Free ACCA Mock Test 38 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 38
applaa-acca-mock-38.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
A grocery distributor, Nova Tech Solutions Ltd, recorded net sales of £38,400 for standard-rate products (20% VAT) and £19,200 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£7,680
- B.£11,520
- C.£3,840
- 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 (£38,400): Output VAT = £38,400 × 20% = £7,680 2. Zero-Rate Sales (£19,200): Output VAT = £19,200 × 0% = £0 3. Total Output VAT = £7,680 + £0 = £7,680 Common Mistakes to A
Atlas Transport Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £84,000, and 2) Had the exterior of the existing office block repainted for £8,400. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£84,000), Repainting: Revenue Expenditure (£8,400)
- C.Warehouse system: Revenue Expenditure (£84,000), Repainting: Capital Expenditure (£8,400)
- 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 (£84,000): - This is a *new* asset installed to generate future economic benefits. I
For the last quarter, Vanguard Retail Ltd had net credit sales of £110,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £66,000. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£11,000 Payable
- B.£11,000 Reclaimable
- C.£22,000 Payable
- D.£8,800 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): £110,000 × 20% = £22,000 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fracti
Zephyr Services LLP purchased a motor car for £250,000 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
Swift Logistics Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £12,000, and 2) Had the exterior of the existing office block repainted for £1,200. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£12,000), Repainting: Revenue Expenditure (£1,200)
- C.Warehouse system: Revenue Expenditure (£12,000), Repainting: Capital Expenditure (£1,200)
- 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 (£12,000): - This is a *new* asset installed to generate future economic benefits. I
For the year ended 31 December, Vanguard Retail Ltd paid rent of £21,600. At the year-end, the company had an outstanding electricity invoice of £1,800 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £1,800, Credit Electricity Expense £1,800
- B.Debit Electricity Expense £1,800, Credit Accruals (Liabilities) £1,800
- C.Debit Cash £1,800, Credit Electricity Expense £1,800
- D.Debit Electricity Expense £1,800, Credit Prepayments (Assets) £1,800
✓ 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 £1,800 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, Meridian Distributors Ltd, purchased inventories for a gross total of £8,400 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: £7,000, VAT Recoverable: £1,400
- B.Net Cost: £8,400, VAT Recoverable: £1,680
- C.Net Cost: £6,720, VAT Recoverable: £1,680
- D.Net Cost: £7,000, 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 £8,400. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £8,40
For the year ended 31 December, Meridian Distributors Ltd 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
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Paper Info
- Exam
- ACCA
- Mock number
- 38 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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