ACCT1501 Practice Exam Questions

QUESTION 1

(10 marks)

2015S2

Accounts Receivable

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 control accounts as they would appear in the general ledger.

ACCT1501 Practice Exam Questions

2015S2

QUESTION 2 (12 Marks) Financial Reporting Principles, Accounting Standards

and Auditing, & Sustainability Reporting
Provide short answers to the following:
1. Auditors are required to maintain independence from their audit client. Why
such independence is crucial? Why achieving and maintaining independence is
difficult? (4 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)

ACCT1501 Practice Exam Questions

2015S2

3. Describe Scope 1 and Scope 2 emissions and provide an example for each of
them. (4 marks)

ACCT1501 Practice Exam Questions

2015S2

QUESTION 3 Preparing 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 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 revenue

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

2015S2

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
$

Account name

Credit
$

ACCT1501 Practice Exam Questions

2015S2

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.

ACCT1501 Practice Exam Questions

2015S2

QUESTION 4 (15 marks) Inventory

The following information relates to inventory transactions of Promises Ltd for the
month ending 30 June 2014:
Date
1 June
10 June
18 June
25 June
30 June

Cash Purchases

Cash Sales

Balance
100 units @ $10

80 units @ $12
140 units @ $20
30 units @ $14
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)
Date

Debit
$

Account name

Credit
$

ACCT1501 Practice Exam Questions

2015S2

ACCT1501 Practice Exam Questions

2015S2

Question 5 Management Accounting (21.5 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 manufacturers
products

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 Ltds 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:

ACCT1501 Practice Exam Questions

2015S2

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

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

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Part C (10 marks)

Fit4U Ltd sells a single product, deluxe exercise bikes. The business profit
calculations for last year were as follows:

Sales revenue (1000 @ $1,800)

Less variable Costs
Contribution Margin
Less fixed costs
Profit

$1,800,000
(900,000)
900,000
(750,000)
$150,000

Fit4U wants to boost sales, and has decided to change the design of the exercise bikes.
The pedals and bike seats will now be hot pink in colour (instead of black), and glow
in the dark. This will increase the cost per exercise bike by $20. The price for these
new bikes will be increased to $1,990 each.
In addition, Fit4U will run a $50,000 advertising campaign to raise awareness of its
product. The expectation is that the campaign will cause demand to increase to 1500
units, despite the increased price.
1) Using the above income statement format, calculate the expected profit for Fit4U
Ltd next year.
(5 marks)

2) How many bikes would Fit4U have to sell to earn as much profit next year as it did
last year?
(3 marks)

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3) Do you agree with Fit4U Ltds decision to change the design of the bike and price,
and spend more on advertising? Explain why or why not.
(2 marks)

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ACCT1501 Practice Exam Questions

2015S2

Question 6 - MCQ practice questions

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

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ACCT1501 Practice Exam Questions

Additional Question 1 (6 Marks)

2015S2

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.

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(4 marks)

ACCT1501 Practice Exam Questions

2015S2

Part B: Prepare any necessary adjusting journal entries.

(2 marks)
Debit
$

Account name

15

Credit
$

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2015S2

Additional Question 2 (6 marks) Financial Statement Analysis

Drake Ltd manufactures and sells commercial kitchen equipment. The company is
constantly profitable. Drake Ltds financial statement ratios are as follows:
Profit Margin
Total Asset Turnover
Current Ratio
Debt to Equity Ratio
Return on Equity

15%
1.8 times
2.2 times
0.8 times
17%

For each of the following transactions or events, indicate the directional effect
(increase, decrease, no change) on the Profit Margin, Current Ratio and Debt to
Equity in the table below. Note that you must write either increase, decrease or
no change. A blank response will be marked as incorrect. Consider each transaction
independently of all the other transactions.
a. Drake Ltd borrowed an additional $200,000 as short-term loan from the bank. (3
marks)
b. An equipment costing $120,000, on which $90,000 of depreciation was charged,
is sold for $30,000. (3 marks)
Record your answer in the table below.
Profit Margin
Transaction

Current Ratio

Debt to Equity
Ratio

a.

b.

PLEASE NOTE THERE IS A LIST OF RATIO FORMULAE PROVIDED ON

THE FOLLOWING PAGE.

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RATIO FORMULAE
Operating Profit after Tax
Shareholders' Equity
Cash from Operations
Operating Profit after Tax

Return on Equity
Quality of Earnings Ratio

Earnings Before Interest and Tax

Total Assets

Return on Assets

Total Assets
Total Shareholders Equity

Leverage Ratio

Cash From Operations

Total Assets

Cash Flow to Total Assets

Current Assets
Current Liabilities

Current Ratio

Quick Ratio

Dividend Payout Ratio

Gross Profit Margin

Cash + Accounts Receivable + Short-term investments

Current Liabilities
Annual Dividends Declared per Share
Earnings per Share
Gross Profit
Sales
Operating Profit after Tax
Sales
Sales
Total Assets
COGS
Average Inventory
Credit Sales
Average Trade Debtors
Earnings before Interest and Tax
Interest Expense
Total Liabilities
Total Shareholders' Equity
365
Inventory Turnover
365
Debtors Turnover

Profit Margin
Asset Turnover
Inventory Turnover
Debtors Turnover
Interest Coverage Ratio
Debt to Equity Ratio
Days in Inventory
Days in Debtors
Price/Earnings Ratio

Earnings Per Share

Current market price per share

Earnings per Share
Operating profit after tax
preference share dividends
Weighted Average Number of
Ordinary Shares Outstanding

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ACCT1501 Practice Exam Questions

2015S2

Additional Question 3 (10 Marks) 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)
Date

Debit
$

Account name

What is the book value of the equipment at 30 June 2014? (1 Mark)

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Credit
$