Sample/practice Exam 2016, Questions and Answers Sample/practice Exam 2016, Questions and Answers

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Sample/practice exam 2016, questions and answers
Accounting and Financial Management 1A (University of New South Wales)
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ACCT1501 Practice Exam Questions & Solutions 2016S1
QUESTION 1 Control Accounts (8 marks)
Rupert Ltd maintains subsidiary ledgers for debtors and creditors. At 31 May 2014,
the debtors control account has a debit balance of $50,120 and the creditors control
account has a credit balance of $30,670. An extract of totals from the special
journals for the month of June 2014 is as follows:
$
Credit sales 86,500
Cash sales 6,100
Credit purchases 93,200
Cash received from debtors 67,800
Cash paid to creditors 55,890
Cash purchases 4,300
Discount received from 7,500
creditors
Discount allowed to debtors 3,500
Complete the debtors and creditors control accounts as they would appear in the
general ledger.
0.5 MARKS PER ENTRY IN EACH CONTROL ACCOUNT
Debtors control
$ $
Opening balance 50,120 Cash 67,800
(Balance b/d)
Sales 86,500 Discount expense 3,500
Closing balance 65,320
(Balance c/d)
136,620 136,620
Opening balance 65,320
(Balance b/d)
Creditors control
$ $
Cash 55,890 Opening balance 30,670
(Balance b/d)
Discount revenue 7,500 Inventory 93,200
(Balance c/d)
123,870 123,870
Opening balance 60,480
(Balance b/d)

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This is also acceptable.
Debtors control
$ $
Opening balance 50,120 Cash 67,800
Sales 86,500 Discount 3,500
expense
Creditors control
$ $
Cash 55,890 Opening balance 30,670
Discount revenue 7,500 Inventory 93,200

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QUESTION 2 Financial Reporting Principles, Accounting Standards and

Auditing (7 Marks)
Provide short answers to the following:
1. You are analysing the financial statements of two companies, ABC Ltd and XYZ
Ltd. Both sets of financial statements have been audited by external auditors. The
external auditor for ABC Ltd issued an unmodified opinion on ABC's financial
statements whereas the external auditor for XYZ Ltd issued an adverse opinion on
XYZ's financial statements. Which set of financial statements is more reliable and
why? (3 marks)
Unmodified opinion (or Unqualified opinion) is the opinion that auditors issue when
they believe that the financial statements give a true and fair view, that they are in
accordance with the provisions of the Corporation Act 2001, applicable accounting
standards (GAAP) and other professional mandatory reporting requirements. (1
mark)
Note: If students do not provide full answer as outlined, they can still
receive mark:
o If students mention that unmodified opinion (or unqualified
opinion) is the opinion that auditors issue when the they believe
that the financial statement give a true and fair view (0.5 mark)
o If students mention that unmodified opinion (or unqualified
opinion) is the opinion that auditors issue when they believe that
the financial statement give a true and fair view and that they are
in accordance with GAAP or accounting standards (1 mark)
An adverse opinion is issued when the auditors believe that the financial statements
do not provide a true and fair view and that they are not in accordance with GAAP.
(1 mark)
Note: If the students do not provide full answer as outlined, they can still
receive mark:
o If students mention that an adverse opinion is issued when the
auditors believe that the financial statements do not provide a true
and fair view (0.5 mark)
o If students mention that an adverse opinion is issued when the
auditors believe that the financial statements are not in accordance
with GAAP (0.5 marks)
The financial statements of ABC Ltd are more reliable as they have been
prepared based on the GAAP and give true and fair view. On the other hand, the
financial statements of XYZ Ltd are not reliable as it has not been prepared in
accordance to GAAP, hence do not present true and fair view. (1 mark).

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2. Going concern assumption is one of the key assumptions to financial reports.

