Federation Business School (FBS)
Assessment task III: Final Assessment Task IIl
Semester 2, 2021
BSMAN3009 Accounting for Managers
Assessment task III conditions:
This is an Open Book individual on-line assessment. By taking this assessment you agree to the relevant FUA plagiarism legislation conditions, in particular that you will undertake this assessment without consulting assistance.
Materials Permitted: Open-book unlimited
Instructions:
Section A: Calculation questions (20 marks) – answer all questions
Section B: Theory/short answer questions (20 marks) – answer all questions
Section C: Multiple choice questions (10 marks) – answer all questions

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SECTION A (20 Marks)

CALCULATION QUESTIONS – ANSWER ALL QUESTIONS

EACH QUESTION IS WORTH 5 MARKS

Question 1: (3 + 2 = 5 marks)

A list of account balances for Mr Andrew’s business (Andrews Consulting) at the end of the 30 June 2020 reporting period is shown below.
Prepare the income statement for the reporting period and the statement of changes in equity at the end of the year

$‘000
Cash
26,000
Accounts receivable
14,000
Office supplies
1,200
Prepaid insurance
650
Plant and equipment
125,000
Accumulated depreciation – plant and equipment
29,300
Accounts payable
20,600
Salaries payable
6,000
Rent received in advance
12,000
Share capital
75,000
Retained earnings (at beginning)
16,000
Service revenue
278,000
Rent revenue
14,000
Supplies expense
17,500
Rent expense
29,500
Insurance expense
2,100
Depreciation expense
20,650
Salaries expense
114,300

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Question 2: (5 marks)

The following T-account shows the transactions in the cash account during the month

Cash Account
$ $
Drawings Paid 10 000
Opening Balance 10 000 Payment for wages 54 000
Receipts from customers 156 000 Payments for inventory 70 000
Dividends received 3 000 Expense payments 6 000
Sale of motor vehicle 16 000 Tax paid 5 000
Proceeds from loan 30 000 Interest paid 3 000
Closing Balance 67 000
215 000 215 000

Required:
Prepare a statement of cash flows based on the cash account.

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Question 3: (5 marks)

Warne Enterprises decides to expand its operations by applying for an additional loan of $600,000. As a result, revenue from ordinary activities is expected to increase by $90 000. Financial data (assume average balances) before and after expansion include:

Before expansion
After expansion
Total assets (average)
$3 000 000
$3 600 000
Total liabilities
800 000
1 400 000
Average shareholders’ equity
2 200 000
2 200 000
Revenue from ordinary activities
800 000
830 000
Interest expense
60 000
80 000
Profit before income tax
540 000
550 000
Income tax expenses (30 per cent)
162 000
165 000
Profit
$378 000
385 000

Required:
Calculate the following before and after the expansion:

ROA ratio
Return on ordinary shareholders’ ratio
Debt to total assets ratio
Times interest earned ratio
Would shareholders be happy with the expansion plans?

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Question 4: (5 marks)

You are required to prepare a Balance Sheet for Sparky’s Pty Ltd at 30 June 2017. The balance sheet must be clearly labelled and presented in either T-format of narrative classified format.
Cash at Bank $80,000
Retained Earnings $140,000
Accounts Payable $7,500
Inventory $22,000
Land and Buildings $125,000
Share Capital $45,000
Tax Payable $2,500
Loan $35,000
Accounts Receivable $3,000

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SECTION B: (20 MARKS)

SHORT ANSWER QUESTIONS – ANSWER ALL QUESTIONS

Question 1: (3+2=5 marks)

Discuss the three pillars of sustainability? (3 marks)
Outline the benefits for organisations in considering sustainability (2 marks)

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Question 2: (5 marks)

What is the purpose of a statement of cash flows? (3 marks)

b) Discuss two cash-flow problem warning signals. (2 marks)

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Question 3: (2+3=5 marks)

You have been assigned a consulting job with a medium-sized agricultural company that specialises in supplying seedlings to nurseries. The entity is divided into divisions based on geographical locations.

Currently the management of each division is evaluated on its return on investment (ROI).

Your investigations at the entity reveal its mission is to be ‘the number one provider of quality plant stock in the southern hemisphere’. You also note that the entity has identified customer satisfaction, product quality and product innovation as hallmarks of success.

However, recently the company’s profits have been declining. You notice a positive attitude at the plant propagation laboratories during your field visits, but at the distribution centres there appears to be some discontent resulting in a lot of lost stock and customer complaints.

Required

a) Explain how the performance measurement system can negatively affect the entity’s success. (2 marks)
b) For each of the identified factors — customer satisfaction, product quality and product innovation outline one non-financial performance indicator that could help focus work effort at the agricultural company. (3 marks)

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Question 4: (5 marks)

a. Explain the difference between cash accounting and accrual accounting when determining profit or loss for a reporting period. (3 marks)

b. Describe two users of financial statements who would be interested in the financial performance and position of an entity, and explain why they would be interested. (2 marks)

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SECTION C: (10 marks)
Multiple choice – select the BEST answer. Please attempt ALL questions. Each question is worth 1 mark

1. The shareholders’ equity section of the balance sheet for a public company includes:
a. share capital (contributed equity).
b. retained earnings.
c. reserves.
d. all of the above.
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2. Equity finance for a sole trader comes from:
a. the issue of shares to the public such as an IPO (Initial Public Offering)
b. borrowings from the government.
c. the owner and profit retained in the business.
d. bank loans.
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3. A master budget is a set of different types of related budgets. The starting point is what type of budget?
a. Profit
b. Capital purchases
c. Cash Flow
d. Sales and Revenue
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4. The decision rule for net present value calculations is to invest:
a. if the NPV is above a hurdle level.
b. in projects with the lowest discount rate.
c. in projects with the highest discount rate.
d. if the NPV is positive.
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5. Creditors’ accounts are settled 35% in the month of purchase and 65% in the month following the purchase. If credit purchases are $20 000 in January and $26,000 in February, how much cash is paid to creditors in February?

a. $26,000
b. $20,000
c. $22,100
d. $46,000
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6. A business purchases stationery for $349. In their journal they record it as a decrease to cash of $394 and a decrease of $349 to profit or loss. What type of accounting error is this?
a. Single-entry error
b. Transposition error
c. Incorrect entry
d. None of the above
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7. Which of the following statements about opportunity costs is true?
a. Opportunity costs are the costs of forgoing benefits that would be available if the resources had been used in the next best alternative.
b. Calculating opportunity costs is not an important part of tactical decision making.
c. Opportunity costs are avoidable costs.
d. All of the statements are true.
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8. Triple Bottom Line is made up of 3 dimensions. Which one of the following is not one of those dimensions:
a. Social
b. Ethical
c. Environmental
d. Economic
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9. Tan Dan Ltd is planning to purchase a non-current asset costing $150 000 in total. The planned delivery date is 1 December 2018 with settlement on that date. A deposit of $20 000 is to be paid on 1 July 2017. The amount that will appear in the monthly cash budget for December 2018 is:
a. $150 000 outflow
b. $20 000 outflow
c. $130 000 outflow
d. $20 000 inflow.
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10. A business organised as a separate legal entity that is owned by shareholders is a:
a. partnership.
b. company.
c. sole trader.
d. legal partnership.
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