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Accounting and Financial Management 1B Sample/practice

exam January 2015, answers
Accounting and Financial Management 1B (University of New South Wales)

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ACCT1511 – AFM 1B

SOLUTIONS TO FINAL EXAM, JUNE 2009

QUESTION 1
1. Depreciation expense included in Other Expenses account (3 Marks):

Accumulated depreciation - Buildings

81,000 o/bal

Disposal 45,000

29,000 Depn exp (1  mark)  

65,000 c/bal

Accumulated depreciation - Equipment

67,000 o/bal

Disposal 43,000

9,000 Depn exp (1  mark)  

33,000 c/bal

Total depreciation expense = 29,000 + 9,000 = 38,000 (1  mark)

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QUESTION 1 (CONT.)
2. Operating cash flows for JNT Ltd. using indirect method (7 Marks):

JNT Ltd.
Operating Cash Flows for Year Ended 30 June 2008

Net profit 0.5 257,000

+ Depreciation expense 0.5 38,000
+ Loss on disposal of buildings 0.5 19,000
- Gain on sale of equipment 0.5 (16,000) 41,000
298,000
Adjustment for changes in operating assets and liabilities:
- Accounts receivable 0.5 (90,000 )
- Allowance for doubtful debts 1 (11,000)
+ Inventory 0.5 150,000
- Prepaid insurance 0.5 (6,000 )
- Accounts payable 0.5 (15,000)
- Accrued expenses 0.5 (2,000 )
- Income tax payable 0.5 (2,000) 24,000

Cash from operations 322,000

§ 1   mark   for   general   format   (i.e.,   start   with   the   NPAT   and   adjusting   for   both  
permanent  and  timing  differences  to  get  at  the  CFO).  

Note:    

§ For  all  the  adjustments  for  permanent  differences,  there  is  no  need  to  check  the  
accuracy  of  the  figures  as  they  are  either  given  in  the  question  or  carried  over  
from  Part(1)  above.  Just  check  the  sign  and  the  item  included  in  the  adjustment.  
§ For  the  adjustments  relating  to  timing  differences,  make  sure  to  check  the  sign,  
item  and  figure  of  the  adjustment.  

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Question 2 (8 marks)

(1) Three issues (2 marks for each point)

• Level 3 assets are potentially misstated, and at 6% of total assets, if it is worth nothing could
almost wipe out shareholders equity.

• The off-balance sheet assets of $160 billion, or 7% of total assets itself approximates shareholders
equity of $167 billion.

• The total derivative exposure of 380% of risk based capital, exceeds shareholders equity.

(2) Possible conclusion (2 marks)

• There is significant risk of JPM insolvency as the losses from level 3 assets (6% of total assets,
i.e., almost value of shareholders equity), and possible losses from derivatives (380% of
shareholders equity) cumulatively exceed shareholders equity.

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Question 3 (6 marks) NOT EXAMINABLE TOPIC – CORPORATE GOVERNANCE

Question 4 (6 marks)
Kang Company
Statement of Cost of Goods Manufactured
For the Year Ended December 31, 2008

Direct materials
Beginning raw materials inventory $ 25,000
Purchases of raw materials 200,000
Total raw materials available $225,000
Ending raw materials 35,000
Raw materials used $190,000 (2 marks)
Direct labour 175,000
Overhead
Indirect labour $ 35,000
Indirect materials 10,000
Depreciation 55,000
Maintenance 25,000
Miscellaneous 15,500
$140,500 (1 marks)  
Less: Underapplied overhead (10,500) (2 marks)

Overhead applied 130,000

Total manufacturing costs added $495,000

Add: Beginning work in process 110,000
Total manufacturing costs $605,000
Less: Ending work in process 80,250
Cost of goods manufactured $524,750 (1 mark)

Supporting calculation for under-applied overhead:

Applied ($5.20 x 25,000) $130,000

Actual:
Indirect labour $35,000
Indirect materials 10,000
Depreciation 55,000
Maintenance 25,000
Miscellaneous 15,500 140,500
$ 10,500 Under-applied overhead

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QUESTION 5 (10 Marks)

Echo Systems
January February March April
Sales Budget (2 marks)
Budgeted sales (units) 60,000 80,000 100,000 80,000
Budgeted selling price per unit 70 70 70 70
Budgeted sales revenue 4,200,000 5,600,000 7,000,000 5,600,000

Cash receipts budgets are no longer examinable in 1B (for 2015)

Cash Receipts Budget (2 marks)

Budgeted cash receipts:
From December sales 4,000,000
From January sales 2,100,000 2,100,000
From February sales 2,800,000 2,800,000
From March sales 3,500,000 3,500,000
From April sales 2,800,000
Total budgeted cash receipts 6,100,000 4,900,000 6,300,000 6,300,000
0.5 0.5 0.5 0.5
Production Budget (3 marks)
Budgeted sales (units) 60,000 80,000 100,000
Add: Desired ending inventory of finished units 20,000 25,000 20,000
Total units required 80,000 105,000 120,000
Less: Beginning inventory of finished units (15,000) (20,000) (25,000)
Budgeted production (units) 65,000 85,000 95,000

Raw Materials Purchases Budget (3 marks)

Budgeted production (speakers) 65,000 85,000 95,000
Expected usage of audio cable per speaker (units) 8 8 8
Audio cable usage requirements (units) 520,000 680,000 760,000
Add: Desired ending inventory of audio cable (units) 136,000 152,000
Total audio cable requirements (units) 656,000 832,000
Less: Beginning inventory of audio cable (units) (104,000) (136,000)
Purchase requirement for audio cable (units) 552,000 696,000
Price per unit 0.4 0.4
Purchase cost of audio cable 220,800 278,400

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QUESTION 6: MC QUESTIONS

1 A
2 A
3 D
4 D
5 D or E both awarded marks
6 A
7 D
8 A
9 E
10 B
11 A
12 D
13 C
14 E
15 E
16 D
17 C
18 D
19 D
20 B

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