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First Semester Mid-semester Examination (2015)

BUSINESS REPORTING & ANALYSIS


(BUSN1001)
Writing period : 1 hour 30 minutes duration
Study period : 15 Minutes duration
Permitted materials: The examination is a closed book examination. Non-programmable
calculators may be used. Electronic dictionaries are not allowed. English/foreign language
dictionaries for which permission has been granted may be used.

INSTRUCTIONS:

This examination paper comprises 8 pages including this cover page.

Total mark is 100 marks. Total number of questions: Twenty (20) multiple choice
questions in Section A [20 x 2.5 marks = 50 marks], one (1) problem in Section B [12
marks], and one (1) problem in Section C [38 marks].

Answer ALL Section A Multiple Choice Questions on the multiple choice answer
sheet provided.

On the Multiple Choice Answer Sheet, you are required to

write your surname, other names (i.e. given names, etc), and course code
BUSN1001 in the boxes provided;

write your student ID number in the boxes provided and then mark the oval
corresponding to the number in each column;

use a 2B pencil to mark the ovals.

On the Script Book, you are required to


-

write your student ID number in the boxes provided;

write your tutorial day and time.

Answer the questions in Section B and C on the provided scrip book(s). Script
books without student ID numbers will be deemed incomplete and FAILED.

This examination paper must be handed in upon completion.

Page 1 of 8 - BUSINESS REPORTING & ANALYSIS (BUSN1001)

SECTION A: Multiple Choice Questions (20 X 2.5 MARKS = 50 MARKS)


You are required to answer all the questions in this section. Identify the best response to the
questions and shade the corresponding letter on the multiple choice answer sheet provided.
Q1.

A.
B.
C.
D.
E.

Q2.
A.
B.
C.
D.
E.
Q3.
A.
B.
C.
D.
E.

Q4.
A.
B.
C.
D.
E.

If equipment was acquired by borrowing $20,000 from a bank and by paying


$10,000 in cash:
total assets are decreased by $ 10,000.
total assets are increased by $ 30,000.
total assets are increased by $20,000.
Total owners equity is decreased by $10,000
None of the above.

Which of the following is not included in owners equity?


Retained earnings.
Dividends.
Reserves.
Share Capital.
Unearned revenue.
Which of the following is not an asset?
Accounts payable.
Accounts receivable.
Inventory.
Land.
None of the above.

Which of the following would not be included in a cash flow statement?


Cash sales.
Credit sales.
Cash received from customers.
Wages paid.
None of the above.

Page 2 of 8 - BUSINESS REPORTING & ANALYSIS (BUSN1001)

Q5.

A.
B.
C
D.
E.

Q6.

A.
B.
C.
D.
E.

Q7.

Tom purchased an item for $5,050 in 2014. He sold the item to a complete
stranger for $7000 in 2015 and incurred a sum of $250 for advertising it.
Which of the following statements is true?
Historical cost is $5,050.
Fair value is $7,000.
Net realisable value is $6,750.
All of the above.
None of the above.

On 28 July a company receives an invoice for TV advertising for the month


of July. It is not due for payment until August. The journal recording the
transaction would indicate a debit to increase:
Expenses payable.
Prepaid expenses.
Advertising expense.
Brand assets.
None of the above.

ABC Ltd Retained Profits as at July 1, 2014 was $800,000 and Share Capital
was $1,000,000. Final dividend payable as at July 1, 2014 is $40,000. The
following events took place during the year ended 30 June 2015.
Net loss was $150,000.
Sales were $ 2,000,000.
A final dividend of $50,000 was declared but not paid.
$25,000 was transferred from Retained Profits to a General Reserve.
In January 2015, 100,000 shares were issued to an investor for $300,000.

What is the total Shareholder's Equity as at 30 June 2015?


A.
B.
C.
D.
E.

$ 1,900,000
$ 2,200,000
$ 3,900,000
$ 1,850,000
None of the above

Page 3 of 8 - BUSINESS REPORTING & ANALYSIS (BUSN1001)

Q8.

