Professional Documents
Culture Documents
INSTRUCTIONS TO STUDENTS
This paper consists of two parts, Part A and Part B, printed on a total of 8 pages (for a
total of 100 marks). PLEASE CHECK BEFORE COMMENCING. This is a FINAL
paper.
Part A consists of 4 questions (70 marks). You are to answer ALL questions and show
ALL relevant calculations when appropriate.
Part B consists of 15 Multiple Choice Questions (30 marks). Please write your
answers to Part B on the FIRST page of your answer booklet. Each correct answer
is worth 2 marks and a penalty of marks will be applied to any incorrect answer.
ACCT101
3%
10
20
1.3439
1.8061
0.7441
0.5537
11.4639
26.8704
8.5302
14.8775
4%
10
20
1.4802
2.1911
0.6756
0.4564
12.0061 29.7781
8.1109 13.5903
6%
10
20
1.7908
3.2071
0.5584
0.3118
13.1808 36.7856
7.3601 11.4699
8%
10
2.1589
0.4632
14.4866
6.7101
20
4.661
0.2145
45.762
9.8181
Required:
a.
Prepare the necessary journal entries for (1) the commissioning of the equipment (2)
delivery of the equipment and (3) the depreciation journal entry for the financial year
ended 31 December 20X2.
b.
Explain how the choice of depreciation method will impact MISOs bottom line.
Illustrate your arguments with examples.
c.
Outline the advantages and disadvantages of raising funds from (1) debt providers and
(2) shareholders.
d.
Prepare the necessary journal entry for the issuance of the bonds on July 1, 20X2 and
the required adjusting entry on December 31, 20X2.
e.
Discuss the appropriate accounting treatment for the lawsuit.
ACCT101
Balance Sheet
as at 30 June 2002
Income Statement
for the year ended 30 June 2002
Required:
a.
Calculate the following ratios for the latest financial year and interpret the ratios for
your uncle: (1) Current Ratio (2) Debtors Turnover (3) Gross Profit Margin (4) Asset
Turnover and (5) Times Interest Earned. Remember you will need to explain the ratio,
not just saying how the ratio is calculated.
b.
After explaining the five ratios above to your uncle, explain to him the limitations of
financial statement analysis AND suggest ways on how you can improve your analysis
of Robinson, if you are given additional time to do a more thorough and meaningful
analysis.
3
ACCT101
Question 3 (6 + 5 + 4 = 15 marks)
a.
The extracts of GoAmigo Ltds Annual Report shows that it has issued new shares and
bought back some shares during the year.
Statement of Changes in Equity extract:
369,644,000
(1,191,000)
1,244,000
369,697,000
Under the share buy back scheme mandated by shareholders, the company
purchased 1,191,000 ordinary shares of $1 each at an average price of $17.94 per
share, amounting to a total cost, including brokerage, of $21,360,000. The
repurchase transactions were financed by internally generated funds. The amounts
were adjusted against the companys share capital and retained profits accounts.
Required: Propose the aggregate journal entries for the two transactions.
b.
In the process of completing bank reconciliation, the account clerk of Barbossa Ltd
noted that the bank statement balance was $21,212 but the ledger account shows a
balance of $12,121.
Required: Provide five possible reasons/items why the two figures do not tally and
how you would go about reconciling these reasons/items (eg: X is added to bank
statement balance, Y is deducted from ledger balance).
c.
Suppose KarFur Store ended May 20X4 with 800,000 units of merchandise that costs
an average of $7 each. KarFur uses the periodic inventory system. Suppose the store
then sold 600,000 units of merchandise for $4.9 million during June 20X4. Further,
assume that the store made two large purchases during June: 100,000 units @ $6 on
June 6 and 400,000 units @ $5 on June 21.
Required: At June 30, the store manager needs to know the stores gross profit under
both FIFO and LIFO. Provide this information.
