ACCTG 102 Accounting Concepts Mid-semester Practice Test #2

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PRACTICE TEST NUMBER-2 QUESTION SET

ACCTG 102

Accounting Concepts

Mid-semester Practice Test #2

1 Practice Test 02 Question 01

Question 01 (1 mark):

The sole trader form of business organisation:

Select the one correct answer:

is a separate legal entity.

must have at least two owners.

results in the owner having personal liability for the debts of the business.

the Accounting Entity concept does not apply.

2 Practice Test 02 Question 02

Question 02 (1 mark):

A $20,000 machine is purchased by paying $5,000 cash and agreeing to pay for the remainder in 30 days' time, the journal entry should include a:

Select the one correct answer:

credit to Revenue.

debit to Cash.

credit to Machinery.

credit to Accounts payable.

3 Practice Test 02 Question 03

Question 03 (1 mark):

On 1 September 2022 Carlson Limited borrowed $10,000 from the bank for three months at the annual interest rate of 9% per annum. Principal and interest are payable to the bank on 1 December 2022. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on 30 September 2022, would be:

Select the one correct answer:

Debit Interest expense, $900; Credit Interest payable, $900.

Debit Interest expense, $300; Credit Interest payable, $300.

Debit Promissory note payable, $900; Credit cash, $900.

Debit Interest expense, $75; Credit Interest payable, $75.

4 Practice Test 02 Question 04

Question 04 (1 mark):

Hammer Hardware sold goods to James Brown on credit at a price of $2,750 including GST (assuming GST rate of 10%). What is the correct accounting entry to record this transaction in Hammer Hardware’s books?

Select the one correct answer:

Debit: Accounts receivable $2,500; Debit: GST collections $250; Credit: Sales $2,750.

Debit Accounts receivable $2,500; Credit: Sales $2,500.

Debit: accounts receivable $2,750; Credit: Sales $2,500; Credit: GST collections $250.

Debit: Accounts receivable $2,750; Credit: Sales $2,750.

5 Practice Test 02 Question 05

Question 05 (1 mark):

A company just starting in business purchased three units of inventory at the following costs: first unit was purchased for $110; second unit was purchased for $115; third unit was purchased for $120. If the company sold two units for a total of $300 and used FIFO costing, the gross profit for the period would be:

Select the one correct answer:

$75.

$70.

$65.

$60.

6 Practice Test 02 Question 06

Question 06 (7 marks):

Q6(a): Explain and state what are the two advantages and two disadvantages to a business of being formed as a company? (4 marks)

Q6(b): Why is it important that the statement of financial position is faithfully represented? (3 marks)

7 Practice Test 02 Question 07

Question 07 (10 marks)

Transactions for Diner Limited for the month of September 2022 are presented below.

Ref.

1. Shareholders invested $15,000 cash in the business.

2. Purchased delivery truck for $30,000. Paid cash $10,000 and the remainder on credit.

3. Paid $1,000 cash for the current month’s rent expense.

4. Paid $400 cash for a one-year insurance policy in advance.

5. Received $2,500 cash for delivery services performed.

6. Paid salaries to employees for the period, $500.

7. Received a $100 bill not yet paid for September electricity

8. Paid dividends to shareholders of $750.

9. Invoiced customer for delivery service, $1,000.

Q7(a): Journalise each transaction and identify each transaction by number reference (Ref.). You may omit journal narrations and ignore GST. Fill in your answer in the boxes provided. Not all boxes need to be completed. For general journal entries, narrations are NOT required. Make sure each Debit (Dr) and Credit (Cr) entry is typed in on a separate line within the Inspera text answer box.

Ref.         Account Debited              Account Credited           Debit $ Credit $

Q7(b): Calculate the closing balance of Diner Limited's Cash account at the end of the month of September 2022 after all the above transaction journal entries has been posted (indicate whether the closing balance is a Debit or Credit balance).

8 Practice Test 02 Question 08

Question 08 (6 marks)

Watson Limited prepares monthly financial statements. Below are listed some selected accounts and their balances on the 30 September 2023 trial balance before any adjustments have been made for the month of September 2023.

