accounting - home - tasc page 6 question 2 (40 minutes) this question assesses criterion 8 and is...

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5 Answer Booklets

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than the Tasmanian Secondary Assessment Board.

Tasmanian Secondary Assessment Board

ACCOUNTINGSenior Secondary 5C

Subject Code: BS871

External Assessment

2003

Time: Three Hours

On the basis of your performance in this examination, the examiners will provideresults on each of the following criteria taken from the syllabus statement:

Criterion 4 Understand accounting and financial terms, ideas and concepts.

Criterion 6 Apply and understand the principles of double entry bookkeeping inthe recording of financial transactions.

Criterion 7 Apply and understand the use of accounting control techniques.

Criterion 8 Apply accrual accounting techniques to prepare correctly presentedaccounting reports.

Criterion 9 Identify business problems, offer solutions and make financialdecisions.

Accounting

CANDIDATE INSTRUCTIONS

Candidates MUST ensure that they have addressed ALL of the externally assessed criteria on thisexamination paper.

This paper consists of FIVE questions and ALL FIVE must be answered.

Each question must be completed in the answer booklet provided for that question.

It is recommended that calculators be used.

All formulae required for this examination are on the Formula Sheet provided.

Accounting

Question 1 (20 minutes)

This question assesses Criterion 4 and is worth 20 marks in total.

There are THREE parts to this question (a), (b) and (c) with a choice of TWO questions in parts(b) and (c).

(a) Multiple Choice Questions

Clearly indicate your answer to each question by circling the appropriate letter in AnswerBooklet – Question 1.

1. Schultz Styles is a hairdressing salon owned and operated by Jay Schultz. In 1995 thebusiness premises were purchased for $80 000. Two independent valuers have inspectedthe property this year and have valued the premises at $107 000 and $110 000respectively. In her accounts Jay should value the premises at

(a) $80 000 because of the historic cost assumption(b) $107 000 because that seems to represent a fair and conservative value(c) $110 000 because that is the most relevant and recent value for the premises(d) $110 000 because the business is a going concern and the amount represents the

likely future value of the premises

2. The following item relates to activities of people associated with the Dragicevic DentalSurgery: A three year personal loan is taken out by the dentist’s wife. This item would

(a) appear as a current asset in the firm’s balance sheet.(b) appear as a current liability in the firm’s balance sheet.(c) appear as a proprietorship item in the firm’s balance sheet.(d) be irrelevant to the firm’s balance sheet.

3. The account “delivery vehicle expenses” would be classified as

(a) a cost of goods sold expense(b) a selling and distribution expense(c) a non-current asset(d) a general and administrative expense

4. Source documents are a vital part of the accounting process because they

(a) play an important role in decision-making.(b) allow the objectivity convention to be followed.(c) allow the business to apply the going concern assumption.(d) permit the conservative measurement of a business’ profit.

5. A statement usually prepared at a particular date to bring our cash records into agreementwith the bank statement is called a

(a) bank statement.(b) cash book automatic balance.(c) bank reconciliation statement.(d) statement of account.

6. A journal is

(a) the book of original entry.(b) the book of second entry.(c) the account that sorts out all the transactions.(d) the cash receipts and cash payments.

Question 1 continues over the page.

Accounting

Question 1 (continued)

7. Coughlan Carpentry Services received the following document in the mail:

Taroona TimberyardMain RoadTaroona 7053

No: 345

Credit theaccountof

Coughlan Carpentry Service8 Clarence StreetClarence 7019

Date: 5/7/02

Quantity Description Value Total cost1 3.5 metre sleeper $15 $15

TOTAL CREDIT ALLOWED $15 (GST included)

This document is an example of:

(a) an invoice.(b) a credit note.(c) a receipt.(d) a cheque butt.

8. A balance sheet shows

(a) the end of the accounting cycle is close.(b) what is owned and owed at a particular date.(c) the change in assets over time.(d) the source and use of funds by the business during the last financial period.

9. The writing off of an intangible asset over its useful life is called

(a) general costs.(b) appreciation.(c) depreciation.(d) amortisation.

10. Costs that do not change with changes in volume are called

(a) fixed costs.(b) breakeven costs.(c) non-variable costs.(d) variable costs.

(10 x 1 mark = 10 marks, approximately 10 minutes)

Question 1 continues opposite.

Accounting


(b) (i) List two interested parties who may wish to have access to the financial data of anenterprise and outline their particular interests.

OR

(ii) Comment on the role and usefulness of the cash flow statement.(4 marks, approximately 4 minutes)

(c) (i) Outline the importance of cash to a business organisation and identify and describe twointernal controls over cash.

OR

(ii) Outline the importance of accounts receivable to a business organisation and identify anddescribe two internal controls over accounts receivable.