A.
B.
C.
D.
E.

On March 30, 2015 art student Gary started his new business called Red
Hot Chili Painters: by contributing cash of $2,000, and borrowing $10,000
from his parents. At the end of his first day of business Garys business has
Cash (in bank account) $ 12,000; Loan from parents $ 10,000; and a Vehicle
(cost less depreciation) $ 5,000. What is the value of the net assets at the end
of the first day?

12,000
17,000
7,000
19,000
None of the above.

Q9. Calculate gross profit if sales are $90,000, inventory at beginning is $5,600,
purchases of inventory are $30,500 and inventory at end is $4,900.
A.
B.
C.
D.
E.

Q10.

A.
B.
C.
D.
E.

Q11.

A.
B.
C.
D.
E.

$ 31,200.
$ 41,000.
$ 58,800.
$ 59,500.
None of the above.

BaD Ltd uses the allowance method for accounting for bad debts. When BaD
Ltd makes the journal entry to recognise the allowance, what effect will it
have on the following accounts?
Bad debts
Allowance for
Accounts
Expense
Doubtful Debts
Receivable
No effect
Increase
Decrease
Increase
Decrease
No effect
Increase
Increase
Increase
Increase
No effect
Decrease
Increase
Increase
No effect

If a company pays a 12 month insurance premium for $ 24,000 on 1 June 2014, at 30


June 2014 the accounts will show:
Expenses in the income statement $ 24,000.
A prepayment of $ 22,000 in the income statement.
A prepayment of $ 20,000 in the balance sheet and an insurance expense of $ 4,000
in the income statement.
A prepayment of $ 22,000 in the balance sheet and an insurance expense of $ 2,000
in the income statement.
None of the above.

Page 4 of 8 - BUSINESS REPORTING & ANALYSIS (BUSN1001)

Q12.

A.
B.
C.
D.
E.

Q13.
A.
B.
C.
D.
E.
Q14.
A.
B.
C.
D.
E.
Q15.

A.
B.
C.
D.
E.
Q16.

A.
B.
C.
D.
E.

A company purchases inventory on credit for $ 20,000: sells goods costing $ 14,000
on credit for $ 30,000; pays accounts payable of $ 20,000; and receives $ 30,000 from
accounts receivable. What will be the impact on profit for the period?
$ 16,000 loss.
$ 16,000 profit.
$ 4,000 profit.
$ 46,000 profit.
None of the above.

Which of the following transactions would increase profit for Kai Ltd for the year?
Received orders for delivery next year.
Issue additional share capital.
Interest on investments is owed to Kai Ltd which will be received next year.
Receive a cash deposit for work to be done in the next accounting period.
None of the above.
In the year-end financial reports accumulated depreciation is classified as:
On the balance sheet as a liability.
On the balance sheet as a deduction from the related asset.
On the income statement as an expense.
On the balance sheet as a liability and the income statement as an expense.
On the cash flow statement.
A business has a five day work week. A business pays salaries of $ 50,000 on a
Thursday for five days work completed during the previous week ending on the
previous Friday. The adjusting entry necessary at the end of financial period ending on
a Wednesday is:
Decrease Wages Expense $ 30,000; Decrease Cash $ 30,000.
Increase Wages Expense $ 80,000; Increase Accrued wages $ 80,000.
Increase Wages Expense $ 30,000; Increase Accrued wages $ 30,000.
Decrease Wages Payable $ 30,000; Decrease Cash $ 30,000.
On the balance sheet as a liability and the income statement as an expense.
An invoice from an electricity supplier is paid by cheque. The cost of electricity for the
month had previously been accrued based upon electricity usage. Which of the following
is correct?
An asset increased and an expense increased.
An asset increased and a liability decreased.
An asset increased and another asset decreased.
A liability increased and an expense increased.
None of the above.

Page 5 of 8 - BUSINESS REPORTING & ANALYSIS (BUSN1001)

Q17.

A.
B.
C.
D.
E.
Q18.

A.
B.
C.
D.
E.
Q19.

A.
B.
C.
D.
E.

Q20.

