INTI COLLEGE MALAYSIA CAMBRIDGE A - LEVEL PROGRAMME ACC111 : ACCOUNTING 1 SEMESTER EXAMINATION : APRIL 2003 SESSION

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1 111 / Page 1 of 11 INTI OLLEGE MLYSI MRIGE - LEVEL PROGRMME 111 : OUNTING 1 SEMESTER EXMINTION : PRIL 2003 SESSION Section (nswer all questions on the OMR sheets) Select the best answer for each question. 1. The accounting process involves all of the following except identifying economic transactions that are relevant to the business. communicating financial information to users by preparing financial reports. recording nonquantifiable economic events. analyzing and interpreting financial reports. 2. Owner s capital at the end of the period is equal to liabilities. drawings. owner s capital at the beginning of the period plus net income minus owner s capital at the beginning of the period plus net income minus net income. assets plus liabilities. 3. n account is a part of the financial information system and is described by all except which one of the following? n account has a debit and a credit side. n account is a source document. n account may be part of a manual or a computerized accounting system. n account has a title. 4. trial balance is a listing of transaction in a journal. the chart of accounts. general ledger accounts and balances. the totals from the journal pages.

2 111 / Page 2 of The periodicity assumption states that a transaction can only affect one period of time. estimates should not be made if a transaction affects more than one time period. adjustments to the enterprise s accounts can only be made in the time period when the business terminates its operations. the economic life of a business can be divided into artificial time periods. 6. The Valet Laundry ompany purchased $4,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is ebit Laundry Supplies Expense, $2,000; redit Laundry Supplies, $2,000. ebit Laundry Supplies Expense, $2,500; redit Laundry Supplies, $2,000. ebit Laundry Supplies, $2,500; redit Laundry Supplies Expense, $2,000. ebit Laundry Supplies Expense, $2,500; redit Laundry Supplies, $2, Working apital is a term meaning The amount of capital invested by the proprietor The excess of the current assets over the current liabilities The capital less drawings The total of Fixed ssets urrent ssets 8. Which of the statements below is not true? n adjusted trial balance should show ledger account balances. n adjusted trial balance can be used to prepare financial statements. n adjusted trial balance proves the mathematical equality of debits and credits in the ledger. n adjusted trial balance is prepared before all transactions have been journalized. 9. The information for preparing a trial balance on a work sheet is obtained from financial statements. general ledger accounts. general journal entries. business documents.

3 111 / Page 3 of Which of the following steps in the accounting cycle would not generally be performed daily? Journalize transactions. Post to ledger accounts. Prepare adjusting entries. nalyze business transactions. 11. Sales revenue less cost of goods sold is called gross profit. net profit. net income. marginal income. 12. Sales Returns and llowances account is not debited if a customer returns defective merchandise. receives a credit for merchandise of inferior quality. utilizes a prompt payment incentive. returns goods that are not in accordance with specifications. 13. cash discount is best described as a reduction in the sum to be paid If payment is made within a previously agreed period If payment is made by cash, not cheque If payment is made either by cash or cheque If purchases are made for cash, not on credit 14. Freight costs paid by a seller on the merchandise sold to customers will cause an increase in the selling expense of the buyer. in the operating expenses for the seller. to the cost of goods sold of the seller. to a contra-revenue account of the seller. 15. Which one of the following is not an objective of a system of internal controls? Safeguard company assets. Overstate liabilities in order to be conservative. Enhance the accuracy and reliability of accounting records.

