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Semester One Final Sample Exam, 2012

Semester One Final Sample Exam, 2012 This exam paper must not be removed from the venue

This exam paper must not be removed from the venue

ACCT2101 Financial Reporting

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School of Business EXAMINATION Semester One Final Examinations, 2012 ACCT2101 Financial Reporting (SAMPLE) This paper
School of Business
EXAMINATION
Semester One Final Examinations, 2012
ACCT2101 Financial Reporting
(SAMPLE)
This paper is for St Lucia Campus students.
For Examiner Use Only
Examination Duration:
120 minutes
Question
Mark
Reading Time:
10 minutes
Exam Conditions:
This is a Central Examination
This is a Closed Book Examination - specified materials permitted
During perusal - write only on the rough paper provided
This examination paper will NOT be released to the Library
Materials Permitted In The Exam Venue:
(No electronic aids are permitted e.g. laptops, phones)
An unmarked Bilingual dictionary is permitted
Calculators - Casio FX82 series or UQ approved (labelled)
Materials To Be Supplied To Students:
1 x 14 Page Answer Booklet

1 x Multiple Choice Answer Sheet

Rough Paper

Instructions To Students:

All questions to be answered. Questions carry the number of marks indicated.

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Total

Semester One Final Sample Exam, 2012

ACCT2101 Financial Reporting

SECTION A: QUESTIONS 1 TO 5 - MULTIPLE CHOICE QUESTIONS These multiple choice questions are to be completed on the COMPUTER sheet provided. Select the most correct answer.

1.

2.

3.

4.

A reconciliation between the beginning and ending balances of Retained Profits should be shown on which of the following statements?

a. Income statement.

b. Balance sheet. c. Cash flow statement. d. Statement of changes in equity. Which of
b. Balance sheet.
c. Cash flow statement.
d. Statement of changes in equity.
Which of the following is true in relation to companies’ environmental reporting
practices?
a.
Companies report more negative news about environmental issues than
positive news.
b.
The extent of reporting does not change much across companies of different
sizes and industries.
c.
Most companies do not quantify the economic impact of their environmental
issues.
d.
Environmental reporting within annual reports is mandatory in Australia.
The net effect of a cash dividend on total shareholders’ equity:
a. Is an increase in total shareholders’ equity.
b. Is a decrease in total shareholders’ equity.
c. Has no effect on total shareholders’ equity.
d. May either increase or decrease total shareholders’ equity.
Which of the following is least likely to be classified as a current asset?
a. An asset held to earn rentals and/or for capital appreciation.

b. An asset expected to be realised within 12 months after the reporting date.

c. An asset intended for sale or consumption in the entity’s normal operating cycle.

d. An asset held primarily for the purpose of being traded.

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Semester One Final Sample Exam, 2012

ACCT2101 Financial Reporting

5. Which of the following statements about depreciation is true?

a. Depreciation ensures non-current assets are recorded at fair value.

b. Depreciation ensures non-current assets are recorded at net realisable value.

c. Depreciation reflects value in use.

d. Depreciation is a simple process and does not allow any opportunity for management to manipulate accounting numbers.

[End of Part A. Section B begins on page 4]
[End of Part A. Section B begins on page 4]

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Semester One Final Sample Exam, 2012

ACCT2101 Financial Reporting

SECTION B: QUESTIONS 6 TO 12 - WRITTEN QUESTIONS These written questions are to be completed in the 14 PAGE ANSWER BOOK provided.

Question 6

Telemax Ltd had 500 units of inventory on 31 December 2009 with a total cost of $7,500. During the 2010 financial year, the company had the following transactions:

January – March April – June July – August September – December

Purchased 200 units of inventory at $11 per unit. Sold 400 units of inventory at $37 per unit. Purchased 600 units of inventory at $17 per unit. Sold 300 units of inventory at $42 per unit.

$17 per unit. Sold 300 units of inventory at $42 per unit. Required: Calculate cost of

Required:

Calculate cost of goods sold and ending inventory for the financial year ending on 31 December 2010 assuming the company uses:

(1) Periodic inventory system with the weighted average inventory cost flow assumption. (2) Perpetual inventory system with the last in, first out inventory cost flow assumption.

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Semester One Final Sample Exam, 2012

ACCT2101 Financial Reporting

Question 7

During the financial year ending on 30 June 2010, Plants World Ltd purchased $260,000 inventory on credit and had total sales revenue of $730,000. Assume all sales are on credit. The company had $54,000 worth of inventory at the beginning of the financial year. A year-end stock-take showed that inventory costing $41,000 was on hand at the end of the financial year. The company uses the periodic inventory system. Required:

(1)

Prepare general journal entries to record the above events for the financial year ending on 30 June 2010, including a closing entry for expenses. You do NOT need to prepare any other closing entries (e.g. for sales revenue or to close profit to the retained profits account). Calculate the company’s cost of good sold for the year. The company believed that the ending inventory can be sold for $32,000. Does the company need to adjust the value of its inventory at the end of the year? Briefly explain why or why not by reference to the accounting rule for inventory valuation in AASB102 Inventories. If you believe an adjustment is required, then provide the journal entry. Otherwise, state “no adjustment is needed”.

is required, then provide the journal entry. Otherwise, state “no adjustment is needed”. (2) (3) Page

(2)

(3)

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Semester One Final Sample Exam, 2012

ACCT2101 Financial Reporting

Question 8

Greenfield Ltd purchased equipment for $330,000 on 1 July 2006. The company uses the revaluation model and straight-line depreciation method for its non-current assets. The equipment has an expected useful life of 8 years and an estimated residual value of $30,000. The fair value of the equipment was $200,000 on 30 June 2009. Annual depreciation for the equipment was $34,000 after 30 June 2009. The equipment’s fair value on 30 June 2010 was $240,000. Annual depreciation was $52,500 after 30 June 2010. The equipment was sold for $230,000 on 1 November 2010. The financial year- end of the company is 30 June. Required:

(1)

(2)

(3) Prepare relevant journal entries on 1 November 2010 for the asset sale.