(6 marks, approximately 6 minutes)

Accounting



Daniel Sipthorp is the owner/manager of Sipthorp Service and provides you with the following trialbalance and additional information for the year ended 30 June 2003.

Sipthorp ServiceTrial Balance as at 30 June 2003

Debit CreditAdministrative Expenses 3 500Provision for Doubtful Debts 600Bank Overdraft 5 000Cash on Hand 650Debentures 1 350Non-trade Creditors Control 750Workshop Equipment 27 000Interest 850Capital 9 750Lease Charges 14 000Long Term Loan 4 000Sales Returns 850Buying Expenses 150Donation – Bushfire Appeal 500Gain on Disposal of Office Fixtures and Fittings 1 500Accumulated Depreciation – Workshop Equipment 10 000Purchases 151 200Sales 235 000Inventory (1 July 2002) 3 400Accounts Payable Control 2 400Accounts Receivable Control 15 000Wages – Sales Staff 32 000Drawings 18 000Legal Costs/Damages 550

$269 000 $269 000


Accounting


Additional Information:

• Inventories on hand after a physical stocktake on 30 June 2003 is $4 000.

• Lease charges relate to the firm’s building and include prepayment in respect of the year ending30 June 2004 of $2 000.

• Depreciation is to be calculated on equipment using the diminishing balance method at a rate of20%.

• Interest owing on the long-term loan at 30 June 2003 is $150.

• An analysis of the accounts receivable accounts suggests that debts of $500 should be writtenoff as uncollectible and that the provision for doubtful debts should be increased to $800.

You are required to:

(a) Prepare a correctly classified Profit & Loss Statement in narrative form for Sipthorp Service forthe year ended 30 June 2003.


(b) Prepare a correctly classified Balance Sheet in narrative form for Sipthorp Service for the yearended 30 June 2003.


Accounting



(a) Multiple Choice Questions

Clearly indicate your answer to each question by circling the appropriate letter in AnswerBooklet – Question 3.

1. What is the owner’s claim on the business based on the following information? Mortgage$10 000, Accounts Payable $5 000, Cash at Bank $1 000, Inventory $14 000, MotorVehicles $20 000

(a) $15 000(b) $20 000(c) $25 000(d) $35 000

2. What is the new value of capital based on the following information? The opening capitalbalance is valued at $40 000; the owner withdrew $2 000 in stock, as well as contributinga motor vehicle valued at $10 000 to the business; and the business made a net loss of $5 000. The new value of capital is

(a) $43 000(b) $57 000(c) $45 000(d) $55 000

3. Cash sales of $110 has been incorrectly posted as $101 to the Sales Account, butcorrectly entered as $110 in the Bank Account. The effect on the Trial Balance will be to

(a) overstate the total credit balance by $9(b) understate the total credit balance by $9(c) overstate both the debit and credit totals by $9(d) have no effect at all

4. A business operating a periodic inventory system buys goods to the value of $500 oncredit from Bowden Bros. The next day $50 worth of the goods are found to be faultyand are returned. Which ledger balances would reflect both transactions?

(a) Inventory $500 Dr, Bowden Bros $450 Cr, Sales returns $50 Cr(b) Bowden Bros $500 Dr, Bank $450 Cr, Purchases returns $50 Cr(c) Purchases $500 Dr, Bowden Bros $450 Cr, Purchases Returns $50 Cr(d) Purchase Returns $50 Dr, Purchases $450 Dr, Bowden Bros $500 Cr

5. The following entry was made on balance day in the General Journal.

Extract from General JournalDate Particulars Debit ($) Credit ($)2003Jun 30 Rent Expense 250

Accrued Expense 250

Which of the following best describes the reason for the entry?

(a) An adjusting entry was made for rent paid in advance.(b) A reversing entry was made for rent owing on balance day.(c) A correcting entry was made to record the amount of rent paid on balance day.(d) An adjusting entry was made for the amount of rent owing on balance day.


Accounting


6. Study the following ledger account carefully

M Richardson2003 2003

Jun 1 Balance b/d 120 June 8 Cash CRJ 1086 Sales SJ 80 Discount Expense CRJ 12

12 Sales SJ 56 13 Sales Returns SRJ 617 Equipment GJ 2130 Balance c/d 109

256 256Jul 1 Balance b/d 109

Which of the following statements is true?

(a) On June 1 M Richardson owes $120.(b) On June 12 M Richardson sells $56 worth of goods.(c) On June 8 M Richardson allows a discount of $12.(d) On June 17 M Richardson buys $21 worth of equipment on credit.

7. Assume you own Kellaway Laundries. You contributed $20 000 in assets and $10 000 inliabilities at the commencement of the business. During the first month of operations, youtook out a personal loan for $5 000 from the Blumstead Bank for a holiday. Assuming noother events took place during the first month of business, what was your capital worth atthe end of the month?

