Question 1

Farook Limited has current assets of £68,420, current liabilities of £50,328, non-current liabilities of £102,000 and equity of £202,359. Using the accounting equation, calculate the figure for non-current assets.

Accepted Answer

The accounting equation is Assets = Liabilities + Equity. Current assets are £68,420, current liabilities are £50,328, non-current liabilities are £102,000, and equity is £202,359. Total liabilities and equity are £50,328 + £102,000 + £202,359 = £354,687. Therefore, total assets (current + non-current) must also be £354,687. Since current assets are £68,420, non-current assets are £354,687 - £68,420 = £286,267.

Question 2

Gurbinder Limited has non-current assets of £250,000, current assets of £142,000, current liabilities of £125,000 and equity of £150,000. Using the accounting equation, calculate the figure for non-current liabilities.

Accepted Answer

The accounting equation is Assets = Liabilities + Equity. Total assets are £250,000 (non-current) + £142,000 (current) = £392,000. Total liabilities and equity are £125,000 (current liabilities) + £150,000 (equity) + non-current liabilities. Solving for non-current liabilities: £392,000 = £275,000 + non-current liabilities, so non-current liabilities = £117,000.

Question 3

Harriet Limited has non-current assets of £425,000, current liabilities of £142,000 and equity of £391,000. Harriet Limited has no non-current liabilities. Using the accounting equation, calculate the figure for current assets.

Accepted Answer

The accounting equation is: Assets = Liabilities + Equity. We know that non-current assets are £425,000, current liabilities are £142,000 and equity is £391,000. Therefore, current assets must be £425,000 - £142,000 + £391,000 = £674,000.

Question 4

Nishi Limited has non-current assets of £622,481, non-current liabilities of £235,148, current assets of £359,727 and equity of £327,138. Using the accounting equation, calculate the figure for current liabilities.

Accepted Answer

The answer of Nishi Limited has non-current assets of £622,481,...

Question 5

Roisin runs a small retail business from a shop in the town centre. At the end of her financial year, she has the following assets and liabilities: taxation repayable: £890, inventory: £25,450, cash in the cash register: £1,750, bank balance (overdrawn): £10,250. What is the total of Roisin's current assets?

Accepted Answer

Current assets include inventory, cash in the cash register, and taxation repayable. Adding these gives £25,450 + £1,750 + £890 = £28,090.

Question 6

Patrick runs an engineering business. At the financial year end he has the following account balances: prepayments: £7,500, trade payables: £52,600, inventory: £74,100, long term loan: £250,000, property, plant and equipment: £325,400, trade receivables: £46,300, bank balance (asset): £22,000, taxation payable: £10,700. Patrick's total assets are:

Accepted Answer

Total assets are calculated by adding prepayments, inventory, property, plant and equipment, trade receivables, and bank balance: £7,500 + £74,100 + £325,400 + £46,300 + £22,000 = £475,300.

Question 7

Gina has the following assets at her financial year end: cash at the bank: £15,000, trademarks: £25,000, trade receivables: £52,000, patents: £10,000, inventory: £35,000, property, plant and equipment: £225,000, a long term shareholding in Tina plc: £48,000. Gina's total non-current assets are:

Accepted Answer

The answer of Gina has the following assets at her...

Question 8

At her financial year end of 31 December 2019, Haylie has trade and other receivables of £78,400, current taxation payable of £22,350 and trade and other payables of £56,250. Haylie also has bank borrowings totalling £500,000. These bank borrowings are repayable by equal annual instalments over the next five years starting with the first repayment of £100,000 on 30 December 2020. What figure will Haylie record in her statement of financial position at 31 December 2019 for current liabilities?

Accepted Answer

The answer of At her financial year end of 31...

Question 9

At 31 October 2019, her statement of financial position date, Suad has trade and other payables of £18,475, taxation recoverable of £1,250, cash in hand of £745 and a bank overdraft of £12,225. What are Suad's current liabilities at 31 October 2019?

Accepted Answer

Current liabilities = Trade and other payables + Taxation recoverable + Cash in hand - Bank overdraft= £18,475 + £1,250 + £745 - £12,225= £30,700

Question 10

Shamsa Limited has the following balances at 30 June 2019, the company's year end: Trade and other payables: £47,450 Taxation payable: £17,275 Bank loan: £360,000 The bank loan is repayable over 5 years by equal monthly instalments. The first loan repayment is due on 28 August 2019 and each subsequent repayment will be on the 28^th of each month until the loan is repaid. What figures will Shamsa Limited show for current and non-current liabilities at 30 June 2019?

