

7. Which of the following statement describes current assets?

8. A firm bought a car for $10,000 on 1 January 2009, which had an expected useful life of 4 years and an expected residual value of $2,000. The car was to be depreciated on a straight line basis.

The firms policy is to charge depreciation in the year of disposal.

On 31 December 2011, the machine was sold for $3,200.

What amount would appear in the Income Statement for the year ended 31 December 2011, for the profit or loss on disposal?

9. X acquired 100% of the share capital of Y on 1 January 2011 for $216,000, on which day the retained earnings of Y were $54,000.

On 31 December 2011 the company’s Statements of Financial Position were as follows:

What amount should appear for retained earnings in the consolidated statement of financial position?

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

11. A business received a delivery of goods on 27 October 2011, which was included in inventory at 31 October 2011. The invoice for the goods was recorded in November 2011.

What effect will this have on the business?

1. Profit for the year ended 31 October 2011 will be overstated.
2. Inventory at 31 October 2011 will be understated
3. Profit for the year ending 31 October 2012 will be overstated.
4. Inventory at 31 October 2011 will be overstated.

12. Vine 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 was $24,000, but was increased to $30,000 from 1 July 2005.

What amounts for rent should appear in the company’s financial statements for the year ended 31 January 2006?

13. A non-current asset was purchased at the beginning of Year 1 for $2,400 and depreciated by 20% per annum using the reducing balance method. At the beginning of year 4 it was sold for $1,200.

The result of this was:

14. Recording a payment for motor insurance by debiting the motor vehicles at cost account would result in:

15. Edwin owns 75% of Drood and sold goods to Drood for $19,200 during the year. The goods were sold at a mark-up of 25%.

50% of these goods were still held by Drood at the year end.

What is the amount of the provision for unrealised profit adjustment necessary for the consolidated accounts?

16. Peter acquired 70% of the share capital of Paul on 1 January 2009 for $120,000, on which date the retained earnings of Paul stood at $36,000.

The fair value of the non-controlling interest at the date of acquisition was $96,000.

On 31 December 2011 the company’s Statements of Financial Position were as follows:

What amount should appear for non-controlling interest in the consolidated statement of financial position?

17. Alpha acquired 100% of the share capital of Beta on 1 September 2005 for $144,000, on which day the retained earnings of Beta were $34,560 and the fair value of the non-current assets was $36,000 more than their carrying value.

On 31 August 2011 the company’s Statements of Financial Position were as follows:

What amount should appear for retained earnings in the consolidated statement of financial position?

18. Part of a company’s Statement of Cash Flows is shown below:

The following criticisms of the above extract have been made:

1) Depreciation charges should have been added, not deducted

2) Increase in inventory should have been added, not deducted

3) Increase in payables should have been deducted, not added

4) Proceeds of sale of non-current assets should not appear in this part of the Statement of Cash Flows

Which of these criticisms are valid?

19. At 1 December 2005, Laurel owed sales tax to the state of $23,778. During the month of December, she had the following transactions:

• sales of $800,000 exclusive of 17.5% sales tax
• purchases of $590,790 inclusive of sales tax

During December she had paid no tax to the state.

How much did Laurel owe to the state for sales tax at the end of December?

20. “The share premium and the revaluation reserve are both revenue reserves. However the retained earnings are capital reserves.”

The above statement is:

21. Which of the following characteristics of financial information contribute to reliability, according to the IASB’s Framework for the Preparation and Presentation of Financial Statements?

1. Completeness
2. Prudence
3. Neutrality
4. Faithful representation

22. Which of the following accounts would be expected to have a debit balance at the end of the year?

23. The following bank reconciliation statement has been prepared by a trainee accountant at 31 December 2005:

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

24. Which of the following would a decrease in the allowance for receivables result in?

25. Jolly acquired 90% of the share capital of Roger on 1 January 2010 for $51,840. Roger was incorporated on that date.

On 31 December 2012 the company’s Statements of Financial Position were as follows:

What amount should appear for non-controlling interest in the consolidated statement of financial position?

26. Bass Co extracted a trial balance and discovered that the total of the debit balances was $420 less than the total of the credit balances. A suspense account was opened for this amount.

The following errors were subsequently discovered:

1. A cash sale for $80 had been entered correctly in the cash account, but no entry had been made in the sales account
2. A debit entry for $100 in an account had been incorrectly recorded as a credit of $700

 After correction of these errors, what is the balance on Bass Co’s suspense account?

27. A manufacturing company receives an invoice on 29 February 2002 for work done on one of its machines. $25,500 of the cost is actually for a machine upgrade which will improve its efficiency.

The accounts department do not notice and charge the whole amount to maintenance costs. Machinery is depreciated at 25% per annum on a straight line basis, with a proportional charge in the years of acquisition and disposal.

By what amount with the profit for the year to 30 June 2002 be understated?

