Reference no: EM132559727

Question 1 - The trade receivables for a company were $32,000 at 31 March 2020. At that date, it was decided to write off $1,400 of debts as irrecoverable and adjust the allowance for receivables to 5% of receivables. There was an allowance for receivables of $3,000 as at the 1 April 2019 and during the year $1,600 of debts previously written off were recovered.

What figure should be included in the statement of profit or loss as the receivables expense for the year?

$200 credit

$200 debit

$70 debit

$70 credit

Question 2 - Which of the following describes the purpose of a disclosure note?

To allow the directors to provide more detail for users of financial statements about the information contained in the financial statements.

To allow companies to present their financial statements in the most favourable light to shareholders and potential investors.

To explain the accounting treatment adopted where management have deviated from recommended accounting standards.

To provide explanations for poor performance that cannot be stated on the face of the financial statements.

Question 3 - A sole trader has not kept records of his sales or his purchases during the year. However, he has been able to provide the following information:

Opening receivables $55,000

Opening inventory $23,555

Cash received from customers $470,000

Closing receivables $52,330

Closing inventory $27,645

He operates with a gross profit margin of 30%.

What is the figure for purchases for the year?

$323,041

$378,331

$331,221

$363,575

Question 4 - A business purchases machinery on the 1 January 2017 for $55,000 with an expected useful life of 10 years and residual value of $5,000. The business year end is the 31 December. Whilst preparing the year end accounts in 2019, a review of assets shows that the machinery is only likely to have a total useful life of 7 years and no residual value is now to be expected.

Calculate the net book value of the machinery to be recorded in the NCA account for the year ended 31 December 2019.

$36,000

$41,000

$27,000

$32,000