Accounting 101 Exam-style question

1.5 HOURS

CLOSED BOOK

Instructions

This exam paper consists of three sections. You are required to answer all questions of each section.

Section 1 (30% of total marks)

Section 2 (30% of total marks)

Section 3 (40% of total marks)

Section 2: Multiple Choice Questions

Please complete your name and CID number in the box provided at the top of this question paper. This is to ensure all question papers are collected at the end of the examination as question papers are not allowed to be removed from the examination hall. This paper will not be used for marking purposes in any way and so you should ensure that you enter all of your answers on the answer sheet provided.

The system for multiple choice marking is as follows:

· You score 3 point for each correct answer

· A half point is deducted for each incorrect answer

· You score zero for each blank answer

· You must choose only ONE answer per question

Only college calculators can be used during the exam.

A Present Value Table is included on Page XX of the exam paper.

Section 1

Bright Light Plc has the following trial balance as at 31 December 2015:

The following additional information is given to prepare the adjustments:

Required:

a. Prepare the Income Statement (Statement of Profit & Loss) for Bright Light Plc for the year ended 31 December 2015

b. Prepare the Statement of Financial Position (Balance Sheet) as at that date.

c. Explain the relationship between the Income Statement, the Statement of Financial Position and the Statement of Cash Flows.

Section 2

Question A

Transport Ltd wishes to compare its product costs using traditional product costing and activity-based costing. The company makes two products: the Bike and the Scooter. There are the following details of the overheads and cost drivers:

You have the following information about the products:

Required:

A calculation of total product costs per unit for each product using:

a. Traditional total absorption costing, recovering overheads using direct labour hours.

b. Activity-based costing using the different cost drivers to allocate the cost to each product.

c. Advise management which system to use to allocate the overhead costs to their products.

Question B

Bath Expert plc manufactures and distributes bathroom fittings to major building supply chains and DIY chains. The board is currently considering two projects to develop a new range of products for the bathroom. The two projects represent levels of ‘luxury’ bathrooms. The cash flows are different for the two product ranges.

The Super Bathroom project will cost $4m and generate $6m net cash over five years. Each year $1m cash is generated, except for the third year when $2m cash is generated. The Superluxury Bathroom project will cost $8m and generate $11m cash flows spread over five years. Each year $2m cash is generate, except for the third when $3m cash is generated.

It may be assumed that all cash flows occur the last day of each year. Bath Expert Plc’s cost of capital is 10%.

Required:

a. Calculate the NPV for each project

b. Calculate the IRR for each project

c. Explain the advantage and disadvantage of both methods

End of Paper

Present Value Tables