Homework 6

1	In reconciling the receivables ledger control account with the list of receivables ledger balances of SK, the following errors were found:
	1	The sales day book had been overcast by $370
	2	A total of $940 from the cash receipts book had been recorded in the receivables ledger control account as $490
	What adjustments must be made to correct the errors?
	A	Credit sales control account $820. Decrease total of receivables ledger balances by $820
	B	Credit sales control account $820. No change in total of receivables ledger balances
	C	Debit sales control account $80. No change in total of receivables ledger balances
	D	Debit sales control account $80. Increase total of receivables ledger balances by $80
2	The cash book of Jessy shows a credit balance of $1,350. Cheques of $56 have been written to suppliers but not yet cleared the bank; uncleared lodgements amount to $128. The bank has accidentally credited Jessy’s account with interest of $15 due to another customer. A standing order of $300 has not been accounted for in the general ledger. What is the balance on the bank statement?
	A	$993 Cr
	B	$993 Dr
	C	$1,707 Cr
	D	$1,707 Dr
3	JC’s bank ledger account shows a balance of $190 credit. Her bank statement reports a balance of $250 credit. Which of the following will explain the difference in full?
	A	Unpresented cheques of $100 and an uncleared lodgement of $30
	B	Unpresented cheques of $150, the misposting of a cash receipt of $130 to the wrong side of the cash account and unrecorded bank interest received of $30
	C	An unrecorded direct debit of $30, a dishonoured cheque of $70 and an uncleared lodgement of $40
	D	An unrecorded standing order of $60, an unpresented cheque of $110 and a bank error whereby Jo’s account was accidentally credited with $110
4	Which of the following statements about bank reconciliations are correct?
	(1)	In preparing a bank reconciliation, unpresented cheques must be deducted from a balance of cash at bank shown in the bank statement.
	(2)	A cheque from a customer paid into the bank but dishonoured must be corrected by making a debit entry in the cash book.
	(3)	An error by the bank must be corrected by an entry in the cash book.
	(4)	An overdraft is a debit balance in the bank statement.
	A	1 and 3
	B	2 and 3
	C	1 and 4
	D	2 and 4
5	The following bank reconciliation statement has been prepared by an inexperienced bookkeeper at 31 December 20X5:
	Balance per bank statement (overdrawn) Add: Lodgements not credited				$ 38,640 19,270
	Less: Unpresented cheques				57,910 14,260
	Balance per cash book				43,650
	What should the final cash book balance be when all the above items have been properly dealt with?
	A	$43,650 overdrawn
	B	$33,630 overdrawn
	C	$5,110 overdrawn
	D	$72,170 overdrawn
6	A bank reconciliation statement for Dallas at 30 June 20X5 is being prepared. The following information is available:
	1	Bank charges of $2,340 have not been entered in the cash book.
	2	The bank statement shows a balance of $200 Dr.
	3	Unpresented cheques amount to $1,250.
	4	A direct debit of $250 has not been recorded in the ledger accounts.
	5	A bank error has resulted in a cheque for $97 being debited to Dallas’ account instead of Dynasty’s account.
	6	Cheques received but not yet banked amounted to $890.
	The final balance in the cash book after all necessary adjustments should be
	A	$463 Dr
	B	$463 Cr
	C	$63 Cr
	D	$63 Dr
7	The following information relates to a bank reconciliation.
	1	The bank balance in the cash book before taking the items below into account was $8,970 overdrawn
	2	Bank charges of $550 on the bank statement have not been entered in the cash book.
	3	The bank has credited the account in error with $425 which belongs to another customer.
	4	Cheque payments totalling $3,275 have been entered in the cashbook but have not been presented for payment.
	5	Cheques totalling $5,380 have been correctly entered on the debit side of the cashbook but have not been paid in at the bank.
	What was the balance as shown by the bank statement before taking the items above into account?