4 111 / Page 4 of 12 Reduce the risks of errors. 16. The size of the petty cash fund is dependent on the wishes of the custodian of the fund. anticipated disbursements for the year. anticipated disbursements for a three to four-week period. the size of the regular cash account. 17. eposits in transit have been recorded on the company s books but not yet by the bank. have been recorded by the bank but not yet by the company. have not been recorded by the bank or the company. are checks from customers which have not yet been received by the company. 18. When the final accounts are prepared, the bad debts account is closed by a transfer to the alance sheet Profit and Loss ccount Trading ccount Provison for oubtful ebts ccount 19. provison for oubtful ebts is created When debtors become bankrupt When debtors cease to be in business To provide for possible bad debts To write off bad debts 20. Is it true that the trial balance totals should agree? No, there are sometimes good reasons why they differ Yes, except where the trial balance is extracted at the year end Yes, always No, because it is not a balance sheet 21. Which of the following is correct? Profit does not alter capital Profit reduces capital apital can only come from profit Profit increases capital

5 111 / Page 5 of company purchased land for $85,000 cash. Real estate brokers commission was $6,000 and $9,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at $94,000. $85,000. $91,000. $100, Equipment was purchased for $12,000. Freight charges amounted to $500 and there was a cost of $1,500 for building a foundation and installing of the equipment. It is estimated that the equipment will have a $2,500 salvage value at the end of its 5-year useful life. epreciation expense each year using the straight-line method will be: $2,800. $2,300. $2,000. $1, plant asset cost $21,000 and is estimated to have a $3,000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the fourth year using the sum-of-the-years -digits method would be: $4,000. $2,500. $3,000. $2, The cost of an improvement that does not increase the useful life of a plant asset should be debited to an Expense account. debited to the sset account. debited to the ccumulated epreciation account. credited to the ccumulated epreciation account. 26. The book value of an asset is the difference between the replacement cost of the asset and its historical cost. cost of the asset and the amount of depreciation expense for the year. cost of the asset and the accumulated depreciation to date. proceeds received from the sale of the asset and its original cost.

6 111 / Page 6 of Intangible assets should be reported under the heading Property, Plant, and Equipment. are not reported on the balance sheet because they lack physical substance. should be reported as urrent ssets on the balance sheet. should be reported as a separate classification on the balance sheet. 28. partnership has only one owner. pays taxes on partnership income. must file an information tax return. is not an accounting entity for financial reporting purposes. 29. credit balance brought down on a Rent ccount means we owe that rent at that date we have paid that rent in advance at that date we have paid too much rent we have paid too little in rent 30. If we take goods for own use we should ebit rawings ccount: redit Purchases ccount ebit Purchases ccount: redit rawings ccount ebit rawings ccount: redit Stock ccount ebit Sales ccount: redit Stock ccount

7 111 / Page 7 of 11 Section : nswer LL questions from this section Question 1 The following is the trial balance of ivas Holding as at 31 ecember 19X4 ebit redit $ $ ank 1,100 apital 7,600 ash in hand 500 rawings 4,590 Electricity 468 Insurance 220 Returns iscounts arriage 440 Motor Vehicle 15,500 ccumulated depreciation - M.V. 2,500 Motor vehicle expense 180 Postage and stationery 97 Provision for doubtful debts 654 Purchases 16,000 Rates 360 Rent expense 500 Rental income 50 Sales 32,000 Stock 900 Sundry Expenses 256 reditor 2,200 ebtors 2,000 Wages 2,225 46,040 46,040 dditional information 1. The owner has used stamps worth $20, which were purchased by the firm and included in postage and stationery. 2. The rent is $50 per month, last rent was paid to the end of October. 3. Salaries of $45 were due to be paid to an employee. 4. Last rate payment was for six months ended 31 March 19X5 and amounted to $ ll insurance premiums are paid for a year in advance on 30 June and the last payment was $80 6. ivas Holding rent out retail space to a local trader, as at 31 ecember the trader owed the firm $ The closing stock $1, ½ of the carriage expenses is incurred in bringing goods purchased to ivas Holding warehouse.

