Professional Documents
Culture Documents
3int - 2007 - Jun - QUS CAT T3
3int - 2007 - Jun - QUS CAT T3
Maintaining
Financial Records
(International Stream)
INTERMEDIATE LEVEL
QUESTION PAPER
Please use the Candidate Registration Sheet provided to indicate your chosen answer to each multiple choice question.
Each question in this section is worth 2 marks.
3 After Toni prepared her draft accounts she discovered that she had incorrectly classified an item of revenue
expenditure as capital expenditure.
When the error is corrected, how will her net profit and capital be affected?
Net profit Capital
A increased reduced
B reduced increased
C increased increased
D reduced reduced
4 Jimi sold a machine which originally cost $14,900. At the date of the sale the accumulated depreciation on the
machine was $8,940. The sale proceeds were $7,455.
2
The following information relates to questions 5 and 6:
While carrying out the reconciliation of the balance on the payables control account in the general ledger with the list
of balances from the payables ledger, Celine discovered the following errors:
(i) a payment of $1,700 in full settlement of a balance of $1,714 was correctly recorded on the supplier’s account,
but only $1,700 was posted to the control account.
(ii) the total of the purchase day book was understated by $900.
(iii) a supplier’s credit note was incorrectly recorded in the daybook as an invoice.
(iv) no entries were made to record an arrangement to offset a balance of $620 against a balance in the receivables
ledger.
5 Which of the above errors require a correcting entry in the general ledger?
A (i) and (ii) only
B (ii) and (iii) only
C (iii) and (iv) only
D (i), (ii), (iii) and (iv)
6 Which of the above errors should be dealt with as an adjustment to the list of balances from the suppliers ledger?
A (i) and (ii) only
B (ii) and (iii) only
C (iii) and (iv) only
D (i), (ii), (iii) and (iv)
7 When Nicola extracted her trial balance, the total of the debit balances exceeded the total of the credit balances by
$1,000. She opened a suspense account to make the two totals equal.
She then discovered that an invoice received for property repairs for $1,500 was entered as $500 on the credit side
of the property repairs account.
What is the revised balance on the suspense account when Nicola corrects this error?
A nil
B $2,000 debit
C $2,000 credit
D $3,000 credit
8 Minnie calculated that her receivables allowance at 30 April 2007 should be $890. At 30 April 2006, her receivables
allowance was $770.
How should the movement in the receivables allowance be recorded in Minnie’s income statement?
A a charge of $890
B a credit of $890
C a charge of $120
D a credit of $120
3 [P.T.O.
9 Daniel made an error when he calculated the value of his closing inventory, which means that the inventory is
overvalued.
How are his net profit for the year and net assets at the end of the year affected by this error?
Net profit Net assets
A overstated understated
B overstated overstated
C understated understated
D understated overstated
10 At 31 May 2007 Katie had a loan with an outstanding balance of $30,000. She is required to repay $500 on the
10th of each month.
How should the loan be reported on her balance sheet at 31 May 2007?
A as a current liability of $30,000
B as a current liability of $24,000 and a non-current liability of $6,000
C as a current liability of $6,000 and a non-current liability of $24,000
D as a non-current liability of $30,000
11 Chris is completing his extended trial balance. The value of closing inventory has been recorded in the adjustment
columns.
Into which columns should the entries for closing inventory be extended?
A Income statement debit and income statement credit
B Balance sheet debit and balance sheet credit
C Income statement debit and balance sheet credit
D Income statement credit and balance sheet debit
12 When he closed his ledger accounts at 30 April 2007 Luther’s wages expense account had a debit balance of
$87,963. Luther also had to make an accrual of $1,268 for outstanding wages.
13 During May 2007, Sarah’s purchases were $126,500, and her sales were $150,000. Sarah’s gross profit is 20% of
sales. The value of her inventory at 1 May 2007 was $12,500.
4
14 At 31 May 2006 Dave’s capital balance was $96,578. During the year to 31 May 2007, his drawings were
$25,764. At 31 May 2007 his capital balance was $104,864.
15 Carol has prepared the following reconciliation of the balance on the payables ledger control account in her general
ledger with the list of balances on the payables ledger:
$
Total of list of balances 86,579
Balance omitted from list 1,385
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Balance on control account 87,964
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16 George is preparing the general ledger journal entry to write off an irrecoverable debt. He knows that the debit entry
should be made in the receivables expense account.
17 On 23 May 2007, Julie used cash to pay the rent on her business premises for the three months to 31 August 2007
in advance.
18 Which method of inventory valuation is used when issues are assumed to be taken from inventory in the order in
which they were received?
A Net realisable value
B First in first out
C Periodic weighted average
D Continuous weighted average
5 [P.T.O.
