1101AFE Accounting Principles Final Practice Exam SEM 1

Question 1
The annual report of Xino Ltd contains the following information:
Xino Ltd
Comparative Balance Sheets as at 30th June 2016
$
2016
Current assets
Cash
1,015
Accounts receivable
1,800
Inventory
3,150
Prepayments
175
6,140
Non-current assets
Plant & equipment
9,500
Less: Accumulated depreciation
3,000
6,500
Total assets
12,640
Current liabilities
Accounts payable
Accrued expenses

$
2015
880
1,750
3,300
125
6,055
9,500
2,200
7,300
13,355

2,510
75
2,585

2,730
125
2,855

Non-current liabilities
Mortgage payable
Total liabilities

4,000
6,585

4,500
7,355

Net assets

6,055

6,000

3,600
1,000
1,205
250
6,055

3,600
1,000
1,150
250
6,000

Shareholders equity
Share capital - ordinary shares (3,600 shares)
- preference share capital (20%)
Retained profits
Reserves

Xino Ltd
Income Statement for the year ended 2016
Sales (all credit)
Less: Cost of sales
Gross profit
Less: operating expenses (including interest expense of $1,020)
Operating profit before tax
Income tax expense
Operating profit after tax

$
26,000
15,550
10,450
6,020
4,430
1,330
$3,100

Additional information:
Ordinary dividends declared and paid for 2016 were $3,045
Market price per ordinary share at 30 June 2016 was $1.20
Preference dividends 200 (20%)

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1101AFE Accounting Principles Final Practice Exam SEM 1

Maintain all your calculations to 2 decimal places

a. Prepare an horizontal analysis of the assets section of the Balance Sheet for the year
Current assets
2016
2015
$
Cash
1,015
880
Accounts receivable
1,800
1,750
Inventory
3,150
3,300
Prepayments
175
125
6,140
6,055
Non-current assets
Plant & equipment
9,500
9,500
Less: Accumulated dep
3,000
2,200
6,500
7,300
Total assets
12,640
13,355

b. Prepare a vertical analysis using the common size percentages for the following:
Income Statement - year ended 2016
Sales (all credit)
Less: Cost of sales
Gross profit
Less: operating expenses
Operating profit before tax
Income tax expense
Operating profit after tax

$
26,000
15,550
10,450
6,020
4,430
1,330
$3,100

c. Calculate the following ratios for 2016 and indicate whether the ratios are a measure of
profitability, liquidity, efficiency or investment (Show your calculations)
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
i.

Rate of return on total assets

Earnings per share
Price earnings ratio
Rate of return on sales or net profit % or margin
Rate of return on shareholders equity
Debt ratio
Current ratio
Inventory turnover in days

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1101AFE Accounting Principles Final Practice Exam SEM 1

i.

Rate of return on total assets

ii.

Earnings per share

iii.

Price earnings ratio

iv.

Rate of return on

v.

Rate of return on ordinary shareholders equity

vi.

Debt ratio

vii.

Current ratio

viii.

Inventory turnover

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1101AFE Accounting Principles Final Practice Exam SEM 1

Question 2
The following information is provided to prepare bank reconciliation
Bank reconciliation 30th June
Balance as per bank statement 30th June
Less: Outstanding cheques
99
100
Adjusted bank balance 30th June
July 1 Opening bal
4
9
11
14
17
25
31

July 31

Closing balance

Cash (ledger)
11,720
July 6
2,716
10
544
13
1,655
14
896
18
367
27
890
30
2,038
30
30
31
9,473

July 31st bank statement shows the following information:

Date
Transaction details
July 1 Beginning balance
July 1 EFT Rent receipt
5 Deposit
6 Cheque 100
8 Dishonoured cheque
9 Cheque 101
10 Deposit
11 Deposit
13 Cheque 102
14 Cheque 103
15 Deposit
15 Cheque 104
18 Deposit
19 EFT Insurance payment
22 Cheque 105
25 Deposit
29 Cheque 106
31 Bank collection of Bill receivable
31 Cheque 107
31 Bank fees

12,288
468
100

(568)
$11,720

Cheque 101
102
103
104
105
106
107
108
109
110

1,465
1,004
450
8
775
88
4,126
970
200
2,267

Dr $

Total Debits
Total Credits
Closing balance

Cr

$
12,288
625
2,716

100
441
1,465
544
1,655
1,004
450
896
8
367
340
775
890
88
1,000
4,216
25
8,912
8,693
12,069

Assume bank figures are correct and insurance is NOT prepaid

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1101AFE Accounting Principles Final Practice Exam SEM 1

a. What is internal control?

b. Why is internal control important?
c. Provide an example of separation of duties
d. Prepare bank reconciliation at 31st July

e. Prepare the journal entries to correct the accounts

Date
Account name

Dr $

Cr $

f. Post the relevant journal entries to the cash ledger account and balance
Cash

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1101AFE Accounting Principles Final Practice Exam SEM 1

Question 3
Maintain all your calculations of unit cost to 2 decimal places and total cost to nearest $
a. Complete the perpetual inventory record below
Inventory Record FIFO cost method
Wallets

