Semester 1 2011 Examinations Topic No/s:BUSN1001 Topic Name/s: Accounting Principles

Reading Time: 15 mins Examination Duration: 3 hours Pages (including cover): 12 Questions: 25 multiple choice, plus 5 problems Instructions to Candidates Answer ALL Questions. Mark your answers to the Multiple Choice Questions (Part A) on the Multiple Choice Answer Sheet provided, write your name and student ID number on the sheet where indicated and place it inside your answer booklet. Write your answers to part B in the answer booklet (you may use more than one booklet if required). (Eligible ESL students may have an extra 30 minutes) Calculators Standard (scientific) calculators Materials Permitted Writing implements only (Eligible ESL students may have a translation dictionary). Materials Required

Students must hand in this paper at the end of the examination

DO NOT TURN OVER PAPER UNTIL PERMITTED

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PART A - MULTIPLE CHOICE QUESTIONS Circle the number on the answer sheet provided that represents the correct answer. If you make a mistake, place a cross through the incorrect answer and circle the correct answer. Write your name and student identification number on the answer sheet provided and place your completed answer sheet inside your answer booklet. For each question, please select the one best response.

1.

Which of the following types of behaviour would be regarded as unethical? 1. blaming others for your own mistakes 2. using confidential information for personal gain 3. deceptive advertising 4. manipulating financial statements 5. all of the above

2.

A company has the following set of characteristics 1. provides owners with shared control, simple to establish 2. simple to set up, owner retains control 3. complex to set up, provides owners with shared control 4. provides owners with shared control, unlimited liability 5. combines the records of the business with the personal records of the owner

3.

The accounting standards issues by the Australian Accounting Standards Board are consistent with those issued by the 1. Financial Reporting Council 2. Australian Taxation Office 3. Urgent Issues Group 4. International Accounting Standards Board 5. ASIC

4.

Which of the following is an internal user of accounting data for the XYZ Company Ltd? 1. internal auditor from the Australian Taxation Office 2. management of XYZ Company 3. ASX 4. customer of XYZ Company 5. creditor of XYZ Company

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5.

Buying and selling products are examples of 1. operating activities 2. investing activities 3. financing activities 4. delivering activities 5. all of the above

6.

The going concern assumption assumes that the business 1. will be liquidated in the near future 2. will be purchased by another business 3. is in a growth industry 4. will be relocating interstate 5. will remain in operation for the foreseeable future

7.

The accounting period concept states that 1. the business will remain in operation for the foreseeable future 2. the life of a business can be divided into artificial time periods 3. every business entity can be separately identified and accounted for 4. only those events that can be expressed in money may be included in the accounting records 5. accounting records will be kept for one year, then destroyed

8.

Resources owned by a business are referred to as 1. equity 2. liabilities 3. assets 4. revenues 5. expenses

9.

An income statement 1. summarises all changes in retained earnings for a specific period of time 2. reports the changes in assets, liabilities, and equity across a period of time 3. reports the assets, liabilities, and equity at a specific date 4. presents the revenues and expenses for a specific period of time 5. is the last financial statement to be prepared each period

10.

The statement of changes in equity does not show 1. the beginning balance of retained earnings 2. total revenue 3. the amount of dividends paid 4. the ending balance of retained earnings 5. profit or loss for the period

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11.

If total liabilities increased by $25,000 and equity increased by $5,000 during a period of time, then total assets 1. increase by $30,000 2. increase by $20,000 3. increase by $25,000 4. decrease by $20,000 5. decrease by $30,000

12.

Liabilities of a company are owed to 1. investors 2. owners 3. creditors 4. shareholders 5. managers

13.

Equity 1. 2. 3. 4. 5.

is always equal to cash on hand is equal to liabilities plus assets includes retained earning and issued shares is shown on the income statement never changes

14.

Included amongst current liabilities on a classified statement of financial position would be 1. cash 2. property, plant and equipment 3. deferred tax assets 4. insurance expense 5. short-term borrowings

15.

Solvency measures the ability of a business to 1. repay its long-term debts at maturity and its interest as it becomes due 2. meet its short-term obligations 3. pay its obligations that will fall due within the operating cycle 4. turn its inventory into cash 5. none of the above

16.

