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Which journal entry will correct the errors?  

 

 Dr 

Cr 

A 

Bank interest paid 

$768 

 

 

Bank interest received 

 

$592 

 Suspense 

account 

 

$176 

B 

Bank interest paid 

$88 

 

 

Bank interest received 

$88 

 

 Suspense 

account 

 

$176 

C 

Bank interest paid 

$680 

 

 

Bank interest received 

 

$680 

D 

Bank interest paid 

$384  

 

Bank interest received 

 

$296 

 Suspense 

account 

 

$88 

 

(2 marks) 

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           PRACTICE QUESTION BANK 

 

500

 

67 

Marcia Blane, a sole trader, extracted the following trial balance on 31 December 20X2. 

TRIAL BALANCE AS AT 31 DECEMBER 20X2 

 

Dr 

Cr  

 

$ 

$ 

 Capital at 1 January 20X2 

 

  26,100 

 Receivables 

  41,000 

 

 Cash in hand 

  2,802 

 

 Payables 

 

 34,500 

 Fixtures and fittings at cost 

  42,200 

 

 Discounts received 

 

  1,200 

 Inventory at 1 January 20X2 

  18,460 

 

 Sales 

 

 487,550 

 Purchases 

  379,590 

 

 Motor vehicles at cost 

  45,730 

 

 Lighting and heating 

  6,100 

 

 Motor expenses 

  3,250 

 

 Rent 

  10,750 

 

 General expenses 

  9,475 

 

 Bank overdraft 

 

  20,100 

 Accumulated depreciation 

 

 

 

Fixtures and fittings 

 

  2,200 

 Motor 

vehicles 

 

  15,292 

 Drawings 

   27,585 

               

 

 586,942 

 586,942 

The following information as at 31 December is also available. 

(1) 

$520 is owing for motor expenses 

(2) 

$450 has been prepaid for rent 

(3) 

Depreciation is to be provided for the year as follows: 

 

Motor vehicles: 20% on cost 

 

Fixtures and fittings: 10% reducing balance method 

(4) 

Inventory at the close of business was valued at $20,250 

(5) 

Marcia took some goods costing $800 from inventory for her own use. The normal selling price 

of the goods is $1,600    

Required 

(a) 

What is the net effect on profit of the adjustments in notes (1) to (3) above?  (6 marks)    

(b) 

Which of the following journal entries would correctly record the transaction in note (5)?  

 

 

Dr Cr 

  

$ 

$ 

A Drawings 

account 

800 

 

 Inventory 

account 

 

800 

B Drawings 

account 

800 

 

 Purchases 

account 

 

800 

C Sales 

account 

1,600 

 

 Drawings 

account 

  1,600 

D Inventory 

account 

 

1,600 

 Drawings 

account 

1,600 

 

 

(2 marks) 

(c) 

Prepare Marcia's statement of financial position as at 31 December 20X2. 

(7 marks) 

Total marks for the question 

(15 marks) 

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PRACTICE QUESTION BANK 

 

501 

68 

Which of the following calculates a sole trader's closing net assets?  

A 

Opening net assets – drawings + capital introduced + profit 

B 

Opening net assets + drawings + capital introduced + profit 

C 

Opening net assets + drawings – capital introduced – profit 

D 

Opening net assets – drawings – capital introduced + profit  

 

(2 marks) 

69 

A fire on 30 September destroyed some of a company's inventory and its inventory records. The 

following information is available. 

 

$ 

Inventory at 1 September       

318,000 

Sales for September 

612,000 

Purchases for September      

412,000 

Inventory in good condition at 30 September   

214,000 

Standard gross profit percentage on sales is 25%.  

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

A $96,000 

B $271,000 

C $26,400 

D $57,000 

 

(2 marks) 

70 

Bob is a sole trader. He has calculated a cost of sales figure for the year, which is $342,000. 

Bob received a payment of $8,030 into the business bank account for goods sold on a special 

deal to Harry and this amount has been included within sales. The figure of $8,030 was 

calculated by adding a mark-up of 10% to the cost of the goods. His gross profit percentage on 

all other goods sold was 20% of sales. 

What is the total figure of sales for the year? 

