AF101 Mid-Semester Test

OnCampus Mode

Multiple Choice Answer Sheet

Name:____________________________ ID Number: ____________________

Circle only one answer per question.

If you circle more than one answer, you will receive a mark of zero for that question.

If you change your mind, cross out your original answer and circle your new answer.

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
11 A B C D
12 A B C D
13 A B C D
14 A B C D
15 A B C D
16 A B C D
17 A B C D
18 A B C D
19 A B C D
20 A B C D
SECTION B PROBLEM SOLVING QUESTIONS 60 MARKS

QUESTION 21 BANK RECONCILIATION 25 MARKS

Required:
a) Briefly explain to the owner of Mountainview Furniture Ltd the ‘3 important principles
of an internal control system for cash’.
[6 marks]

1. Separation of responsibility for handling & custodianship of cash from

responsibility for maintaining the records about cash – prevents misappropriation of
cash and falsification of accounting records uncles there is collusion among
employees.

2. Banking intact of each day’s cash receipts – prevents the cashier from borrowing the
funds for a few days and replacing them before they are deposited.

3. Making all payments by electronic transfer or cheque – requires authorisation by

designated personnel; the bank record of all cash transactions is a cross-check on the
accuracy of the internal cash records of the entity.

[2 marks each]
b) Recalculate the general ledger Cash at Bank account balance as it should be at 28th February,
2017.
[6 marks]
Cash at Bank
2017 2017
Feb 28 Balance $2 631.65 June 30 CPJ $60 990.55
1 mark
June 30 CRJ 63 669.05 [$60 989.55 ½ mk +
[$62 669.05 ½ mk $10 account fee ½
– $100 ret. chq½ mk – $9 add. Error
mk + $1100 add.
½ mk]
Error 1 mk]
June 30 Balance c/d 5 310.15½
mk

$66 300.70 $66 300.70

June 30 Balance b/d $5 310.15 1
mk
 c) Recalculate the Balance as per Bank Statement at 28th February, 2017.
[5 marks]
Balance as per previous bank statement 1 mk $3 402.75
Add: Deposits to bank in June 1 mk 62 870.90
66 273.65
Less:
Total cheques presented and paid $57 952.05 1 mk
Dishonoured cheque 100.00 1 mk
Bank fees ½ mk 10.00 58 062.05
Balance as per Bank Statement ½ mk 8 211.60

d) Prepare the Bank Reconciliation Statement as at 28th February, 2017.

[4 marks]
Mountainview Furniture Limited [ ½ mark for title]
Bank Reconciliation Statement
as at 28th February 2017
Cr. Balance as per Bank Statement ½ mk $ 8 211.60

Add: Outstanding deposit 1 mk 1 840.70

10 052.30
Less: Unpresented cheques 1 mk 6 742.15
Balance as per Cash at Bank account 1 mk $3 310.15

e) Advise the owner of Mountainview Furniture Ltd whether or not pilfering cash is taking place,
assuming that the records maintained by the bank are accurate. Also, provide ONE
recommendation for the improvement in internal control system [take into account your
answer from (a)].
[4 marks]

The Cash at Bank balance as at 28th Feb 2017 should be $5310.15

The Cash at Bank balance as per the Bank Reconciliation is $3310.15

There is a discrepancy of $2000. It appears that all the cash receipts reported in the cash receipts
journal had not been deposited in the bank. This would suggest some breakdown in the internal
control procedures over cash; that is, a deposit has not been banked or lost through theft.

Assuming the bank records are accurate, the owner must investigate the shortfall and take action
to establish better control over the asset cash.

Suggestion of improvement in Internal Control:

Separation of responsibility for handling & custodianship of cash from responsibility for
maintaining the records about cash – prevents misappropriation of cash and falsification of
accounting records uncles there is collusion among employees.
QUESTION 22 COMPLETE ACCOUNTING CYCLE 35 MARKS

Required:

a) Prepare adjusting journal entries for items 1 to 8 above.

Particulars Dr Cr
1 Office Supplies Expense 720
Office Supplies 720 2 marks
[1140 - 420]
(1/2 mark each for correct a/c
& ¼ mark for each correct amt
& ½ mark for working)
2 Unearned Consulting Fees 1 200
1.5
Consulting Fees Revenue 1200 marks

3 Prepaid Insurance 585

Insurance Expense 585 2 marks
[780 X 9/12]

4 Interest Expense 220

1.5
Interest Payable 220 marks

5 Telecommunications Expense 320

Telecommunications Expense 1.5
Payable 320 marks

6 Salaries Expense 980

1.5
Salaries Expense Payble 980 marks

7 Accounts Receivable 5 500

Consulting Fees Revenue 5 500
1.5
marks
8 Rent Expense 2 400
Prepaid Rent 2 400 2 marks
[3 200 X ¾ ]

Total: 13.5 marks

 b) Post adjusting entries to the provided 10-column worksheet template.
Unadjusted trial Adjustments Adjusted trial Income statement Balance sheet
balance balance

Account title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash at Bank 5 200 5 200 5 200

Prepaid Rent 3 200 8) 2400 800 800

Accounts Receivable 10 180 7) 5 500 15 680 15 680

Office Supplies 1 140 1) 720 420 420

Land 60 000 60 000 60 000

Building 152 000 152 000 152 000

Acc. Depr. Building 67 200 67 200 67 200

Office Equipment 23 400 23 400 23 400

Acc. Depr. Office Equip. 6 420 6 420 6 420

Accounts Payable 7 960 7 960 7 960

Unearned Consulting Fees 1 560 2) 1200 360 360

Mortgage Payable 88 600 88 600 88 600

Capital 73 490 73 490 73 490

Drawings 52 780 52 780 52 780

Consulting Fees Revenue 156 860 2) 1200 163 560 163 560

7) 5 500

Insurance Expense 1 660 3) 585 1075 1075

Salaries Expense 87 940 6) 980 88 920 88 920

Electricity Expense 2090 2090 2090

 Interest Expense 760 4) 220 980 980

Telecommunications Expense 1 740 5) 320 2060 2060

$402 090 $402 090

Office Supplies Expense 1) 720 720 720

Prepaid Insurance 3) 585 585 585

Interest Payable 4) 220 220 220

Telecomm. Expense Payable 5) 320 320 320

Salaries Payable 6) 980 980 980

Rent Expense 8) 2400 2400 2400

11 925 11 925 409 110 409 110 98 245 163 560

Profit for the year 65 315 65 315

163 560 163 560 310 865 310 865

Yellow highlighted 0.25 mark each X 46 entries = 11.5 marks

Blue highlighted 0.5 mark X 8 entries = 4 marks

c)
Journalise the closing entries.

30 June Consulting Fees Revenue $163 560

1 mark [1/4 mark each for correct account
Profit & Loss Summary $163 560 & amt]
30 June Profit & Loss Summary 98 245
Insurance Expense 1075

Salaries Expense 88 920

Electricity Expense 2090

Interest Expense 980

Telecommunications 2060
Expense

Office Supplies 720

Expense
2400
Rent Expense

4 marks [1/4 mark each for correct

account & amt]

30 June Profit and Loss Summary 65 315

½ mark [1/4 mark each for correct
Capital 65 315 account]

Dec-31 Capital 52 780

½ mark [1/4 mark each for correct
Drawings 52 780 account]

Total marks: 6 marks