CORK INSTITUTE OF TECHNOLOGY INSTITIÚID TEICNEOLÍOCHT CHORCÍ Semester 2 Examinations 2007/08 Module Title: Financial ccounting 2 Module Code: CCT 6009 School: School of usiness Programme Title: achelor of usiness Year 1 Higher Certificate in usiness Year 1 Higher Certificate in usiness (EOD) Year 1 Programme Code: USS_7_Y1 USE_7_Y1 US_6_Y1 External Examiner(s): Internal Examiner(s): Ms. M. Duggan Mr. G. Forde, Ms. Twomey, Mr. P. Quigley, Mr.. McGrath, Ms. C. Twohig Instructions: nswer Question 1 and TWO other questions. Please indicate your class group and lecturer s name on your examination answer book. Duration: 2 HOURS Sitting: Summer 2008 Requirements for this examination: Note to Candidates: Please check the Programme Title and the Module Title to ensure that you have received the correct examination paper. If in doubt please contact an Invigilator. Page 1 of 9 CCT6009
Q1. This question consists of 15 parts. Required: Indicate in your examination answer book the correct answer to each of the following multiple choice questions. Each correct answer receives two marks: Please present your answer in the following format: Question (16) Question (17) (Total 30 Marks) (1) The purchase of a delivery van had been debited to the purchases account instead of the machinery account. The above error is best described as an error of: C D Principle Original error Omission Commission (2) What should happen at the year end if the balance on the suspense account is a material amount? C D The balance should be written off to the profit and loss account The balance should be carried forward to the next accounting period The balance should be ignored The error(s) should be located Page 2 of 9 CCT6009
(3) The discount received account had been undercast by 300. Which of the following is the correct journal entry to correct the error? Debit Credit Discount received Suspense Suspense Discount received C Discount allowed Discount received D Discount received Discount allowed (4) fter the preparation of the profit and loss account it is discovered that the purchases day book has been overcast by 300 s result of the above error net profit was: Overstated by 300 Overstated by 600 C Understated by 300 D Understated by 600 (5) sole trader who does not maintain complete accounting records, provides the following information for the year ended 31 December 2007: Capital at beginning of year 200,000 Drawings 25,000 Capital at end of year 250,000 What is the net profit for the year ended 31 December 2007? 50,000 25,000 C 75,000 D 250,000 Page 3 of 9 CCT6009
(6) Where in a control account would you find returns inwards? C D The debit side of the sales ledger control account The credit side of the sales ledger control account The debit side of the purchases ledger control account The credit side of the purchases ledger control account (7) Which of the following corrections is revealed by the journal entry? Dr Suspense 300 Cr Discount allowed 300 Discount received account had been overcast by 300 Discount received account had been undercast by 300 C Discount allowed account had been overcast by 300 D Discount allowed account had been undercast by 300 (8) Which of the following is correct? C D ank charges are normally classified as an expense ank charges are normally classified as an asset ank charges are normally classified as a liability ank charges are normally classified as a revenue (9) When doing a bank reconciliation which of the following does not require a correction to the cash book balance? 1. ank charges 2. Credit transfers received by bank 3. Standing orders paid by bank 4. Unpresented cheques 1 2 C 3 D 4 Page 4 of 9 CCT6009
(10) comparison of the bank statement with the cash book revealed the following: credit transfer receipt of 800 Unpresented cheques 1,600 Outstanding lodgements 1,200 If the balance shown by the bank statement is 15,400 what is the corrected cash book balance? 14,200 15,000 C 15,800 D 16,200 (11) cheque received from a debtor had been entered in the bank account only. Which of the following is the journal entry to correct the error? Debit Credit Suspense Debtors Debtors Suspense C ank Suspense D ank Debtors (12) t 1 January 2007 a business owed its suppliers 32,000. During the year the business paid suppliers 220,000 and at 31 December 2007 owed suppliers 38,000. What is the figure for purchases for the year ended 31 December 2007? 214,000 220,000 C 226,000 D 258,000 Page 5 of 9 CCT6009
