MUF0022 ACCOUNTING UNIT 2
Writing time: 90 minutes


Sample Examination
Question Booklet

Structure of Examination
Section Type of question
Number of
questions
Number of
questions to
be answered
Number of
marks
n/a Problem Based 7 7 60
Total Marks 60

Instructions
Answer ALL questions.
There are 7 questions in total.
Write your response to each question in the spaces provided in the Answer Booklet.
Candidates must write clearly and in English.
Materials Allowed:
A scientific (non-programmable) calculator is allowed.



Monash University Foundation Year

Page 2 of 8

Question 1 (14 marks)

Kate’s Pet Shop sells three products - Bird Cage, Cat Litter and Dog Food. On 1 October 2019, the
business had the following stock on hand:

No. of units Cost $ Total $
5 250 1 250


During October, the following financial transactions took place:


Oct 1 Sold 3 Bird Cages for $500 each (Rec. 1)
5 Purchased 2 Bird Cages for $500 from Felines (Inv. 67Y2)
10 Sold 2 Bird Cages to Birds Galore for $1 000 (Inv. 1)
12 Kate donated 1 Bird Cage to Home School for use in a raffle (Memo 1)
17 Purchased 4 Bird Cages for $250 each (Chq. 1)
29 Purchased 5 Bird Cages for $300 each from We Make Bird Cages (Inv. 786)
30 Returned 1 Bird Cage purchased on the 29 October to We Make Bird Cages (Credit note
45)
31 A stocktake revealed 7 Bird Cages on hand (Memo 2)




a. Record the transactions for October 2019 in the stock card for Bird Cage.
8 marks


b. Calculate the Cost of Sales of Bird Cages for October 2019
1 mark


c. Record Memo 2 into the General Journal of Kate’s Pet Shop. A narration is required.
3 marks


d. State two benefits of using stock cards for Kate’s Pet Shop.
2 marks

Page 3 of 8

Question 2 (7 marks)

On 31 January 2018, Bodyworks returned 4 car tyres to Flat-out Tyers. Each tyre was purchased by
Bodyworks for $80 each (cost price $40 each) (Credit note CN456).




a. Record the above transaction into the General Journal of Flat-out Tyers. A narration is not
required.

4 marks


b. State the effect on the accounting equation if the transaction is not recorded.
3 marks



Page 4 of 8

Question 3 (9 marks)

Tracy operates Tracy’s Toy Store. Tracy’s Toy Store purchased new Office Equipment on 31 December
2017 for cash (Rec. 678). The Office Equipment costs $5 000.

Tracy estimates that the Office Equipment will last for three years. She also believes that after the three
years, the Office Equipment will have a residual value of at $800.





a. State an Accounting Assumption that is related to depreciation expense.
1 mark


b. Calculate Depreciation expense for the year ending 31 March 2018.
2 marks


c. Show the General Journal entry necessary to record the depreciation of the Office Equipment for
the year ending 31 March 2018 (Memo 543). A narration is not required.
2 marks


d. Post the General Journal entry to the relevant accounts of the General Ledger of Tracy’s Toy
Store.

2 marks


e. Define an expense and explain why depreciation expense is reported in the Income Statement.

2 marks


Page 5 of 8

Question 4 (8 marks)

During 2018, Peter’s Mugs paid $13 500 for advertising, but as at 31 December 2018 a further $4 300
was still owing (Memo 31).




a. Calculate Advertising Expense for the year ended 31 December 2018 for Peter’s Mugs.
1 mark


b. Referring to one Qualitative Characteristic, explain why the advertising owing should be included
in the Advertising Expense for the year 2018.
3 marks


c. Show the General Journal entries necessary to record advertising owing as at 31 December
2018. A narration is not required.
2 marks


d. Explain how Accrued Advertising would be reported in the Balance Sheet of Peter’s Mugs as at
31 December 2018.
2 marks




Page 6 of 8

Question 5 (7 marks)

On 1 January 2018, Benny’s Bazaar received $1 200 from a friend who rented out a small area of
Benny’s Bazaar (Rec. 45). The amount was for 12 months starting 1 January 2018.




a. Record the transaction on 1 January 2018 into the Cash Receipts Journal.
1 mark


Benny’s Bazaar prepares its financial reports on a quarterly basis. The next balance day is 31 March
2018.


b. Record the adjusting entry for the rent as at 31 March 2018 (Memo 5). A narration is required.

3 marks


c. State the effect on the Accounting Equation if the adjustment is not made.
3 marks


Page 7 of 8

Question 6 (4 marks)
Below is a graphical representation showing financial data related to the performance of Dan’s Coffee
Machines.








a. Describe the trend in Sales over the period.
1 mark


b. Explain why Gross Profit is increasing yet Net Profit is decreasing.
2 marks


c. State one way the business can improve Net Profit.
1 mark

Page 8 of 8

Question 7 (11 marks)

Jiang owns and operates Jiang’s Games Shop. The business has calculated the following performance
indicators for the years 2017 and 2018:
Performance Indicators 2017 2018
Return on Investment (ROI) 15% 10%
Net Profit Margin (NPM) 10% 5%
Debtors Turnover (DTO) 45 days 28 days
Working Capital Ratio (WCR) 1:35:1 0.75:1
Gearing Ratio (GR) 60% 80%

Additional information
• The Industry Average for Return on Investment (ROI) in 2018 was 15%.
• Credit term offered to debtors is 30 days.



a. Distinguish between profit and profitability.
2 marks


b. Explain if Jiang should be happy with the performance of the business in terms of profitability.

3 marks


c. Explain if Jiang should be happy with the performance of the business in terms of efficiency.

2 marks


d. Describe the trend in the Working Capital Ratio and explain one concern about the trend.
2 marks


e. Explain two ways that Jiang could improve the Gearing Ratio.
2 marks





END OF QUESTION BOOKLET