What is going concern assumption? Why is assumption important in the
preparation of financial statements? (4 marks)
The going concern assumption relates to the assumption that an entity will continue
in operation for the foreseeable future. (1 Mark)
The assumption underlies the historical cost basis of accounting. The cost of assets is
recovered in the normal course of operations through sale or use. If going concern
does not apply, i.e., when the entity intends or needs to liquidate, financial reports
need to be prepared on the liquidation basis rather than historical cost. (1 mark)
Any example that shows the use of liquidation value instead of historical cost when
an entity intends or needs to liquidate is acceptable. (1 mark)
Students need to explain that due to the limited market for the assets to be sold
during liquidation, the liquidation value is normally a lot less than the historical cost
value. (1 mark)

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QUESTION 3 Prepare Financial Statements (25 Marks)
The following pre-adjusted trial balance has been prepared for Sydney Company as at
30 June 2014 (for the 12 months beginning on 1 July 2013):
DR CR
$ $
Bank Overdraft 10,000
Accounts Receivable 200,000
Allowance for Doubtful Debts 1,000
Inventory 100,000
Prepaid Rent 10,000
Property, Plant and Equipment 450,000
Accumulated Depreciation 200,000
Accounts Payable 60,000
Bank loan 50,000
Contributed Capital 310,000
Retained Profit at 1 July 2013 34,000
Sales revenue 450,000
Cost of Goods Sold 265,000
Interest Expense 5,000
Wages Expenses 80,000
Rent Expense 5,000
1,115,000 1,115,000
The following information is given which may give rise to year end adjustments:
• Depreciation on Property, Plant and Equipment is provided for on a straight line

basis at 10% per annum, and it is assumed that it will have no salvage value.
• The balance in Prepaid Rent relates to the 12 month period from 1 January 2014 to
31 December 2014.
• An ageing analysis shows that $4,000 of Accounts Receivable is estimated to be

uncollectible.
• On 30 June 2014, the directors declared a dividend of $5,000, which the

shareholders authorised. The dividend is to be paid on 15 September 2014.

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• It is discovered that $10,000 cash received during the year and credited to sales are
actually related to services to be delivered in July 2014.
• $5,000 of wages relating to June 2014 have not been paid and need to be accrued.
Part A (12 Marks)
Prepare journal entries for the necessary end of period adjustments.
Account name Debit Credit

$ $
Depreciation Expense 45 000

Accumulated Depreciation 45 000
(1 mark for each entry)
Rent Expense 5 000

Prepaid Rent 5 000
Bad Debts Expense 3 000

Allowance for doubtful debts 3 000
Retained Profits 5 000

Dividend Payable 5 000
Sales revenue 10,000

Unearned revenue 10,000
Wages Expense 5,000

Wages Payable 5,000

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Part B (9 Marks)
Prepare an Income Statement for the year ended 30 June 2014:
Sydney Company
Income Statement for year ended 30 June 2014
$
Sales revenue (1 mark) 440 000
Less: Cost of Goods Sold (1 mark if COGS is in correct place) 265 000
Gross Profit (0.5 mark) 175 000
Less other expenses

Interest expense (1 mark) 5 000
Depreciation expense (1 mark) 45 000
Rent expense (1 mark) 10 000
Bad debts expense (1 mark) 3 000
Wages expense (1 mark) 85 000 148 000
Net Profit (1 mark) 27 000
0.5 mark for correct heading
Part C (4 Marks)
In the Balance Sheet as at 30 June 2014, what would be the closing balance of
retained profits? Show all workings.
$
Opening Balance 34 000 (1 mark)
Plus Net Profit for Period 27 000 (1 mark)
Less Dividends declared 5 000 (1 mark)
Closing Balance 56 000 (1 mark)
(1 mark for each item & correct figure)

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QUESTION 4 Inventory (15 marks)
The following information relates to inventory transactions of Promises Ltd for the
month ending 30 June 2014:
Date Cash Purchases Cash Sales Balance

1 June 100 units @ $10
18 June 140 units @ $20
Promises Ltd uses FIFO (first-in-first-out) and perpetual inventory control.
Calculate the cost of goods sold based on the costs of units sold. (3 Marks)
18 June Sale of 140 units

100 units at $10 and 40 units at $12 = $1,480
30 June Sale of 50 units

40 units at $12 and 10 units at $14 = $620
Total cost of sales = $1480 + $620 = $2,100
Check for closing inventory (not required for solution)

20 units at $14 = $280
Opening $1,000 + Purchases $960 + $420 – GOGS $2,100 = $280
3 MARKS FOR THE CALCULATION
Prepare the journal entries for inventory purchases and cost of sales for the month of
June 2014. (12 Marks)
Date Account name Debit Credit

$ $
10 June Inventory 960

Cash 960
(80 x $12 = $960)
18 June Cost of goods sold 1,480

Inventory 1,480
[(100 x $10) + (40 x $12)

