BEA1008 Coursework test 2012-13 _adapted_ - questions

UNIVERSITY OF EXETER

BUSINESS SCHOOL

NOVEMBER 2012

INTRODUCTION TO FINANCIAL ACCOUNTING

COURSEWORK TEST

Duration: 60 MINUTES

ALL QUESTIONS ARE COMPULSORY

Section Questions type MarksSuggested time allocationA 15 Multiple-choice/short-form questions30 30 minutes B One long-form question 30 30 minutes Total 60 60 minutes

Section A: 15 multiple-choice questions that carry two marks each. Each question is followed by four suggested answers – only one of which is correct. You are invited to select one of these answers by clearly marking one of the letters adjacent to the appropriate question number in the manner instructed on the MCQ answer sheet provided. You must enter your student ID number, and enter and encode your candidate number on the answer sheet in the manner instructed. The answer sheet must be inserted as the first sheet inside your answer booklet cover sheet.

You may attempt as many questions as you wish. You will score two marks for each correct answer. You will neither gain nor lose marks for wrong answers, for questions which you do not attempt, or for answers which are unclear or ambiguous.

Section B: One compulsory long-form question of 30 marks. You should show clear workings as marks are available for the method you use.

60 marks in total are available on this test, which will be scaled to represent 20% of overall module marks.

Approved calculators permitted. This is a closed note examination. Material to be supplied: Answer booklet.   

 Student ID number:    

SECTION A

Answer all questions

1. According to the IFRS Conceptual Framework for Financial Reporting, which qualitative

characteristics enhance the usefulness of information that is relevant and faithfully represented?

A. Comparability, understandability, timeliness, verifiability B. Consistency, prudence, measurability, verifiability C. Consistency, reliability, measurability, timeliness

2. Which of the following is an aspect of relevance, according to the IFRS Conceptual

Framework for Financial Reporting?

A. Neutrality B. Free from error C. Completeness D. Materiality

3. The capital of a sole trader would change as a result of

A. A trade payable being paid from the business bank account by cheque B. Raw materials being paid for from petty cash C. Non-current assets being purchased for cash

D. The owner taking goods from the inventory of the business

4. A sole trader purchases goods on credit for £400.

Which elements of the accounting equation will change due to this transaction assuming the trader is using the perpetual inventory system? A. Assets and liabilities only B. Assets and capital only C. Capital and liabilities only D. Assets only

5. Which of the following best explains the imprest system of petty cash?

A. Each month an equal amount of cash is transferred into petty cash

B. The exact amount of petty cash expenditure is reimbursed at intervals to maintain a

fixed float C. The amount of petty cash in total must never fall below the imprest amount D. Petty cash must be kept under lock and key

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D. Materiality, understandability, measurability, reliability

6. What transaction is represented by the entries: debit non-current assets account, credit

purchases ledger control account?

A. The receipt of money from sale of a non-current asset B. The issue of an invoice for the sale of a non-current asset C. Purchase of a non-current asset on credit D. Payment for a non-current asset

7. Which of the following could be a credit entry in the sales ledger control account?

A. Sales day book total B. Cash sales total

C. Receivables total in the cash receipts book D. Discounts received total from cash book

8. Which of the following are classified as books of original entry?

(1) Sales day book (2) Sales ledger

(3) Sales ledger control account (4) Cash book A. (1) and (3) B. (1), (2) and (3) C. (2) and (4) D. (1) and (4)

9. In double-entry bookkeeping, which of the following statements is true?

A. Credit entries decrease expenses and increase assets B. Debit entries decrease expenses and increase assets C. Credit entries decrease liabilities and increase income D. Debit entries decrease income and increase assets

10. In preparing its financial statements for the current year, a company’s closing inventory

was understated by £50,000.

What will be the effect of this error if it remains uncorrected?

A. The current year’s profit will be overstated and next year’s profit will be understated B. The current year’s profit will be understated but there will be no effect on next year’s

profit C. The current year’s profit will be understated and next year’s profit will be overstated D. The current year’s profit will be overstated but there will be no effect on next year’s

profit

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11. G purchases goods on credit from H for £1,000. £100 of these goods are defective and

G returns them to H. What document would H issue to G in respect of the returned goods?

Answer: _____________________________

12. Reece has opening receivables of £42,100 and closing receivables of £38,600. Sales for

the period totalled £186,190 (£13,400 of which were cash sales).

Receipts recorded in the sales ledger control account for the period were:

Answer: _____________________________

13. When a business counts its inventory it discovers that it has 5,000 items of product X

and 1,000 of product Y; these cost £12 and £6 respectively. You also discover the following information:

Product X – 600 of these were found to be defective and would be sold at a cut price of £9 each.

Product Y – 100 of these were to be sold for £5.00 with selling expenses of £1.00 each. What figure should appear in the business's statement of financial position for inventory?

Answer: _____________________________

14. An inventory record card shows the following details.

1 May 50 units in inventory at a cost of £15 per unit 7 May 100 units purchased at a cost of £20 per unit 14 May 80 units sold 21 May 50 units purchased at a cost of £25 per unit 28 May 60 units sold

What is the value of inventory at 31 May using the FIFO method?

Answer: _____________________________

15. The statements of financial position of Gazhal’s business at 31 December 20X2 and

20X1 showed the following. 31 December 31 December

20X2 20X1 £ £ Non-current assets 32,500 45,000 Current assets 17,500 30,000 Current liabilities 12,500 12,500 Non-current liabilities 0 0

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Gazhal introduced new capital of £5,000 during the year, and drew out £10,000 from the business.

What was the profit or loss of Gazhal’s business for the year 20X2?

Answer: _____________________________

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SECTION B

Answer this question

A trial balance at 31 December 2011 does not balance and a suspense account has been opened with a credit balance of £510. The following errors are then discovered. (i) (ii)

Cash purchases of £450 were recorded in the appropriate accounts as £0. The total of the motor expenses account was undercast by £70.

(iii) Cash received from a receivable of £150 has been posted to the bank account only. (iv) The sales account was undercast by £350. (v)

Drawings of £100 have been debited to the wages account.

(vi) A bill for sundry expenses of £50 from a supplier has been entirely omitted from the

books. The bill was unpaid at the year end. (vii) The insurance expenses account was overcast by £80.

(viii) A cheque received from a receivable – John Smith of £60 has been correctly entered

in the nominal ledger but credited to the account of James Smith, another receivable. Note: the business operates the periodic inventory system and keeps separate sales and purchases memorandum ledgers.

Required:

a) Show the journal entries needed to correct the errors. Narratives are not required.

(16 marks)

b) c)

Write up the suspense account showing correction of the errors.

(6 marks)

The net profit figure originally calculated for the year ended 31 December 2011 was £12,000. Calculate the corrected net profit figure.

(8 marks)

(Total 30 marks)

END OF PAPER

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