Free ACCA Mock Test 148 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 148
applaa-acca-mock-148.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
Falcon Engineering Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £180,000, and 2) Had the exterior of the existing office block repainted for £18,000. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£180,000), Repainting: Revenue Expenditure (£18,000)
- C.Warehouse system: Revenue Expenditure (£180,000), Repainting: Capital Expenditure (£18,000)
- D.Both projects are Revenue Expenditure.
✓ Worked Explanation
Core Concept: Capital Expenditure vs. Revenue Expenditure Capital Expenditure (CapEx) creates or enhances a long-term non-current asset and is capitalised on the balance sheet, then depreciated over its useful life. Revenue Expenditure (RevEx) relates to day-to-day operations, maintenance, or restoration and is expensed immediately in profit or loss. Step-by-Step Resolution: 1. Warehouse Conveyor Belt System (£180,000): - This is a *new* asset installed to generate future economic benefits.
For the year ended 31 December, Nexus Media plc paid rent of £14,400. At the year-end, the company had an outstanding electricity invoice of £1,200 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £1,200, Credit Electricity Expense £1,200
- B.Debit Electricity Expense £1,200, Credit Accruals (Liabilities) £1,200
- C.Debit Cash £1,200, Credit Electricity Expense £1,200
- D.Debit Electricity Expense £1,200, Credit Prepayments (Assets) £1,200
✓ 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 £1,200 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
A retail store, Crown Paper Ltd, purchased inventories for a gross total of £18,000 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Crown Paper Ltd?
- A.Net Cost: £15,000, VAT Recoverable: £3,000
- B.Net Cost: £18,000, VAT Recoverable: £3,600
- C.Net Cost: £14,400, VAT Recoverable: £3,600
- D.Net Cost: £15,000, 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 £18,000. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £18,
A retail store, Atlas Transport Ltd, purchased inventories for a gross total of £6,000 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Atlas Transport Ltd?
- A.Net Cost: £5,000, VAT Recoverable: £1,000
- B.Net Cost: £6,000, VAT Recoverable: £1,200
- C.Net Cost: £4,800, VAT Recoverable: £1,200
- D.Net Cost: £5,000, 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 £6,000. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £6,00
Meridian Distributors Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £42,000, and 2) Had the exterior of the existing office block repainted for £4,200. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£42,000), Repainting: Revenue Expenditure (£4,200)
- C.Warehouse system: Revenue Expenditure (£42,000), Repainting: Capital Expenditure (£4,200)
- D.Both projects are Revenue Expenditure.
✓ Worked Explanation
Core Concept: Capital Expenditure vs. Revenue Expenditure Capital Expenditure (CapEx) creates or enhances a long-term non-current asset and is capitalised on the balance sheet, then depreciated over its useful life. Revenue Expenditure (RevEx) relates to day-to-day operations, maintenance, or restoration and is expensed immediately in profit or loss. Step-by-Step Resolution: 1. Warehouse Conveyor Belt System (£42,000): - This is a *new* asset installed to generate future economic benefits. I
For the last quarter, Meridian Distributors Ltd had net credit sales of £125,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £75,000. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£12,500 Payable
- B.£12,500 Reclaimable
- C.£25,000 Payable
- D.£10,000 Payable
✓ Worked Explanation
Core Concept: VAT Return - Output VAT vs. Input VAT A VAT-registered business acts as a tax collector for HMRC. It charges Output VAT on sales and reclaims Input VAT on purchases. The *net VAT payable* is the difference: Output VAT Input VAT. Step-by-Step Resolution: 1. Calculate Output VAT (tax charged to customers on sales): - Sales are NET (exc. VAT): £125,000 × 20% = £25,000 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fracti
The trial balance of Apex Trading Ltd balanced perfectly. However, it was later discovered that a purchase of equipment costing £18,000 was entered into the repairs and maintenance account. What type of error has occurred?
- A.Error of Omission
- B.Error of Commission
- C.Error of Principle
- D.Error of Reversal
✓ Worked Explanation
Core Concept: The Six Types of Accounting Errors There are six classic types of bookkeeping errors. Some cause the trial balance to disagree; others do not. This question tests recognition of errors that *hide* behind a balanced trial balance - meaning both sides are still equal, but the accounting treatment is fundamentally wrong. Step-by-Step Resolution: 1. Analyse the Error: Equipment (a non-current asset / capital expenditure) was posted to Repairs & Maintenance (a revenue expense accou
Beacon Logistics LLP disposed of a delivery vehicle for £28,800. The vehicle had originally cost £48,000 and had accumulated depreciation of £24,000 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 £4,800
- B.Loss on disposal of £4,800
- C.Gain on disposal of £-19,200
- D.Loss on disposal of £24,000
✓ 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 = £48,000 £24,000 = £24,000 2. Compare to Disposal Proceeds: £28,800 (recei
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Paper Info
- Exam
- ACCA
- Mock number
- 148 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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