(a) $5 000(b) $30 000(c) $10 000(d) $35 000

8. The following was extracted from a business’s records under the perpetual inventorysystem.

Extract from the Cash Receipts JournalDate Particulars Discount

ExpenseDebtors Cash

SalesCost ofSales

Sundries Bank

2003Aug 31 Totals 900 34 300 28 570 23 100 4 000 66 870

Which of the following correctly describes how the $23 100 in the Cost of Sales columnwould be posted to the General Ledger?

(a) A debit to Cost of Sales Account and a credit to Inventory Control Account.(b) A debit to Cost of Sales Account and a credit to Sales Account.(c) A debit to Cash at Bank Account and a credit to Inventory Control Account.(d) A debit to Cash at Bank Account and a credit to Cost of Sales Account.

9. Helen is the owner of Pickering Pets, which sells dog and cat supplies. On balance day,Helen finds the following error in the records of her business: Interest revenue of $750has been recorded as Interest expense. What will be the effect on the net profit of thebusiness if the error is not rectified?

(a) Net profit is overstated by by $750(b) Net profit will be understated by $750(c) Net profit is overstated by by $1 500(d) Net profit is understated by $1 500


Accounting


10. The following entry was made on balance day in the General Journal.

Extract from General JournalDate Particulars Debit ($) Credit ($)2003Jun 30 Capital 14 700

Profit & Loss 14 700

Which of the following would be the most correct narration to explain this entry?(a) Closing the Capital Account to the Profit & Loss Account.(b) Transferring the net profit to the Capital Account.(c) Reversing the entry made on balance date transferring the net profit to the Capital

Account.(d) Transferring the net loss to the Capital Account.

(10 x 1 mark = 10 marks, approximately 9 minutes)

(b) Tigerland Traders is a Tasmanian store specializing in supporter’s clothing for a major footballteam. It uses the periodic method for recording stock and its financial year ends on 30 June.The following information was extracted from its books on 30 June 2003:

Debit ($) Credit ($)

Accounts Receivable 50 000Provision for Doubtful Debts 1 000Plant and Equipment (wdv) 46 000Depreciation of Plant & Equipment 3 600Supplies on Hand 500Prepaid Rent Revenue 2 400Prepaid Advertising 4 500Delivery Vehicle (cost) 16 000

Additional information provided by the owner:

1. Tigerland Traders recently rented part of it warehouse to another business. Rent ispayable quarterly in advance. The amount represents payment for the months of June, Julyand August.

2. The Advertising occurred as a result of an agreement with the Tiger 103 Network for radioadvertising for 3 months commencing 1 May 2003. The full cost was debited to PrepaidAdvertising in May. It is expected that the advertising will benefit the business in equalproportions each month the program is on air.

3. Gross Profit was calculated to be $110 000.


(i) Prepare the adjusting entry in the General Journal of Tigerland Traders on 30 June 2003for the transaction identified in Additional Information 1 above. A narration is notrequired. If you believe no adjusting entry is needed, write NO ENTRY REQUIRED.

(2 marks)


Accounting


(ii) Prepare the reversing entry in the General Journal of Tigerland Traders on 1 July 2003for the transaction identified in Additional Information 2 above. A narration is notrequired. If you believe no reversing entry is needed, write NO ENTRY REQUIRED.

(2 marks)

(iii) Prepare the Profit & Loss Account in the General Ledger of Tigerland Traders for theyear ended 30 June 2003. (Note: Folios or cross references to the appropriate journal arenot required. Dates, full details and closing are required.) (6 marks)


(c) Listed below are six transactions that would be recorded in the journals of the Campbell StreetSalad Bar, owned by W Campbell. You are to assume the balance date is 30 June 2003 and thestore uses the perpetual system for inventory valuation.

You are required to complete the table as indicated:

• In the first column you are to write the names of the accounts to which these transactionswill be posted in the ledger. List the debit account first.

• In the second column you are to specify the type of each account involved. You are to usethe following abbreviations: P = Proprietorship, A = Asset, L = Liability, E = Expense,R = Revenue.

• In the third column you are to indicate the Debit amount and the Credit amount against theappropriate account(s).

• In the final column you are to record the value ($) of the transaction.

The first transaction has been done for you as a guide. Dates and narrations are not required. Ifyou believe no entry is needed, write NO ENTRY REQUIRED.

(i) The owner contributed $45 000 cash as capital.

(ii) Campbell withdrew a computer to the value of $1 500 for personal use.

(iii) The inventory records show the value of inventory to be $22 500 whilst a physicalstocktake indicated inventory to be $24 500.

(iv) Campbell Street Salad Bar acts as an agent for other businesses and has $3 000commission owing to it on balance date.

