ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS MULTIPLE CHOICE QUESTIONS PAPER 1.

1
DEPRECIATION

1. Straight method of charging depreciation is feasible in case of: A. Increase in benefit every year. B. Decrease in benefit every year C. Constant accrual of benefit every year D. Fluctuation in benefit every year 2. Where asset accounts are kept at cost, the journal entry for recording depreciation at the end of the year shall be: Debit Credit A. Profit & Loss Account Asset Account B. Profit & Loss Account Bank Account C. Provision for depreciation Account Asset Account D. Profit & Loss Account Provision for depreciation Account 3. be: A. B. 4. A. B. 5. A. B. C. D. 6. A. B. C. D. A vehicle has four years of useful life, rate of depreciation on straight line method shall

25% p.a C. 33.33% p.a. 20% p.a. D. 15% p.a. Decrease in the recoverable amount of an asset should be treated as: Revenue loss C. Revenue profit Capital reserve D. Capital loss Carrying amount of an asset at the end of a year is equal to: Cost at year end less depreciation for the year Cost at the end of the year Cost at year end less accumulated depreciation None of above Depreciation is charged in order to: Charge the depreciable amount of an asset over its useful life Calculate true profit Reduce profit and tax burden Provide funds for the replacement of asset 7. During the year ended on 31st December, 20X8, A Ltd has traded in for $7,740 a machinery (purchased for $10,000 on 1st January, 20X5 & depreciated @ 20%p.a. on straight line basis) against a second hand machine (cost $8,500). The balance due was paid in cash. A Ltd immediately incurred $1,750 on the overhauling of machine purchased. It is expected that machine will have a useful life of 5 years with salvage value of $500. Depreciation is provided on monthly basis. a. Depreciable amount of machine purchased shall be: A. $7,740 C. $10,250 B. $8,500 D. $9,750 b. Depreciation for the year 20X8 shall be: A. $1,950 C. $2,050 B. $975 D. $1,025 c. Gain or Loss on disposal of old machine shall be: A. $5,740 Gain C. $1,500 Loss C. $5,740 Loss D. $2,260 Gain 8. On 1st January, 20X9, a machine, which was purchased by A Ltd on 1st July, 20X3 for $40,000 was revalued at $35,000. Company charge depreciation on machinery @10% p.a. using reducing balance method. Full years depreciation is charged in the year of purchase and none in the year of disposal. a. The revaluation has resulted in:

A. B.

$5,000 Deficit C. $11,380 Surplus $11,380 Deficit D. $5,000 Surplus b. Depreciation for the year 20X9 shall be: A. $3,500 C. $4,000 D. $2,862 D. $4,500 st 9. On 1 May, 20X9, B Ltd imported a machine and incurred following costs: a. Payment to supplier $15,000 b. Freight paid $530 c. Import taxes paid $1,100 d. Insurance & erection costs paid $750 e. Daily allowance of engineers erected machine $245 f. Cost to train operators of machine $130 Depreciable amount of machine shall be: A. $15,750 C. $17,625 B. $16,525 D. $17,755 10. Vehicles Account and Provision for Depreciation-Vehicles Account in the books of XY Ltd showing balances of $120,000 and $64,000 respectively as on 31 st December, 2000. All vehicles were purchased in the year to 31 st December, 1999 or earlier but after 1 st January, 1992 when the company commenced operations. Depreciation is charged @15%p.a. on straight-line basis. During the year 2000, a car costing $30,000 was sold for $22,500. The sale proceeds were credited to Vehicles Account. No other transaction was passed in this regard. Depreciation charge for the year shall be: A. $18,000 C. $14,625 B. $13,500 D. $8,400 st 11. At 1 January, 20X2, following balances existed in the books of Crown Ltd: a. Building Cost $1,700 Depreciation upto 31st Dec. 20X1 $350 b. Fixtures Cost $600 Depreciation upto 31st Dec. 20X1 $360 Depreciation policy depreciation is charged on reducing balance method at the following rates: a. Building 5% p.a. b. Fixtures 15% p.a. Amount of depreciation chargeable to Profit $ Loss Account for the year 20X2, for both assets shall be: A. $175 C. $103.50 B. $230 D. $159 12. The net book value of the vehicles owned by a company on 1st January,1999 was $83,000. During 1999 new vehicle was purchased for $50,000 and an old car was sold for $15,000 on which it made a gain of $800. If the depreciation charge for the year is $23,000, net book value of vehicles on 31st December,1999 shall be: A. $95,000 C. $60,000 B. $95,800 D. $118,000 13. If loss on the disposal of an asset having book value of $18,670 is $3,830, sale price of asset shall be: A. $22,500 C. $25,000 B. $18,670 D. $14,840 14. An asset costs $10,000 and is expected to last for 10 years. However after 10 years the asset is still in use. Accounting treatment for this shall be: A. Stop charging depreciable after the year 10 B. Continue to charge $1,000 per year C. Revalue the asset D. None of above

15.

