ACCA F3 (INT) Financial Accounting - 2010 - Study text - Emile Woolf Publishing
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Chapter 11 Control accounts and bank reconciliations
Exercise 1
$
Bankbalanceinthebankstatement 7,400
Itemsrecordedinthecashbook,butnotyetinthebankstatement
Chequesreceivedfromcustomersandbanked 16,200
Chequespaidbutnotyetpresentedforpayment (18,500)
5,100
Itemsinthebankstatement,notinthecashbook
Bankcharges 250
Balanceinthecashbook 5,350
This cash book balance is before recording the bank charges in the ledger.
The bank charges should be recorded in the ledger as follows:
Debit Bank charges account (expense), Credit Cash book (= Bank)
Exercise 2
(a) Note: A debit balance in the cash book means that, according to the entity’s
accounting records, it has money in the bank. A debit balance on a bank
statement, on the other hand, would indicate an overdraft.
$ $
Bankbalanceinthecashbook1,600
Itemsrecordedinthecashbook,butnotyetinthebankstatement
Chequesreceivedfromcustomersandbanked(8,200)
Chequespaidbutnotyetpresentedforpayment4,700
(1,900)
Itemsinthebankstatement,notinthecashbook
Bankcharges (150)
Directdebitpayment (400)
Dishonouredcheque (300)
(850)
Balanceinthebankstatement(=overdraftbalance)(2,750)
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(b) The ledger accounts should be updated as follows:
Debit Credit
$ $
Bankcharges(expenseaccount) 150
Expenseaccounttowhichthedirectdebitpaymentrelates 400
Receivables(dishonouredcheque)orbaddebtsexpense 300
Bank(cashbook)850
Multiple choice questions
1 D
$
Bank statement balance (2,850)
Add: Deposits not yet credited 12,700
Deduct: Outstanding cheques (7,920)
Correct cash book balance 1,930
2 A
If a cheque from a customer is dishonoured, a credit entry is recorded in the cash
book.
3 B
The error makes the balance on the control account lower than the total of balances
on the accounts in the payables ledger. The other three errors, if corrected, would
make the difference between the totals even larger.
4 A
5 D
$ $
Zed statement: amount owed by Dee 9,440
Deduct: Cheque sent by Dee (3,700)
Adjusted balance 5,740
Balance in Dee’s payables ledger account for Zed 4,770
Adjusted for discount not allowed 80
Adjusted balance 4,850
Unexplained difference 890
6 B
$
Total of payables ledger balances 289,500
Contra entry not recorded in payables ledger (690)
Invoice under-stated in payables ledger (8,720 – 7,820) 900
Adjusted balance 289,710
This should be the correct balance in the payables ledger control account after the
error in recording total purchases returns is corrected.
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Chapter 12 Preparing financial statements
Exercise 1
Incomestatement
$
Currentyear 65,000
Under‐provisioninpreviousyear(59,000–54,000) 5,000
Taxcharge 70,000
Statementoffinancialposition
Currentliabilities:Incometaxes 65,000
Multiple choice questions
1 C
2 B
Item 1 leaves working capital unchanged, because trade payables and cash are both
reduced by $2,000. Item 2 increases current assets by $1,000 ($2,000 in inventory
becomes $3,000 cash or receivables) and there is an increase in capital (profit) of
$1,000. Item 3 also increases cash (current asset) and profit by $1,000.
3 C
Current assets
$
Loan principal receivable in January Year 4 (asset) 20,000
Accrued interest receivable on loan 600
Prepayment of insurance (($18,000 × 10/12)
15,000
Rent income accrued for Year 3 8,000
Inventory at 30 June Year 2 43,600
4 D
Adjusting events result in an alteration of the figures in the draft financial
statements; details are not disclosed of adjusting events in notes to the financial
statements, only details of non-adjusting events.
5 A
$
Initial inventory valuation 363,800
Transactions after the reporting period
Deduct: Purchase of goods (12,500)
Add back: Cost of goods sold (60% × $14,000)
8,400
Add back: Purchase returns by Z 600
Inventory at 30 June Year 2 360,300
6 A
Item 3 is a non-adjusting event.
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7 C
Both events provide evidence of conditions that existed at the end of the reporting
period.
Chapter 13 Partnership accounts
Exercise 1
Total A B C
$ $ $ $
Notionalsalary 25,000 10,000 15,000
Residualprofit 75,000
Pshare $75,000×2/530,000
Qshare $75,000×2/530,000
Rshare $75,000×1/515,000
Profitshare
100,000 30,000 40,000 30,000
These profit shares are credited to the individual current account of the partners.
Exercise 2
Total G H I
$ $ $ $
Notionalsalary15,000 5,000 10,000
Notionalinterestat8% (on$50,000,
$40,000and
$30,000)
9,600 4,000 3,200 2,400
Residualprofit(balance)90,000
Dshare $90,000×3/645,000
Eshare $90,000×2/630,000
Fshare $90,000×1/6 15,000
Profitshare
114,600 49,000 38,200 27,400
These profit shares are credited to the individual current account of the partners.
