2010-2011上学期Accounting 1B

ACC100

DAY &DATE: TIME: WRITING TIME: 180 minutes

INSTRUCTIONS TO CANDIDATES:

1. Enter your name and student number in the space provided at the left of the test paper.

2. This is a closed book examination; therefore no written material, reference books or notes will be permitted into the examination room.

Part A (10marks)

MULTIPLE CHOICE (1 marks each)

Choose the one alternative that best completes the statement or answers the question.

1) Purchasing a building for $120,000 by paying cash of $20,000 and

obtaining a mortgage for $100,000 would:

A increase assets and increase liabilities by $100,000

B increase net assets by $100,000

C increase liabilities by $120,000

D decrease assets and decrease liabilities by $20,000

2) Liquidity ratios measure:

A the short term ability of a company to pay its maturing obligations

B the operating success of a company for a period of time

C the ability of a company to survive over a long time

D the extent to which a company’s assets a re financed by debt

3) Which is the correct order in which the following steps occur?

1. Post to the ledger

2. Prepare source document

3. Enter in the journal

4. Transaction occurs

A 2,4,3,1

B 4,2,3,1

C 4,2,1,3

D 4,1,3,2

4) A company that receives money in advance of performing a service:

A debits cash and credits accounts payable

B debits unearned revenue and credits accounts payable

C debits cash and credits unearned revenue

D debits cash and credits accounts receivable

5) If total lia bilities decreased by $14,000 during a period of time and shareholders’ equity

increased by

$6,000 during the same period then the change in total assets is

A an increase of $14,000

B an increase of $20,000

C a decrease of $8,000

D an increase of $8,000

6) The entries which set the balances of the temporary accounts to zero are called:

A closing entries

B balancing entries

C correcting entries

D adjusting entries

7) If revenues total $7,800 and expenses total $4,900 which journal entry properly shows the

closing of the temporary accounts?

A Retained Profits 7,800

Revenues 7,800

B Expenses 7,800

Retained Profits 7,800

C Profit and Loss Summary 2,900

Retained Profits 2,900

D Retained Profits 7,800

Profit and Loss Summary 2,900

8) In the current financial year Micro Services recorded the payment of $500 cash for a

previously accrued expense and the accrual of $325 for another expense. The impact of these two entries on total expenses and net profit for the year is:

Total Expenses Net Profit

A increase by $825 decrease by $325

B increase by $825 decrease by $825

C increase by $325 decrease by $325

D increase by $325 decrease by $825

9) Which of the following is not an example of a special purpose journal?

A sales journal

B cash receipts journal

C cash payments journal

D general journal

10) If the Johnson Company has the following opening account balances for debtors: $4,000,

$5,000, $2,000; and cash received from debtors during the period amounted to $3,000, then the closing balance of the control account for accounts receivable is

A $8,000

B $11,000

C $14,000

D $3,000

PART B (90 marks)

ALL SIX QUESTIONS NEED TO BE ANSWERED

Question 1 Financial statement analysis (10 marks) The following information has been extracted from the financial statements and the notes of Anna Bean Pty Ltd.

2006 2005

Cash assets $32 500 $36 000

Receivables 74 800 77 000

Prepaid expenses 4 400 6 600

Property plant and equipment 308 000 269 500

Current liabilities 183 700 167 200

Sales 979 000 951 500

Cost of Goods Sold 587 400 573 000

Total liabilities 593 000 567 000

Total assets 650 000 612 000

Net profit 98 000 83 000

Required:

i) Calculate the following for 2006:

1.Current ratio

2.Gross profit ratio

3.Debt to total assets ratio (6 marks)

ii) Based on the information calculated write a brief report that comments on Anna Bean Pty Ltd’s liquidity, profitability and solvency. (4 mar ks)

Question 2 Recording business transactions (10 marks) Mikes Bikes Pty. Ltd. opened a bike repair business on 1 July 2005. The following transactions occurred during the first month of operations:

July 1 Shareholders invested $100,000 in the business in exchange for shares in the company.

1 Paid $24,000 for the first six month’s rent.

1 Paid insurance premium for the year of $1,200.

2 Paid Local Energy Corp $300 for a deposit on electricity.

8 Purchased workshop equipment for a total cost of $16,500 by issuing a cheque for

$11,500 and signing a commercial loan agreement for $5,000.