Prepare relevant journal entries on 30 June 2009 for the first revaluation. Prepare relevant journal
Prepare relevant journal entries on 30 June 2009 for the first revaluation.
Prepare relevant journal entries on 30 June 2010 for the second revaluation.

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Semester One Final Sample Exam, 2012

ACCT2101 Financial Reporting

Question 9 On 1 January 2010, the beginning balance of Bermuda Ltd’s share capital was $7,400,000 (at $8 per share). The company announced a share issue of 100,000 ordinary shares in March. The shares were payable $7 on application and $3 on allotment. Applications for 120,000 shares were received by 30 April 2010. The shares were allotted on 5 May 2010 and excess application money was refunded on 10 May. All of the allotment money was received by the end of May. Required:

allotment money was received by the end of May. Required: Prepare general journal entries to record

Prepare general journal entries to record the above events for the financial year ending on 31 December 2010.

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Semester One Final Sample Exam, 2012

ACCT2101 Financial Reporting

Question 10 Watercress Ltd took out a mortgage of $600,000 to buy machinery on 15 May 2010. The interest rate is 6% p.a. The company will make monthly repayments of $5,000 per month. The first payment is due on 15 June 2010. The company's balance date is 30 June. Required:

Prepare all relevant journal entries up to and including the second repayment on 15 July 2010 except the purchase. You do NOT need to prepare the journal entry for the purchase of the asset. Do NOT use a reversing entry. Round the amounts to the nearest dollar.

entry for the purchase of the asset. Do NOT use a reversing entry. Round the amounts

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Semester One Final Sample Exam, 2012

Question 11

The following information relates to Planet Ltd.

Cash Flow Statement

ACCT2101 Financial Reporting

Planet Ltd

Comparative Balance Sheet as at 30 June

2010 2009 Current assets Cash Accounts receivable Less: Allowance for doubtful debts Inventory Prepaid insurance
2010
2009
Current assets
Cash
Accounts receivable
Less: Allowance for doubtful debts
Inventory
Prepaid insurance
Total current assets
$
$
125,800
210,000
446,000
525,000
-27,000
-45,000
430,000
367,000
50,000
20,000
1,024,800
1,077,000
Non-current assets
PPE (at cost)
Less: Accumulated depreciation
Total non-current assets
Total assets
2,650,000
1,900,000
-950,000
-870,000
1,700,000
1,030,000
2,724,800
2,107,000
Current liabilities
Accounts payable
Interest payable
Provision for income tax
Total current liabilities
340,000
260,000
42,000
22,000
52,000
73,000
434,000
355,000
Non-current liabilities
Bank loans
Total liabilities
490,000
310,000
924,000
665,000
Net assets
1,800,800
1,442,000

Shareholders' equity Share capital General reserve Retained profits Total shareholders' equity

1,100,000

1,050,000

90,000

90,000

610,800

302,000

1,800,800

1,442,000

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Semester One Final Sample Exam, 2012

ACCT2101 Financial Reporting

The company’s income statement for the year contains the following items:

Sales revenue 2,800,000; Cost of sales 1,550,000; Insurance expense 70,000; General

Interest expense 78,000;

Depreciation expense 145,000; Loss on sale of equipment 10,000; Income tax expense

97,200; Operating profit after tax 388,800.

expenses 410,000; Bad debt expense

51,000;

Additional information:

• PPE means property, plant and equipment. was $245,000. The cost of PPE sold during
PPE means property, plant and equipment.
was $245,000.
The cost of PPE sold during the year
The company paid off $90,000 of its long-term loans during the year.
The company classifies dividend payments as financing cash flows. Interest
payments are classified as operating cash flows.
Required:
(1) Prepare the company’s cash flow statement (direct method) for the year ended 30
June 2010 in accordance with AASB 107 Cash Flow Statements. Include a list
(either on the face of the cash flow statement or in a note) of the individual items
(and the amounts) which constitute payments to suppliers and employees. Part
marks will be given to these items. Note: You must present the cash flow statement
using the correct format. T-accounts will not be marked.
(2) Prepare a note of reconciliation for operating cash flows using the indirect method in
accordance with AASB 107 Cash Flow Statements.
You do NOT need to prepare other notes to the cash flow statement.

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Semester One Final Sample Exam, 2012

ACCT2101 Financial Reporting

Question 12

Answer ALL questions below.

Short Answer Questions

(1)

Briefly explain two benefits of social responsibility reporting from the user’s point of view.

(2)

(3)

Briefly describe three reasons (motivations) why managers might make accounting policy choices in the best interest of the company. For example, managers can choose accounting methods that minimise the company’s tax payments.

[End of Exam Paper]
[End of Exam Paper]

Harry is a very hard-working employee who is in charge of inventory storage and all inventory records. He has not taken any leave over the last 5 years. Required: (a) Identify two weaknesses in the internal control activities of this company. (b) Very briefly explain why these weaknesses can lead to problems for the company. (c) Suggest solutions to deal with the internal control weaknesses.

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