ACCT1501 Practice Exam Questions

2014S1

QUESTION 1 (8 Marks) Financial Reporting Principles, Accounting Standards

and Auditing, & Sustainability Reporting
Provide short answers to the following:
1. What are generally accepted accounting principles? (2 Marks)

2. If you have a good idea and expect to make a lot of money from the idea is
that a sufficient reason to recognise an asset? Explain why or why not. (2
Marks)

ACCT1501 Practice Exam Questions

2014S1

3. How can financial information be relevant to the users of financial reports? (2

Marks)

4. What is meant by sustainability reporting? (2 Marks)

ACCT1501 Practice Exam Questions

2014S1

QUESTION 2 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%
9%
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
1.0
Return on Equity

Operating Profit after Tax

Shareholders' Equity

Return on Assets

Operating Profit after Tax

Total Assets

Financial Leverage

Total Assets
Total Shareholders Equity

Profit Margin

Earnings Before Interest and Tax

Sales

Asset Turnover

Sales
Total Assets

Days in Inventory

Average Inventory x 365

COGS

Days in Debtors

Average Trade Debtors x 365

Credit Sales

Current Ratio

Current Assets
Current Liabilities

Quick Ratio

Current Assets - Inventory

Current Liabilities
Total Liabilities
Total Shareholders' Equity

Debt to Equity Ratio

ACCT1501 Practice Exam Questions

2014S1

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

ACCT1501 Practice Exam Questions

QUESTION 3

(7 marks)

2014S1

Accounts Receivable

On 1st January 2011, Parker Company has a debit balance of $21,000 in Accounts
Receivable and a credit balance of $1,550 in the Allowance for Doubtful Debts.
During the year to 31st December 2011, Parker made sales on credit terms for $99,100
and collected cash from customers on accounts receivable amounting to $82,000. On
1st August 2011, Parker wrote off a bad debt on an account for $230. An ageing
analysis at 31st December 2011 indicates that the allowance for doubtful debts account
should have a credit balance of $2,150.
Parker Companys financial year ends on 31st December 2011.

Required:
a)

(i) Prepare the journal entry to record credit sales.

(1 mark)
Debit

Credit

(ii) Prepare the journal entry to record cash collected from customers
Debit

(1 mark)
Credit

(iii) Prepare the journal entry to write off the uncollectible account of $230
against the allowance for doubtful debts

(1 mark)
Debit

Credit

ACCT1501 Practice Exam Questions

2014S1

(iv) Prepare the adjusting journal entry to the allowance for doubtful debts
based on the ageing analysis at 31st December 2011

(2 marks)
Debit

Credit

(v) Prepare the closing journal entry for bad debts expense
Debit

(2 marks)
Credit

ACCT1501 Practice Exam Questions

2014S1

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 2014 (for the 12 months beginning on 1 July 2013):
DR
Cash at Bank

CR
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 - PPE

200,000

Accounts Payable

60,000

Bank loan

50,000

Contributed Capital

310,000

Retained Profit at 1 July 2013

34,000

Sales

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.

ACCT1501 Practice Exam Questions

2014S1

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.
Debit

Credit

ACCT1501 Practice Exam Questions

2014S1

Part B (6 Marks)
Prepare an Income Statement for the year ended 30 June 2014:

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.

ACCT1501 Practice Exam Questions

2014S1

QUESTION 5 (12 Marks) Inventory

The following information is taken from the accounting records of Noiseworks Ltd
for the year ended 30 June 2011.

$
Inventory 1 July 2010

50,000

Purchases (all credit)

300,000

Sales (all credit)

360,000

Inventory 30 June 2011

90,000

The companys mark-up is 50% on cost

Required:
a) Assuming all purchases and sales were in single transactions, prepare the
summary journal entries relevant to the determination of the balances for
inventory and cost of sales using:
i. Perpetual inventory method (4 marks)
Debit

10

Credit

ACCT1501 Practice Exam Questions

2014S1

ii. Periodic inventory method (4 marks)

Debit

Credit

b) Prepare an extract of income statements for the year ended 30 June 2011
showing sales, cost of sales and gross profit based on:
i. Perpetual inventory method (2 marks)

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ACCT1501 Practice Exam Questions

2014S1

ii. Periodic inventory method (2 marks)

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ACCT1501 Practice Exam Questions

2014S1

QUESTION 6 (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)

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ACCT1501 Practice Exam Questions

2014S1

2. On 31 December 2012 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)

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ACCT1501 Practice Exam Questions

2014S1

Question 7 Management Accounting and Cost Concepts (9 marks)

Part A (7 marks)
Earth Ltd. manufactures tents. At the beginning and end of June 2011, the following
information on inventory was provided by the companys accountant:
1 June 2011
$255,000
$180,000
$110,000

Raw Materials inventory

Work in progress inventory
Finished Goods inventory

30 June 2011
$236,000
$220,000
$95,000

During June, cost for direct labour amounted to $350,000, new purchases for raw
materials were $200,000 on 6 June and $300,000 on 27 June. The total overhead cost
was $1,200,000.
Prepare a cost of goods manufactured statement for June 2011.

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ACCT1501 Practice Exam Questions

2014S1

Part B (2 marks)
Tree & Woods Corp., an international furniture company, manufactures and sells
furniture of unique natural material. In 2010, the company sold all 25,000 chairs that
it produced at $200 each. Total costs amounted to $3,300,000 comprised of
$1,300,000 variable costs and $2,000,000 fixed costs. In 2011, the company purchases
a new saw mill for $110,000. The useful life is estimated to be 5 years with a salvage
value of $10,000. Each year, the same amount of depreciation expense is recorded.
The usage of the new saw mill allows Tree & Woods to reduce variable costs for
producing one chair by $7. All other costs remain the same as in 2010.
What was Tree & Woods Corp.s break-even point in number of units in 2010?

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ACCT1501 Practice Exam Questions

2014S1

Question 8 - MCQ practice questions

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

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