iCMA 43 1. Identify from the list below the correct definition of manufacturing cost

| March 30, 2017

Question
iCMA 43
1. Identify from the list below the correct definition of manufacturing cost.

Select one: Direct materials + Direct expenses + Direct labour expenses

The cost of finished goods produced + Opening inventory of work-in-progress – Closing inventory of work-in-progress

Prime cost + Raw materials used in production
Prime cost + Total indirect manufacturing cost

iCMA 43
2. Suppose that over a period Brad recorded the following:

Sales: £120,000
Sales returns: £1,900
Purchases: £75,000
Purchase returns: £1,000
Carriage inwards: £3,200
Carriage outwards: £1,250
At the start of the period, his inventory was £38,300 and at the end of the period his inventory was £40,400.

Calculate Brad’s gross profit for the period.

Answer the question by providing the appropriate number in the box below (e.g., 123456). Do not enter a dot, commas, spaces, letters, words or symbols (such as £). Failure to follow these instructions will result in the answer being marked as incorrect.

£ Answer

iCMA 43
3. The following figures relate to the purchases made by a business.

£
Payables control account – Opening credit balance 90,000
Credit purchases 500,000
Cash paid to credit suppliers 430,000
Contra with receivables ledger – credit receivables ledger 15,000
Discounts received 5,250
What was the closing balance on the payables control account?

Answer the question by providing the appropriate number in the box below (e.g., 123456). Do not enter a dot, commas, spaces, letters, words or symbols (such as £). Failure to follow these instructions will result in the answer being marked as incorrect.

£ Answer

iCMA 43
4. Below is the payables control account for Fela’s Creations on 31 December 2011.

Payables control account
£ £
Total money paid 430,000 Balance b/d at 1.1.2011 90,000
Total discounts received 5,000 Total credit purchases 500,000
Balance c/d at 31.12.2011 155,000
590,000 590,000
Balance b/d at 01.01.2012 155,000

The total of the payables ledger balances as at 31 December 2011 was £159,200. There were only credit balances on the individual supplier’s accounts. Fela checked all the balances and discovered the following errors.

a) Purchases of £1,600 have been omitted from the control account, but had been correctly entered in supplier Norah’s personal account.
b) £500 of discount received from supplier Kristina for December 2011 had not been entered in the control account or in her personal account.
c) The credit side of supplier Vlad’s personal account had been undercast by £300.
d) A cash payment of £1,450 to supplier Hans had been credited to his personal account, but had been entered correctly in the PCA.

What was the correct closing balance on the payables control account at 31 December 2011?

Answer the question by providing the appropriate number in the box below (e.g., 123456). Do not enter a dot, commas, spaces, letters, words or symbols (such as £). Failure to follow these instructions will result in your answer being marked as incorrect

iCMA 43
5. Canan’s unadjusted closing balance as per cash book showed a bank overdraft of £550 as at 31 March 2012. However, the bank statement showed a positive balance of £560. She found the following differences after comparing the cash book with the bank statement.

a) A standing order of £1,000 for rent paid by Canan to Better Builders Inc. pertaining to April and May 2012 entered in the cash book twice.

b) An unpresented cheque for £290.

c) Bank charges of £20 deducted on the last day of the month.

d) £160 of telephone charges paid by direct debit on 30 March to Telecom plc.

What would be the adjusted closing balance as per cash book as at 31 March 2012?

Answer the question by providing the appropriate number in the box below (e.g., 123456). Do not enter a dot, commas, spaces, letters, words or symbols (such as £). Failure to follow these instructions will result in your answer being marked as incorrect.

£ Answer

6. Which of the following isnot a reason why the cash book and bank statement would fail to agree? Select one:

Cash payment posted to receivables

Bank charges

Error

Timing differences

iCMA 43
7. The accountant for Lobelia’s Flowerhouse determined the profit for the accounting period ended in 2011 to be £235,000. However, subsequently, the following errors were discovered.

A delivery van for the purpose of delivering flowers costing £40,000 had been included in the purchases account.
A return outwards of £1,550 had been wrongly entered as a sales return instead of a purchase return.

Calculate the correct net profit for the period.

iCMA 43
8. When a trial balance did not balance, an accountant opened a suspense account. The accountant then discovered the following errors.

Telephone expense of £1,900 had wrongly been entered in the accounts as £9,100.

A purchase of 2,000 had been recorded twice in the purchases account.

A £1,400 settlement discount received from a supplier had been posted to the wrong side of the discounts received account.

Note that the other side of the entries was correct, otherwise there would not have been an imbalance.

How much was the original balance on the suspense account? Identify the suspense account figure as either a credit or a debit balance.

Drag and drop the correct answers in the boxes provided.

/ / /

£12,000 £11,000 £13,500

Debit Credit

iCMA 43
9. Ben sells flowers. He decides to give his girlfriend 100 roses to wish her a Happy New Year and he takes these out of the inventory he purchased early in the morning of 31 December. What adjustment should Ben make in respect of the 100 roses, assuming that the roses cost £0.50 each and that he uses a periodic inventory system?

The periodic inventory system debits inventory purchased to the purchases account and requires an adjustment for closing inventory at the end of an accounting period

Select one:

DR Drawings £50 / CR Suspense£50

DR Purchases £50 / CR Drawings£50

DR Inventory £50 / CR Drawings £50

DR Drawings £50 / CR Purchases £50

iCMA 43
10.Which of the items listed below does not normally appear in a post-closing trial balance?

Select one:

a. Inventory
b. Payables control account

c. Purchases

d. Non-current assets at cost

iCMA 43
11. On the morning of 1 May 2012 (the day after the previous accounting period ended), a shopkeeper found a window broken and the till empty. Someone had broken in overnight and stolen the cash that was in the till. Suppose that you know the following information.

