MT - Business case - EY entrance test.

SAPP Academy 6 Floor, No 2, Trai Ca Valley, Truong Dinh street, Ha Noi Tel 096 972 94 63 Sapp.edu.vn SAPP Academy No. 20, 198 alley, Xa Dan street, Ha Noi Tel: 0166 7703 493 Sapp.edu.vn EY ENTRANCE TEST Full name: Test: Total question: Time: I. 1. ACCOUNTING (20 questions) The IASB’s Conceptual Framework for Financial Reporting identifies characteristics which make financial information faithfully represent what it purports to represent. Which of the following are examples of those characteristics? (i) Accruals (ii) Completeness (iii) Going concern (iv) Neutrality A. B. C. D. 2. 60 MCQs + 1 essay 90 minutes i and ii ii and iv ii and iii i and iv The following bank reconciliation statement has been prepared by a trainee accountant: $ Overdraft per bank statement 3,860 Less: Unpresented cheques 9,160 5,300 Add: Outstanding lodgements 16,690 Cash at bank 21,990 What should be the correct balance per the cash book? A. $21,990 balance at bank as stated B. $3,670 balance at bank C. $11,390 balance at bank D. $3,670 overdrawn Page 1 of 21 3. SAPP Academy 6 Floor, No 2, Trai Ca Valley, Truong Dinh street, Ha Noi Tel 096 972 94 63 Sapp.edu.vn SAPP Academy No. 20, 198 alley, Xa Dan street, Ha Noi Tel: 0166 7703 493 Sapp.edu.vn Gareth, a sales tax registered trader purchased a computer for use in his business. The invoice for the computer showed the following costs related to the purchase: $ Computer 890 Additional memory 95 Delivery 10 Installation 20 Maintenance (1 year) 25 1,040 Sales tax (17.5%) 182 Total 1,222 How much should Gareth capitalise as a non-current asset in relation to the purchase? A. $1,193 B. $1,040 C. $1,222 D. $1,015 4. Prior to the financial year end of 31 July 20X7, Cannon Co has received a claim of $100,000 from a supplier for providing poor quality goods which have damaged the supplier’s plant and equipment. Cannon Co’s lawyers have stated that there is a 20% chance that Cannon will successfully defend the claim. Which of the following is the correct accounting treatment for the claim in the financial statements for the year ended 31 July 20X7? A. Cannon should neither provide for nor disclose the claim B. Cannon should disclose a contingent liability of $100,000 C. Cannon should provide for the expected cost of the claim of $100,000 D. Cannon should provide for an expected cost of $20,000 Page 2 of 21 SAPP Academy 6 Floor, No 2, Trai Ca Valley, Truong Dinh street, Ha Noi Tel 096 972 94 63 Sapp.edu.vn SAPP Academy No. 20, 198 alley, Xa Dan street, Ha Noi Tel: 0166 7703 493 Sapp.edu.vn 5. Q’s trial balance failed to agree and a suspense account was opened for the difference. Q does not keep receivables and payables control accounts. The following errors were found in Q’s accounting records: (i) In recording an issue of shares at par, cash received of $333,000 was credited to the ordinary share capital account as $330,000 (ii) Cash of $2,800 paid for plant repairs was correctly accounted for in the cash book but was credited to the plant asset account (iii) The petty cash book balance of $500 had been omitted from the trial balance (iv) A cheque for $78,400 paid for the purchase of a motor car was debited to the motor vehicles account as $87,400. Which of the errors will require an entry to the suspense account to correct them? A. i, ii and iv only B. i, ii, iii and iv C. i and iv only D. ii and iii only 6. Which of the following statements about sales tax is/are true? (i) Sales tax is an expense to the ultimate consumer of the goods purchased (ii) Sales tax is recorded as income in the accounts of the entity selling the goods A. i only B. ii only C. Both i and ii D. Neither i nor ii 7. The following extracts are from Hassan’s financial statements: $ Profit before interest and tax 10,200 Interest (1,600) Tax (3,300) Profit after tax 5,300 Share capital 20,000 Reserves 15,600 35,600 Loan liabilities 6,900 42,500 What is Hassan’s return on capital employed? A. 15% B. 29% C. 24% D. 12% Page 3 of 21 8. SAPP Academy 6 Floor, No 2, Trai Ca Valley, Truong Dinh street, Ha Noi Tel 096 972 94 63 Sapp.edu.vn SAPP Academy No. 20, 198 alley, Xa Dan street, Ha Noi Tel: 0166 7703 493 Sapp.edu.vn The plant and machinery account (at cost) of a business for the year ended 31 December 20X6 was as follows: Plant