	A	$8,970 overdrawn
	B	$11,200 overdrawn
	C	$12,050 overdrawn
	D	$17,750 overdrawn
8	Shiny’s bank statement at 31 October 20X8 shows a balance of $13,400. She subsequently discovers that the bank has dishonoured a customer’s cheque for $300 and has charged bank charges of $50, neither of which is recorded in the cash book. There are unpresented cheques totalling $1,400and an automatic receipt from a customer of $195 has been recorded as a credit in Sharmin’s cash book. Shiny’s cash book balance, prior to correcting the errors and omissions, was:
	A	$11,455
	B	$11,960
	C	$12,000
	D	$12,155
9	JC’s bank statement shows a balance of $715 overdrawn. The statement includes bank charges of $74 which have not been entered in the cash book. There are also unpresented cheques totalling $824 and lodgements not yet credited of $337. In addition the bank statement erroneously includes a dividend receipt of $25 belonging to another customer. The bank overdraft in the statement of financial position should be:
	A	$253
	B	$1,177
	C	$1,202
	D	$1,227
10	The cash book shows a bank balance of $5,675 overdrawn at 31 August 20X5. It is subsequently discovered that a standing order for $125 has been entered twice, and that a dishonoured cheque for $450 has been debited in the cash book instead of credited. The correct bank balance should be:
	A	$5,100 overdrawn
	B	$6,000 overdrawn
	C	$6,250 overdrawn
	D	$6,450 overdrawn
11	An organisation’s cash book has an opening balance of $485 credit. The following transactions then took place: Cash sales $1,450 including sales tax of $150. Receipts from customers of debts of $2,400. Payments to suppliers of debts of $1,800 less 5% cash discount. Dishonoured cheques from customers amounting to $250. The resulting balance in the cash book should be:
	A	$1,255 debit
	B	$1,405 debit
	C	$1,905 credit
	D	$2,375 credit
12	The bank statement at 31 October 20X7 showed an overdraft of $800. On reconciling the bank statement, it was discovered that a cheque drawn by your company for $80 had not been presented for payment, and that a cheque for $130 from a customer had been dishonoured on 30 October 20X7, but that this had not yet been notified to you by the bank. The correct bank balance to be shown in the statement of financial position at 31 October 20X7 is:
	A	$1,010 overdrawn
	B	$880 overdrawn
	C	$750 overdrawn
	D	$720 overdrawn
13	Your firm’s cash book at 30 April 20X8 shows a balance at the bank of $2,490. Comparison with the bank statement at the same date reveals the following differences:                                                                                                    $ Unpresented cheques                                                            840 Bank charges not in cash book                                               50 Receipts not yet credited by the bank                                   470 Dishonoured cheque not in cash book                                 140 The correct bank balance at 30 April 20X8 is:
	A	$1,460
	B	$2,300
	C	$2,580
	D	$3,140
14	Your firm’s cash book shows a credit bank balance of $1,240 at 30 April 20X9. On comparison with the bank statement, you determine that there are unpresented cheques totalling $450, and a receipt of $140 which has not yet been passed through the bank account. The bank statement shows bank charges of $75 which have not been entered in the cash book. The balance on the bank statement is:
	A	$1,005 overdrawn
	B	$930 overdrawn
	C	$1,475 in credit
	D	$1,550 in credit
15	Which of the following is not an ‘unrecorded difference’ when reconciling the balance on the cash book to the amount shown in the bank statement?
	A	A standing order
	B	Bank interest
	C	An uncleared lodgement
16	A trial balance shows a total of debits of $347,800 and a total of credits of $362,350. After adjusting for the following errors, what is the balance on the suspense account?
	(1)	A credit sale of $3,670 was incorrectly entered in the sales day book as $3,760.
	(2)	A non-current asset with a carrying value of $7,890 was disposed of for $9,000. The only accounting entry was to debit cash.
	(3)	The allowance for receivables was increased from $8,900 to $10,200. The allowance account was debited in error.
	A	$26,150 debit
	B	$26,060 debit
	C	$26,240 debit
	D	$2,950 credit
17	The trial balance of Kelvin does not balance. Which two of the following errors could explain this, assuming that Kelvin maintains control accounts for its receivables and payables within the double entry system?
	(1)	The sales day book was undercast by $100.
	(2)	Discounts allowed were debited to the discounts received account.
	(3)	An opening accrual was omitted from the rent account.
	(4)	The debit side of the cash account was undercast.
	A	1 and 2
	B	2 and 3
	C	3 and 4
	D	1 and 4
18	The trial balance of MHSB does not balance at the year end. What type of error may explain this?
	A	Extraction error
	B	Error of commission
	C	Compensating error
19	The trial balance of Bob Butler shows total debits of $125,819 and total credits of $118,251. Which of the following explains the difference in full?
	A	Discounts allowed of $3,784 have been shown on the wrong side of the trial balance.
	B	Discounts received of $3,784 have been credited to the payables ledger control account.
	C	The sales day book has been undercast by $7,568.
	D	An opening accrual of $7,568 has been omitted from the rental expense account.
20	Which one of the following journals is correct according to its narrative?
									Debit $	Credit $
	A	Mr Smith personal account Directors’ remuneration Bonus allocated to account of managing director (Mr Smith)							100,000	100,000
	B	Purchases Wages Repairs to buildings Transfer of costs of repairs to buildings carried out by company employees using materials from inventory							14,000 24,000	38,000
	C	Discounts allowed Discounts received Correction of error: discounts allowed total incorrectly debited to discounts received account.							2,800	2,800
	D	Suspense account Rent receivable Rent payable Correction of error: rent received credited in error to rent payable account							20,000	10,000 10,000
21	The trial balance of Koi did not balance, and a suspense account was opened for the difference. Which of the following errors would require an entry to the suspense account in correcting them?