(v) On balance date Campbell charged Hilton’s Hotel interest at a rate of 15% per annum onan account of $2 000, outstanding for six (6) months.

(vi) The accounting records show the end of period inventory to have cost $11 700. Therealizable value of this inventory is estimated to be $13 900. List the details for the entry, ifany, required by the lower of cost or market rule.

(5 x 2 marks = 10 marks, approximately 10 minutes)

Accounting



There are THREE parts to this question (a), (b) and (c) with a choice of TWO questions in eachpart.

(a) On 31 October 2003 the owner of Stafford Stores comes to you concerned about the firm’s cashposition. You are presented with the following details outlining the expected transactions for thefirm during the next three months.

• The bank overdraft on 31 October 2003 was $5 000. The bank has advised the firm that itwould impose an overdraft limit of $30 000 until further notice.

• All sales are made on credit and sales charged to debtors during the previous three monthswere as follows:

August $80 000September $70 000October $90 000.

• Analysis of accounts receivable indicates that they are expected to settle their accounts as inthe past. Records show that they pay as follows:

30% in the month following the sale50% in the second month following the sale20% in the third month following the sale

• The firm owes its creditors $20 000 at 31 October 2003. It is the firm’s policy to pay allcreditors in the month following to take advantage of the 2% discount available.

• Expenses are paid in the month in which they are incurred.

• Plans to increase plant capacity will require a cash outlay of $90 000 to be spread evenlyover the next three months.

• Estimates of expected sales, purchases and other expenses are as follows:

Sales($) Purchases($) Other Expenses ($)November 2003 40 000 20 000 31 000December 2003 70 000 30 000 36 000January 2004 90 000 35 000 40 000

• Depreciation on existing plant, property and equipment amounts to $2 750 per month.


(i) Prepare the cash budget of Stafford Stores for the three months ending 31 January 2004.In the Answer Booklet, a table has been provided to assist you in calculating collectionsfrom accounts receivable. (12 marks)

(ii) Comment on the effect of the overdraft limit imposed by the bank upon the financing ofthe firm’s operations during the three months ending 31 January 2004. (3 marks)



Accounting


OR

Chaffey CDs uses the perpetual inventory method in conjunction with the identified cost methodof recording stock:

• Stock as at 1 October 2003: 430 CDs at a cost of $14 per unit.

• Bank balance at 7 October $2 135.

• There are no debtors or creditors balances.

• Stock transactions for the first week of October were:

Oct 1 Bought 45 CDs at $14 each from C Biddiscombe (Cheque #237)Oct 2 Sold 75 CDs at $25 each to Fiora FM (Inv #1825): $14 per unit at costOct 3 Bought 19 CDs at $15 each from G Tivendale (Cheque #238)Oct 3 Fiora FM returns 3 CDs (Credit note #12)Oct 3 Purchased 120 CDs at $12 each from Rodan’s Records (Inv #5532)Oct 4 Sold 35 CDs at $27 each (Receipt #567): $14 per unit at costOct 5 Returned 95 CDs to Rodan’s Records (Credit note #26)Oct 6 Sold 25 CDs at $23 each to Dragicevic’s DJ School (Inv #1826); $12 per

unit at costOct 7 Sold 22 CDs at $27 each (CRR): $14 per unit at cost.

• A physical stocktake at 7 October revealed a stock loss of 4 CDs at $15 each.


(iii) Prepare a stock card for the first week of October using the perpetual inventory method ofinventory valuation. (5 marks)

(iv) Complete the following accounts in the General Ledger of Chaffey CDs for the weekended 7 October 2003:

• Cost of Goods Sold• Trading.

(Note: Folios or cross references to the appropriate journal are not required. Dates, fulldetails and closing are required.) (10 marks)



Accounting


(b) The owner of Gaspar’s Grocery Store brings you its cash records for reconciliation:

Balance of the Cash at Bank account on 1 February 2003 was $6 329 Cr.

Summary of Cash Receipts Journal2003

Feb 2 Sales CRR $5075 Capital R343 2 0009 Sales CRR 835

17 Sales CRR 76524 D Frawley R344 79528 Furniture R345 40528 W Brittain R346 887

Total $6 194

Gaspars Grocery StoreIn account with TasBank for the month of February 2003

Date Particulars Debit Credit Balance2003Feb 1 Balance forward 6 329 Dr

2 C/c 507 5 822 Dr7 C/c 2 000 3 822 Dr8 P Spargo (Deposit) 350 3 472 Dr9 C/c 835 2 637 Dr9 793 524 3 161 Dr

13 794 1 090 4 251 Dr17 C/c 765 3 486 Dr18 Bank charges 33 3 519 Dr24 C/c 795 2 724 Dr27 797 1 090 3 814 Dr28 798 280 4 094 Dr28 796 415 4 509 Dr28 C/c 405 4 104 Dr28 Interest 77 4 181 Dr


(i) Complete the Cash at Bank account in the General Ledger of Gaspar’s Grocery Store.(5 marks)

(ii) Prepare the Bank Reconciliation Statement of Gaspar’s Grocery Store at 28 February2003. (5 marks)



Summary of Cash Payments Journal2003

Feb 9 Purchases Ch793 $52413 Wages 794 1 09020 D Wheadon 795 32425 Rates 796 41526 Drawings 797 1 09027 G Miller 798 280

Total $3 723

Accounting


OR

The following transactions have been extracted from the records of Zantuck Company for themonth of September 2003.