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= $1,480]
25 June Inventory 420

Cash
(30 x $14 = $420) 420
30 June Cost of goods sold 620

Inventory 620
[(40 x $12) + (10 x $14) =
$620]
4 MARKS: 2 MARKS EACH FOR INVENTORY PURCHASE JOURNALS

4 MARKS FOR COST OF SALES ENTRY 18 JUNE
4 MARKS FOR COST OF SALES ENTRY 30 JUNE

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Question 5 Management Accounting (15.5 marks)
Part A (2 marks)
For each of the items 1-4 in the table below, indicate whether the item is a product
cost or a period cost
Item Cost Classification
1. A food retailer purchases milk for resale Product
2. Depreciation of head office computers Period
3. Salaries of production line workers for a Product
manufacturer
4. Advertising costs to promote a manufacturer’s Period
products
½ mark each entry
Part B (9.5 marks)

Bandcamp Ltd manufactures guitars. In the month of January 2014, Bandcamp
Ltd recorded:
• direct labour cost of $200 000

• raw materials purchased of $400 000
• total overhead cost of $500 000.
The following information was supplied by Bandcamp Ltd’s accountant about the
opening and closing inventory:
31 January 1 January
(ending) (beginning)
Raw materials inventory $80 000 $95 000
Work in progress inventory $110 000 $60 000
Finished goods inventory $255 000 $75 000
Required:
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1. Prepare a cost of goods manufactured statement for January 2014.
Bandcamp Ltd
Statement of Cost of Goods Manufactured
For the Month Ended 31 January 2014
Direct materials: $ $
Beginning raw materials inventory 95 000
Add: Purchases 400 000
Materials available 495 000
Less: Ending raw materials inventory 80 000
Direct materials used 415 000
Direct labour 200 000
Manufacturing overhead 500 000
Manufacturing costs added 1 115 000
Add: Beginning work in process 60 000
Total manufacturing costs 1 175 000
Less: Ending work in process 110 000
Cost of goods manufactured 1 065 000
½ mark each entry

½ mark for heading
2. Prepare a cost of goods sold statement for January 2014.
Bandcamp Ltd
Cost of Goods Sold Statement
For the Month Ended 31 January 2014
$
Beginning finished goods inventory 75 000
Add: Cost of goods manufactured 1 065 000
Goods available for sale 1 140 000
Less: Ending finished goods inventory 255 000
Cost of goods sold 885 000
½ mark each entry

½ mark for heading
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Part C (4 marks)
Luggage2u Ltd manufactures and sells a wide range of innovative and high quality
luggage for travellers. The operating results for Luggage2u Ltd in 2013 are as
follows:
Sales 750,000
Less: Variable costs (500,000)
Contribution margin 250,000
Less: Fixed costs (150,000)
Profit before tax 100,000
Less: Tax (20,000)
Profit after tax 80,000
Luggage2u Ltd has decided to use new advanced material in the production of
luggage beginning in 2014. The new material is flexible and lightweight and will
make company’s luggage more appealing to travellers. In 2014, Luggage2u Ltd
expects variable costs to increase by 8% and fixed costs by 5%. The company also
expects sales revenue to increase by 20%.
Required:
(a) What is the contribution margin ratio for 2014? (2 marks)

(b) Suppose that Luggage2u would like to earn an after-tax profit of $110,000 in
2014. How much sales revenue must Luggage2u generate to earn the profit? Assume
a tax rate of 20%. (2 marks)
Show all working.
(a) Contribution margin ratio

2014:
= Contribution Margin
Sales
= Sales – Variable Costs = 900,000 – 540,000

Sales 900,000
= 360,000
900,000
= 0.4 (2 marks for correct answer)
(b) First, Profit Before Tax (PBT) needs to be calculated:

Let Profit After Tax = PAT
PAT = PBT - (20% x PBT)
PAT = PBT - 0.2PBT
PAT = PBT (1-0.2)
Therefore, PBT = PAT/ (1-0.2)
PBT = 110,000 / 0.8
= 137,500 (1 mark12
for correct answer)

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R = (Fixed Costs + Profit)