Exercise 3
Total X Y Z
$ $ $ $
Notionalinterestat6% (on$100,000,
$80,000and
$60,000)
14,400 6,000 4,800 3,600
Residualprofit(balance) 180,000
Ashare $180,000×4/980,000
Bshare $180,000×3/960,000
Cshare $180,000×2/9 40,000
Profitshare 194,40086,00064,80043,600
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Currentaccounts
X
YZ X YZ
$$$ $ $$
Drawings 78,000 58,000 35,000Profitshare 86,000 64,800 43,600
Balancec/d 8,000 6,800 8,600
86,000 64,800 43,600 86,000 64,800 43,600
Exercise 4
Capitalaccounts
PQM P QM
$$$ $ $$
Balanceb/d 60,000 50,000
Bank 40,000
Goodwill 6,0006,0003,000Goodwill 10,000 5,000
Balancec/d 64,00049,00037,000
70,00055,00040,000 70,000 55,00040,000
Multiple choice questions
1 D
Total XYZ
$$$$
6monthsto30Jun 600,000 240,000 360,000
6monthsto31Decbeforebaddebt 1,000,000 300,000 400,000 300,000
Baddebt (100,000) (40,000) (60,000) 0
Profitshare 1,500,000 500,000 700,000 300,000
2 C
Interest on drawings is a notional charge and a technique for sharing profit between
the partners in a partnership. It is not income or an expense of the business.
3 A
Total JK
$$$
6monthsto30JuneYear5 506,250
Jsalary(6/12×$120,000) (60,000) 60,000
JInterestoncapital(5%×6/12×$600,000) (15,000) 15,000
KInterestoncapital(5%×6/12×$300,000) (7,500) 7,500
Residualprofit (423,750)211,875 211,875
6monthsto31DecemberYear5 506,250
JInterestoncapital(5%×6/12×$600,000) (15,000) 15,000
KInterestoncapital(5%×6/12×$600,000) (15,000) 15,000
Residualprofit (476,250)238,125 238,125
Profitshare 1,012,500540,000 472,500
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Chapter 14 Statements of cash flows
Exercise 1
Workings
$
Originalcostofvehicle 50,000
Accumulateddepreciationatdateofdisposal (20,000)
Netbookvalueatthetimeofdisposal 30,000
Lossondisposal 8,000
Thereforenetsalesproceeds 22,000
(a) In the adjustments to get from the operating profit to the cash flow from
operations, the loss on disposal of $8,000 should be added.
(b) Under the heading ‘Cash flows from investing activities’, the sale price of the
vehicle of $22,000 should be included as a cash inflow.
Exercise 2
$ $
Profitbeforetaxation 60,000
Adjustmentsfor:
Depreciation 25,000
Interestcharges 10,000
Gainondisposalofnon‐currentasset (14,000)
81,000
Reductionintradeandotherreceivables 5,000
Increaseininventories (4,000)
Reductionintradepayables (6,000)
76,000
Taxationpaid (17,000)
Interestchargespaid (10,000)
Cashflowsfromoperatingactivities49,000
Exercise 3
Property,plantandequipmentpurchases
$
Atcostorvaluationattheendoftheyear 381,000
Atcostorvaluationatthebeginningoftheyear 329,000
52,000
Add:Costofassetsdisposedofintheyear 40,000
Subtract:Assetrevaluationduringtheyear(102,000–67,000) (35,000)
Purchasesduringtheyear 57,000
Disposalofequipment
$
Atcost 40,000
Accumulateddepreciation,atthetimeofdisposal (21,000)
Netbookvalue/carryingamountatthetimeofdisposal 19,000
Lossondisposal 5,000
Netdisposalvalue(=assumedcashflow) 15,000
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Multiple choice questions
1 B
2 C
3 D
4 D
Cash inflow from share issues = $(500,000 + 300,000) - $(300,000 + 100,000) =
$400,000.
Cash payments to repay loans = $(40,000 + 20,000) - $(60,000 + 15,000) = $(15,000).
Chapter 15 Incomplete records
Exercise 1
Receivablesmemorandumaccount
$ $
Openingbalance 2,400 Moneybanked 12,500
Sales(balfig) 12,100
Baddebtwrittenoff 200
Closingbalance 1,800
14,500 14,500
Exercise 2
Payablesmemorandumaccount
$ $
Cashpaid 11,300 Openingbalance 1,400
Closingbalance 1,900 Purchases(balfig) 11,800
13,200 13,200
Exercise 3
Cashandbankmemorandumaccount
$ $
Openingbalance,cashinhand 100 Paymentstosuppliers 38,200
Openingbalance,bank 2,400 Paymentstoemployees 3,400
Receipts 51,700
Drawings(=balancingfigure) 7,250
Closingbalance,cashinhand 150
Closingbalance,bank 5,200
54,200 54,200
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Exercise 4
Costofsales $
Openinginventory 3,100
Purchases 42,100
Less:closinginventory (4,000)
41,200
Sales = 41,200 × 140% = $57,680
Exercise 5
Sales = $98,000
Cost of sales = $98,000 × 100/140
= $70,000
Costofsales $
Openinginventory5,000
Purchases 71,200
Closinginventory(balancingfigure) 6,200
Costofsales 70,000
Multiple choice questions
1 D
$
Inventoryat1March 127,000
PurchasesforMarch 253,000
380,000
Closinginventory 76,000
Costofsales+costoflostinventory 304,000
Costofsales($351,000×70%) 245,700
Inventorylostinthefire 58,300
2 A
It is assumed that all sales for the month should have been banked. Since sales were
$190,000, this suggests that the cost of sales should have been $95,000 (given a mark-
up of 100% on cost).
$
Opening inventory 80,000
Purchases for the month 120,000
200,000
Closing inventory 100,000
Cost of sales on the basis of these figures 100,000
Cost of sales assuming sales of $190,000 95,000
Discrepancy 5,000
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This indicates that inventory costing $5,000 might have been stolen.
Alternatively, $10,000 cash might have been stolen and sales might have been
$200,000 (giving a cost of sales of $100,000).
3 C
$
Netassetsat31December(376,000–108,000) 268,000
Netassetsat1January(314,000–87,000) 227,000
Increaseinnetassets 41,000
Drawings 55,000
Newcapitalintroducedintheyear (25,000)
Profitfortheyear 71,000
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