Faculty of Business, Economics and Accounting

Department of Business Studies

Department of Accounting and Finance
School of Hospitality and Tourism

August 2020 Semester

ON-LINE (OPEN BOOK) EXAMINATION
(Proctored)

Subject Code : ACC101

Subject Name : FINANCIAL ACCOUNTING 1

This examination carries 70% of the total assessment for this subject.

Examiner(s):
GOOI CHEE SAN
K. CHANDRAN KARUPPAN

Date : 8 DECEMBER 2020 Time : 8:00 AM – 12:00 NN

Time allowed : 4 HOURS

INSTRUCTION(S):

1. This examination consists of TWO (2) sections: Answer ALL questions from SECTION A & B.

2. This is an Open Book examination.

3. Students are required to upload their answers script to the LMS Platform.

4. Students are required to submit to TURNITIN (ONLY 1 time is allowed).

The Class ID and Enrolment Key are separate for ELM Damansara and Subang 2 Campuses
ELM Damansara Campus: Class ID: 26339599 Enrolment Key: ACC101
Subang 2 Campus: Class ID: 26339706 Enrolment Key: ACC101

5. Students are to provide student ID and e-mail address in each of their answers script.

6. Students MUST pass this examination in order to pass the subject.

(This examination paper consists in 15 printed pages, including cover page)

ACC101 (August 2020 Semester, Online Examination) Page 2

SECTION A: MULTIPLE CHOICE QUESTIONS (20 MARKS)

Answer ALL questions. Each question carries 1 mark.

1. KZR Enterprise had these assets and liabilities:

Account $’000
Bank overdraft 20,000
Cash in hand 10,000
Inventory 40,000
Accounts payables 21,000
Accounts receivables 28,000
Bank loan 10,000
Office equipment 50,000
The Equity is:
A. $51,000,000
B. $77,000,000
C. $128,000,000
D. $179,000,000

2. KXG reports the following balance sheet information for 2019:

Date 1 January 2019 31 December 2019
Assets 300,000 380,000
Liabilities 120,000 130,000
Assuming the capital contribution made by the owners during 2019 was $20,000 and
withdrawals were $10,000, profit for 2019 must have been:
A. $60,000
B. $250,000
C. $420,000
D. $510,000

3. A chronological (order by date) record of all the transactions of an entity is provided in

the:
A. Income statement
B. Ledger
C. Trial balance
D. Journal

4. A trial balance will disclose which of these errors?

A. Cannot detect any error.
B. Recording an amount on the right side of the wrong account
C. Recording a debit amount different from a credit amount
D. Recording a transaction twice
ACC101 (August 2020 Semester, Online Examination) Page 3

5. An office computer is purchased on credit for $10,000 plus 10%GST. The general journal
entry to record this transaction is:
DR $ CR $
A. Equipment 10,000
Accounts Payable 10,000
B. Equipment 9,000
GST Receivable 1,000
Accounts Payable 10,000
C. Equity 10,000
GST Receivable 1,000
Accounts Payable 11,000
D. Equipment 10,000
GST Receivable 1,000
Accounts Payable 11,000

6. KQQ Enterprise buys office supplies in bulk and uses them daily. Under the Accrual
Accounting, these supplies would be an expense of the period in which they are:
A. Used
B. Ordered
C. Paid for
D. Received

7. Determine the cash payments made during the year for salary from the following
information:
Date Item Amount in $
1.1.2019 Salary payable 30,000
31.12.2019 Salary payable 40,000
Whole year 2019 Salary expense 200,000
A. $190,000
B. $200,000
C. $210,000
D. $270,000

8. Which statement relating to the Accumulated Depreciation account is correct?

A. It normally has a debit balance
B. It reflects the portion of the cost of the asset that has been assigned as an expense
since it was purchased
C. It is the cash set aside for future replacement
D. It is the main item in the income statement
ACC101 (August 2020 Semester, Online Examination) Page 4

9. Closing the accounts refers to:

A. Establishing zero balances in the balance sheet accounts
B. Establishing a zero balance in the cash at bank account
C. Establishing zero balances in all ledger accounts
D. Transferring income and expense account balances to the profit and loss summary
account, which is then closed to the equity account

10. How many of these are temporary accounts?

Cash Accounts Payable Office Supplies
Drawings Interest Expense Rent Payable
Capital Interest Receivable Rent expense
Sales Revenue Interest Revenue Office Supplies expense
A. Two
B. Five
C. Six
D. Seven

11. Before calculating the profit for the period, the totals of the income statement debit and
credit columns on the worksheet are $1,400,000 and $1,000,000 respectively. What
is the amount of the profit or loss?
A. $40,000 profit
B. $40,000 loss
C. $400,000 profit
D. $400,000 loss

