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Financial Accounting (International Stream)

Final Mock Examination

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Final Mock Examination

Question Paper

Time allowed 2 hours

All questions are compulsory and MUST be attempted

Instructions:
Please attempt this exam under test conditions and attach the frontsheet complete with your name and address
to your script. The completed package should be sent to BPP Marking Department.
Take a few moments to review the notes on the inside of this page titled, ‘Get into good exam habits now!’ before
attempting this exam.

DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER
EXAMINATION CONDITIONS
Get into good exam habits now!
Take a moment to focus on the right approach for this exam.

Effective time management

The following steps are recommended for answering multiple choice and objective test questions.

Step 1 Note down how long you should allocate to each question. For this paper you will be answering
50 questions in 120 minutes, so you will be spending on average 2.5 minutes on each 2 mark
question and 1 minute on 1 mark question. Remember however that you will not be expected to
spend an equal amount of time on each of them and that some can be answered instantly but
others will take time to work out.

Step 2 Attempt each question. Read the question thoroughly.

Step 3 To answer a multiple choice question read the four options and see if one matches your own
answer. Be careful with numerical questions, as the distracters are designed to match answers
that incorporate common errors.

Step 4 If you are unsure of your answer

• Re-read the question to ensure you understand it and are answering the requirement
• Eliminate any obviously wrong answers
• Consider which of the remaining answers is the most likely to be correct and select
the option

Step 5 If you are still unsure, continue to the next question. Likewise if you are nowhere near working
out which option is correct after a couple of minutes, leave the question and come back to it later.

Step 6 Revisit questions you are uncertain about. When you come back to a question after a break you
often find you are able to answer it correctly straight away. If you are still unsure have a guess.
You are not penalised for incorrect answers, so never leave a question unanswered!

2
All FIFTY questions are compulsory
1. G Co has made annual purchases of $116,000 and over the same period its inventories have risen by
$16,000. Assuming that G Co enjoys a gross profit margin of 12.5%, what is the total value of credit
sales if cash sales account for 15% of turnover?

A $67,750

B $95,625

C $97,143

D $140,625
(2 marks)

2. On 31 May 2008 the balance on Dean’s receivables ledger control account was $21,480. During the
month of May, the following transactions had occurred:

$
Cash sales 4,160
Credit sales 19,950
Payables ledger contra 1,025
Sales returns 105
Discounts allowed 910
Discounts received 720
Cheques received from credit customers 20,370
Refunds paid to credit customers 490

What was the balance on the control account on 1 May 2008?

A $19,290

B $21,190

C $23,450

D $24,430
(2 marks)

3
3. The balance on Daniel’s payables ledger control account on 1 February 2008 was $3,590. During the
month the following transactions occurred:

$
Returns inwards 460
Returns outward 310
Cash paid to suppliers 5,390
Purchases on credit 6,260
The cash paid included an amount of $1,150 in full settlement of an invoice for $1,170.

What should appear as the balance on the payables ledger control account on 28 February 2008?

A $3,980

B $4,130

C $4,150

D $4,750
(2 marks)

4. The following figures were extracted from the records of Duncan & Co as at 30 June 2008:

Receivables ledger control account 20,770

Total per listing of receivables ledger balances 20,320

Which of the following errors could have led to this discrepancy?

A A credit note for $450 was omitted from the sales day book

B The receivables ledger column in the cash receipts book which totalled $4,830 was posted to the
receivables ledger control account as $4,380

C An invoice for $270 was entered in the sales day book as $720

D A credit balance of $225 in the receivables ledger was listed as a debit

(2 marks)

4
5. The balance sheet of Denzil Limited as at 1 October 2007 included the following:
Cost Accumulated Net book
Depreciation value
$ $ $
Motor vehicles 98,000 31,360 66,640
During the year, the company purchased a new van for a cash payment of $15,400 plus the trade in
allowance on an old van which had cost $14,000 and had a net book value at 1 October 2007 of $6,160.

The company made a loss of $1,680 on the trade in and the total depreciation charge on motor vehicles
for the year was $20,100.

What is the net book value of motor vehicles as at 30 September 2008?

A $55,780

B $56,340

C $60,260

D $68,100
(2 marks)

6. Amy Banks has been trading for 5 months. The period end cash account shows a balance of $14,950.
This does not agree to the bank statement. Further analysis shows that:

i) the bookkeeper has forgotten about a $10 monthly direct debit

ii) a cheque for $350 from a customer has been returned by the bank as dishonoured

iii) further cheques amounting to $495 have been received but not yet cleared by the bank.

What is the balance on the bank statement?

