Sample/practice exam June, questions PDF

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ACC/ACF1200(SAMPLE(QUESTIONS! ! PLEASE(NOTE(THAT(THESE(QUESTIONS(ARE(SAMPLES(AND(MAY(NOT(REFLECT(THE( UPCOMING(EXAMS.(THEY(HAVE(BEEN(CHOSEN(FROM(A(SELECTION(OF(PAST(EXAMS(AS( WELL(AS(WORK(EXPERIENCE! Question(1( ! a) Why!can’t!external!users!rely!on!management!accounting!information!to!help!them!with! decision!making?! ! ! ! ! ! ! ! b) The!Conceptual!Framework!outlines!a!number!of!‘enhancing’!qualitative!characteristics! which!financial!information!should!have.!List!the!enhancing!qualitative!characteristics! and!briefly!explain!their!collective!purpose.! ! ! ! ! ! ! ! ! ! ! ! c) Two!common!errors!made!when!undertaking!transaction!analysis!in!a!worksheet!are! ‘transposition!errors’!and!‘single!entry!errors’.!Explain!whether!one!or!both!of!these! errors!would!be!detected!as!the!worksheet!is!completed!and!totalled.! ! ! ! ! ! ! ! ! ! ! ! ! (2(+(3(+(2(=(7(marks)(

! ! Question(2( ! a) Explain!the!term!‘accrual!accounting’.! ! ! ! ! ! ! ! b) A!small!business!owner!is!confused!by!the!financial!statements!prepared!for!him!by!his! accountant.!The!business!specialises!in!home!renovations,!and!most!jobs!performed!for! clients!involve!new!kitchens!or!bathrooms!with!an!average!price!charged!of!$15,000.! The!owner!thought!the!business!was!performing!quite!well,!as!he!never!seemed!to!be! short!of!cash.!However,!the!statement!of!cash!flows!reports!a!net!cash!flow!of!$54,200! for!the!year,!while!the!income!statement!reports!a!loss!of!$3,900.!Briefly!outline!five!(5)! reasons!why!this!could!have!occurred.! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! (2(+(5(=(7(marks)( ! ! ! Question(3( ! a) Explain!briefly!how!tax!is!determined!on!profits!for!a:! i. Partnership! ! ! ! ! !

Public!company! ! ! ! ! ! ! ! b) “The!‘sole!trader’!business!structure!allows!for!one!owner,!which!means!the!owner!must! do!all!of!the!work!in!the!business!entirely!on!their!own”.!Briefly!explain!whether!you! agree!with!this!statement.! ! ! ! ! ! ! ! ! c) Three!brothers!currently!own!a!partnership!that!runs!a!concreting!business.!They!are! considering!changing!their!business!structure!to!a!private!company.!Provide!two!(2)! advantages!of!private!companies!over!partnerships.! ! ! ! ! ! ! ! ! ! ((1(+(1)(+(1(+(2(=(5(marks)( ! ii.

Question(4! ! a) Explain!the!role!of!the!‘Balanced!Scorecard’.! ! ! ! ! ! ! ! ! !

b) Explain!the!term!‘common!costs’!and!outline!why!careful!allocation!of!common!costs!is! important!in!divisional!performance!evaluation!and!decision!making.! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! (2(+(3(=(5(marks)( ! Question(5! ! Molly!loves!dogs!and!is!considering!starting!her!own!small!business!offering!dog!washing! services.!Molly!thinks!she!could!charge!$20!per!dog!wash!for!the!service!and!the!variable! costs!would!be!$11!per!dog!wash.!Annual!fixed!costs!would!be!$15,180.! ! Required:( a) Explain!the!benefit!of!doing!a!break-even!analysis!on!the!new!dog!wash!business.! ! ! ! ! ! ! ! ! ! b) Calculate!how!many!dog!washes!would!need!to!be!performed!each!year!to!break!even.! ! ! ! ! ! ! ! ! !

