Free ACCA Mock Test 112 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 112
applaa-acca-mock-112.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
Crown Paper Ltd purchased a motor car for £12,000 inclusive of VAT, for use by a director. The car is used 60% for business travel and 40% for private travel. What is the input VAT recovery rule regarding this vehicle?
- A.Input VAT can be recovered in full (100%).
- B.Input VAT can be recovered at 60% representing the business use portion.
- C.No input VAT can be recovered because input VAT is generally blocked on passenger motor cars unless used exclusively for business (0% recovery).
- D.Input VAT can be recovered in full if the car is leased rather than purchased.
✓ Worked Explanation
Core Concept: Input VAT Block on Passenger Motor Cars Under HMRC VAT rules, input VAT on the purchase of a passenger motor car is subject to a 100% block - meaning it is entirely irrecoverable - unless the car is used *exclusively* for business purposes with no possibility of private use. Step-by-Step Resolution: 1. Identify the Asset: This is a passenger motor car (not a commercial vehicle like a van or lorry). 2. Apply the VAT Block Rule: If the car is available for any private use, input VAT
For the year ended 31 December, Atlas Transport Ltd paid rent of £3,600. At the year-end, the company had an outstanding electricity invoice of £300 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £300, Credit Electricity Expense £300
- B.Debit Electricity Expense £300, Credit Accruals (Liabilities) £300
- C.Debit Cash £300, Credit Electricity Expense £300
- D.Debit Electricity Expense £300, Credit Prepayments (Assets) £300
✓ Worked Explanation
Core Concept: Accruals (Expenses Incurred but Not Yet Paid) Under the accruals concept (IAS 1), expenses must be recognised in the period they are *incurred*, not when they are *paid*. An accrual is a current liability - the business owes this amount but hasn't yet paid the invoice. Step-by-Step Resolution: 1. Identify the Issue: The electricity expense of £300 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this year
A retail store, Aura Goods Ltd, purchased inventories for a gross total of £9,600 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Aura Goods Ltd?
- A.Net Cost: £8,000, VAT Recoverable: £1,600
- B.Net Cost: £9,600, VAT Recoverable: £1,920
- C.Net Cost: £7,680, VAT Recoverable: £1,920
- D.Net Cost: £8,000, VAT Recoverable: £0 (VAT is non-recoverable on inventories)
✓ Worked Explanation
Core Concept: Extracting VAT from a VAT-Inclusive (Gross) Price When a price is VAT-inclusive, you must use the VAT fraction to extract the tax element. You cannot simply multiply the gross price by 20% - that would over-calculate the VAT because you would be applying the rate to an amount that already contains VAT. Step-by-Step Resolution: 1. Identify the Problem: The gross (VAT-inclusive) price is £9,600. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £9,60
For the year ended 31 December, Titan Steel plc paid rent of £3,600. At the year-end, the company had an outstanding electricity invoice of £300 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £300, Credit Electricity Expense £300
- B.Debit Electricity Expense £300, Credit Accruals (Liabilities) £300
- C.Debit Cash £300, Credit Electricity Expense £300
- D.Debit Electricity Expense £300, Credit Prepayments (Assets) £300
✓ Worked Explanation
Core Concept: Accruals (Expenses Incurred but Not Yet Paid) Under the accruals concept (IAS 1), expenses must be recognised in the period they are *incurred*, not when they are *paid*. An accrual is a current liability - the business owes this amount but hasn't yet paid the invoice. Step-by-Step Resolution: 1. Identify the Issue: The electricity expense of £300 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this year
Before correcting the year-end errors, the draft profit of Summit Manufacturing Ltd was £120,000. An error was discovered: Closing inventory was overstated by £22,000. What is the revised profit after correcting this error?
- A.£142,000
- B.£98,000
- C.£120,000 (no effect on profit)
- D.£76,000
✓ Worked Explanation
Core Concept: Impact of Inventory Errors on Profit The relationship between inventory and profit is one of the most important concepts in financial accounting. Closing inventory is deducted from Cost of Sales. If closing inventory is overstated, Cost of Sales is *understated*, which means Gross Profit is *overstated*. Correcting the overstatement increases COGS and reduces profit. Step-by-Step Resolution: 1. Recall the COGS Formula: Cost of Sales = Opening Inventory + Purchases Closing Invent
Solar Energy plc disposed of a delivery vehicle for £60,000. The vehicle had originally cost £100,000 and had accumulated depreciation of £50,000 at the date of disposal. What is the gain or loss on disposal to be recorded in profit or loss?
- A.Gain on disposal of £10,000
- B.Loss on disposal of £10,000
- C.Gain on disposal of £-40,000
- D.Loss on disposal of £50,000
✓ Worked Explanation
Core Concept: Profit or Loss on Disposal of a Non-Current Asset When a non-current asset is sold, the gain or loss is measured as Disposal Proceeds minus the Carrying Value (Net Book Value). It is *not* compared to the original cost. Only the written-down value at the disposal date is relevant. Step-by-Step Resolution: 1. Find the Carrying Value (NBV) at disposal date: NBV = Original Cost Accumulated Depreciation = £100,000 £50,000 = £50,000 2. Compare to Disposal Proceeds: £60,000 (rece
At 31 March, the bank statement of Swift Logistics Ltd shows a credit balance of £7,200. Unpresented checks total £1,800, and outstanding uncleared lodgements total £900. What is the reconciled balance that should appear in Swift Logistics Ltd's cash book?
- A.£6,300
- B.£8,100
- C.£9,900
- D.£4,500
✓ Worked Explanation
Core Concept: Bank Reconciliation Statement A bank reconciliation explains the difference between the *cash book balance* (company's records) and the *bank statement balance* (bank's records). Timing differences - unpresented cheques and uncleared lodgements - cause these differences. Step-by-Step Resolution: 1. Start with Bank Statement Balance: £7,200 (credit balance, meaning the bank shows this as a positive balance for the company). 2. Add Uncleared Lodgements: Deposits sent by Swift Logist
The sole trader of Meridian Distributors Ltd took goods costing £3,600 from the business for personal use. These goods had a selling price of £5,400. What is the correct double entry to record this transaction?
- A.Debit Drawings £3,600, Credit Purchases £3,600
- B.Debit Drawings £5,400, Credit Revenue £5,400
- C.Debit Purchases £3,600, Credit Drawings £3,600
- D.Debit Inventory £3,600, Credit Drawings £3,600
✓ Worked Explanation
Core Concept: Owner's Drawings of Inventory at Cost When a sole trader takes goods from the business for personal use, this is treated as drawings - a withdrawal of capital by the owner. The key rule is that drawings of goods are always valued at cost price, never at selling price. Step-by-Step Resolution: 1. Identify the Economic Event: The owner has taken goods worth £3,600 (cost) for personal use. This is a capital withdrawal. 2. Choose the Correct Value: Goods are recorded at cost (£3,600),
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Paper Info
- Exam
- ACCA
- Mock number
- 112 of 250
- Questions
- 20
- Format
- Multiple Choice (MCQ)
- Sections
- 1
- Audience
- Accountancy students
- Timing
- Exams: Mar, Jun, Sep, Dec
- Copyright
- Applaa Proprietary
Sections Covered
- Financial Accounting
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