12. Discount allowed is given as to:

A. Attract new customers.
B. Facilitate competition against other suppliers
C. Reduce the invoice price of the goods
D. Encourage the customer to settle their account early

13. ZEQ Enterprise recorded sales of $2,300,000 during the year. Ignore GST. Of these,
$300,000 were on credit. Bad debts have averaged 0.1% of credit sales. The entry to
estimate bad debt expense for the year is:
$ $
A. Bad Debts Expense 2,300
Allowance for Doubtful Debts 2,300
B. Bad Debts Expense 300
Allowance for Doubtful Debts 300
C. Bad Debts Expense 300
Accounts Receivable 300
D. Bad Debts Expense 2,300
Accounts Receivable 2,300
ACC101 (August 2020 Semester, Online Examination) Page 5

14. GQC Enterprise uses the FIFO assumption with the periodic inventory method.
Items Number of Units Cost per unit Total cost
$ $
Beginning Inventory 100 17 1,700
Purchase 400 18 7,200
Purchase 500 19 9,500
Purchase 500 20 10,000
Sales 900
What is the value of its ending inventory?
A. $8,900
B. $9,500
C. $11,900
D. $19,500

15. TKP Enterprise bought 10 motor vehicles on 1.1.2018 which cost $12,000 each. Each has
a useful life of 6 years after which it will be scrapped off with zero value. The business
adopted the straight-line method of depreciation. What was the carrying value on
31.12.2019?
A. $8,000
B. $10,000
C. $80,000
D. $100,000

16. The balance sheet of Appraisal Ltd at 31 December 2019 shows the following:
Building $260,000
Accumulated Depreciation of Building $60,000
Carrying value $200,000
On 1 January 2020, based on a valuer’s estimate of fair value, it was decided to revalue the
building to $250,000.
The journal entry to record the revaluation is:
A. Accumulated Depreciation of Building 60,000
Building 10,000
Revaluation reserve 50,000
B. Building 50,000
Revaluation reserve 50,000
C. Expense on Revaluation of Building 50,000
Building 50,000
D. Building 50,000
Expense on Revaluation of building 10,000
Accumulated Depreciation of Building 60 000
ACC101 (August 2020 Semester, Online Examination) Page 6

17. Which of these would not be defined as a liability under the Framework?
A. Amount owed to a supplier
B. A loan taken from a bank
C. Last month’s salary not paid.
D. Intention to buy inventory from a wholesaler

18. The primary purpose of a statement of cash flows is to provide information about:
A. Profitability
B. Net asset value
C. Net profit
D. Cash payments and cash receipts

19. Financial ratios are used:

A. Only by shareholders to assess profitability
B. Only by creditors to monitor liquidity
C. Only by management for planning and control
D. All of the above

20. How many of the items below are classified as liability accounts?
Salary expense Salary payable Interest expense Interest payable
Interest receivable Drawings Bank loan Service fee revenue
Unearned fee Bad debts expense Building Depreciation expense
A. 2
B. 3
C. 4
D. 5
ACC101 (August 2020 Semester, Online Examination) Page 7

SECTION B (80 MARKS)

Answer ALL questions.

Question 1
ZKQ Enterprise is a trading business. Its financial year end is 31 January each year. Below is
an extract of the ZKQ Enterprise’s trial balance as at 31 January 2020.

Debit Credit
No Account Title
$'000 $'000
1 Accounts payable 329
2 Accounts receivable 307
3 Accumulated depreciation, motor vehicle, 1.2.2019 50
4 Accumulated depreciation, office equipment, 1.2.2019 50
5 Allowance for doubtful debts 11
6 Bank loan, due 1.2.2030 200
7 Capital 300
8 Cash at bank 84
9 Consultancy and advisory expense 32
10 Discount allowed 15
11 Discount received 23
12 Drawings 191
13 Employees training expense 40
14 Interest expense 15
15 Interest revenue 7
16 Inventory at 1.2.2019 240
17 Motor vehicle, at cost 260
18 Office equipment, at cost 190
19 Other operating expense 7
20 Prepaid insurance 18
21 Prepaid rent 21
22 Purchases 1,010
23 Rent expense 77
24 Salaries and wages expenses 362
25 Sales return 30
26 Sales revenue 2,030
27 Telephone and electricity expense 29
28 Transport inwards expense 11
29 Transport outwards expense 34
30 Upkeep and repairs expense 27
Total 3,000 3,000
ACC101 (August 2020 Semester, Online Examination) Page 8

You are provided the other data:

(i) ZKQ was operating in a country that did not impose Goods and Services Tax.
(ii) ZKQ Enterprise did an inventory count on the last day of the financial year. It was
valued at $293,000
(iii) The prepaid insurance in the above was valid from 01 February 2019 to 31 July 2020.
(iv) The prepaid rent was for the period from 1 January 2020 to 31 March 2020
(v) The depreciation charges for motor vehicle $32,000 and for office equipment $23,000
for the financial year had not yet been adjusted.
(vi) The Allowance for Doubtful Debts was required to increase to $17,000.
(vii) ZKQ Enterprise sent its motor vehicle for a minor repair on 28 January 2020. The cost
of the repair was $1,000. The workshop gave ZKQ 30 days credit period. No entry
has been made regarding this transaction.