ACCT101
Question 4 (3 + 12 = 15 marks)
The comparative Balance Sheet of Northern Bell Company at March 31, 20X9 reported the
following:
$
$
$
$
$
$
$
March 31
20X9
20X8
19,900 $
4,000
14,900 $
21,700
63,200 $
60,600
1,900 $
1,700
30,300 $
27,600
10,700 $
11,100
8,000 $
4,700
Northern Bells transactions during the year ended March 31, 20X9, included the following:
Acquisition of land by issuing note payable ............................$76,000
Amortisation expense...................................................................2,000
Payment of cash dividends.........................................................30,000
Cash acquisition of equipment...................................................78,700
Issuance of long-term note payable (to borrow cash)................50,000
Sale of long-term investments ...................................................13,700
Depreciation expense .................................................................15,300
Cash acquisition of building ......................................................47,000
Net income .................................................................................70,000
Issuance of common stock for cash ..........................................11,000
Stock Dividends .........................................................................18,000
Required:
a. Explain the concept of cash equivalents and provide examples of what would be normally
included as cash equivalent.
b. Prepare the 20X9 Cash Flow Statement for Northern Bell, including cash reconciliation
and any other relevant disclosures.
ACCT101
2.
3.
Tom paid his creditor $10,000. The amount was wrongly recorded as a debit to Expense
$10,000 and a credit to Cash $10,000. The adjusting entry to correct this error is:
A. A debit to Account Payable $10,000 and a credit to Expense $10,000
B. A debit to Account Payable $10,000 and a credit to Cash $10,000
C. A debit to Cash $10,000 and a credit to Expense $10,000
D. A debit to Expense $10,000 and a credit to Account Payable $10,000
E. None of the above
4.
5.
ACCT101
6.
What is the effect on a companys balance sheet equation when an amortization expense
is recognized?
A. There will be no change in the total assets, liabilities and owners equity
B. This transaction affects only the income statement, so no change on the balance
sheet will occur
C. Total asset will increase and total profit will decrease by the same amount
D. Without knowing the exact dollar amount of amortization, the effect on the balance
sheet cannot be determined
E. None of the above
7.
8.
Under the allowance method for estimating uncollectible accounts, the entry to write off
an account:
A. reduces total assets
B. increases total assets
C. reduces net income
D. increases net income
E. has no effect on total assets
9.
10. An error in the ending inventory for the year ended 31 December 2002:
A. affects only the 2002 financial statements
B. has no effect on the 2002 financial statements but will create an error in the 2003
financial statements
C. automatically creates errors in the ending inventory balance in 2002 and 2003
D. automatically creates errors in cost of goods in 2002 and 2003
E. none of the above
ACCT101
11. Maxim Limited used accrual accounting. For the year ended 31 Dec 2002, the company
reported $35,000 in salary expense on its Income Statement. The comparative Balance
Sheets stated that salary payable as at 31 Dec 2001 was $1,000 and $2,500 as at 31 Dec
2002. How much did the company pay for salary during the year 2002?
A. $31,500
B. $33,500
C. $35,000
D. $36,500
E. $38,500
12. Recoding depreciation of long-term assets at each accounting period is an attempt to:
A. match the cost of a plant asset with the revenue it generates
B. record the annual decline in the value of assets
C. measure the fair market value of plant asset
D. match the expected loss of productive life as the years pass
E. None of the above
13. The depreciation expense on a particular machine was $5,000 for the 3rd year and
$10,500 in the 4th year. The most logical explanation for this is:
A. Heavy repair costs were incurred in year 4
B. The company decided to de-accelerate its depreciation method
C. Units of production method of depreciation was used
D. The estimated useful life was increased in year 4
E. A balancing charge of depreciation on the last year of assets live (DDB method)
14. The liability on bonds issued at a discount is calculated by:
A. subtracting unamortized discount from bonds payable
B. subtracting the sum of amortized discount from bonds payable
C. subtracting interest expense from bonds payable
D. subtracting amount paid for stated interest from bonds payable
E. No calculation is needed, the liability will be equal to the bonds face value
15. Under the effective-interest method of amortizing bond premium, the interest expense
for each interest payment period:
A. is equal to the carrying value of the bond multiplied by the effective rate of interest
B. is equal to the carrying value of the bond multiplied by the stated rate of interest
C. is equal to the face value of the bond multiplied by the stated rate of interest
D. is equal to the face value of the bond multiplied by the effective rate of interest
E. None of the above
End of Part B (30 marks)