Free ACCA F3 (Management Accounting) Questions and Answers — Questions and Answers
Question 1: According to IAS 10 occurrences After the Reporting Period, which of the following occurrences would typically be considered modifying events following the reporting? <br> <br> 1. A credit customer's bankruptcy if they have an outstanding balance at the conclusion of the reporting period <br> 2. A decrease in investments' market value <br> 3. The declaration of an ordinary dividend <br> 4. The determination of the cost of assets purchased before the end of the reporting period.
- 1 and 4 only (Correct answer)
- 1, 3, and 4
- 2 and 3 only
- 1 and 2 only
Correct answer: 1 and 4 only
IAS 10 defines adjusting events as those providing evidence of conditions that existed at the end of the reporting period. A credit customer's bankruptcy (1) indicates an impairment existing at year-end, and the determination of asset costs (4) confirms the value of an existing asset. A decrease in investments' market value (2) and dividend declarations (3) typically reflect conditions arising after the period, making them non-adjusting events.
Question 2: Out of the above, which is the true statement regarding intangible assets? <br> <br> 1. Research expenditure has to be recorded as an intangible asset if certain requirements are satisfied. <br> 2. For every form of intangible asset, the gross carrying amount and the cumulative amortization at the start and end of the period should be disclosed in the financial statements' notes. <br> 3. Intangible assets must be amortized over their useful life.
- 1 and 2 only
- 2 and 3 only (Correct answer)
- All three statements are correct
- 1 and 3 only
Correct answer: 2 and 3 only
Statement 1 is false because research expenditure is generally expensed, while development expenditure can be capitalized if specific criteria are met. Statements 2 and 3 are true: IAS 38 requires disclosure of gross carrying amount and cumulative amortization for intangible assets, and intangible assets with a finite useful life must be amortized over that life to reflect the consumption of their economic benefits.
Question 3: Regarding the transactions of Razil, a lone proprietor who neglects to maintain accurate accounting records, the following details are accessible. <br> <br> Opening inventory --> $77,000 <br> Closing inventory --> $84,000 <br> Purchases --> $763,000 <br> <br> Gross profit as a percentage of sales --> 30% <br> <br> Based on this information, what is Razil's sales revenue for the year?
- $1,090,000
- $982,800
- $2,520,000
- $1,080,000 (Correct answer)
Correct answer: $1,080,000
First, calculate the Cost of Goods Sold (COGS): Opening Inventory ($77,000) + Purchases ($763,000) - Closing Inventory ($84,000) = $756,000. Since gross profit is 30% of sales, COGS represents 70% of sales (100% - 30%). Therefore, Sales Revenue = COGS / 0.70 = $756,000 / 0.70 = $1,080,000.
Question 4: Out of the following assertions, which one is true? <br> <br> 1. If there is a reasonable chance that they may materialize, contingent assets are recorded as assets in financial accounts. <br> <br> 2. If it is likely that contingent liabilities will arise, then financial statements must account for them. <br> <br> 3. Notes in the financial statements are used to disclose material non-adjusting events.
- 1 and 3
- 1 only
- 3 only
- 2 and 3 (Correct answer)
Correct answer: 2 and 3
Statement 1 is false because contingent assets are not recognized in financial statements due to prudence, only disclosed if probable. Statement 2 is true: contingent liabilities are recognized as provisions if an outflow of resources is probable and reliably estimable. Statement 3 is also true: material non-adjusting events must be disclosed in the notes to the financial statements if they are significant.
Question 5: The receivables ledger control account serves which THREE of the following purposes?
- A receivables ledger control account helps to locate errors in the trial balance (Correct answer)
- A receivables ledger control account ensures that there are no errors in the personal ledger
- Control accounts deter fraud (Correct answer)
- A receivables ledger control account provides a check on the arithmetical accuracy of the personal ledger (Correct answer)
Correct answer: A receivables ledger control account helps to locate errors in the trial balance
A receivables ledger control account provides a summary total of all individual customer balances, allowing for a check on the arithmetical accuracy of the personal ledger accounts. Discrepancies between the control account balance and the sum of individual ledger balances indicate errors, which can help locate errors in the trial balance. Furthermore, control accounts can deter fraud by requiring reconciliation and providing an independent check on the detailed records.
Question 6: On September 30, 20X5, Richard's trial balance has the following balances: <br> <br> Trade receivables $61,427 <br> Receivables allowance $2,079 <br> <br> Regarding Richard's statement of financial situation as of September 30, 20X5, how should these amounts be reported?
- An asset of $59,348 (Correct answer)
- A liability of $59,348
- An asset of $61,427 and liability of $2,079
- A liability of $61,427 and an asset of $2,079
Correct answer: An asset of $59,348
Trade receivables represent the total amount owed by customers, which is an asset. The receivables allowance is a contra-asset account that reduces the gross receivables to their estimated realizable value. Therefore, on the statement of financial position, the net amount of trade receivables should be reported as an asset: $61,427 (Trade receivables) - $2,079 (Receivables allowance) = $59,348.
Question 7: The amount that overheads are factored into the cost of finished products inventories is specified in S 2 Inventories. <br> <br> Which of the following claims about this area's IA S 2 requirements is true? (Select every option that is accurate.)
- Finished goods inventories may be valued on the basis of labour and materials cost only, without including overheads.
- Carriage inwards, but not carriage outwards, should be included in the overheads when valuing inventories of finished goods. (Correct answer)
- Factory management costs should be included in fixed overheads allocated to inventories of finished goods. (Correct answer)
Correct answer: Carriage inwards, but not carriage outwards, should be included in the overheads when valuing inventories of finished goods.
IAS 2 Inventories requires the cost of inventories to include all costs of purchase, conversion, and other costs incurred to bring them to their present location and condition. Carriage inwards (B) is a cost of purchase and should be included, while carriage outwards is a selling cost. Factory management costs (C) are part of fixed production overheads and should be allocated to inventories. Valuing inventories on labor and materials only (A) is incorrect as production overheads must be included.
Free ACCA F3 (Management Accounting) Questions and Answers
According to IAS 10 occurrences After the Reporting Period, which of the following occurrences would typically be considered modifying events following the reporting?
1.
A credit customer's bankruptcy if they have an outstanding balance at the conclusion of the reporting period
2.
A decrease in investments' market value
3.
The declaration of an ordinary dividend
4.
The determination of the cost of assets purchased before the end of the reporting period.