ACC2250 Accounting II Mock Practice Exam. ECU Sem 1 2017 PDF

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Summary

A Mock Exam relating to the ACC2250 Accounting II ECU unit. Written in semster 1, 2017...

Description

Unit Code and Title

ACC2250 Accounting II

Student Number

SURNAME/FAMILY NAME

OTHER OR GIVEN NAME/S

Please print clearly

Duration Attempt

All questions should be attempted

Marks

100 marks in total

Type of Exam A single doubled sided hand written page of working notes is allowed. The working notes page must be written in English. Also an unmarked paper copy of a multi-lingual dictionary is allowed. No other materials or texts are allowed in the exam.

Special Instructions

   

This examination paper consists of one part. There are a total of 17 pages. Non-programmable calculators are allowed. All answers must be written in the spaces provided in this examination paper.

Do not commence reading or writing this examination until you are told to do so.

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Examination Questions This exam paper consists of five questions worth 100 marks in total. All exam questions must be answered in this paper, in the spaces provided. Please do not write your answers on any other paper. All questions should be attempted. Question 1: Marks: 13 Required: The following financial items for George Karatsis IT Services as at May 31, 2016 are presented below in alphabetical order. Accounts payable Accounts receivable Building Cash at bank

$ 64 000 70 000 520 000 61 000

Land Mortgage payable Office equipment Office supplies

$250 000 710 000 180 000 34 000

Required (round all amounts to the nearest dollar): Using the information provide above as your starting point prepare the balance sheet for George Karatsis IT Services as at May 31, 2016.

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GEORGE KARATSIS IT SERVICES Balance Sheet as at 31 May 2016 ASSETS

TOTAL ASSETS LIABILITIES

TOTAL LIABILITIES NET ASSETS EQUITY TOTAL EQUITY

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Question 2: Marks: 16 Required: O’Malley and O’Reilly formed a partnership on 1 July 2015 to run an information systems consultancy business by investing $400 000 and $360 000 respectively. Both partners work similar hours in the business. O’Reilly has a Masters degree in information systems and five years’ experience in the workforce; O’Malley has an undergraduate degree and has worked for three years; she has invested money inherited from her parents. On 1 January 2016 O’Malley invested an additional $40 000 cash as a capital contribution. On 1 May 2016 O’Malley and O’Reilly withdrew $50 000 each in cash in expectation of profits for the current year ended 30 June 2016. They had not drawn up a partnership agreement and so are not sure how the profits of $120 000 should be distributed to each partner. You have been asked to decide the most appropriate way to divide the profit, and a number of alternative scenarios are provided for you to consider: (a) no suggestions have been made by the partners (b) the partners suggest distributing the profits in the ratio of the original capital balances (c) the partners suggest that O’Malley receives a salary of $40 000 and O’Reilly receives a salary of $60 000 to reflect his greater qualifications and experience, with interest of 5% on ending capital balances, and the remainder distributed evenly between the partners. Required (round all amounts to the nearest dollar): A. Calculate the amount of profit distribution to each partner under each scenario. B. Which scenario is most favourable to O’Malley and which to O’Reilly? C. Given the capital commitments and expertise of each partner, which scenario is the most appropriate for the partnership agreement?

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Part A: Calculate the amount of profit to be distributed to each partner under each scenario Marks: 13 (a) no suggestions have been made by the partners Partner O’Malley O’Reilly Total Profit Distributed

Share of Profit

(b) the partners suggest distributing the profits in the ratio of the original capital balances Partner O’Malley O’Reilly Total Profit Distributed

Share of Profit

(c) the partners suggest that O’Malley receives a salary of $40 000 and O’Reilly receives a salary of $60 000 to reflect his greater qualifications and experience, with interest of 5% on ending capital balances, and the remainder distributed evenly between the partners Partner O’Malley O’Reilly Total Profit Distributed

Salary

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Interest

Share of Profit

Part B. Which scenario is most favourable to O’Malley and which to O’Reilly Marks: 2 O’Malley O’Reilly

Part C: Given the capital commitments and expertise of each partner, which scenario (A, B or C) is the most appropriate for the partnership agreement? Marks: 1

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Question 3: Marks: 11 The following transactions were undertaken by Porschet Ltd during the financial year ended 30 June 2017. Ignore GST. 1. 2. 3. 4. 5. 6.