10 Purchased supplies for $1,180

16 Recorded sales for the first half of the month of $6,480 in cash and $275 on account.

23 Received a $50 payment from customers on account.

28 Paid salaries of $1,500.

31 Recorded revenue for the second half of the month of $12,729 in cash and $530 on

account.

Required:

Prepare the general journal entries to record the above transactions

Question 3 Posting, adjusting entries and preparing financial statements (20 marks) Mecca’s Party Hire hires out equipment for parties. The unadjusted trial balance of the business appears as shown below.

The following information is supplied:

1.Expired insurance amounts to $850.

2.June electricity costs of $300 have not been paid or recorded.

3.Depreciation on the plant and equipment is $7,270.

4.The Rent Expense account accrued $660 for June 2008 rent have not been paid or recorded.

5.Salaries accrued in June amounting to $540 have not been recorded.

Required:

https://www.sodocs.net/doc/0b7171185.html,ing the above information, prepare the adjusting entries for the moth of June.

(explanations are required) (5 marks)

2.Calculate the Net profit, Retained profit for the year ended 30 June 2008. (only

calculation results are required) (6 marks)

3.Calculate the Asset, Liabilities and owner’s equity as at 30 June 2008. (only calculation

results are required) (9 marks)

Question 4 Cash journals (10 marks) Greg’s Glass Repairs Pty Ltd had the following cash related receipts during January 2006: Jan 1 The owner Gregory Glenister invested cash of $25,000 in the business

Jan 15 Sold services for cash totalling $5,600

Jan 18 Collected $200 in s ettlement of Wayne’s World outstanding account

Jan 23 Received proceeds of $7,000 bank loan taken out to cover cash flow problems Jan 28 Collected $150 in settlement of Fred Firkenstirker’s outstanding account Required

Using the following format:

Greg’s Glass Repairs

Cash Receipts Journal

Cash Accts Receivable Sales Other Accounts

Date Account credited DR CR CR CR

Record the above transactions in the cash receipts journal.

Question 5 Bank Reconciliation (15 marks) The following information is available for Forthright Investments regarding its 31 December 2005 bank statement

?Balance per bank statement is $10,300

?Balance per books is $9,653

?Cheque #412 for $1,948 and cheque #414 for $1,600 were not shown on the bank statement.

? A deposit in transit of $4,562 had not been received by the bank when the bank statement was generated.

? A bank debit memo indicated a dishonored cheque written by Bruce Garrett to Forthright Investments on 13 December for $279.

? A bank credit memo indicated a direct receipt of $1,975 into the bank on 20 December that was not recorded by the company.

?The bank statement indicated service charges of $35 that were not previously recorded by the company.

Required:

Prepare a bank reconciliation for Forthright Investments dated 31 December 2005 that includes adjustments to the General Ledger of the company.

Question 6 Statement of Cash Flows (25 marks) You have been employed by Kamaria Limited to prepare its cash flow statement. The company provides you with its 2006 Statement of Financial Performance as follows:

Kamaria Limited

Statement of Financial Performance

for the period ended 30 June 2006

Sales $60 000

Cost of Goods Sold 32 000

Gross Profit $28 000

Salaries expense $19 500

Depreciation expense 3 000

Total operating expenses $22 500

Net Profit $ 5 500

You determine that these numbers are correct. You review the company’s beginning and ending balance sheets and find that the cash balance was $2 300 on 1 July 2005 and $7 900 on 30 June

2006. In addition, you find the following changes:

Accounts receivable $4 100 decrease

Inventory 4 600 decrease

Accounts payable 2 800 decrease

Salaries payable 1 500 increase

Furthermore, you determine that during the year, the company sold equipment for $4 800, purchased land for $13 000 and repaid $2,100 of an outstanding bank loan, all for cash. Required:

1. Using the information calculated above, prepare the c ompany’s Statement of Cash Flows for the year ended 30 June 2006 using direct method. (18 marks)

2. Using the information calculated cash flows from operating activities for the year ended 30 June 2006 using indirect method. (7 marks)

Appendix 1

Ratio Calculation

Return on assets

Net profit Average total assets

Gross profit Gross profit Net sales

Net profit Net profit Net sales

Operating expenses to sales ratio Operating expenses

Net sales

Current

Current assets Current liabilities

Current cash debt coverage

Net cash provided by

operating activities Average current liabilities

Debt to total assets Total liabilities Total assets

Cash debt coverage

Net cash provided by operating activities Average total liabilities

Inventory turnover Cost of goods sold Average inventory

Receivables turnover

Net sales Average net receivables