Free ACCA Mock Test 172 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 172
applaa-acca-mock-172.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
Crest Hotels Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £36,000, and 2) Had the exterior of the existing office block repainted for £3,600. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£36,000), Repainting: Revenue Expenditure (£3,600)
- C.Warehouse system: Revenue Expenditure (£36,000), Repainting: Capital Expenditure (£3,600)
- 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 (£36,000): - This is a *new* asset installed to generate future economic benefits. I
For the year ended 31 December, Summit Manufacturing Ltd paid rent of £66,000. At the year-end, the company had an outstanding electricity invoice of £5,500 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £5,500, Credit Electricity Expense £5,500
- B.Debit Electricity Expense £5,500, Credit Accruals (Liabilities) £5,500
- C.Debit Cash £5,500, Credit Electricity Expense £5,500
- D.Debit Electricity Expense £5,500, Credit Prepayments (Assets) £5,500
✓ 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 £5,500 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
At 31 March, the bank statement of Meridian Distributors Ltd shows a credit balance of £60,000. Unpresented checks total £15,000, and outstanding uncleared lodgements total £7,500. What is the reconciled balance that should appear in Meridian Distributors Ltd's cash book?
- A.£52,500
- B.£67,500
- C.£82,500
- D.£37,500
✓ 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: £60,000 (credit balance, meaning the bank shows this as a positive balance for the company). 2. Add Uncleared Lodgements: Deposits sent by Meridian Di
A bookkeeper at Alpha Properties Ltd prepared a trial balance which failed to agree, with the credit side exceeding the debit side by £800. A suspense account was opened. Which of the following errors, when corrected, could explain this difference?
- A.A purchase invoice for £400 was completely omitted from the books.
- B.A cash payment of £400 to a supplier was debited to the purchases account but not credited to the cash account.
- C.Sales of £400 were recorded by debiting Receivables Control and debiting Sales Account.
- D.A purchase return of £400 was debited to the Purchase Returns account and credited to Receivables Control.
✓ Worked Explanation
Core Concept: Trial Balance Errors and the Suspense Account A trial balance fails to agree when a transaction is posted with unequal debits and credits. The difference is placed in a suspense account until the error is found and corrected. Errors that cause the trial balance to fail include: single-sided entries, casting errors, and transposition errors on one side only. Step-by-Step Resolution: 1. Analyse the Symptom: Credits exceed debits by £800. This means the debit side is £800 *too small*
A retail store, Meridian Distributors Ltd, purchased inventories for a gross total of £14,000 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Meridian Distributors Ltd?
- A.Net Cost: £11,666, VAT Recoverable: £2,334
- B.Net Cost: £14,000, VAT Recoverable: £2,800
- C.Net Cost: £11,200, VAT Recoverable: £2,800
- D.Net Cost: £11,666, 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 £14,000. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £14,
An entity purchased a machine on 1 January Year 1 for £48,000. The residual value of the machine is estimated to be £4,800 with an estimated useful life of 5 years. The entity uses the straight-line method of depreciation. What is the carrying value (net book value) of the machine on 31 December Year 2?
- A.£39,360
- B.£30,720
- C.£25,920
- D.£34,560
✓ Worked Explanation
Core Concept: Straight-Line Depreciation The straight-line method spreads the depreciable amount (Cost Residual Value) equally over the asset's useful life. The same charge is recognised in *every* period. After 2 complete years, two annual depreciation charges are deducted from the original cost. Step-by-Step Resolution: 1. Calculate Annual Depreciation: (Cost Residual Value) ÷ Useful Life = (£48,000 £4,800) ÷ 5 years = £8,640 per year 2. Calculate Accumulated Depreciation at 31 Dec Y
A grocery distributor, Meridian Distributors Ltd, recorded net sales of £28,800 for standard-rate products (20% VAT) and £14,400 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£5,760
- B.£8,640
- C.£2,880
- D.£0 (all food products are exempt from output VAT)
✓ Worked Explanation
Core Concept: Zero-Rated vs. Standard-Rated VAT Supplies In UK VAT, there are multiple categories of supply: standard-rated (20%), zero-rated (0%), reduced-rated (5%), and exempt. Both standard-rated and zero-rated are *taxable* supplies, but zero-rated generates £0 output VAT. Step-by-Step Resolution: 1. Standard-Rate Sales (£28,800): Output VAT = £28,800 × 20% = £5,760 2. Zero-Rate Sales (£14,400): Output VAT = £14,400 × 0% = £0 3. Total Output VAT = £5,760 + £0 = £5,760 Common Mistakes to A
The sole trader of Crest Hotels Ltd took goods costing £9,000 from the business for personal use. These goods had a selling price of £13,500. What is the correct double entry to record this transaction?
- A.Debit Drawings £9,000, Credit Purchases £9,000
- B.Debit Drawings £13,500, Credit Revenue £13,500
- C.Debit Purchases £9,000, Credit Drawings £9,000
- D.Debit Inventory £9,000, Credit Drawings £9,000
✓ 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 £9,000 (cost) for personal use. This is a capital withdrawal. 2. Choose the Correct Value: Goods are recorded at cost (£9,000),
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Paper Info
- Exam
- ACCA
- Mock number
- 172 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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