A $14,055

B $14,550

C $14,855

D $15,045
(2 marks)

7. Craig undervalued his inventory at 1 July 2007 by $1,500 and overvalued his inventory at 30 June 2008
by $620. As a result his profit for the year ended 30 June 2008 was

A understated by $880

B overstated by $880

C understated by $2,120

D overstated by $2,120
(2 marks)

5
8. Dogma Ltd had the following balances on the trial balance as at 31 December 2008:

$
Receivables 90,350
Specific allowance at 1 January 2008 750
General allowance at 1 January 2008 2,500
The accountant then discovered the following:

The specific allowance related to J James who has since paid his debt in full. A debt relating to F Smith
of $500 is considered irrecoverable and should be written off. There is some uncertainty concerning two
customers who owe $225 and $625 respectively and it is decided that an allowance should be made
against these balances. A general allowance of 2% of all remaining receivables is to be maintained.

What is the total allowance for receivables at 31 December 2008?

A $1,765

B $2,615

C $2,632

D $2,647
(2 marks)

9. The following transactions were recorded in the books of Arthur Co during one week in August 2008:

$
Purchases on credit (excluding sales tax) 5,760
Sales on credit (including sales tax) 6,627
Payment to suppliers 4,310
Purchase of a motor car (including sales tax) 5,875
Sales tax is at a rate of 17.5%. Sales tax on motor vehicles cannot be reclaimed.

If the balance on the sales tax control account was $2,063 credit at the beginning of the week what is the
balance at the end of the week?

A $2,084 credit

B $2,042 credit

C $1,961 credit

D $1,167 credit
(2 marks)

6
10. A change in accounting policy requires the prior year financial statements to be restated but the
correction of an error is recorded in the year that the error is discovered.
Is the above statement correct?
A Yes

B No
(1 mark)

11. Which of the following is not an example of the accounting concept of accruals?

A Depreciation

B Writing inventory down from cost to NRV

C Prepayments
(1 mark)

12. Which of the following items should be included when calculating the cost of an item of inventory?

A Selling price

B Carriage in

C Carriage out
(1 mark)
13. Magpie Ltd has reviewed its receivables ledger for the year ended 31 May 2008 and has provided you
with the following information:

(i) Receivables at the year end are $108,520

(ii) A specific allowance is to be made against two customer balances totalling $3,200

(iii) A general allowance of 5% should be made against all remaining balance

(iv) The allowance for receivables at 31 May 2007 was $7,300.

The following adjustment should be made to bad debts expense in the income statement:

A $1,166 credit

B $1,166 debit

C $1,874 credit

D $1,874 debit
(2 marks)

7
14. The bookkeeper at Solo Co has been trying to perform the bank reconciliation for the month to 31 July
2008 and has discovered the following differences:

Unrecorded lodgements $24,075

Outstanding cheques $15,030
Items on the bank statement not in the cash book:

Date Description Amount

$
15 Jul 08 Direct debit 409
29 Jul 08 Interest charged 324
2 Aug 08 Direct debit 302

In addition it has been discovered that a credit entry of $350 has been entered as a debit entry in the
cashbook in error. The current balance on the cashbook is $29,324 Cr.
The corrected cashbook balance at 31 July 2008 for Solo Co should be:

A $30,057 Cr

B $30,757 Cr

C $31,059 Cr

D $36,006 Cr
(2 marks)

15. The bookkeeper at Tinto Ltd is having difficulty reconciling the payables ledger with the payables ledger
control account (PLCA) at 31 May 2008. The following problems have been identified:

1 The PLCA column in the cashbook has been undercast by $439.

2 A purchase invoice for $325 (excluding sales tax) has been omitted from the payables ledger.
3 A credit note for $700 (excluding sales tax) has been entered twice in the payables ledger.
Sales tax is calculated at a rate of 15%.
Dealing with the above issues should result in the following adjustment being made to the payables
ledger balance:

A a decrease of $439

B an increase of $765

C an increase of $1,025

D an increase of $1,179
(2 marks)

8
16. Lola, Darth and Obi are in partnership and share profits in the ratio 3:2:1. In addition Obi and Darth have
an annual salary of $30,000 each. During the year ended 31 August 2008 the partnership made a profit
of $43,000.

How much of the profit for the year is appropriated to Obi?

A $27,167

B $30,000
(1 mark)

17. Hawaii & Co started trading on 1 October 2007 and has a gross profit margin of 24%. They made sales
of $92,325 during the 10 months ended 31 July 2008, and know that the purchases made during the
same period were $89,300; however, they lost details of the inventory counted at the end of the period.

