ertifi ed ccounting Technician Examination Intermediate Level Maintaining Financial Records (International Stream) Wednesday 9 ecember 2009 Time allowed: 2 hours This paper is divided into two sections: Section LL 20 questions are compulsory and MUST be attempted Section LL FOUR questions are compulsory and MUST be attempted Paper T3 (INT) o NOT open this paper until instructed by the supervisor. This question paper must not be removed from the examination hall. The ssociation of hartered ertified ccountants
Section LL 20 questions are compulsory and MUST be attempted Please use the andidate Registration Sheet provided to indicate your chosen answer to each multiple choice question. Each question is this section is worth 2 marks. 1 Estelle has prepared the following journal entry: ebit ash $500 redit T Simpkins $500 What is the correct narrative for the journal entry? ash sale to T Simpkins ash purchase from T Simpkins ash paid to T Simpkins ash received from T Simpkins 2 On checking his ledger entries, de found the following errors: (i) an invoice from a supplier has not been recorded; and (ii) the debit entry of $500 for repairs has been correctly recorded, but the credit entry was recorded as $50. Which of the above errors would cause a difference between the total of the debit balances and the total of the credit balances when the trial balance is extracted? (i) only (ii) only both (i) and (ii) neither (i) nor (ii) 3 Which of the following statements describes the qualitative characteristic relevance? information which is free from material error information which is unbiased information which infl uences the decisions of a user information which can easily be understood 4 In the year to 30 November 2009, Lui accounted for $7,000 of expenditure on machinery repairs as the cost of a new machine. Lui depreciates machinery on a straight-line basis over 10 years and charges depreciation for a full year in the year an asset is acquired. What is the effect of the error on Lui s profit for the year to 30 November 2009? understated by $6,300 understated by $7,700 overstated by $6,300 overstated by $7,700 2
5 In the fi nancial year ended 31 October 2009, Edita sold a car for $5,600. The car had been bought in January 2006 for $14,000. Edita depreciates motor vehicles on the reducing balance basis at a rate of 25% per annum. She charges a full year s depreciation in the year an asset is bought, and no depreciation in the year it is sold. What is the profit or loss on disposal of the car (to the nearest $1)? $306 loss $306 profi t $2,100 loss $2,100 profi t 6 When completing the extended trial balance, in which column should the balance for receivables allowance be included? income statement debit income statement credit statement of fi nancial position debit statement of fi nancial position credit 7 Eva opened a suspense account with a debit balance of $99. She then discovered that: when recording a cash sale for $9 only the credit entry was made; and the balance on the sales account was under-cast by $90. When these errors are corrected, what is the debit balance on the suspense account? nil $18 $180 $198 8 When completing the reconciliation between the balance on the receivables control account in the general ledger and the total of the list of balances from the personal ledger, Emir discovered that a credit note for $47 issued to a customer had been entered in the customer s personal account as an invoice. How will the total value of the list of balances change when the error is corrected? increase by $47 increase by $94 reduce by $47 reduce by $94 9 Gilda is preparing her bank reconciliation statement. Following the necessary correcting entries, the balance on the bank account in her general ledger is $4,782 credit. She still has to deal with the following: (i) her bank charged fees of $365 to her account in error; (ii) she has outstanding cheques totalling $1,745; and (iii) she has an outstanding lodgement of $1,519. What is the overdraft balance on her bank statement? $4,191 $4,556 $4,643 $4,921 3 [P.T.O.
