THE ACCOUNTING FRAMEWORK

Topics: Generally Accepted Accounting Principles, Balance sheet, Liability Pages: 26 (3097 words) Published: April 28, 2014
Student Number: __________________________

Pages: 12
Questions- Section A: 6
Section B: 15

UNIVERSITY OF TASMANIA

EXAMINATIONS FOR DEGREES AND DIPLOMAS

October- November 2008

BFA707 THE ACCOUNTING FRAMEWORK
Examiner: Mrs Debbie Wills

Time Allowed: THREE (3) hours

Instructions:
This examination paper is to be marked out of 100. It has two sections. Write your student number clearly at the top of this examination paper. Hand in the examination paper. Do not remove any part of the examination paper from the examination room.

Section A:
• There are six (6) questions in this section. You must answer ALL questions. • Start each answer on a new page.
• You may use a calculator. No other materials may be taken into the examination room. • Calculations are considered to be part of your answers and must be written down clearly. Section B:
• This section contains FIFTEEN (15) multiple-choice questions worth a total of 10 marks. • All questions are worth equal marks.
• Select the BEST answer in each case by circling the appropriate letter on the fold out answer sheet attached at the end of this paper.
• You will not be penalised for an incorrect answer.
• Write your student number on the answer sheet where indicated and place the complete examination paper inside your examination answer booklet BEFORE leaving the examination room.
____________________________________________________________

BFA707 – The Accounting Framework

SECTION A
There are six (6) questions in this section. You must answer ALL questions. Question 1
Answer the following questions:
a
Why would you choose just one point to recognise revenue even though the process of earning that revenue may take a long time? What is the most common point chosen for recognition of revenue? Why would you choose this particular point?

b.

What are the two essential characteristics of a liability? What are the two recognition criteria for a liability?
[Total marks for Question 1 =10 marks]

Question 2
Shinnie Shoes owns a company which buys and sells a particular brand of designer shoes. All purchases and sales of the shoes are on credit. On 1 August 2008 the business held 20 pairs of shoes which had cost $110 each.

The following selected transactions occurred during the month of August: Aug 5
Purchased
8 pairs shoes @ $115
15
Sold
10 pairs shoes @ $230
18
Purchased
15 pairs shoes @ $115
23
Sold
10 pairs shoes @ $230

Assume that the business has a perpetual inventory system and that it makes a weighted average inventory flow assumption. (Calculations in this question should be to the nearest cent.)
a. Complete a stockcard, recording the transactions for the month. (6 marks)

b. Complete any journal entries necessary to record the purchase and sale listed above for the 5th and 15th August respectively.
(6 marks)
c. Suppose that a stocktake on 31 August reveals 20 pairs of shoes on hand, and that one of these has been damaged and will have to be sold for only $80. Prepare adjusting journal entries to record these facts. (You do not have to amend the stock card prepared in part a above for this loss and damage.)

(4 marks)

[Total marks for Question 2 =16 marks]

2

BFA707 – The Accounting Framework

3
Question 3
The following CR account balances appeared in the balance sheet of Gen’s Giants Ltd as at 30 June 2007:
$
Paid-up capital (1 000 000 ordinary shares)
Retained profits
Asset revaluation reserve
General reserve

500 000
520 000
300 000
100 000

The following selected transactions took place during the financial year ended 30 June 2008. 8 August
• A 1:5 bonus share dividend, valued at $1.50 per share, is declared (using funds from the asset revaluation reserve account) and the shares are issued immediately. 31 October
• Gen’s Giants Ltd issues a prospectus offering 100 000 shares at $2.00 per share, all payable at the time of application.
30 November
• Applications and money are...
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