2018 Senior External Examination. Part A: 60 minutes Part B: 60 minutes Part C: 60 minutes

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1 2018 Senior External Examination Accounting Paper Two Question book Wednesday 7 November :15 pm to 4:25 pm Time allowed Perusal time: 10 minutes Working time: 3 hours Examination materials provided Paper Two Question book Paper Two Response book Equipment allowed QCAA-approved equipment non-programmable calculator prepared-task material completed during the year to use when responding to Part A Question 2 and Part B Question 3 Paper Two is an open-book examination. You may refer to any paper-based written or printed materials you have bought into the examination room. You may write on your material at any time during the examination. Directions You may write in this book during perusal time. Paper Two has three parts, each of equal value. Attempt all questions. Suggested time allocation Part A: 60 minutes Part B: 60 minutes Part C: 60 minutes Assessment Paper Two assesses the following assessment criteria: Knowledge, interpretation and evaluation Routine practical procedures Challenging practical application Assessment standards are at the end of this book. After the examination session The supervisor will collect this book when you leave. The prepared task material will be collected by the supervisor.

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3 Part A Knowledge, interpretation and evaluation Part A has two questions. Respond to both questions. Write your responses in the response book. Suggested time allocation: 60 minutes. Question 1 a. Explain the purpose of preparing a Cash Flow Statement. b. Name one expense that would not be included in the Cash Flow Statement and explain your choice. c. Describe the types of accounts that need to be analysed to determine both inflows and outflows for cash flows from financing activities and how they affect the cash position of a business. Question 2 Using the analysis and interpretation of financial reports prepared task material, respond to the following questions. a. In the table provided in the response book, state the amounts and spreadsheet formulas to calculate: from the Income Statement, the net profit for from the Income Statement, the percentage change for Cost of Goods Sold. from the Balance Sheet, the dollar value of the difference in Accounts Payable. from the Balance Sheet, the total assets for b. In the table provided in the response book, state the amounts for ratios and the full process to calculate each amount: Turnover of Accounts Receivable in 2017 (days) Turnover of Inventories in 2018 (days) Ratio of Cost of Goods Sold to Sales in Question 2 continues over next page 1

4 c. The following industry averages have been provided for the 2018 financial year for the software industry. Gross Profit ratio 48% Net Profit ratio 14% Return on Owner s Equity 25% Return on Total Assets 20% Turnover of Inventories Turnover of Accounts Receivable 33 days 50 days Equity ratio 55% Debt ratio 45% Current ratio 2.5:1 Quick ratio 1.2:1 Ratio of Selling and Distribution Expenses to Sales 24% Ratio of General and Administrative Expenses to Sales 18% Ratio of Finance Expenses to Sales 5% Write a short report of words analysing and interpreting the earning capacity and financial stability of the business. Your report should only include decisions and recommendations on areas in which the business could improve. End of Part A 2

5 Part B Routine practical procedures Part B has three questions. Respond to all questions. Write your responses in the response book. Suggested time allocation: 60 minutes. Question 1 The following information has been taken from the books of Jo s Outdoor Furniture. Rent Expense Showroom 5200 Rent Expense Factory Wages Factory Wages Sales Staff Direct Materials Indirect Materials 7000 Depreciation Factory Machinery Depreciation Sales Fixtures 4000 Marketing Expenses Factory Repairs and Maintenance 3800 Insurance Factory Machinery Financial Expenses 2500 Rates 3700 Postage and Stationery 1100 You are required to: a. Calculate the product, period and total costs. Show all working. b. Calculate the product unit cost and total unit cost if units are produced. 3

6 Question 2 Mike s Farm Fruits commenced business on 1 July While the business has been operating satisfactorily, Mike is thinking of expanding and wants a cash budget prepared to support his loan application to purchase new machinery. This business is GST exempt. The following data has been supplied to assist with the preparation of a cash budget for the quarter ending 31 December Cash at Bank balance as at 30 September is $6 500 debit. Estimated purchases represent 40% of total sales. All purchases are on credit and are paid in the month following the purchase. Accounts Receivable regularly settle their accounts, on average, as follows: 50% in the month following sale 40% in the second month following sale 10% in the third month following sale. Total sales for July, August and September were $7 500, $7 000 and $8 000 respectively. Estimated total sales for the months of October, November and December are $6 500, $9 000 and $ Credit sales amount to 60% of total sales. Cash sales represent 40% of total sales. Expenses are paid by cash in the month in which they are incurred and are estimated to be: Wages $1 500 each month Advertising expenses for the months of October, November and December are $500, $350 and $600 General and Administrative expenses for the months of October, November and December are expected to be $1 500, $1 700 and $ Depreciation of $50 each month is included in the General and Administrative expenses. Commission of 2% is received monthly based the previous month s total sales. It is anticipated new machinery costing $ will be purchased in November. A 25% deposit is to be paid in November and the balance is to be paid in December. You are required to prepare a: a. Statement of Estimated Receipts from Accounts Receivable b. Cash Budget. 4