10 On checking his draft fi nancial statements, Ricardo noted that he had omitted an accrual for $754 and a prepayment for $388. y how much is the value of his current assets understated? $388 $366 $754 $1,142 11 Jerome s receivables ledger has balances totalling $57,840. He has decided to write off an irrecoverable debt of $320. His receivables allowance at the last year end was $1,368. He has calculated that this should be revised to $1,247. What is the resulting charge to Jerome s income statement? $199 $441 $1,567 $1,688 12 t 31 October 2009, Lalia had a bank overdraft of $3,681 and a bank loan of $16,800. The bank loan is due to be repaid by three payments of $5,600 on 1 pril 2010, 1 pril 2011 and 1 pril 2012. How should these amounts be reported in Lalia s statement of financial position at 31 October 2009? urrent liabilities Non-current liabilities $3,681 $16,800 $3,681 $11,200 $9,281 $11,200 $20,481 nil 13 t 1 November 2008 orim had an accrual of $855 for fuel. uring the year to 31 October 2009 he paid invoices with a total value of $11,874. His closing accrual at 31 October 2009 was $962. What is the charge for fuel in his income statement for the year to 31 October 2009? $10,057 $11,767 $11,981 $13,691 14 gnes sold some items of inventory which she had bought for $2,622, for $1,950 in cash. How are her assets and capital affected by the sale? ssets apital reduced by $672 reduced by $672 reduced by $2,622 reduced by $672 increased by $672 increased by $2,622 increased by $1,950 reduced by $672 4
15 onsider the following statements about going concern: (i) fi nancial statements must always be prepared on the going concern basis (ii) if a business is not considered to be a going concern, fi nancial statements should not be prepared Which of the statements is/are correct? (i) only (ii) only both (i) and (ii) neither (i) nor (ii) 16 Val has extended and totalled her extended trial balance, but has not entered the profi t or loss for the period. The total of the statement of fi nancial position debit column is less than the total of the statement of fi nancial position credit column. Which of the following is correct? Val has made a profi t, and the total of the income statement debit column will be less than the total of the income statement credit column. Val has made a loss, and the total of the income statement debit column will be less than the total of the income statement credit column. Val has made a profi t, and the total of the income statement debit column will be greater than the total of the income statement credit column. Val has made a loss, and the total of the income statement debit column will be greater than the total of the income statement credit column. 17 t 30 November 2009, Marek s trial balance includes the following balances: $ $ Inventory at 1 ecember 2008 17,558 Trade receivables 31,749 Prepayments 3,629 Trade payables 24,928 ccruals 5,291 ank account 1,827 Receivables allowance at 1 ecember 2008 683 Inventory at 30 November 2009 is valued at $18,736, and the receivables allowance is to be adjusted to $744. What value should be reported on Marek s statement of financial position at 30 November 2009 for current assets? $51,543 $52,192 $52,253 $53,370 18 Which of the following correctly calculates closing capital? apital introduced + drawings profi t + opening capital apital introduced drawings + profi t + opening capital apital introduced + drawings + profi t + opening capital apital introduced drawings profi t opening capital 5 [P.T.O.
19 When carrying out a reconciliation between the non-current assets in her asset register and the assets which she can physically identify, Wilma could not fi nd one of the assets which is recorded in her asset register. She thinks this could be because: (i) no record was made when the asset was sold (ii) the supplier s invoice has not yet been received Which of the reasons may explain the discrepancy? (i) only (ii) only both (i) and (ii) neither (i) nor (ii) 20 Wasim has prepared the following receivables reconciliation: $ Total of list of balances 19,738 iscount not recorded in personal account (29) alance on receivables control account 19,709 Invoice not recorded in day book 1,627 21,336 ontra with payables ledger not recorded (2,628) 18,708 What value should be reported in Wasim s statement of financial position for receivables? $18,708 $19,709 $19,738 $21,336 (40 marks) 6
Section LL FOUR questions are compulsory and MUST be attempted 1 (a) Explain: (i) the difference between assets and expenses; and (ii) how each of these elements is treated in the financial statements. (b) State TWO reasons for maintaining a non-current asset register, and indicate THREE items of information which are normally recorded about each non-current asset. (5 marks) (c) t 30 September 2008, closing inventory was incorrectly valued using the periodic weighted average method instead of the fi rst-in, fi rst-out (FIFO) method. uring the year to 30 September 2008 prices have risen. The error was not corrected until 30 September 2009, when the correct method (FIFO) was used. Required: Identify the effect on profit and net assets in the financial statements for: (i) 2008; and (ii) 2009. (d) Explain two reasons for extracting a trial balance. (15 marks) 7 [P.T.O.