	1	A cash payment to purchase a motor van had been correctly entered in the cash book but had been debited to the motor expenses account.
	2	The debit side of the wages account had been undercast.
	3	The total of the discounts allowed column in the cash book had been posted to the receivables ledger control account correctly and credited to the discounts received account.
	4	A cash refund to a customer had been recorded by debiting the cash book and crediting the customer’s account.
	A	1 and 2
	B	2 and 3
	C	3 and 4
	D	2 and 4
22	A company’s trial balance failed to agree, and a suspense account was opened for the difference. Subsequent checking revealed that discounts allowed of $13,000 had been credited to the discounts received account and an entry on the credit side of the cash book for the purchase of some machinery costing $18,000 had not been posted to the plant and machinery account. Which two of the following journal entries would correct the errors?
				Debit $				Credit $
	1	Discount allowed Discount received		13,000				13,000
	2	Discount allowed Discount received Suspense account		13,000 13,000				26,000
	3	Suspense account Discount allowed Discount received		26,000				13,000 13,000
	4	Plant and machinery Suspense account		18,000				18,000
	5	Suspense account Plant and machinery		18,000				18,000
	A	1 and 4
	B	2 and 5
	C	2 and 4
	D	3 and 5
This information is relevant to the following TWO questions: A company’s draft financial statements for 20X5 showed a profit of $630,000. However, the trial balance did not agree, and a suspense account appeared in the company’s financial statements. Subsequent checking revealed the following errors:
1	The cost of an item of plant $48,000 had been entered in the cash book and in the plant account as $4,800.Depreciation at the rate of 10% per year ($480) had been charged.
2	Bank charges of $440 appeared in the bank statement in December 20X5 but had not been entered in the company’s records.
3	One of the directors paid $800 due to a supplier in the company’s payables ledger by a personal cheque. The bookkeeper recorded a debit in the supplier’s ledger account but did not complete the double entry for the transaction (The company does not maintain a payables ledger control account).
4	The payments side of the cash book had been understated by $10,000.
23	Which of the above items would require an entry to the suspense account in correcting them?
	A	All four items
	B	3 and 4 only
	C	2 and 3 only
	D	1, 2 and 4 only
24	What would the company’s profit become after the correction of the above errors?
	A	$634,760
	B	$624,760
	C	$624,440
	D	$625,240
25	The draft accounts of Galahad’s business for the year ended 31 July 20X0 show a profit of $54,250 prior to the correction of the following errors:
	1	Cash drawings of $250 have not been accounted for.
	2	Debts amounting to $420, which were provided against in full during the year, should have been written off as irrecoverable.
	3	Rental income of $300 has been classified as interest receivable.
	4	On the last day of the accounting period, $200 in cash was received from a customer, but no bookkeeping entries have yet been made.
	What is the correct profit of the business for the year?
	A	$53,580
	B	$53,830
	C	$54,250
	D	$55,830
26	The trial balance of Flo, a limited liability company, does not agree and a suspense account has been opened. Inventory bought at a tax inclusive cost of $4,700 has been credited to the payables ledger control account. The sales tax, at 17.5%, has been recorded in the sales tax account and the total $4,700 has been recorded in the purchases account. What entry is required to correct the error?
	A	Dr Payables ledger control account $700					Cr Suspense account $700
	B	Dr Payables ledger control account $822.50					Cr Suspense account $822.50
	C	Dr Suspense account $700					Cr Purchases $700
	D	Dr Suspense account $822.50					Cr Purchases $822.50
27	Weagan’s trial balance at 31 October 20X9 is out of agreement, with the debit side totalling $500 less than the credit side. During November, the following errors are discovered: ·        The credit side of the sales account for October had been undercast by $150. ·        Rent received of $240 had been credited to the rent payable account. ·        The allowance for receivables, which decreased by $420, had been recorded in the allowance for receivables account as an increase. Following the correction of these errors, the balance on the suspense account would be:
	A	$190 Cr
	B	$670 Cr
	C	$1,190 Cr
	D	$1,490 Dr
28	Which ONE of the following is an error of principle?
	A	A gas bill credited to the gas account and debited to the bank account
	B	The purchase of a non-current asset credited to the asset at cost account and debited to the supplier’s account
	C	The purchase of a non-current asset debited to the purchases account and credited to the supplier’s account
	D	The payment of wages debited and credited to the correct accounts, but using the wrong amount
29	The trial balance of C did not agree, and a suspense account was opened for the difference. Checking in the bookkeeping system revealed a number of errors: Error
	1	$4,600 paid for motor van repairs was correctly treated in the cash book but was credited to motor vehicles asset account.
