ACCT1101 Final Exam Revision Questions

Summary: these are a range of revision questions across topics 6 to 11.

 The exam information identifies the general topics that will be assessed in the final exam.
 Some of these revision questions are relatively easy, others are more difficult.
 These revision questions should not be your only source of revision. The weekly lecture examples,
tutorial questions and self-study questions cover all topics and should be your primary focus to
ensure that you can apply your knowledge under time limits.
 There are past papers available in the library (see links below). Please note that it is the first
semester that our course returns to in-face delivery mode fully. The past exam papers are online and
non-invigilated papers since 2020, so the relevance is limited.

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 Question 1

West Ltd wish to identify which of the following items represent cash flows for their business.

For the items that are cash flows, classify each of them as either operating, investing or financing and
whether they are inflows/outflows of cash using the table provided below.

Cash Flow Type of Activity Inflow/Outflow

Classification (Operating, investing or
(Yes or no) financing)
Cash sales Yes Operating Inflow
Payment of accounts payable Yes Financing Outflow
Net profit No -
Payment for land Yes Investing Outflow
Borrowed money with a bank loan Yes Financing Inflow
Collection of accounts receivable Yes Operating Inflow
Payment of cash dividends Yes Financing Outflow
Payment of salaries & wages Yes Operating Outflow
Depreciation expense No - -
Payment for Building Yes Investing Outflow
Issues of shares for cash Yes Financing In flow
Long term assets is typically is investing activity

Net profit is not a cash flow because it represents earnings after

expenses and may include non-cash items, such as depreciation.
Depreciation expense is also non-cash as it only allocates the cost of
tangible assets over their useful life, without involving actual cash
movements.

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Question 2

Tander’s Ltd have provided their income statement for 2023 and 2022 below.

2023 2022

Sales 4,500,000 4,050,000

Cost of goods sold 2,235,000 2,214,000

Gross profit 2,265,000 1,836,000

Selling expenses 369,000 315,000

Administration expenses 276,000 243,000

Total operating expenses 645,000 558,000

Profit before tax 1,620,000 1,278,000

Income tax expense 486,000 383,400

Net profit 1,134,000 894,600

Provide your answers to Question 2 below:

a. In your own words, explain the difference between horizontal analysis and vertical analysis,
giving an example of each. (150 words maximum)
Horizontal analysis comparing financial data over multiple periods to identify
trends and growth patterns.
Vertical analysisinvolves expressing each item in a financial statement as a
percentage of a base figure from the same period.

b. Prepare a common size statement (i.e., vertical analysis) for the income statement below, using
the table provided.
2023 2022
$ % $ %
Sales 4,500,000 100% 4,050,000 100%
Cost of goods sold 2,235,000 50% 2,214,000
Gross Profit 2,265,000 50% 1,836,000
Selling expenses 369,000 8% 315,000
Administrative expenses 276,000 6% 243,000
Total operating expenses 645,000 14% 558,000
Profit before tax 1,620,000 36% 1,278,000
Income tax expense 486,000 11% 383,400
Net Profit 1,134,000 25 894,600

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Question 3
Bikes Ltd manufactures camping equipment which are sold to customers. The following financial
statistics have been calculated for both 2023 and 2022:

2023 2022
Profit margin 13.9% 19.8%
Gross profit margin 37.5% 42.4%
Current ratio 1.7:1 1.2:1
Days inventory 115 days 79 days

Provide your answer to Question 3 below:

a. Discuss the likely implications of the observed change in days inventory. (50 words maximum)
This means that the company is holding inventory longer, this might be
due to the bikes company slower sales or overstocking. Which they will lost
money by holding their equipment.

b. Comment on the entity’s liquidity or profitability in your discussion where appropriate. (50 words
maximum)
The 19.8% of profit margin means that in every one dollar of sale they earn 19.8% in that dollar
By 2023 they only earn 13.9% from a dollar
Lower gross profit margin might mean that their COGS increases, since gross profit margins represent
the percentage of revenue that exceeds the COGS
The improved current ratio from 1.2:1 to 1.7:1 reflects better liquidity, showing the company is better
able to meet short-term obligations.

c. Consider the following statements and analyse whether you agree or disagree with each, giving an
explanation in your own words. (150 words maximum)

1. An increase in return on equity may not be indicative of an increase in profit.

I agree. Return on equity (ROE) can increase if the company uses leverage
effectively, even if profits remain stable or decrease. ROE measures
profitability relative to equity, so changes in leverage or equity can affect it
independently of profit

2. A low debt to assets ratio is typically indicative of growth in the business.

I disagree. A low debt to assets ratio indicates limited reliance on debt
financing, which could mean the business is growing conservatively. High-

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growth companies often take on more debt to fund expansion, so a low
ratio may instead suggest a cautious approach to growth.

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Question 4

Bailey Ltd’s actual sales in September 2023 were $960 000.