The closing inventory for the period should have been:

A $14,845

B $19,133
(1 mark)

18. A cash sale of $5,712 including sales tax at 12% has been treated as a receipt from a credit customer in
error.

The journal entry to correct this is:

Dr Cr

$ $

A Sales 5,100
Sales tax 612
RLCA 5,712
B RLCA 5,712
Sales tax 612
Sales 5,100
C Sales 5,712
Sales tax 685
RLCA 6,397
D RLCA 6,397
Sales tax 685
Sales 5,712
(2 marks)

9
19. The bookkeeper at Magic Carpet has prepared the trial balance as at 30 June 2008.

The trial balance balances, however the bookkeeper is still not confident that all the entries are correct.

This could be due to:

1 items not being entered in the accounting records

2 incorrect analysis
3 omission of an accrual

A 1 only

B 1 and 2

C 2 and 3

D all of the above

(2 marks)

20. Hurdy Ltd issued $150,000 of 7% debentures on 1 May 2007. By the year ended 31 December 2007
Hurdy had paid interest of $7,000 in respect of the debentures.

The adjustment required at the end of the year is:

A Dr Interest $875
Cr Accruals $875

B Dr Interest $3,500
Cr Accruals $3,500

C Dr Prepayments $ 3,500
Cr Interest $3,500
D No adjustment is necessary
(2 marks)

21. Over the last financial year, the purchase price of Puffin’s main manufacturing components has been
falling consistently. If he were to use weighted average inventory valuation method as compared to a first
in, first out (FIFO) method this would result in

A a lower inventory asset on the balance sheet but higher cost of sales

B a lower inventory asset on the balance sheet and lower cost of sales

C a higher inventory asset on the balance sheet and higher cost of sales

D a higher inventory asset on the balance sheet but lower cost of sales
(2 marks)

10
22. Which of the following errors would result in a trial balance imbalance?

(i) No opening inventory journal has been posted although the closing inventory adjustment has
been made correctly.

(ii) The total column of the final month’s cash payments book was miscast before it was posted to the
nominal ledger.

(iii) Cash paid for the purchase of a van was debited to the motor expenses account.

A None of the above

B (i) and (ii)

C (ii) only

D All of the above

(2 marks)

23. The payables ledger balances of Lyric Co at 31 March totalled $18,170, which did not agree to the
balance on the payables ledger control account. The discrepancy was eliminated after adjustments were
made for the following errors identified by the reconciliation:

(i) the discounts received column in the cash payments book had been undercast by $1,000.

(ii) a debit balance of $2,270 had been included as a credit on the payables ledger listing.

What was the original balance on the payables ledger control account prior to the reconciliation?

A $12,630

B $13,630

C $14,630

D $23,710
(2 marks)

24. In a company’s cash flow statement, a revaluation of property, plant and equipment during the year will
be

A shown as an adjustment to cash generated from operations

B disclosed under cash flows from investing activities

C entirely excluded
(1 mark)

11
25. The following information relates to James Co; which has a June year end.

2008 2007
$ $
Property, plant & equipment @ NBV 13,658 6,694
During the year ended 30 June 2008, the business disposed of property, plant & equipment for $2,316
that resulted in a net loss of $184. Depreciation charged in the income statement for the year was $1,192
and property, plant & equipment were revalued by $5,000 during the year.

What are the effects on the following?

Cash generated Cash flows from

from operations investing activities
$ $
A + 1,192 - 5,656

B + 1,008 + 2,316

C - 1,376 - 5,656

D + 1,376 - 3,340
(2 marks)

26. An entity’s issued share capital consists of 500,000 ordinary shares of 10c each and 100,000 8%
preference shares of $1 each. Profit for the year 2008 amounted to $135,000. The directors resolved to
transfer $12,000 to a plant replacement reserve and have paid an interim dividend of $6,000. If retained
earnings brought forward on 1 January 2008 were $212,000, calculate the balance of retained earnings
carried forward at 31 December 2008.

A $103,000

B $267,000

C $321,000

D $345,000
(2 marks)

27. If the owner of a business takes goods from inventory for his own personal use, the accounting concept
or principle to be considered is the

A prudence principle

B accruals concept

C separate entity concept

(1 mark)

12
28. Financial accounts differ from management accounts in that they

A are prepared monthly for internal control purposes

B contain details of costs incurred in manufacturing

C are summarised and prepared mainly for external users of accounting information

D provide information to enable the trial balance to be prepared

(2 marks)

29. X Co purchases a machine for $3,700. The cost of transporting the machine to the company's premises is
$212. The costs of pre-operational testing are $190. After its first week in use it breaks down and repair
costs are $175 and $200 for a maintenance contract for future repairs.

