Paper F3
 

ACCA
 

Financial Accounting

Mock Exam 2
 

Answers
(Duration: 3 hours)
LSAM
 
 Mock Exam - 2 (Answers)

ANSWER 1

Receivables ledger control account

$ $
Opening balance b/d 43,000 Opening balance b/d 1,000
Sales 150,000 Bank (payments) 130,000
Bank (refunds) 1,100 Discounts allowed 700
Sales returns 1,400
Closing balance (net) 61,000
_______ _______
194,100 194,100
_______ _______

Opening balance (net) 61,000

ANSWER 2
A
$000
Closing cost 420
Less: Opening depreciation 144
Disposals (12)
___
(___
132)
288
___

Depreciation charge 20% u 288 for the year = 57.6

Motor vehicle – Accumulated depreciation account

$000 $000
Disposals 12 Opening balance b/d 144
Depreciation expense
Closing balance (Statement of
c/d 189.6
_____ comprehensive income) 57.6
_____
201.6 201.6
_____ _____

LondonSAM 1 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 3
D

The opening number of shares will be 800,000 ($400,000/$0.50).

The bonus number of shares would be 1,600,000 (800,000 u 2)
The value of the bonus issue would result in $800,000 (1,600,000 u $0.50)
The share capital would increase by the value of the bonus.

Reduce the share premium by a maximum of $300,000 and the balance of $500,000 will be
taken against the accumulated profits.

This would preserve the accumulated profits for dividend distribution.

The double entry will be as follows:

$000
Dr Share premium 300
Dr Accumulated profits 500
Cr Share capital 800

ANSWER 4
C
Current account – Mack
$ $
Opening balance b/d 1,000 Salary 12,000
Interest on drawings 5,000 Interest on capital 3,000
Drawings 90,000 Share of profits during the 110,000
year
Balance c/d 29,000
_______ _______
125,000
_______ 125,000
_______

Balance b/d 29,000

ANSWER 5
B

The petty cash records cash transactions.

ANSWER 6
C

(ii) Single entry

(iii) Casting error of a ledger account
(vi) Two debit entries

would result in the total debits not equalling the credit balances, therefore leading to an
adjustment to the suspense account.

LondonSAM 2 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 7
B
$
Balance per bank statement 41,200
Add: Bank error – bank incorrectly debited another customer's cheque 1,500
Less: Outstanding cheques presented after date (40,100)
Add: Deposits credited after date 28,100
______
Balance per cash book 30,700
______

ANSWER 8
B

(ii) The Financial Reporting Review Panel is not part of The Regulatory Framework for
International Accounting Standards. It is part of the UK Regulatory Framework.

ANSWER 9
B
$
Payments for the purchase of new motor vehicles (16,000)
Proceeds from the sale of motor vehicle (23,000 + 5,000) 28,000
______
Net cash inflow 12,000
______

ANSWER 10
D
$
Receivables (before any adjustments) 269,000
Bad debts to be written off (9,000)
Specific allowances (16,000)
_______
244,000
_______
Closing general allowances to be 10% u 244,000 = 24,400
Specific allowances 16,000
_______
Total allowances 40,400
Opening allowances (41,000)
_______
Decrease in allowances (600)
Irrecoverable debts 9,000
_______
Net charge to the statement of comprehensive income 8,400
_______

Thus this is the amount debited to the statement of comprehensive income.

LondonSAM 3 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 11

Price Value
Units $ $
1st Opening inventory 100 2.10 210
4th Purchases 700 2.60 1,820
8th Sales (600)
15th Purchases 900 2.70 2,430
28th Sales (___
910)
31st Closing inventory 190
___

Under FIFO the closing inventory will be valued at the latest price:

$513 (190 u $2.70)

ANSWER 12
C
Sales tax
$ $
Sales tax on purchases (input 295,000 Bal b/d 22,000
tax)
Bank (payment of opening 22,000 Sales tax on sales (output 250,000
sales tax balance) tax)
Sales tax on sales returns 10,000
Bal c/d 55,000
_______ _______
327,000 327,000
_______ _______

Bal b/d 55,000

ANSWER 13
D

$ $ %
Sales 2,200,000 110
Cost of sales
Opening inventory 590,000
Purchases 1,820,000
Closing inventory (390,000)
Destroyed inventory (ȕ) (20,000)
________
(________
2,000,000) 100
___
Gross profit 200,000
________ 10
___

LondonSAM 4 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 14
A

ANSWER 15
C

Rent
$ $
Bal b/d (opening prepayment) 100
Bank 1,200 SOCI (balance) 1,180
Bal c/d (1/3 u $360) 120
_____ _____
1,300
_____ 1,300
_____

Bal b/d (1/3 u $360) 120

(closing prepayment)

ANSWER 16
B

To correct transaction B would require the following entry:

Dr Bank $80
Cr Suspense $80

Thus the suspense account will be reduced.

