CIMA

CERTIFICATE IN BUSINESS ACCOUNTING

PAPER C2
FUNDAMENTALS OF FINANCIAL ACCOUNTING

COURSE TEST 3
QUESTION PAPER

Answer all questions

CMC2CT10(N) CT3 Questions

CC210 C2 CT (3)

CMC2CT10(N) CT3 Questions

You must attempt all questions.

Each correct answer will score two marks. No deduction will be made for wrong answers.
An answer sheet is provided on the last page of this test. You must indicate your answer in the box provided.
No workings should be submitted on the answer sheet

Bow Ltd had a receivables balance of $6,000 at 31 December 2008. During the year $500 was received
from a debtor previously written off, and a specific debt of $100 was provided for. The general provision
brought down as at 1 January 2008 was $1,000 and a provision of 5% is to be maintained.
The bad and doubtful debts credit for the year ended 31 December 2008 is $

If Poppy Limited reduces its allowance for doubtful debts by $300, which of the following statements is
correct?
A

Current assets decrease by $300

Current liabilities decrease by $300

Gross profit increases by $300

Net profit increases by $300

Lamp makes the following purchases in the year.

(i)
(ii)
(iii)
(iv)
(v)

21.01.X8
30.04.X8
31.07.X8
01.09.X8
11.11.X8

Units
100
300
40
60
80

$/unit
12.00
12.50
12.80
13.00
13.50

Total($)
1,200
3,750
512
780
1,080

At the year end 200 units are in inventory but 8 are damaged and are only worth $10 per unit. These are
identified as having been part of the 11.11.X8 delivery. Lamp operates a FIFO system for valuing
inventory.
The figure for inventories at 31.12.X8 is $

On 31 October 2008 the balance on Delta Ltd's receivables account was $78,000 and the balance on the
allowance for doubtful debts account was $1,700. This balance did not include any specific provisions.
After a further review of the company's accounts it was discovered that a bad debt of $1,020 had not
been written off. The provision for doubtful debts is to be maintained at 2% of debtors.
The bad and doubtful debts expense for the year ended 31 October 2008 assuming no other entries have
been made for the year is $

Bouncy Balls has 40 units of its special spongy balls in inventory as at 30 November 20X8. The product
costs $5 per unit to manufacture and can be sold for $15 per unit. Half of the units in inventory at the year
end have been damaged and will require rectification work costing $10 per unit before they can be sold.
Selling costs are $1 per unit.
The value of inventory at 30 November 20X8 is $

A car has a list price of $23,500 but the garage gives the company a trade discount of $2,350. In
settlement the garage accepts a cheque for $18,000, together with an old company car on which it grants
a trade-in allowance of $3,150. The amount to be capitalised by the company is $

CMC2CT10(N) CT3 Questions

Panther owns her own business selling Gladiator dolls to department stores. At 30 June 2008 she had the
following balances in her books:
$
Receivables
31,450
Allowance for doubtful debts (General)
(450)
(as at 1 July 2007)
31,000
A balance of $1,000 due from Selfrodges Ltd is considered irrecoverable and is to be written off. Horrids
Ltd was in financial difficulty and Panther wished to provide for 60% of their balance of $800. She also
decided to make a general provision of 10% on her remaining receivables.
The allowance for doubtful debts in her balance sheet at 30 June 2008 should be $

The closing inventory of Stacks Limited amounted to $58,200 excluding the following two inventory lines:
(i)

200 different items which had cost $15 each. These items were found to be defective at the
balance sheet date. Rectification work after the balance sheet date amounted to $1,200 for the
batch, after which they were sold for $17.50 each, with selling expenses totalling $300 for the
batch.

(ii)

400 items which had cost $2 each. All were sold after the balance sheet date for $1.50 each, with
selling expenses of $200 for the batch.

Which of the following figures should appear in the balance sheet of Stacks Limited for inventory?

$62,000

$61,600

$60,600

$61,000

On 1 April 2008 a sole trader paid $2,860 in rates for the year ending 31 March 2009. This was an
increase of 10% on the charge for the previous year.
The correct charge for rates in her income statement for the year ended 31 December 2008 is
$

10

Fenton Ltd is a manufacturer of microcomputers. The company makes two different models, the M1 and
M2 and has 100 of each in inventory at the year end.
Cost and related data for each model are as follows:
M1
$
230
400
110
65

Costs to date
Selling price
Modification costs to enable sale
Marketing costs

M2
$
350
500
75

The figure for inventory that should appear in the balance sheet at the year end is $
11

Bob Ltd's inventory was valued at $13,000 at the year end, excluding goods supplied to a customer on a
sale or return basis. The customer still had 30 days within which to return the inventory at the year end.
The goods on sale or return were purchased by Bob Ltd for $6,000 and were invoiced at $8,000.
The value of Bob Ltd's inventory should be $

at the year end.