A machine was purchased for $50,000 during 20X1 and its useful life was estimated at 5 years. In the year ended on 31st December, 20X4, it was found that the machine still have useful life of 4 years. Depreciation charge for the year 20X4 on straight line basis shall be: A. $5,000 C. $10,000 B. $7,142 D. $20,000 16. After an asset is revalued, depreciation should be charged on: A. Cost of asset B. Book value of asset C. Revalued amount D. None of above 17. Where a machine is traded in for another machine, journal entry to be recorded in machinery account for this transaction shall be: A. Debit machinery account with cost of machine purchased B. Credit machinery account with cost of machine traded in C. Debit & Credit machinery account with cost of machine purchased and traded in D. None of above 18. Depreciable amount of an asset shall be: A. Purchase price of the said asset B. Purchase price plus direct expenses incurred on the said asset C. Purchase price plus direct expenses incurred less scrap value for the said asset D. Purchase price less scrap value of the said asset 19. H Ltd purchased a Vehicle for $20,000 on 30th November, 20X8. H Ltd charge depreciation on vehicles by using sum of digit method. Useful life of the vehicle is 5 years with estimated salvage value of $4,000. Depreciation charge for 20X8 shall be: A. $4,267 C. $5,333 B. $10,000 D. $6,667 20. A wasting asset includes: A. Natural resources C. Deferred expenditure B. Depreciable asset D. Capital expenditure 21. The book value of machine as on 31st December,2000 is $42,645.50. This machine was purchased on 1st January,1997 and is depreciated @ 10%p.a.usinf reducing balance method. Cost of this machine shall be: A. $70,000 C. $71,075 B. $65,000 D. $60,900 22. A Ltd purchased a machine for $75,000 on 1 st January,1996 and its useful life was estimated at 10 years. On 1st January,1998 management found that his machine can still be used for further 10 years. Depreciation is charged on straight line basis. Depreciation for the year 1998 shall be: A. $7,500 C. $6,750 B. $5250 D. $6,000 23. On 31st December, 20X9, balance on Vehicles Account (at cost) of Crown Ltd was $27,500. This included a vehicle purchased on 1st January, 20X6 for $3,500 and sold for $1,780 on 31st December, 20X9. Sale proceeds of the vehicle were credited to Vehicles Account. Except this, no other transaction, in regards, was recorded. Now the adjustment required to the Vehicles Account is: A. $1,720 Debit C. $1,720 Credit B. $1,780 Debit D. $1,780 Credit 24. Useful life of an asset is: A. Expected usage of an asset by the enterprise B. Life determined by the manufacturer of asset C. Period over which depreciation shall be charged D. None of above 25. A company has following figures appearing in its balance sheet as on 31st December, 20X5:

A. B.
26. A. B. C. D. 27. A. B. C. D.

Machinery Cost $15,000 Depreciation up-to 31st Dec. 20X5 $2,512.50 Book value as on 31st Dec. 20X5 $12,487.50 Depreciation is charged @ 15%p.a. on original cost on monthly basis. Bulk of the machinery was purchased when company commenced operations except for an asset costing $3,000 which was purchased on 1st October, 20X5. The date on which the commenced operations shall be: 1st September, 20X4 C. 1st April, 20X4 st 1 July, 20X4 D. 1st October, 20X4
BANK RECONCILIATION

A bank reconciliation statement reconciles the: Ledger and the journals Petty cash book and the bank account Bank statement and the cash book Day books and the bank statement Which of the following would be required to be entered in the cash book: Bank charges A dishonored cheque Credit transfer received from a customer All of above 28. Following information is available for A Ltd as on 31st December, 20X5: a. Un-presented cheque $25,000 b. Un-collected cheque $60,000 c. Balance of overdraft as per bank statement $26,400 Balance as per cash book as on the above referred date shall be: A. $61,400 Credit C. $111,400 Credit B. $8,600 Debit D. $58,600 Credit 29. Bank reconciliation statement can be prepared: A. At the year end C. At the half year end B. At the month end D. At any time during the year 30. The amount of bank balance to be shown in balance sheet shall be: A. Balance as per bank statement C. Non-adjusted balance as per cash book B. Adjusted balance as per cash book D. Joint balance of cash & bank 31. Following information has been extracted from the accounting records of A Ltd for the year 20X9: As on As on As on As on 31st Jan. 28th Feb. 31st March 30th April $ $ $ $ Balance as per bank statement a 4,500 675 2,200 Deposits in transit 1,200 b 450 125 Outstanding cheque 1,000 1,500 c 75 Balance as per cash book 9,400 3,600 625 d Figures to appear in the blank spaces shall be: (a) (b) (c) (d) $ $ $ $ A 10,400 600 175 2,250 B 8,200 900 50 2,275 C 9,200 5,100 225 2,325 D 7,200 2,100 500 2,400 32. Timing differences that might cause difference between cash book & bank statement are the differences due to: a. Standing order transactions b. Un-presented cheque c. Un-credited deposits

d. A.

Profit credited by bank 1&3 C. 3 & 4 B. 1 & 2 D. 2 & 3 33. Balance as per bank statement of Crown Ltd on 31 st December,20X0 is $17,900 (favorable). On reconciliation with cash book, following differences were found: a. Outstanding cheque for $840 b. Standing order payment of interest for $1,750 c. Dividend collected by bank for $180 d. Deposits not yet credited $250 Balance to be taken in balance sheet as on 31st December, 20X0 shall be: A. $18,880 Debit C.$17,900 Debit B. $17,310 Debit D. $19,470 Debit 34. Which of the following shall require an adjustment to the bank balance as per cash book: a. Cheques paid into bank returned un-paid by the subscribers bank. b. Outstanding cheque c. Charges collected by bank from the account d. Amount wrongly debited by the bank A. a, b & c C. b & c B. a, c & d D. a & c 35. Balance of cash in hand & at bank calculated by the accountant of Standard Ltd as on 31 st December, 20X0 was $7,788. Bank statement on the same date shows a favorable balance of $7,155 and on scrutiny of bank statement following were found: a. Outstanding cheques for $1,590 b. Deposits in transit $660 Balance of cash on hand on 31st December, 20X2 shall be: A. $1,563 C. $2,223 B. $633 D. $1,293 36. Balance at bank as per cash book of Growers Ltd as on 1 st November, 20X0 was $3,655 (overdraft). During November, 20X0 payments were made for materials invoiced for $120,000 less trade discount @ 15%. Receipts from customers against invoices for $135,000 less 10% discount were made during the year. Balance at bank as per cash book as on 30 th November, 20X0 shall be: A. $15,845 Debit C. $11,345 Debit B. $15,845 Credit C. $11,345 Credit
INVENTORIES

37. A. B. C. D. 38. A. B. C. D.

Inventories means tangible property held: For sale in the ordinary course of business For use in the process of production and sale For use in the rendering of services All of above Inventories should be valued at: Cost Net realizable value Lower of cost and net realizable value Current values 39. The closing stock of Growers Ltd as on 30 th June, 20X1 amounted to $52,500. After inspection of the stock on the same day you found that: a. A lot of goods returned by a customer and included in the figure of stock at cost of $4,200, requires some extra work to make it saleable. Estimated amount of expenditure on the extra work is $1,365 and after re-work this lot is expected to be sold for $5,000. b. Balance amount of inventories is valued at cost. Its net realizable value is $55,700. Break-up of the cost is as under: $

A.