The correction of transaction C would increase the suspense account difference.

Transactions A and D will not affect the suspense account.

ANSWER 17
D

The $90,000 should be capitalised and depreciated in accordance with IAS 16. The
remainder of $630,000 should be written off during the year in accordance with IAS 38.

LondonSAM 5 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 18
A

Revalued amount $500,000

Less: NBV ($780,000 í $540,000) $240,000
________
Revaluation reserve $260,000
________

Therefore:

Dr Accumulated depreciation $540,000

Cr Building cost $280,000
Cr Revaluation reserve $260,000

ANSWER 19
D

The gross profit is not affected by the discount received. Therefore any error in recording the
discount received will not affect the gross profit.

ANSWER 20
A

The inventory is valued at the lower of cost or net realisable value (NRV). NRV is determined
after deducting the commission.

Product A $1,200
Product B (6,100 u 95%) $5,795
Product C (930 u 95%) $884
______
$7,879
______

ANSWER 21
B

The historical cost concept will understate asset values since the assets will be recorded at
original cost. This cost will generally be lower than the current value, especially regarding
assets such as land and buildings.

The depreciation on the assets will be based on the original cost, which is lower than if the
depreciation is based on the current value.

LondonSAM 6 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 22
D
$
December 2006 (1/3 u $15,000) 5,000
January – March 20X7 15,000
April – June 20X7 18,000
July – September 20X7 18,000
October and November 20X7 (2/3 u $18,000) 12,000
______
Rent receivable – statement of comprehensive income 68,000
______

The rent received for December 20X7 is an item of prepaid income (credit balance) received
in advance for 1/3 u $18,000 = $6,000.

ANSWER 23
C

$
Payables ledger control account balance 42,000 Cr
(i) Less – purchase return day book under cast (2,000) Dr
(ii) Add – credit purchase invoice omitted 2,600 Cr
______
Adjusted balance 42,600 Cr
______

Total of the individual purchase ledger balances 41,500

(ii) Add – credit purchase invoice omitted 2,600
(iii) Less – Credit balances incorrectly stated as debit (2 u $500) 1,000
______
Adjusted balance 45,100
______

ANSWER 24
R S T
Original profit share 120,000 50,000 50,000
GMPS 2/3:1/3 u $15,000 (10,000) 15,000 (5,000)
_______ ______ ______
Total 110,000 65,000 45,000
_______ ______ ______

GMPS = guaranteed minimum profit share

The partners guaranteeing the profit share will be allocated according to the remaining profit
share ratio of 2:1 (i.e. 2/3 and 1/3).

ANSWER 25
B

According to IAS 10 only items (i), (iv) and (v) are adjusting events.

LondonSAM 7 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 26
C

Statement 1
The money measurement concept is that items should only be recorded in the accounts if
their value can be identified in money terms.

Statement 2
Comparability does usually require consistency in accounting treatments from one period to
the next.

Statement 3
Financial information should be neutral, i.e. free from bias, although this sometimes conflicts
with the prudence concept.

Statement 4
Gains are increases in ownership not resulting from contributions from owners.
('Contributions from owners' means the introduction of new capital.)

ANSWER 27
B

ANSWER 28
D
$000
Retained profit for the year (92,000 – 70,000) 22,000
Add back:
Tax payable 28,000
Debenture interest payable (10% u 20,000) 2,000
______
Profit from operations 52,000
______

ANSWER 29
A

The statement of comprehensive income tax charge will include:

The current year’s tax estimated liability $60,000

Less overprovision of previous year’s tax ($50,000 – $20,000) ($30,000)
_______
Total tax charge $30,000
_______

The statement of financial position liability will be the current year’s estimated tax liability of
$60,000.

