Mock Test

Unit name: Accounting

Writing time: 1.5 hours

This examination is CLOSED BOOK. Calculators allowed

Instructions for candidates:

1. This paper consists of ONE section.

2. This paper carries 100 marks.
3. ALL QUESTIONS MUST BE ANSWERED on the answer booklet(s)
provided.

It is considered Academic Misconduct to:

1. Have reference materials, books, notes, own paper, or other material in your
possession. (Materials on or under your desk or chair or on your person are deemed
to be in your possession.)

2. Remove the examination paper from the examination room.

3. Copy any section of the examination paper.

NOTE: Mobile phones brought into the examination venue must be switched off
and placed under your desk. Any mobile phones found that have not been placed
under the desk will be considered in your possession and as such an act of Academic
Misconduct.

All candidates MUST complete this section:

Full Name:
1. Rose plc
Extracts from the financial statements for Rose plc for the year ended 31 August 20X4 are as
follows:
Statement of profit or loss for the year ended 31 August 20X4
£
Operating profit 77,475
Investment income 3,000
Finance costs (22,000)
Profit before tax 58,475
Income tax (11,695)
Profit for year 46,780
Statements of financial position at 31 August
20X4 20X3
ASSETS £ £
Non-current assets
Property, plant and equipment 2,450,000 2,550,000

Current assets
Inventories 127,000 135,000
Trade receivables 155,000 149,000
Investments 65,000 10,000
Cash at bank 6,042 78,637
Total assets 2,803,042 2,922,637

EQUITY AND LIABILITIES

Equity
Equity share capital (£1 shares) 650,000 500,000
Share premium 120,000 100,000
Retained earnings 1,662,467 1,750,687

Non-current liabilities
Borrowings 150,000 312,000

Current liabilities 220,575 259,950

Total equity and liabilities 2,803,042 2,922,637
Additional information

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(1) An analysis of property, plant and equipment shows the following.
20X4 20X3
£ £

Cost 3,669,000 3,800,000

Depreciation (1,219,000) (1,250,000)
2,450,000 2,550,000
(2) During the year Rose plc purchased additional machinery for £309,000, while machinery
with a carrying amount of £220,000 was disposed of for £225,000.
(3) Investment income of £3,000 was received from the investments held by Rose plc.
(4) Included in trade payables at 31 August 20X4 are dividends payable of £15,000. The
equivalent figure for 20X3 is £30,000.
(5) On 1 September 20X3 Rose plc made a 1 for 5 bonus issue from retained earnings.
(6) Current liabilities
20X4 20X3
£ £
Tax payable 43,000 56,000
Trade payables 125,500 134,650
Accruals 45,825 64,300
Accrued interest 6,250 5,000
220,575 259,950
(7) Included in trade receivables is £20,000 which relates to the disposal of machinery.
(8) The investments held by Rose plc are highly liquid and are therefore classed as cash
equivalents.
Requirement
Prepare a statement of cash flows for the year ended 31 August 20X4 in accordance with IAS 7.
Rose plc
Statement of cash flows for the year ended 31 August 20X4
£
Cash flows from operating activities
Profit before tax
Investment income
Finance costs
Depreciation
Gain/loss on sale of property, plant and equipment
Movement in inventories
Movement in trade receivables
Movement in trade payables
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 Movement in accruals
Cash generated from operations
Tax paid
Interest paid
Net cash from/used in operating activities

Cash flows from investing activities

Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Interest received
Net cash from/used in investing activities

Cash flows from financing activities

Proceeds from issue of shares
Movement in borrowings
Dividends paid
Net cash from/used in financing activities

Net increase/decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Please follow the directions on the exam question sheet.
Fill in the entire circle that corresponds to your answer for each question on the exam. Erase
marks completely to make a change.