Direct material 35,000 Conversion costs 12,000 Portion of admin overheads 1,300 Value of inventories to be taken in balance sheet shall be: $50,635 C. $52,500 B. $60,700 D. $53,300

40.

A firm had 60 units in stock, as on 1st October, 20X6, valued at $12 each. During October, 20X6 following transactions took place: Date Particulars Value $ Oct. 08 40 units purchased 600 Oct. 15 75 units sold 1,200 Oct. 18 50 units purchased 900 The cost of stock as on 31st October, 20X6, under FIFO method shall be: A. $1,275 C. $1,110 B. $1,020 D. $1,200 41. On 30th April, 20X4, the stock of Crown Ltd was completely destroyed by fire. The following information is available: a. Stock as on 31st March, 20X4 112,400 b. Sales during April 20X4 160,000 c. Purchases during April, 20X4 85,800 d. Sales include an amount of $1,200. Cost of these goods is $1,170 Crown Ltd earns 15% gross profit on sales. Value of stock as on 30th April, 20X4 shall be: A. $186,600 C. $186,630 B. $199,320 D. $135,250 42. Following is the information for the movements in stocks during March, 20X4: 1st April Stock in hand 150 units @ $8.50 3rd April Purchases 300 units @ $9.00 8th April Purchases 200 units @ $10.00 10th April Sales 200 units @ $11.00 20th April Sales 150 units @ $11.00 Distribution expenses per unit are 20 cents. a. Units of stock in hand as on 30th April shall be: 450 C. 200 B. 300 D. 150 b. NRV of stock in hand as on 30th April shall be: B. $2,640 C. $2,940 B. $2,840 D. $3,240 c. Cost of stock in hand as on 30th April using FIFO method shall be: A. $2,900 C. $3,000 B. $2,700 D. $4,700 d. Cost of units sold by weighted average method shall be: A. $3,850 C. $2,806 B. $4,706 D. $3,760 e. Using weighted average method of costing, gross profit for the month shall be: A. NIL C. $1,044 B. $856 Loss D. $90 43. Draft balance sheet of Standard Ltd include stock figure of $2,500. Upon investigation following facts were discovered: a. One stock over stated by $100 A.

b. Goods returned by a customer had been included in stock at selling price of $600 c. Goods included in stock at cost of $1,000 had been damaged. These would be sold at normal selling price of $1,200 after repairing which will cost $300. d. Company earns gross profit @15% on sales. The correct amount of stock in hand shall be: A. $2,210 C. $2,310 B. $2,500 D. $2,010 44. The system which give a continuous information regarding quantity & value of stock is known as: A. Periodic inventory C. Continuous stock taking B. Perpetual inventory D. Both a & b th 45. X Ltd had 3,000 units of product beta on hand on 30 June, 20X0. Unit cost of Beta is as under: $ Raw material 10.50 Wages 1.25 Manufacturing overheads 2.30 Interest 0.70 Distribution costs 0.50 Admin overheads 0.25 -----15.50 ==== Value of stock to be shown in balance sheet as on 30th June, 20X0 shall be (ignore NRV): A. $46,500 C. $45,000 B. $42,900 D. $42,150 th 46. Y Ltd had stocks costing $225,000 on hand on 30 November,20X5. Transaction for the month of December, 20X5 are as under: $ Purchases 430,000 Sales 588,250 Sales return 22,000 Carriage inwards 23,000 Sales include goods costing $27,500 sold for $25,000 Company earns gross profit @33.33% on cost Cost of stock as on 31st December, 20X5 shall be: A. $222,000 C. $111,750 B. $224,000 D. $114,250 47. NRV of semi manufactured units shall be: A. Sale price of units C. Cost of units in process B. Sale price less distribution cost D. Sale price less cost to complete and distribution costs
CONTROL ACCOUNTS

48. 49. 50. 51.

Debits for sales in the sales ledger control account shall be made from: A. Sales invoices C. Journal B. Sales book D. Cash book Sales ledger control account is prepared to keep collective record of: A. Sales C. Suppliers B. Customers D. Stocks Purchase ledger control account is prepared to keep collective record of: A. Purchase C. Customers B. Suppliers D. Direct expenses Transactions for purchases recorded in purchase ledger, on daily basis, from: A. Journal C. Cash book B. Purchase invoices D. None of above

52.

Transactions that could appear in a control account may be for: A. Sales & sales returns B. Receipts, payments, discounts & dishonored cheques of customers C. Bad debts, contras and interest charged D. All of above

53. Standard Ltd had a debit balance of $4,000 in your sales ledger and credit balance of $2,300 in your purchase ledger. If a contra transaction is required, journal entry shall be: Debit Credit A. Creditors control A/C $4,000 Debtors control A/C $4,000 B. Creditors control A/C $1,700 Debtors control A/C $1,700 C. Creditors control A/C $2,300 Debtors control A/C $2,300 D. Debtors control A/C $2,300 Creditors control A/C $2,300 54. Transactions posted from cash book in Control A/C are for: A. Receipts from customers B. Refunds to customers C. Discount allowed to customers D. All of above 55. Where Purchase Ledger Control A/C is maintained, balance of creditors that would appear in balance sheet shall be extracted from: A. Journal B. Purchase journal C. Purchase ledger D. Purchase ledger control A/C 56. Which of the following items would not appear in the Debtors Control A/C: A. Provision for doubtful debts B. Returns inwards C. Discount allowed D. Interest charged on over due amounts 57. The following information is extracted from the Sales Ledger Control A/C in the books of Crown Ltd for the year 19X8: $ Debtors on 1st January CR 1,560 DR 22,500 Debtors on 31st December CR 1,890 DR 27,300 Sales 107,800 Sales returns 15,670 Discount allowed 1,070 Refund to customers 2,700 Assuming no other transaction during the year, receipts during the year shall be: A. $89,290 C. $103,000 B. $85,300 D. $112,600 58. Following transactions are appearing in the Debtors Control A/C for a year: $ Bank 102,000 Discount allowed 8,125 Credit sales 120,100 Contra settlements 3,500 Balance c/d on 31st December (DR) 12,920 Assuming no other transactions for the year, opening balance b/f on 1st January on the Debtors Control A/C shall be: A. $4,825 (DR) C. $6,445 (CR) B. $6,445 (DR) D. $47,625(CR)

59.

