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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.

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.

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.

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.

Question 3

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

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.

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.