X Co depreciates machines at 20% on a reducing balance basis with a full year’s charge in the year of
acquisition.

What is the net book value of the machine which should be shown in the balance sheet at the end of the
first year?

A $2,960

B $3,130

C $3,282

D $3,422
(2 marks)
30. In order for the information in financial statements to be reliable it should possess the following
characteristics:
A Neutrality

B Consistency

C Both of the above

(1 mark)

13
31. A business has the following transaction to post. What double entry should it record?

The business received payments from its customers of $5,875 and made payments of $4,230 to its
suppliers. Discounts received and allowed were $150 and $180 respectively.

A Dr Cash 1,645
Dr PLCA 4,080
Dr Discounts received 150
Cr RLCA 5,695
Cr Discounts allowed 180
B Dr Cash 1,645
Dr RLCA 2,405
Dr Discount allowed 180
Cr PLCA 4,080
Cr Discounts received 150
C Dr Cash 1,645
Dr PLCA 4,380
Dr Discounts allowed 180
Cr RLCA 6,055
Cr Discounts received 150
D Dr PLCA 4,380
Dr Discounts allowed 150
Cr RLCA 2,735
Cr Cash 1,645
Cr Discounts received 150

(2 marks)

32. A business has net assets at 31 December 2006 and 31 December 2007 of $26,500 and $25,300
respectively. During the year ended 31 December 2007 the proprietor of the business:

(a) introduced $11,000 of additional capital to the business; and

(b) withdrew $8,500 for his personal living expenses.

What profit or loss was made by the business in 2007?

A $1,300 profit

B $1,300 loss

C $3,700 loss

D $18,300 loss
(2 marks)

14
33. Which of the following errors would give rise to a difference on an entity’s trial balance?

A Undercast of the sales day book by $1,000

B Failure to record the purchase of new plant and machinery cost $5,000

C The posting of a payment of $2,000 for directors fees to the nominal ledger account for office
salaries

D Recording the opening balance on an investment account of $11,500 as $15,100

(2 marks)

34. A sole trader who runs a newsagents business makes up his accounts each year to 31 May. His rent is
payable quarterly in advance on 1 January, 1 April, 1 July and 1 October. Rates are paid each year in
advance in two equal instalments on 1 April and 1 October.

His annual rental for the calendar years 2006 and 2007 was $4,800 and $5,400 respectively but on 1
January 2008 this was increased to $6,000 per annum. Local authority rates for the last three years have
been:
$
2006/07 3,600
2007/08 3,900
2008/09 4,200
In preparing his accounts for the year ended 31 May 2008 what would be the charge to the income
statement for rent and rates?

A $6,100

B $7,070

C $8,750

D $9,600
(2 marks)

35. Jones, a butcher, occupies premises whose rent is fixed every year on 1 February. On 1 February 2007
his annual rent was fixed at $20,000 payable quarterly in advance on the following dates:

1 February, 1 May, 1 August, 1 November.

The rent for the previous year from 1 February 2006 had been $16,000. The rent for the year from 1
February 2008 is fixed at $24,000. Jones always pays rent on time.

What is his charge for rent for the year ended 31 December 2007?

A $20,000

B $19,666

C $21,333

D $18,333
(2 marks)

15
36. Wellington Co is an internet company which sells wet weather hiking gear. At the end of the year, it has
the following items in inventory:

Item Cost Sales price

$ $
Waterproof Jackets 21,300 47,000
Green Wellies 27,450 27,200
Woolly Hats 15,900 16,500
Wellington dispatches all goods to customers within 5 working days. Distribution costs borne by the
company amount to 5% of the cost of the item.

At the year end, inventory should be recorded at:

A $62,832

B $63,027

C $64,455

D $64,650
(2 marks)

37. Which of the following items would appear in the ‘cash flows from financing activities’ section of a cash
flow statement?

(i) repayment of bank loan

(ii) purchase of shares (in an unrelated company)
(iii) bonus issue of shares
(iv) dividend received

A (i) only

B (i) and (ii)

C (i), (ii) and (iii)

D all of the items

(2 marks)

16
38. Hills and Roberts are partners in a racing business. Originally, they each contributed $9,600 capital and
agreed to share profits as follows:

Interest on capital - 11% per annum

Salary - Roberts, $2,400 per annum
Profit sharing ratio - Hills 2/3
- Roberts 1/3

The profit for the year to 31 December 2007 was $14,880. Hills’ current account showed a credit balance
of $3,672 at 31 December 2007 ($1,608 at 1 January 2007). How much did Hills draw from the business
during the year to 31 December 2007?