	2	$360 received from Brown, a customer, was credited in error to the account of Green.
	3	$9,500 paid for rent was debited to the rent account as $5,900.
	4	The total of the discount allowed column in the cash book had been debited in error to the discounts received account.
	5	No entries had been made to record a cash sale of $100.
	Which of the errors above would require an entry to the suspense account as part of the process of correcting them?
	A	Errors 3 and 4 only
	B	Errors 1 and 3 only
	C	Errors 2 and 5 only
	D	Errors 2 and 3 only
30	Drive gives a cash discount of $40 to a customer. The discount is credited to the discounts allowed account. The effect of recording the discount in this way is that profit will be:
	A	Correct
	B	overstated by $80
	C	understated by $80
	D	understated by $40.
31	A suspense account was opened when a trial balance failed to agree. The following errors were later discovered: Error
	1	A gas bill of $420 had been recorded in the Gas account as $240.
	2	Discount of $50 given to a customer had been credited to Discounts Received.
	3	Interest received of $70 had been entered in the bank account only.
	The original balance on the suspense account was:
	A	debit $210
	B	credit $210
	C	debit $160
	D	credit $160
32	The book-keeper of High Hurdles was instructed to make a contra entry for $270 between the supplier account and the customer account for Greyfold. He recorded the transaction by debiting the customer account and crediting the supplier account with $270. The business accounts do not include control accounts. Which of the following statements is correct?
	A	Unless the error is corrected, profit will be over-stated by $540
	B	Unless the error is corrected, net assets will be over-stated by $270
	C	Unless the error is corrected, net assets will be over-stated by $540
	D	The errors should be corrected, but neither the profit nor the net assets are overstated
33	Which of the following are advantages of computerised accounting systems?
	1	A computer runs under the control of a stored program meaning that only limited operator activity is required.
	2	Computer systems are flexible and can be altered quickly and at little cost.
	3	Computers can recognise and highlight errors and incomplete or incorrect data.
	4	The computer can be programmed to undertake complicated decision making processes.
	A	1 and 2
	B	All 4
	C	1 and 4
	D	2 and 3
34	Which of the following is NOT an advantage of a database over a manual card index system?
	A	May be used to generate reports
	B	Can hold more information
	C	Calculations can be performed automatically
	D	Records matching a certain criterion can be selected
35	Which of the following statements is true?
	1	In a computerised system, all accounting personnel will have access to all records.
	2	The general ledger in a computerised system tends to take the same format as that in a manual system, i.e. a number of T accounts.
	A	Neither 1 nor 2
	B	Both 1 and 2
	C	1 only
	D	2 only
36	Which of the following best describes an integrated accounting package?
	A	A computerised package which has grown piecemeal, with the most detailed areas of accounting being computerised first
	B	A computerised package which handles all parts of the accounting process and produces the financial statements
	C	A computerised package that can be used for ‘modelling’ type applications such as forecasting
	D	A computerised package that includes word processing, spreadsheets and database systems
37	Which of the following is / are features of a spreadsheet?
	1	Goal-seeking facility.
	2	Flexibility.
	3	Look up tables.
	4	‘What if’ analysis
	5	Graphics.
	A	All 5
	B	1, 2, 3 and 4
	C	1, 2 and 4
	D	3 and 5
38	On 1 September 20X8, Winston had inventory of $380,000. During the month, sales totalled $650,000 and purchases $480,000. On 30 September 20X8 a fire destroyed some of the inventory. The undamaged goods were valued at $220,000. The business operates with a standard gross profit margin of 30%. Based on this information, what is the cost of the inventory destroyed in the fire?
	A	$185,000
	B	$140,000
	C	$405,000
	D	$360,000
39	The following information is available about the transactions of Razil, a sole trader who does not keep proper accounting records:                                                                                 $ Opening inventory                                          77,000 Closing inventory                                             84,000 Purchases                                                           763,000 Gross profit margin                                         30% Based on this information, what is Razil’s sales revenue for the year?
	A	$982,800
	B	$1,090,000
	C	$2,520,000
	D	$1,080,000
40	You are given the following incomplete and incorrect extract from the income statement of a company that trades at a mark up of 25% on cost:
	Sales Less: Cost of goods sold Opening inventory Purchases Closing inventory		$ 12,274 136,527 X	$ 174,258 (X)
	Gross Profit			X
	Having discovered that the sales figure should have been $174,825 and that purchase returns of $1,084 and sales returns of $1,146 have been omitted, the closing inventory should be:
	A	$8,662
	B	$8,774
	C	$17,349
	D	$17,458