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ACCT2511-无代写
时间：2023-05-02
UNSW BUSINESS SCHOOL
SCHOOL OF ACCOUNTING, AUDITING & TAXATION
ACCT 2511:
Financial Accounting Fundamentals
PRACTICE EXAMINATION – QUESTIONS ONLY
Term 3, 2022
Information similar (but not identical) to what is below will be on the cover page in
your Final Exam:
1. Time allowed – 2 hours, plus 15 minutes reading time.
2. Total marks available – 50 marks, worth X% of the total marks for the course.
3. This is a closed book exam.
4. Answer all questions. The exam is divided into X sections:
Section 1 of PRACTICE EXAM - contains multiple choice questions (16 marks in total). Select
the best and most appropriate answer for each question.
Section 2 of PRACTICE EXAM - contain questions of unequal value. Answers to these
sections must be typed in the boxes provided. Marks available for each question are shown in
the exam (34 marks in total).
5. Students are advised to read all of the examination questions before attempting to answer the
questions.
6. This exam cannot be copied, forwarded, or shared in any way.
7. Students have been reminded of the UNSW rules regarding Academic Integrity and Plagiarism.
8. Your work will be saved periodically throughout the exam and will be automatically submitted
when the test ends, provided that you are connected to the internet.
9. You must complete all of your work within the exam time. There is no extra time. No late
submissions will be accepted.
In addition for students doing exam by Zoom:
10. You must remain in this Zoom meeting and keep your camera and screensharing on for the
entirety of the exam. Not doing so will result in a potential academic misconduct.
11. Please keep your speakers on during the exam (do not mute yourself), but also do not talk to the
invigilator - type your messages to them only.
1
SECTION I: MULTIPLE CHOICE QUESTIONS (16 marks)
1. AAA Ltd has the following transactions for year ended 30 June 2019:
(1) Produced 120,000 units at a cost of $10 each
(2) Sold and delivered 80,000 units at a price of $20 each and
(3) Collected cash on 40,000 units of those sold.
Which of the following statements is true for the year ended 30 June 2019?
a. The company's cost of goods sold is $1,200,000 this year
b. The company earned $2,400,000 sales revenue this year
c. The company's gross profits from this sale is $800,000 this year
d. The company's inventory decreased by $1,200,000 this year due to sales
e. The company collected $1,600,000 cash from the sale
2. Which of the following affects the balance of total shareholders’ equity of the
financial year ended 30 June 2020?
a. The company makes a net profit after tax of $100,000 for the financial year
b. The company transfers $50,000 from retained profits to general reserves
c. The company receives $100,000 cash deposits from a customer, for work to be
delivered in the next financial year starting 1 July 2020.
d. The company declares and performs a 4:1 share split
e. The company declares and issues $10,000 worth of bonus shares out of the
revaluation reserve.
3. On 1 July 2019, XYZ Ltd received $100,000 in cash from customer ABC for an order
of 100,000 units of its product. By the end of the financial year (assume the financial
year starts on 1 July 2019 and ends on 30 June 2020), XYZ Ltd had delivered 35,000
units of product to ABC (selling price per unit is $1).
The rest of the cash received in in advance from ABC relates to goods that will be
provided in the next financial year. XYZ sets its selling price by employing a 100%
mark up on the cost of inventory.
Which of the following statements is true for transactions between XYZ and ABC for the
financial year ended 30 June 2020?
a. XYZ’s COGS was $35,000
b. XYZ’s inventory decreased by $35,000
c. The closing balance of unearned revenue relating to ABC was $35,000
d. XYZ generated sales revenue of $65,000 from ABC
e. XYZ’s COGS was $17,500
2
4. A company made an offer to issue 10,000 shares at $5, requiring $2 per share to be
paid at the time of application. On allotment, another $1 was due and a further $2 was
to be called when determined by the board of directors. There was no
oversubscription or undersubscription. The application money was received on 10
August 2019. On 31 August, the shares were allotted. The allotment money was
received on 15 September. The remaining $2 was called up on 20 October and
received on 5 November.
If the company had a Share Capital balance of $150,000 on 9 August 2019, what was the
closing balance of Share Capital on 31 August 2019?
a. $170,000
b. $180,000
c. $200,000
d. $190,000
e. $150,000
5. On 1 January 2020, ABC Ltd signed a contract worth $30,000,000 to construct an
apartment complex. The complex is to be built over five years, with progress
payments of $6,000,000 to be received at the end of each year. Estimated costs were
$20,000,000 and the following costs incurred by ABC Ltd represented the percentage
completed in each year: $10,000,000 in 2020, $3,000,000 in 2021, $4,000,000 in
2022, $2,000,000 in 2023, $1,000,000 in 2024. The project will be completed in
December 2024.
Using the percentage of completion method, how much profit would ABC report for
the financial year ended 31 December 2020?
a. $6,000,000 profit
b. $1,000,000 profit
c. $3,000,000 profit
d. $10,000,000 profit
e. $5,000,000 profit
3
6. As of 30 June 2019, AAA Ltd had share capital of $500,000, consisting of 100,000
ordinary shares issued at $5 each. On 30 June 2019, AAA Ltd decided to declare a
dividend of $0.15 per share out of retained profits. The dividends were paid to
shareholders on 15 September 2019.
