Progress Test 1

1. The International Sustainability Standards Board (ISSB) was established in 2021

and will issue IFRS Sustainability Disclosure Standards. Which of the following
statements regarding sustainability reporting is true?
a. There is a legal requirement for UK companies to disclose information relating
to sustainability in their financial statements.
b. There has not previously been any guidance issued relating to the disclosure
of sustainability information.
c. The IFRS Sustainability Disclosure Standards will replace IFRS Standards
d. The ISSB will initially focus on climate-related disclosures

2. A business has the following payroll costs for a month:

Gross pay £77,200

PAYE £10,800
Employees’ national insurance £ 6,200
Employer's national insurance £ 7,000
What is the wages cost to the business for the month?

a. £ 77,200
b. £ 84,200
c. £ 94,200
d. £ 101,200

3. Blake is a VAT registered trader whose sales and purchases carry VAT at the
standard rate of 20%. Blake sells a customer goods on credit for £9.600 exclusive
of VAT. What is the double entry to record this?
a. Debit Sales £9,600, Debit VAT £1,920 Credit Receivables £11.520
b. Debit Receivables £11,520, Credit Sales £9,600, Credit VAT 1,920
c. Debit Sales £8,000, Debit VAT £1,600, Credit Receivables £9,600
d. Debit Receivables £9,600, Credit Sales £8,000, Credit VAT £1,600

4. Plym plc is a VAT registered retailer. All transactions attract VAT at the rate of
20%. For the year to 30 June 20X7, Plym plc made purchases of £69,600 including
VAT and made sales of £89,400 excluding VAT. There was no change in the figures
for opening and closing inventory in the statements of financial position as at 30
June 20X6 and 20X7.
What was Plym plc’s gross profit for the year ended 30 June 20X7?
a. £19,800
b. £4,900
c. £31,400
d. £16,500
5. Indicate whether the following statements are true or false.
In a period of rising prices, applying the first in first out (FIFO) method to
determine the cost of inventories will give a lower gross profit figure than the
average cost (AVCO) method. (True / False)
Closing inventory is a debit in the statement of profit or loss. (True / False)
a. True , True
b. True, False
c. False, False
d. False, True

6. Percy plc started trading on 1 April 20X4 and made a loss in the year to 31 March
20X5. The cost of inventory shown in Percy plc’s statement of financial position at
31 March 20X5, using the average cost (AVCO) basis, was £6,420. Had the first in
first out (FIFO) basis been used, the cost would have been £8,080.
What is the effect of adopting the FIFO basis on Percy plc’s financial statements
for the year ended 31 March 20X5?

a. decreases losses and decrease current assets by £1,660

b. increase current assets and decrease losses by £1,660
c. increase capital and decrease current assets by £1,660
d. increase capital and decrease current assets by £6,420

7. Which of the following accounting treatments derive from the accrual accounting
concept?
(1) Write down of a non-current asset which has suffered a fall in value
(2) Opening and closing inventory adjustments
(3) Capitalisation and amortisation of development expenditure
a. 1 and 2
b. 3 only
c. 2 and 3
d. 1 only

8. Bark plc has yet to account for sales commission of £1,755 owed to its
employees for sales made during the year. Sales commission is included within
distribution costs.
Which two of the following entries of £1,755 should Bark plc make at the year
end in respect of the sales commission?
a. Debit the accruals account
b. Debit the prepayments account
c. Debit the distribution costs account
d. Credit the distribution costs account
e. Credit the prepayments account
f. Credit the accruals account
 Choices
a. A and B
b. B and C
c. D and F
d. C and F

9. Brindal plc acquired five apartments on 1 June 20X4 and immediately rented
them out to different tenants. Brindal plc has a credit balance on its rental
income account in the trial balance as at 31 May 20X5 of £22,850. It has yet to
record rental income in arrears for Apartment 1 as at 31 May 20X5 of £4,490 and
rental income in advance for Apartment 4 of £7,720 also at 31 May 20X5.
What amount will appear for rental income in Brindal plc's statement of profit or
loss for the year ended 31 May 20X5?
a. £19,620
b. £22,850
c. £26,080
d. £37,340

10. Which of the following should be accounted for as capital expenditure?

a. The annual cost of painting a factory floor
b. The repair of a window in a building
c. The purchase of a vehicle for re-sale by a car retailer
d. Legal fees incurred on the purchase of a building

