P aper T3 (INT)

Certified Accounting Technician Examination

Intermediate Level

Mock Exam
Maintaining
Financial Records
(International Stream)
9 November 2010

Time allowed: 2 hours

This paper is divided into two sections:

Section A - ALL 20 questions are compulsory and MUST

be attempted

Section B - ALL FOUR questions are compulsory and MUST

be attempted

The Association of Chartered Certified Accountants

Section A - ALL 20 questions are compulsory and MUST be attempted

Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to
each multiple choice question.
Each question in this section is worth 2 marks.
1 Zhou sells building materials. One of his suppliers agreed to accept some building materials in settlement of an
outstanding balance due by Zhou.

In which of Zhou's general ledger accounts should entries be made?

A trade receivables and trade payables

B trade payables and bank
C sales and trade payables
D sales and trade receivables

2 When goods are sold on credit at a profit, what is the effect on the assets and liabilities of the seller?

Assets Liabilities
A increase do not change
B do not change do not change
C do not change reduce
D reduce do not change

3 Ricardo pays to rent car parking spaces outside his office. On occasions, he is able to sublet these. During the year to
30 April 2010, the following entries were recorded in his rental ledger account:

- rent paid $4,853;

- an additional invoice for $150; and
- cash of $822 received from subletting the parking spaces.

What is the net balance on the rental ledger account that should be included in Ricardo's trial balance at 30 April
2010?

A $3,881 debit
B $3,881 credit
C $4,181 debit
D $4,181 credit

4 Which body issues International Financial Reporting Standards?

A The International Federation of Accountants

B The International Accounting Standards Board
C The International Accounting Standards Committee
D The Standards Advisory Council

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The following information relates to questions 5 and 6:

At 1 June 2009 the cost of Ramon's machinery was $189,751 and the accumulated depreciation balance was $64,008.
During the year to 31 May 2010, he acquired new machinery at a cost of $27,500 and sold a machine which had cost
$15,000 for $5,600. The accumulated depreciation on this machine at the date of disposal was $9,100. The depreciation
charge on machinery for the year to 31 May 2010 was $23,200.

5 What is the total charge which should be included in Ramon's income statement for the year to 31 May 2010?
A $22,900
B $23,500
C $28,800
D $32,300

6 What value should be reported in Ramon's statement of financial position at 31 May 2010 for machinery at
cost?

A $124,143
B $202,251
C $207,251
D $232,251

7 Which of the following will require an entry in a suspense account?

(i) a customer paid $190 to settle an invoice with a value of $109;

(ii) the debit and credit totals of the trial balance did not agree.

A (i) only
B (ii) only
C both (i) and (ii)
D neither (i) nor (ii)

8 When carrying out the reconciliation between the balance on the trade payables control account in the general ledger
and the list of balances in the personal ledger, you discovered that:

(i) a supplier's balance of $890 had been included in the list of balances as $980;
(ii) a supplier's invoice for $220 had been entered in the purchases day book as $202.

Which of these errors require an entry in the general ledger?

A both (i) and (ii)

B neither (i) nor (ii)
C (i) only
D (ii) only

3 [P.T.O.
9 Before making any adjustments, the balance on the bank account in Freema's general ledger is $2,564 credit.

She knows that to complete her bank reconciliation, she needs to deal with the following:

(i) a cheque for $420 has not been presented at the bank;
(ii) a lodgement for $1,200 has not been credited on her bank statement; and
(iii) she has not recorded bank charges of $470.

What overdraft balance should be reported on Freema's statement of financial position?

A $1,784
B $2,094
C $2,254
D $3,034

10 Which of the following statements is correct?

A a prepayment arises when an expense is incurred before it is paid

B an accrued expense is recorded when the payment is made
C prepaid expenses reduce the value of assets
D accrued expenses increase the value of liabilities

The following information relates to questions 11 and 12:

At 31 May 2010, Shelina was owed $38,286 by her customers, and her receivables allowance was $1,157. She wishes
to write off a balance of $178 as irrecoverable. At 31 May 2009, her receivables allowance was $1,284.