Which of the following belongs to the journal entry to record AAA Ltd’s payment of
the cash dividend on 15 September?
a. DR Cash $15,000
b. CR Share capital $15,000
c. DR Dividends payable $15,000
d. DR Retained profits $15,000
e. DR Share capital $15,000
7. A company issues bonus shares to shareholders out of the Revaluation Reserve.
Which of the following statements is true?
a. The company's total equity increases
b. Total number of shares increase
c. No journal entries are needed to record this bonus issue
d. The shareholders need to pay extra money to the company to obtain these bonus
shares
e. Revaluation reserve increases
8. On 1 July 2019, ABC Pty Ltd issued 500 two-year bonds with a face value of $1000
and a coupon interest rate of 5 per cent per annum, payable annually in arrears at the
end of the financial year. The bonds were well received by the market, and the issue
price for each bond was $1038.30. The market rate was 3% at the time the bonds were
issued.
What will be the total interest expense recognised by the company over the life of the
bonds (ignore any tax implications; select the most appropriate answer):
A. $25,000
B. $50,000
C. $30,850
D. $69,150
E. $19,150
4
9. XYZ Ltd sold a piece of equipment on 1 July 2019 for $50,000 ($30,000 was received
in cash, and the remaining $20,000 on credit). On 1 July 2019, after depreciation had
been updated and immediately prior to the equipment’s disposal, the following was
shown in the company’s records. What was the Gain/Loss on sale of the equipment?
Original Cost of
equipment
Residual value of
equipment
Expected useful life Accumulated
Depreciation
(straight line)
$62,500 $7,500 10 years $5,500
A. $32,500 Loss on sale
B. $7,500 Gain on sale
C. $12,500 Gain on sale
D. $12,500 Loss on sale
E. $7,000 Loss on sale
10. XYZ Pty Ltd purchased new equipment for $600,000 on 1 July 2015. The equipment
was expected to have a useful life of 20 years, with residual value of $10,000, and
depreciated using the straight-line depreciation method.
XYZ uses the revaluation method for valuing its equipment. The first time that the
equipment was revalued was at 30 June 2018, and at this date the fair value was
$605,000. On 30 June 2019, the company conducted impairment testing and found
that the equipment’s fair value less cost sell was $545,000, whereas its value in use
was $550,000.
Assuming that there were no changes to the equipment’s useful life, residual value or
depreciation method as a result of the revaluation or impairment, what depreciation expense
would be recorded for the equipment for the financial year ended 30 June 2020?
A. $33,750
B. $39,667
C. $33,437
D. $35,000
E. $29,500
11. ABC Limited purchased land for $5 million. In the second year, the land was revalued
to $3 million. In the third year, the land was revalued to $2 million. At the beginning
of the fourth year, the land was sold for $3 million. Which of the following belongs to
the journal entries for the sale of land?
A. CR Land 5 million
B. CR Land 2 million
C. DR Loss on sale 1 million
D. DR Gain on sale 1 million
E. CR Revaluation reserve 1 million
5
12. A machine had a purchase price of $100,000. Prior to being ready for use, it required
a major overhaul of $10,000 to improve its efficiency, installation costs of $2,000,
delivery cost of $1,000. It has an estimated residual value of $1,000, a remaining
useful life of 10 years, and a yearly maintenance cost of $1,000. Assume straight-line
depreciation. The machine was put into use on 1 July 2019. What would be the
depreciation expense for the year ended 30 June 2020?
A. $10,000
B. $11,000
C. $11,200
D. $11,300
E. $11,400
13. Which of the following will be recorded as a contingent liability in the notes to the
financial statements of BBT Ltd?
A. Estimated cost of providing warranty for the goods sold
B. Wages owed to employees
C. A lawsuit against BBT Ltd where it is probable that the company will be found liable
but the amount of the damages cannot be reliably measured
D. A guarantee that BBT Ltd provided to a lender for a loan taken out by a subsidiary
company where a default on the loan is very likely and amount can be reliably
estimated
E. Estimated amount of doubtful debts
14. On 30 June 2018, a company issued 500 bonds ($100 face value each) with a maturity
date on 30 June 2021. The coupon rate was 5% and market rate was 3%. The coupon is
paid annually. The company received $51,900 in total in cash from the bondholders.
Which of the below is true in relation to the impact on the company’s financial
statements of making the first coupon payment on 30 June 2019?
A. Its total liabilities increased by $51,900
B. Its expenses decreased by $1,557
C. Its total assets decreased by $1,557
D. Its total liabilities decreased by $943
E. Its expenses increased by $2,500
6
15. XYZ Limited purchased land for $10 million. In the second year, the land was revalued
to $15 million. In the third year, the land was revalued to $12 million. At the beginning
of the fourth year, the land was sold for $11 million. Which of the following belongs to
the journal entries for the sale of land?