REQUIRED:

(a) Prepare a detailed Income Statement for the year ended 31 January 2020; and
(10 marks)

(b) A Statement of Owner’s Equity for the year and a detailed Balance Sheet as at 31
January 2020.
(10 marks)
ACC101 (August 2020 Semester, Online Examination) Page 9

Question 2

QKP is a trading business and has been in operation for many years.

QKP has prepared its final accounts as shown below:

Balance Sheet as at 31 January: 2 0 20 2019

Current assets $’000 $’000 $’000 $’000
Cash at bank 380 360
Accounts receivables 118 100
Inventory 240 220
Prepaid rent 60 20
798 700
Non-current assets
Motor vehicle 430 300
Less: Accumulated depreciation (93) 337 (100) 200
Office equipment 340 280
Less: Accumulated depreciation (92) 248 (60) 220
TOTAL ASSETS 1,383 1,120

Current liabilities
Salary payable 10 18
Accounts payable 480 460
490 478
Non-current liabilities
Notes payable 0 200
TOTAL LIABILITIES (490) (678)
NET ASSETS 893 442

Owner’s Equity
Beginning capital 442 442
Add: Net Profit 500 200
Less: Drawings (49) (200)
Ending capital 893 442
ACC101 (August 2020 Semester, Online Examination) Page 10

QKP: Income Statement for the year ended 31 January 2020

$’000 $’000
Sales 16,700
Less: Cost of goods sold (14,500)
Gross profit 2,200
Add: Profit on disposal of motor vehicle 2
2,202
Less: Expenses
Interest expenses 13
Loss on disposal of office equipment 1
Depreciation expenses 80
Salary expense 1,140
Rent expense 440
Sundry expenses 28 1,702
Net Profit 500

Other data given:

(i) The interest expenses and sundry expenses were on cash basis.
(ii) During the financial year QKP sold motor vehicle for $5,000 cash. The original cost
was $50,000 and its accumulated depreciation prior to the disposal was $47,000.
QKP bought a fleet of brand-new motor vehicles for $180,000 cash.
(iii) QKP sold office equipment for $1,000 cash. Its original cost was $10,000 and its
accumulated depreciation was $8,000.
QKP bought new office equipment for $70,000 cash.

REQUIRED:

(a) Prepare a detailed Cash Flow Statement of QKP for the year ended 31 January 2020.
(16 marks)

(b) The owner of QKP could not understand why the net profit was $500,000 but the cash
balance increased by $20,000 only. With reference to the cash flow statement you have
prepared, explain why this was happening.
(4 marks)
ACC101 (August 2020 Semester, Online Examination) Page 11

Question 3 (A) (10 marks)

Please refer to the Financial Statements of QKP Enterprise in Question 2.

Required:

(i) Calculate the inventory turnover and the average inventory turnover period
and

(ii) Calculate the accounts receivables turnover and the average collection period
for the financial year ended 31 January 2020.
(6 marks)

(iii) Comment on the ratios you have calculated for the financial year ended 31 January
2020 and compare them with the ratios for the financial year ended 31 January 2019, as
shown below.

For Financial Year ended 31 January 2019

Inventory turnover 52.14 times

Average inventory turnover period 7 days
Accounts receivables turnover 73 times
Average collection period 5 days
(4 marks)
ACC101 (August 2020 Semester, Online Examination) Page 12

Question 3 (B) (10 marks)

KPW is a consultancy firm. It updates its accounts daily.

Indicate the immediate effect of the following errors on each of the accounting elements
described in the column headings below, using the following code:

O = overstated
U = understated
NE = no effect

Copy the table below before answering. Do not copy the questions.

Net Total Total Owner’s

Error Profit Assets Liabilities Equity

For Example: Received $500 cash for advice

given to a customer but recorded the U U NE U
transaction as $50.

(i) KPW bought a motor vehicle for $74,500

cash. It was recorded twice.

(ii) KPW paid $3,800 cash at the end of the

month for the electricity used. It was wrongly
recorded as Dr. Electricity Expense $8,300 and
Cr. Cash $8,300

(iii) The owner of KPW withdrew $11,100 cash

for personal use. It was wrongly recorded as
$1,100.

