ACCOUNTING AND FINANCE 2A/B

SEMESTER 1, 2009 - EXAM

Time allowed for this paper

Reading/planning time before commencing work:10 minutes

Working time for paper:2½ hours

Material required/recommended for this paper

To be provided by the supervisor

This Question/Answer booklet

Multiple-choice answer sheet

To be provided by the candidate

Standard items:Pens, pencils, eraser or correction fluid, highlighter and ruler

Special items:Calculators satisfying the conditions set by the Curriculum Council for this course.

Important note to candidates

No other items may be taken into the examination room. It is your responsibility to ensure that you do not have any unauthorised notes or other items of a non-personal nature in the examination room. If you have any unauthorised material with you, hand it to the supervisor before reading any further

Name:

Structure of this paper

Section / Suggested working time / Number of questions available / Number of questions to be attempted / Marks / Weighting
(%)
Section One:
Multiple-choice / 20 minutes / 20 / 20 / 10 / 10
Section Two: Application and Response / 130 minutes / 5 / 5 / 90 / 90
Total / 100 / 100
Section / Page Number / Marks
Allocated / Marks
Gained
Section One:
Multiple-choice / 2 / 10
Section Two:
1 – Final Reports / 6 / 24
2 – General Ledger / 9 / 20
3 – Profit Determination in the Ledger / 11 / 11
4 – Fundamental Concepts / 12 / 20
5 – General Journal / 14 / 15
Total marks / 100

Instructions to candidates

  1. Spare answer pages may be found at the end of this booklet. If you need to use them, indicate in the original answer space where the answer is continued (i.e. give the page number).
  1. Information for questions 1 and 2 in section two has been repeated on a removable information sheet so that you can refer to it more easily while answering the questions. Do not write your answers on the information sheet.

ONE: MULTIPLE-CHOICE20 marks

This section has twenty questions. Attempt ALL questions.

Record your answer on the multiple-choice answer sheet provided. Read the instructions on the answer sheet carefully.

Suggested working time: 20 minutes

1 / Which of the following is a non-current asset?
  1. Inventory
  2. Cash at bank
  3. Motor vehicles
  4. Account receivable

2 / A business paid $200 for rates. The effect of this on the general ledger would be:
  1. Debit ‘Cash at Bank’ and credit ‘Rates’
  2. Credit ‘Cash at Bank’ and debit ‘Rates’
  3. Debit ‘Cash at Bank’ and debit ‘Rates’
  4. Credit‘Cash at Bank’ and credit ‘Rates’

Questions 3 to 5 relate to the following simplified balance sheet for Wilson Traders
Wilson Traders, Balance Sheet, as at June 2019
Assets / $ / Liabilities / $
Cash / 110 000 / Accounts Payable / 145 000
Accounts Receivable / 50 000 / Loan (due 6/12/2019) / 115 000
Inventory / 180 000 / Loan (due 6/12/2022) / 300 000
Buildings / 500 000 / Equity
Equipment / 150 000 / Capital / ?
990 000 / 990 000
3 / The current assets of the business amount to:
  1. $160 000
  2. $340 000
  3. $840 000
  4. $990 000

4 / The non-current liabilities amount to:
  1. $115 000
  2. $145 000
  3. $260 000
  4. $300 000

5 / The capital figure should be:
  1. $145 000
  2. $260 000
  3. $430 000
  4. $560 000

6 / Pete’s Plumbing supplied the following information for March 2009:
Assets $80 000, Liabilities $43 000, Income $86 000, Expenses $57 000
The profit for the period is:
  1. $6 000
  2. $29 000
  3. $37 000
  4. $43 000

7 / Fill in the gaps: A proprietary company may have ___ to ___ non employee shareholders:
  1. 1 – 20
  2. 2 – 20
  3. 1 – 50
  4. 1 – unlimited