8 111 / Page 8 of The depreciation on motor vehicles are charged at 25% cost. 10. The provision for doubtful debt should be $ bill in the amount of $150 for motor vehicle repair has been received but has not been recorded Required (a) Prepare the Trading and Profit and Loss Statement for the year ended 31 ecember 19X4. (10 marks) (b) Prepare the alance Sheet as at 31 ecember 19X4. (10 marks) Question 2 Part On 15 May 19X8, Mr.Lake received her monthly bank statement for the month ended 30 pril 19X8. The bank statement contained the following details: ate Particulars Payments Receipts alance $ $ $ 1 pr alance pr pr ank Giro credit pr pr harges pr pr pr pr Standing order pr Sundry credit pr pr pr ank Giro redit pr Sundry redit pr

9 111 / Page 9 of 12 For the corresponding period, Mr.Lake s own records contained the following bank account: ate etails $ ate etails heque $ No. 1 pr alance pr Purchases pr Sales pr Electricity pr Sales pr Purchases pr Sales pr Rent pr Sales pr Purchases pr Purchases pr Wages pr alance Required (a) (b) Prepare a statement reconciling the balance at 30 pril as given by the bank statement to the balance at 30 pril as stated in the bank account. (9 marks) Explain briefly which items in your bank reconciliation statement would require further investigation. (3 marks) Part (a) The following information has been extracted from the books of a trader at 1 July 19X6. $ mount owing by debtors 40,000 mount owing by creditors 31,200 The transactions during the year ended 30 June 19X7 were as follows: Returns inwards 15,750 Returns outwards 8,660 iscount received 3,187 iscount allowed 5,443 Sales 386,829 Purchases 222,954 ad debts written off 3,400 heques received from customers 230,040 heques paid to suppliers 108,999 Your are required to write up the sales ledger control account and the purchase ledger control account for the year ended 30 June 19X7. (4 marks) (b) Give 2 advantages of maintaining control accounts. (4 marks)

10 111 / Page 10 of 12 Question 3 Part G ook, a trader, keeps his fixed assets account at cost with separate provision for depreciation accounts. On 31 ecember Year 4, he bought: 1) motor lorry (Lorry No. 1), 10,000 2) motor car (ar No. 1), 8,000 3) Furniture, 6,000 On 6 February Year 5, ook bought furniture costing 2,000 for cash. On 31 ecember Year 5, the end of his financial year, he decided to provide annual depreciation as follows: (i) Motor lorries and motor cars at the rate of 20% per annum on cost by the straight line method. (ii) Furniture at the rate of 20% on book value by the reducing balance method. Note: There is no provision for depreciation for the year in which an assets is bought or sold. On 30 June Year 7, he bought a new motor car (ar No. 2) for 12,000, on credit from the Royal Motor ompany and was allowed 2,000 in part exchange for the firm s car (ar No. 1). On 31 October Year 7, he bought a new lorry (Lorry No. 2) for 22,000, on credit, from the New Transport ompany. On 1 September Year 8, he sold the original motor lorry (Lorry No. 1) for 5,000 cash. Required: (a) Motor lorries account (2 marks) (b) Motor cars account (2 marks) (c) Furniture account (1 mark) (d) Provision for depreciation of motor lorries account (3 marks) (e) Provision for depreciation of motor car account (3 marks) (f) Provision for depreciation of furniture account (5 marks) (g) sset disposal account (4 marks)

11 111 / Page 11 of 11 Part (a) (b) (c) Explain the difference between capital and revenue expenditure. Explain the nature of depreciation. escribe the data needed in order to compute depreciation. (4 marks) (3 marks) (3 marks) The End cc111apr03 / thiru / reformat

Paper F3 (INT) Financial Accounting (International) Fundamentals Pilot Paper Knowledge module. The Association of Chartered Certified Accountants

Paper F3 (INT) Financial Accounting (International) Fundamentals Pilot Paper Knowledge module. The Association of Chartered Certified Accountants Fundamentals Pilot Paper Knowledge module Financial ccounting (International) Time allowed: 2 hours LL FIFTY questions are compulsory and MUST be attempted. Paper F3 (INT) o NOT open this paper until instructed