Cash paid to creditors............................................................................................. $13 100Cash received from debtors.................................................................................... 15 300Wages paid ............................................................................................................ 11 400Purchases from creditors........................................................................................ 14 000Bad debts written off.............................................................................................. 1 200Cash purchases ...................................................................................................... 1 300Purchase returns and allowances............................................................................ 700Transfers from accounts receivable to accounts payable (Contra) .......................... 1 500Sold old computer system to Blumfield Motors..................................................... 1 250Freight paid and charged to debtors ....................................................................... 140Discount allowed.................................................................................................... 160Discount received................................................................................................... 150Purchases returned to creditors .............................................................................. 90Sales to debtors...................................................................................................... 13 500Allowances by creditors ......................................................................................... 75Return of goods sold to debtors............................................................................. 1 100Cash sales .............................................................................................................. 500Provision for doubtful debts................................................................................... 1 200Accounts receivable balance (1 September 2003)................................................... 18 500Accounts payable balance (1 September 2003) ...................................................... 14 700


(iii) Complete the Accounts Receivable Control Account in the General Ledger of ZantuckCompany for the month ended 30 September 2003.

(Note: Dates, full details, folios or cross references to the appropriate journals andbalancing are required.).



Accounting


(c) Fiora Fitness Centre operates a financial year ending 31 December and, where relevant,depreciation is calculated as a percentage for that proportion of the year for which the particularmachinery has been in use.

At 31 December 2000 the non-current asset register of Fiora Fitness Centre showed thefollowing:

Asset: Gym MachineDepreciation Method: ReducingbalanceRate: 20% per annum

Estimated life: 10 yearsEstimated residual value: $1 000

Date Particulars Original Cost ($) AnnualAccountingDepreciation ($)

AccumulatedDepreciation($)

2000Jan 1 Cash 12 000

Dec 31 2 400 2 4002001

Dec 31 1 920 4 320

On 30 April 2002, the gym machine was replaced by a new and improved version costing$15 000. Fiora Fitness Centre purchased the new machine for cash from Mills Machinery andwere allowed a trade-in of $5 500 for the old machine. The new machine is expected to have ascrap value of $2 000 at the end of its useful life of 10 years. In addition, $500 cash was spenton installing the new machine. The new machine is to be depreciated using the straight linemethod.

You are required to

(i) Complete the Disposal of Gym Machinery account in the General Ledger of Fiora FitnessCentre at 30 April 2002. (Note: Folios or cross references to the appropriate journal arenot required. Date, full details and closing are required.). (4 marks)

(ii) Explain the impact on the financial records of Fiora Fitness Centre for the year ending 30June 2002 from your answer to part (i). (2 marks)

(iii) Prepare the entries in the General Journal of Fiora Fitness Centre to record thedepreciation expense under the straight-line method for the years ending 31 December2002 and 31 December 2003. Narrations are not required. (4 marks)



Accounting


OR

Biddiscombe Bikes specialises in the sale of mountain bikes. The business purchases its stockfrom oversea’s manufacturers and uses the perpetual stock system applying the ‘first-in first-out’ (FIFO) method of valuing inventories for this type of item. It calculates profit monthly.

Below is information relating to its stock of mountain bikes for the month of March 2003.

Stock ledger card for the “Krakouer” modelDate Particulars In Out Balance2003 Qty Unit

Cost($)

TotalCost($)

Qty UnitCost($)

TotalCost($)

Qty UnitCost($)

TotalCost ($)

Mar 1 Balance 25 600 15 00031 Issue 5 600 3 000 20 600 12 000

Stock ledger card for the “Pettifer” modelDate Particulars In Out Balance2003 Qty Unit

Cost($)

TotalCost($)

Qty UnitCost($)

TotalCost($)

Qty UnitCost($)

TotalCost ($)

Mar 1 Balance 30 750 22 50012 Issue 10 750 7 500 20 750 15 00023 Issue returns 3 750 2 250 23 750 17 25029 Issue 12 750 9 000 11 750 8 250

Additional information:• Selling costs for both models amount to $175 per mountain bike• Selling prices of mountain bikes: ‘Krakouer’ model $700