8 / An electrical business received $99 (inclusive of GST), for provision of services on
14 May 2008. What would the General Journal entry be for this transaction?
a. General Journal
DATE / PARTICULARS / DEBIT / CREDIT
2008
14 May / Bank / $99
Fees / $99
Charge for services rendered, inclusive of GST
b. General Journal
DATE / PARTICULARS / DEBIT / CREDIT
2008
14 May / Bank / $99
Fees / $90
GST Collected / 9
Charge for services rendered, inclusive of GST
c. General Journal
DATE / PARTICULARS / DEBIT / CREDIT
2008
14 May / Bank / $90
Fees / $90
GST Collected / 9
Charge for services rendered, inclusive of GST
d. General Journal
DATE / PARTICULARS / DEBIT / CREDIT
2008
14 May / Bank / $90
GST Collected / 9
Fees / $99
Charge for services rendered, inclusive of GST
9 / The accounting period principles states that:
  1. The business is a separate entity to the owner for financial purposes
  2. All transactions must be recorded in dollars and cents
  3. Assets are recorded at the amount paid in the balance sheet
  4. The business life is divided into regular intervals for reporting purposes

10 / Which of the following business structures usually have unlimited liability?
a.Partnerships
b.Public companies
c.Proprietary companies
d.All of the above
11 / Double entry means:
a.for every transaction, two accounts are affected
b.for every transaction, one debit and one credit is recorded
c.two entries are made in every account
d.for every transaction, total debits equal total credits.
12 / Which of the following errors is disclosed by the trial balance?
a.Entries made to the wrong side of each account
b.Transactions omitted entirely or put in twice
c.A transaction posted to only one account
d.Entries made in the wrong accounts but on the correct side
13 / The Cost of Sales account is:
a.an asset
b.a liability
c.a revenue
d.an expense.
14 / If credit purchases are returned, the Inventories account is credited because it is:
a.an expense which is decreasing
b.a liability which is increasing
c.a revenue which is increasing
d.an asset which is decreasing.
15 / Another terms for Creditors is:
  1. accounts payable
  2. accounts receivable
  3. inventories
  4. overdraft

16 / An important advantage that the perpetual inventory system has over the periodic inventory system is that:
  1. it reduces time and effort in recording entries dealing with inventories
  2. it allows a physical stocktake to be carried out each month
  3. it increases control over inventories because the business knows the value of inventories that shouldbe on hand at any point of time
  4. it hides the value of lost, stolen or spoiled goods in the cost of goods sold figure.

17 / Which of the following is not a general aim of internal control?
  1. Check the accuracy and reliability of accounting data
  2. Promote employee morale
  3. Encourage operational efficiency
  4. Safeguard the assets of the business.

18 / Which of the following is an example of debt finance:
  1. bank loan
  2. bank overdraft
  3. leasing
  4. all of the above

19 / A business purchased a new vehicle for $29 150 including GST. The GST paid on this transaction would be
a.$2 600
b.$2 650
c.$2 900
d.$2 915
20 / The accounting process is (in order):
  1. source documents, ledger, journals, trial balance, balance sheet, income statement
  2. source documents, journals, ledger, trial balance, balance sheet, income statement
  3. source documents, journals, ledger, trial balance, income statement, balance sheet
  4. source documents, trial balance, journals, ledger, income statement, balance sheet

Section two begins on the next page.

SECTION TWO:

This section has 5questions. Attempt ALL questions.

Record your answers in the spaces provided. Additional paper is available at the end of the booklet if required.

Suggested working time: 2 hours and 10 minutes

Question 1 (24 marks)

Given the following trial balance for Doris Trading, you are required to prepare:

  1. an Income Statement for the year ended 30 June 2010 and

12 marks

  1. a Balance Sheet as at June 30, 2010

12 marks

Doris Trading

Trial balance as at 30 June 2010

Account Debit Credit

$ $

Sales 166 523

Cost of sales44 795

Creditors 35 421

Stationery2 250

Advertising 16 540

Rent expense 13 251

Capital 73 974

Cartage outwards 1 246

Telephone 684

Delivery vehicle expenses 1 112

Debtors70 652

Electricity1 404

Delivery vehicles41 950

Drawings 24 600

Inventory17 270

Discount Allowed990

Wages and salaries 65 420

Bank overdraft 6 546

Bank loan (due 20/8/2015)23 150

Bad debts 3 450

$305 614 $305 614

Question 2 (15 marks)

Robert Newman, the owner of Newman Enterprises has supplied the following transactions. You are required topost the transactions to the general ledger and balance any necessary accounts

Date / Transaction
2/4/10 / The business obtained a bank loan$25 000.
4/4/10 / Paid quarterly insurance premium $1 200 plus $120 GST.
5/4/10 / Newman purchased $1 290 of goods on credit from Blue Box Traders plus GST.
10/4/10 / Newman bought a computer system on credit from Compsyche Computers $6 000 plus $600 GST. The computer is to form part of the office equipment.
15/4/10 / Cash sales were $1 100including GST. Cost price of the goods was $650.
18/4/10 / Sold goods on credit to S Rielly for $300 plus GST of $30. Cost price of the goods was $190.
25/4/10 / Paid telephone expenses of $330 plus GST.
27/4/10 / The owner withdrew $400 cash for personal use.
30/4/10 / Received amount owing from S Rielly in full, after a discount of $20.

