Question 1

Which of the following is not regarded as other comprehensive income?

Accepted Answer

Other comprehensive income includes items of income and expense that are not recognised in profit or loss as required or permitted by other IFRSs. Profits on the disposal of non-current assets are typically recognized in the profit or loss statement, not in other comprehensive income.

Question 2

Which of the following best reflects a contingent asset?

Accepted Answer

A contingent asset is defined as a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. This matches the description given in option A.

Question 3

A company has 100,000, equity shares and £100,000 5% preference shares at a nominal value of 50p each. The directors decide to declare a dividend of 5p per equity share.
The total amount to be paid in dividends in the year amounts to:

Accepted Answer

B

Question 4

A company has £600,000, 12% debentures which were issued at par. The company pays interest half yearly. The final instalment is outstanding at the end of the year. Which of the following is correct?

Accepted Answer

DThe interest charge in the income statement for a full year on £600,000 at 12% is £72,000 (B). Since interest is paid half-yearly and the final instalment is outstanding at the end of the year, there will be an interest accrual of £36,000 (half-year interest) in the statement of financial position, not £72,000, making D incorrect based on the provided options and explanation. However, the correct interpretation of the interest accrual should indeed be £36,000 for the half-year outstanding, not £72,000 as stated in option D. My explanation mistakenly indicated D as correct when it should highlight the discrepancy in the accrual amount. The correct focus is on the annual interest charge (B) which is accurately calculated for the income statement.

Question 5

A company has £1,000,000, equity shares at a nominal value of £1.00 each and 100,000 5% preference shares at a nominal value of 50p each. The directors decide to pay a dividend of 5p per equity share.
The total amount to be paid in dividends in the year amounts to:

Accepted Answer

The total dividend payment is calculated by adding the dividend for equity shares and preference shares. For equity shares: 1,000,000 shares * £0.05 = £50,000. For preference shares: 100,000 shares * £0.025 (5% of 50p) = £2,500. Adding both gives £52,500, but since the option is not available, the closest correct option based on the provided choices is C) £55,000, indicating a possible mistake in the question or the options provided.

Question 6

Animo Ltd. has a turnover of £500,000 and pre-tax profits of £50,000. It financial statements are prepared each year to 31 December. The following comes to light in respect of the year ended 31 December 20X1.
The company wrote off research and development costs of £300,000 in the year as the project has had to be abandoned.
How should this be treated in the financial statements of Animo Ltd?

Accepted Answer

The write-off of research and development costs due to the abandonment of a project is considered an exceptional item because it is a significant and unusual event. Therefore, it should be disclosed separately on the income statement to provide clarity to the users of the financial statements about the nature and impact of the expense.

Question 7

A company has £25,000,000, equity shares at a nominal value of £5.00 each and 50,000 5% preference shares at a nominal value of £2.50 each. The directors paid a dividend of 10p per equity share in the year and are going to propose an equity dividend of 5p per share at the AGM.
The total amount to be included as a distribution from reserves in the year is:

Accepted Answer

The answer of A company has £25,000,000, equity shares at...

Question 8

At the end of the year, the accountant has calculated that the income tax charge for the year should be
£250,000. An opening accrual for taxation of £25,000 is still outstanding. The double entry to record
The tax charge is as follows:

Accepted Answer

CThe correct entries to record the tax charge involve recognizing the expense for the current year and adjusting for any opening accruals. Option A correctly records the current year's tax expense. Option C correctly adjusts for the opening accrual by adding it to the current year's expense, resulting in a total payable of £275,000.

Question 9

At the end of the year, the accountant has calculated that the income tax charge for the year should be £250,000. An opening accrual for taxation of £25,000 is still outstanding as no payments were made to the tax authorities in the year.
What will the taxation creditor in the statement of financial position be at the end of the year?

Accepted Answer

The taxation creditor at the end of the year will be £275,000, which is the sum of the income tax charge for the year (£250,000) and the opening accrual for taxation (£25,000) that was not paid during the year.

Question 10

Which of the following is not classed as an administration expense in the income statement of a company?

Accepted Answer

Depreciation on plant and machinery is typically classified under cost of goods sold (COGS) or operating expenses related to production, not as an administration expense. Administration expenses are more related to the general operation of the company, such as office supplies, salaries of administrative personnel, and auditor fees.

Question 11

Which of the following is not allocated to the generic heading selling and distribution expenses in the income statement?

Accepted Answer

Discount received is typically classified under other income or as a reduction in cost of goods sold, not as a selling and distribution expense.

Question 12

Which of the following is not classed as a finance cost in company financial statements?

Accepted Answer

Dividends paid to ordinary shareholders are not classified as finance costs in company financial statements. Finance costs typically include expenses related to the borrowing of funds, such as interest on loans and dividends on preference shares, but not dividends on ordinary shares, which are considered distributions of profit.

Question 13

In the income statement, items have to be presented in a set order. Which of the following is in the correct order?

Accepted Answer

The correct order in an income statement is: Gross profit, finance costs, taxation, profit for the year.

Question 14

Which of the following is not likely to lead to a prior year adjustment under IAS 8, wherein the opening reserves of the current year are adjusted and the comparatives amended in light of the new, more accurate information?

Accepted Answer

The answer of Which of the following is not likely...

Quiz 30: The Final Financial Statements of Limited Companies