PMP Accounting & Finance Mock Examination 1 2023

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PMP Accounting & Finance

Mock Examination 1

2023

PART I: KNOWLEDGE-BASED SHORT ANSWER QUESTIONS [Total 25 marks]

This part consists of FIFTEEN (15) questions. Answer ALL questions in this part.

MULTIPLE CHOICE: Choose the one alternative that best completes the statement or answers the question.

1) Investing Cash Flows affect: (1 mark)

A) current assets and current liabilities.

B) equity accounts.

C) long-term asset accounts.

D) long-term liability accounts.

Your Answer ______________

2) Closing entries are prepared for which of the following reasons? (1 mark)

A) To get the accounts ready for the next accounting period

B) To get the journal ready for the next accounting period

C) To get the worksheet ready for the next accounting period

D) To get the financial statements ready for the next accounting period

Your Answer ______________

3) Oracle Company provided the following manufacturing costs for the month of June.

From the above information, calculate Oracle’s total fixed costs. (1 mark)

A) £40,200 B) £60,200 C) £298,800 D) £64,200

Your Answer ______________

4) Straw, Inc. incurred fixed costs of £300,000. Total costs, both fixed and variable, are £500,000 when 59,000 units are produced. It sold 35,000 units during the year. Calculate the variable cost per unit. (Round your answer to the nearest pence.) (2 marks)

A) £5.08 B) £3.39 C) £14.29 D) £8.47

Your Answer ______________

5) Q-Connect Company has an inventory turnover of 20 times per year. The industry average is 5.0 times per year. What does a high inventory turnover mean? (1 mark)

A) The company may not be keeping enough inventory on hand which can lead to lost sales.

B) The company is having a difficult time selling the inventory.

C) The company has too much inventory on hand.

D) The company may have obsolete inventory on hand.

Your Answer ______________

6) The ratio that provides an estimate of the number of days, on average, that it takes for customers to pay their accounts is the: (1 mark)

A) current ratio.              B) accounts receivable turnover.

C) days' sales in receivables.  D) acid-test ratio.

Your Answer ______________

7) Dom’s Computers purchased 3000 shares of its own £10 par value common stock for £98,000. As a result of this transaction: (1 mark)

A) Dom’sstockholders' equity increased £30,000.

B) Dom's stockholders' equity increased £98,000.

C) Dom's stockholders' equity decreased £98,000.

D) Dom's stockholders' equity increased £68,000.

Your Answer ______________

8) The payment of dividends will be reported on the statement of cash flows as a: (1 mark)

A) negative amount in the financing activities section.

B) positive amount in the investing activities section.

C) negative amount in the investing activities section.

D) positive amount in the financing activities section.

Your Answer ______________

9) Adjusting entries: (1 mark)

A) are needed because errors have been made in previous journal entries.

B) must be made on a daily basis to record supplies used during that day.

C) are made before the financial statements can be prepared.

D) are needed for all balance sheet accounts.

Your Answer ______________

10) Which account is debited and credited in the adjusting entry to allocate the cost of equipment? (1 mark)

A) Debit Accumulated Depreciation–Equipment; Credit Depreciation Expense–Equipment

B) Debit Accumulated Depreciation–Equipment, Credit Equipment

C) Debit Depreciation Expense – Equipment; Credit Accumulated Depreciation–Equipment

D) Debit Depreciation Expense–Equipment; Credit Equipment

Your Answer ______________

11) Foam Company holds a £13,200 note receivable dated July 1, 2023, with 10% interest. What adjusting entry is needed on December 31, 2023? (1 mark)

A) No entry is needed.

B) Debit Interest Receivable for £660 and credit Interest Revenue for £660

C) Debit Interest Receivable for £1320 and credit Interest Revenue for £1320

D) Debit Interest Receivable for £132 and credit Interest Revenue for £132

Your Answer ______________

12) If a company prepares its financial statements three years after the end of its accounting period, it has violated the qualitative characteristic of: (1 mark)

A) understandability. B) materiality.

C) timeliness. D) verifiability.

Your Answer ______________

Short Questions:

13) Management at XYZ Ltd anticipates an operating profit of £230,000 in 2020. The company had reported an operating loss of £70,000 in 2019. If the UK corporation tax rate is 20%, Calculate XYZ Ltd tax liability for 2020. Show your calculations. (4 marks)

14) The following information has been extracted from the financial statements of T-Link Ltd. The total assests has been valued at £78,605 and total liabilities at £28,724 as at 31st December 2020. The total revenue is £45,387 and total expenses is £32,117 for year ending 31st December 2020.

Calculate the amount of ownership interest of T-Link Ltd as at 1st January 2020. You must show workings / calculation to gain full marks. (4 marks)

15) Jacob’s Ltd purchased a computer for £5,600. A reducing-balance basis at the rate of 15% per annum has been applied to the depreciation of the computer. Calculate the depreciation charge (or expense) at the end of each year over the next four years. (4 marks)

Answer:

Year	NBV at the start of the year £	Depreciation £	NBV at the end of the year £
Year 1
Year 2
Year 3
Year 4

PART II: Answer ANY THREE questions in this part.                    [Total 25X3=75 marks]

QUESTION 1) Total marks: 25

Sheffield confectionary Limited manufactures two types of biscuits: Square and Triangle. The weekly production is 500 units each. The products are made in batches, after the production of each batch, the machines need to be maintained. Each batch produced has to be processed with quality inspections to ensure that it meets the required standard.

The following are the details of each product:

The following are the fixed production costs each week:

Currently, the company uses absorption costing, these costs are attributed to output based on direct labour hours.

Required:

a) Prepare income statements using the following methods:

i) Absorption Costing

ii) Activity-Based Costing. (22 marks)

b) Are the profits of the Week by each method the same or different? Why/Why not? (3 marks)

QUESTION 2) Total marks: 25

As an accountant of Alpha Ltd, you are informed that the non-current assets totalled £300,200, current liabilities £120,500, the opening retained earnings totalled £85,000, the administration expenses totalled £38,680 and that the available ratios were the current ratio 1.2, the quick ratio 0.8, the trade receivables collection period was six weeks, the gross profit was 16% and the net assets turned over 1.3 times.

Required:

a) Calculate the following items in the table using the information provided. (Workings need to be shown) (15 marks)

	Workings	£
Current assets
Inventory
Net Assets
Sales
Weekly Sales (52 weeks per annum)
Trade Receivables
Cash
Gross Profit
Net Profit
Capital

b) Prepare the Alpha Ltd statement of financial position from the above information. (10 marks)

Answer:

Statement of financial position

QUESTION 3) Total marks: 25

Laundry Ltd manufactures washing machines and dryers, which are sold to retailers. The abbreviated financial statements for 2019 and 2020 are as follows:

Income statements for the year ended 30 April 2020
	2019	2020
	￡000	￡000
Revenue	5,600	10,800
Cost of sales	(3,640)	(7,992)
Gross profit	1,960	2,808
Administration expenses	(813)	(1,202)
Distribution expenses	(65)	(120)
Operating profit	1,082	1,486
Interest	(18)	(190)
Profit before tax	1,064	1,296
Tax	(210)	(260)
Profit for the year	854	1,036

Statements of financial position as at 30 April
	2019	2020
	￡000