Accounting Paper 3 November 2004

Answer this when you sit the paper.

1. A$4 800
2. B$7 200
3. C$9 600
4. D$12 000

Answer this when you sit the paper.

Answer this when you sit the paper.

1. A$628.18
2. B$691.00
3. C$760.10
4. D$767.78

Answer this when you sit the paper.

1. A$38 005
2. B$76 010
3. C$103 650
4. D$114 015

Answer this when you sit the paper.

Answer this when you sit the paper.

1. A$4 365
2. B$5 401.50
3. C$10 365
4. D$11 401.50

Answer this when you sit the paper.

1. A$140
2. B$1 000
3. C$1 140
4. D$2 140

Answer this when you sit the paper.

Answer this when you sit the paper.

Answer this when you sit the paper.

1. AThe business is assumed to continue in operation for the foreseeable future, so its fixed assets are carried at cost less the depreciation charged to date rather than at break up value.
2. BThe business is assumed to be about to be wound up, so every asset is written down to the amount it would fetch in a forced sale before the final accounts are drawn up for the year.
3. CThe same accounting policies are applied from one year to the next so that the results of the two years can be compared with one another.
4. DRevenue and costs are recorded in the year they are earned or incurred rather than in the year the cash for them is received or paid.

1. AThat every business in the same industry uses identical accounting policies, so that any two sets of published accounts can be compared line by line without any adjustment being needed.
2. BThat an accounting policy, once chosen, is applied to like items from one year to the next, and is changed only where the change gives a fairer presentation, the change then being disclosed.
3. CThat the reported profit is held steady from one year to the next by adjusting the depreciation rates whenever trading conditions change.
4. DThat items of a similar nature are grouped into one figure whenever showing them separately would not influence a reader of the accounts.

1. AThat a cost is recorded only in the period in which it is actually paid and revenue only in the period in which the customer's money is banked, so that the accounts follow the cash book.
2. BThat any cost whose exact amount is uncertain at the year end is left out of the accounts until the amount is known.
3. CThat revenues and costs are recognised in the period in which they are earned or incurred and matched against one another, whether or not the cash has yet been received or paid.
4. DThat expenses are spread evenly over the whole life of the business rather than charged to the year in which they arise.

1. AThat the largest item in each section of the accounts sets the treatment for all the smaller items in that same section.
2. BThat an item is disclosed and treated strictly on its own where omitting or misstating it could influence a reader's decision, while items too small to affect a decision may be grouped.
3. CThat every item, however small, is shown separately in the final accounts, because a reader is entitled to see each transaction the business entered into during the year.
4. DThat only items of physical substance, such as stock and machinery, are recorded, since an item that cannot be touched cannot be given a reliable value.

1. AGoing concern
2. BMateriality
3. CAccruals
4. DConsistency

1. AGoing concern
2. BPrudence
3. CSubstance over form
4. DMateriality

1. APrudence
2. BGoing concern
3. CMateriality
4. DConsistency

1. AAccruals
2. BConsistency
3. CGoing concern
4. DMateriality

Answer this when you sit the paper.

Answer this when you sit the paper.

1. A19.9%
2. B30.0%
3. C59.1%
4. D79.6%

Answer this when you sit the paper.

Answer this when you sit the paper.

Answer this when you sit the paper.

Answer this when you sit the paper.

1. AIt is close to being unable to pay its creditors as they fall due, and will need to raise further short term finance quickly if it is to survive the coming year.
2. BIts stock is turning over faster than the industry's, and that is what pushes both of its ratios above the trade average.
3. CIt holds far more working capital than the trade needs, so cash is tied up in stocks and debtors instead of earning a return.
4. DIt is more profitable than the rest of the industry, since a high current ratio measures the profit earned on each dollar of sales.

1. AThe partners have withdrawn too little from the business during the year, and that is what has pushed the return below the trade average.
2. BThe partnership is technically insolvent and cannot meet its liabilities out of the capital that the partners have invested in the business.
3. CEach dollar tied up in the business is earning less than it would earn elsewhere in the trade, so the capital is not being used as productively.
4. DThe partnership is charging a higher price for its product than the rest of the industry charges for the same product.

