2018 Senior External Examination

AccountingPaper One — Question book

Wednesday 7 November 20189 am to 12:10 pm

Time allowed• Perusal time: 10 minutes

• Working time: 3 hours

Examination materials provided• Paper One — Question book

• Paper One — Response book

Equipment allowed• QCAA-approved equipment

• non-programmable calculator

DirectionsYou may write in this book during perusal time.

Paper One has three parts, each of equal value.

Attempt all questions.

Suggested time allocation• Part A: 60 minutes

• Part B: 70 minutes

• Part C: 50 minutes

AssessmentPaper One assesses the following assessment criteria:

• Knowledge, interpretation and evaluation

• Routine practical procedures

• Challenging practical application

Assessment standards are at the end of this book.

After the examination sessionThe supervisor will collect this book when you leave.

Planning space

1

Part A — Knowledge, interpretation and evaluationPart A has five questions. Respond to all questions.

Write your responses in the response book.

Suggested time allocation: 60 minutes.

Question 1Define the following terms:

a. accounting entity assumption

b. bad debts

c. bank reconciliation

d. capital expenditure

e. income statement.

Question 2Explain the relationship between accrual accounting and balance day adjustments.

Question 3Describe two ways inventory levels can be improved through use of electronic business activities.

Question 4Use the graph to answer the following questions.

a. Identify the method of depreciation represented.

b. Explain one advantage of this method of depreciation.

c. Explain one disadvantage of this method of depreciation.

d. Name two assets that could be depreciated using this method and justify your choice.

2

Question 5Your firm, Ideal Solutions, has received the following letter from Fred Wright, the manager of Surf s̓ Up, 56 High Street, Noosa Heads, Qld 4567. Surf s̓ Up sells a range of surfwear and accessories.

Write a letter of response to Mr Wright, approximately 300–400 words, which:

a. Identifies internal control weaknesses that are evident and provides justified recommendations to address the identified weaknesses.

b. Recommends changes to address the weaknesses found. A full explanation of your recommendations is required.

21 October 2018

Mr Mark StubbsIdeal Solutions48 Bowen RoadBRISBANE QLD 4001

Dear Mr Stubbs

Our surfwear store opened six months ago. While we have plenty of stock on the shelves we are concerned about our present inventory control system.

Currently we are using the periodic inventory system to value inventories. Deliveries of stock are made to the front door and any one of the three staff pack the goods in the storeroom. For convenience the storeroom is left unlocked during the day, because when stock is required for the shelves, the employees have access to the storeroom.

We feel that some stock is going missing, but we don’t know how much or when stock is going missing. We are also concerned that we don’t know how our business has progressed over the past six months, as profit figures are not available because we cannot afford the time for a stocktake. We would like to be able to produce monthly profit results.

Could you please advise us as to how we can improve our inventory control?

Yours sincerely

ManagerFred Wright

End of Part A

3

Part B — Routine practical proceduresPart B has three questions. Respond to all questions.

Write your responses in the response book.

Suggested time allocation: 70 minutes.

Question 1

Complete the bank reconciliation process for Dan s̓ Office Supplies for the month of September.

You are required to:

a. complete the cash journals

b. prepare the Cash at Bank account

c. prepare a Bank Reconciliation Statement.

Danʼs Office SuppliesBank Reconciliation Statement

As at 31 August 2018

Credit balance as per bank statement 1 222

Less unpresented cheque nos. 225 238

228 75

230 1 136 1 449

Credit balance as per Cash at Bank a/c $227

Danʼs Office SuppliesCash Receipts Journal (extract)

Date2018

Receipt No. Particulars F Bank

$

Sept 1 43 Equipment 715

3 CRS Sales 1 320

5 CRS Sales 891

10 44 O King 950

16 CRS Sales 245

18 45 Commission Revenue 380

21 46 F Rankin 1 100

30 CRS Sales 752

Question 1 continues over next page ▬►

4

Danʼs Office SuppliesCash Payments Journal (extract)

Date2018

Cheque No. Particulars F Bank

$

Sept 1 231 Bagnall Wholesalers 630

2 232 Drawings 300

6 233 Furniture 520

10 234 Inventories 781

12 235 Wages 1 200

18 236 Insurance 550

20 237 F Dodd 926

22 238 Postage 135

26 239 Wages 1 200

29 240 Inventories 977

Danʼs Office SuppliesBank Statement

Date2018 Particulars Debit

$Credit

$Balance

$

Sept 1 Balance 1 222 Cr

C/c 715 1 937 Cr

2 Chq. 228 75 1 862 Cr

3 C/c 1 320 3 182 Cr

Chq. 232 300 2 882 Cr

Deposit – insurance refund 550 3 432 Cr

5 Chq. 231 630 2 802 Cr

C/c 891 3 693 Cr

10 C/c 950 4 643 Cr

12 Chq. 235 1 200 3 443 Cr

14 Bank Charges 45 3 398 Cr

16 C/c 245 3 643 Cr

18 C/c 380 4 023 Cr

Brisbane City Council – Rates 742 3 281 Cr

22 C/c 1 100 4 381 Cr

23 O King – dishonoured cheque 950 3 421 Cr

25 Chq. 238 135 3 296 Cr

27 Chq. 239 1 200 2 096 Cr

30 Interest on Investments 50 2 146 Cr

5

Question 2Magical Mirrors sells two types of mirrors: freestanding and decorative.

