A non-profit organisation supporting students to achieve their best. Practice Exam Question Booklet Duration: 15 minutes reading time, 90 minutes writing time Structure of book: Number of questions Number of questions to Number of marks be answered 2 2 90 Students are permitted to bring into the examination room: pens, pencils, highlighters, erasers, rulers and one scientific calculator. Students are not permitted to bring into the examination room: blank sheets of paper and/or white out liquid/tape. Materials supplied: This question booklet of 6 pages. An answer booklet. Instructions: You must complete all questions of the examination. Write all your answers in the answer booklet provided with this exam.
Question 1 Harold Jones runs a small business called Stationery Heaven which sells stationery products. The business has been previously using single entry accounting but he decides to switch to using double entry accounting system based on the accrual accounting method of accounting. In addition, it uses control accounts and subsidiary records for Creditors, Debtors and Stock. In order to record stock, the perpetual method of stock recording and the FIFO cost assignment method are used. The business prepares half-yearly reports on 30 June and 31 December. 1.1. Stationery Heaven had the following balances as at 1 July 2011: $ Bank 25000 Dr Debtors 15000 Creditors 7900 Stock 57620 Equipment 5700 Capital -- Jones? Loan -- ABC Finance 3500 The loan from ABC Finance must be repaid by 15 September 2011. 1.1.1. Prepare the relevant general journal entries to record the commencing entries. (A narration is not required). 1.1.2. Identify two benefits of using both a control account and a subsidiary ledger. 1.1.3. Explain how the ABC Finance Loan should be classified in the Balance Sheet in July 2011, with reference to a definition. 1.2. At 31 December 2011, the following journals were provided by the owner: Cash Receipts Date Details 2011 31 Dec. Totals to Cash Payments Date Details 2011 31 Dec. Totals to Rec. No. Chq. No. Bank Disc. Expense Debtors Cost of Sales Sales GST Sundries 44780 60 5240 12000 26000 1000 480 Bank Disc. Creditors Stock Wages GST Sundries Revenue 22140 40 4350 7500 6800 2700 750 Purchases Journal Date 2011 Creditor Invoice No. Stock GST Total Creditors 31 Dec. Totals to 8900 890 9790 Sales Journal Date 2011 Debtor Invoice No. Cost of Sales Sales GST Total Debtors 31 Dec. Totals to 5600 11000 1100 12100 Page 1 6.5 hour revision VCEseminars for just $52 -- visit www.ee.org.au for more info.
When Harold was searching through his files, he discovered the following documents which he later realised had not yet been recorded: Stationery Heaven Tax Invoice No. 78 30 November 2011 Charge to: Georges Primary School For: Student Diaries Quantity: 25 Diaries at $8 each Amount: $200 GST: $20 Total: $220 Stationery Heaven Memo No. 56 15 November 2011 Withdrew 10 Yellow Lester Highlighters, with cost price $1 each, for personal use. The cost price of the student diaries was $5 each. 1.2.1. Record the above transactions in the appropriate journals. 1.2.2. Explain the effect on the balance sheet if the transaction documented by Memo No. 56 was not recorded. 1.2.3. Complete the Stock Control ledger as at 31 December 2011. (You are required to balance the account.) 1.2.4. Identify one advantage and one disadvantage of offering debtors a discount for early payment. 6 marks 1.3. Harold provided the following trial balance on 30 June 2012: Stationery Heaven Trial balance as at 30 June 2011 Account Debit $ Credit $ Bank 3200 Debtors 14700 Stock 7890 GST Clearing 570 Wages Expense 6800 Equipment 5700 Cost of Sales 17500 Advertising 340 Discount Revenue 70 Discount Expense 90 Shop Fittings 400 Administration Expenses 560 Drawings 90 Sales 32000 Freight In 250 Prepaid Advertising 800 Rent 1600 Telephone Bill 750 Cartage Out 390 Delivery Expenses 400 Capital -- Jones 22420 58260 58260 www.engageeducation.org.au Page 2
1.3.1. Identify one benefit in having a Trial Balance. 1 mark 1.3.2. Prepare a Classified Profit and Loss Statement for the period ending 30 June 2012. 6 marks 1.3.3. Explain the benefit in separating gross profit from net profit in the Profit and Loss Statement. 1.3.4. Explain why GST clearing is classified as a current liability as at 30 June 2012. 1.3.5. Prepare an extract of the assets in the Balance Sheet as at 30 June 2012. 3 marks 1.4. The following transactions took place during January 2013: Stationery Heaven sold 6 ABX calculators at $50 + $5 GST (cost price was $30 + $3 GST) each on 4 January 2012 (Rec. 123) 2 ABX calculators were purchased at $27.50 each (incl. GST) on 5 January (Inv. 67) On 7 January the owner withdrew one ABX calculator for personal use (Memo 11) Dan s Pens fell bankrupt and were unable to pay their debt of $1200, which was recognised on 8 January (Memo 12) On 14 January, 6 ABX calculators were sold to Georges Primary School at $50 + $5 GST (Rec. 125) Purchased 5 ABX calculators at $24.20 each (incl. GST) on 14 January (Inv. 79) Purchased 3 ABX calculators at $28 +$2.80 GST each on 21 January (Chq. 145) Sold 1 TEX Calculator at $50 + $5 GST on 25 January (Rec. 128) The physical stocktake conducted on 31 January showed that there were 11 ABX calculators (Memo 15) Stationery Heaven has a balance of 12 calculators with a cost price of $33 each (including GST) as at 1 January 2013. 1.4.1. Prepare the necessary General Journal entries to record the events that occurred on 8 and 31 January 2013. (Narrations are required.) 3 marks 1.4.2. Show the effects on the Balance Sheet if the stock gain or loss found on 31 January was not recorded. 1.4.3. Record the relevant transactions above in Stationery Heaven s stock card for ABX calculators. 8 marks Page 3 6.5 hour revision VCEseminars for just $52 -- visit www.ee.org.au for more info.