11. On 1 April, a business had a balance of £100 (the imprest amount) in petty
cash. At the end of April, it had vouchers totalling £38, a receipt for a refund for
stationery of £4 and a note to say that an employee was reimbursed £12 in
respect of postage costs, but no voucher was issued.
How much does the business need to reinstate its imprest balance at 30 April?
a. £34
b. £46
c. £54
d. £66

12. Hal Ltd discovered that an error had taken place during its inventory count for
the year ended 31 March 20X7. Some inventory was double-counted, which
lead to closing inventory being £1,298 higher than cost. The directors of Hal Ltd
do not plan to correct for this error.
What is the impact of the error on the profit for the years ended 31 March 20X7
and 31 March 20X8 if it remains uncorrected?
 a. Profit for the year ended 31 March 20X7 is overstated, Profit for the year
ended 31 March 20X8 is overstated.
b. Profit for the year ended 31 March 20X7 is overstated, Profit for the year
ended 31 March 20X8 is understated.
c. Profit for the year ended 31 March 20X7 is understated, Profit for the year
ended 31 March 20X8 is understated.
d. Profit for the year ended 31 March 20X7 is understated, Profit for the year
ended 31 March 20X8 is overstated.

13.A sole trader had trade receivables of £5,400 at 1 May. During May they made
cash sales of £14,400 credit sales of £33,000 and received £30,600 from their
credit customers. The balance on the trade receivables account at the end of
May was:
a. £3,000
b. £7,800
c. £17,400
d. £22,200

14. The following are balances on the accounts of Luigi, a sole trader, as at the end of the
current financial year and after all entries have been processed and the profit for the year
has been calculated.

Non-current assets` £170,000

Trade receivables £14,000
Trade payables £6,000
Bank loan £30,000
Accumulated depreciation, non-current assets£30,000
Inventory $8,000
Accruals $2,000
Prepayments $4,000
Bank overdraft $4,000

What is the balance on Luigi's capital account?

a. $118,000
b. $132,000
c. $124,000
d. $128,000

15.Platoon plc is preparing its financial statements for the year ended 30 April
20X1, having extracted an initial trial balance.
It had no opening inventory, its purchases in the period were £686,880 and
closing inventories were valued as £18,647 on 30 April 20X1.
Which two of the following journal entries are required to record cost of sales and
closing inventories at 30 April 20X1?
 A Dr Cost of sales: £686,880; Cr Inventories: £686,880
B Dr Purchases: £686,880; Cr Cost of sales: £686,880
C Dr Cost of sales: £686,800; Cr Purchases: £686,880
D Dr Inventories: £18,647; Cr Cost of sales: £18,647
E Dr Cost of sales: £18,647; Cr Inventories: £18,647
F Dr Inventories: £18,647; Cr Purchases: £18,647

What is the choice?

a. C and D
b. A and B
c. C and E
d. A and D

16. At its year end Crocodile plc has 6,000 items of product A costing £10 per unit,
and 2,000 items of product B costing £5 per unit. The following information is
available:

Product A-500 are defective and can only be sold at f8 each.

Product B-100 are to be sold for £4.50 each with selling expenses of £1.50 each.

What amount should be shown in Crocodile plc's statement of financial position

for inventory?

a. £57,000
b. £68,950
c. £68,800
d. £70,000

17.Mickey Ltd has calculated the cost of inventory using the average cost (AVCO)
method. At 1 June 20X8, there were 60 units in inventory at a cost of £12 each.
On 8 June, 40 units were purchased for £15 each, and a further 50 units were
purchased for £18 each on 14 June. On 21 June, 75 units were sold for £20.00
each.

What is the carrying amount of closing inventory at 30 June 20X8?

A £1,110
B £1,010
C £900
D£1,125
18.Morgan plc's direct production cost of each unit of inventory is £46. Production
overheads are £15 per unit. Currently the goods can only be sold if they are
modified at a cost of £17 per unit. The selling price of each modified unit is £80
and selling costs are estimated at 10% of selling price.

At what amount should each unmodified unit of inventory be included in the

statement of financial position?
 a. £48
b. £55
c. £64
d. £61

19.Which two of the following may be included when arriving at the cost of
finished goods inventory for inclusion in the financial statements of a
manufacturing company?
A Delivery inwards
B Delivery outwards
C Depreciation of delivery vehicles
D Finished goods storage costs
E Production line wages
What are the choices ?
a. A and E
b. B and C
c. A and C
d. B and D

20.For the year ended 31 October 20X3 a company carried out a physical count of
inventory on 4 November 20X3, leading to an inventory cost at this date of
£483,700.