11 What charge should be reported in Shelina's income statement for the year to 31 May 2010 for receivables
expense?

A $51
B $305
C $1,157
D $1,335

12 What value should be reported in Shelina's statement of financial position at 31 May 2010 for receivables?

A $36,951
B $37,129
C $37,307
D $38,235

13 Cameron makes capital repayments of $558 on 10th of each month on a bank loan. At 31 May 2010 the capital
balance on the loan was $18,414.

How should the loan be reported in Cameron's statement of financial position at 31 May 2010?

Current liability Non-current liability

A nil $18,414
B $18,414 nil
C $6,696 $11,718
D $11,718 $6,696

4
14 Mikel has been contacted by a customer because a part he supplied has damaged one of the customer's machines.

The customer has asked Mikel to pay costs of $5,500.

Mikel's offer to pay $3,000 has been refused by the customer, leading to legal action. Mikel's solicitor has told him
that the court case will not take place until late 2011, and that it is almost certain that he will be required to pay
$4,000.

What provision should Mikel make in his statement of financial position at 30 April 2010?
A nil
B $3,000
C $4,000
D $5,500

15 When completing the extended trial balance, in which column should the closing balance for prepayments be
entered?

A income statement debit

B income statement credit
C statement of financial position debit
D statement of financial position credit

16 Rachid's extended trial balance has been extended and totalled, but the final result for the year has not been
calculated.

Rachid's opening capital balance was $138,736, and his drawings during the year were $32,273.

The totals of the income statement columns on his extended trial balance are:

Debit $261,930 Credit $341,839

What is Rachid's closing capital balance?

A $26,554
B $106,463
C $186,372
D $218,645

17 Which of the following items should be included in the calculation of the net profit for a partnership?

(i) interest on a loan from a partner

(ii) salaries for employees
(iii) salaries for partners

A (i) and (ii) only

B (ii) and (iii) only
C (i) and (iii) only
D (i), (ii) and (iii)

5 [P.T.O.
18 Paulo and Claude are in partnership sharing profits and losses in the ratio 2:3. In the year to 31 March 2010

the partnership profit was $144,890 and the partners withdrew $35,000 each. Interest is charged at 8% on all
drawings.
Interest on capital for the year was Paulo $11,450
Claude $9,770

What is Paulo's share of the residual profit?

A $47,228
B $51,708
C $64,204
D $77,562

19 In the year to 28 February 2010, Simone paid $378,942 into her bank account. This included $40,000 of new capital
and was after drawings of $26,500 had been made in cash. The balance represented cash received from customers.

How much cash did Simone receive from customers?

A $312,442
B $365,442
C $392,442
D $445,442

20 Bill obtains a 25% margin on all his sales. In the year to 31 March 2010 he bought goods with a total value of
$69,000. His closing inventory cost $3,000 less than his opening inventory.

What is the value of Bill's sales in the year to 31 March 2010?

A $82,500
B $88,000
C $90,000
D $96,000

(40 marks)

6
Section B - ALL FOUR questions are compulsory and MUST be attempted

1 (a) Explain the purpose of:

(i) a statement of financial position; and (4 marks)

(ii) an income statement.
(b) For both the year in which the error is made and the following year, state the effect on the financial statements
if expenditure which should have been classified as machine repairs is incorrectly classified as the purchase
of a new machine. (4 marks)

(c) Describe TWO types of bookkeeping errors which should be detected by extracting a trial balance, and TWO
types of bookkeeping errors which would not be detected by extracting a trial balance. (4 marks)

(d) Indicate what a debit entry represents in:

(i) an expense account;

(ii) a liability account;
(iii) an asset account. (3 marks)

(15 marks)

2 (a) At 28 February 2010 the balance on the trade receivables control account in Donna's general ledger was
$126,528, and the total of the list of balances from the sales ledger was $125,092.