7 Question 3 Using the accounting package prepared task material, respond to the following questions. a. What is the total value of outstanding deposits on 30 June? b. Did the business make a gross profit or loss for June and what was the amount? c. What is the balance of the GST liability in the Balance Sheet and is this amount to be paid to or received from the Australian Taxation Office? d. What was the balance of the shoes in stock? e. State the number of units on hand as at 30 June 2018 for: i. Thongs ii. Sneakers. f. Explain why there are outstanding cheques listed in the Reconciliation Report. g. State the balances from the Balance Sheet for: i. Petty Cash ii. Drawings. h. State the balances from the Profit and Loss Statement for: i. Bad Debts ii. Shoe Purchases. i. Name two accounts receivable who owe Shooz R Us money and state the amounts. j. What is the total of accounts payable and who is the money owed to? k. Outline the process to record the transaction on 8 June. l. Outline the process to record the transaction on 16 June. m. Outline the process to record the transaction on 19 June. n. Outline the process to record the transaction on 28 June. o. Outline the process to record the depreciation on fixtures and fittings on 30 June. Include the formula for calculating the amount. End of Part B 5

8 Part C Challenging practical application Part C has two questions. Respond to both questions. Write your responses in the response book. Suggested time allocation: 60 minutes. Question 1 Jared Hansen, the proprietor of Hansen s Homewares, has provided the following additional information and list of balances as at 30 June You are required to prepare: a. Balance day adjustments (no narrations are required) b. A fully classified Income Statement. Additional information: Provision for Doubtful Debts is to be 2.5% of Accounts Receivable. Inventories (30 June 2018) are $ Weekly office salaries (based on a five-day working week) of $1 000 have been paid on 29 June 2018 for the week 27 June 1 July. Rent Revenue is $500 per month. Adjust the account for the amount received in advance. The furniture is to be depreciated at a rate of 10% per annum using the straight line method (assume no residual value). The delivery vehicle is being depreciated using the diminishing balance method at the rate of 20% per annum. Electricity on 30 June did not include $360 owing for supply for the three months to 31 July Rates owing is $ Interest on government bonds is owing on balance day. The bonds were purchased nine months ago, and 10% interest for the year will be paid in three months time. 6

9 Account Balances as at 30 June 2018 Account Amount Advertising 3500 Provision for Doubtful Debts 2200 Inventories Control Delivery Vehicle Accumulated Depreciation Delivery Vehicle Building GST Clearing (Cr) 7520 Salaries Office Petty Cash 500 Sales Bank Loan Delivery Vehicle Expenses 3400 Cost of Goods Sold Loan to Gavin Godfrey (matures 31 March 2019) 4200 Insurance Cash at Bank Interest Expense 3600 Furniture Accumulated Depreciation Furniture Electricity 1380 Cash in Hand 600 Commission Revenue 5000 Sales Returns 1830 Postage and Stationery 2780 Telephone Expenses 1800 Accounts Receivable Interest Revenue 700 Accounts Payable Government Bonds 6000 Bad and Doubtful Debts 7900 Bank Charges 610 Rent Revenue 6500 Drawings J Hansen 8500 Capital J Hansen

10 Question 2 The manager of Tinana Air Conditioners, Andrew Grant, has limited ability to prepare a Cash Flow Statement but needs help reconstructing ledger accounts and starting the Cash Flow Statement. He has provided you with the following financial information. Assume there is no GST. You are required to: a. Reconstruct the following ledger accounts: Interest Revenue Wages Insurance Accounts Receivable Inventories Accounts Payable b. Prepare a Cash Flow Statement extract showing the Cash Flows from Operating Activities section only. Tinana Air Conditioners Income Statement for year ended 30 June 2018 Credit Sales Less Cost of Goods Sold Gross Profit Add Other Revenue Interest Revenue Less Other Expenses Insurance Telephone 600 Wages Bad Debts Net Profit $