A. CR Land 10 million
B. CR Land 11 million
C.DR Loss on sale 1 million
D.CR Gain on sale 1 million
E. DR Retained profits 2 million
16. On 1 January 2014, ABC Ltd signed a contract worth $21,000,000 to construct a light
rail. The light rail was to be built over three years, with progress payments of
$7,000,000 to be received at the end of each year. Estimated costs were $15,000,000
and the following costs incurred by ABC Ltd represented the percentage completed in
each year:
2014 $8,000,000
2015 $4,000,000
2016 $3,000,000
The project was completed in December 2016.
Using the percentage of completion method, how much profit would ABC Ltd report for the
financial year ended December 2016?
a. $1,200,000
b. $7,000,000
c. $5,000,000
d. $200,000
e. $600,000
7
SECTION 2: CALCULATION AND SHORT-ANSWER QUESTIONS (34 marks)
NOTE for anybody trying to compare this document content with what is in the Inspera practice
exam: we have not numbered our questions in Inspera. This is to avoid confusion as the page
numbers in Inspera are too prominent (they look like question numbers). So for example, Q17
part 2 in this document is on page 18 of Inspera, Question 18 in this document appears on page
19 of Inspera etc.
17. Provided below is the balance sheet for the ABC Ltd for the years ending 30 June
2019 and 30 June 2020, Income statement for 2020, and additional information.
ABC Ltd
Balance sheet
As at 30 June 2019 and 2020
2020 2019
$ $
ASSETS
Cash 53,700 57,000
Accounts receivable 50,000 32,000
Allowance for doubtful debts (15,000) (6,000)
Inventory 78,500 10,000
Prepaid insurance 15,000 7,000
Land 42,000 70,000
Buildings 250,000 100,000
Less: Accumulated depreciation -
buildings (25,000) (11,000)
Equipment 142,000 68,000
Less: Accumulated depreciation -
equipment (24,000) (10,000)
TOTAL ASSETS $567,200 $317,000
LIABILITIES AND EQUITY
Accounts payable 65,000 56,000
Interest payable 4,000 1,000
Accrued expenses 8,000 6,000
Tax payable 12,000 15,000
Short-term loan 65,000 123,000
Share capital 250,000 60,000
Revaluation reserve 15,000 7,000
General reserve 20,000 13,000
Retained profits 128,200 36,000
TOTAL LIABILITIES AND EQUITY $567,200 $317,000
8
ABC Ltd
Income Statement
For the period ended 30 June 2020
Sales 898,000
Cost of goods sold 460,000
Bad debts expense 15,000
Insurance expense 5,000
Interest expense 22,000
Salaries and wages 75,000
Other expenses 66,400
Loss on sale -
equipment 1,000
253,600
Other income:
Gain on sale of land 4,000
Interest revenue 2,000
Profit before tax 259,600
Income Tax Expense (65,000)
Net Profit After Tax $194,600
Additional information during the year:
• All sales were on credit and the company purchased all inventory on credit.
• The company sold some land for cash.
• The company sold equipment (carrying value of $36,000 and an original cost of
$41,000).
• The company did not sell any buildings during the financial year.
• The company revalued their land upwards this year. The company did not revalue any
other non-current assets.
• The company issued $5,000 worth of bonus shares out of revaluation reserves.
• The company spent $10,000 to buy back 1,000 shares that were originally issued at $7
each.
9
Required:
(1) Write a summary journal entry for cash received from customers (2 marks)
(2) Prepare the cash flows from financing section of the cash flow statement for the year
ended 30 June 2020 (4 marks)
18. Commodore Ltd sells toy boats. These toy boats are called Neos and are sold with a 5-
year warranty. The company allows for returns of faulty Neos units for brand new units;
alternatively, customers can be provided with a cash refund if a Neo is broken during
the warranty period. Each Neo unit is sold for $50 and costs $15 to manufacture. During
the financial year ending 30 June 2020 Commodore Ltd had the following financial
information:
Sales revenue $500,000
Cost of Goods Sold $150,000
Prior experience with the Neo unit sales provides it with an estimate of:
Expected returns of products for refund: 7%
Expected returns of products to be exchanged for new products: 5%
a. Record the journal entry to record to recognise a warranty liability in relation
to Commodore Ltd's returns policy (1 mark)
10
b. As at 30 June 2020, Commodore Ltd had received 230 faulty Neo units returned.
From this total amount of returned Neo units, 70% were returned for cash and
the remaining 30% were exchanged with new Neo units. Record the journal
entry for refunding cash and replacing the faulty products (2 marks) (ignore any
tax implications)
19. The following information is taken from the accounts of ABC Ltd. During the year it
sold plant (machinery) for cash.
