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F3 Financial accounting Test

Batch Teacher:

1. Deirdre valued her closing inventory at $ 76,380. Included in this amount are the following two
inventory lines:
(1) 65 DVD recorders at cost $100 each. A fault has been discovered with these machines, which will
cost $ 2,000 in total to rectify, before selling the recorders for $ 145 each.
(2) 140 VHS video tapes at cost $ 5 each. Due to the introduction of DVDs, demand for these tapes
has reduced, and they could now be sold for only $ 2 each.

At what amount should Deirdre value her closing inventory?


2. In 20X6 Princi a limited liability company, changed its accounting policy with respect to inventories.
Inventories were formerly valued using weighted average cost, and are now to be valued using first-
in-first-out(FIFO). Princi has made a prior period adjustment and stated the comparative figures for
20X5 as though FIFO had always been used.
Of which accounting concept is this an application?
A) Accruals B) Going concern
C) Consistency D) Prudence

3. According to IAS-2 inventories, what is the definition of net realisable value?

1) Selling price less cost to completion and selling costs
2) Purchase cost plus cost of conversion and storage costs

4. Traore has a year end of 31 December 20X8.

On 1 january 20X7 a flood in the finished goods warehouse caused damage to some inventory. The
inventory had cost $ 45,000 to produce, but was sold on 15 january 20X7 for $ 30,000.
On 3 january 20X7 one of the compnay’s customer, Axis, went into liquidation owing Traore $ 50,000.
What is the decrease in the profit for the year ended 31 December 20X8 as a result of these
A) $ 0
B) $ 65,000
C) $ 15,000
D) $ 50,000

5. While preparing the year end financial statements, the accountant of Minerva is informed that items
of inventory which cost $ 10,000 have been discovered in the inventory room. They have been
omitted from the company’s records. One of these inventory items has been damaged. It cost $
7,000 and could be sold for $ 6,000 , but only after $ 500 has been spent on repairing it.
How much should Minerva increase her inventory value by to record these intems?

F3 Financial accounting Test

6. Weaver had opening inventory of $ 66,000 on 1 July 20X2 and closing inventory of $ 74,000 on 30
June 20X3. During the year Weaver made sales of $ 84,000 all at a gross profit margin of 25%.
What purchases figures should Weaver include in the financial statements for the year-ended 30
June 20X3?

7. One item of Joseph’s inventory cost $ 3,000 to purchase. It will cost $ 300 to get the inventory ready
for sale and $ 200 auctioneer’s fee to sell the inventory. He plans to sell it for $ 3,400. It would cost $
3,700 to buy a similar item of inventory.
In his draft financial statements he has valued his inventory at $ 2,900.
Which inventory valuation method has been used?
A) Historical cost
B) Net realisable value
C) Replacement cost
D) Expected selling price

8. The following extract is taken from Polly’s financial statements for the year ended 30 November
Year ended 20X6 20X7
Trade receivables $ 150,000 $ 140,000
Allowance for receivables $ 6,000 $ 4,200
Which Two of the following statements are correct for the year ended 30 November 20X7 in
relation to the information given above?
A) The allowance for receivables charged in the income statements is a debit of $ 4,200
B) The allowance for receivables charged in the income statements is a credit of $ 1,800
C) Net trade receivables reported in the balance sheet are $ 140,000
D) Net trade receivables reported in the balance sheet are $ 135,800

9. Yasmin received $ 200 cash from a credit customer whose debt she had written off as irrecoverable
in the previous accounting period.
What will be the impact on the receivables balance when Yasmin acconts for the recovery of the $
A) Decrease B) Increase C) No impact

10. Credit purchases of $ 600 have been omitted from the purchase day book.
What will be an effect of correcting this error?
A) Net profit will be reduced by $ 600
B) Net profit will be increased by $ 600
C) Net assets will be increase by $ 600

11. Jody was owed $500 from a customer who has gone bankrupt. Jody has been informed that she will
receive 50c for every $1 owed. Jody also needs to increase her allowance for receivables by $275.
How much will jody’s profit be reduced by, when the items have been accounted for?

F3 Financial accounting Test

12. Berly has forgotten to record the decrease of $18,000 in her receivables allowance in her accounts
for the year ended 31 December 20X9.
How will Berly’s profit for the year and net assets at the year-end be affected by this?
A) Profit—overstated Net-asset-------- overstated
B) Profit--- understated Net-assets------- understated
C) Profit--- understated Net-assets-------- overstated
D) Profit--- overstated Net-assets-------- understated

13. Receivables at 31 December 20X6 $ 36,000

Allowance at 31 December 20X5 $ 1,460
On reviewing the receivables account it was found that an irrecoverable debt of $800 has not been
written off and the recovery of a debt of $240 previously written off had not yet been entered in the
books. The company wishes to make an allowance for receivables of 6% at the year-end.
What is the net charge to the income statement for the year ended 31 December 20X6 in respect
of receivables?