19 At 30 April 2007 the total amount owed to James by his customers was $54,864. At the same date, James
calculated that his receivables allowance is $3,775.
(40 marks)
6
Section B – ALL FOUR questions are compulsory and MUST be attempted
1 (a) State three reasons for maintaining a non-current asset register. (3 marks)
(b) The Framework for the preparation and presentation of financial statements states that in order to be useful,
financial information should meet four objectives. These are:
(i) relevance;
(ii) reliability;
(iii) comparability; and
(iv) understandability.
(c) Explain the terms ‘gross profit margin’ and ‘mark up’. (4 marks)
(d) Identify and explain TWO reasons for maintaining control accounts. (4 marks)
(15 marks)
7 [P.T.O.
2 Ron Green would like to know how his business has performed for the year to 31 May 2007. His trial balance at that
date, as well as the other information he has given you, is shown below:
Debit Credit
$ $
Sales 729,542
Purchases 486,463
Electricity 9,200
Rent 42,000
Wages 120,800
Vehicle expenses 11,858
General expenses 5,843
Carriage inwards 10,644
Sales returns 5,728
Purchases returns 6,528
Machinery at cost 124,500
Vehicles at cost 38,672
Accumulated depreciation at 31 May 2006:
Machinery 18,600
Vehicles 22,352
Inventory at 31 May 2006 29,664
Trade receivables 77,920
Trade payables 44,568
Bank account 5,702
Drawings 15,000
Capital account 151,000
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978,292 978,292
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(i) The last electricity invoice received was for $2,760. This was for the three months to 31 March 2007.
(ii) Ron has paid his rent up to 31 July 2007. His annual rent is $36,000.
(iii) Ron depreciates his non-current assets on the following bases:
Machinery 20% per annum, straight line
Vehicles 25% per annum, reducing balance
(iv) Ron’s inventory at 31 May 2007 cost $38,670. This includes some damaged items, which had cost $6,850.
Ron has arranged for these to be repaired at a cost of $1,285. He will then be able to sell the items for $4,200.
Required:
Calculate the amounts to be included in Ron’s final accounts for the year to 31 May 2007 for:
(a) accruals; (1 mark)
(15 marks)
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3 Eleanor and Steve are in partnership, sharing profits and losses in the ratio 2:3.
The partnership agreement provides for the following:
Eleanor is entitled to a salary of $32,000;
Steve is entitled to a salary of $26,000;
Interest is paid at a rate of 8% per annum on the partners’ capital balances at the start of the financial year; and
Interest is charged at a rate of 12% per annum on the partners’ drawings.
At 1 May 2006, the partners’ capital and current account balances were:
Eleanor Steve
Capital $47,500 (credit) $34,800 (credit)
Current $1,680 (debit) $6,750 (credit)
During the year to 30 April 2007:
Eleanor’s drawings were $22,800;
Steve’s drawings were $25,600; and
the net profit for the year was $52,956.
Required:
(a) Calculate the profit attributable to each partner for the year to 30 April 2007. (9 marks)
(b) Prepare the partners’ current accounts for the year to 30 April 2007. (6 marks)
(15 marks)
9 [P.T.O.
4 Sarah prepares a bank reconciliation statement for her business bank account at the end of each month. At 31 May
2007 her ledger balance was $2,759 (credit) and her bank statement showed that she had funds of $131 at the
bank. She has the following information:
(i) The bank debited Sarah’s account with charges of $129 during May. Sarah has not recorded the charges.
(ii) Sarah arranged for $2,500 to be transferred from her personal bank account into the business bank account.
The bank made the transfer on 30 May, but Sarah has not made any entry for it in her records.
(iii) On 22 May Sarah withdrew $100 cash which she did not record.
(iv) Cheque number 543987 which Sarah issued to a supplier appears on the bank statement as $650. Sarah
incorrectly recorded the cheque as $560.
(v) On 31 May, Sarah lodged $457. This amount appears on the bank statement dated 3 June.
(vi) Sarah was advised by the bank that she earned $52 interest for the period in May that her account was in
credit. Sarah recorded this in May, but the bank did not credit her account until June.
(vii) Three of the cheques issued in May, with a total value of $942, were not debited on the bank statement until
after 31 May.
(viii) A cheque for $276, issued to a supplier was cancelled, but Sarah has not recorded the cancellation of the
cheque.
Required:
(a) Show the bank account in Sarah’s general ledger, including any adjusting entries required due to the
information in (i) to (viii) above.
Note: You MUST present your answer in a format which clearly indicates whether each entry is a debit or a
credit. (7 marks)
(b) Prepare a reconciliation of the bank statement balance to the corrected balance on the bank account in
Sarah’s general ledger. (5 marks)
(c) Indicate how the bank balance will be reported in Sarah’s final accounts, and the value to be reported.
(3 marks)
(15 marks)
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