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ACCT1101 Practice Exam
Question 1

West Ltd wish to identify which of the following items represent cash flows for their business.

Cash sales
Payment of accounts payable
Net profit
Payment for land
Borrowed money with a bank loan
Collection of accounts receivable
Payment of cash dividends
Payment of salaries & wages
Depreciation expense
Payment for Building
Issues of shares for cash

Required

a.For the items that are cash flows, classify each of them as either operating, investing or financing and whether they are inflows/outflows of cash using the table provided below.

b.For any items that are not cash flows, explain in your own words why they are not related to cash. (50 words maximum)

Provide your answer to Question 1 below:

a.For the items that are cash flows, classify each of them as either operating, investing or financing and whether they are inflows/outflows of cash using the table provided below.

Cash Flow Yes/No Operating/ Investing/ Financing Inflow/(Outflow)
Cash Sales

Payment of Accounts Payable
Net Profit

Payment for Land
Borrowed money with a bank loan
Collection of accounts receivable
Payment of cash Dividends
Payment of salaries & wages
Depreciation expense
Payment for Building
Issues of shares for cash

b.For any items that are not cash flows, explain in your own words why they are not related to cash. (50 words maximum)

Question 2

Tander’s Ltd have provided their income statement for 2022 and 2021 below.

2022 2021
Sales 4,500,000 4,050,000
Cost of goods sold 2,235,000 2,214,000
Gross profit 2,265,000 1,836,000
Selling expenses 369,000 315,000
Administration expenses 276,000 243,000
Total operating expenses 645,000 558,000
Profit before tax 1,620,000 1,278,000
Income tax expense 486,000 383,400
Net profit 1,134,000 894,600

Required

a.In your own words, explain the difference between horizontal analysis and vertical analysis, giving an example of each. (150 words maximum)

b.Prepare a common size statement (i.e., vertical analysis) for the income statement below, using the table provided.

Provide your answers to Question 2 below:

a.In your own words, explain the difference between horizontal analysis and vertical analysis, giving an example of each. (150 words maximum)

b.Prepare a common size statement (i.e., vertical analysis) for the income statement below, using the table provided.

2022 2021
$ % $ %
Sales 4,500,000 4,050,000
Cost of goods sold 2,235,000 2,214,000
Gross Profit 2,265,000 1,836,000
Selling expenses 369,000 315,000
Administrative expenses 276,000 243,000
Total operating expenses 645,000 558,000
Profit before tax 1,620,000 1,278,000
Income tax expense 486,000 383,400
Net Profit 1,134,000 894,600

Question 3

Bikes Ltd manufactures camping equipment which are sold to customers. The following financial statistics have been calculated for both 2022 and 2021:

2022 2021
Profit margin 13.9% 19.8%
Gross profit margin 37.5% 42.4%
Current ratio 1.7:1 1.2:1
Days inventory 115 days 79 days

Required

a.Discuss the likely implications of the observed change in days inventory. (60 words maximum)

b.Comment on the entity’s liquidity or profitability in your discussion where appropriate. (100 words maximum)

c.Consider the following statements and analyse whether you agree or disagree with each, giving an explanation in your own words. (100 words maximum)

1.An increase in return on equity may not be indicative of an increase in profit.
2.A low debt to assets ratio is typically indicative of growth in the business.

Provide your answer to Question 3 below:

a.Discuss the likely implications of the observed change in days inventory. (50 words maximum)

b.Comment on the entity’s liquidity or profitability in your discussion where appropriate. (50 words maximum)

c.Consider the following statements and analyse whether you agree or disagree with each, giving an explanation in your own words. (150 words maximum)

1.An increase in return on equity may not be indicative of an increase in profit.

2.A low debt to assets ratio is typically indicative of growth in the business.

Question 4

Bailey Ltd’s actual sales in September 2023 were $960 000.

Projected sales for the fourth quarter of 2023 are:

October $1,080,000
November $1,300,000
December $1,280,000

Sales are 20% cash and 80% on credit. Credit customers (accounts receivable) pay in the month following the sale.

Required

a.Calculate the total projected cash to be received in November. Show all workings.

b.Calculate the projected cash to be collected from accounts receivable in the month of November. Show all workings.

c.What will be the balance of accounts receivable on 1 December Show all workings.

Provide your answer for Question 4 below:

a.Calculate the total projected cash to be received in November. Show all workings.

b.Calculate the projected cash to be collected from accounts receivable in the month of November. Show all workings.

c.What will be the balance of accounts receivable on 1 December Show all workings.

Question 5

Beachside Industries is a single-product entity. Information related to the sale of the product is provided below.
Selling price $10.00
Variable cost per unit $5.40
Variable selling costs $1.40
Annual fixed selling costs $240,000
Annual fixed administration costs $380,000
Profit target $126,000

Required
a.Calculate the break-even point in units and in dollars. Show all workings.

b.Calculate how many units need to be sold to achieve the profit target and calculate the sales total required to achieve the target profit. Show all workings.

c.Calculate the margin of safety in units and in revenues if they achieved the target profit. Show all workings.

Provide your answers to Question 5 below:

a.Calculate the break-even point in units and in dollars. Show all workings.

b.Calculate how many units need to be sold to achieve the profit target and calculate the sales total required to achieve the target profit. Show all workings.

d.Calculate the margin of safety in units and in revenues if they achieved the target profit. Show all workings.

Question 6

Morgan and Mable manufacture building materials and household items from marble and have several different departments in their organisation structure. They use a five-perspective balanced scorecard.

Required
a.Using the table below, identify two (2) goals and two (2) measures that would likely appear in each of the five (5) balanced scorecard perspectives for Morgan and Marble.

b.For the two (2) measures you have selected to include in the sustainability perspective in part a, identify which UN Sustainable Development Goals they align with.

c.In your own words, identify and explain two (2) reasons why corporate social responsibility reporting is increasing in popularity. (100 words maximum)

d.In your own words, explain the concept of a ‘stakeholder’ in the context of corporate social responsibility. Give three examples of stakeholders a mining company would need to consider from a corporate social responsibility perspective. (75 words maximum)

Provide your answer to Question 6 below:

a.Using the table below, identify two (2) goals and two (2) measures that would likely appear in each of the five (5) balanced scorecard perspectives for Morgan and Marble.

Goals Measures
Financial Perspective
1. 1.
2. 2.
Customer Perspective
1. 1.
2. 2.
Internal Operations Perspective
1. 1.
2. 2.
Innovation and improvement Perspective
1. 1.
2. 2.
Sustainability Perspective
1. 1.
2. 2.

b.For the two (2) measures you have selected to include in the sustainability perspective, identify which UN Sustainable Development Goals they align with.

1.

2.

c.In your own words, identify and explain two (2) reasons why corporate social responsibility reporting is increasing in popularity. (50 words maximum)

d.In your own words, explain the concept of a ‘stakeholder’ in the context of corporate social responsibility. Give three examples of stakeholders a mining company would need to consider from a corporate social responsibility perspective. (75 words maximum)

END OF PRACTICE EXAMINATION