AC - Test 1

Which of the following items should be treated as revenue items in an entity's financial statements? 1. Payment of local property tax 2. Purchase of premises 3. Alteration of premises to configure them to be ready for use in the business 4. External audit fee

1 & 4 only

Alan has a closing receivables balance of £180,000. Against this he wants to make an allowance against two receivables: he wants to create an allowance against the full balance of £6,000 on Zhiang's account, and he wants to provide for 25% of the balance (£12,000) on Helena's account. Calculate the closing allowance for receivables for the year.

9000

Nigel has received the following telephone bills during his year end 31st December 20X7. Bill period Amount Paid Nov 20X6 - Jan 20X7 450 Feb 20X7 Feb 7 - Apr 20X7 480 May 20X7 May 20X7 - Jul 20X7 410 Aug 20X7 Aug 20X7 - Oct 20X7 460 Nov 20X7 Nov 20X7 - Jan 20X8 465 Jan 20X8 What entry should be made in the Statement of Financial position at year-ended 20X7 in respect of this?

Accrual of £310

Rossi had the following balances in its trial balance at 30 July 20X6: £Total receivables 81,000 Irrecoverable debts expense 2,500 Allowance for receivables as at 1 August 20X5 3,700 The company wishes to carry forward an allowance of £2,500. What is the irrecoverable debts expense in the statement of profit or loss?

Bal per TB 2,500 Decrease in allowance 1,200 Taken to SPL 1,300

AK Ltd sold goods on 30 days credit to BN Ltd for £300. Included in the terms and conditions of sale is the opportunity for BN Ltd to take advantage of 5% early settlement discount if the invoice is paid within 10 days of invoice date. At the point of raising the invoice, AK Ltd expected BN Ltd to take advantage of the early settlement discount terms offered. BN Ltd subsequently paid the amount due within 30 days of invoice date, but not within the time period eligible for the early settlement discount. What accounting entries are required to be made by AK Ltd to properly account for the amount received from BN Ltd?

Debit Cash £300, Credit Receivables £285, Credit Revenue £15

An amount of £750 is received from a bad debt previously allowed for within the accounts. What is the double entry required to record this?

Debit Cash, Credit Receivables

What is the double entry to record drawings of inventory made by a proprietor?

Debit Drawings, Credit Purchases

How would the following transaction affect the accounting equation in terms of increase or decrease in asset, capital or liability? Making a cash sale to a customer of £850.

Increase in Asset, Increase in Capital.

Lee received the following rent bills during the year (year end is the 31 Dec X7): Bill period Amount Paid Nov 20X6 - Jan 20X7 2,100 Oct 20X6 Feb 20X7 - Apr 20X7 2,100 Feb 20X7 May 20X7 - Jul 20X7 2,400 Jun 20X7 Aug 20X7 - Oct 20X7 2,400 Oct 20X7 Nov 20X7 - Jan 20X8 2,400 Feb 20X8 What will be the opening and closing balances on the prepayments account?

Opening Balance: £700, Closing Balance: £0

In 20X6, Dani Ltd made a net profit of £50,000 after accounting for irrecoverable debts. During 20X6 Dani increased its allowance for receivables by £1,500 and also recovered a debt previously written off amounting to £3,500. What would the net profit have been prior to accounting for these items?

Profit prior to adjustment 48,000 Less increase in allowance(1,500) Add debt recovered 3,500 Profit per a/cs50,000

Which of the following items should be treated as capital expenditure in the accounts of a sole trader? £1,000 drawings made by the proprietor to buy himself a new kitchen at home. £1,000 spent on purchasing a new computer for his secretary in order to deal with business administration. £1,000 on purchasing a motorbike for resale. £1,000 paid to a painter for redecorating his office.

£1,000 spent on purchasing a new computer for his secretary in order to deal with business administration.

Clare runs a florist and pays an annual premium to be part of the Interflora group. Her year end is 31st July. On 1st January 20X6 she paid her annual fee to Interflora of £1,600. On the 1st January 20X7 the fee for the year to Interflora had risen to £1,900. How much should be included in her accounts for 20X7 for the Interflora expense?

£1,775

Nigel has received the following telephone bills during his year end 31st December 20X7. Bill period Amount Paid Nov 20X6 - Jan 20X7 450 Feb 20X7 Feb 7 - Apr 20X7 480 May 20X7 May 20X7 - Jul 20X7 410 Aug 20X7 Aug 20X7 - Oct 20X7 460 Nov 20X7 Nov 20X7 - Jan 20X8 465 Jan 20X8 How much should be included for the 20X7 telephone expense?

£1,810

John owns an antiques store and at the end of the year gathers the following information about his inventory: ItemQuantityCost per itemNRV per item ££ Chippendale chair8 80 100 Van Gogh painting1 50 200,000 18th century dressers3 350 400 1920's lamps 4 250 20 Calculate the value of John's inventory.

£1,820

An asset is purchased on 1 Jan 20X4 for £90,000 and is depreciated on a reducing balance basis at 15% per annum. The asset is sold on the 1 Jan 20X7 for £45,000. What is the profit/loss on disposal?

£10,271 loss

Lisa has a brought forward balance on her allowance for receivables of £12,000 from 20X6. At the end of 20X7 her receivables balance stands at £240,000. She wants to write off £20,000 at the end of the year and have an allowance for receivables against Gill's full balance of £6,000. How much will be charged for the year to the statement of profit or loss from the irrecoverable debts expense account?

£14,000

On 1 Jan 20X1 Fleet Ltd. bought a non-current asset for £225,000 which had an estimated useful life of 20 years and a residual value of £25,000. Assets are depreciated on a straight line basis. Fleet's year end is 31 December. On 1 January 20X4 the asset's total useful life is revised to 15 years in total with no residual value. What is the total deprecation charge in 20X4?

£16,250

Robinson Ltd. has the following inventory movements in the month of September: Units £ per unit Opening stock 10 20 1 Sep goods in 8 22 2 Sep sales (9) 3 Sep goods in 6 24 4 Sep sales (11) 5 Sep goods in 4 26

£193

Helen buys and sells mobile phones. She has been trading for many years. On 1 January 20X7, her opening inventory is 3,000 mobile phones which cost £25 each. She purchased 9,000 phones in the year amounting to £250,000 and on 31 December 20X7 she has mobile phones left in inventory with a cost of £57,500. Helen has sold phones with a sales value of £525,000 in the year. What is the gross profit for the year ended 31 December 20X7?

£257,500

Zhu received a bill for insurance for his new business. The business was set up on 1st March 20X7 and it was decided that the first year end for accounting purposes would be 30th November 20X7. The bill for insurance totalled £1,950. It was for the period running from the start of the business to the end of March 20X8. But Zhu didn't pay it until 30th September 20X7. How much should be included as a prepayment for the first set of accounts?

£600