Watson Limited

Unadjusted Trial balance (selected accounts)

30 September 2023

Office supplies $2,700 Dr

Prepaid insurance $5,400 Dr

Office equipment $15,000 Dr

Accumulated depreciation — office equipment $1,000 Cr

Revenue received in advance $1,200 Cr

(Note: Debit column does not equal credit column because this is a partial listing of selected account balances.)

An analysis of the account balances by the company's accountant provided the following additional information:

Ref.

Ref-1. A physical count of office supplies revealed $1,200 on hand on 30 September 2023.

Ref-2. A two-year insurance policy was purchased on 1 June 2023 for $5,400.

Ref-3. Office equipment depreciates $6,000 per year on a straight line basis.

Ref-4. The amount of rent received in advance that remains unearned at 30 September 2023 is $500.

Required:

Using the above additional information, prepare the adjusting journal entries by number reference (Ref.) that should be made by Watson Limited on 30 September 2023. You may omit journal narrations and ignore GST. Fill in your answer in the boxes provided. Not all boxes need to be completed. For general journal entries, narrations are NOT required. Make sure each Debit (Dr) and Credit (Cr) entry is typed in on a separate line within the Inspera text answer box.

Ref.            Account Debited             Account Credited             Debit $ Credit $

9 Practice Test 02 Question 09

Question 09 (10 marks)

Lakeland Limited uses a perpetual inventory system. During April 2022, the following transactions and events occurred (ignore GST):

DATE (Ref.)

April 3 (Ref-1) Purchased $1,500 of inventory; terms 2/10, n/60.

6 (Ref-2) Returned $300 of the inventory purchased on April 3.

7 (Ref-3) Paid freight charges of $150 on goods purchased on April 3.

12 (Ref-4) Paid for the goods purchased on April 3.

13 (Ref-5) Sold goods on credit for $1,000; terms 1/10, n/30. The goods sold had cost $500.

14 (Ref-6) The customer of April 13 physically returned $200 of the goods. The value of the goods returned had cost $100.

23 (Ref-7) Received payment from the customer of April 13.

The chart of accounts for Lakeland Limited includes Cash, Accounts receivable, Inventory, Freight-In, Accounts payable, Sales, Sales returns and allowances, Discount received, Discount allowed, and Cost of sales.

Required:

Journalise the April 2022 transactions (ignore GST and narrations). Fill in your answer in the boxes provided. Not all boxes need to be completed. For general journal entries, narrations are NOT required. Make sure each Debit (Dr) and Credit (Cr) entry is typed in on a separate line within the Inspera text answer box.

Ref.          Account Debited             Account Credited             Debit $             Credit $

10 Practice Test 02 Question 10

Question 10 (6 marks)

Sweetness Limited sells all kinds of chocolates. The entity’s accountant, Dan Walters, was preparing the information needed to account for the GST and report to the taxation authority for the quarter ending 30 June 2022, when he had to suddenly take annual leave for family reasons. You have been hired to take over Dan’s role until he returns. Before Dan left, he prepared the following information for the quarter:

Total sales (including GST) $ 66,880

Total sales returns (including GST) 5,500

Total purchases (including GST) 91,300

Required:

Journalise the sales and purchases transactions, as well as the settlement of GST with the taxation authority (i.e., payment or refund), using the GST paid and GST collected accounts (assume GST rate of 10% and all sales and purchases were made with cash). Fill in your answer in the boxes provided for Q10 below. Not all boxes need to be completed. For general journal entries, narrations are NOT required. Make sure each Debit (Dr) and Credit (Cr) entry is typed in on a separate line within the Inspera text answer box.

Account Debited          Account Credited            Debit $           Credit $

11 Practice Test 02 Question 11

Question 11 (6 marks)

Required:

Q11(a): Assume that the company uses the FIFO method. Calculate the value of the ending inventory at 31 December 2022. (Show computations).

Q11(b): Assume that the company uses the average cost method. Calculate the value of the ending inventory on 31 December 2022. (Show computations).

Q11(c): Assume that the company uses the LIFO method. Calculate the value of the ending inventory on 31 December 2022. (Show computations).

Q11(d): Assume that the company uses the FIFO method. Calculate the value of the cost of sales for the financial year ended 31 December 2022. (Show computations).