A $4,848

B $5,904

C $7,504

D $10,032
(2 marks)

39. Joshua is a budding businessman who operates from two retail outlets, both of which are rented.

Joshua is preparing his accounts for the year ended 30 June 2008 but is not sure how much to include in
his income statement for rental expense.

He gives you the following information.

Premises 1 Premises 2
$ $
Rent owed 30 June 2007 3,500
Rent prepaid 30 June 2007 4,900
Rent paid in the year 14,000 17,500
Rent owed at 30 June 2008 1,750
Rent prepaid at 30 June 2008 700

How much is his rental expense?

A $29,050

B $31,150

C $31,850

D $33,950
(2 marks)

17
40. Which of the following statements is true?

A Partners’ salaries have the same effect in the accounts of a partnership as have directors’ salaries
in the accounts of a limited company.

B Interest on drawings in the books of a partnership has the same effect as debenture interest in a
limited company.

C The balance on the current accounts in a partnership is equivalent to the balance on the retained
earnings in a limited company.

D Loans made by partners to their business are treated identically to loans made by sole traders to
their business.
(2 marks)
41. Which of the following sentences BEST describes the difference between capital and revenue
expenditure?

A Capital expenditure is always where a business acquires a new non-current asset, whereas
revenue expenditure is when it pays for rates.

B Revenue expenditure is shown in the income statement, whereas capital expenditure is shown in
the balance sheet.

C Capital expenditure must be depreciated, whereas revenue expenditure isn’t.

D Capital expenditure relates to expenses that will benefit the business on a continuing basis,
whereas revenue expenditure is used in the period when it is incurred.
(2 marks)

42. Lolly Co had the following transactions during the year ended 31 December 2008.

$
Credit sales 97,300
Returns outwards 4,900
Cash received 71,800
Discounts received 2,100
Credit notes issued 5,400

The balances brought forward at 1 January 2008 for receivables and the allowance for receivables were
$105,000 and $8,000 respectively.

Assuming Lolly Co requires a closing allowance of 5% of receivables, the bad and doubtful debts
expense for the year will be:

A $1,745 debit

B $1,745 credit

C $1,990 debit

D $1,990 credit
(2 marks)

18
43. Connor’s bookkeeper is inexperienced and made the following errors in September.

Payments totalling $113 were posted to the telephone expense account as $311 and proceeds for the
disposal of a non-current asset of $1,769 were posted to the disposals account as $1,796.

The entries required to correct this are:

A Dr Suspense 225
Cr Disposals 27
Cr Telephone 198
B Dr Disposals 27
Dr Suspense 171
Cr Telephone 198
C Dr Disposals 27
Dr Telephone 198
Cr Suspense 225
D Dr Telephone 198
Cr Suspense 171
Cr Disposals 27

(2 marks)

44. Hawk’s financial year end is on 31 March. He purchased a machine on 1 April 2004 for $44,600 and
began charging depreciation on the assumption it would have a useful life of 8 years after which its
residual value would be $3,000. Depreciation is charged on a straight line basis.

Hawk realised on 1 April 2007 that he would only use the machine for a further two years.

The depreciation charge for this machine in the year ended 31 March 2008 is

A $8,320

B $13,000

C $14,500

D $17,680
(2 marks)

19
45. Guy Ltd has the following share capital for the years 2007 and 2008.

2007 2008
$ $
$1 Ordinary shares 1,800 5,000
Share premium account - 700
1,800 5,700
During the year, the company had an issue of shares at full market price after a 1 for 3 bonus issue.

What amount appears in the cash flow statement under “Cash flows from financing activities”?

A $3,300

B $3,200

C $3,900

D $Nil
(2 marks)

46. Which of the following costs is included in the definition of the cost of inventory?

1. trade discounts

2. conversion costs incurred

3. further costs to completion

A 2

B 2 and 3

C 1 and 2

D all of the above

(2 marks)

47. Pot Co purchased an item of machinery for $10,000 in 2006 and the useful life was estimated to be 5
years, with no residual value, and depreciation was provided on the straight-line basis in 2006 and 2007.
In 2008, its total useful life was revised to 4 years and the straight-line basis of depreciation was
maintained.

The effect of this revision on the profit for 2008 was:

A an increase of $1,000

B an increase of $500

C a decrease of $500

D a decrease of $1,000
(2 marks)

20
48. Which of the following criteria must be met if a provision is to be recognised in the financial
statements?