A $401,640 

 

B $402,370 

C $418,375 

 

D $426,405 

 

(2 marks) 

71 

Ossie does not keep full accounting records. The last accounts drawn up show that his capital 

balance was $51,980. At the year end he calculated that his assets and liabilities at 30 June 

20X0 were: 

 

$ 

Non-current assets 

51,300 

Inventory 7,770 

Receivables 5,565 

Payables 3,994 

Bank overdraft 

3,537 

On reviewing his calculations, you note that there were no entries made in relation to rent for 

June 20X0 because the rent for June 20X0 was paid on 1 July 20X0. Rent is $500 per month. 

What is the value of Ossie's closing capital? 

A $51,980 

B $56,604 

C $57,604 

D $63,678 

 

(2 marks) 

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           PRACTICE QUESTION BANK 

 

502

 

72 

Patience is trying to work out her cost of sales for the year ended 31 December 20X9. 

She has the following details for supplier and inventory balances. 

 

At 1 January 20X9 

At 31 December 20X9 

Suppliers $15,264 

$16,812 

Inventory $6,359 

$4,919 

In the year to 31 December 20X9, Patience's payments to suppliers totalled $141,324. 

What was Patience's cost of sales for the year to 31 December 20X9? 

A  

$149,231 

B  

$144,312 

C  

$142,872 

D  

$141,432 

 

(2 marks) 

73 

Should dividends paid appear on the face of a company's statement of profit or loss?  

A Yes 

 

B No 

 

 

(1 mark) 

74 

Which of the following journal entries are correct, according to their narratives?  

 

 Dr 

Cr 

  

$ 

$ 

1 Suspense 

account 

18,000  

 Rent 

received 

account 

 

18,000 

 

Correction of error in posting $24,000 cash received for rent to  

 

the rent received amount as $42,000 

2 

Share premium account 

400,000 

 

 

Share capital account 

 

400,000 

 

1 for 3 bonus issue on share capital of 1,200,000 50c shares 

3 

Trade investment in X 

750,000 

 

 

Share capital account 

 

250,000 

 

Share premium account 

 

500,000 

 

500,000 50c shares issued at $1.50 per share in exchange for 

 

shares in X 

A 

1 and 2  

B 

2 and 3  

C 

1 only  

D 

3 only  

 

(2 marks) 

75 

Which of the following should appear in a company's statement of changes in equity?  

1 

Profit for the financial year 

2 

Dividends proposed during the year 

3 

Surplus on revaluation of non-current assets 

A 

All three items 

B 

2 and 3 only 

C 

1 and 3 only 

D 

1 and 2 only 

 

(2 marks) 

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PRACTICE QUESTION BANK 

 

503 

76 

Lorel Co, a limited liability company, has the following capital structure. 

Share capital 

$'000 

50c ordinary shares  

 45,000 

Share premium 

   60,000 

 

 105,000 

The company made a bonus issue of two shares for every three shares held, using the share 

premium account for the purpose.  

What was the company's capital structure after the bonus issue?  

 

Ordinary share capital 

Share premium account 

 $ 

$ 

A 60,000 

45,000 

B 75,000 

30,000 

C 105,000 

nil 

D 112,500 

(7,500) 

 

(2 marks) 

77 

Which of the following statements is/are correct? 

1 

IAS 1 requires that some items must appear on the face of the statement of financial 

position. 

2 

IAS 1 requires that a company must present a combined statement of profit or loss and 

other comprehensive income. 

A 1 

only 

B 2 

only 

C 

Both 1 and 2 

D 

Neither 1 or 2 

 

(2 marks) 

78 

Where are the following items shown in a company's financial statements?  

1 

Gains on property revaluations 

2 Dividends 

paid 

3 

Bonus issue of shares 

Statement of profit or loss and other  

      comprehensive income                               Statement of changes in equity 

A 

1 and 2 only 

 2 and 3 only 

B 

1 and 3 only 

 1 and 2 only 

C 

1 only 

 1, 2 and 3 

D 

1 only 

 2 and 3 only 

 

(2 marks) 

79 

Which of the following is/are required for disclosure of revalued assets in a company's financial 

statements? 