Balance on Purchase Ledger Control A/C as on 31st December, 20X0 is $1,660 more than the aggregate of balances extracted from the Purchase ledger on the same date. Which of the following errors could by itself account for the discrepancy: A. Purchase day book is overcast by $2,560 B. In addition to difference as per A above, an invoice valued $1,450 is omitted from posting in Purchase Ledger. C. In addition to differences in A & B above, Creditors having balances of $540 written back during the year but omitted from Purchase Ledger Control A/C. D. None of above. 60. Control accounts are prepared because: A. They provide check on the accuracy of transactions in personal accounts B. They assist in the location of errors in the personal accounts C. They immediately give the figure of net receivable/net payable D. All of above 61. Reconciliation between balances as per Sales/Purchase ledgers their related control accounts shall be required due to: A. Posting of incorrect amount to the control account because of miscast of books of original entry B. A transposition error in the posting of transactions in the personal accounts C. Balances extracted from the sales/purchase ledger may be incorrect or their sum may be miscast D. All of above 62. On the scrutiny of payable ledger, following errors were found: a. A debit note for $75 is recorded as if it was an invoice b. Returns to a supplier for $260 entered on the wrong side of suppliers personal account c. Creditors written back for $300, omitted from purchase ledger d. A credit balance of $800 had been omitted when listing the accounts payable ledger If the aggregate of the balances from the Purchase Ledger is $23,000, adjusted balance after the rectification of above referred errors shall be: A. $22,905 C. $23,465 B. $23,165 D. $22,830
INCOMPLETE RECORDS

63. A businessman wants calculate his net profit for the year and had made available following information: $ Capital at 1st January 100,000 Capital at 31st December 150,000 Drawings during the year 60,000 New capital introduced during the year is $40,000. His net profit for the year shall be: A. $40,000 C. $50,000 B. $60,000 D. $70,000 64. Following are the assets and liabilities of Hawk Traders as on 31st December, 20X8: $ Non Current assets 120,000 Stocks 13,600 Debtors 15,000 Cash 8,700 Creditors 22,300 Amount of Capital on the same date shall be: A. $157,300 C. $120,000 B. $135,000 D. None of above

65. If a general store makes gross profit of 10% on cost and cost of goods sold amounted to $60,570, the amount of sales shall be: A. $66,700 C. $67,300 B. $66,627 D. $67,000 66. If a the sales of a store during the year amounts to $300,000and it sells goods at the markup of 33.33% on cost, the gross profit shall be: A. $100,000 C. $175,000 B. $75,000 D. $90,000 67. Following information is extracted from the books of a trader: $ Opening capital 30,000 Closing capital 34,500 Net profit for the year 7,500 His drawings during the year shall be: A. $1,500 C. $6,000 B. $3,000 D. $4,500 68. A business had trade debtors of $19,000 as on 1st January, 20X5 and $23,750 as on 31st December, 20X5. If receipts & bad debts during the year are $45,000 and $1,950 respectively, sales during the year shall be: A. $51,700 C. $42,200 B. $49,750 D. $40,250 69. A business had trade creditors of $37,280 on 1st July, 20X5 and of $26,450 on 30 th June, 20X6. If the payments to and discount received from the creditors during the were from $31,490 and $1,230 respectively, purchases during the year shall be: A. $59,170 C. $20,660 B. $70,000 D. $21,890 70. Following figures have been extracted from the records of Standard Ltd for the year 20X5: Prepaid rent 12,660 Accrued salaries 22,500 Balance as on 31st December Accrued rent 6,700 Accrued salaries 25,000 Payments during the year Rent 24,000 Salaries 240,000 Amount of rent and salaries chargeable to profit and loss account for 20X5 shall be: A. $43,360 C. $285,860 B. $242,500 D. None of above 71. A business had stock on hand on 1st July, 20X6 and on 30th June, 20X7 for $84,000 and $93,500 respectively. Sales during the year were for $900,000 and business makes gross profit @ 30% on sales. Amount of purchases during the year shall be: A. $909,500 C. $701,808 B. $639,500 D. None of above 72. Mr Bill Smith is running a departmental store and does not keep proper record for the stocks. On 30th May, 20X9, a fire took place in his store damaging most of the stocks. Only goods costing $7,570 were survived. His wish to file claim for loss of stock with the insurance company and for its computation, provide you the following information: $ Stock on 1st July, 20X8 8,210 Creditors on 1st July, 20X8 4,690 Creditors invoices unpaid on 30th May, 20X9 3,780 Payments to creditors during the period 36,450 Credit notes received from creditors 1,580 Balance as on 1st January