1 The entity has a possible obligation arising out of a past event or transaction

2 It is possible that an outflow of economic resources will be required to settle the obligation

3 A reliable estimate of the obligation can be made

A 1 and 3 only

B 2 and 3 only

C 3 only

D All three
(2 marks)

49. Which of the following material events after the balance sheet date would be adjusted for in the financial
statements?

A The discovery of a material error in the financial statements

B The announcement of the closure of part of the business after the year end
(1 mark)

50 Consider the following statements:

1 Laboratory equipment purchased for the purpose of carrying out research and development is an
intangible non-current asset

2 Capitalised development costs must be amortised over a period which matches to the expected
sales revenue

Which of the statements are false?

A 1 only

B 2 only

C Neither statement
(1 mark)

21
22
MULTIPLE CHOICE ANSWER SHEET FOR MOCK EXAMINATION
Please detach and return with your script
REQUIREMENT: Place a line through the letter (A, B, C or D) that gives the correct answer to each sub-
question.
If you wish to change your mind about an answer, cross out your first attempt and then place a line through
another letter. If you do not indicate clearly your final choice, or if you line more than one letter, no mark will be
awarded for the sub-question concerned.

Name: .......................................................................... Exam date: .............................................................

Company: ..................................................................

1 A B C D 26 A B C D
2 A B C D 27 A B C D
3 A B C D 28 A B C D
4 A B C D 29 A B C D
5 A B C D 30 A B C D
6 A B C D 31 A B C D
7 A B C D 32 A B C D
8 A B C D 33 A B C D
9 A B C D 34 A B C D
10 A B C D 35 A B C D
11 A B C D 36 A B C D
12 A B C D 37 A B C D
13 A B C D 38 A B C C
14 A B C D 39 A B C D
15 A B C D 40 A B C D
16 A B C D 41 A B C D
17 A B C D 42 A B C D
18 A B C D 43 A B C D
19 A B C D 44 A B C D
20 A B C D 45 A B C D
21 A B C D 46 A B C D
22 A B C D 47 A B C D
23 A B C D 48 A B C D
24 A B C D 49 A B C D
25 A B C D 50 A B C D

23
Student self-assessment
Having completed this exam, take a few minutes to consider what you did well and what you found difficult. Use
this as a basis to focus your future study on effectively improving your performance.

Common problems Future emphasis if you answer Yes

Timing and planning

Did you finish too early?
Did you overrun?
Y/N Go back and check your answers, especially those you were
unsure of.
Y/N Focus on allocating your time better.
Practise questions under strict timed conditions.
If you get behind move on.

Content
Did you struggle with:
Interpreting the questions?
Understanding the subject?
Remembering the notes/text?
Y/N Learn subject jargon (look at key terms in your Study Text).
Read questions carefully.
Practise as many questions as possible.
Y/N Review your notes/text.
Work through easier examples first.
Contact your tutor for further help.
Y/N Quiz yourself constantly as you study. You need to develop your
memory as well as your understanding of a subject.

Note here any thoughts on your performance which could help you on the big day.

24
ACCA
Paper F3
Financial Accounting
(International Stream)

Final Mock Examination

Commentary and solutions

ACF3FM08 INT
Guidance on improving your exam performance
To help improve your performance you should focus on these key areas.
1 Terminology
This paper tests your understanding of a large number of key terms and definitions. Learning as many of
these as you can will help save you time in the exam which you can use to answer questions that require
more thought. Your Study Text provides you with assistance by highlighting these terms and definitions.
2 Question spotting
Avoid the temptation to question spot or to assume certain areas of the syllabus will be examined in a
particular way. Ensure you are able to answer questions across the syllabus in a number of question
styles as this will maximise the number of questions that you will be able to attempt successfully.
3 What went wrong?
OK, you’re not going to get 100% correct, but pay attention when you consistently get certain areas of the
syllabus wrong. This is your cue to revise these areas fully, learn from your mistakes, and try not to
repeat them!