The following errors were identified:

(i) a balance of $79 due from a customer has been omitted from the list of balances;
(ii) a debit balance of $200 on a customer's account has been treated as a credit balance;
(iii) a customer paid $2,200 in full settlement of a balance of $2,215. Only the cash received has been
recorded;
(iv) no entries have been made for a contra of $780 with the purchases ledger;
(v) the total of the sales day book was under-cast by $99;
(vi) the total of credit notes issued to customers in February, $528, was posted to the general ledger as sales
invoices; and
(vii) a payment of $145 from a customer was recorded in the cash received day book as $154.

Required:

(i) Prepare the trade receivables control account from Donna's general ledger, showing the necessary
correcting 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. Annotating an entry as '+' or '-' will NOT obtain marks.
(6 marks)

(ii) Prepare the reconciliation of the total of the list of balances to the corrected general ledger balance.
(6 marks)

(b) In March 2010 Donna issued a credit note for $239 to a customer, but this was omitted from her accounting
records. The credit note had the reference CN251.

Required:

Prepare the general ledger journal entry to correct this error. (3 marks)

(15 marks)

7 [P.T.O.
3 The following trial balance has been extracted from the books of Asham Gupta at 31 May 2010:

Debit Credit
$ $
Sales 348,955
Carriage inwards 1,389
Carriage outwards 2,648
Purchases 194,894
Wages 53,928
Office expenses 28,538
Vehicle and travel expenses 24,855
Motor vehicles at cost 65,000
Equipment at cost 125,900
Accumulated depreciation at 1 June 2009:
Motor vehicles 23,400
Equipment 45,800
Inventory at 1 June 2009 18,650
Trade receivables 34,580
Trade payables 17,642
Cash and bank 5,890
Capital at 1 June 2009 148,475
Drawings 28,000
-------- --------
584,272 584,272
-------- --------
-------- --------
The following information is relevant:

(i) Inventory at 31 May 2010 is valued at $17,240.

(ii) Office expenses include $6,300 for rent for the three months to 31 July 2010.
(iii) Vehicle and travel expenses of $1,350 were unpaid at 31 May 2010.
(iv) Depreciation is to be provided on the following bases:

Motor vehicles 20% per annum, reducing balance

Equipment 10% per annum, straight line

Required:

Calculate the following values for inclusion in Asham's final accounts for the year to 31 May 2010:

(a) Gross profit for the year; (3 marks)

(b) Net profit for the year; (7 marks)

(c) Non-current assets at 31 May 2010; (2 marks)

(d) Current assets at 31 May 2010; and (2 marks)

(e) Current liabilities at 31 May 2010. (1 mark)

(15 marks)

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4 (a) IAS 2 states that inventory must be valued at the lower of cost and net realisable value.

Required:

Explain the terms 'cost' and 'net realisable value'. (4 marks)

(b) Bob Mason buys buildings, which he improves and then sells at a profit. His inventory currently includes one
building, for which he has the following data:

(i) he paid $125,000 for the building;

(ii) to date, he has spent the following amounts:

materials $12,800
sub-contractors $6,850

(iii) he estimates that he will need to spend a further $17,500 to complete the work and $2,590 on advertising
the building for sale; and
(iv) on completion, he expects to sell the building for $185,000.

Required:

Calculate the cost, net realisable value and inventory value of the building. (5 marks)

(c) A junior colleague is preparing final accounts for a client and has asked you to demonstrate how the periodic
weighted average method of inventory valuation is applied, using the following data:

Date Purchases Sales

10 March 200 units at $12·20 per unit
25 March 127 units at $21·00 per unit
8 April 100 units at $12·23 per unit
15 April 211 units at $21·20 per unit
26 April 120 units at $12·27 per unit

The opening inventory was 83 units, with total value of $1,016·29.

Required:

Calculate the value of the closing inventory using the periodic weighted average method. (6 marks)

(15 marks)

End of Question Paper