CMC2CT10(N) CT3 Questions

12

When valuing inventory at cost, which of the following shows the correct method of arriving at cost?
Include inward
transport costs

Include production
overheads

Yes

No

No

Yes

Yes

Yes

No

No

CMC2CT10(N) CT3 Questions

FUNDAMENTALS OF FINANCIAL ACCOUNTING COURSE

TEST 3
Answer Sheet
Name: ..........................................................................

Date: ..........................................................................

Student number: ....................................................

1
2
3
4
5
6
7
8
9
10
11
12

CMC2CT10(N) CT3 Questions

BPP House, Aldine Place, London W12 8AA

Tel: 0845 0751 100 (for orders within the UK)
Tel: +44 (0)20 8740 2211
Fax: +44 (0)20 8740 1184
www.bpp.com/learningmedia

CIMA
CERTIFICATE IN BUSINESS ACCOUNTING
PAPER C2
FUNDAMENTALS OF FINANCIAL ACCOUNTING

COURSE TEST 3
SOLUTIONS

CMC2CT10(N) CT3 Solutions

CC210 C2 CT (3)

CMC2CT10(N) CT3 Solutions

SOLUTIONS TO COURSE TEST 3

1

$1,105

$2,594

$860

$180

$21,150

$3,445

$2,795

10

$57,500

11

$19,000

12

CMC2CT10(N) CT3 Solutions

WORKINGS
1

$1,105
Bad and Doubtful Debt Expense
$'000
Specific debt
P&L

100
1,105
1,205

Debtors
Less specific provision
x 5% =

6,000
(100)
5,900
295

Provision b/d
Provision required
Decrease in provision

1,000
295
705

$2,594
Inventory =

8
72
60
40
20
200

@ $10
@ $13.50
@ $13
@ $12.80
@ $12.50

$860
$
1,020
1,540
(1,700)
(160)
860

$180
Cost
NRV (good inventory) (15-1)
NRV (damaged inventory) (15-1-10)

$5
$14
$4

... Total value - good inventory (20 @ 5)

damaged inventory (20 @ 4)
6

1,205

$
80
972
780
512
250
2,594

=
=
=
=
=

Bad debt write off

Provision required
(78,000 1,020) 2%
General provision b/f
Movement in provision
5

Cash from a bad debt

Decrease in general provision*

$'000
500
705

$
100
80
180

$21,150
$'000
18,000
3,150
21,150

Price paid
Trade in allowance

CMC2CT10(N) CT3 Solutions

$3,445
Receivables
$
31,450

B/d

Allowance
$
1,000

Bad debt
C/d

$
B/d

30,450
C/d

31,450
(W1) Net receivables
Less: Horrids
Prov @ 10%

General prov
Specific prov
= 800 x 60%
8

200 items
Cost
NRV

3,445 (W1)

31,450
$
30,450
(800)
29,650
2,965

Subtract the whole of Horrids debt as we have

considered what will happen to the whole debt.
60% is doubtful and has a specific allowance.
No need to make a general provision against
ANY of the 800.

$
2,965
Provide for 60% of Horrids debt.

480
3,445

$
3,000
2,000

200 x $15
(200 x $17.50) - $1,200 - $300
Therefore use NRV

400 items
Cost
NRV

$
800
400

400 x $2
(400 x $1.50) - $200
Therefore use NRV

Total inventory figure = $58,200 + $400 + $2,000 = $60,600

9

$2,795
2,860 x
2,860 x

$
2,145

12
100
110

650

12

2,795
10

$57,500
M1
$230
$225
$225

Cost
NRV (400 - 110 - 65)
Value per unit

Value of 100 units

CMC2CT10(N) CT3 Solutions

M1
M2

(500 - 75)

22,500
35,000
57,500

M2
$350
$425
$350

$
450

11
$
13,000
6,000
19,000

Inventory at valuation
Goods on sale or return at cost
Inventory valuation
12

Cost includes all costs incurred to get the goods to their present location and condition.

CMC2CT10(N) CT3 Solutions

BPP House, Aldine Place, London W12 8AA

Tel: 0845 0751 100 (for orders within the UK)
Tel: +44 (0)20 8740 2211
Fax: +44 (0)20 8740 1184
www.bpp.com/learningmedia