Issued ordinary shares for cash, $1 000 000. Purchased land to be held for future expansion for $900 000 cash. Paid off a long-term $360 000 loan plus interest of $32 000. Sold for $480 000 used cars with a carrying amount of $200 000. Paid cash dividends of $220 000. Purchased machinery factory, giving $120 000 cash and signing a mortgage loan for $400 000. 7. Purchased shares in MBW Ltd to be held as an investment for $400 000 cash. 8. Sold a long-term government bond, with a carrying amount of $100 000, for $198 000, including $12 000 accrued interest. 9. Purchased shares in Forden Ltd to be held as a long-term investment, paying $380 000 cash. 10. Issued 5% debentures for $1 400 000.

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Required (round all amounts to the nearest dollar): Prepare the net cash flow used in investing activities section and the net cash used in financing activities section of the statement of cash flows. PORSCHET LTD Cash Flow Statement (Extract) for the year ended 30 June 2017 Cash flows from investing activities:

Net cash used in investing activities Cash flows from financing activities:

Net cash from financing activities

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Question 4: Marks: 51 A trial balance taken from Galston Ltd’s accounting records at September 30, 2016 showed the following account balances: Galston Ltd Trial Balance as at September 30, 2016 Account Debit Credit Share capital (700,000 ordinary shares $700,000 fully paid) General Reserve 240,000 Retained earnings 117,800 Current tax liability 30,000 Accounts Payable 120,900 Mortgage Payable 180,000 Bank Overdraft 60,600 Other Liabilities 3,300 Property, Plant and Equipment (net) 890,800 Accounts Receivable 90,200 Inventory 370,600 Prepayments 1,000 Patent 100,00 1,452,600 1,452,60 0 At a meeting of directors on October 1, 2016, it was decided to issue additional ordinary shares to fund future operations. Accordingly a prospectus was issued on October 10, 2016 offering 400,000 ordinary shares at $1.00 each to the public, payable 50c per share on application, 25c per share on allotment and the remainder in one call when required. By November 30, 2016, applications were received from the public for 24,000 shares in excess of the number available, and the application money paid in on 24,000 shares was refunded to unsuccessful applicants. The rest of the shares were allotted to the successful applicants, including one who had paid in full on application for 4,000 shares. The share issue had been underwritten for a fee of $8,000. By December 15, 2016, all cash due on allotment had been received, and the underwriting fee was paid on this date.

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On January 31, 2017, an interim dividend of 6c per share was paid out of retained earnings on all fully paid equivalent shares. On February 28, 2017, the remaining call on the shares was made, and all cash was received on the call by March 31, 2017, except for the holder of 7,000 shares. Required (round all amounts to the nearest dollar): A. Prepare journal entries in general journal form to record the above transactions. Please refer to the provided Chart of Accounts (see Appendix A at the end of this paper) for the appropriate accounts to be used in completing the journals. B. Prepare the following accounts in T-account format to show the effect of the above transactions: Share Capital – Ordinary Shares, Application – Ordinary Shares, Allotment – Ordinary Shares, and First Call – Ordinary Shares. A.

Prepare journal entries in general journal form to record the above transactions. Please refer to the provided Chart of Accounts (see Appendix A at the end of this paper) for the appropriate accounts to be used in completing the journals. Marks: 26

2016

Cash received on application for ordinary shares

Allotment of ordinary shares

Refund to applicants for shares unsuccessfully applied for

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Transfer of cash on allotment of shares

Transfer of excess application money

Receipt of outstanding allotment money

Underwriting fee paid 2017

Declaration of interim dividend

Payment of interim dividend.