A.
B.
C.
D.
E.

Received cash from a customer paying an account owing. Using the double entry
system the transaction is recorded as:
Dr Accounts receivable; Cr Cash
Dr Cash; Cr Accounts
Dr Cash; Cr Accounts Receivable
Dr Cash; Cr Accounts Payable
Dr Cash; Cr Cash equivalents
Which of the following would not be included in revenue for a company group
presenting a consolidated income statement:
Credit sales from the sale of goods.
Rent from a building owned by the company.
Cash received from sales.
Rent charged to a subsidiary company.
All of the above would be included in group revenue.
XYZ Limited had repairs to their equipment in June 2014. The subcontractors have
not sent their invoice by the end of the financial year June 30, 2014; but when they do
the bill will be due to be paid on the 1 August 2014. The appropriate year-end
adjustment is:
Increase Accrued Expenses; Increase Prepaid repair expense
Increase repair expense; Increase Accrued expenses
Increase Accrued expenses; Decrease Repair expense
No adjustment is required.
None of the above.

If $80,000 is owed by customers at the beginning of the year, $75,000 is owed at the
end and credit sales are $120,000, the cash received from customers must have been:
$80,000.
$120,000.
$125,000.
$115,000.
None of the above.

PLEASE ENSURE YOUR NAME IS ON THE


MULTIPLE CHOICE ANSWER SHEET
END OF SECTION A

Page 6 of 8 - BUSINESS REPORTING & ANALYSIS (BUSN1001)

SECTION B:

(12 marks)

There is one problem in this section. Answer the problem in the script book provided.
Finefine Wines began business 1 July 2013, producing and selling wine. One year later you
have been appointed as the companys new accountant. Unfortunately, Al who started the
business is more skilled at making wine that he is at accounting and has requested your
advice. He has the correct balances from his bookkeeper but he is not sure how to present the
information in a balance sheet format. He shows you the following balance sheet that he has
prepared.

Assets
Cash
Net profit
Inventory of grapes
Accounts payable

Finefine Wines Pty. Limited


Balance Sheet 30 June 2014
Liabilities
4,340
Accounts receivable
24,720
Share Capital
9,800
Kitchen equipment
10,680

10 460
40,000
50,800

Required:
List six corrections that need to be made. Please number each correction neatly. (Only the first
six provided will be marked.)

END OF SECTION B

Page 7 of 8 - BUSINESS REPORTING & ANALYSIS (BUSN1001)

SECTION C:

PROBLEM (38 marks)

There is one problem in this section. Answer the problem in the script book provided.
Round any estimates to the nearest dollar.
Paris Ltd had the following transactions on July 1, 2014:
1

Owners started the company by issuing shares for $ 800,000 in cash.

Bought equipment for $ 400,000 paying cash. The equipment is expected to


have a five year useful life but no residual value. The company uses straight
line depreciation method.

Bought $ 90,000 inventory on credit.


.

Paid $10,000 for a year of rent on a building.


.

Took out a $400,000 bank loan at an interest rate of 8% per annum. The
. interest will be paid in a single payment at the end of the loan in 2016.

During July to December the following transactions occurred:


6

Sold inventory the cost $ 80,000 for $ 130,000. All sales were on credit.
.

Paid $ 50,000 to suppliers of inventory for the credit purchase in (3) above.
.

Collected $ 90,000 from customers.


.

Paid salaries of $ 20,000.


.

10

Received an $ 8,000 deposit from a customer for work to be completed in August.

On 30 December: Salaries of $ 6,000 had been earned but not paid. Interest received of $ 900
appears on the bank statement but has not yet been recorded.
(a)

Prepare a neat worksheet recording the transactions listed above and then
include the end-or-period adjustments required (ignoring tax). The typical
worksheet would be expected to have approximately twelve columns.

(b)

Prepare an income statement for the half-year ended 30 December, 2014.

(c)

Based upon the totals from the worksheet in part (a), briefly explain two
important aspects of the financial position of the company at the end of
December 2014 (one or two sentences on each of two items).
END OF SECTION C
END OF EXAM

Page 8 of 8 - BUSINESS REPORTING & ANALYSIS (BUSN1001)