Question 2 Baxtor Boats is a small business which sells boat and fishing equipment. It uses the double entry accounting system based on the accrual accounting method of accounting. In addition, it uses control accounts and subsidiary records for Creditors, Debtors and Stock. In order to record stock, the perpetual method and the FIFO cost assignment are used. The business prepares quarterly reports. 2.1. As at 31 January 2011, the following pre-adjustment Trial Balance was provided: Baxtor Boats Pre-adjustment Trial Balance as at 31 January 2011 Account Debit $ Credit $ Bank 5900 Debtors 7800 Stock 4580 GST Clearing 20 Wages Expense 320 Equipment 3900 Cost of Sales 5000 Advertising 890 Motor Vehicle 30200 Accumulated Depreciation -- Motor Vehicle 2200 Drawings 510 Sales 12300 Accrued Wages 80 Prepaid Rent 7200 Capital -- Baxtor 67890 Loan -- WXY Finance 8000 Creditors 450 78620 78620 The following items require adjustments to be made for the period ending 31 January: A six-month contract of $7200 for prepaid rent beginning 1 December 2010 has been signed. The wages expense is $80 per five-day working week. At 31 January, two days wages are still owed. Interest on the WYX Finance Loan is charged at 7% p.a., and is payable on 30 November and 31 May each year. The payment for November 2010 has been made and recorded. The motor vehicle is depreciated using the straight-line method at 12%. $20 in drawings was accidentally recorded as a wages expense. 2.1.1. Show the General Journal entries necessary to record the balance day adjustments on 31 January 2011. (Narrations are not required.) 10 marks 2.1.2. Explain the purpose of preparing balance day adjustments, with reference to an accounting principle. 2.1.3. Prepare a post-adjustment Trial Balance for Baxtor Boats as at 31 January 2011. 4 marks 2.1.4. Show how the general ledgers for the prepaid rent, rent expense, accumulated depreciation -- motor vehicle and depreciation -- motor vehicle accounts appear after the balance day adjustments have been made. (You are not required to balance the relevant accounts.) 3 marks www.engageeducation.org.au Page 4
2.1.5. Prepare the General Journal entries required to close off the relevant accounts to the Profit and Loss Summary account. 6 marks 2.1.6. Prepare an extract of the non-current assets in the Balance Sheet as at 31 January 2011. The owner has been depreciating the cost of the motor vehicle for a number of years, but decides that next year she will not depreciate the vehicle, as it is reducing profit. 2.1.7. Explain, using a qualitative characteristic, why this would be incorrect. 2.2. Baxtor Boats purchased a delivery van on 5 February 2011. The supplier s price for the van was $39160 (incl. GST) The owner decided to fit shelves into the van for $500 The delivery van was painted for advertising purposes for $310 2.2.1. Define what residual value means. 1 mark 2.2.2. Calculate the cost of the delivery van. 1 mark 2.2.3. Using a qualitative characteristic, explain your treatment of the paint job when calculating the cost of the delivery van. 2.3. The following journals have been provided for the period ending 30 April 2015: Cash Receipts Date Details Rec. Bank Disc. Debtors Cost of Sales GST Sundries 2015 No. Expense Sales 30 Apr Totals to 10760 90 4500 2000 5600 560 190* *Sundries: GST Refund $120 Interest Revenue $70 Cash Payments Date Details Chq. Bank Disc. Creditors Stock Wages GST Sundries 2015 No. Revenue 30 Apr Totals to 27520-3900 10500 580 1050 11490** **Sundries: Loan Repayment -- WXY Finance $500 Interest on Loan $20 Prepaid Rent $7200 Telephone Expense $320 Advertising Expense $450 Shop Fittings $3000 2.3.1. Prepare a classified Cash Flow Statement for the 3 months ended 30 April 2015. The bank balance of Baxtor Boats as at 1 February 2015 was $9800. 8 marks Page 5 6.5 hour revision VCEseminars for just $52 -- visit www.ee.org.au for more info.
2.3.2. Identify one use of a Cash Flow Statement. 1 mark The owner was surprised to find that the business had a net profit for the period ended 30 April 2015, despite the fact that its bank balance had decreased. 2.3.3. Explain why a decrease in cash does not necessarily equal a net loss, giving two examples. 3 marks End of Booklet www.engageeducation.org.au Page 6