(iv) This morning KPW received $7,890 for the

consultancy work done in the previous financial
year. It was recorded as Dr. Cash $7,890 and
Cr. Revenue $7,890.

(v) KPW did $4,560 worth of consultancy work

for a client. KPW has totally forgotten to
invoice the client. It gave the client 30 days
credit period. No accounting entry was made.
ACC101 (August 2020 Semester, Online Examination) Page 13

Question 4 (A) (12 marks)

The following information is provided by MARZ Enterprise.

On 01 March 2020, it was noted that the following cheques were still outstanding.
Cheque no. 3301 $6,000
Cheque no. 3302 $8,000
Cheque no. 3303 $10,000

The following information is extracted from the books of MARZ Enterprise.

Cash at Bank Account
Date Particulars $ Date Particulars $
1/3 Balance b/d 24,000 3/3 Cheque no 3304 1,300
4/3 Deposit 11,000 8/3 Cheque no 3305 2,500
7/3 Deposit 1,800 13/3 Cheque no 3306 2,000
31/3 Deposit 9,000 22/3 Cheque no 3307 3,000
31/3 Deposit 6,000 31/3 Cheque no 3308 4,000
31/3 Cheque no 3309 5,000
31/3 Balance c/d 34,000
51,800 51,800
----------------------------------------------------------------------------------------------------------------
The Bank Statement for March 2020 below was issued by MARZ Enterprise’s banker.
MARZ Enterprise: Bank Statement as at 31 March 2020
Date Particulars DR $ CR $ Balance $
1/3 Balance b/d 48,000 CR
3/3 Cheque no 3303 10,000 38,000 CR
4/3 Deposit 11,000 49,000 CR
7/3 Deposit 1,800 50,800 CR
8/3 Cheque no 3305 2,500 48,300 CR
10/3 Cheque no 3304 3,300 45,000 CR
16/3 Bank Charges 40 44,960 CR
17/3 Cheque no 3306 2,000 42,960 CR
23/3 Cheque no 3308 4,000 38,960 CR
28/3 Cheque no 1111 1,100 37,860 CR
31/3 Interest 30 37,890 CR
31/3 Cheque no 3302 8,000 29,890 CR
31/3 Cheque no 3307 3,000 26,890 CR
---------------------------------------------------------------------------------------------------------------
Notes:
> A cheque issued by a customer, XXX, for the amount $9.000 was deposited by MARZ
Enterprise on 31 March 2020. The next day, the bank returned the cheque to MARZ
Enterprise because XXX have insufficient fund in his account.
> The correct amount for cheque no 3304 was $1,300.
> The cheque no 1111 was issued by MAZE Co, not MARZ Enterprise.
---------------------------------------------------------------------------------------------------------------
ACC101 (August 2020 Semester, Online Examination) Page 14

REQUIRED:

(i) Update the Cash at Bank Account of MARZ Enterprise. (4 marks)

(ii) Prepare a Bank Reconciliation of MARZ Enterprise as of 31/3. (5 marks)

(iii) Record the journal entries to update MARZ Enterprise’s ledger accounts. (3 marks)

Question 4B (8 marks)

GHG Ltd is a retailer. All sales are on cash basis. The business uses the perpetual inventory
system. The following is a summary of its purchases and sales for the month of January 2020.
On 1 January 2020, GHG Ltd’s opening inventory was 500 units, costing $60 each.

Purchases of Inventory in January 2020

Date of Purchase Number of units Cost price per unit

Purchased $
6 January 300 65
29 January 100 70

Sales of Inventory in January 2020

Date of Sales Number of units Sales price per unit

Sold $
3 January 400 200
26 January 300 230

(Ignore Goods & Services Tax)

REQUIRED:

(i) Use the First-in First-out valuation method (FIFO), prepare the inventory record
showing the purchase, the cost of goods sold and the balance on hand columns.
(5 marks)

(ii) The periodic inventory system suffers from great disadvantages as compared to the
perpetual inventory system. Explain why it is still popular and being used widely in the
business world. (3 marks)

*** END OF EXAMINATION PAPER ***

ACC101 (August 2020 Semester, Online Examination) Page 15

FORMULA SHEET

Net Profit
 100%
Net Sales

Gross Profit
 100%
Net Sales

Current Assets
Current Liabilities

Quick Assets
Current Liabilities

Total Liabilities
Total Assets

Net Profit  Interest Expense

 100%
Average Total Assets

Net Profit
 100%
Average Owner' s Equity

Cost of Goods Sold

Average Inventory

Number of Days in Business Year

Inventory Turnover

Net Credit Sales

Average Accounts Receivable

Number of Days in Business Year

Accounts Receivable Turnover