$
Plant, 1 July 2018 200,000
Plant, 30 June 2019 300,000
Accumulated Depreciation – Plant, 1 July 2018 45,000
Accumulated Depreciation – Plant, 30 June 2019 50,000
Depreciation Expense – Plant, year ended 30 June 2019 15,000
Gain on sale of plant, year ended 30 June 2019 8,000
Original cost of plant sold during the year 80,000
Write the journal entry for the sale of plant (2 marks)
11
20. Consecutive balance sheets of ABC Ltd showed the following balances:
30 June 30 June
2022 2021
$000 $000
Land 800 700
Equipment 240 280
Accumulated depreciation –
equipment
(120) (100)
The following information is relevant for calculations relating to the year ended 30 June 2022:
• The only non-current assets the company have are land and equipment.
• Land was revalued downwards by $50,000.
• The company did not sell any land during the year.
• The company did not revalue their equipment during the year as the market
value did not change.
• The company sold a piece of equipment with original value of $50,000 and
accumulated depreciation of $20,000, and made a gain on sale of $5,000.
• Assume all purchases and sales of non-current assets are with cash.
Prepare the cash flows from investing section of the cash flow statement for the year
ended 30 June 2022 (4 marks).
12
21. Cash flows from operations for Jackson Ltd was $154,500 for the period ending 30
June 2022. Depreciation for the period was $60,000. Balances of current asset and
current liability accounts are listed below:
30 June 2022 30 June 2021
$ $
Cash 75,000 80,000
Accounts Receivable 140,000 120,000
Inventories 180,000 205,000
Prepaid Insurance 3,500 3,000
Accounts Payable 100,000 110,000
What is the net profit or net loss for the period ending 30 June 2022? (1 mark). Select Net
Profit or Net Loss from the dropdown menu and type the amount/number in the box
provided. In your answers, include numbers only. No text, no commas, no signs or
symbols etc.
Dropdown menu – Choices (Net Profit vs. Net Loss) $
22. The following opening balances are provided on 1 July 2019 for Wonder Alice Ltd:
Retained Profits $50,000
Share Capital $100,000
General reserve $30,000
Total Shareholder’s Equity $180,000
• The company made a net profit after tax of $50,000 for the financial year (1 July 2019
to 30 June 2020).
• The company paid $50,000 to buy back 2,000 shares during the financial year (these
shares were originally issued at $20 each).
• The company transferred $15,000 from retained profits to general reserve on 20 May
2020.
• The company declared and paid cash dividends totalled $20,000 during the financial
year.
• During the financial year, the company issued 1,000 new shares to an institutional
investor and received $15,000 cash.
What is the ending balance for Retained profits on 30 June 2020? (1 mark). In your answers,
include numbers only. No text, no commas, no signs or symbols etc.
$
13
23. The following information is taken from the accounts of QRS Ltd.
$
Accounts Receivable, 1 January 2022 200,000
Accounts Receivable, 31 December 2022 224,000
Allowance for Doubtful Debts, 1 January 2022 15,000
Allowance for Doubtful Debts, 31 December 2022 20,000
Credit sales for the year ended 31 December 2022 240,000
Cash received from customers for credit sales during the year
ended 31 December 2022
210,000
A. Write the summary journal entry that would have recorded bad debt write offs during the
year (2 marks)
B. Write the adjusting journal entry that would have recorded bad debts expense for the year
(2 marks)
C. What is the estimated collectable value of Accounts Receivable as at 31 December 2022?
(1 mark)
In your answers, include numbers only. No text, no commas, no signs or symbols etc.
$
D. Imagine that the auditor of QRS has expressed concerns that the bad debts expense
recorded for the year is not high enough. What would be the impact on the reported value
of the following items if the auditor requires an adjustment to be made? Select higher,
lower or no effect from the drop down menu. (3 marks)
Item Indicate higher/lower/no effect
Cash
Accounts Receivable
Allowance for Doubtful Debts
Bad debts expense
Current Assets
Net Profit
14
24. A. What is the difference between the allowance method of accounting for bad debts and
the direct write-off method? (2 marks)
B. Provide two (2) reasons why businesses may choose to use the allowance method. (2
marks)
25. JKL buys and sells a single product. It uses a perpetual inventory system, with a moving
average cost flow assumption. On 1 June 2022, it had 10 units at $7 per unit on hand.
During the month ended June 30, 2022, inventory activity was as follows:
Purchases
June 10 15 units at $6
June 20 10 units at $4
Sales
June 5 7 units at $15
June 19 12 units at $15
A. What is the value of ending inventory on June 30? Show workings (round to two decimal
places at each step of your calculations). (2 marks)
15
B. Would June profit be higher, lower or unchanged if LIFO had been used instead? Explain
why (1 mark)
26. MNO Ltd makes two types of wood chopping boards: the Hardy and the Bardy. At
the beginning of the financial year, MNO estimates that it will incur $40,000 in
manufacturing overheads, $10,000 in selling and admin costs, and will make 500
chopping boards (300 Hardy boards and 200 Bardy boards) in the current year. MNO
uses a normal costing system and allocates overhead based in number of units
produced. Prices are set equal to cost plus 30% mark up.
The Hardy chopping board uses up 0.5m of a wood plank, and requires 2 hours of labour.
One metre wood planks cost $100 each, and labour costs $40 per hour.
What price will MNO charge for each Hardy chopping board? (2 marks). In your
answers, include numbers only. No text, no commas, no signs or symbols etc.