Purchases

Date

Quantity

Unit
Cost

Cost of sales
Total
Cost

Quantity

Unit
Cost

Inventory on hand
Total
cost

Quantity

May 1
3

40
80

44

Total
Cost
1,600

3,520

45

21

30

45

1,350

25

15

50

750

30
Total

Unit
Cost
$40

92
125

5,620

b. If each Wallet sold for $78, what would the gross profit be for the month?

c. Complete the perpetual inventory record below

Inventory Record Average cost method
Wallets

Purchases

Date

Quantity

Unit
Cost

Cost of sales
Total
Cost

Quantity

Unit
Cost

Inventory on hand
Total
cost

Quantity

May 1
3

40
80

44

Total

Total
Cost
1,600

3,520

8
21
25
30

Unit
Cost
$40

45
30
15

45
50

1,350
750

92
125

5,620

d. If each Wallet sold for $78, what would the gross profit be for the month?

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1101AFE Accounting Principles Final Practice Exam SEM 1

e. Pittman Pictures uses a periodic inventory system. At the beginning of March there were 75 units
on hand and each unit cost $20. During March the following purchases were made. At the end of
March 86 units were on hand. Calculate ending inventory and cost of sales values using Average
and FIFO cost methods.
Maintain calculations of unit cost to 2 decimal places and total cost to nearest $. Show your
calculations
March 4

125 @

$28 =

3,500

12

85 @

$30 =

2,550

19

185 @

$32 =

5,920

25

44 @

$35 =

1,540

439

Total

$13,510

Ending inventory (Average)

Cost of sales (Average)

Ending inventory (FIFO)

Cost of sales (FIFO)

f. Which method from question e. above would produce the lowest profit and why?

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1101AFE Accounting Principles Final Practice Exam SEM 1

Question 4
At 30th June Cool Clothing had a normal accounts receivable balance of $32,000
The allowance for doubtful debts account has a normal balance of $600
i.
Cool Clothing estimates that 2% of net credit sales will not be collected
ii.
$26,000 was collected on account
iii.
Sales of $94,000 were made $35,000 on credit
iv. $650 is uncollectable and written off
a.

Prepare the journal entries to record the above transactions

Date
Account name
i.

Dr $

Cr $

ii.
iii.
iv.
b. Post the above transactions to the following ledger accounts
Accounts receivable
Allowance for doubtful debts

c. Show how Receivables would be reported in the classified Balance Sheet at 30th June

d. The company has decided to change to the direct write off method of accounting for bad debts and
has $650 of uncollectable debts that are to be written off. Prepare the entry to record the write off.
Date
Account name
Dr $
Cr $

e.

The following company uses ageing of accounts to determine bad debts. What would the journal
entry be given the following information?
Allowance for doubtful debts has a credit balance of $2,540
30 days
60 days
90 days
Accounts receivable
74,000
36,000
33,000
Estimated bad
1%
2.5%
3%
Total
Date
Account name
Dr $
Cr $

f. What is the fundamental difference between the % of sales and ageing of accounts receivable?

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1101AFE Accounting Principles Final Practice Exam SEM 1

Question 5
Whiting Ltd purchased equipment for $300,000 on 1st July, 2013. It is expected that the Equipment will
have a residual value of $30,000 at the end of its 4 year useful life (or 100,000 machine hours).
a. Calculate the Depreciation expense, Accumulated depreciation and Carrying amount for each of
the 4 years ended 30th June, to the nearest whole $ using the following depreciation methods:

Straight line
Reducing balance (rate = 40%)
Units of production (20,000 hours 2014; 16,000 hours 2015; 36,000 hours 2016 and 28,000 hours 2017)

Date
30th June 2014
30th June 2015
30th June 2016
30th June 2017

Straight-Line Method
Depreciation expense
Accumulated depreciation

Carrying amount

Reducing Balance Method

Date
30th June 2014
30th June 2015
30th June 2016
30th June 2017

Depreciation expense

Accumulated depreciation

Units-of-Production Method
Date
30th June 2014
30th June 2015
30th June 2016
30th June 2017

Depreciation expense

Carrying amount

Calculation of unit cost

Accumulated depreciation

Carrying amount

b. Record the journal entries required for the sale of the above Equipment using SL method if it sold on
the 31st December, 2016 for $65,000
Date
Account name
Dr $
Cr $

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1101AFE Accounting Principles Final Practice Exam SEM 1

Question 6
a. Peter, Paul and Mary have capital balances of $64,000, $96,000 and $160,000 respectively. The
first $120,000 of profit is shared based on partner capital balances. The next $43,000 is based on
service and shared equally between Peter and Paul. The remainder is divided equally.
Calculate each partners share of the $196,000 profit to the nearest whole $. Show your
calculations.
Peter

Paul

b. Record the journal entry to allocate profit to each partner from question a.
Account name
Dr $

Mary

Cr $

c. Mick, Nick and Rick show the following capital balances respectively: $100,000, $200,000 and
$300,000.
- Journalise the following independent situations admitting Vick as a new partner
- Calculate each partners new equity
Vick pays Rick $400,000 cash to purchase Ricks partnership interest

Vick invests $200,000 in partnership, acquiring interest

Vick invests $160,000 in partnership, acquiring interest

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