Free ACCA Mock Test 197 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 197
applaa-acca-mock-197.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
For the last quarter, Nexus Media plc had net credit sales of £150,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £90,000. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£15,000 Payable
- B.£15,000 Reclaimable
- C.£30,000 Payable
- D.£12,000 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): £150,000 × 20% = £30,000 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fracti
The Receivables Ledger Control Account of Pinnacle Consulting Ltd is shown in the diagram. Credit sales of £18,000 were recorded, and cash of £14,400 was received from credit customers. What is the correct closing balance (balance c/f) of the account?
- A.£12,600 Debit closing balance
- B.£12,600 Credit closing balance
- C.£27,000 Debit closing balance
- D.£14,400 Credit closing balance
✓ Worked Explanation
Core Concept: Receivables Ledger Control Account The Receivables Ledger Control Account is an asset account that tracks money owed to the business by credit customers. As an asset, it follows the fundamental debit rule: increases are recorded on the debit side and decreases on the credit side. Step-by-Step Resolution: 1. Opening Balance: The account opens with a debit balance of £9,000 - money already owed by customers. 2. Credit Sales (+): New credit sales of £18,000 increase the amount owed,
An entity purchased a machine on 1 January Year 1 for £42,000. The residual value of the machine is estimated to be £4,200 with an estimated useful life of 3 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.£29,400
- B.£16,800
- C.£12,600
- D.£25,200
✓ 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 = (£42,000 £4,200) ÷ 3 years = £12,600 per year 2. Calculate Accumulated Depreciation at 31 Dec
Alpha Properties Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £250,000, and 2) Had the exterior of the existing office block repainted for £25,000. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£250,000), Repainting: Revenue Expenditure (£25,000)
- C.Warehouse system: Revenue Expenditure (£250,000), Repainting: Capital Expenditure (£25,000)
- 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 (£250,000): - This is a *new* asset installed to generate future economic benefits.
Pinnacle Consulting Ltd disposed of a delivery vehicle for £120,000. The vehicle had originally cost £200,000 and had accumulated depreciation of £100,000 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 £20,000
- B.Loss on disposal of £20,000
- C.Gain on disposal of £-80,000
- D.Loss on disposal of £100,000
✓ 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 = £200,000 £100,000 = £100,000 2. Compare to Disposal Proceeds: £120,000 (r
Nexus Media plc completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £48,000, and 2) Had the exterior of the existing office block repainted for £4,800. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£48,000), Repainting: Revenue Expenditure (£4,800)
- C.Warehouse system: Revenue Expenditure (£48,000), Repainting: Capital Expenditure (£4,800)
- 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 (£48,000): - This is a *new* asset installed to generate future economic benefits. I
The sole trader of Alpha Properties Ltd took goods costing £5,500 from the business for personal use. These goods had a selling price of £8,250. What is the correct double entry to record this transaction?
- A.Debit Drawings £5,500, Credit Purchases £5,500
- B.Debit Drawings £8,250, Credit Revenue £8,250
- C.Debit Purchases £5,500, Credit Drawings £5,500
- D.Debit Inventory £5,500, Credit Drawings £5,500
✓ 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 £5,500 (cost) for personal use. This is a capital withdrawal. 2. Choose the Correct Value: Goods are recorded at cost (£5,500),
Nexus Media plc purchased a motor car for £42,000 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
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Paper Info
- Exam
- ACCA
- Mock number
- 197 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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