$
End of examination
SCHOOL OF ACCOUNTING, AUDITING & TAXATION
ACCT 2511:
Financial Accounting Fundamentals
PRACTICE EXAMINATION – QUESTIONS ONLY
Term 3, 2022
Information similar (but not identical) to what is below will be on the cover page in
your Final Exam:
1. Time allowed – 2 hours, plus 15 minutes reading time.
2. Total marks available – 50 marks, worth X% of the total marks for the course.
3. This is a closed book exam.
4. Answer all questions. The exam is divided into X sections:
Section 1 of PRACTICE EXAM - contains multiple choice questions (16 marks in total). Select
the best and most appropriate answer for each question.
Section 2 of PRACTICE EXAM - contain questions of unequal value. Answers to these
sections must be typed in the boxes provided. Marks available for each question are shown in
the exam (34 marks in total).
5. Students are advised to read all of the examination questions before attempting to answer the
questions.
6. This exam cannot be copied, forwarded, or shared in any way.
7. Students have been reminded of the UNSW rules regarding Academic Integrity and Plagiarism.
8. Your work will be saved periodically throughout the exam and will be automatically submitted
when the test ends, provided that you are connected to the internet.
9. You must complete all of your work within the exam time. There is no extra time. No late
submissions will be accepted.
In addition for students doing exam by Zoom:
10. You must remain in this Zoom meeting and keep your camera and screensharing on for the
entirety of the exam. Not doing so will result in a potential academic misconduct.
11. Please keep your speakers on during the exam (do not mute yourself), but also do not talk to the
invigilator - type your messages to them only.
1
SECTION I: MULTIPLE CHOICE QUESTIONS (16 marks)
1. AAA Ltd has the following transactions for year ended 30 June 2019:
(1) Produced 120,000 units at a cost of $10 each
(2) Sold and delivered 80,000 units at a price of $20 each and
(3) Collected cash on 40,000 units of those sold.
Which of the following statements is true for the year ended 30 June 2019?
a. The company's cost of goods sold is $1,200,000 this year
b. The company earned $2,400,000 sales revenue this year
c. The company's gross profits from this sale is $800,000 this year
d. The company's inventory decreased by $1,200,000 this year due to sales
e. The company collected $1,600,000 cash from the sale
2. Which of the following affects the balance of total shareholders’ equity of the
financial year ended 30 June 2020?
a. The company makes a net profit after tax of $100,000 for the financial year
b. The company transfers $50,000 from retained profits to general reserves
c. The company receives $100,000 cash deposits from a customer, for work to be
delivered in the next financial year starting 1 July 2020.
d. The company declares and performs a 4:1 share split
e. The company declares and issues $10,000 worth of bonus shares out of the
revaluation reserve.
3. On 1 July 2019, XYZ Ltd received $100,000 in cash from customer ABC for an order
of 100,000 units of its product. By the end of the financial year (assume the financial
year starts on 1 July 2019 and ends on 30 June 2020), XYZ Ltd had delivered 35,000
units of product to ABC (selling price per unit is $1).
The rest of the cash received in in advance from ABC relates to goods that will be
provided in the next financial year. XYZ sets its selling price by employing a 100%
mark up on the cost of inventory.
Which of the following statements is true for transactions between XYZ and ABC for the
financial year ended 30 June 2020?
a. XYZ’s COGS was $35,000
b. XYZ’s inventory decreased by $35,000
c. The closing balance of unearned revenue relating to ABC was $35,000
d. XYZ generated sales revenue of $65,000 from ABC
e. XYZ’s COGS was $17,500
2
4. A company made an offer to issue 10,000 shares at $5, requiring $2 per share to be
paid at the time of application. On allotment, another $1 was due and a further $2 was
to be called when determined by the board of directors. There was no
oversubscription or undersubscription. The application money was received on 10
August 2019. On 31 August, the shares were allotted. The allotment money was
received on 15 September. The remaining $2 was called up on 20 October and
received on 5 November.
If the company had a Share Capital balance of $150,000 on 9 August 2019, what was the
closing balance of Share Capital on 31 August 2019?
a. $170,000
b. $180,000
c. $200,000
d. $190,000
e. $150,000
5. On 1 January 2020, ABC Ltd signed a contract worth $30,000,000 to construct an
apartment complex. The complex is to be built over five years, with progress
payments of $6,000,000 to be received at the end of each year. Estimated costs were
$20,000,000 and the following costs incurred by ABC Ltd represented the percentage
completed in each year: $10,000,000 in 2020, $3,000,000 in 2021, $4,000,000 in
2022, $2,000,000 in 2023, $1,000,000 in 2024. The project will be completed in
December 2024.
Using the percentage of completion method, how much profit would ABC report for
the financial year ended 31 December 2020?
a. $6,000,000 profit
b. $1,000,000 profit
c. $3,000,000 profit
d. $10,000,000 profit
e. $5,000,000 profit
3
6. As of 30 June 2019, AAA Ltd had share capital of $500,000, consisting of 100,000
ordinary shares issued at $5 each. On 30 June 2019, AAA Ltd decided to declare a
dividend of $0.15 per share out of retained profits. The dividends were paid to
shareholders on 15 September 2019.
