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MAA103: Accounting for Decision Making T2 2020 Examination EXAMINATION PAPER Faculty of Business and Law Trimester 2 2020 Examination Unit Code:MAA103 Unit Name:Accounting for Decision Making Anticipated writing time: TWO (2) HOURS Maximum exam time: You must submit your exam response within THREE (3) hours. The additional hour includes 15 minutes reading time, and time to download and save the exam paper and upload the completed paper into CloudDeakin Special instructions for candidates: · This examination is OPEN BOOK. · Calculators are ALLOWED. · This examination constitutes 60% of your assessment in this unit. · This examination comprises nine (9) questions. You are required to answer ALL nine (9) questions. · Save this document on your computer using the file name: student ID, unit code and the unit name, for example: 216123123_MAA103_Accounting · Record all answers in the spaces provided below for each question · Upload your exam response to the Exam Submission Dropbox in the CloudDeakin unit site. Check that you upload the correct file. · Late submissions will not be marked. · Remember to save your work regularly. · It is important that you complete this task individually. Your submission will be reviewed for the purposes of detecting collusion and/or plagiarism. · If you encounter any technical issues with CloudDeakin, please contact the IT Service Desk online or via phone (1800 463 888; +61 5227 8888 if calling from outside Australia) and record your ticket number as evidence of technical issues during the examination period. · In the unlikely event that you cannot upload your completed exam paper, email it as an attachment to your unit chair [
[email protected]] within the submission time. · The breakdown of marks in this exam is: Question Marks Question Marks 1 6 6 8 2 4 7 8 3 6 8 8 4 6 9 8 5 6 Total Available Marks 60 All candidates MUST complete this section Type your student ID number here: QUESTION 1 (6 marks) Ink Spill, a printing company, provides printing services to its customers. Customers normally pay for printing services in advance. In October 2020, Ink Spill received $20,000 from customers for services to be provided in November 2020. A senior accountant at Ink Spill wants to record the full amount as a liability in the company’s Balance Sheet at the end of October 2020. Required: Should the $20,000 be recorded as a liability in the company’s Balance Sheet at the end of October 2020? Explain, using the definition and recognition criteria of a liability in your explanation. (6 marks) Answer here: QUESTION 2 (3 + 1 = 4 marks) Dark Room is a business servicing film photographers. In November 2020, Dark Room will be paying $12,000 to cover six months of various expenses between November 1, 2020 and April 30, 2021 and receiving $18,000 from a client for services to be delivered over the following twelve months between November 1, 2020 and October 31, 2021. Assume various expenses are incurred and services provided evenly across the six and twelve months, respectively. Required: Calculate the monthly expenses, service revenue and profit/loss of Dark Room for the months of November 2020 and December 2020 under both cash and accrual accounting using the table below. Ignore GST. (3 marks) Cash accounting Accrual accounting November 2020 December 2020 November 2020 December 2020 Service revenue Various expenses Profit/loss Which accounting method (cash or accrual accounting) is more accurate in recording accounting transactions and why? (1 mark) Answer here: QUESTION 3 (6 marks) A manager at Stalemate, a chess business retailing chess boards and providing chess lessons, requires help with interpreting some of the accounting transactions that took place during the month of September 2020. The manager has provided you with a list of those transactions below. Required: Underneath each transaction in the space provided, write a brief narration describing the economic event that corresponds to that transaction. (6 marks) Date Account titles (Details) Dr ($) Cr ($) 2/9/2020 Cash 3,000 Accounts Receivable 2,500 GST Collected 500 Service Revenue 5,000 Answer here: 3/9/2020 Wages Payable 6,500 Cash 6,500 Answer here: 15/9/2020 Chess boards 10,000 GST Paid 1,000 Accounts Payable 5,000 Cash 5,100 Answer here: 30/9/2020 Accounts Payable 15,000 Bank Loan 15,000 Answer here: 30/9/2020 Rent Expense 2,000 Prepaid Rent 2,000 Answer here: 30/9/2020 Unearned Revenue 10,000 Service Revenue 10,000 Answer here: QUESTION 4 (2 + 4 = 6 marks) Piece of Time is a manufacturer of wrist watches and relies heavily on advertising to promote its