Sales 42,200 Rate of gross profit is 20% on sales Amount of claim to be lodged with the insurance company for the loss of stock, shall be: A. $4,000 C. $7,600 B. $840 D. No claim is required 73. Mr John is a retailer and does not keep proper books of account. He has employed an accountant/cashier who is responsible for the collection of cash against sales, making small payments and banking the balance in till on the week-end. Mr John used to draw $200 on every week-end for his personal expenses. On 17th November, 20X2 the accountant disappeared with the balance of cash in hand. Mr John now wish to file claim for loss with the insurance company and for its computation, furnish you the following information: $ Stock on 1st November, 20X2 3,200 Debtors on 1st November, 20X2 1,200 Stock on 17th November, 20X2 2,850 Debtors on 17th November, 20X2 1,400 Purchases during November, 20X2 6,600 Other payments during the month: Cash banked 7,500 Wages 150 Office cleaning 50 Sales expenses 70 Mr John earns gross profit @ 30% on cost Amount of claim to be lodged with the insurance company for cash misappropriated, shall be: A. $1,115 C. $715 B. $1,964 D. $1,564 74. You have been provided with the following information relating to a business for the year 20X1: $ Stock on 1st January, 20X1 83,450 Stock on 31st December, 20X1 35,000 Creditors on 1st January, 20X1 23,160 Creditors on 31st December, 20X1 21,600 Sales during the year 210,000 Fixed rate of gross profit 33.33% Payments to creditors during the year shall be: A. $163,110 C. $93,110 B. $110,610 D. $ 101,860 75. Mr Gullard runs a garments store. On January 01,20X8, his stock on hand, at cost, amounted to $39,500. During the quarter to 31st March, 20X8 his sales were $129,480 and purchases & returns outwards for the same period were for $90,000 & $3,660. Mr Gullard makes a gross profit of 30% on cost. On 31st March, there was a fire in the store and all the stock was damaged. Mr Gullards loss due to fire is fully secured from Hampshire Insurance. Amount of insurance claim for the loss of stock due to fire, to be lodged with insurance company, shall be: A. $35,204 C. $26,240 B. $30,200 D. No claim required
PARTNERSHIP

76. Following payments to partners by the firm are recorded in the Profit & Loss Appropriation Account: 1. Salaries 2. Interest on capital 3. Interest on loan from partner

4. A.

Interest on partners drawings 1,2,3 & 4 C. 1,2 & 3 B. 1,2 & 4 D. 1,3 & 4 77. The following information is available for a firm of partnership: $ Net profit before the following items 23,000 Salaries to partners 12,200 Interest on loan from partner 6,670 Interest on drawings 1,210 Amount of profit to be shared by partners, in the profit sharing ratio, shall be: A. $10,800 C. $12,010 B. $4,130 D. $5,340 78. The following information is available for a firm having two partners A & B sharing profits and losses in the ratio of 2:1: $ Net profit before the following items 23,000 Salaries to partners A 4,800 B 7,400 Interest on loan from A 6,670 Interest on drawings A 650 B 560 Total amount of share of A in the profits of the firm shall be: A. $7,710 C. $15,030 B. $14,380 D. $8,620 79. In case of revaluation of assets, surplus on revaluation is shared by the partners in ratio of: A. Their capitals C. Their balances on current accounts B. Their profit sharing ratio D. None of the above 80. A. 81. of: A. 82. A. Partnership agreement should cover: Amount of capitals to be introduced C. Drawings, salaries & interest on capitals B. Profit sharing ratio D. All of above In the absence of any partnership agreement, profits or losses shall be shared in the ratio Their capitals C. Equally B. Their balances on current accounts D. None of the above Total amount of share of a partner in the profits of the firm is credited to his: Capital account C. Drawings account B. Current account D. None of the above

83. Aggregate amount of partners investment in the firm, to be included in the balance Sheet, shall be: A. Balance on capital account B. Amount of capital less drawings C. Balance on capital & Current accounts net of drawings D. None of the above 84. You are given the following information by the partners of a firm: $ Net profit before the following items 19,000 Salaries to partners B 1,200 C 1,400 Interest on capitals

A 600 B 500 C 700 Interest on loan from A 1,400 Partners A+B+C Profit sharing ratio 4 : 4 : 2 Total amount of As share in the profits of the firm shall be: A. $6,980 C. $7,380 B. $5,880 D. $4,740 85. Taking the information in previous question, you are informed that C is guaranteed a minimum return of $5,000 by A & B. In this case total amount of Bs share in the profits of the firm shall be: A. $7,020 C. $6,720 B. $5,620 D. $6,850 86. Net profit of a firm having three partners X,Y & Z, for the year ended 31st March, 20X6 is $12,560 after accounting for following expenses: $ Salaries to partners X 600 Y 900 Z 1,200 Interest on loan from partners X 300 Y 200 Z 150 Partners share profits in the ratio of 3:3:4 for X, Y & Z respectively and X is guaranteed a minimum return of $4,000 by Y & Z. Considering above information, amount of share of each of each partner in the profit of the firm shall be: A. X $4,000, Y $4,668, Z $6,224 B. X $4,000, Y $4,484, Z $6,040 C. X $4,368, Y $4,300, Z $5,856 A. X $4,368, Y $4,668, Z $6,224
CONSOLIDATED ACCOUNTS

87. Holding company means a company: A. Holding an interest in any other company. B. Holding more than 50% shares in another company. C. Entitled to receive dividend from another company. D. None of above 88. A subsidiary company means a company: A. Having another company as its shareholder. B. Which is controlled by a parent company B. Which cannot sell shares to public. C. None of above 89. Minority interest is the: A. Share of minority shareholders in the capital of holding company. B. Share of minority shareholders in the capital of subsidiary company. C. Share of minority shareholders in the net assets of subsidiary company. D. None of above 90. Goodwill is the: A. Value of creditability of the holding. B. Value of creditability of the subsidiary. C. Excess of cost of investment in the subsidiary over the share of holding in the equity of subsidiary. D. Excess of cost of investment in the subsidiary over the share of holding in the equity of subsidiary at the time of acquisition.

91. A. B. C. D. 92. A. B. C. D.

Pre-acquisition reserves means: Reserves of subsidiary at the time of acquisition by holding company. Reserves of subsidiary on balance sheet date. Reserves of holding on balance sheet date. Reserves of holding at the time of acquisition by holding company. Amortization of goodwill is charged to: Profit & loss account of subsidiary. Profit & loss account of holding. Reserves of subsidiary Capital expenditure of holding YOU are provided with the following Balance Sheets of S Ltd.(subsidiary company), as on 31st December, 20X5 & 20X4, by the directors of H Ltd (holding company): $ $ Non Current Assets Tangible assets 19,000 20,000 Investments 5,000 5,000 Current assets 18,000 12,500 Less: Current Liabilities (8,700) (6,500) ---------- 9,300 ---------- 6,000 ---------------33,300 31,000 ====== ===== Capital 25,000 25,000 Reserves 8,300 6,000 -------------------33,300 31,000 ======= ====== H Ltd acquired 75% shares in S Ltd on 31st December, 20X4 at the cost of $25,000 Based on the above information, select correct choice out of the choices given in the question No. 92 to 96.