The following transactions took place between 1 November 20X3 and 4

November 20X3:

(1) Goods costing £38,400 were received from suppliers.

(2) Goods that had cost £14,800 were sold for £20,000.
(3) A customer returned, in good condition, some goods which had been sold to
him in October for £600 and which had cost £400.
(4) The company returned goods that had cost £1,800 in October to the supplier,
and received a credit note for them.

What amount should be shown in the company's financial statements at 31

October 20X3 for closing inventory, based on this information?

a. £458,700
b. £505,900
c. £508,700
d. £461,500

21.A business preparing its financial statements for the year to 31 October pays
rent quarterly in advance on 1 January, 1 April, 1 July and 1 October each year.
The annual rent was increased from £48,000 to £60,000 from 1 March 20X4.
 What amount should appear for rent in the statement of profit or loss for the
year ended 31 October 20X4 and in the statement of financial position as at that
date?
a. Statement of profit or loss: £56,000; Statement of financial position:
£10,000
b. Statement of profit or loss: £52,000; Statement of financial position:
£5,000
c. Statement of profit or loss: £56,000; Statement of financial position:
£5,000
d. Statement of profit or loss: £55,000; Statement of financial position:
£10,000

22. The electricity account for the year ended 30 June 20X1 was as follows.

Opening balance for electricity accrued at 1 July 20X0 £600

Payments made during the year

1 August 20XO for three months to 31 July 20X0 £1,200

1 November 20X0 for three months to 31 October 20X0 $1,440
1 February 20X1 for three months to 31 January 20X1 $1,800
30 June 20X1 for three months to 30 April 20X1 $ 1,680

On 1 August 20X1 a payment of £840 was made for the three months ended 31
July 20X1.

What is the charge for electricity that should be included in the statement of
profit or loss for the year ended 30 June 20X1?

a. £6,120
b. £6,640
c. £6,720
d. £7,240

23. The year end of Murphy plc is 30 November 20X1. The company pays for its
gas by a standing order of £1,200 per month. It had an opening accrual of £800
and a closing accrual of £1,000.

What is the correct charge for gas to be included in Murphy plc's statement of
profit or loss for the year ended 30 November 20X1?

a. £15,400
b. £14,200
 c. £14,400
d. £14,600

24.Arabella has a debit balance of £123 in Fab pic's payables ledger. Which of the
following would, alone, explain this balance?

Choose one:

a. Fab plc bought and paid for some goods for £123 which it then returned, but
Arabella has not yet issued a credit note for Fab pic to record
b. Fab plc paid £37 to Arabella in respect of an invoice for £160
c. Fab plc received a credit note for £123 from Arabella but posted it to the
account of Mirabelle
d. Fab plc paid an invoice for £123 even though Arabella had issued a credit
note in respect of it

25.Which three of the following are fundamental principles of the IESBA Code of
Ethics for Professional Accountants?

Choose three:
A. Integrity
B. Objectivity

C. Independence
D. Professional behaviour
E. Reliability

What are the choices?

a. A,C,and E
b. B,C,and E
c. B,D and E
d. A,B and D

26.Walt pic's statement of profit or loss for the year to 31 August 20X4 shows tax
expense of £135,840. In its statement of financial position at that date tax
payable is £109,480. During the reporting period Walt plc paid HMRC £100,000
in respect of tax for the year ended 31 August 20X3, but subsequently received
a refund from HMRC for £6,000.

At 31 August 20X3 Walt pic's tax payable balance in its statement of financial
position was
 Choose one:

a. £67,640
b. £73,640
c. £94,000
d. £120,360

27.Winston started a trading business on 1 July 20X6 with capital of £100,000. In

the first year of trading the business made a profit of £56,000, selling goods at a
margin on sales of 60%. Winston injected additional capital of £20,000 in the
year and withdrew a monthly amount of £1,000 for living expenses. They also
took drawings from stock of goods with a resale value of £12,600. There was no
stock left at the year end.

What were Winston's net assets at 30 June 20X7?

Select one:

a. £46,880
b. £156,320
c. £158,880
d. £169,880