1 

The methods and significant assumptions applied in estimating the value   

2 

Whether an independent valuer was involved in the valuation 

3 

How certain the directors are that the valuation will not change in the next five years 

A 1 

only 

B 

1 and 2 only  

C 2 

only 

D 

All three are required 

 

(2 marks) 

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           PRACTICE QUESTION BANK 

 

504

 

80 

The following trial balance for ABC Ltd is extracted at 31 December 20X1. 

 

Dr Cr 

 

$      

$      

Sales  

341,726 

Purchases  

202,419 

 

Carriage inwards 

376 

 

Carriage outwards 

729 

 

Wages and salaries 

54,210 

 

Rent and rates 

12,466 

 

Heat and light 

4,757 

 

Inventory at 1 January 20X1 

14,310 

 

Dividends paid  

28,500 

 

Receivables 49,633 

 

Payables  

32,792 

Bank  

3,295 

Sundry expenses 

18,526 

 

Cash 20,877 

 

Share capital 

 

20,000 

Reserves  

8,990 

 406,803 

406,803 

Closing inventory is 15,327. 

(a) 

Gross profit for the year is $ ___________________ 

(3 marks) 

(b) 

Profit before tax for the year is $ _________________ 

(4 marks) 

(c) 

Net assets are $ _________________ 

(2 marks) 

(d) 

The directors of ABC Ltd are considering refinancing. Where should the following be 

classified in a company's statement of financial position at 31 December 20X1? 

1 

An overdraft balance of £55,000 

2 

A loan from a bank due for repayment in full in July 20X3 

 

Current liabilities   

Current assets  

Non-current liabilities 

A (1) 

– 

(2) 

B 

(1) and (2) 

– 

– 

C (2) 

 

(1) 

– 

D 

– 

– 

(1) and (2) 

 

 

 

 

 

(2 marks) 

(e) 

Which of these transactions would not increase a company's retained earnings for the 

year? 

A 

Revaluation of a freehold factory from $140,000 to $250,000 

B 

Receipt of $5,000 from a receivable previously written off 

C 

Receive discounts of $1,000 from a supplier 

D 

Sell a car for $6,000 which cost $10,000 and has been depreciated by $4,500 

 

(2 marks) 

(f) 

ABC's tax charge for the year is $5,000 and $10,000 is to be transferred to a non-current 

asset reserve. A final dividend of 5c per ordinary share is proposed. 

The retained earnings for the year is $_____________. 

(2 marks) 

Total marks for the question 

(15 marks) 

 

 

 

 

 

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PRACTICE QUESTION BANK 

 

505 

81 

Which material events after the reporting period should be disclosed in the notes to financial 

statements according to IAS 10 Events after the reporting period? 

A Adjusting 

events 

B Non-adjusting 

events 

(1 mark) 

82 

H has prepared its financial statements for the year ending 30 June 20X8. On 15 July a major 

fraud was uncovered which had taken place during the year to 30 June. On 31 July the company 

made a bonus issue of shares that significantly increased the number of shares in issue.  

In accordance with IAS 10 Events after the reporting period, how should the two events be 

treated in the financial statements?  

 

Fraud 

Bonus share issue 

A 

Accrued in accounts 

Disclosed in notes 

B 

Accrued in accounts 

Accrued in accounts 

C 

Disclosed in notes 

Disclosed in notes 

D 

Disclosed in notes 

Accrued in accounts 

(2 marks) 

83 

The following material events take place after the reporting date of 31 December 20X1 and 

before the financial statements for Tapenade Co are approved. 

1 

Barroles Co, a major customer of Tapenade Co, went into liquidation. Tapenade Co has 

been advised that it is highly unlikely to receive any of the outstanding debt of $150,000 

owed by Barroles at the year end.  

2 

A fire occurred in the warehouse of Tapenade Co and stock costing $75,000 was 

destroyed. 

Adjustments are made in the financial statements as required by IAS 10 Events after the 

reporting date.  

What is the effect on profit for the year in the financial statements at 31 December 20X1 of 

making the required adjustments?  

A 

Reduction of $150,000 

B 

Reduction of $75,000 

C 

Reduction of $225,000 

D  

No effect on profit 

(2 marks) 

84