ACCT1501 Chapter : FINAL-Exams-20023

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28 Jun 2021
Department
Course
Professor
THE UNIVERSITY OF
NEW SOUTH WALES
School of Accounting
ACCT 1501: Accounting and Financial Management 1A
Copies of Recent Exams
in this subject
Contents:
1. Semester 1, 2002 Final Exam
with solutions
2. Semester 2, 2002 Final Exam
3. Semester 1, 2003 Final Exam
with solutions and
markers’ reports
Course website: http://www.webct.unsw.edu.au/
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Past Exams for Session 1, 2004 AFM1A
2
School of Accounting
ACCT 1501: Accounting and Financial Management 1A
FINAL EXAMINATION PAPER
SESSION 1, 2002
This is a three (3) Hour paper.
There are six (6) questions.
There are six (6) pages, including this one.
You must answer all parts of all questions.
The questions are not of equal value.
All answers must be written in blue or black ink.
Show all relevant working.
This paper forms 60% of the assessment in this course.
This paper may be retained by the candidate.
Do not turn the page until instructed by the examination supervisor.
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Past Exams for Session 1, 2004 AFM1A
3
QUESTION 1 (20 marks)
Accounts Receivable
On January 1 2002 you run into your old friend Nick weeping into his beer at the local pub.
His business, Good Seeds Pty Ltd, sells quality indoor plants to corporations seeking to
brighten up their offices. Unfortunately he is having severe cash flow problems because
clients aren’t paying him on time, and sometimes not at all. Nick has lost track of who owes
him what and has no idea how much he can expect to recover. Being a good friend you offer
to help out, and the next day you go to Nick’s office to look over his accounts (fortunately
Nick’s assistant Deanna has kept records of all transactions, even though Nick doesn’t know
how to make use of them). During your review you establish the following things:
Good Seeds’ credit sales for the calendar year 2001 were $56,000. In 2000 credit
revenues were $45,000 ($9,000 is still outstanding from 2000).
There is no Provision for Doubtful Debts account.
You obtain provisioning factors from people in the same line of business as Nick (see
table below). They have found these provisioning factors to be reasonably accurate for the
past 5 years. Further, you establish that unpaid credit sales are of the following ages and
amounts:
Days Outstanding 0-30 30-60 60-90 90 180 180-360 360+
Balance (2001) 1,700 15,000 4,000 6,000 $8,000 $9,000
Provision factor 2% 4% 6% 10% 15% 95%
One of Good Seeds’ customers, Dot.Bomb has gone bankrupt. Dot.Bomb owes Nick
$5,000 from a sale 45 days ago, and there is no hope of recovering this amount.
Another customer, R. Ipoff has left Sydney permanently for the Bahamas. She had bought
$2,000 worth of potted palms in February 2001 and only paid $200 of it. She will not be
paying the remainder.
Required
Part (1) 10 marks total
(a) Prepare journal entries to incorporate the information you have received about
Dot.Bomb and R. Ipoff. Create a new table of Ageing of Accounts Receivable with
this information. (2 marks)
(b) Using the updated aged accounts receivable information and given provision factors,
create a provision for doubtful debts. (2 marks)
(c) What is the total bad debts expense for 2001? What is the net realisable value of
accounts receivable? (4 marks)
(d) How much confidence do you have in the appropriateness of the provisioning factors
used for calculation of Good Seeds’ bad debts expense? Why? (2 marks)
Part (2) 7 marks total
(a) Calculate bad debts for 2001 as a proportion of credit sales. In doing so, assume that
the appropriate percentage for uncollected debts is the percentage of debt
outstanding from 2000 credit sales. This percentage is to be applied to the amount
of credit sales before any write-offs. Write out the journal entry. What is net
realisable value of accounts receivable under this method? (4 marks)
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