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Duration
Reading time 10 minutes, Writing time 3 hours
Instructions
This examination carries a 50% weighting towards your overall course grade.
To secure a pass mark in the course, you must score a mark of at least 50% over all
assessment AND a mark of at least 40% in this examination.
You may use a non-programmable calculator
There are eight pages in this examination paper, including this cover page.
Section A
20 marks
This section is COMPULSORY. It contains 10 multiple choice questions, worth 2 marks each.
Answer this section on the special answer sheet provided.
Use the following information to answer Questions 1 and 2
On 1 July, a company purchased 2,000 units of inventory for $10.00. During the month, it sold all the
units for $15.00. On 31 July, the cost of inventory is $13.00.
Question 1
To maintain its physical capital, the company should recognise a profit of:
A
$10,000
$7,000
$6,000
$4,000
Question 2
Which of the following statements is incorrect?
To maintain its financial capital, using current cost accounting, the company
A
2013
2014
Cash
5,000
7,000
Accounts Receivable
22,000
24,000
Inventory
9,000
5,000
Accounts Payable
18,000
20,000
Goodwill
100,000
90,000
100
108
100
104
Page 2 of 8
Question 3
Assume the company uses current cost accounting. In 2014, it should recognise:
A
Question 4
Assume the company uses exit price accounting. The value of goodwill at 31 December 2014
should be:
A
Zero
Question 6
Which of the following apply to current cost accounting?
A
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$6,000
$6,200
$6,300
$6,400
Question 8
Under current cost accounting, back-log depreciation on the building for 2014 is:
A
$100
$300
$400
Question 9
Under current cost accounting, the company should recognise
A
Question 10
Under exit price accounting, the price variation adjustment on buildings for 2014 is:
A
$10,000
$20,000
$30,000
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Section B
60 marks
Page 5 of 8
This company has just announced a new capital investment project, which will
commence in the next 3 months. The project is expected to increase future profits.
This company is being sued by customers, who claim that its products have harmed
their health and may increase the chances of developing cancer.
This is a newly registered company, which has just released its prospectus. The
business plan and projected financial statements look very similar to another highly
successful company. The two companies also have some common directors.
Suggested Strategy
Allen
Marjorie
Sell 10% of the shares in B in order to increase shareholding in A and acquire shares in
C
Seini
Required
a) Explain which decision-making heuristic is most evident in the strategy outlined by each of your
colleagues.
b) Instead of using heuristics, you could use an approach based on the Brunswik Lens Model.
Discuss which approach would result in a better investment decision.
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Section C
20 marks
This section contains 4 questions. Answer ONLY 1 question. Each question is worth 20 marks
In answering these questions, you may apply relevant theories from the course. You may also
discuss the findings and conclusions from your group research project.
A good answer will be between 1 and 2 pages.
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THE END
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