Free ACCA Mock Test 218 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 218
applaa-acca-mock-218.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
Summit Manufacturing Ltd disposed of a delivery vehicle for £20,160. The vehicle had originally cost £33,600 and had accumulated depreciation of £16,800 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 £3,360
- B.Loss on disposal of £3,360
- C.Gain on disposal of £-13,440
- D.Loss on disposal of £16,800
✓ 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 = £33,600 £16,800 = £16,800 2. Compare to Disposal Proceeds: £20,160 (recei
A grocery distributor, Falcon Engineering Ltd, recorded net sales of £57,600 for standard-rate products (20% VAT) and £28,800 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£11,520
- B.£17,280
- C.£5,760
- 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 (£57,600): Output VAT = £57,600 × 20% = £11,520 2. Zero-Rate Sales (£28,800): Output VAT = £28,800 × 0% = £0 3. Total Output VAT = £11,520 + £0 = £11,520 Common Mistakes t
A retail store, Omega Foodstuffs plc, purchased inventories for a gross total of £4,200 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Omega Foodstuffs plc?
- A.Net Cost: £3,500, VAT Recoverable: £700
- B.Net Cost: £4,200, VAT Recoverable: £840
- C.Net Cost: £3,360, VAT Recoverable: £840
- D.Net Cost: £3,500, 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 £4,200. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £4,20
Before correcting the year-end errors, the draft profit of Crown Paper Ltd was £120,000. An error was discovered: Closing inventory was overstated by £11,000. What is the revised profit after correcting this error?
- A.£131,000
- B.£109,000
- C.£120,000 (no effect on profit)
- D.£98,000
✓ 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
For the year ended 31 December, Zephyr Services LLP paid rent of £25,200. At the year-end, the company had an outstanding electricity invoice of £2,100 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £2,100, Credit Electricity Expense £2,100
- B.Debit Electricity Expense £2,100, Credit Accruals (Liabilities) £2,100
- C.Debit Cash £2,100, Credit Electricity Expense £2,100
- D.Debit Electricity Expense £2,100, Credit Prepayments (Assets) £2,100
✓ 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 £2,100 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 Omega Foodstuffs plc shows a credit balance of £33,600. Unpresented checks total £8,400, and outstanding uncleared lodgements total £4,200. What is the reconciled balance that should appear in Omega Foodstuffs plc's cash book?
- A.£29,400
- B.£37,800
- C.£46,200
- D.£21,000
✓ 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: £33,600 (credit balance, meaning the bank shows this as a positive balance for the company). 2. Add Uncleared Lodgements: Deposits sent by Omega Foods
Summit Manufacturing Ltd disposed of a delivery vehicle for £5,760. The vehicle had originally cost £9,600 and had accumulated depreciation of £4,800 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 £960
- B.Loss on disposal of £960
- C.Gain on disposal of £-3,840
- D.Loss on disposal of £4,800
✓ 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 = £9,600 £4,800 = £4,800 2. Compare to Disposal Proceeds: £5,760 (received)
A bookkeeper at Omega Foodstuffs plc prepared a trial balance which failed to agree, with the credit side exceeding the debit side by £1,200. A suspense account was opened. Which of the following errors, when corrected, could explain this difference?
- A.A purchase invoice for £600 was completely omitted from the books.
- B.A cash payment of £600 to a supplier was debited to the purchases account but not credited to the cash account.
- C.Sales of £600 were recorded by debiting Receivables Control and debiting Sales Account.
- D.A purchase return of £600 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 £1,200. This means the debit side is £1,200 *too sm
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Paper Info
- Exam
- ACCA
- Mock number
- 218 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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