c) If!Molly!wishes!to!earn!a!target!profit!of!$15,000!from!the!dog!wash!service,!how!many! additional!dog!washes!must!be!done!beyond!the!breakeven!point?! ! ! ! ! ! ! ! ! ! ! ! ! ! ! (2(+(2(+(2(=(6(marks)! ! Question(6( ! Greenscapes!Pty!Ltd!is!a!small!company!that!specialises!in!landscape!gardening!for! residential!and!commercial!properties.!Most!landscaping!jobs!take!around!two!weeks!to! complete,!and!Greenscapes!Pty!Ltd!offer!their!customers!45!days!to!pay!(from!the! commencement!of!the!job).!Suppliers!of!landscaping!materials!used!during!gardening!jobs! are!paid!within!30!days!of!the!purchase!of!the!supplies.! ! The!manager!is!a!little!concerned!that!business!has!been!quiet!lately!with!a!new!competitor! entering!the!market.!This!was!not!anticipated!and!a!comparison!of!the!actual!cash!flow!to! budget!shows!some!unfavourable!variances.! ! Required:( a) Assume!the!cash!budget!predicted!a!cash!shortage!in!the!coming!months.!Outline!a! strategy!that!Greenscapes!Pty!Ltd!could!adopt!to!minimise!the!forecast!cash!shortage.! You!must!also!identify!the!implications!of!the!strategy!on!business!profitability.! ! ! ! ! ! ! ! ! ! ! ! ! !

b) An!extract!of!the!budgeted!income!statement!and!actual!data!is!provided!below:! ! Actual! Budget! !

$!

$!

Landscaping!fees!

77,320!

85,960!

Wages!expense!

(41,190)!

(48,730)!

Advertising!expense! (2,350)! (1,500) ! Calculate!the!variances!related!to!the!three!items!above,!indicating!whether!they! are!favourable!or!unfavourable.! ! ! ! ! ! ! ! ! ii. Comment!on!whether!the!variances!are!consistent!with!the!data!provided!about! Greenscapes!Pty!Ltd!at!the!beginning!of!this!question.! ! ! ! ! ! ! ! ! ! ! c) The!manager!made!the!following!comment:!“I!don’t!investigate!favourable!income! variances,!even!if!they!are!large”.!Do!you!agree!with!this!comment?!Briefly!explain!why! or!why!not.! ! ! ! ! ! ! ! ! ! ! ! (2(+((3(+(2)(+(2(=(9(marks)( i.

Question(7( ! a) Explain!why!it!is!important!for!manufacturing!entities!to!accurately!determine!the!full! cost!of!their!products.! ! ! ! ! ! ! ! ! ! b) Provide!an!example!of!a!‘period!cost’!and!outline!how!such!costs!are!accounted!for!in! the!financial!statements.! ! ! ! ! ! ! ! ! ! c) Kang!Industries!manufactures!standard!folding!tables.!While!colours!vary,!the!tables!are! otherwise!identical!and!take!around!three!hours!each!to!manufacture.!Currently!indirect! factory!costs!are!allocated!to!products!based!on!quantity!produced.!The!manager!is! considering!commencing!production!of!a!new!folding!table,!the!‘deluxe’!model.!He!is! unsure!whether!the!introduction!of!the!new!product!will!affect!the!entity’s!costing! approach.!Outline!what!information!you!would!need!to!know!before!you!could!advise! the!manager!whether!the!costing!approach!would!need!to!be!changed.! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! (2(+(2(+(2(=(6(marks)(

Question(8( ! Robert!has!the!opportunity!to!undertake!two!investment!proposals!but!is!unsure!which!is! more!favourable.!He!can!only!afford!to!invest!in!one!of!them.!Details!about!the!cash!flows! related!to!each!proposal!are!outlined!below:! Year! 0! 1! 2! 3!

Proposal!A! ($100,000)! $60,000! $40,000! $10,000!

Proposal!B! ($100,000)! $15,000! $35,000! $60,000!

! Required:( ! Based!on!the!cash!flow!data!above,!and!given!a!discount!rate!of!6%! a) Determine!the!payback!period!for!each!investment!proposal.!Based!on!your!calculations,! justify!which!proposal!you!would!recommend!to!Robert.! ! ! ! ! ! ! ! ! ! b) Calculate!the!net!present!value!(NPV)!of!each!proposal.! ! ! ! ! ! ! ! c) Based!on!your!answer!to!part!(b),!indicate!which!proposal!you!would!recommend!to! Robert.!Justify!your!choice!and!include!in!your!answer!the!reason!why!one!proposal!is! more!favourable!than!the!other.! ( ( ( ( ( ( ( ( ( ( (3(+(4(+(3(=(10(mark)...