ACCT1501 Practice Exam Questions & Solutions

2013S2

QUESTION 1 ACCOUNTS RECEIVABLES (10 marks) On 1st January 2013, SSS Ltd. has a debit balance of $30,000 in Accounts Receivable and a credit balance of $ 4,500 in the Allowance for Doubtful Debts. On 1st July, 2013, one of SSSs customers, BBB, went bankrupt. BBB owes SSS $2,500 and there is no hope for recovering this amount. On 1st October 2013, SSS collected $85,000 from outstanding accounts. SSS Ltds financial year ends on 31st December. During the year to 31 December 2013, SSS sold goods for cash for $22,000, and on credit for $80,000.

Required: Part A (i) If bad debts expense for 2013 is recognised based on 2% of credit sales, prepare the entry to record bad debts expense. (3 marks) Debit Credit

(ii) Calculate the net accounts receivable after recognising the bad debts expense. (3 marks)

ACCT1501 Practice Exam Questions & Solutions

2013S2

Part B (i) Assume bad debts expense is determined as an adjusting entry at year end. If uncollectible accounts are estimated to be $3,200 from aging receivables, prepare the adjusting entry on the 31st December to record bad debts expense (i.e., ignore your answer to Part A, 3 marks). Debit Credit

(ii) Calculate the net accounts receivable after the adjusting entry. (1 mark)

ACCT1501 Practice Exam Questions & Solutions

2013S2

QUESTION 2 Inventory (8 Marks) The following information is taken from the accounting records of Eden Ltd for the year ended 31 December 2010.

Jan 1 Mar 10 Jun 25 Aug 30 Oct 5 Nov 26 Dec 31

Inventory Purchases Sales Purchases Sales Purchases Sales

Units 2,000 2,200 1,800 1,800 2,500 3,000 2,000

Purchase price/unit $56 $55 $52

Selling price/unit

$60 $65 $50 $63

Assume Eden uses the first-in-first-out method of allocating cost to inventories. Determine the cost of ending inventory as at 31 December 2010 and the cost of goods sold and gross profit for the year ended 31 December 2010, assuming perpetual Inventory System. Show all working.

ACCT1501 Practice Exam Questions & Solutions

2013S2

QUESTION 3 Financial Statement Analysis (8 marks) BPS Ltd, a supplier of telecommunications equipment, retails its products through suburban outlets. Shown below are the calculations of some of its key financial ratios for 2011 and 2012. 2012 2011 Return on Equity 13% 12% Return on Assets 8% 8% Profit margin 20% 18% Asset turnover 0.40 0.50 Days in inventory 72 days 55 days Days in debtors 42 days 42 days Current ratio 1.6 1.5 Quick ratio 0.7 1.1 Debt-to-Equity ratio 1.4 1:1
Return on Equity Operating Profit after Tax Shareholders' Equity Earnings Before Interest and Tax Total Assets Operating Profit after Tax Sales Sales Total Assets Average Inventory x 365 COGS Average Trade Debtors x 365 Credit Sales Current Assets Current Liabilities Current Assets - Inventory Current Liabilities Total Liabilities Total Shareholders' Equity

Return on Assets

Profit Margin

Asset Turnover

Days in Inventory

Days in Debtors

Current Ratio

Quick Ratio

Debt to Equity Ratio

ACCT1501 Practice Exam Questions & Solutions

2013S2

Required Analyse BPSs profitability, asset management, liquidity and financial structure for 2012 using the ratio information shown above.

ACCT1501 Practice Exam Questions & Solutions

2013S2

QUESTION 4 ADJUSTING ENTRIES AND FINANCIAL STATEMENTS (22 Marks) The following pre-adjusted trial balance has been prepared for Sydney Company as at 30 June 2010 (for the 12 months beginning on 1 July 2009): DR Cash at Bank Accounts Receivable Allowance for Doubtful Debts Inventory Prepaid Rent Property, Plant and Equipment Accumulated Depreciation - PPE Accounts Payable Bank loan Contributed Capital Retained Profit at 1 July 2009 Sales Cost of Goods Sold Interest Expense Wages Expenses Rent Expense 265,000 5,000 80,000 5,000 1,115,000 1,115,000 100,000 10,000 450,000 200,000 60,000 50,000 310,000 34,000 450,000 200,000 1,000 CR 10,000

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 2010 to 31 December 2010. An ageing analysis shows that $4,000 of Accounts Receivable is estimated to be uncollectible. On 30 June 2010, the directors declared a dividend of $5,000, which the shareholders authorised. The dividend is to be paid on 15 September 2010.