First call ordinary shares

Transfer of calls previously paid

Recording of call money received

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B.

Prepare the following accounts in T-account format to show the effect of the above transactions: Share Capital – Ordinary Shares, Application – Ordinary Shares, Allotment – Ordinary Shares, and First Call – Ordinary Shares. Marks: 25 Application – Ordinary Shares 2016

2016

Allotment – Ordinary Shares 2016

2016

2016 2017

Share Capital – Ordinary Shares 2016 2017

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First Call – Ordinary Shares 2017

2017

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Question 5: Marks: 9 Required: Referring to the provided copy of JB Hi-Fi Limited’s Annual Report 2015 record the values as given, there is no need to add ‘000 to the values/calculations as applicable for the following items. Unless advised otherwise you should report the June 30, 2015 values: 1 2 3 4 5 6 7 8 9

Number of ordinary shares on issue as at June 30, 2015 Other Comprehensive Income – Exchange differences on translation of foreign operations Income tax expense – deferred tax Remuneration of Auditors – IT services Percentage of equity holding in the subsidiary, Clive Anthonys Pty Ltd Non-current assets – Plant & Equipment – Disposals Current Liabilities – Trade and Receivables (total) Earnings per share – diluted Number of shares held by the largest individual shareholder

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APPENDIX A – CHART OF ACCOUNTS When completing journal entries in this paper, please select the appropriate account name from the Chart of Accounts given below. Accounts Payable Control Accounts Payable – Chloe’s Clothing Importers Accounts Payable – Kingsbury Wholesalers Accounts Payable - Wieland Pty Ltd Accounts Receivable Control Accounts Receivable – Kingsbury Wholesalers Accounts Receivable – Chloe’s Clothing Importers Accounts Receivable - Wieland Pty Ltd Acc. Dep. - Buildings Acc. Dep. – Furniture Acc. Dep. – Machinery Acc. Dep. – Motor Vehicles Acc. Dep. – Vehicles Advertising expense Application – Ordinary Shares Application – Preference Shares Allotment – Ordinary Shares Allotment – Preference Shares Bank Loan Calls in Advance – Ordinary Shares Cash at Bank Cash Trust Computer equipment Cost of Sales Depreciation Expense Discount Allowed Discount Received First Call – Ordinary Shares First Call – Preference Shares GST Payable GST Receivable Interest Receivable Interest Revenue Interim Dividend Payable Insurance Expense Inventory Office supplies Office supplies expense Machinery 15 of 17

Machinery Payable Motor Vehicle Expense Parts Replaced Expense Prepaid Insurance Purchases Retained Earnings Sales Returns and Allowances Salary Expense Salaries Payable Second Call – Ordinary Shares Second Call – Preference Shares Security Services Revenue Share Capital – Ordinary Shares Share Capital – Preference Shares Telephone Expense Tutoring income Third Call – Ordinary Shares Third Call – Preference Shares Unearned Security Services Revenue Vehicles

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END OF EXAMINATION PAPER

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DO NOT TURN THIS PAPER OVER UNTIL INSTRUCTED TO DO SO THIS IS THE EXAMINATION PAPER FOR

You are now under examination conditions: The following are not permitted during this examination. Non-compliance may result in action being taken under the University’s Academic Misconduct Rules (Students), which provide penalties for misconduct in assessment. • Possessing or controlling any unauthorised electronic device, including mobile telephone, smart watch (all such devices must be turned off and placed in your bag). • Possessing any unauthorised materials or sources of information viewable by you. • Communicating or attempting to communicate in any manner with another student, including sharing items e.g. calculator. • View or attempt to view the work of another student or permit another student to view or attempt to view your work. • Accessing/attempting to access your bag or other items under your chair. • If you have any questions, raise your hand and speak to an invigilator – do not stand up, leave your desk or the room without permission....