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ACCT1501 Practice Exam Questions & Solutions

QUESTION 1 (6 Marks)Bank Reconciliation

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, 2011.(4 marks)
Part B: Prepare any necessary adjusting journal entries.(2 marks)

QUESTION 2 (9 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. 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)
3. Describe Scope 1 and Scope 2 emissions and provide an example for each of them. (3 marks)

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% 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/ COGS x 365


Days in Debtors Average Trade Debtors/Credit Sales x 365


Current Ratio Current Assets/Current Liabilities


Quick Ratio Current Assets - Inventory/Current Liabilities


Debt to Equity Ratio Total Liabilities/Total Shareholders' Equity

Required
Analyse BPS’s profitability, asset management,liquidity and financial structure for 2012 using the ratio information.


QUESTION 4 (15 marks)Control Accounts

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.

QUESTION 5 ADJUSTING ENTRIES AND FINANCIAL STATEMENTS (23 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 450,000
Equipment
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 revenue 4,50,000
Cost of Goods Sold 265,000
Interest Expense 5,000
Wages Expenses 80,000
Rent Expense 5,000

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.
• 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.
Part B (7 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.

QUESTION 6 (15 marks) Inventory
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
10 June 80 units @ $12
18 June 140 units @ $20
25 June 30 units @ $14
30 June 50 units @ $25

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)
Prepare the journal entries for inventory purchases and cost of sales for the month of June 2014. (12 Marks)
3 MARKS FOR THE CALCULATION
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

QUESTION 7 (10Marks) Noncurrent assets
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)
What is the book value of the equipment at 30 June 2014? (1 Mark)

3 MARKS EACH FOR EACH JOURNAL (NO HALF MARKS)
1 MARK FOR BOOK VALUE (ALLOWANCE FOR CARRYFORWARD ERRORS)

Question 8 Management Accounting and Cost Concepts (13.5 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
2)Depreciation of head office computers
3)Salaries of production line workers for a
manufacturer
4)Advertising costs to promote a manufacturer’s


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:
1. Prepare a cost of goods manufactured statement for January 2014.
2. Prepare a cost of goods sold statement for January 2014.

Part C (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?


Question 9 - MCQ practice questions
You have seen samples of MCQ in the lectures and in your quiz attempts.






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