LondonSAM 8 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 30
B
Cost
Straight line method =
Expected useful life

$9,000
=
4

= $2,250

Reducing balance method

$
Cost 9,000
Depreciation 25% u 9,000 (year 1) 2,250
_____
NBV 6,750
Depreciation 25% u 6,750 (year 2) 1,688
_____
NBV 5,062
_____

ANSWER 31
B

(i) Share premium – is a capital reserve.

(ii) Accumulated profits – is a revenue reserve.
(iii) General reserves – is a revenue reserve.
(iv) Revaluation reserves – is a capital reserve.

ANSWER 32
D

The normal point of revenue recognition is when the goods are delivered to the customer and
he/she accepts them. This is due to the risks and rewards of ownership being transferred to
them. All the other statements are false.

ANSWER 33
A

When the sole trader withdraws goods for his own use then record the transaction at the cost
by increasing the drawings and reducing the purchases.

LondonSAM 9 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 34
Cash
$ $
Bal b/d 500 Cash banked 21,500
Cash sales (ȕ) 21,780 Cash expenses paid 230
Cash drawings 150
______ Bal c/d 400
______
22,280
______ 22,280
______

Bal b/d 400

ANSWER 35
D

Capital account – Hill

$ $
Share of goodwill 5,000 Cash/bank 80,000
(1/6 u $30,000)

Bal c/d 75,000

______ ______
80,000 80,000
______ ______

Bal b/d 75,000

ANSWER 36
B

The following is incorrect in:

A í A debit entry increases sales.

C í A credit entry reduces sales.
D í A debit entry reduces assets.

LondonSAM 10 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 37
C
Debit Credit
$000 $000
Capital 4,000
Sales 28,000
Purchases 26,000
Expenses 1,000
Assets 40,000
Liabilities 38,000
Suspense (ȕ) 3,000
______ í
______
70,000 70,000
______ ______

ANSWER 38
A

ANSWER 39
D
$
Receivables 269,000
Less: Further irrecoverable debts (9,000)
_______
260,000
Less: Closing allowance for receivables (10% u 260,000) (26,000)
_______
Closing net receivables 234,000
_______

ANSWER 40
A

ANSWER 41
A

Sales tax on sales í $329,000 u 17.5/117.5 = $49,000 owing

Sales tax on purchases í $290,000 u 17.5% = $50,750 recoverable
_______
The net recoverable = $1,750
_______

LondonSAM 11 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 42
C
Bank
$ $
Receipt from customer 385 Bal b/d 2,850
Bank charges 56
Bal c/d 2,521
_____ _____
2,906
_____ 2,906
_____

Bal b/d 2,521

ANSWER 43
B

The purchase cost is only after trade discount. Any cash/settlement discount is not deducted
from purchases but shown separately in the statement of comprehensive income as
discounts received.

ANSWER 44
D

Plant and machinery at cost of $28,875

(i) Delivery costs $1,500
(ii) Legal costs $875
(iv) Testing and training costs $3,100
______
Total capital expenditure $34,350
______

(iii) The maintenance contract for the next 3 years of $2,100 is to be treated as revenue
expenditure.

ANSWER 45
B

Old car profit ($6,000 í $5,500) $500

New car cost ($18,000 + $6,000) $24,000

ANSWER 46
$
Profit for the year 21,000
Depreciation 1,200
Increase in receivables (500)
Decrease in inventories 300
Increase in payables 600
Non-current assets sales proceeds 4,500
______
Decrease in cash and cash equivalents 27,100
______

LondonSAM 12 F3 - Financial Accounting

 Mock Exam - 2 (Answers)

ANSWER 47
D

Revenue can be recognised before payment is made by customers. This applies to credit
sales transactions.

ANSWER 48
A

The opening accumulated profits are normally restated when there is a prior period
adjustment.

ANSWER 49
C
$
Increase in shares (32,000 – 30,000) 2,000
Increase in share premium (4,000 – 1,000) 3,000
Repayment of 5% loan notes (34,000 – 40,000) (6,000)
_____
Net outflow (1,000)
_____

ANSWER 50
C

(1) is incorrect in that development costs should be capitalised if the criteria are satisfied.

(3) is incorrect because research expenditure must be written off to the statement of
comprehensive income in the period in which it is incurred.

(4) – development expenditure should be amortised from the period in which commercial
production commences.

LondonSAM 13 F3 - Financial Accounting