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2 Tanga plc is preparing its financial statements as at 31 December 20X9. Its ledger account
balance for subscription income includes £15,730 subscriptions received in 20X9 in respect
of 20X8.
Tanga plc should enter a journal with two entries of £15,730 as:
A a credit entry to the deferred income (liability) account
B a credit entry to the subscription income account
C a debit entry to the subscription income account
D a credit entry to the accrued income (asset) account
E a debit entry to the deferred income (liability) account
F a debit entry to the accrued income (asset) account
3 Brassie plc has an allowance for receivables of £1,200 on 1 October 20X4. During the
reporting period ending 30 September 20X5 the following events take place:
(1) A cheque for £106 previously received and included in the cash at bank account was
returned unpaid on 29 September 20X5. The amount was correctly credited to the cash
at bank account but the other side of the transaction was debited to the suspense
account. The directors wish to write the debt off as irrecoverable.
(2) An allowance of £1,500 is required at the year end.
(3) A cheque received for £36 in respect of an amount written off in August 20X4 was
debited to the cash at bank account and credited to the suspense account.
What journal entries are required as at 30 September 20X5?
A Dr Trade Receivables £106; Dr Irrecoverable debts expense £264; Cr Suspense account
£70; Cr Allowance for receivables £300
B Dr Irrecoverable debts expense £370; Cr Allowance for receivables £300;
Cr Suspense account £70
C Dr Suspense account £70; Dr Irrecoverable debts expense £200;
Cr Allowance for receivables £300
D Dr Irrecoverable debts expense £406; Cr Allowance for receivables £300;
Cr Suspense account £70; Cr Trade receivables £36
4 As at 30 November 20X8 Briggs plc had accrued administrative expenses of £1,589 and
prepaid administrative expenses of £746. On 1 December 20X8 the bookkeeper processed
the following opening journal: Credit Accruals £1,589, Debit Prepayments £746, Debit
Administrative expenses £843.
During the reporting period to 30 November 20X9 cash was paid in respect of administrative
expenses of £54,123 and was correctly posted to the administrative expenses account. At the
end of the reporting period, Briggs plc's bookkeeper correctly processed closing journals to

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 set up an accrual of £2,745 and a prepayment of £1,669 in respect of administrative
expenses.
Which of the following journals should Briggs plc process as at 30 November 20X9 to
correct the three accounts?
A Dr Accruals £1,589; Cr Prepayments £746; Cr Administrative expenses £843
B Dr Administrative expenses £1,686; Dr Prepayments £1,492; Cr Accruals £3,178
C Dr Administrative expenses £843; Dr Prepayments £746; Cr Accruals £1,589
D Dr Accruals £3,178; Cr Prepayments £1,492; Cr Administrative expenses £1,686
5 In relation to accounting for partnerships, which two of the following statements are true?
A Goods taken by a partner from the business are treated as appropriations of profit
B Interest on drawings by a partner is an expense in the partnership's profit and loss
account
C Interest on a partner's loan capital is an expense in the partnership's profit and loss
account
D Drawings by a partner are debited in the current account
E In the absence of a partnership agreement, under the Partnership Act 1890 salaries of
£5,000 are due to partners
6 The following statements have been made by a colleague about accounting for partnerships:
Statement 1: Partners' salaries affect neither the amount of profit for the year available for
appropriation, nor the partnership's cash position.
Statement 2: Interest on partners' drawings affects the amount of profit for the year available
for appropriation but not the partnership's cash position.
Identify whether these statements are true.
A Statement 1 is true but Statement 2 is false.
B Statement 1 is false but Statement 2 is true.
C Both Statement 1 and 2 are true.
D Neither Statement 1 nor Statement 2 are true.
7 Lemon plc draws up financial statements to 31 December in each year. It pays telephone line
rental charges for each year ending 30 April in two equal instalments, on 1 May and
1 November, in advance. It also pays telephone call charges quarterly in arrears at the end of
February, April, July and November. The total telephone line rental for the year to
30 April 20X4 was £6,300. Telephone call charges for the year commencing 1 July 20X3
were £5,820.
What were Lemon plc's prepayment for line rental and accrual for call charges in its
statement of financial position at 31 December 20X3?
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 A Prepayment for line rental £2,100; Accrual for call charges £485
B Prepayment for line rental £1,575; Accrual for call charges £485
C Prepayment for line rental £1,575; Accrual for call charges £970
D Prepayment for line rental £2,100; Accrual for call charges £970
8 In relation to distribution costs Levi plc has paid £11,794 in the period ended
31 October 20X9. The company's distribution costs accruals need to be £107 more than at 31
October 20X8, and prepayments need to be £78 more.
What is the amount of distribution costs in Levi plc's statement of profit or loss for the year
ended 31 October 20X9?
A £11,269
B £11,327
C £11,765
D £11,823
9 Wombat plc is a retailer that rents its premises; its only non-current assets are fixtures and
fittings. The company has been experiencing trading problems for some time. The directors
have concluded that the company is no longer a going concern and have changed the basis of
preparing the financial statements to the break-up basis.
Which of the following will be the immediate effect of changing to the break-up basis?
A All fixtures and fittings are transferred from non-current to current assets
B Fixtures and fittings are valued at their purchase cost
C The company ceases to trade
D A liquidator is appointed
10 George plc acquired a new truck on 1 February 20X7 for £79,680 including VAT. The
company depreciates all vehicles straight line at 25% per annum on a monthly basis.
What is the carrying amount of George plc's truck at 31 July 20X7?
A £49,800
B £58,100
C £66,400
D £69,720
11 Winston started a trading business on 1 July 20X6 with capital of £50,000. In his first year
of trading he made a profit for the year of £28,000, selling goods at a margin on sales of
60%. He injected additional capital of £10,000 in the year and withdrew a monthly amount
of £500 for his living expenses. He also took drawings from inventories of goods with a
resale value of £6,400. The business had no inventories at the year end.