Projected sales for the fourth quarter of 2023 are:

October $1,080,000
November $1,300,000
December $1,280,000

Sales are 20% cash and 80% on credit. Credit customers (accounts receivable) pay in the month
following the sale.

Required

a. Calculate the total projected cash to be received in November. Show all workings.

b. Calculate the projected cash to be collected from accounts receivable in the month of November.
Show all workings.

Provide your answer for Question 4 below:

a. Calculate the total projected cash to be received in November. Show all workings.

b. Calculate the projected cash to be collected from accounts receivable in the month of November.
Show all workings.

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Question 5

Beachside Industries is a single-product entity. Information related to the sale of the product is
provided below.

Selling price $10.00

Variable cost per unit $5.40

Variable selling costs $1.40

Annual fixed selling costs $240,000

Annual fixed administration costs $380,000

Profit target $126,000

Required
a. Calculate the break-even point in units and in dollars. Show all workings.

b. Calculate how many units need to be sold to achieve the profit target and calculate the sales total
required to achieve the target profit. Show all workings.

c. Calculate the margin of safety in units and in revenues if they achieved the target profit. Show all
workings.

Provide your answers to Question 5 below:

a. Calculate the break-even point in units and in dollars. Show all workings.

b. Calculate how many units need to be sold to achieve the profit target and calculate the sales total
required to achieve the target profit. Show all workings.

d. Calculate the margin of safety in units and in revenues if they achieved the target profit. Show all
workings.

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Question 6

The following financial statements were prepared for the management of Chloe Ltd.

Chloe Ltd
Statement of profit or loss
for the year ended 30 June 2023
Sales revenue $562 500
Cost of sales 407 500
Gross profit 155 000
Expenses (including tax and finance) See Note 2 below 90 000
Profit $65 000

Chloe Ltd
Statement of financial position
as at 30 June 2023
Current assets
Cash assets $8 900
Receivables (all trade) 140 175
Inventories 126 000
Total current assets 275 075
Non-current assets
Land 31 500
Building 113 000
Less: Accumulated depreciation 18 900 94 100
Store equipment 23 625
Less: Accumulated depreciation 13 625 10 000
Total non-current assets 135 600
Total assets $410 675
Current liabilities
Payables (all trade) $135 450
Other payables 20 790
Total current liabilities 156 240
Non-current liabilities
Loan due 2036 31 500
Total liabilities 187 740
Equity
Ordinary shares 151 000
Retained earnings 71 935
Total equity 222 935
Liabilities and equity $410 675
Additional information
1. Total assets and total equity at the beginning of the year were $377 500 and $180 500
respectively.
2. Income tax expense for the year was $31 500. Net finance expenses were $3 150.

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Required

Use the financial information provided and the formulae used in the course lectures and
prescribed textbook to calculate one (1) ratio that a financial analyst might calculate to give
some indication of:

a) the profitability of the business and

b) the capital structure of the business

Show all workings. Round your calculations to 3 decimal places. (e.g., 0.351)

Provide your answer to Question 6 below:

Use the financial information provided and the formulae used in the course lectures and
prescribed textbook to calculate one (1) ratio that a financial analyst might calculate to give
some indication of the:

a) the profitability of the business and

b) the capital structure of the business

Show all workings. Round your calculations to 3 decimal places. (e.g., 0.351)

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Question 7

Morgan and Mable manufacture building materials and household items from marble and have several
different departments in their organisation structure. They use a five-perspective balanced scorecard.

Required
a. Using the table below, identify two (2) goals and two (2) measures that would likely appear in
each of the five (5) balanced scorecard perspectives for Morgan and Marble.

b. For the two (2) measures you have selected to include in the sustainability perspective in part a,
identify which UN Sustainable Development Goals they align with.

c. In your own words, identify and explain two (2) reasons why corporate social responsibility
reporting is increasing in popularity. (100 words maximum)

d. Explain what an ESG balanced scorecard is and how it differs from a traditional balanced
scorecard. (75 words maximum)

Provide your answer to Question 7 below:

a. Using the table below, identify two (2) goals and two (2) measures that would likely appear in
each of the five (5) balanced scorecard perspectives for Morgan and Marble.

Goals Measures
Financial Perspective
1. 1.
2. 2.
Customer Perspective
1. 1.
2. 2.
Internal Operations Perspective
1. 1.
2. 2.
Innovation and improvement Perspective
1. 1.
2. 2.
Sustainability Perspective
1. 1.
2. 2.

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 b. For the two (2) measures you have selected to include in the sustainability perspective, identify
which UN Sustainable Development Goals they align with.

1.

2.

c. In your own words, identify and explain two (2) reasons why corporate social responsibility
reporting is increasing in popularity. (50 words maximum)

d. Explain what an ESG balanced scorecard is and how it differs from a traditional balanced
scorecard. (75 words maximum)

END OF REVISION QUESTIONS

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