11 Tinana Air Conditioners Balance Sheet (extract) as at 30 June Assets Cash at Bank Accounts Receivable Inventories Accrued Revenue Interest Revenue Prepaid Expense Insurance Equipment Less Liabilities Accounts Payable Accrued Expense Wages Net Assets $ $ End of Part C End of Paper Two 9

12 Assessment standards from the Accounting Senior External Syllabus 2007 Criterion A B C D E Knowledge, interpretation and evaluation recalls, describes and explains a comprehensive range of relevant facts, concepts and principles applies an extensive knowledge of accounting concepts and principles to analyse and interpret information to solve problems and make valid decisions and recommendations communicates a comprehensive range of accounting information and understandings clearly, accurately and cohesively in written form, using appropriate terminology. recalls, describes and explains a substantial range of relevant facts, concepts and principles applies knowledge of accounting concepts and principles on most occasions to analyse and interpret information to solve problems and make valid decisions and recommendations communicates a substantial range of accounting information and understandings which are usually expressed clearly, accurately and cohesively in written form, using appropriate terminology. recalls and describes relevant facts and generally explains concepts and principles analyses and generally interprets accounting information to make valid decisions communicates a range of accounting information and understandings in written form, in a manner which is generally clear and accurate, using some appropriate terminology. states some relevant facts and concepts identifies relevant facts from accounting information communicates some accounting information in written form, although the communication sometimes lacks clarity and accuracy. states some facts communicates little accounting information in written form, and this communication lacks clarity and accuracy. Routine practical procedures accurately applies fundamental accounting concepts to select and organise relevant data to record a wide range of routine transactions consistently demonstrates knowledge of fundamental accounting concepts to correctly process accounting information in usual situations accurately prepares and effectively presents accounting reports. applies fundamental accounting concepts to select and organise relevant data to record a wide range of routine transactions in most situations usually demonstrates knowledge of fundamental accounting concepts to correctly process accounting information in usual situations accurately prepares and presents accounting reports on most occasions. applies fundamental accounting concepts to select and organise relevant data to record a range of routine transactions generally processes accounting information correctly in usual situations prepares and presents accounting reports with some inaccuracies. selects relevant data and records routine transactions on some occasions occasionally processes some accounting information correctly in usual situations prepares and presents accounting reports which frequently lack accuracy. seldom records routine transactions accurately rarely processes accounting information correctly in usual situations rarely prepares and presents accounting reports accurately. 10

13 (continued) Criterion A B C D E Challenging practical application effectively applies accounting knowledge and concepts to accurately record a variety of transactions which include complex elements applies accounting knowledge and concepts to consistently and correctly process accounting information which includes complex elements accurately prepares and effectively presents accounting reports involving complex processing consistently and effectively solves problems involving complex practical processes. usually applies accounting knowledge and concepts to accurately record a variety of transactions which include complex elements applies accounting knowledge and concepts to correctly process, in most situations, accounting information which includes complex elements accurately prepares and effectively presents, on most occasions, accounting reports involving complex processing usually solves problems involving complex practical processes. generally applies accounting knowledge and concepts to accurately record transactions which include complex elements follows a given procedure to process accounting information which includes complex elements prepares and presents accounting reports involving complex processing with varying degrees of accuracy solves problems involving complex practical processes on some occasions. occasionally records accurately transactions which include complex elements follows a given procedure, in part, to process accounting information which includes complex elements prepares and presents accounting reports involving complex processing with little accuracy. seldom records transactions or processes information which include complex elements rarely prepares or presents accounting reports involving complex processing. 11

14 The State of Queensland (Queensland Curriculum and Assessment Authority) 2018 Copyright enquiries should be made to: Manager Publishing Unit Queensland Curriculum & Assessment Authority PO Box 307, Spring Hill QLD 4004 Australia Level 7, 154 Melbourne Street, South Brisbane T

Accounting Monday 26 October 2015 Paper Two Question book

2015 Senior External Examination Accounting Monday 26 October 2015 Paper Two Question book 1:15 pm to 4:25 pm Time allowed Perusal time: 10 minutes Working time: 3 hours Examination materials provided