93. C.

Amount of pre-acquisition reserves of S Ltd are: $8,300 C. $31,000 B. $33,300 D. $6,000 94. Amount of goodwill paid by H Ltd is: D. $1,750 C. $25 B. $19,000 D. NIL 95. H Ltds share in the reserves of S Ltd, to be included in the amount of reserves of H Ltd, to be taken in the consolidated balance sheet as on 31st December, 20X5 shall be: E. $1,725 C. $6,225 B. $4,500 D. NIL 96. If goodwill is to be amortized by H Ltd over the period of four years from the year of acquisition, the amount of goodwill that would appear in the consolidated balance sheet as on 31 st December, 20X5 shall be: F. $12.50 C. $875 B. $9,500 D. 1,750 YOU are provided with the following Balance Sheets of Crown Ltd.(holding company) and Standard Ltd (subsidiary company) , as on 30th June, 20X5. Crown Standard $ $ Non Current Assets Tangible assets 20,800 13,000 Investment in Standard Ltd 9,000 -

Current assets Less: Current Liabilities

8,200 (4,000) ----------

15,500 (5,500) 4,200 -----------------34,000 ======

10,000 -------23,000 =====

20,000 8,000 0 4,000 4,000 6,000 -------------------24,000 18,000 7% Debentures 10,000 5,000 --------------------34,000 23,000 ======= ====== Crown Ltd acquired 60% ordinary shares, 5% preference shares and 25% debentures of Standard Ltd on 1st July, 20X2 when the reserves of Standard Ltd were $4,000. Based on the above information, select correct choice out of the choices given in the question No. 97 to 101. 97. Amount of goodwill paid by Standard Ltd is: G. $600 C. $350 B. $1,800 D. $4,200 98. Crown Ltss share in the amount of reserves of Standard Ltd as on 30 th June, 20X5, to be included in the consolidated reserves of Crown Ltd & its subsidiary shall be : H. $3,600 C. $2,400 B. $1,200 D. $6,000 99. Amount of minority interest to be included in the consolidated balance sheet of Crown Ltd & its subsidiary, as on 30th June, 20X5, shall be: I. $9,400 C. $11,400 B. $7,200 D. $8,600 100. If goodwill is to be amortized over a period of five years from the year of acquisition, value of goodwill to be included in the consolidated balance sheet as on 30th June, 20X5 shall be: J. $120 C. $NIL B. $360 D. $70 101. Following is the consolidated balance sheet of H Ltd and its subsidiary, S Ltd, as on 31st December, 20X3: $ Non Current Assets 19,000 Goodwill 2,800 Net current assets 7,000 --------28,800 ====== Ordinary Capital 10,000 Consolidated reserves 16,000 ----------26,000 Minority interest 2,800 ----------28,800 =======

Ordinary Capital Preference Capital Reserves

Other information: a. Capital of Standard Ltd is $5,000 and there is no change in it since the acquisition. b. Post acquisition reserves of S Ltd are $5,000 c. On 1st January, 20X1, H Ltd acquired 80% of capital in S Ltd. Based on the above information, select correct choice out of the choices given in the question No. 102 to 104. 102. Pre-acquisition profits of S Ltd are: K. $4,000 C. $6,000 B. $5,000 D. $7,000 103. Cost of investment of H Ltd in S Ltd is: L. $8,000 C. $10,000 B. $9,000 D. $11,000 104. M. Amount of post-acquisition of S Ltd are: $4,000 B. $5,000 C. $6,000 D. $7,000

105. A. B. C. N. 106. O. A. B. C. 107. A. B. C. P. 108. A. B. C. Q. 109. A. B. C. R. 110. S. A. B. T. 111.

RATIO ANALYSIS & INTERPRETATION OF ACCOUNTS Users of financial statements may be: Shareholders & management. Employees Lenders All of above Lenders as users of financial statements may be interested in: Adequacy of profits, working capital & solvency position Earning and dividend per share Earning & dividend yield None of above Shareholders as users of financial statements may be interested in: Earning and dividend per share ROCE & ROOE Earning & dividend yield All of above Working capital cycle in days is: Inventory holding period Debtors collection period Creditors payable period Net of above three ROOE is worked out from profit after: Tax Preference dividend Financial charges All of above three ROCE is worked out from profit after: Tax Preference dividend Financial charges None of above three A company is said to more leveraged as compared to other company if:

U. V. W. X. 112. where: Y. Z. AA. BB. 113. CC. DD. EE. FF. 114. GG. HH. II. JJ. 115. KK. LL. MM. NN.

Said companys earnings are more than the other company Said companys capital is more than the other company Said companys working capital is more than the other company Said companys reliance on debts is more than the other company ROOE of a more leverage company increases sharply as compared to increase in ROCE Interest does not increase in line with the increase in borrowings. ROCE is greater than cost of borrowings There is sharp increase in earning per share. None of above Liquid assets are also called: Quick assets Net assets Current assets None of above Capital employed is: Shareholders equity Long term debts Short term debts Shareholders equity plus debts Working capital is the amount of: Cash and bank balances Long term and short term loans Excess of current assets over current liabilities Accumulated profits YOU are provided with the following information about firm X and its competitor firm Y: Firm X Firm Y Current ratio 1.80 1.60 Acid test ratio 0.95 0.95 ROCE 16% 16% ROOE 18% 20% Gearing ratio 50% 60% Receivables age 35 days 45 days Inventories carrying period 80 days 75 days Payables age 35 days 45 days Gross profit % 27% 25% Net profit % 11% 12% Based on the above information, select correct choice out of the choices given in the question No. 116 to 120. Working capital cycle of Firm X is: 80 days C. 115 days B. 75 days D. 120 days Out of the two, more leveraged company is: Firm X C. There is no loan in both companies B. Firm Y D. None of the choice is correct Comparison of current ratio and acid test ratio of both firms means: Firm X has more inventories than Y Firm Y has more inventories than X Current assets of X are greater than Y None of the choice is correct Comparison of gross profit and net profit ratios reveals that:

116. OO. 117. PP. 118. QQ. RR. SS. TT. 119.

UU. VV. WW. XX. 120. YY. ZZ. AAA. BBB.