Solutions
1 C 16 B 31 C 46 C

2 C 17 B 32 C 47 D

3 B 18 B 33 D 48 C

4 B 19 D 34 D 49 A

5 C 20 D 35 B 50 A

6 A 21 D 36 A

7 D 22 C 37 A

8 B 23 C 38 B

9 B 24 C 39 D

10 B 25 D 40 C

11 B 26 C 41 D

12 B 27 C 42 B

13 B 28 C 43 B

14 B 29 C 44 B

15 D 30 A 45 A

2
Workings
1. C

Sales 100% Sales ∴ 100 )

114,286 (100,000 x 87 .5
Cost of sales 87.5% Cost of sales 116,000 – 16,000
Gross profit 12.5%

∴ Credit sales = 114,286 x 85% = 97,143

2. C
Receivables Ledger Control Account

$ $
∴ Balance b/d 23,450 Payables ledger contra 1,025
Credit sales 19,950 Sales returns 105
Bank - refunds 490 Discounts allowed 910
Bank 20,370
Balance c/d 21,480
43,890 43,890

3. B
Payables Ledger Control Account

$ $
Returns 310 B/d 3,590
Bank 5,390 Purchases 6,260
Discount received 20
C/d 4,130
9,850 9,850

4. B

A and C would affect both the RLCA and the total of the receivables ledger balances.

D would result in receivables ledger total being $450 higher than the RLCA.

3
5. C
Cost

$ $
B/d 98,000 Disposals (W) 14,000

Additions - Bank 15,400 C/d 103,880

- Trade in (W) 4,480
117,880 117,880

Accumulated Depreciation

$ $
Disposals (W) 7,840 B/d 31,360

Depreciation 20,100
C/d 43,620
51,460 51,460

NBV = $103,880 – $43,620 = $60,260.

(W) Disposal $

Cost 14,000
∴ Accumulated depreciation (7,840)
NBV 6,160
∴ Trade in allowance 4,480
Loss on disposal 1,680

6. A
Cash Account

$ $
Bal b/d 14,950 5 months direct debit 50
Dishonoured cheque 350

Bal c/d 14,550

14,950 14,950

$
∴ Balance per bank statement β 14,055
Outstanding lodgements 495
Balance per adjusted cash account 14,550

7. D
$
1,500 overstatement
620 overstatement
2,120

4
8. B
Receivables

B/f 90,350 Bad debt expense 500

Cash received 750
C/f 89,100
90,350 90,350

$
Adjusted receivables 89.100
Less specific allowance (850)
($225 + $625)
88,250

General allowance @ 2% $1,765

Closing allowance for receivables at 31.12.08 is: $850 + $1,765 = $2,615

9. B
Sales tax control account

$ $
Sales tax on purchases 1,008 Balance b/d 2,063
(5,760 x 17.5%) Sales tax on sales 987
(6,627 x 17.5/117.5)
Balance c/d 2,042
3,050 3,050

10. B

11. B

This is an example of prudence.

12. B

A - The selling price relates to the net realisable value of inventory rather than the cost.

C - This is a selling and distribution expense and not part of the cost.

5
13. B
$
Receivables 108,520
Less: specific allowance (3,200)
105,320
General allowance @ 5% 5,266

Required closing allowance 8,466

($3,200 + $5,266)
Opening allowance (7,300)
Increase required 1,166

14. B
$
Balance per cash book (29,324)
Direct debit (409)
Interest charged (324)
Correction of error (2 x $350) (700)
(30,757)

15. D

Adjustment PLCA Payables ledger

(1) (439)
(2) 374
(3) 805
(439) 1,179

16. B

Lola Darth Obi Total

$ $ $ $
Salary - 30,000 30,000 60,000
Share of loss (8,500) (5,667) (2,833) (17,000)
Profit for the year (8,500) 24,333 27,167 43,000

17. B

$
Sales 100% 92,325
COS 76% 70,167 = 92,325 ×76%
Gross profit 24%

COS:
Opening inventory Nil*
Purchases 89,300
Closing inventory ?
70,167

Closing inventory is therefore $19,133.

* Note there is no opening inventory as this is the first year of trading.

6
18. B
Did:
Dr bank 5,712
Cr RLCA 5,712

Should
Dr bank 5,712
Cr sales 5,100 (5,712 × 100/112)
Cr sales tax 612

Adjustment
Dr RLCA 5,712
Cr sales 5,100
Cr sales tax 612

19. D

20. D
$
Interest due $150,000 x 7% x 8/12 = 7,000
Interest paid 7,000
No adjustment required Nil

21. D
Under FIFO the closing inventory relates to the most recent purchases. Prices are falling and so the
FIFO closing inventory value would be lower than a weighted average price which would include the
higher materials costs from earlier in the year.
Using weighted average would therefore give a higher closing inventory value and a lower cost of sales
figure.

22. C (ii) would result in the credit entry (posted from the total column) differing from the total of debit
entries (posted from the analyses columns) ... giving an imbalance.

(i) (omitting a journal) and (iii) (debiting an expense instead of debiting non-current assets) would not
affect the balance of debits and credits.