28. According to the illustrative financial structure in IAS 1 Presentation of Financial Statements, dividends paid during the year should be disclosed in:

29. Willy provides the following information about his business:

The value of inventory was the value left after a fire had destroyed much of the inventory.

What was the cost of inventory lost in the fire?

30. A business received a delivery of goods on 29 June 2007, which was included in inventory at 30 June 2007.

The invoice for the goods was recorded in July 2007.

What effect will this have had on the business?

1) Profit for the year ended 30 June 2007 will be overstated

2) Inventory at 30 June 2007 will be understated

3) Profit for the year ended 30 June 2008 will be overstated

4) Inventory at 30 June 2007 will be overstated

31. Jolly acquired 90% of the share capital of Roger on 1 January 2010 for $51,840. Roger was incorporated on that date.

On 31 December 2012 the company’s Statements of Financial Position were as follows:

What amount should appear for retained earnings in the consolidated statement of financial position?

32. The accounts of Mandy plc for the year ended 31 December 2011 include the following information:

What is the current ratio?

33. A company owns a number of properties which are rented to tenants. The following information is available for the year ended 30 June 2007:

Cash received from tenants during the year ended 30 June 2007 was $1,669,200.

All rent in arrears was later received.

What figure should appear in the company’s Income Statement for rent receivable for the year ended 30 June 2007?

34. Hussy Co has 20,000 50c shares in issue (each issued for $1.25) and makes a 1 for 4 bonus issue, capitalising the share premium account.

What are the balances on the share capital and share premium accounts after this transaction?

35. Andrea started her business by transferring her car, worth $5,000, into the business.

What are the accounting entries required to record this?

36. The debit side of a company’s trial balance totals $4,608 more than the credit side.

Which one of the following errors would fully account for the difference?

37. Which TWO of the following items must be disclosed in the note to the financial statements for intangible assets?

1. The useful lives of intangible assets capitalised in the financial statements
2. A description of the development projects that have been undertaken during the period
3. A list of all intangible assets purchased or developed in the period
4. Impairment losses written off intangible assets during the period

38. Peter acquired 70% of the share capital of Paul on 1 January 2009 for $120,000, on which date the retained earnings of Paul stood at $36,000.

The fair value of the non-controlling interest at the date of acquisition was $96,000.

On 31 December 2011 the company’s Statements of Financial Position were as follows:

What amount should appear for goodwill in the consolidated statement of financial position?

39. Wanda has the following working capital ratios:

Which of the following statements is NOT correct?

40. At 1 July 2005, a company’s receivables amounted to $838,000. It was decided to write off $72,000 of these debts and adjust the allowance for receivables to $60,000.

What are the final amounts for inclusion in the company’s Statement of Financial Position at 30 June 2006?

41. On 1 September 2011, Plaice Co was owed $132,000 by credit customers, During the year to 31 August 2012, credit sales totalled $1,470,480; discounts allowed totalled $8,400; irrecoverable debts totalled $1,920; and dishonoured cheques totalled $15,600.

On 31 August 2012 the balance on Plaice Co’s receivables account was $150,120.

What was the amount received from credit customers during the year ended 31 August 2012?

42. The accounts of Mandy plc for the year ended 31 December 2011 include the following information:

What is the gross profit percentage?

43. Trout Co acquired 70% of the ordinary share capital of Perch Co six years ago. The following information relates to Perch Co for the year ended 30 September 2010.

Sales revenue: $1,152,000 Cost of sales: $648,000 Administration expenses: $216,000 Taxation: $72,000

What is the profit attributable to the non-controlling interest in the consolidated income statement?

44. Which of the following items does not appear under the heading ‘reserves’ on a company’s Statement of Financial Position?

45. An error of principle will result in the trial balance failing to balance.

Is this statement true or false?

46. Which of the following items should be disclosed in the notes to the financial statements?

1. Reconciliation of carrying amounts of non-current assets at the beginning and end of period
2. Useful lives of assets or depreciation rates used
3. Increases in asset values as a result of revaluations in the period
4. Depreciation expense for the period

47. On 31 December 2010, Allysum estimated the tax charge for 2010 to be $230,000. The actual charge turned out to be $222,000 and this was paid in 2011.

On 31 December 2011, the tax charge for 2011 has been estimated as $265,000.

What amounts should appear in the financial statements at the end of 2011?

48. A fire on 31 December destroyed some of a company’s inventory and its inventory records.

The following information is available:

Inventory at 1 December:  763,200

Sales for December:  1,468,800

Purchases in December:  988,800

Inventory in good condition at 31 December : 513,600

The standard gross profit percentage on sales in 25%

Based on this information, what is the value of the inventory lost?

49. The debit side of a company’s trial balance totals $1,000 more than the credit side.

Which one of the following errors would fully account for the difference?

50. A company issued 1 million ordinary $1 shares at a premium of 50c per share. The proceeds were correctly recorded in the cash account, but were incorrectly credited to the sales account.

Which of the following journal entries will correct the error?