2 t 30 November 2009, the balance on the payables control account in riadna s general ledger was $80,130 and the total of the list of balances on the suppliers personal accounts was $80,441. Investigation of the reasons for the difference indicated the following: (i) a credit note received from a supplier for $438 was omitted from the accounting records; (ii) an invoice for $385 was correctly recorded in the purchase day book, but when posting to the supplier s personal account the value was entered as $358; (iii) a payment of $1,000 was made to settle a balance of $1,012, but the discount was not recorded on the supplier s personal account; (iv) a contra with the receivables ledger of $700 had been recorded in the supplier s personal account, but no entry was made in the control account; (v) a debit balance of $63 on a supplier s personal account was treated as a credit balance; (vi) the purchase day book was under-cast by $900; and (vii) a payment to a supplier for $320 was incorrectly recorded as drawings. Required: (a) Prepare the payables control account in the general ledger, including the necessary adjusting entries and the corrected balance. NOTE: Your answer MUST be presented in an acceptable format, which clearly indicates whether each entry is a debit entry or a credit entry. nnotating an entry as + or will NOT obtain marks. (5 marks) (b) Prepare the reconciliation of the list of balances to the corrected balance on the payables control account in the general ledger. (6 marks) (c) For each of the adjusting entries in the payables control account in the general ledger, indicate which general ledger account will be used to complete the double entry. (4 marks) (15 marks) 8
3 dnan and oris are in partnership, sharing profi ts and losses in the ratio 2:3. The partnership maintains separate capital and current accounts. The partners have prepared draft accounts for the year to 31 October 2009, which report a profi t of $27,850. This has been divided between the partners in the profi t and loss sharing ratio, although the partnership agreement states that interest is to be paid on the partners opening capital balances at a rate of 9% per annum. You have the following additional information: (i) the following items have been included as part of the partnership s business expenses for the year to 31 October 2009: the salary of $13,000 which dnan is entitled to under the terms of the partnership agreement; and the partners drawings of $22,000 each. (ii) the opening balances on the partners capital and current accounts were: apital urrent dnan $20,900 credit $5,359 debit oris $23,100 credit $7,956 debit Required: alculate: (a) the correct net profit for the year to 31 October 2009; (b) the correct amount of profit to be divided in the profit and loss sharing ratio; (c) each partner s total share of the corrected net profit; (d) the closing balance on each partner s current account at 31 October 2009; and (e) the total assets less total liabilities of the partnership at 31 October 2009. (4 marks) (4 marks) (3 marks) (15 marks) 9 [P.T.O.
4 uring a burglary at his business premises, some of eng s accounting records were destroyed. ll of the cash which was on the premises was also stolen. eng has asked you to calculate how much cash was stolen, and his net profi t up to the date of the burglary. You have agreed that the amount of cash stolen will be treated as a business expense when calculating his net profi t. You have the following information: (i) all of eng s sales are cash sales, at a mark up of 30%; (ii) at the date of the burglary, the total amount due to suppliers was $17,855, and he had lodged $255,850 to his bank account. $40,000 of this was a loan from a relative, and the rest was receipts from sales; (iii) none of his inventory, which was valued at $7,246, was stolen; (iv) cheques with a total value of $223,600 had been debited in his bank statement up to the date of the burglary. This has been analysed as follows: $ Payments to suppliers 165,570 usiness expenses 34,815 rawings 23,215 ; (v) accrued expenses at the date of the burglary are estimated to be $1,044, and prepaid expenses at the same date are estimated to be $373; (vi) depreciation on non-current assets has been calculated as $11,800; (vii) balances at the start of the period included: $ due to suppliers 15,847 inventory 6,958 accrued expenses 752 prepaid expenses 519 ; (viii) there were no outstanding cheques or lodgements when the last fi nancial statements were prepared, or at the date of the burglary; and (ix) there was no cash on the premises at the start of the current accounting period. Required: alculate: (a) the value of purchases up to the date of the burglary; (b) the gross profit up to the date of the burglary; (c) the value of the cash which was stolen; and (d) net profit up to the date of the burglary. (3 marks) (3 marks) (7 marks) (15 marks) End of Question Paper 10