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 What were Winston's net assets at 30 June 20X7?
A £23,440
B £78,160
C £79,440
D £84,940
12 Hedges plc, a clothing retailer, depreciates all vehicles monthly over four years. On
31 December 20X4 Hedges plc bought a car at a cost of £21,000 plus VAT, trading in an old
car that had cost £17,760 including VAT on 1 December 20X2. A cheque for £11,900 was
also handed over.
In respect of this disposal in its statement of profit or loss for the reporting period ended
31 October 20X5 Hedges plc will show a profit of:
A £4,790
B £4,415
C £2,008
D £590
13 Quizzle plc has share capital of 500,000 £1 shares at 1 January 20X0. These were issued at
£1.30 per share. On 31 December 20X0 Quizzle plc made a three for five bonus issue.
Before accounting for this the balance on retained earnings at 31 December 20X0 was
£484,000.
What is Quizzle plc's retained earnings balance at 31 December 20X0?
A £184,000
B £334,000
C £434,000
D £484,000
14 At the end of its first year of trading on 30 September 20X4, Sage plc's net assets are
£185,621. There are no non-current assets. It has share capital of £30,000 made up of 50p
equity shares issued at £1 each, and retained earnings of £105,621. There have been no other
entries in share premium other than those in relation to the original share issue.
In relation to Sage plc's statement of financial position at 30 September 20X4, which of the
following statements is true?
A It has other reserves of £50,000.
B It has share premium of £20,000.
C It has other reserves of £20,000.
D It has share premium of £50,000.

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15 Tennant plc is preparing its statement of profit or loss for the year ended 30 June 20X7. On
the initial trial balance at that date distribution costs have a debit balance of £125,000 before
accounting for depreciation and profits/losses on disposal in respect of the company's
vehicle fleet. At 30 June 20X6 Tennant plc had vehicles that cost £564,810, all of which had
been purchased on 1 July 20X5, and it had accumulated depreciation of £188,270. A vehicle
costing £15,000 was sold on 1 July 20X6 for £8,500. Vehicles are depreciated monthly over
three years.
The amount to be disclosed as distribution costs in Tennant plc's statement of profit or loss
for the year ended 30 June 20X7 is:
A £183,270
B £306,770
C £309,770
D £314,770
16 Vargo plc is finalising its financial statements as at 30 June 20X4. In its initial trial balance
at that date Vargo plc has a figure for tax payable as at 1 July 20X3 of £32,810. The total tax
charge in the statement of profit or loss for the year to 30 June 20X4 is £35,450, and tax paid
in the year was £31,960.
The tax payable balance that will appear in Vargo plc's statement of financial position as at
30 June 20X4 is:
A £29,320
B £34,600
C £35,450
D £36,300
17 Redman plc is finalising its financial statements as at 30 April 20X2. On 1 January 20X1 the
company paid an annual membership fee of £15,000 for the 12 months ended
31 December 20X1. A 10% increase in this subscription is expected, but has not been
finalised at 30 April 20X2.
In its statement of financial position at 30 April 20X2 Redman plc will include:
A a prepayment of £11,000
B a prepayment of £5,500
C an accrual of £11,000
D an accrual of £5,500