(13) The following information relates to the year ended 31 December 2007 Opening inventory 20,000 Closing inventory 30,000 Sales 300,000 If gross profit on all goods sold was 20%, what is the figure for cost of sales for the year ended 31 December 2007? 240,000 225,000 C 250,000 D 237,500 (14) If sales are 200,000 and the mark up is 25%, what is gross profit? 150,000 160,000 C 50,000 D 40,000 (15) business purchases goods for 30,000 plus VT at 20%. What entry should be made in the VT account? 5,000 Debit 5,000 Credit C 6,000 Debit D 6,000 Credit (Total 30 marks) Page 6 of 9 CCT6009
Q2. CLOGHRU CMOGIE CLU RECEIPTS ND PYMENTS CCOUNT FOR THE YER ENDED 31 ST DECEMER 2007 alance b/d 42,400 Expenses of dance 18,800 Subscriptions received 118,200 Repairs 4,400 Sale of dance tickets 14,600 Printing and stationery 6,200 ar takings 82,200 New roller 17,400 Heat and light 6,400 ar costs 60,400 alance c/d 143,800 257,400 257,400 The following information is also relevant. In arrears In advance (a) Subscriptions at 1.1.2007 9,000 7,400 Subscriptions at 31.12.2007 11,200 4,400 (b) Invoices for printing unpaid t 31 st December 2007 2,200 (c) Purchased (but not yet paid for) new goals nets 56,000 (d) ssets at 1.1.2007: Fixtures and fittings 174,000 Equipment 60,000 (e) Depreciation on assets is to be provided at 15% Required: (a) Calculate the ccumulated Fund at 1 January 2007 (b) Prepare the Subscriptions ccount for the year ended 31 December 2007 (c) Prepare the Income and Expenditure ccount and a alance sheet as at 31 December 2007. Total 35 marks Page 7 of 9 CCT6009
Q3. The financial year of C ended on 31 st December 2007. You have been asked to prepare a Sales Ledger Control ccount and a Purchases Ledger Control ccount in order to produce end-of-year figures for Debtors and Creditors for the draft final accounts. You are able to obtain the following information for the year ended 31 st December 2007, form the books of original entry. Sales - cash 342,000 - credit 570,000 Purchases - cash 29,850 - credit 694,500 Total receipts from customers 910,870 Total payments to suppliers 728,950 Discounts allowed (all to credit customers) 6,740 Discounts received (all from credit suppliers) 4,190 Refunds given to cash customers 450 alance in the sales ledger set off against balance in the purchases ledger 850 ad debts written off 1,890 Increase in the provision for bad debts 1,040 Credit notes issued to credit customers 2,880 Credit notes received from credit suppliers 3,160 Dishonoured cheques 1,120 ccording to the financial statements for the previous year, Debtors and Creditors as at 1 st January 2007 were 86,000 and 94,000 respectively. Required: Prepare the Sales Ledger Control ccount and the Purchases Ledger Control ccount for the year ended 31 st December 2007 (35 marks) Page 8 of 9 CCT6009
Q4. You are presented with the summarised final accounts of J. Lamb for the years 2006 and 2007. Profit and Loss ccounts Extracts 2006 2007 000 000 Sales 1200 1400 Less Cost of sales Opening stock 80 100 Purchases 700 800 Less Closing stock (100) (150) 680 750 Gross profit 520 650 Less Expenses (200) (300) Net Profit 320 350 alance sheets as at: 31 December 2006 31 December 2007 000 000 000 000 Fixed assets at cost 1,000 1,000 Current assets Stock 100 150 Debtors 100 150 ank 20 120 220 420 Less current liabilities Creditors 80 140 80 340 1,140 1,340 Financed by Capital at beginning of year 870 1,140 dd Net profit 320 350 1,190 1,490 Less drawings 50 150 1,140 1,340 Required Calculate and comment on the following ratios for years 2006 and 2007 (i) Current ratio (ii) cid test ratio (iii) Gross profit percentage (iv) Net profit percentage (v) Debtors collection period (vi) Creditors payment period (vii) Return on capital employed (35 marks) Page 9 of 9 CCT6009