A business handles a large volume of similar transaction data by using 1. one general ledger 2. worksheets 3. control accounts and subsidiary ledgers 4. financial statements 5 all of the above

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17.

A subsidiary ledger is a group of 1. financial statements with a common reporting date 2. worksheets with a common reporting date 3. ledgers with a common characteristic 4. accounts with a common characteristic 5. companies controlled by a parent company

18.

Each general ledger control account balance must equal the total balance of the accounts in the 1. related subsidiary ledger 2 statement of financial position 3. income statement 4. trial balance 5. cash receipts journal

19.

A list of all accounts and their balance in the accounts payable subsidiary ledger is also known as a 1. trial balance 2. schedule of creditors 3. control account 4. statement of financial position 5. schedule of debtors

20.

A sales journal is used for the recording of all 1. cash received including cash from debtors 2. cash paid including cash to creditors 3. purchases of inventory whether for cash or on account 4. successful marketing campaigns 5. sales of inventory on account

21.

Cash sales of inventory are entered in which of the following special journals? 1. cash payments journal 2. cash receipts journal 3. sales journal 4. purchases journal 5. general journal

22.

The amounts recorded in the accounts payable column in a cash payments journal are posted 1. individually on a daily basis to the subsidiary ledger 2. individually on a daily basis to the purchases journal 3. only in total at the end of the reporting period to the income statement 4. only in total at the end of the reporting period to the statement of financial position 5. never
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23.

Inventory that is sold on account and which had a cost of $5000 would be recorded using the following entry 1. Dr Accounts receivable $5000 Cr Sales $5000 2. Dr Accounts receivable Cr Cost of goods sold Dr Cost of goods sold Cr Inventory Dr Inventory Cr Sales Dr Sales Cr Cost of goods sold $5000 $5000 $5000 $5000 $5000 $5000 $5000 $5000

3.

4.

5.

24.

In a cash receipts journal the total of the accounts receivable column is posted as a credit to 1. the accounts receivable account in the general ledger 2. the individual customers accounts 3. GST collections 4. discount allowed 5. the cost of goods sold account

25.

Credit purchases of equipment or supplies are recorded in the 1. purchases journal 2. general journal 3. cash payments journal 4. sales journal 5. none of the above

[Total 25 Marks] *************************************************** END OF PART A

PART B OVER THE PAGE

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BUSN1001 Accounting Principles PART B PROBLEMS Question One

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Cash and cash controls

The following information is needed in order to prepare the Bank Reconciliation Statement as at 30 November 2010, for Sams Cleaning Services. 1) The bank statement showed a credit balance of $2,062.80 on 30 November. 2) The balance of the Cash at Bank account of Sams Cleaning Services was $2,721.20 in debit on 30 November. 3) Cheques not yet presented to the bank for payment: No. 852 $ 232.80 No. 857 $ 800.00 No. 859 $ 468.80

4) A deposit made on 30 November did not appear on the bank statement, $2,700. 5) A deposit of $520 made by the owner of Sams Cleaning Services, into his private banking account, appeared on the businesss bank statement. 6) The bank statement showed bank fees charged for November of $20.00 7) A receipt from a debtor, B. Prompt, was incorrectly entered in the cash receipts journal as $458. The amount was correct on the bank statement, $498.00.

Required: a) Make any adjustments necessary directly to the Cash at Bank Ledger account (use a T-account). Balance the account. (7 marks) b) Prepare the Bank Reconciliation Statement for Sams Cleaning Services at 30 November. (7 marks) c) Explain one of the features of a Petty Cash fund which gives control over the payment of small amounts of cash. (2 marks) TOTAL QUESTION 1= 16 marks

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BUSN1001 Accounting Principles Question Two Accounting Cycle

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Ben Webster has a business offering legal advice to university students. The Unadjusted Trial Balance of Websters Legal Services on 30 June 2011 is shown below Websters Legal Services Unadjusted Trial Balance as at 30 June 2011 Account Title Cash Accounts Receivable Office Supplies Office Equipment Accumulated Depreciation Office Equip Accounts Payable Service Revenue Received in Advance B. Webster - Capital B. Webster - Drawings Service Revenue Rent Expense Salaries Expense Debit $20,600 17,200 4,600 28,000 Credit

