Question 1

Section B - Case 2: Single Entity Accounts

**Scenario: AquaHarvest Marine Farms**
AquaHarvest prepares its financial statements for the year ended 30 September 20X6. The draft profit before adjustments is $120,000. 
Issue 1: A payment for marine insurance of $6,000 for the year ending 31 December 20X6 was recorded entirely as an expense in the P&L.
Issue 2: Depreciation on harvesting equipment (Cost $80,000, Acc Dep $30,000) needs to be charged at 20% reducing balance.
Issue 3: A customer went bankrupt owing $2,500. This needs to be written off.
Issue 4: A suspense account has a $4,500 Credit balance because a cash receipt of $4,500 from a credit customer was only recorded in the cash book.

Calculate the final adjusted profit for the year. (Enter the number only)

Accepted Answer

Start with draft profit. Add back the prepayment (reduces expense). Deduct depreciation (new expense). Deduct irrecoverable debt (new expense). Suspense clearance has no effect.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Deducting the prepayment instead of adding it, or adjusting for the suspense account.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 5

More questions from this exam