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
91 2008 Subject — Paper One — Question/Response bookT:\exexams\2017\Papers\Subjects\Accounting\standards\1_Accounting Standards _ knowlg routine.fm August 3, 2018 10:28 am
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101 2008 Subject — Paper One — Question/Response bookT:\exexams\2017\Papers\Subjects\Accounting\standards\2_Accounting Standards (continued).fm August 3, 2018 10:29 am
(con
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