Accepted Answer

Current liabilities include trade and other payables (£47,450), taxation payable (£17,275), and the portion of the bank loan due within one year. The annual repayment of the bank loan is £360,000 / 5 = £72,000. Therefore, current liabilities are £47,450 + £17,275 + £72,000 = £136,725. Non-current liabilities are the remaining bank loan balance: £360,000 - £72,000 = £288,000.

Question 11

The International Accounting Standards Board's Conceptual Framework for Financial Reporting defines equity as:

Accepted Answer

Equity is defined as the residual interest in the assets of the entity after deducting all its liabilities, according to the Conceptual Framework for Financial Reporting.

Question 12

The equity of an unincorporated business that makes a profit in the financial year is calculated as:

Accepted Answer

Equity is calculated by adding the capital at the start of the year, any additional capital introduced, and the profit for the year, then subtracting any drawings.

Question 13

Alpaca Limited has the following balances at 31 December 2019: share capital of £25,000, share premium of £50,000, retained earnings at 1 January 2019 of £225,000 and a retained loss for the year to 31 December 2019 of £70,000. What is the total equity of Alpaca Limited at 31 December 2019?

Accepted Answer

Total equity is calculated as share capital plus share premium plus retained earnings minus retained loss: £25,000 + £50,000 + £225,000 - £70,000 = £230,000.

Question 14

Parminder, a sole trader, makes a profit of £25,600 in the year ended 30 June 2019. Her capital account balance at 1 July 2018 was £76,750 and she withdrew £55,200 from the business during the year for her own expenses. What is the balance on Parminder's capital account at 30 June 2019?

Accepted Answer

The capital account balance at the end of the year is calculated as the opening balance plus profit minus withdrawals: £76,750 + £25,600 - £55,200 = £47,150.

Question 15

Foromin Limited has share capital of £20,000, share premium of £50,000 and retained earnings at the start of the financial year (1 July 2018) of £150,000. During the year ended 30 June 2019, Foromin Limited makes a profit of £60,000 from which a dividend of £40,000 is paid to shareholders. What is the total equity of Foromin Limited at 30 June 2019?

Accepted Answer

The total equity is calculated by adding share capital, share premium, and retained earnings at the end of the year. Retained earnings at the end of the year are the initial retained earnings plus profit minus dividends: £150,000 + £60,000 - £40,000 = £170,000. Total equity = £20,000 (share capital) + £50,000 (share premium) + £170,000 (retained earnings) = £240,000.

Question 16

Bubbles Limited has share capital of £16,000, share premium of £25,000 and retained earnings at 1 May 2018 of £75,000. During the financial year ended 30 April 2019, Bubbles Limited made a loss of £22,000 and paid a dividend of £9,000 to the shareholders. What is the total equity of Bubbles Limited at 30 April 2019?

Accepted Answer

The total equity of Bubbles Limited at 30 April 2019 is £85,000. This is calculated as follows:Share capital: £16,000Share premium: £25,000Retained earnings at 1 May 2018: £75,000Loss for the year ended 30 April 2019: £22,000Dividend paid: £9,000Total equity at 30 April 2019: £85,000

Question 17

Which one of the following does the statement of financial position show?

Accepted Answer

The statement of financial position, also known as the balance sheet, shows all the financially measurable resources (assets) and obligations (liabilities) of an organization at a specific point in time. It does not necessarily reflect current market values.

Question 18

Which one of the following statements is not correct?

Accepted Answer

The statement of financial position, also known as the balance sheet, does not show the market value of an organization; it shows the book value of assets, liabilities, and equity at a specific point in time.

Question 19

A business buys a new computer system for £20,000 and agrees to pay the £20,000 to the supplier of the system in 30 days' time. What is the double entry in the statement of financial position to reflect this transaction?

Accepted Answer

The computer system is a non-current asset, so it increases non-current assets by £20,000. The payment due in 30 days is a current liability, so it increases current liabilities by £20,000.

Question 20

Beta Limited buys £30,000 of inventory on credit terms. What is the correct double entry to reflect this transaction?

Accepted Answer

When inventory is purchased on credit, inventory increases as an asset and trade payables increase as a liability, both by £30,000.

Quiz 2: The Statement of Financial Position