CM Ratio
= (157,500 + 137,500)
0.4
= $295,000
0.4
= $737,500 (1 mark for correct answer)
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Question 6 - Multiple Choice Questions
You have seen samples of MCQ in the lectures and in your quiz attempts.
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Additional Question 1 Bank Reconciliation (6 Marks)
The following information is given about Nadak Co.:
1. The August 31 balance shown on the bank statement is $9,810.
2. There is a deposit in transit of $1,260 at August 31.
3. Outstanding cheques at August 31 totalled $1,890.
4. A bank charge of $40 for cheques was made to the account during August, as
shown on the bank statement. Although the company was expecting a charge,
its amount was not known until the bank statement arrived.
5. In the process of reviewing the cheques, it was determined that a cheque

issued to a supplier in payment of accounts payable of $361 had been recorded
as $631.
6. The August 31 balance in the general ledger Cash account, before

reconciliation, is $8,950.
Required:
Part A: Prepare a bank reconciliation as of August 31, 2014. (4 marks)
Balance per bank $9,810 CR (0.5mark)

Add: Deposits in transit 1,260 (0.5mark)
Less: Outstanding cheques (1,890) (0.5mark)
Adjusted balance $9,180 CR (0.5mark)
Balance per accounting records $8,950 DR (0.5 mark)

Less: Bank charge (40) (0.5mark)
Add: Cheque recording error 270 (0.5mark)
Adjusted balance $9,180 DR (0.5 mark)
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Part B: Prepare any necessary adjusting journal entries. (2 marks)

$ $
Bank charges 40
Cash at Bank 40
Cash at Bank 270

Accounts payable 270
1 mark each journal entry

(No mark deduction for a combined adjusting journal
entry.)
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Additional Question 2 Accounts Receivable (8 Marks)
A company records an allowance for doubtful debts. On 1 July 2015, the allowance
has a credit balance of $15 000.
i) Sales for the year to 30 June 2016 are $350 000. Prepare the journal entry to
recognise a bad debts expense based on 2% of sales.
Bad Debts Expense 7000

Allowance for Doubtful Debts 7000
ii) On 1 May 2016 a customer owing $1000 goes bankrupt. Prepare the journal entry
to write-off the bad debt.

Accounts Receivable 1000
iii) Assume the journals for parts i) and ii) have been processed. An ageing analysis
of outstanding debts finds that the balance of the allowance at 30 June 2016
should be $25 000. Prepare the adjusting journal entry.
Bad Debts Expense 4000

(25 000 – [15 000 + 7000 – 1000] = 4000)
iv) Prepare the closing journal entry for bad debts expense
Profit and Loss Summary 11 000

Bad Debts Expense 11 000
(2 marks each section, no part marks)
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Additional Question 3 Financial Statement Analysis (6 marks)

Drake Ltd manufactures and sells commercial kitchen equipment. The company is
constantly profitable. Drake Ltd’s financial statement ratios are as follows:
Profit Margin 15%

Total Asset Turnover 1.8 times
Current Ratio 2.2 times
Debt to Equity Ratio 0.8 times
Return on Equity 17%
For each of the following transactions or events, indicate the directional effect
(increase, decrease, no change) on the Profit Margin, Current Ratio and Debt to
Equity in the table below. Note that you must write either ‘increase’, ‘decrease’ or
‘no change’. A blank response will be marked as incorrect. Consider each transaction
independently of all the other transactions.
a. Drake Ltd borrowed an additional $200,000 as short-term loan from the bank. (3
marks)
b. An equipment costing $120,000, on which $90,000 of depreciation was charged,
is sold for $30,000. (3 marks)
Record your answer in the table below.

Transaction Profit Margin Current Ratio Debt to Equity
Ratio
a.
No change Decrease Increase
b.
No change Increase No change
1 mark each entry
PLEASE NOTE THERE IS A LIST OF RATIO FORMULAE PROVIDED ON