‘Pettifer’ model $1 200


(iv) Calculate the value of the closing stock held by Biddiscombe Bikes if it used the lower ofcost or net realisable value rule. (4 marks)

(v) Briefly explain the accounting principle under which Biddiscombe Bikes uses the lower ofcost or net realisable value rule. (3 marks)

(vi) Demonstrate the effect of this principle through calculating the impact on gross profit ofBiddiscombe Bikes for the month ended 31 March 2003. (Note: You are not required tomake the journal or ledger entries). (3 marks)


Accounting



(a) Ottens Manufacturing has been operating for three years. Although sales have been increasing,the owner is not happy with the overall performance. Drawings possible from the business seeminadequate as a reward to the owner for experience, responsibility and time devoted to itsoperation. You are provided with the following financial reports for the three years ended 30June 2001, 30 June 2002 and 30 June 2003.

Ottens ManufacturingProfit & Loss Statements for the years ended

30 June 2001 30 June 2002 30 June 2003Sales 400 000 430 000 480 000Less Cost of Goods Sold 308 000 340 000 385 000Gross Profit 92 000 90 000 95 000Less Operating ExpensesSelling Expenses 25 000 18 000 22 000Administrative Expenses 44 000 45 500 41 000Finance Expenses 3 000 3 500 4 000Net Profit $20 000 $23 000 $28 000

Ottens ManufacturingBalance Sheet as at

30 June 2001 30 June 2002 30 June 2003Cash at Bank 5 000 4 000 5 000Accounts Receivable 19 000 20 000 25 000Inventory 24 000 25 000 30 000Plant, property and equipment 418 000 430 000 462 000

$466 000 $479 000 $522 000Accounts Payable 23 000 24 000 35 000Bank Overdraft 7 000 8 000 11 000Non Current Liabilities 166 000 166 000 180 000Capital 265 000 270 000 281 000Drawings (15 000) (12 000) (13 000)Net Profit 20 000 23 000 28 000

$466 000 $479 000 $522 000


(i) Calculate for 2003 the following figures and enter your answers in the table provided inAnswer Booklet – Question 5: Gross profit ratio, Net profit ratio, Selling expenses ratio,Administrative expenses ratio, Finance expenses ratio, Rate of return on owner’s equity,Working capital ratio, Quick Asset ratio, Equity ratio and Inventory turnover. (10 marks)

(ii) Comment on the trends in profitability revealed by the figures you calculated in part (i)and the table in Answer Booklet – Question 5. (3 marks)

(iii) Comment on the trends in liquidity revealed by the figures you calculated in part (i) andthe table in Answer Booklet – Question 5. (3 marks)

(iv) Comment on the trends in stability revealed by the figures you calculated in part (i) and thetable in Answer Booklet – Question 5. (3 marks)


Accounting


(v) Explain fully two recommendations you would make to improve the performance ofOttens Manufacturing. In your answer consider the following industry averages.

(6 marks)

Industry averages for firms in thesame line of business

Gross profit ratio 33%Selling expenses ratio 6%Administrative expense ratio 10%Finance expense ratio 2%Net profit ratio 15%Sales growth per annum 15-20%


(b) As the accountant for Rodan’s Pool Shop part of your job is to give advice to the firm aboutthe best way to use its limited investment funds. The firm is considering three projects, eachof which requires an outlay of $9 500. The firm has limited funds available and can onlyfund one of the projects.

To help with your analysis, you have made the following calculations for each project:

Project NPV of NetCash Inflow

at 10%discountfactor

Payback Ratio

A $(125) 2 years 5 monthsB $448 2 years 8 monthsC $1 001 1 year 6 months


(i) Identify the project you think would be the most beneficial to Rodan’s Pool Shop.(1 mark)

(ii) Outline your reasoning for your choice of project based on the financial informationabove. (5 marks)

(iii) Explain two other types of financial information that would make your recommendationmore reliable. (4 marks)



Accounting


(c) Vardy Buoys makes mooring buoys for boats and is trying to analyse its budgeted figures forthe coming year, which have been prepared by their accountant in graphical format.

