NANYANG
POLYTECHNIC
2015/2016 SEMESTER 2 - SEMESTRAL EXAMINATION
Course
Diploma in
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Diploma in
Diploma in
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Business Management
Marketing
Sport & Wellness Management
Banking & Finance
Fund Management & Administration
Hospitality & Tourism Management
Module
BM0003 - Principles of Accounting
February 2016
Time Allowed: 2 hrs
INSTRUCTIONS TO CANDIDATES
1
This examination paper consists of EIGHT (8) pages including this
page.
2
Answer ALL questions in SECTION A and SECTION C and any ONE out of
two questions in SECTION B.
3
All questions are to be answered on the answer book provided.
4
Show all workings clearly as marks will be awarded accordingly.
Semestral Exam I BM0003 I Page 2
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Section A (35 marks)
Answer ALL the questions in this section.
Question 1 (8 marks)
Sole proprietorship and company are two types of business setups.
Required:
(a)
State the difference in the ownership structure of these two business setups.
(2 marks)
(b)
Briefly explain the business entity concept and how it affects the recording of
transactions related to business owners.
(4 marks)
(c)
State how a business should treat a payment for business rent made by the
(2 marks)
business owner-from his personal cash.
Question 2 (14 marks)
Best Courier provides courier service to business. The following transactions took
place in the month of November 2015:
Transaction
Particulars
1
$89,000 was received from customers who paid cash.
$54,000 was earned from credit customers.
Another
2
A total of $61,000 was received from customers on account.
3
A customer paid $9,000 for courier services to be rendered from
December 2015 to February 2016.
4
Collected $800 interest income from a fixed deposit placed with a local
bank.
5
Paid $9,600 salary for the month of November 2015.
Required:
(a)
For each of the above transactions, prepare the general journal entries for the
(6 marks)
month of November 2015. Narrations are not required.
(b)
Suppose the business uses special journals, update the cash receipt journal using
(6 marks)
the following format:
Transaction Accounts
Credited
(c)
Accounts
Receivable CR ($)
Sales
CR($)
Others
CR($)
Cash
DR ($)
Briefly explain when a business should switch from solely using general journal to
(2 marks)
using special journal.
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Semestral Exam I BM0003 I Page 3
Question 3 (13 marks)
The Cool Cafe reported a net profit of $21,000 for the month of October 2015 before
discovering the following missing transactions and errors:
(1) The cafe earned $26,000 of cash sale during the last week of October 2015. No
entry was passed.
(2) Payment of $8,100 for a new oven bought on 31 October 2015 was recorded as:
Dr Supplies $8, 100 Cr Cash $8, 100
(3) October utilities bill totaled $770 was received on 29 October 2015 and no entry
was passed.
(4) Rent for October 2015 of $12,000 was prepaid previously.
was passed.
No adjusting entry
Required:
(a)
Prepare the appropriate journal entries for the transactions above.
(8 marks)
(b)
Calculate the adjusted net profit for the month of October 2015.
(5 marks)
END OF SECTION A
Semestral Exam I BM0003 I Page 4
SECTION B (25 marks)
Answer ONE out of the two questions in this section.
Question 4 (25 marks)
Vital Phone Accessories maintains the Purchases Journal, Cash Payments Journal
and General Journal to record its business transactions. The business uses the
periodic inventory system. The following transactions took place in January 2016:
4 Jan
Purchased $9,800 phone accessories on account from HuaTi Company.
5 Jan
Owner took $300 of phone accessories for donation to his son's school as
prizes for an IT competition.
7 Jan
Reimbursed staff $150 cash for transport claims.
8 Jan
Sold $6,600 of accessories to Starrub Shop on credit term n/15.
11 Jan
Paid $230 for phone accessories purchased from Miaomi Company.
14 Jan
Paid $2,700 to Damsung Ltd for amount owing.
18 Jan
Purchased $890 of phone accessories on term n/30 from Yukio Corp.
29 Jan
Paid $5,800 to HuaTi Company for amount owing.
30 Jan
Accrued salaries of $7,600 for January 2016.
Required:
(a)
Record the above transactions into the appropriate journals using the formats
shown below.
(20 marks)
General Journal
Date
Descrietion
DR($)
Purchases Journal
I Date
I Account credited
I Amounts($)
I
Date
(b)
C as h Paymen t s J ourna
Accounts Debited
Accounts Payable
DR($)
I
CR($)
Others
DR($)
Cash
CR ($)
Show the postings from part (a) to the Accounts Payable Control Account in the
General Ledger using columnar format.