ACCT1501 Practice Exam Questions & Solutions

2013S2

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 2010. $5,000 of wages relating to June 2010 have not been paid and need to be accrued. Part A (12 Marks) Prepare journal entries for the necessary end of period adjustments. Debit Credit

ACCT1501 Practice Exam Questions & Solutions

2013S2

Part B (6 Marks) Prepare an Income Statement for the year ended 30 June 2010:

Part C (4 Marks) In the Balance Sheet as at 30 June 2010, what would be the closing balance of retained profits? Show all workings.

ACCT1501 Practice Exam Questions & Solutions

2013S2

QUESTION 5 (8 Marks) Non-current Assets A car was purchased on 1 January 2009 for $50,000. The car was depreciated using straight-line depreciation with an estimated useful life of four years and expected residual value of $10,000. 1. Calculate depreciation for the first year that the company holds the car, and provide the journal entry. What is the carrying value of the car on January 1, 2010? (4 marks)

2. On 31 December 2013 the car was sold for $8,000. Determine the profit or loss on disposal, and show the relevant accounting journal entries to account for the disposal. (4 marks)

ACCT1501 Practice Exam Questions & Solutions

2013S2

QUESTION 6 Financial Reporting Principles, Accounting Standards and Auditing, & Sustainability Reporting (5 marks) Provide short answers to the following:

1. What is difference between recognition and disclosure? (2 marks)

Recognition: information appears on the face of the balance sheet (1 mark).

2. What is the role of directors in governing a corporation? How are they appointed, and why? (3 marks)

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ACCT1501 Practice Exam Questions & Solutions

2013S2

Question 7 Management Accounting and Cost Concepts (10 marks)

The following cost data relates to TTT Ltd for the year ending 30 June 2013. Direct material used in production Advertising expenses Depreciation on factory building Direct labour: wages Cost of finished goods inventory on hand, 30 June 2013 Indirect labour: wages Factory supervisors salary Cash on hand, 30 June 2013 Indirect labour: overtime wages Bonus paid to factory supervisor Cost of goods sold Work-In-Progress, 30 June 2012 Work-In-Progress, 30 June 2013 Administrative costs Rental of office space for sales personnel Sales commissions Billboard advertising costs Required: 1. What is the total prime cost for the year ending 2013? (1 mark) $550,000 $60,000 $57,500 $290,000 $325,000 $70,000 $22,500 $500,000 $15,000 $4,500 $675,000 $175,000 $325,000 $75,000 $7,500 $2,500 $5,000

2. What is the total manufacturing overhead cost for the year ending 2013? (2 marks)

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ACCT1501 Practice Exam Questions & Solutions

2013S2

3. Complete the following Work-In-Process T account. Clearly label each item. (5 marks) Work-In-Process

4. What is the total period cost for the year ending 30 June 2013? (2 marks)

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ACCT1501 Practice Exam Questions & Solutions

2013S2

Question 8 CVP analysis (10 marks)

Softy Ltd specialises in toys for young children. It is going to produce a new cuddly toy bear called Boftlie. Boftlies will be sold for $30. Softy will have to buy a new industrial sewing machine costing $40,000 in order to manufacture the Boftlie. The machine will be fully depreciated in the first year. Other fixed costs of producing and marketing the Boftlie will be $500,000. The material and labour costs for each Boftlie come to $6. In addition, sales personnel will receive 20% commission on every Boftlie sold. Part A How many Boftlies must Softy sell to: 1. Break-even? (4 marks)

ixed costs = 500,000 + 40,000 = 540,000 (1 mark) BEP = 540 000 /18 = 30 000 units (1 mark)

2. Earn a target operating profit of $150,000 assuming no taxes? (1 mark)

3. Earn a target after-tax operating profit of $150,000 assuming the company has a 25% tax rate? (2 marks)

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ACCT1501 Practice Exam Questions & Solutions

2013S2

Part B Softy is considering buying a more expensive sewing machine, which costs $70,000 (instead of the $40,000 one). The machine will be fully depreciated in the first year. The new machine will cut labour and material costs down to $5 per Boftlie. All other variables will remain the same, i.e., other fixed costs are still $500,000, the price is still $30, and commission is still 20% Calculate the break-even under this scenario. (2 marks).

New Variable cost = 5 + 6 = 11 (1/2 mark) New CM = 30-

Part C Do you think Softy should buy the cheaper or more expensive sewing machine? Explain your answer. (1 mark)

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ACCT1501 Practice Exam Questions & Solutions

2013S2

MCQ practice questions You have seen samples of MCQ in the lectures and in your quiz attempts.

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