MUF0022 ACCOUNTING UNIT 2 Writing time: 90 minutes Sample Examination Question Booklet Structure of Examination Section Type of question Number of questions Number of questions to be answered Number of marks n/a Problem Based 7 7 60 Total Marks 60 Instructions Answer ALL questions. There are 7 questions in total. Write your response to each question in the spaces provided in the Answer Booklet. Candidates must write clearly and in English. Materials Allowed: A scientific (non-programmable) calculator is allowed. Monash University Foundation Year Page 2 of 8 Question 1 (14 marks) Kate’s Pet Shop sells three products – Bird Cage, Cat Litter and Dog Food. On 1 October 2019, the business had the following stock on hand: No. of units Cost $ Total $ 5 250 1 250 During October, the following financial transactions took place: Oct 1 Sold 3 Bird Cages for $500 each (Rec. 1) 5 Purchased 2 Bird Cages for $500 from Felines (Inv. 67Y2) 10 Sold 2 Bird Cages to Birds Galore for $1 000 (Inv. 1) 12 Kate donated 1 Bird Cage to Home School for use in a raffle (Memo 1) 17 Purchased 4 Bird Cages for $250 each (Chq. 1) 29 Purchased 5 Bird Cages for $300 each from We Make Bird Cages (Inv. 786) 30 Returned 1 Bird Cage purchased on the 29 October to We Make Bird Cages (Credit note 45) 31 A stocktake revealed 7 Bird Cages on hand (Memo 2) a. Record the transactions for October 2019 in the stock card for Bird Cage. 8 marks b. Calculate the Cost of Sales of Bird Cages for October 2019 1 mark c. Record Memo 2 into the General Journal of Kate’s Pet Shop. A narration is required. 3 marks d. State two benefits of using stock cards for Kate’s Pet Shop. 2 marks Page 3 of 8 Question 2 (7 marks) On 31 January 2018, Bodyworks returned 4 car tyres to Flat-out Tyers. Each tyre was purchased by Bodyworks for $80 each (cost price $40 each) (Credit note CN456). a. Record the above transaction into the General Journal of Flat-out Tyers. A narration is not required. 4 marks b. State the effect on the accounting equation if the transaction is not recorded. 3 marks Page 4 of 8 Question 3 (9 marks) Tracy operates Tracy’s Toy Store. Tracy’s Toy Store purchased new Office Equipment on 31 December 2017 for cash (Rec. 678). The Office Equipment costs $5 000. Tracy estimates that the Office Equipment will last for three years. She also believes that after the three years, the Office Equipment will have a residual value of at $800. a. State an Accounting Assumption that is related to depreciation expense. 1 mark b. Calculate Depreciation expense for the year ending 31 March 2018. 2 marks c. Show the General Journal entry necessary to record the depreciation of the Office Equipment for the year ending 31 March 2018 (Memo 543). A narration is not required. 2 marks d. Post the General Journal entry to the relevant accounts of the General Ledger of Tracy’s Toy Store. 2 marks e. Define an expense and explain why depreciation expense is reported in the Income Statement. 2 marks Page 5 of 8 Question 4 (8 marks) During 2018, Peter’s Mugs paid $13 500 for advertising, but as at 31 December 2018 a further $4 300 was still owing (Memo 31). a. Calculate Advertising Expense for the year ended 31 December 2018 for Peter’s Mugs. 1 mark b. Referring to one Qualitative Characteristic, explain why the advertising owing should be included in the Advertising Expense for the year 2018. 3 marks c. Show the General Journal entries necessary to record advertising owing as at 31 December 2018. A narration is not required. 2 marks d. Explain how Accrued Advertising would be reported in the Balance Sheet of Peter’s Mugs as at 31 December 2018. 2 marks Page 6 of 8 Question 5 (7 marks) On 1 January 2018, Benny’s Bazaar received $1 200 from a friend who rented out a small area of Benny’s Bazaar (Rec. 45). The amount was for 12 months starting 1 January 2018. a. Record the transaction on 1 January 2018 into the Cash Receipts Journal. 1 mark Benny’s Bazaar prepares its financial reports on a quarterly basis. The next balance day is 31 March 2018. b. Record the adjusting entry for the rent as at 31 March 2018 (Memo 5). A narration is required. 3 marks c. State the effect on the Accounting Equation if the adjustment is not made. 3 marks Page 7 of 8 Question 6 (4 marks) Below is a graphical representation showing financial data related to the performance of Dan’s Coffee Machines. a. Describe the trend in Sales over the period. 1 mark b. Explain why Gross Profit is increasing yet Net Profit is decreasing. 2 marks c. State one way the business can improve Net Profit. 1 mark Page 8 of 8 Question 7 (11 marks) Jiang owns and operates Jiang’s Games Shop. The business has calculated the following performance indicators for the years 2017 and 2018: Performance Indicators 2017 2018 Return on Investment (ROI) 15% 10% Net Profit Margin (NPM) 10% 5% Debtors Turnover (DTO) 45 days 28 days Working Capital Ratio (WCR) 1:35:1 0.75:1 Gearing Ratio (GR) 60% 80% Additional information The Industry Average for Return on Investment (ROI) in 2018 was 15%. Credit term offered to debtors is 30 days. a. Distinguish between profit and profitability. 2 marks b. Explain if Jiang should be happy with the performance of the business in terms of profitability. 3 marks c. Explain if Jiang should be happy with the performance of the business in terms of efficiency. 2 marks d. Describe the trend in the Working Capital Ratio and explain one concern about the trend. 2 marks e. Explain two ways that Jiang could improve the Gearing Ratio. 2 marks END OF QUESTION BOOKLET