Which of the following belongs to the journal entry to record AAA Ltd’s payment of
the cash dividend on 15 September?
a. DR Cash $15,000
b. CR Share capital $15,000
c. DR Dividends payable $15,000
d. DR Retained profits $15,000
e. DR Share capital $15,000
7. A company issues bonus shares to shareholders out of the Revaluation Reserve.
Which of the following statements is true?
a. The company's total equity increases
b. Total number of shares increase
c. No journal entries are needed to record this bonus issue
d. The shareholders need to pay extra money to the company to obtain these bonus
shares
e. Revaluation reserve increases
8. On 1 July 2019, ABC Pty Ltd issued 500 two-year bonds with a face value of $1000
and a coupon interest rate of 5 per cent per annum, payable annually in arrears at the
end of the financial year. The bonds were well received by the market, and the issue
price for each bond was $1038.30. The market rate was 3% at the time the bonds were
issued.
What will be the total interest expense recognised by the company over the life of the
bonds (ignore any tax implications; select the most appropriate answer):
A. $25,000
B. $50,000
C. $30,850
D. $69,150
E. $19,150
4
9. XYZ Ltd sold a piece of equipment on 1 July 2019 for $50,000 ($30,000 was received
in cash, and the remaining $20,000 on credit). On 1 July 2019, after depreciation had
been updated and immediately prior to the equipment’s disposal, the following was
shown in the company’s records. What was the Gain/Loss on sale of the equipment?
Original Cost of
equipment
Residual value of
equipment
Expected useful life Accumulated
Depreciation
(straight line)
$62,500 $7,500 10 years $5,500
A. $32,500 Loss on sale
B. $7,500 Gain on sale
C. $12,500 Gain on sale
D. $12,500 Loss on sale
E. $7,000 Loss on sale
10. XYZ Pty Ltd purchased new equipment for $600,000 on 1 July 2015. The equipment
was expected to have a useful life of 20 years, with residual value of $10,000, and
depreciated using the straight-line depreciation method.
XYZ uses the revaluation method for valuing its equipment. The first time that the
equipment was revalued was at 30 June 2018, and at this date the fair value was
$605,000. On 30 June 2019, the company conducted impairment testing and found
that the equipment’s fair value less cost sell was $545,000, whereas its value in use
was $550,000.
Assuming that there were no changes to the equipment’s useful life, residual value or
depreciation method as a result of the revaluation or impairment, what depreciation expense
would be recorded for the equipment for the financial year ended 30 June 2020?
A. $33,750
B. $39,667
C. $33,437
D. $35,000
E. $29,500
11. ABC Limited purchased land for $5 million. In the second year, the land was revalued
to $3 million. In the third year, the land was revalued to $2 million. At the beginning
of the fourth year, the land was sold for $3 million. Which of the following belongs to
the journal entries for the sale of land?
A. CR Land 5 million
B. CR Land 2 million
C. DR Loss on sale 1 million
D. DR Gain on sale 1 million
E. CR Revaluation reserve 1 million
5
12. A machine had a purchase price of $100,000. Prior to being ready for use, it required
a major overhaul of $10,000 to improve its efficiency, installation costs of $2,000,
delivery cost of $1,000. It has an estimated residual value of $1,000, a remaining
useful life of 10 years, and a yearly maintenance cost of $1,000. Assume straight-line
depreciation. The machine was put into use on 1 July 2019. What would be the
depreciation expense for the year ended 30 June 2020?
A. $10,000
B. $11,000
C. $11,200
D. $11,300
E. $11,400
13. Which of the following will be recorded as a contingent liability in the notes to the
financial statements of BBT Ltd?
A. Estimated cost of providing warranty for the goods sold
B. Wages owed to employees
C. A lawsuit against BBT Ltd where it is probable that the company will be found liable
but the amount of the damages cannot be reliably measured
D. A guarantee that BBT Ltd provided to a lender for a loan taken out by a subsidiary
company where a default on the loan is very likely and amount can be reliably
estimated
E. Estimated amount of doubtful debts
14. On 30 June 2018, a company issued 500 bonds ($100 face value each) with a maturity
date on 30 June 2021. The coupon rate was 5% and market rate was 3%. The coupon is
paid annually. The company received $51,900 in total in cash from the bondholders.
Which of the below is true in relation to the impact on the company’s financial
statements of making the first coupon payment on 30 June 2019?
A. Its total liabilities increased by $51,900
B. Its expenses decreased by $1,557
C. Its total assets decreased by $1,557
D. Its total liabilities decreased by $943
E. Its expenses increased by $2,500
6
15. XYZ Limited purchased land for $10 million. In the second year, the land was revalued
to $15 million. In the third year, the land was revalued to $12 million. At the beginning
of the fourth year, the land was sold for $11 million. Which of the following belongs to
the journal entries for the sale of land?