Breakeven Graph for Vardy Buoys


(i) Determine the value of the fixed costs for the year. (1 mark)

(ii) Determine the break-even point in volume of sales and number of units. (1 mark)

(iii) Determine the total value of the variable costs at sales of $100 000. (1 mark)

(iv) Determine the effect on the break-even point (in volume of sales and units) if there was aforced increase of $10 000 to fixed costs for the year. (2 marks)


Revenue andCosts

($ ‘000)

Volume in ‘000 units

Accounting

BLANK PAGE

TASMANIAN SECONDARY ASSESSMENT BOARD

ACCOUNTING – SENIOR SECONDARY 5C

Formula Sheet – 2003

Accounting Rate of Return =Average Accounting Profit

Average Book Value of Asset x

1001

where Average Book Value =Historic Cost of Asset + Scrap Value

2

Accounts Receivable Turnover =Net Credit Sales

Average Accounts Receivable

Diminishing Balance Method = Rate of Depreciation x (Original Cost – Accumulated Depreciation)

Equity Ratio =

†

Owners EquityTotal Assets

x 100

1

Expense Ratio =ExpenseNet Sales

x 1001

Gearing or Debt Ratio =Total Liabilities

Total Assets x

1001

Gross Profit Ratio =Gross Profit

Net Sales x

1001

Inventory Turnover =Cost of Goods SoldAverage Inventory

Net Profit Ratio = Net Profit (or Net Profit after tax)Net Sales x

1001

Payback Ratio =Original InvestmentAverage Cash Flow

where Average Cash Flow =Total Cash FlowNumber of Years

Profit = Sn - (F + Vn)where S = selling price per unit

F = total fixed costsV = variable cost per unitn = number of units

Quick Asset Ratio =Current Assets - Inventories - Prepayments

Current Liabilities - Bank Overdraft

Rate of Return on Owners Equity =Net Operating Profit

Average Owners Equity x

1001

Rate of Return on Total Assets =Net Operating Profit + Interest Expense

Average Total Assets x

1001

Straight Line Method =Original Cost - Estimated Residual Value

Estimated Life

Working Capital Ratio =Current Assets

Current Liabilities

Pages: 4

©Copyright for part(s) of this examination may be held by individuals and/or organisations other than the Tasmanian

Secondary Assessment Board.

PLACE LABEL HERE


Tasmanian Certificate of Education

External Assessment

2003


ANSWER BOOKLET — Question 1

Marker’s Use Only:

Criterion 4(a) (b) (c) Total

Marker'sUse Only

Select the most appropriate answer for each question.

Circle your answer, for example: If you wish to change an answer:

(a) (b) (c) (d) (a) (b) (c) (d)

b is correct d is correct

(a) 1. (a) (b) (c) (d)

2. (a) (b) (c) (d)

3. (a) (b) (c) (d)

4. (a) (b) (c) (d)

5. (a) (b) (c) (d)

6. (a) (b) (c) (d)

7. (a) (b) (c) (d)

8. (a) (b) (c) (d)

9. (a) (b) (c) (d)

10. (a) (b) (c) (d)

Marker'sUse Only

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(c) ........................................................................................................................................

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Pages: 7



PLACE LABEL HERE



External Assessment

2003




Criterion 8(a) (b) Total

Marker'sUseOnly

(a)

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Pages: 5



PLACE LABEL HERE



External Assessment

2003





Marker'sUse Only

Select the most appropriate answer for each question.

Circle your answer, for example: If you wish to change an answer:

(a) (b) (c) (d) (a) (b) (c) (d)

b is correct d is correct

(a) 1. (a) (b) (c) (d)

2. (a) (b) (c) (d)

3. (a) (b) (c) (d)

4. (a) (b) (c) (d)

5. (a) (b) (c) (d)

6. (a) (b) (c) (d)

7. (a) (b) (c) (d)

8. (a) (b) (c) (d)

9. (a) (b) (c) (d)

10. (a) (b) (c) (d)

Marker'sUse Only

(b) (i) Extract from the General Journal of Tigerland Traders

Date Particulars Debit ($) Credit ($)

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(ii) Extract from the General Journal of Tigerland Traders


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Extra

ct fr

om th

e Gen

eral

Led

ger o

f Tig

erla

nd T

rade

rs

Prof

it an

d Lo

ss A

ccou

nt

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Marker’sUseOnly(b)

Page 4

Tran

sact

ion

Acc

ount

s In

volv

edTy

pe o

fA

ccou

ntD

r or

Cr

Am

ount

(i)Th

e ow

ner c

ontri

bute

d $4

5 00

0 ca

sh a

s ca

pita

l.Ca

sh a

t Ban

kA

Dr

$45

000

Capi

tal

PCr

(ii)

Cam

pbel

l with

drew

a c

ompu

ter t

o th

e va

lue

of $

1 50

0 fo

rpe

rson

al u

se.

(iii)

The

inve

ntor

y re

cord

s sh

ow th

e va

lue

of in

vent

ory

to b

e $2

2 50

0w

hilst

a p

hysic

al s

tock

take

indi

cate

d in

vent

ory

to b

e $2

4 50

0.

(iv)

Cam

pbel

l Stre

et S

alad

Bar

act

s as

an

agen

t for

oth

er b

usin

esse

san

d ha

s $3

000

com

miss

ion

owin

g to

it o

n ba

lanc

e da

te.

