Q: Which formula correctly calculates the depreciation expense for a building costing R420,000, using the diminishing balance method at 2% per annum for two months?

$$420\,000 \times 2\% \times \frac{2}{12}$$

Q: A company issues 20,000 ordinary shares at R1.25 each. What is the total proceeds from the share issue?

$$20\,000 \times R1.25 = R25\,000$$

Q: A company has the following inventory at year-end: Raw materials R140,000 (NRV 5% below cost), Work in progress R200,000 (NRV 5% above cost), Finished goods R50,000 (NRV 5% below cost). What is the total value of inventory to be reported?

$$140\,000 \times 95\% + 200\,000 + 50\,000 \times 95\% = R133\,000 + R200\,000 + R47\,500 = R380\,500$$

Question 1

Which of the following best describes the treatment of inventory in the statement of financial position according to IFRS, when inventory is valued at the lower of cost or net realisable value?

Accepted Answer

Inventory is valued at the lower of cost or net realisable value, as per IFRS requirements.

Question 2

A company purchased machinery for R250,000 and depreciates it at 15% per annum using the straight-line method. What is the depreciation expense for the year?

Accepted Answer

R37,500

Question 3

A motor vehicle originally cost R40,000 and had accumulated depreciation of R24,000. It was traded in for a new vehicle costing R70,000. What is the carrying amount of the old vehicle at the time of trade-in?

Accepted Answer

R16,000

Question 4

Which formula correctly calculates the depreciation expense for a building costing R420,000, using the diminishing balance method at 2% per annum for two months?

Accepted Answer

$$420\,000 	imes 2\% 	imes \frac{2}{12}$$

Question 5

A company holds 20,000 preference shares in Trok Ltd, purchased at R46,000. The market value at year-end is R2.30 per share. What is the fair value of this investment at year-end?

Accepted Answer

R20,000 	imes R2.30 = R46,000

Question 6

Which of the following is NOT a requirement for recognising a liability according to the Conceptual Framework for Financial Reporting?

Accepted Answer

The liability must be settled within the current financial year.

Question 7

A company issues 20,000 ordinary shares at R1.25 each. What is the total proceeds from the share issue?

Accepted Answer

$$20\,000 	imes R1.25 = R25\,000$$

Question 8

A company has a long-term loan of R45,000, repayable in 10 equal annual instalments starting on 1 December 19.8. What is the current portion of the loan at year-end?

Accepted Answer

$$\frac{R45\,000}{9} = R5\,000$$

Question 9

Which of the following best describes the treatment of share issue expenses according to IFRS?

Accepted Answer

Share issue expenses are written off against retained earnings.

Question 10

A company revalues its land from R1,000,000 to R1,500,000. What is the surplus on revaluation?

Accepted Answer

$$R1\,500\,000 - R1\,000\,000 = R500\,000$$

Question 11

A company has the following inventory at year-end: Raw materials R140,000 (NRV 5% below cost), Work in progress R200,000 (NRV 5% above cost), Finished goods R50,000 (NRV 5% below cost). What is the total value of inventory to be reported?

Accepted Answer

$$140\,000 	imes 95\% + 200\,000 + 50\,000 	imes 95\% = R133\,000 + R200\,000 + R47\,500 = R380\,500$$

Question 12

Which of the following is an adjusting event after the reporting date according to IFRS?

Accepted Answer

A debtor’s financial difficulties, discovered after year-end, but existed before year-end.

Question 13

A company’s motor vehicle has a cost of R60,000 and accumulated depreciation of R30,000 at the beginning of the year. It is sold for R50,000. What is the gain or loss on disposal?

Accepted Answer

$$R50\,000 - (R60\,000 - R30\,000) = R50\,000 - R30\,000 = R20\,000$$ gain

Question 14

A company issues a capitalisation share issue of one ordinary share for every six shares held. If there are 270,000 shares in issue, how many capitalisation shares are issued?

Accepted Answer

$$\frac{270\,000}{6} = 45\,000$$

Question 15

Which of the following is the correct journal entry to write off credit losses for a debtor amounting to R40,000?

Accepted Answer

Debit Credit losses (P/L) R40,000; Credit Trade and other receivables (SFP) R40,000

Question 16

A company’s office building was acquired for R350,000 and is depreciated at 10% per annum using the straight-line method. What is the depreciation expense for the year?

Accepted Answer

$$R350\,000 	imes 10\% = R35\,000$$

Question 17

A company has 100,000 ordinary shares issued at R5 each. What is the total value of the shares issued?

Accepted Answer

$$100\,000 	imes R5 = R500\,000$$

Question 18

Which of the following is NOT a component of equity in the statement of financial position?

Accepted Answer

Long-term loan

Step-by-Step Guidance for Financial Accounting Exam Questions

Study Guide - Practice Questions

Study Guide - Flashcards