Firm X is more efficient in trading than Y Firm Y has more controlled operating expenses than X Firm X is more efficient in trading but has higher operating expenses None of the choice is correct Analysis of acid test ratio of firm X reveals that: Current assets are sufficient to meet current liabilities Current assets are grater than current liabilities Current liabilities are greater than current assets Current liabilities are greater than quick assets

YOU are provided with the following information about firm A and its competitor firm B: INCOME STATEMENT Firm A Firm B Year Ended Year Ended 31.12.X3 31.12.X3 60,000 75,000 42,000 59,000 ---------------------18,000 16,000 15,500 13,000 ----------------------18,000 16,000 15,000 13,000 --------------------3,000 3,000 2,200 1,300 --------------------800 1,700 350 600 ---------------------450 1,100 100 200 ---------------------350 900 ======= ======== BALANCE SHEET Firm A As On 31.12.X3 30,500 12,800 4,800 2,350 Firm B As On 31.12.X3 28,500 11,750 4,250 4,100

Sales Cost of sales Gross profit Operating expenses Gross profit Operating expenses Operating profit Interest Tax Preference dividend

Tangible assets Current assets Stocks Debtors Cash & bank balances

----------50,450 ======= Represented by: Ordinary share capital Preference capital Reserves Current liabilities Creditors Others 25,000 5,000 6,750 ---------36,750 5,400 8,300 ----------50,450 =======

------------48,600 ======== 30,000 5,000 9,600 ----------44,600 2,900 1,100 -----------48,600 ========

121. CCC.

Based on the above information, select correct choice out of the choices given in the question No. 116 to 120. Working capital cycle of Firm X is: 80 days C. 115 days B. 75 days D. 120 days

ACCRUALS AND PREPAYMENTS 122. In the year to December31, 20X5, Clark Ltd paid $47,600 on account of rent of office. The amount of outstanding rent on the beginning and close of income year was $2,600 and $3,200 respectively. Amount of rent expenses shall be: DDD. $47,600 C. $48,200 B. $47,000 D. $50,800 123. During 20X9, Standard Ltd received $119,600 from customers. Amount of bills outstanding and received in advance were as follows: As on As on 31.12.20X8 31.12.20X9 Outstanding bills $5,600 $6,300 Advance receipts $1,200 $1,500 Amount of income to be included in income statement shall be: EEE. $120,000 C. $118,600 B. $119,600 D. $120,600 124. Income Statement of Brown Plc for the year ended 31st March, 20X2 included $32,700 on account of operating expenses. This represents payments during the year and following amounts were not taken into account: As on As on 31.03.20X1 31.03.20X8 Unpaid bills $4,150 $4,760 Prepaid amounts $1,150 $2,800 Amount of operating expenses to be included in income statement shall be: $33,740 C. $33,310 B. $30,440 D. $31,660

FFF.

125.

Income Statement of Crown for the year ended 31st March, 20X2 included $44,700 on account of operating expenses. This represents payments during the year and following amounts were not taken into account: As on As on 31.03.20X1 31.03.20X8 Prepaid amounts $4,150 $3,800 Amount of operating expenses to be included in income statement shall be: GGG. $40,550 C. $44,350 B. $48,500 D. $45,050 YOU are provided with the following figures as on 1st July, 20X5, appearing in the record of Brown: Prepaid rates $1,200 Outstanding rent $1,500 Payments during the year to 30th June, 20X6 were: 31.07.20X5 Rent for two months to July, 20X5 $3,000 31.07.20X5 Rates for 3 months to October, 20X5 $3,600 30.09.20X5 Rent for two months to September, 20X5 $3,000 30.10.20X5 Rates for 3 months to January, 20X6 $4,500 30.11.20X5 Rent for two months to November, 20X5 $3,300 30.01.20X6 Rent for two months to January, 20X6 $3,300 30.01.20X6 Rates for 3 months to April, 20X6 $4,500 30.03.20X6 Rent for two months to March, 20X6 $3,300 30.04.20X6 Rates for 3 months to July, 20X6 $4,500 30.05.20X6 Rent for two months to May, 20X6 $3,300 Amount of rent expenses for the year to 30th June, 20X6, shall be: $16,800 C. $13,500 B. $17,100 D. $17,100 Amount of rates expenses for the year to 30th June, 20X6, shall be: $19,200 C. $20,850 B. $19,350 D. $17,700 YOU are provided with the following figures extracted from the Income Statement of Hawk Ltd for the year ended 31st August, 20X4: Rental income $49,200 Salaries $50,000 Insurance $20,600 Rent $12,400 These figures were arrived at after considering the following: As on As on 1st September,20X3 31st August,20X4 Rental income: Accrued $1,400 $1,800 Un-earned $2,400 $2,600 Salaries accrued $5,500 $6,000 Insurance pre-paid $3,000 $3,500 Rent: Accrued $1,200 $1,300 Pre-paid $1,100 $1,150

126. HHH. 127. III.

128.
JJJ.

129.
KKK.

130.

Amount of rental income received during the year to 31st August, 20X4, shall be: $49,000 C. $49,400 B. $49,200 D. $48,400 st Amount of salaries paid during the year to 31 August, 20X4, shall be: $55,500 C. $50,500 B. $56,000 D. $49,500 Amount of insurance premium paid during the year to 31st August, 20X4, shall be:

LLL.

$21,100 C. $24,100 B. $23,600 D. $20,100 131. Amount of rent paid during the year to 31st August, 20X4, shall be: MMM. $12,350 C. $12,450 B. $12,300 D. $12,400 RECTIFICATION OF ERRORS List of account balances extracted from the records of Milan as on 30 th September, 20X9 is not balanced. On scrutiny following errors were found: a. Discount allowed $1,245 omitted from the Debtors account. b. Receipt of $430 from a customer entered in cash book as 340 c. Balance of $1,050 on traveling expenses account omitted from trial balance. d. Sale invoice of $210 omitted from Sales Day Book Balance on Suspense account before rectifying these errors shall be: A. DR $2,175 C. CR $2,175 B. DR $2,385 D. CR $2,385 133. Draft income statement of Standard Ltd for the year ended 30 th September, 20X5 shows profit of $36,950. Its scrutiny revealed that following errors were made, by the accountant, while preparing the income statement:

132.