A. CR Land 10 million
B. CR Land 11 million
C.DR Loss on sale 1 million
D.CR Gain on sale 1 million
E. DR Retained profits 2 million
16. On 1 January 2014, ABC Ltd signed a contract worth $21,000,000 to construct a light
rail. The light rail was to be built over three years, with progress payments of
$7,000,000 to be received at the end of each year. Estimated costs were $15,000,000
and the following costs incurred by ABC Ltd represented the percentage completed in
each year:
2014 $8,000,000
2015 $4,000,000
2016 $3,000,000
The project was completed in December 2016.
Using the percentage of completion method, how much profit would ABC Ltd report for the
financial year ended December 2016?
a. $1,200,000
b. $7,000,000
c. $5,000,000
d. $200,000
e. $600,000
7
SECTION 2: CALCULATION AND SHORT-ANSWER QUESTIONS (34 marks)
NOTE for anybody trying to compare this document content with what is in the Inspera practice
exam: we have not numbered our questions in Inspera. This is to avoid confusion as the page
numbers in Inspera are too prominent (they look like question numbers). So for example, Q17
part 2 in this document is on page 18 of Inspera, Question 18 in this document appears on page
19 of Inspera etc.
17. Provided below is the balance sheet for the ABC Ltd for the years ending 30 June
2019 and 30 June 2020, Income statement for 2020, and additional information.
ABC Ltd
Balance sheet
As at 30 June 2019 and 2020
2020 2019
$ $
ASSETS
Cash 53,700 57,000
Accounts receivable 50,000 32,000
Allowance for doubtful debts (15,000) (6,000)
Inventory 78,500 10,000
Prepaid insurance 15,000 7,000
Land 42,000 70,000
Buildings 250,000 100,000
Less: Accumulated depreciation -
buildings (25,000) (11,000)
Equipment 142,000 68,000
Less: Accumulated depreciation -
equipment (24,000) (10,000)
TOTAL ASSETS $567,200 $317,000
LIABILITIES AND EQUITY
Accounts payable 65,000 56,000
Interest payable 4,000 1,000
Accrued expenses 8,000 6,000
Tax payable 12,000 15,000
Short-term loan 65,000 123,000
Share capital 250,000 60,000
Revaluation reserve 15,000 7,000
General reserve 20,000 13,000
Retained profits 128,200 36,000
TOTAL LIABILITIES AND EQUITY $567,200 $317,000
8
ABC Ltd
Income Statement
For the period ended 30 June 2020
Sales 898,000
Cost of goods sold 460,000
Bad debts expense 15,000
Insurance expense 5,000
Interest expense 22,000
Salaries and wages 75,000
Other expenses 66,400
Loss on sale -
equipment 1,000
253,600
Other income:
Gain on sale of land 4,000
Interest revenue 2,000
Profit before tax 259,600
Income Tax Expense (65,000)
Net Profit After Tax $194,600
Additional information during the year:
• All sales were on credit and the company purchased all inventory on credit.
• The company sold some land for cash.
• The company sold equipment (carrying value of $36,000 and an original cost of
$41,000).
• The company did not sell any buildings during the financial year.
• The company revalued their land upwards this year. The company did not revalue any
other non-current assets.
• The company issued $5,000 worth of bonus shares out of revaluation reserves.
• The company spent $10,000 to buy back 1,000 shares that were originally issued at $7
each.
9
Required:
(1) Write a summary journal entry for cash received from customers (2 marks)
(2) Prepare the cash flows from financing section of the cash flow statement for the year
ended 30 June 2020 (4 marks)
18. Commodore Ltd sells toy boats. These toy boats are called Neos and are sold with a 5-
year warranty. The company allows for returns of faulty Neos units for brand new units;
alternatively, customers can be provided with a cash refund if a Neo is broken during
the warranty period. Each Neo unit is sold for $50 and costs $15 to manufacture. During
the financial year ending 30 June 2020 Commodore Ltd had the following financial
information:
Sales revenue $500,000
Cost of Goods Sold $150,000
Prior experience with the Neo unit sales provides it with an estimate of:
Expected returns of products for refund: 7%
Expected returns of products to be exchanged for new products: 5%
a. Record the journal entry to record to recognise a warranty liability in relation
to Commodore Ltd's returns policy (1 mark)
10
b. As at 30 June 2020, Commodore Ltd had received 230 faulty Neo units returned.
From this total amount of returned Neo units, 70% were returned for cash and
the remaining 30% were exchanged with new Neo units. Record the journal
entry for refunding cash and replacing the faulty products (2 marks) (ignore any
tax implications)
19. The following information is taken from the accounts of ABC Ltd. During the year it
sold plant (machinery) for cash.
$
Plant, 1 July 2018 200,000
Plant, 30 June 2019 300,000
Accumulated Depreciation – Plant, 1 July 2018 45,000
Accumulated Depreciation – Plant, 30 June 2019 50,000
Depreciation Expense – Plant, year ended 30 June 2019 15,000
Gain on sale of plant, year ended 30 June 2019 8,000
Original cost of plant sold during the year 80,000
Write the journal entry for the sale of plant (2 marks)
11
20. Consecutive balance sheets of ABC Ltd showed the following balances:
30 June 30 June
2022 2021
$000 $000
Land 800 700
Equipment 240 280
Accumulated depreciation –
equipment
(120) (100)
The following information is relevant for calculations relating to the year ended 30 June 2022:
• The only non-current assets the company have are land and equipment.