1. AIts fixed assets are worth more than the industry's, and a larger asset figure is what makes the ratio smaller.
2. BIts fixed assets are generating less sales than the same assets generate elsewhere in the trade, so there is spare capacity.
3. CIts fixed assets are wearing out faster than the industry's, which is why its depreciation charge is heavier than the trade average.
4. DIt is holding too much stock, because this ratio measures the number of times stock is turned over during the year.

1. AIdentical trading can give a different profit and a different asset value where one firm values stock on FIFO and the other on AVCO, or where they depreciate at different rates.
2. BAccounting policies are chosen by the auditors rather than by the firm, so neither firm's managers can explain the figures behind their own ratios.
3. CA ratio can only be calculated where both firms set out their final accounts in exactly the same layout.
4. DA firm that changes an accounting policy must restate all of its earlier years' accounts, so no ratio calculated for any earlier year can be relied on at all.

1. AThe average is drawn from firms that differ in size, age, location and product mix, and a firm that buys its desks in ready made has a quite different cost structure.
2. BAn industry average is always struck after tax while a single firm's gross profit percentage is always struck before tax, so the two figures can never be compared with each other.
3. CA firm that manufactures cannot calculate a gross profit percentage at all, because it has no purchases figure to work from.
4. DIndustry averages are published only for public companies, so a partnership is never included in the figures it is comparing itself with.

1. AA balance sheet carries no money values, so a ratio drawn from it can be expressed only as a rank and never as a number.
2. BA ratio taken from a balance sheet measures future performance only, and says nothing at all about the year that has just ended.
3. CA balance sheet is prepared before the year end, so the figures in it are estimates that get corrected once the final accounts have been audited.
4. DA balance sheet is a snapshot on one date, so a seasonal business can show a comfortable current ratio at a quiet year end and a very different one in mid season.

Answer this when you sit the paper.

1. A$10 000 adverse
2. B$10 000 favourable
3. C$11 500 adverse
4. D$11 500 favourable

1. A$101 000 adverse
2. B$111 000 adverse
3. C$112 500 adverse
4. D$112 500 favourable

1. A$11 500 favourable
2. B$101 000 adverse
3. C$101 000 favourable
4. D$112 500 adverse

Answer this when you sit the paper.

1. A$52 500 favourable
2. B$56 250 adverse
3. C$56 250 favourable
4. D$52 500 adverse

1. A$60 000 favourable
2. B$63 750 adverse
3. C$63 750 favourable
4. D$60 000 adverse

1. A$60 000 favourable
2. B$7 500 adverse
3. C$7 500 favourable
4. D$52 500 adverse

1. ABuying timber of a higher grade than the standard specifies, so that less of it has to be scrapped on the workshop floor.
2. BPaying the sawyers overtime so that the timber can be cut and used more quickly than the standard allows.
3. CUsing more cubic metres of timber on each desk than the standard cost card allows for.
4. DBuying timber in larger quantities and so earning a bulk discount from the supplier.

1. APaying the workforce a higher hourly rate than the rate assumed by the standard cost card.
2. BNegotiating a lower price per cubic metre with the timber supplier at the start of the year.
3. CBuying a lower grade of timber, so that more of it splits in cutting and has to be scrapped.
4. DEmploying more experienced machinists, who complete each desk in fewer hours than the standard cost card allows for.

1. AA bonus scheme that persuades the workforce to finish each desk in fewer hours than standard.
2. BA wage award agreed after the standard was set, or the use of workers of a higher grade than the standard assumes.
3. CBadly maintained machinery that keeps breaking down, so that each desk takes more hours to complete than the standard allows.
4. DA fall in the market price of timber part way through the year.

1. AUsing more cubic metres of timber on each desk than the standard cost card allows for.
2. BBetter trained workers and better maintained machines, so that the desks are finished in fewer hours than standard.
3. CA shortage of skilled labour in the district, which forces the partnership to pay more per hour than the standard rate allows.
4. DBuying timber more cheaply per cubic metre than the standard price allows for.

1. AIt gives a yardstick for actual performance, so that variances point management at the few costs that are off standard.
2. BIt removes the need to keep any stock records, since materials are charged out at whatever they actually cost as they are issued.
3. CIt fixes the selling price of the product for the whole of the following year.
4. DIt replaces the profit and loss account at the year end.