(v)

On

bala

nce

date

Cam

pbel

l cha

rged

Hilt

on’s

Hot

el in

tere

st at

ara

te o

f 15%

per

ann

um o

n a

bala

nce

of $

2 00

0, o

utsta

ndin

g fo

rsix

(6)

mon

ths.

(vi)

The

acco

untin

g re

cord

s sh

ow th

e en

d of

per

iod

inve

ntor

y to

have

cos

t $11

700

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able

val

ue o

f thi

s in

vent

ory

ises

timat

ed to

be

$13

900.

List

the

deta

ils fo

r the

ent

ry, i

f any

,re

quire

d by

the

low

er o

f cos

t or m

arke

t rul

e.

Page 5

Marker’sUseOnly(c)

Pages: 9



PLACE LABEL HERE



External Assessment

2003





Marker'sUse Only

(a) (i)Stafford StoresCash Budgetfor the three months ending 31 January 2004

November ($) December ($) January ($)

Estimated Cash Receipts ..................

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Total Estimated Receipts

Estimated Cash Payments ................

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Total Estimated Payments

Bank Balance at Start .......................

Excess of Receipts over Payments ...

Excess of Payments over Receipts ...

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Bank Balance at end

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Collections from Accounts Receivable

Month Amount November ($) December ($) January ($)

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Marker'sUse Only

OR(a) (iii)

Dat

eP

arti

cula

rsIN

OU

TB

AL

AN

CE

Qty

Un

itC

ost

($

)T

ota

lC

ost

($

)T

ota

lC

ost

($

)T

ota

lC

ost

($

)U

nit

Co

st (

$)

Un

itC

ost

($

)Q

tyQ

ty

CO

LL

INS

VA

LE

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HA

RA

CT

ER

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OC

K L

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GE

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AR

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EDG

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AR

D

Marker'sUse Only

(a) (iv)Extract from the General Ledger of Chaffey CDs

Cost of Goods Sold Account

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(b) (i)Extract from the General Ledger of Gaspar’s Grocery Store

Cash at Bank Account

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(ii)

Gaspar’s Grocery StoreBank Reconciliation Statement

as at 28 February 2003

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OR

(b) (iii)

Extra

ct fro

m th

e Gen

eral

Led

ger o

f Zan

tuck

Com

pany

Acc

ount

s Rec

eivab

le Co

ntro

l Acc

ount

Marker'sUse Only

(c) (i) Extract from the General Ledger of Fiora Fitness CentreDisposal of Gym Machinery Account

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(iii) Extract from the General Journal of Fiora Fitness Centre


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OR(c) (iv)

Value of closing stock:

= $ ....................................................................

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(vi) Impact on gross profit:

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Show Full Working Here

Pages: 6



PLACE LABEL HERE



External Assessment

2003





Gro

ss P

rofit

Rat

ioRa

te o

f Ret

urn

on O

wne

r’s E

quity

Net

Pro

fit R

atio

Wor

king

Cap

ital R

atio

Selli

ng E

xpen

ses R

atio

Qui

ck A

sset

Rat

io

Adm

inist

rativ

e Exp

ense

s Rati

oEq

uity

Rat

io

Fina

nce E

xpen

ses R

atio

Inve

ntor

y Tu

rnov

er

Marker’sUseOnly(a)

Page 2

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(a) (i) Ratio 2001 2002 2003

Gross Profit Ratio.................................

Net Profit Ratio.....................................

Selling Expenses Ratio .........................

Administrative Expenses Ratio..............

Finance Expenses Ratio........................

Rate of Return on Owner’s Equity .......

Working Capital Ratio..........................

Quick Asset Ratio.................................

Equity Ratio..........................................

Inventory Turnover ...............................

23.00%

5.00%

6.25%

11.00%

0.75%

7.41%

1.61:1

1.04:1

57.94%

12.83 times

20.93%

5.35%

4.19%

10.58%

0.81%

8.21%

1.53:1

1.00:1

58.66%

13.88 times

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(iii)

Trends in Profitability:

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Trends in Liquidity:

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(a) (iv)

(v)

Trends in Stability:

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Recommendation 1:

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(b) (i)

(ii)

(iii)

Most beneficial project: .................................................................................................

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Reasons for choice of project: .......................................................................................

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Financial Information 1: .................................................................................................

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Financial Information 2: ................................................................................................

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(c) (i)

(ii)

(iii)

(iv)

Fixed costs per annum: .................................................................................................

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Break-even point in sales $: ..........................................................................................

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Break-even points in number of units: ..........................................................................

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Total value of variable costs at sales of $100 000: .........................................................

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Effect on sales $: ..........................................................................................................

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Effect on number of units: ............................................................................................

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accounting - home - tasc page 6 question 2 (40 minutes) this question assesses criterion 8 and is...

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