4,800 9,800 3,000 52,800 6,000 70,400 30,400 34,000 $ 140,800

$ 140,800

The following additional information is available at 30 June: 1. Unused office supplies on hand on 30 June totalled $1,700. 2. The Service Revenue Received in Advance account includes $900 which was earned during June. 3. Estimated depreciation on the office equipment is $2,400. 4. Accrued salaries for the last day of June are $1,200. 5. Revenue of $3,600 has been earned but not yet recorded or invoiced Required (a) Prepare adjusting entries for the month of June. (Narrations are not required.) (5 marks) (b) Prepare an adjusted trial balance for 30 June 2011. (T-accounts are not required.) (8 marks) Prepare a classified Statement of Financial Position for the year ended 30 June 2011 Show a calculation of ending Capital. (11 marks)

(c)

TOTAL QUESTION 2 = 24 marks

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Question Three

Inventory

Pot-R-Us has the following inventory, purchases and stocktake data for the month of March. The business uses a periodic inventory system.

No of units Inventory: Purchases: March l March 6 March 25 March 30 100 units 250 units 200 units 150 units

Unit Cost $2.00 $2.30 $2.50 $3.00

Total Cost $200 575 500 450

The physical inventory count on 31 March shows 250 units on hand.

Required:

Determine the cost of inventory on hand as at 31 March and the Cost of Goods Sold for March under the following cost flow methods:

(a) first-in, first-out (FIFO) method (b) last-in, first-out (LIFO) method (c) weighted-average cost method.

(3 marks) (3 marks) (3 marks)

(d) Explain why an overstatement in ending inventory will result in an overstatement of profit. (2 marks)

TOTAL QUESTION 3 = 11 marks

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BUSN1001 Accounting Principles Question Four Receivables

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Snowfields Pty Ltd is in the retail business and the companys financial year ends on 30 June. In the course of doing business it processed the following transactions: Sold inventory for $10 000 to WasteIt Ltd on credit terms 30 days on 1May. WasteIt could not pay the account on time and on 1 June, Snowfields received a 90-day, 8% Bill of Exchange covering the amount owing by WasteIt. Instead of keeping the Bill to maturity, Snowfields Pty Ltd discounted it to the bank on 15 July at 10% discount rate. Ignore GST. Required a) Calculate the maturity value of the bill and the maturity date. (2 marks) b) Prepare the journal entries in Snowfields General Journal to record i) the receipt of the Bill on 1 June ii) the adjusting entry on 30 June iii) the entry to record the discounting of the Bill on 15 July (Narrations are not required.) (7 marks) c) Briefly describe one method which a business may use to manage Accounts Receivable. (2 marks)

TOTAL QUESTION 4 = 11 marks

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Question Five

Retailing

Outdoor Supplies Pty Ltd carried out the following transactions relating to BBQs in March and April. The business uses only a General Journal. GST is 10%. March 4 6 14 21 Purchased 76 BBQs for $500 each plus GST, on credit. Returned 5 BBQs which were scratched. Sold 3 BBQs for $700 each plus GST, to a customer on credit. The customer returned one (1) of the BBQs that were sold on 14 March. The BBQ was the wrong colour. 30 The physical inventory stocktake at the end of the month consisted of 65 BBQs. 1 Outdoor Supplies sold BBQ tools to a customer for $510 plus GST, terms 1/10, n/30. 3 The customer returned BBQ tools worth $286 (including GST). The tools were undamaged and were returned to the shelves 7 The customer paid the amount due.

April

Required (a) Using a perpetual inventory system, prepare General Journal entries to record the March transactions. (Narrations are not required.) (9 marks)

(b)

If Outdoor Supplies used a periodic inventory system, show what the April transactions in the General Journal would be. (Narrations are not required.) (4 marks)

TOTAL QUESTION 5 = 13 marks

END OF PART B END OF EXAMINATION

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BUSN1001 Accounting Principles Multiple-Choice Answer Sheet Name : ________________________________________

(family name)

Student Number: ________________________________

Please CIRCLE the correct answer

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 19. 20. 21. 22. 23. 24. 25. 1 1 1 1 1 1 1 2 2 2 2 2 2 2 3 3 3 3 3 3 3 4 4 4 4 4 4 4 5 5 5 5 5 5 5