7
23. C PLCA

$ $
CPB undercast 1,000 ∴ Balance b/d 14,630
Balance c/d 13,630
14,630 14,630

$
Total of payables ledger balances 18,170
Debit listed as credit (2 × $2,270) (4,540)
Balance per adjusted control account 13,630

24. C Revaluations do not involve cash movements and so are excluded from the cash flow statement.

25. D

Property, plant & equipment @ NBV

b/f 6,694
Disposals @ NBV (W) 2,500
Revaluation 5,000
Depreciation 1,192
∴ ADDITIONS 5,656
c/f 13,658
17,350 17,350

(W)
$
Proceeds 2,316
Loss on disposal 184
NBV at date of disposal 2,500

Cash flows from investing activities = ($5,656) + $2,316 = ($3,340) outflow

Cash generated from operations = $1,192 + $184 = $1,376

26. C
Retained earnings

$ $
Transfer to plant reserve 12,000 Balance b/d 212,000
Interim dividend on ord. shares 6,000 Profit for the year 135,000
Preference dividend 8,000
(8% x $100,000)
Balance c/d 321,000
347,000 347,000

27. C

28. C

8
29. C
Cost to be capitalised is 4,102
(3,700 + 212 + 190)
Dep’n @ 20% (820)
(4,102 × 20%)
NBV 3,282

30. A

31. C
Dr Cash (5,875 – 4,230) 1,645
Dr PLCA (4,230 + 150) 4,380
Dr Discounts allowed 180
Cr RLCA (5,875 + 180) 6,055
Cr Discounts received 150

32. C
$
Net assets @ 31.12.07 25,300
Net assets @ 31.12.06 26,500
Decrease in net assets (1,200)
Less additional capital (11,000)
Plus drawings 8,500
Loss for year (3,700)

33. D This is the only one where debits will not equal credits.

34. D
$
Rates
10 2
3,900 × + 4,200 × 3,950
12 12

Rent
7 5
5,400 × + 6,000 × 5,650
12 12
9,600

9
 1 2
35. B ( × 4,000) + 5,000 + 5,000 + 5,000 + ( × 5,000) = 19,666
3 3

36. A
Cost Sales price Dist’n costs NRV
$ $ $ $
Jackets 21,300 47,000 1,065 45,935
Wellies 27,450 27,200 1,373 25,827
Hats 15,900 16,500 795 15,705

Inventory is valued at the lower of cost and NRV and is: 21,300 + 25,827 + 15,705 = 62,832.

37. A

38. B

Hills Roberts Total

$ $ $
Interest on capital 1,056 1,056 2,112
Salary - 2,400 2,400
PSR 6,912 3,456 10,368
Total profit for the year 7,968 6,912 14,880

Hills’ current account

∴ Drawings 5,904 b/f 1,608
c/f 3,672 Appropriation 7,968
9,576 9,576

10
39. D

Premises 1 Premises 2
$ $
Paid in the year 14,000 17,500
Less rent owed at 30 June 2007 (3,500)
Less rent prepaid at 30 June 2008 (700)
Add rent prepaid at 30 June 2007 4,900
Add rent owed at 30 June 2008 1,750
9,800 24,150
Total = $33,950

40. C

41. D

42. B

Receivables
b/f 105,000 Cash rec’d 71,800
Sales 97,300 Credit notes 5,400
∴c/f 125,100
202,300 202,300
$
Receivables 125,100
General allowance @ 5% 6,255
Allowance needed 6,255
Opening allowance 8,000
Decrease in allowance 1,745
(credit to income statement)

11
43. B

Did:
Dr telephone 311
Cr bank 113
Dr bank 1,769
Cr disposal account 1,796
Should:
Dr telephone 113
Cr bank 113
Dr bank 1,769
Cr disposal account 1,769
Adjustment:
Dr disposal account 27
Dr suspense 171
Cr telephone 198

44. B
Accumulated depreciation at 1 April 2007:
44,600 - 3,000
x 3 = $15,600
8
Net book value (44,600 - 15,600) = $29,000
New depreciation charge
29,000 - 3,000
= $13,000
2
45. A
Share capital SPA
$ $
Beg. of year 1,800 -
BI 1:3 basis* 600 -
2,400 -
End of year 5,000 700
Increase due to mkt issue 2,600 700
Proceeds received: $2,600 + $700 = $3,300
* must come from reserves as b/f share premium is nil.

46. C

12
47. D
$
Original dep’n charge (10,000 ÷ 5 yrs) 2,000
10,000 - 4,000 *
Revised charge 3,000
2
Additional charge = reduction in profit 1,000
(* Depreciation charged 2 × 2,000)

48. C

49. A

50. A

13
14