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18 Crane plc is finalising its financial statements as at 31 December 20X5. Relevant initial trial
balance figures are as follows:
£
Trade and other payables (excluding interest paid or payable) 149,630
8% debentures as at 1 January 20X5 500,000
Crane plc issued further 8% debentures of £200,000 at par on 1 October 20X5, repayable at
par in ten years' time. No interest was outstanding at 1 January 20X5, and the company paid
interest in respect of debentures of £40,000 in 20X5.
The trade and other payables figure that will appear in Crane plc's statement of financial
position as at 31 December 20X5 is:
A £153,630
B £165,630
C £193,630
D £205,630
19 As at 1 June 20X8 Fara plc had 200,000 25p equity shares, which it issued in 20X2 at 80p
each fully paid. It also had 100,000 £1 5% irredeemable preference shares issued at par in
20X3. On 31 January 20X9 Fara plc made a further issue of 50,000 £1 irredeemable 5%
preference shares at £1.20 fully paid. On the same date Fara plc made a 1 for 5 bonus issue
of equity shares. Fara plc wishes to use the share premium in respect of the bonus issue.
In its statement of financial position as at 31 May 20X9 Fara plc will have share premium
of:
A £100,000
B £110,000
C £120,000
D £150,000
20 Palin plc had fixtures with a carrying amount at 1 July 20X5 of £48,000. On that date it
traded in fixtures which had cost £12,000 on 1 July 20X3 for new fixtures which cost
£18,000, handing over a cheque in full settlement for £3,000. Palin plc depreciates fixtures
at 30% per annum on the reducing balance.
How much depreciation will be charged in Palin plc's statement of profit or loss for the year
ended 30 June 20X6 in respect of fixtures held at that date?
A £18,036
B £19,800
C £46,200
D £60,120

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21 On 1 April 20X6 Newman plc purchased a machine at a price of £50,000. It cost £2,000 to
transport the machine to Newman plc's premises and set it up, plus £500 incurred in training
staff to operate the machine. The machine had a useful life of five years and a residual value
of £5,000. On 31 March 20X8, the directors of Newman plc decided that the machine was
impaired and assessed the recoverable amount to be £31,500.
What is the carrying amount of Newman plc's machine in its statement of financial position
at 31 March 20X8?
A £33,200
B £32,000
C £31,500
D £27,300
22 Nazrim, a sole trader preparing his financial statements under UK GAAP, has the following
information at the start and end of his second year of trading:
At 31 March At 1 April
20X3 20X2
£ £
Fixed assets (net book value) 35,200 21,000
Stock 10,400 7,200
Trade debtors 11,980 8,450
Trade creditors 8,210 5,640
Cash in hand 1,100 300
During the reporting period Nazrim introduced £1,000 capital. He took stock for his own use
that cost £200, and paid himself £800 per month.
What is Nazrim's profit or loss for the reporting period ended 31 March 20X3?
A £10,360 loss
B £27,960 profit
C £33,100 profit
D £36,760 profit
23 Walt plc's statement of profit or loss for the year to 31 August 20X4 shows an income tax
expense of £67,920. In its statement of financial position at that date tax payable is £54,740.
During the reporting period Walt plc paid HMRC £50,000 in respect of income tax for the
year ended 31 August 20X3, but subsequently received a refund from HMRC for £3,000.
At 31 August 20X3 Walt plc's income tax payable balance in its statement of financial
position was:
A £33,820 B £36,820
C £47,000 D £60,180

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24 Joshua plc had the following amounts in its statement of financial position at 30 June 20X8
and 30 June 20X9:
20X9 20X8
£ £
Inventory 15,310 18,200
Trade receivables 23,900 22,400
Cash at bank 3,700 3,200
Trade payables 16,700 19,600
Profit before tax was £18,600 for the year ended 30 June 20X9 and the depreciation charge
was £4,320. What was the cash generated from operations for the year ended
30 June 20X9?
A £24,430
B £12,770
C £21,410
D £15,790
25 A business has a profit before tax of £50,000 after charging depreciation of £5,000. A
non-current asset had been sold for £20,000. Its carrying amount was £17,000 and the profit
or loss on disposal is included in operating profit.
Inventory increased by £8,000, trade receivables increased by £3,000 and trade payables
decreased by £4,000. What was the cash generated from operations?
A £37,000
B £63,000
C £33,000
D £45,000

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