THE FOLLOWING PAGE.
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RATIO FORMULAE
Operating Profit after Tax
Return on Equity
Shareholders' Equity
Return on Assets Operating Profit after Tax
Total Assets
Total Assets
Leverage Ratio
Total Shareholders’ Equity
Total Liabilities
Debt to Assets Ratio
Total Assets
Cash Provided By Operations
Cash Flow to Total Assets
Total Assets
Current Assets
Current Ratio
Current Liabilities
Cash + Accounts Receivable + Short-term investments
Quick Ratio
Current Liabilities
Annual Dividends Declared per Share
Dividend Payout Ratio
Earnings per Share
Gross Profit
Gross Profit Margin
Sales
Operating Profit after Tax
Profit Margin
Sales
Sales
Asset Turnover
Total Assets
COGS
Inventory Turnover
Inventory
Credit Sales
Debtors Turnover
Trade Debtors
Earnings before Interest and Tax
Interest Coverage Ratio
Interest Expense
Total Liabilities
Debt to Equity Ratio
Total Shareholders' Equity
365
Days in Inventory
Inventory Turnover
365
Days in Debtors
Debtors Turnover
Price/Earnings Ratio Current market price per share
Earnings per Share
Earnings Per Share Operating profit after tax – preference share dividends
Weighted Average Number of Ordinary Shares
Outstanding
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Additional Question 4 Noncurrent assets (10 Marks)
On 1 July 2011, Promises Ltd purchased equipment at a cost of $150,000. The

equipment is depreciated using the reducing balance method at the rate of 40% per
annum.
Prepare the journal entries for depreciation for each year 30 June 2012, 30 June 2013
and 30 June 2014. (9 Marks)
Date Account name Debit Credit

$ $
30 June 2012 Depreciation expense 60,000

Accumulated depreciation 60,000
($150,000 x 40% = $60,000)

($90,000 x 40% = $36,000)

($54,000 x 40% = $21,600)
What is the book value of the equipment at 30 June 2014? (1 Mark)

Book value at 30 June 2014 = Cost – Accumulated depreciation
Cost = 150,000
Accumulated depreciation = 60,000 + 36,000 + 21,600 = 117,600
Book value = 150,000 – 117,600 = $32,400
3 MARKS EACH FOR EACH JOURNAL (NO HALF MARKS)

1 MARK FOR BOOK VALUE (ALLOWANCE FOR CARRYFORWARD
ERRORS)
20

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Sample/practice exam 2016, questions and answers

Accounting and Financial Management 1A (University of New South Wales)

StuDocu is not sponsored or endorsed by any college or university

ACCT1501 Practice Exam Questions & Solutions 2016S1

QUESTION 1 Control Accounts (8 marks)

0.5 MARKS PER ENTRY IN EACH CONTROL ACCOUNT

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ACCT1501 Practice Exam Questions & Solutions 2016S1

This is also acceptable.

Closing balance 65,320

Closing balance 60,480

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ACCT1501 Practice Exam Questions & Solutions 2016S1

QUESTION 2 Financial Reporting Principles, Accounting Standards and

Provide short answers to the following:

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ACCT1501 Practice Exam Questions & Solutions 2016S1

2. Going concern assumption is one of the key assumptions to financial reports.

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ACCT1501 Practice Exam Questions & Solutions 2016S1

QUESTION 3 Prepare Financial Statements (25 Marks)

• Depreciation on Property, Plant and Equipment is provided for on a straight line

• An ageing analysis shows that $4,000 of Accounts Receivable is estimated to be

• On 30 June 2014, the directors declared a dividend of $5,000, which the

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ACCT1501 Practice Exam Questions & Solutions 2016S1

Part A (12 Marks)

Prepare journal entries for the necessary end of period adjustments.

Account name Debit Credit

Depreciation Expense 45 000

Rent Expense 5 000

Bad Debts Expense 3 000

Retained Profits 5 000

Sales revenue 10,000

Wages Expense 5,000

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ACCT1501 Practice Exam Questions & Solutions 2016S1

Less other expenses

Net Profit (1 mark) 27 000

0.5 mark for correct heading

(1 mark for each item & correct figure)

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ACCT1501 Practice Exam Questions & Solutions 2016S1

QUESTION 4 Inventory (15 marks)

Date Cash Purchases Cash Sales Balance

Promises Ltd uses FIFO (first-in-first-out) and perpetual inventory control.

18 June Sale of 140 units

30 June Sale of 50 units

Total cost of sales = $1480 + $620 = $2,100

Check for closing inventory (not required for solution)

3 MARKS FOR THE CALCULATION

Date Account name Debit Credit

10 June Inventory 960

18 June Cost of goods sold 1,480

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ACCT1501 Practice Exam Questions & Solutions 2016S1

25 June Inventory 420

30 June Cost of goods sold 620

4 MARKS: 2 MARKS EACH FOR INVENTORY PURCHASE JOURNALS

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ACCT1501 Practice Exam Questions & Solutions 2016S1

Question 5 Management Accounting (15.5 marks)