Cash at the beginning of the period was £1,125.
Receivables at the beginning of the period were £3,250.
Receivables at the end of the period were £6,650.
Total cash received in the bank from credit customers was £55,550.
Expenses paid from cash on hand amounted to £4,930.
Cash receipts banked during the period amounted to £4,350.
Total sales during the period amounted to £80,880.

How much cash had been stolen? Tip: start by determining credit sales.

£Answer

iCMA 43

12. Terence owns a shop selling fishing equipment. His financial year ends on 31 July 2011. On 30 July there was a fire which destroyed part of his inventory. Terence did not have insurance. He provides the following information.

On 1 August 2010 the inventory was £99,450.
Purchases during the year were £60,000.
Sales during the year were £187,500. Terence applies a gross margin on sales of 40 per cent.
Inventory that remained intact and can still be sold amounts to £30,375.

How much of the inventory was lost during the fire? Tip: Start by determining the cost of the goods sold

iCMA 43
13. On 1 January 20X8, Sitah’s business had £2,295 cash in the till. Sitah’s sales and purchases are cash transactions.

During the year, Sitah’s records show that she:

banked £65,800
purchased goods for sale which totalled £22,995
paid £7,250 in wages
took £19,100 in drawings.
On 31 December of the same year there was £9,370 in the till.

What were Sitah’s total cash sales for the year?

£Answer

iCMA 43
14. Nellie, Elmer and Dombo are in partnership. The partnership agreements states that:

the partners share residual profits in the ratio of 5:6:7 respectively
interest on capital is 6%
interest on drawings is 12%
Dombo receives a salary of £12,000 per annum.
The balances on the partners’ capital accounts throughout the accounting period ended 31 December 2011 were as follows:

Nellie: £20,000, Elmer: £16,000, and Dombo: £28,000.

Drawings during 2011 were as follows:

Nellie: £8,000, Elmer: £12,000, and Dombo: £10,000.

Profit for the year ended 31 December 2011 was £192,240.

Calculate Dombo’s share of the residual profits for 2011.

£ Answer

iCMA 43 15. A company has a separate legal personality. Which of the aspects listed below isnot an aspect associated with the concept of the separate legal personality of a company? Select one:

a. The company must have rules based on which to delegate authority to agents who can enter into contracts in its name. b. The company is capable of entering into contracts and owning property.
c. The company is able to sue and be sued in its own name.

d. The personal creditors of the company’s shareholders have a claim on the firm’s assets.

iCMA 43
16. At 31 December 2010 the capital section of The Business plc’s balance sheet showed an ordinary capital of 10,000,000 equity shares of 25p each, and a share premium account of £1,000,000.

On 30 June The Business plc made a 1 for 8 bonus issue, using the share premium account.

Calculate the balance on the share premium account of The Business plc as at 31 December 2011

iCMA 43
17. An accountant is making end of year adjustments in order to prepare the financial statements for Daweh Ltd. During 20X7, a machine which had cost £520,000 and which had an accumulated depreciation of £416,000, was sold for £100,000. At the end of 20X6, Daweh Ltd’s balance sheet shows a total machinery cost of £1,625,000 with a total accumulated depreciation on machinery of £675,000. Daweh Ltd depreciates its machines using the straight-line method over 10 years with no residual value. No depreciation is charged on a machine for the year in which that machine is sold.

Calculate the gain or loss on the disposal of the machine, and calculate the annual depreciation on machinery expense for 20X7.

Select one:

Gain £4000. Annual depreciation expense: £105,000
Loss £3500. Annual depreciation expense: £105,000

Loss £4000. Annual depreciation expense: £110,500

Gain £3000. Annual depreciation expense: £110,000

iCMA 43
18. The following balance sheet and income statement extracts pertain to Ohlala Ltd.

Ohlala Ltd Balance sheet extracts as at:
31.12.20X9 31.12.20X8
Current assets: £ £
Inventory 199,000 205,000
Receivables 60,100 61,900
Prepayments 5,200 4,100
Current liabilities:
Payables 74,700 78,150
Accruals 1,500 2,250
Ohlala Ltd Income statement extract for
the period ended 31 December 20X9
£
Sales revenue 400,000
Less: cost of sales (275,000)
Gross profit 125,000
Operating expenses* (73,300)
Operating profit 51,700
*Operating expenses include £12,500 depreciation expense.

Calculate cash generated from operations during 20X9 using the indirect method.

Answer the question by providing the appropriate number in the box below (e.g., 123456). Do not enter a dot, commas, spaces, letters, words or symbols (such as £). Failure to follow these instructions will result in your answer being marked as incorrect.

£ Answer

iCMA 43
19. Which of the following statements about cash flow statements is not true?

Select one:

a. The cash flow statement articulates with the opening and closing balance sheets by showing how the net increase or decrease in cash came about.b. A cash flow statement is used in combination with the balance sheet and the income statement in order to understand how the business has financed its operations and assets.
c. Cash flows generated from operating activities are cash flows that derive from the primary revenue-producing activities of a business entity

d. A cash flow statement is used to determine the profitability of a business over a period

iCMA 43
20. Trixie Ltd’s financial statements for 20X3 showed the following.

£
Inventory 25,000
Receivables 40,000
Payables 16,000
Sales 92,000
Cost of sales 46,000
Net profit 20,000
Calculate Trixie Ltd’s working capital cycle during 20X3. [Advice: make sure you round your workings and answer to the nearest whole day.]

Answer the question by providing the appropriate number in the box below (e.g., 123456). Do not enter a dot, commas, spaces, letters, words or symbols (such as £). Failure to follow these instructions will result in the answer being marked as incorrect.

Answer

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