• Land was revalued downwards by $50,000.
• The company did not sell any land during the year.
• The company did not revalue their equipment during the year as the market
value did not change.
• The company sold a piece of equipment with original value of $50,000 and
accumulated depreciation of $20,000, and made a gain on sale of $5,000.
• Assume all purchases and sales of non-current assets are with cash.
Prepare the cash flows from investing section of the cash flow statement for the year
ended 30 June 2022 (4 marks).
12
21. Cash flows from operations for Jackson Ltd was $154,500 for the period ending 30
June 2022. Depreciation for the period was $60,000. Balances of current asset and
current liability accounts are listed below:
30 June 2022 30 June 2021
$ $
Cash 75,000 80,000
Accounts Receivable 140,000 120,000
Inventories 180,000 205,000
Prepaid Insurance 3,500 3,000
Accounts Payable 100,000 110,000
What is the net profit or net loss for the period ending 30 June 2022? (1 mark). Select Net
Profit or Net Loss from the dropdown menu and type the amount/number in the box
provided. In your answers, include numbers only. No text, no commas, no signs or
symbols etc.
Dropdown menu – Choices (Net Profit vs. Net Loss) $
22. The following opening balances are provided on 1 July 2019 for Wonder Alice Ltd:
Retained Profits $50,000
Share Capital $100,000
General reserve $30,000
Total Shareholder’s Equity $180,000
• The company made a net profit after tax of $50,000 for the financial year (1 July 2019
to 30 June 2020).
• The company paid $50,000 to buy back 2,000 shares during the financial year (these
shares were originally issued at $20 each).
• The company transferred $15,000 from retained profits to general reserve on 20 May
2020.
• The company declared and paid cash dividends totalled $20,000 during the financial
year.
• During the financial year, the company issued 1,000 new shares to an institutional
investor and received $15,000 cash.
What is the ending balance for Retained profits on 30 June 2020? (1 mark). In your answers,
include numbers only. No text, no commas, no signs or symbols etc.
$
13
23. The following information is taken from the accounts of QRS Ltd.
$
Accounts Receivable, 1 January 2022 200,000
Accounts Receivable, 31 December 2022 224,000
Allowance for Doubtful Debts, 1 January 2022 15,000
Allowance for Doubtful Debts, 31 December 2022 20,000
Credit sales for the year ended 31 December 2022 240,000
Cash received from customers for credit sales during the year
ended 31 December 2022
210,000
A. Write the summary journal entry that would have recorded bad debt write offs during the
year (2 marks)
B. Write the adjusting journal entry that would have recorded bad debts expense for the year
(2 marks)
C. What is the estimated collectable value of Accounts Receivable as at 31 December 2022?
(1 mark)
In your answers, include numbers only. No text, no commas, no signs or symbols etc.
$
D. Imagine that the auditor of QRS has expressed concerns that the bad debts expense
recorded for the year is not high enough. What would be the impact on the reported value
of the following items if the auditor requires an adjustment to be made? Select higher,
lower or no effect from the drop down menu. (3 marks)
Item Indicate higher/lower/no effect
Cash
Accounts Receivable
Allowance for Doubtful Debts
Bad debts expense
Current Assets
Net Profit
14
24. A. What is the difference between the allowance method of accounting for bad debts and
the direct write-off method? (2 marks)
B. Provide two (2) reasons why businesses may choose to use the allowance method. (2
marks)
25. JKL buys and sells a single product. It uses a perpetual inventory system, with a moving
average cost flow assumption. On 1 June 2022, it had 10 units at $7 per unit on hand.
During the month ended June 30, 2022, inventory activity was as follows:
Purchases
June 10 15 units at $6
June 20 10 units at $4
Sales
June 5 7 units at $15
June 19 12 units at $15
A. What is the value of ending inventory on June 30? Show workings (round to two decimal
places at each step of your calculations). (2 marks)
15
B. Would June profit be higher, lower or unchanged if LIFO had been used instead? Explain
why (1 mark)
26. MNO Ltd makes two types of wood chopping boards: the Hardy and the Bardy. At
the beginning of the financial year, MNO estimates that it will incur $40,000 in
manufacturing overheads, $10,000 in selling and admin costs, and will make 500
chopping boards (300 Hardy boards and 200 Bardy boards) in the current year. MNO
uses a normal costing system and allocates overhead based in number of units
produced. Prices are set equal to cost plus 30% mark up.
The Hardy chopping board uses up 0.5m of a wood plank, and requires 2 hours of labour.
One metre wood planks cost $100 each, and labour costs $40 per hour.
What price will MNO charge for each Hardy chopping board? (2 marks). In your
answers, include numbers only. No text, no commas, no signs or symbols etc.
$
End of examination