and machinery - cost 20X6 $ 20X6 $ 01 Jan Balance b/f 240,000 31 Mar Transfer to 60,000 disposal account 30 Jun Cash purchase of 160,000 31 Dec Balance b/f 340,000 plant 400,000 400,000 The company’s policy is to charge depreciation at 20% per year on the straight line basis, with proportionate depreciation in the years of purchase and disposal. What should be the depreciation charge for the year ended 31 December 20X6? A. $68,000 B. $64,000 C. $61,000 D. $55,000 9. Which of the following should appear in a company’s statement of changes in equity? (i) Total comprehensive income for the year (ii) Amortisation of capitalised development costs (iii) Surplus on revaluation of non-current assets A. i, ii and iii B. ii and iii only C. i and iii only D. i and ii only 10. At 31 December 20X5 a company’s capital structure was as follows: $ Ordinary share capital 125,000 (500,000 shares of 25c each) Share premium account 100,000 In the year ended 31 December 20X6 the company made a rights issue of 1 share for every 2 held at $1 per share and this was taken up in full. Later in the year the company made a bonus issue of 1 share for every 5 held, using the share premium account for the purpose. What was the company’s capital structure at 31 December 20X6? Ordinary share capital Share premium account A. $450,000 $25,000 B. $225,000 $250,000 C. $225,000 $325,500 D. $212,500 $262,500 Page 4 of 21 SAPP Academy 6 Floor, No 2, Trai Ca Valley, Truong Dinh street, Ha Noi Tel 096 972 94 63 Sapp.edu.vn SAPP Academy No. 20, 198 alley, Xa Dan street, Ha Noi Tel: 0166 7703 493 Sapp.edu.vn 11. Bumbly Co extracted the trial balance for the year ended 31 December 20X6. The total of the debits exceeded the credits by $300. Which of the following could explain the imbalance? A. Sales of $300 were omitted from the sales day book B. Returns inward of $150 were extracted to the debit column of the trial balance C. Discounts received of $150 were extracted to the debit column of the trial balance D. The bank ledger account did not agree with the bank statement by a debit of $300 12. Amy is a sole trader and had assets of $569,400 and liabilities of $412,840 on 1 January 20X6. During the year ended 31 December 20X6 she paid $65,000 capital into the business and she paid herself wages of $800 per month. At 31 December 20X8, Amy had assets of $614,130 and liabilities of $369,770. What is Amy’s profit for the year ended 31 December 20X6? A. $32,400 B. $23,600 C. $22,800 D. $87,800 13. A company values its inventory using the FIFO method. At 1 May 20X6 the company had 700 engines in inventory, valued at $190 each. During the year ended 30 April 20X7 the following transactions took place: 20X6 1 July Purchased 500 engines at $220 each 1 November Sold 400 engines for $160,000 20X7 1 February Purchased 300 engines at $230 each 15 April Sold 250 engines for $125,000 What is the value of the company’s closing inventory of engines at 30 April 20X7? A. $188,500 B. $195,500 C. $166,000 D. $106,000 Page 5 of 21 SAPP Academy 6 Floor, No 2, Trai Ca Valley, Truong Dinh street, Ha Noi Tel 096 972 94 63 Sapp.edu.vn SAPP Academy No. 20, 198 alley, Xa Dan street, Ha Noi Tel: 0166 7703 493 Sapp.edu.vn 14. Which of the following material events after the reporting date and before the financial statements are approved are adjusting events? (i) A valuation of property providing evidence of impairment in value at the reporting date. (ii) Sale of inventory held at the reporting date for less than cost. (iii) Discovery of fraud or error affecting the financial statements. (iv) The insolvency of a customer with a debt owing at the reporting date which is still outstanding. A. i, ii and iv only B. i, ii, iii and iv C. i and iv only D. ii and iii only 15. The following control account has been prepared by a trainee accountant: Receivables ledger control account $ Opening balance 308,600 Cash Credit sales 154,200 Discounts allowed Cash sales 88,100 Interest charged on overdue accounts Contras 4,600 Irrecoverable debts Allowance for receivables Closing balance Total 555,500 $ 147,200 1,400 2,400 4,900 2,800 396,800 555,500 What should the closing balance be when all the errors made in preparing the receivables ledger control account have been corrected? A. $395,200 B. $304,300 C. $309,500 D. $307,100 Page 6 of 21