You are required to:

a. Prepare the stock ledger card for decorative mirrors using the FIFO method.

b. Prepare the stock ledger card for freestanding mirrors using the Weighted Average method (unit cost to be rounded to four decimal places.)

The following transactions occurred for the month of July.

Stock on hand:

July 1 Decorative mirrors — 150 units @ $14 each

Freestanding mirrors — 80 units @ $11 each

31 Decorative mirrors — 115 units

Freestanding mirrors — 22 units

Purchases:

July 3 Freestanding mirrors — 70 units @ $12 each

9 Decorative mirrors — 50 units @ $13 each

21 Decorative mirrors — 100 units @ $14 each

26 Freestanding mirrors — 50 units @ $13 each

Sales:

July 6 Decorative mirrors — 60 units @ $36 each

11 Freestanding mirrors — 80 units @ $30 each

17 Decorative mirrors — 125 units @ $36 each

27 Freestanding mirrors — 85 units @ $30 each

Purchases returns:

July 5 Freestanding mirrors — 10 units purchased on July 3

23 Decorative mirrors — 5 units purchased on July 21

Sales returns:

July 8 Decorative mirrors — 10 units sold on July 6

28 Freestanding mirrors — 5 units sold on July 27

6

Question 3Broadmeadow Enterprises is considering changing to subsidiary ledgers and has the following account balances as at 1 June 2018:

Account $

Accounts Receivable:

R Graham 980

H Rossini 242

P Tracey 4 210

Other:

Sales 123 456

Accounts Receivable Control 5 432

You are required to:

a. Record the transactions provided below into the general journal.

b. Use the following journals and general journal to post the entries into the Accounts Receivable subsidiary ledger.

c. Post the journals to the Sales and Accounts Receivable Control accounts in the general ledger.

d. Prepare a Schedule of Accounts Receivable as at 30 June.

Transactions:

June 14 Charged P Tracey $35 interest on overdue account.

20 Wrote off H Rossini’s account as a bad debt.

24 Received $165 from P Wyatt, whose account had previously been written off as a bad debt in January. GST was applicable.

7

Sales Journal of Broadmeadows Enterprises

DateTaxInvoice No.

Accounts Receivable Sales GST Clearing

Accounts Receivable

Control

Cost of Goods

Sold/Inventories

2018

June 6 72 R Graham 960 96 1 056 450

12 73 P Tracey 130 13 143 60

26 74 R Graham 580 58 638 260

30 $1 670 $167 $1 837 $770

Cash Receipts Journal of Broadmeadows Enterprises

Date Rec. No. Particulars Sales Other

Accounts Receiv-

able Control

GST Clearing Bank

Cost of Goods

Sold/Inventories

2018

June 2 CRS Sales 430 43 473 200

5 432 R Graham 980

CRS Sales 670 67 1 717 310

12 433 Rent 520 52 572

20 434 Commission 80 8

CRS Sales 450 45 583 220

25 435 P Tracey 2 300 2 300

30 $1 550 $600 $3 280 $215 $5 645 $730

End of Part B

8

Part C — Challenging practical applicationPart C has one question.

Write your response in the response book.

Suggested time allocation: 50 minutes.

Question 1

Megan’s Mobile Dog Wash commenced business on 1 May 2016. On this date, Megan purchased a motor vehicle (motor vehicle 1) for $42 000 (plus GST) on credit from Riverside Motors. She also paid $1 350 (plus GST) for annual comprehensive insurance with cash. Riverside Motors installed a hoist and ramp costing $2 420 (including GST) to help with accessing and moving the dog washing equipment and Megan was also billed for this on 1 May. It was estimated that the motor vehicle will be traded in after five years and have a residual value of $9 000. The diminishing balance method of depreciation is to be used, at a rate of 25% per annum.

The business flourished and on 1 February 2017, an additional dog groomer was hired. To accommodate for this, a second motor vehicle (motor vehicle 2) was purchased for $33 000 (plus GST) cash. Delivery of the vehicle cost $1 650 (including GST) cash. The motor vehicle was estimated to have a useful life of four years, at which point it should have a residual value of $9 900. The straight line method of depreciation is to be used.

On 31 October 2017 Megan decided to sell her vehicle and upgrade to a new model. Her original motor vehicle (motor vehicle 1) was sold for $39 600 cash (including GST). To replace this, she purchased a new motor vehicle (motor vehicle 3) on credit from Auto Traders for $45 000 (plus GST) on the same date. Megan also paid, in cash, $1 420 (plus GST) for annual comprehensive insurance. She had a stereo system costing $1 980 (including GST) installed for calming animals, for which she paid cash. This vehicle is estimated to have a useful life of six years, a residual value of $12 000 and will be depreciated using the diminishing balance method, at a rate of 20% per annum.

You are required to:

a. Use the general journal approach to record the above information, including the disposal of the non-current asset, from 1 May 2016 to 30 June 2018. (Note: Narrations and closing entries are not required.)

b. Present the non-current asset accounts in the Balance Sheet as at 30 June 2016, 2017 and 2018.

End of Part CEnd of Paper One

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