NB: some accounts have been listed below, others you will need to add. All new accounts should only require 2 lines each

Newman Enterprises – General Ledger

DATE / PARTICULARS / F / AMOUNT ($) / DATE / PARTICULARS / F / AMOUNT ($)
Cash at Bank (A1)
GST Paid (A2)

Newman Enterprises – General Ledger

DATE / PARTICULARS / F / AMOUNT ($) / DATE / PARTICULARS / F / AMOUNT ($)
Inventory (A3)
Sales (I1)
Cost of Sales (E1)
S Reilly (A4)
GST Collected (L1)

Newman Enterprises – General Ledger

DATE / PARTICULARS / F / AMOUNT ($) / DATE / PARTICULARS / F / AMOUNT ($)

Question 3 (11 marks)

The following is a trial balance for Fran’s Fashion Supplies;you are required to prepare the profit and loss account (to calculate the profit or loss of the business) and the capital account in the ledger.

Fran’s Fashion Supplies, Trial Balance, as at June 30, 2016
Debit ($) / Credit ($)
Capital / 52 539
Debtors / 24 000
Bad Debts / 789
Cash at Bank / 4 950
Furniture and Fittings / 12 300
Electricity / 2 900
Sales / 194 600
Insurance / 8 200
Cartage Inward / 500
Creditors / 17 690
Cost of Sales / 128 000
Wages / 21 300
Interest Received / 1 580
Inventory / 10 000
Drawings / 3 000
Bank Loan (due 2010) / 15 000
Equipment / 63 000
Advertising / 2 940
Discount Allowed / 450
Discount Received / 510
$ 281 919 / $ 281 919

Fran’s Fashion Supplies, General Ledger

Date

/ Particulars / F / Amount ($) / Date / Particulars / F / Amount ($)
Profit and Loss
Capital

Question 4 (20 marks)

  1. Explain one advantage to a business and one disadvantage for each of the following sources of finance:

Mortgage

Advantage

Disadvantage

Leasing

Advantage

Disadvantage

4 marks

  1. List and explain 3 errors not found by a trial balance.

3 marks

  1. Explain the concept of double entry accounting

2 marks

  1. Ally Turner owns and runs the business Turner’s Car Repairs, she employs three other staff members. Lately she has had some problems keeping accurate records with her inventory. Suggest three internal control methods that she should adopt within the business to help with her problems.

3 marks

  1. Give 2 advantages and 2 disadvantages of owning and operating a business as a sole trader.

4 marks

  1. What is GST and how is it calculated?

4 marks

Question 5 (15 marks)

Craig Rover has recently begun his own dog washing business from home, known as Rover’s Clean Mutts.

Craig has approached you for some help with his accounts. He would like you to post the transactions for the first week into the general journal for him.

NB: Rover’s Clean Mutts is not registered for GST, ie it does notcollected or record GST transactions.

March, 2010

3 / The owner commenced the business with the following assets $6 000 cash, a vehicle valued at $17 500 and $2 200 owing from Bill Hardy, a debtor to the business.
4 / The business purchased cleaning equipment for $12 000 on credit from Dog Wash Specialists
5 / The business received $400 in fees for services provided
6 / The business purchased $2 900 of dog cleaning products (eg shampoo, soap, etc)
7 / The business paid $600 for an advertising campaign
7 / The owner has noticed that $700 that should have been recorded in the office furniture account has accidentally been recorded in the office equipment account
8 / The business paid $1 500 to Dog Wash Specialists and received a discount of $200
8 / Wrote off Bill Hardy as a bad debt
9 / Returned half the cleaning products purchased and was issued a cash refund
9 / Craig Rover withdrew $250 of cleaning products from the business

Additional Paper

DATE / PARTICULARS / F / AMOUNT ($) / DATE / PARTICULARS / F / AMOUNT ($)

1