14. Bert has a profit of $28,000 for the year-ended 31 October 2006. He has not yet recorded the
following items:
 He has irrecoverable debts of $450.
 His allowance for receivables at 1 November 2005 is $ 1,570 and he wants the closing allowance to
amount to be $ 1,070.
 He has received $320 in relation to a debt that was written off in the prior accounting period
What is the net profit for the year-ended 31 October 2006 after adjusting for those items?
A) $ 28,050 B) $ 27,370
C) $ 28,370 D) $ 27,870

15. Which two of the following functions are the aged receivables analyses used for?
A) Reconciling the receivables ledgers and receivables control accounts
B) Calculating the closing receivables balances
C) Calculating the allowance for receivables
D) Identifying potential irrecoverable debts

16. What is the effect on statement of financial position of an increase in allowance for receivables?
A) Increase in current liabilities B) Increase in current assets
C) Increase in both current assets and liabilities D) No effect

17. Lee purchased some inventory at a cost of $ 100,000 ( excluding sale tax). It cost $3,000 (excluding
sales tax) to transport the inventory to Lee’s premises and he paid $10,000 non-recoverable sales
tax. In addition when the inventory is sold it will cost Lee $1,000 to deliver the item to his customer’s
premises. Lee always makes a large profit on his transactions and he always offers free deliveries to
his customers.
At what value should the inventory be included in Lee’s financial statements?
A) $ 103,000 B) $ 114,000 C) $ 113,000 D) $ 112,000

F3 Financial accounting Test

18. An agricultural tractor supplier held the following tractors at the financial year-end.

Historical Cost Replacement cost NRV

$ $ $

TRACTOR 1 14000 16000 13000

TRACTOR 2 20000 18000 19000

TRACTOR 3 17000 15000 20000

In accordance with IAS-2 inventories, what figures should appear for the year-end inventories in
the financial statements of the business?
A) $ 52,000
B) $ 49,000
C) $ 46,000
D) $ 51,000

19. In accordance with IAS-2 inventories, Which FOUR of the following expenses must be excluded
from inventory costs?
1) Import duties
2) Plant depreciation
3) Carriage outwards
4) Abnormal wastage
5) Selling costs
6) Storage costs for finished goods
7) Direct labour

A) 1,2,3,4 C) 1,3,5,7
B) 2,4,6,7 D) 3,4,5,6

20. A manufacturing business calculated cost of its closing inventory as follows:

Direct material cost 200,000
Direct labour cost 180,000
Share of storage cost for finished goods 20,000
Share of indirect factory overheads 60,000
Share of selling costs 85,000
According to IAS-2 inventories, What figures should be used as the cost of closing inventories?
A) $ 440,000
B) $ 545,000
C) $ 200,000
D) $ 380,000

F3 Financial accounting Test

21. MAGDA purchased some raw material inventory from a supplier at a purchase price of $ 2,000. The
raw materials have been converted into finished goods inventory by the process. The process cost $
3,500 made up of $ 2,000 direct labour, $ 1,200 electricity cost and $300 attributable production
overheads. The finished goods will be sold for $8,000.
What is the value of finished goods inventory to be shown in MAGDA’s financial statement.

22. ABC purchased 1,000 units of inventory with the following cost details:
Purchase cost per unit $ 5 per unit
Non-recoverable import tax $ 500
Transport cost $ 1,000
Trade discount 5% of the price
Selling cost $ 1 per unit
What is the cost of inventories according to IAS-2 inventories?
$ ____________________

23. At 30 June 20X5 a company's allowance for receivables was $39,000. At 30 June 20X6 trade
receivables totalled $517,000. It was decided to write off irrecoverable debts totalling $37,000 and to
adjust the allowance for receivables to the equivalent of 5% of the trade receivables.
What figure should appear in the statement of profit or loss for the year ended 30 June 20X6 for
these items?

24. According to IAS 2 Inventories, which TWO of the following costs should be included in valuing
the inventories of a manufacturing company?
A. Carriage outwards
B. Depreciation of factory machinery
C. Carriage inwards
D. General administration overheads

25. G Co has made annual purchases of $116,000 and over the same period its inventories have risen by
$16,000. Assuming that G Co enjoys a gross profit margin of 12.5%,
what is the total value of credit sales if cash sales account for 15% of turnover?
A $67,750
B $95,625
C $97,143
D $140,625