YOU are provided with the following Balance Sheet of Brown as on 31st March, 20X9: ASSETS $ CAPITAL & LIABILITIES $ Non-current assets 8,600 Capital 10,000 Investments in 8% debentures 1,000 Add: Profit 1,420 Less: Drawings (850) ---------10,570 Current Assets Current Liabilities Stocks 1,750 Creditors 1,330 Debtors 600 Accrued expenses 200 Prepayments 150 -------------------12,100 12,100 ======= ====== On scrutiny of records you found that following errors were made by the accountant: a. A credit sale of $25 had not been entered in the sales day book. b. Aggregate of balances extracted from the sales ledger should be $1,790 instead of $1,750. c. No invoice was received for goods costing $90 received on 29 th March, 20X9 and included in the stock. d. Goods costing $30 were received by Brown on 2nd April, 20X9. However, their invoice was received and recorded in the purchase day book on 28th March, 20X9. e. A credit note of $18 issued to a customer (David) for discount allowed to him was entered on the opposite side of his account. Moreover, DR balance of $12 on his account (after incorporating above referred credit note wrongly) was written on the CR side in the trial balance. f. An invoice of a supplier for $14 was recorded in his personal account as if it was a debit note.

134.
A.

135.
B. 136. shall be: C.

Amount of debtors and creditors as on 31st March, 20X9, shall be: Debtors $653, Creditors $1,450 C. Debtors $665, Creditors $1,268 B. Debtors $629, Creditors $1,420 D. Debtors $653, Creditors$1,392 st Value of stock as on 31 March, 20X4, shall be: $1,780 C. $1,1,690 B. $1,660 D. $1,750 , Balance on suspense account before the rectification of above referred transactions, CR $12 C. DR $12 B. DR $24 D. NIL Amount of adjusted profit for the year to 31st March, 20X9 shall be: $1,385 C. $1,330 B. $1,475 D. $1,455

137.
D.

YOU are provided with the following Balance Sheet of Browning as on 31 st March, 20X9: ASSETS $ CAPITAL & LIABILITIES $ Non-current assets 7,800 Capital 9,000 Investments 10% bonds 1,200 Add: Profit 1,020 Less: Drawings (950) ---------9,070 Current Assets Current Liabilities Stocks 1,550 Creditors 2,330 Debtors 800 Accrued expenses 200 Prepayments 250 -------------------11,600 11,600 ======= ====== On scrutiny of records you found that following errors were made by the accountant: a. A purchase invoice of $70 was wrongly recorded in sales day book and the value of invoice is posted to the debit of sales ledger. b. On 20th March, 20X9, Brown took goods worth $40 for his personal use. No journal entry was made to record this transaction. c. A non-current asset costing $140 was purchased & installed before 31st March, 20X9 but its purchase remained un-recorded as no invoice was received from supplier till 31st March. Depreciation on non current assets is charged @10% p.a. and full years depreciation is charged on assets added during the year. d. Included in the creditors is the CR balance of Lee( a customer) for $50. This represents amount received as final recovery against his written off balance of $90 in 20X8. e. Insurance expenses included a premium of $160 paid for the year to 30th June, 20X9. f. Following un-paid bills were not recorded: Electricity $30 Telephone $35 Fuel $15 g. Included in the debtors is the balance of John for $70. 50% of his balance is to be written off and balance to be provided in full. h. Profit on bonds for the last two months is accrued. Based on the above information: 138. Amount of debtors as on 31st March, 20X9, shall be:

E.

$695 C. $660 B. $730 D. $800 139. Amount of creditors as on 31st March, 20X9, shall be: F. $2,490 C. $2,420 B. $2,540 D. $2,350 140. Amount of adjusted profit for the year to 31st March, 20X9 shall be: G. $926 C. $870 B. $856 D. $806 st 141. Amount of prepayments as on 31 March, 20X9 shall be: H. $290 C. $40 B. $250 D. $210 st 142. Amount of accrued expenses as on 31 March, 20X9 shall be: I. $270 C. $200 B. $285 D. $250 143. Amount of non-current assets as on 31st March, 20X9 shall be: J. $7,940 C. $7,800 B. $7,926 D. $7,674 144. Amount of capital including therein adjusted profit and drawings for the year as on 31st March, 20X9 shall be: K. $10,846 C. $10,860 B. $10,916 D. $10,820 YOU are informed that the bookkeeper of Crown Ltd extracted list of account balances as on 30th September, 20X8 and was unable to balance it. The totals of lists were as follows: Debit $176,100 Credit $180,280 He, being instructed by his manager, proceeded to prepare draft financial statements inserting the difference in the balance sheet. The draft income statement showed a profit of $15,370 for the year ended 30th September, 20X8. Having prepared the draft financial statements, the bookkeeper proceeded to locate the errors and found the following but there are few more which are to be traced: a. Credit note for goods returned (invoiced at $120 & cost $90) was recorded in the sales returns book. However the quantity was not included in the inventory list. b. Following figures were posted to the opposite side of the list of balances: Debtors 2,350 Bills payable 1,475 c. Cash in hand as on 1st October, 20X7 of $940 was brought forwarded as $490 d. Plant repairs for $540 were debited to machinery account. Crown Ltd depreciates its machinery @15%p.a.with a full years charge in the year of addition and no charge in the year of disposal. e. Sales returns for $125 were correctly recorded in the sales returns book but posted in the sales ledger as $251.

145.
L. 146. M.

Amount of adjusted profit for the year ended 30th September, 20X8 shall be: $15,001 C. $15,460 B. $15,919 D. $14,920 Net balance on suspense account after rectifying above referred errors shall be: $DR 1,980 C. $CR 970 B. $CR 1,980 D. $DR 6,680