products. Its partially filled Prepaid Advertising account below is missing an additional $44,000 (GST-inclusive) prepaid for advertising by Piece of Time on October 8, 2020 and the recognition of advertising expense for the month of October 2020. Required: Complete the Prepaid Advertising 3-column ledger below to find out the amount of advertising expense incurred by Piece of Time in October 2020. GST needs to be accounted for. Prepaid Advertising Date Explanation Dr ($) Cr ($) Balance ($) 01/10/2020 Opening Balance 55,000 55,000 DR 31/10/2020 Closing Balance 74,000 DR (2 marks) Using the General Journal below, record the additional $44,000 (GST-inclusive) prepaid for advertising and record the advertising expense for the month of October 2020 following the completion of Prepaid Advertising 3-column ledger above. GST needs to be accounted for. Narrations are not required. Date Account titles (Details) Dr ($) Cr ($) (4 marks) QUESTION 5 (6 marks) Hill Riders is a local bicycle shop retailing and servicing mountain bikes. The following information pertains to the business for the month of August 2020. · On August 1st, Hill Riders purchased additional equipment for $15,400 (GST-inclusive). The equipment was delivered on August 1st and the business paid 30% of that amount on the same day. Hill Riders paid the remaining amount on August 20th. · Hill Riders started using equipment purchased on August 1st from the day of purchase. The management believes the equipment will last for five years. By the end of August, no depreciation on that equipment had been recorded for the month. · Hill Riders received $16,500 (GST-inclusive) on July 29th for bike servicing to be provided in August 2020. By the end of August 2020, all services had been provided. · At the end of July 2020, Hill Riders recorded gross wages of $12,000 of which $3,300 was a PAYG withholding. The rest was payable to employees. On August 5th, Hill Riders paid the outstanding amount to employees from the July transaction. Required: Record the economic impact of the above events in the month of August 2020 in the General Journal below. GST needs to be accounted for. Narrations are not required. (6 marks) Date Account titles (Details) Dr ($) Cr ($) QUESTION 6 (7 + 1 = 8 marks) Porcelain is a manufacturer of ceramic products. Its management has projected values for the following account balances as at June 30, 2021. Projected loss for the financial year ending June 30, 2021 is $700. Required: Prepare a classified Balance Sheet for Porcelain as at June 30, 2021. (7 marks) Account titles Projected balance ($) Account titles Projected balance ($) Accum. Dep. – Equipment 12,400 Inventory 5,100 Bank Loan (due in 5 years) 16,800 Equipment 48,900 GST Collected 7,400 Bank overdraft 3,650 Bank Loan (due in 5 months) 3,200 GST Paid 4,700 Share Capital 39,600 PAYG Withheld 6,350 Distributions to owners 15,000 Prepaid Rent 7,200 Accounts Payable 25,300 Accounts Receivable 29,800 Prepaid Insurance 6,500 Wages Payable 3,200 Porcelain Projected Balance Sheet as at June 30, 2021 Assets ($) ($) Liabilities + OE ($) ($) Based on the projected account balances above, calculate the value of payment to or refund from the ATO Porcelain would report in its Business Activity Statement for the period ending June 30, 2021. (1 mark) Answer here: QUESTION 7 (8 marks) SF Marvel, a retailer of small factor computer cases, has provided you with the following information: Budgeted Sales (units) June 2021 1,100 July 2021 1,200 August 2021 1,500 a) SF Marvel sells each computer case for $100 and purchases each computer case for $70. b) SF Marvel plans to maintain inventory on hand at the end of each month to be 20% of next month’s sales volume. You can assume this to be the situation at the end of May 2021. c) 60% of sales are made on cash basis with the remaining 40% - on credit. All credit sales are collected in the month following the sale. d) 50% of inventory purchases are made on cash basis with the remaining 50% - on credit. All credit purchases are paid in the month following the purchase. e) The following cash expenses are incurred on a monthly basis: Rent ($3,500); Wages ($4,400); Utilities ($1,500); Insurance ($500). The business also recognises $2,000 of depreciation expense each month. f) The monthly drawings by the owner of SF Marvel include: $1,000 cash and 1 computer case for personal use. g) Every month the business pays $400 to pay off its bank loan. h) The opening cash balance on July 1, 2021 is budgeted to be a cash deficit of $9,400. Required: Prepare a cash budget for SF Marvel for the month of July 2021. (8 marks) SF Marvel Cash Budget for