The Accounts Payable Control
Account has a credit balance of $21,176 as at 1 January 2016.
(5 marks)
Semestral Exam I BM0003 I Page 5
Question 5 (25 marks)
FunZx Services organises social events and adopts the accrual basis of accounting.
The unadjusted trial balance of FunZx Services as at 31 December 2015 is
presented below:
FunZx Services
Unadjusted Trial Balance
As At 31 December 2015
Cash
Supplies
Accounts Receivable
Prepaid Insurance
Equipment
Accumulated Depreciation
Accounts Payable
Unearned Revenue
Drawings
Capital
Service Revenue
Depreciation Expense
Salary Expense
Utilities Expense
Transport Expense
Total
Debit
$
46,000
5,200
29,000
4,800
60,000
Credit
$
3,600
23,800
19,400
8,300
90,000
79,000
3,600
55,000
2,800
1,100
215,800
215,800
Additional information:
(1)
Prepaid insurance covered the period from October 2015 to September 2016.
(2)
The business completed a service job worth $3,100 on 30 December 2015
which was not invoiced nor recorded.
(3)
Supplies on hand as at 31 December 2015 were determined to be $3,400.
(4)
The business owns 2 equipment and adopts the straight line method of
depreciation. All the equipment have a useful life of 5 years with zero residual
value and proportionate depreciation is applied for assets purchased or
disposed during the year. The first equipment was bought in mid 2015 costing
$36,000 and its depreciation for the current year was recorded. The second
equipment was bought on 1 December 2015 costing $24,000 · and the
depreciation for this equipment was not recorded for the current year.
(5)
In unearned revenue account, only $13,400 of service job was still outstanding
as at 31 December 2015.
Semestral Exam I BM0003 I Page 6
Question 5 (cont'd)
Required:
(a)
Prepare the necessary journal entries for the year ended 31 December 2015
based on the additional information provided. No narrations are required.
(10 marks)
(b)
Prepare the adjusted Trial Balance for FunZx Services as at 31 December
2015.
(11 marks)
(c)
Calculate the net profit for the year ended 31 December 2015.
END OF SECTION B
(4 marks)
Semestral Exam I BM0003 I Page 7 . . . "'
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Section C (40 marks}
Answer the following question in this section.
Question 6 (40 marks}
AL Trading is in the hardware trading business. It uses the periodic inventory
method. The opening inventory as at 1 January 2016 is $17,900.
The following transactions occurred in the month of January 2016:
2 Jan Purchased $43,200 worth of hardware from Hai Tian Motors, on terms 1/10,
n/30, FOB shipping point. Hai Tian Motors paid $590 for shipping costs.
6 Jan Sold goods with list price of $22,900 to a customer, MyStore Co .on terms
2/10, n/30, trade discount 15%, FOB destination. AL Trading paid $300 for
the freight charges.
7 Jan Returned defective hardware of $7,000 purchased on 2 January 2016 to Hai
Tian Motors, receiving full credit.
12 Jan Paid the net amount to Hai Tian Motors for the goods purchased on 2
January.
19 Jan Issued a credit note of $2,000 to MyStore Co for damaged inventory
returned from the sale on 6 January.
20 Jan Cash sale of $10,000 to a walk-in customer.
21 Jan Received cash from MyStore Co in full settlement of the sale on 6 January.
30 Jan Paid $900 for a new storage cabinet.
31 Jan Accrued for $770 utilities for the month.
Ending inventory as at 31 January 2016 was $38,100 and other operating expenses,
apart from those stated above, for the month of January 2016 was $10,000.
Required:
(a)
Briefly explain the credit term "2/10, n/30" and "trade discount".
(b)
Prepare journal entries to record the above transactions for the month of
January 2016. No narrations are required.
(15 marks)
(c)
Prepare the Statement of Comprehensive Income for the month ended 31
January 2016.
(11 marks)
(5 marks)
Semestral Exam I BM0003 I Page 8
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Question 6 {cont'd)
(d)
Treat the following scenarios independently:
(i)
Suppose the sale to MyStore Co on 6 January was actually on FOB
shipping point term, briefly explain the impact of the error on the net profit
(4 marks)
for the month ended 31 January 2016.
(ii)
Suppose the ending inventory as at 31 January was $31,800 instead of
$38,100, briefly explain the impact of the error on the gross profit for the
(5 marks)
month ended 31 January 2016.
END OF SECTION C
END OF PAPER