CORK INSTITUTE OF TECHNOLOGY
INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ
Semester 2 Examinations 2014/15
Module Title: Financial Accounting 1
Module Code: ACCT6007
School: Business
Programme Title: Bachelor of Business (Hons) in International Business with
Language – Year 1
Bachelor of Business (Hons) in Marketing – Year 1
Programme Code: BIBLA_8_Y1
BMRKT_8_Y1
External Examiner(s): Ms Linda McWeeney
Internal Examiner(s): Mr Maurice O'Brien
Instructions:
Duration:
Sitting:
Answer question 1 and Question 2 and One other question.
(Either Q3 or Q4). Answer three questions in total.
2 Hours
Summer 2015
Requirements for this examination: Calculator
Note to Candidates: Please check the Programme Title and the Module Title to ensure that you have received the correct examination paper.
If in doubt please contact an Invigilator.
Page 1 of 9

Question 1: Short Questions 15*2 marks each
(Students must fill in the MCQ sheet, attached at the back of this exam)
Total 30 Marks
1) Which of the following statements is correct?
A) To record a decrease in any given liability account that account must be credited.
B) To record an increase in any given liability account that account must be debited.
C) To record an increase in any given asset account that account must be debited.
D) To record a decrease in capital, the capital account must be credited.
2) Depreciation is .
. .
A) A way of writing off the cost of non-current assets over their estimated revenuegenerating period.
B) A way of setting aside money to provide for the eventual replacement of non-current assets.
C) The writing off of the cost of non-current assets evenly over their estimated useful economic lives.
D) The writing off of the cost of non-current assets over their estimated useful economic lives in ever decreasing amounts.
3) The rationale for making a provision in respect of doubtful debts is that the provision:
A) Matches the estimated cost of future bad debts against the revenue earned in giving rise to the potential bad debts.
B) Is an estimate of future bad debts.
C) Records the expense of bad debts as they are incurred.
D) Records bad debts without taking them out of the 'books' of an entity, thus showing the full amount owed by Amounts receivable as a current asset.
4) A firm's trial balance . .
.
A) Shows its financial position.
B) Lists all of the entries in its double-entry accounting records.
C) Establishes whether its accounting records are correct.
D) Is a list of all of the balances brought down in its double-entry accounting records
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5) What is the balance carried down on the following account on 31 May?
P. Kelly
May-01 Sales 205 May-17 Bank
May-14 Sales
May-31 Sales
360
182
May-28 Returns Inwards
300
50
A) €395 debit B) €397 credit C) €380 debit D) None of the above
6) A Business has an accounting year ending on 30 September. For the year ended 30
September 2015, the following details relate to Wages
Wages owing at the end of the year 600, the amount paid during the year 30,000.
What is the expense charged for Wages in the income statement for the year-ended 30
September 2015?
A) 600 B) 30,000 C) 30,600 D) 29,400
7) A machine, which was bought at a cost of €3,200 is not expected to have any residual value. If it is depreciated at the rate of 25% per annum, using the reducing balance method, its net book value, after two years, will be:
A) €2,400 B) €1,600 C) €1,800 D) None of the above.
8) A company has provided you with the following trail balance figures:
Accounts Receivable 50,000, Bad Debts 4,000, Provision for doubtful debts 3,000.
They have asked you to tell them what figure they should include in the Income Statement for Provision for doubtful debts if they changed the provision for doubtful debts to 10% of
Accounts Receivables.
A) 2,000
B) 5,000
C) 9,000
D) 3,000
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9) Calculate the Gross Profit From the following information:
Sales €100,000, Carriage Inwards €8,000, Closing Inventory €1,000, Purchases €65,000,
Returns Inwards €2,500 and Opening Inventory €3,000.
A) 23,500
B) 21,500
C) 22,500
D)24,500
10) On 1 January 1997, a firm bought a second-hand van for €6,000.
The firm depreciates vehicles over a five year period using the straight-line method, assuming a nil residual value. A full year's depreciation is charged in the year of acquisition and none in the year of disposal. The firm's accounting year-end is 31 December.
What was the profit on the sale of the van, if it was sold for €5,000 on 31 March 2000?
A) €2,600 B) €1,000 C) €2,496 D) €1,244
11) Expenses relevant to an accounting period which remain unpaid at the end of the period should . . .
A) be netted off against prepayments at the same date and shown together, as a single figure, in the Statement of Financial Position at the end of the period.
B) be shown as part of non-current liabilities in the Statement of Financial Position at the end of the period.
C) be shown as an asset in the Statement of Financial Position (balance sheet) at the end of the period and shown as income in the profit and loss account for the period.
D) be shown as an expense in the profit and loss account for the period and shown as a current liability in the Statement of Financial Position at the end of the period.
12) Which of the following is not a book of first entry?
A) Sales Ledger
B) Returns Outwards day book
C) Returns Inwards day book
D) Sales Day Book
13) In a Trial Balance which of the following is shown on the debit side?
A) Sales
B) Capital
C) Wages
D) Accounts Payable
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14) Tony Jones a customer of ours returned goods valued at €80 to the company bought on credit. What is the journal entry required to reflect this transaction?
A) Debit Sales 80, Credit Receivables 80
B) Credit Returns In 80, Debit Receivables 80
C) Debit Returns In 80, Credit Receivables 80
D) Credit Sales 80, Debit Receivables 80
15) Which of the following is NOT an Asset
A) Cash at Bank
B) Machinery
C) Payables
D) Receivables
Total 30 Marks
Page 5 of 9

Question 2: Final Accounts (40 Marks)
Q.2 Tony Smith a painter contractor works as a sole trader. He has provided you with the following trial balance.
Trial Balance as at 31 st
December, 2015
Motor Vehicles
Provision for depreciation Motor Vehicles
Office Building
Provision for depreciation Office Building
Sales
Returns Inwards
Purchases
Returns Outwards
Wages and Salaries
Capital
Insurance
Inventory 1 January 2015
Heat and Light
Carriage Inwards
Carriage Outwards
Accounts Receivable
Accounts Payable
Drawings
Rates
Telephone
Bank
Cash
Bad debts
Allowance for doubtful debts
Additional Information as at 31 st
December2015
66,000
20,000
3,000
855,500
CR
21,000
8,000
610,000
8,000
119,500
2,500
58,000
18,000
8,000
14,000
1,000
3,000
855,500
DR
200,000
60,000
5,000
400,000
15,000
6,000
55,000
8,000
2,000
1.
Inventory at 31 December 2015 was valued at €50,000
2.
Tony’s Telephone bill was pre-paid at the end of the year for €550
3.
Heat and Light owing at the end of the year was €150
4.
Adjust the allowance for doubtful debts to 10% of the accounts receivable
5.
Depreciation is to be provided for as follows:
 Motor Vehicles 10% using the straight line method

Office Building 8% using the reducing balance method.
Required:
(a) Prepare Tony Smith’s Income Statement as at 31 st
December 2015. (25 marks)
(b) Prepare the Statement of Financial Position of Tony Smith as at 31 st
December 2015.
(15 marks)
Total: 40 marks
Page 6 of 9

Answer one of the following questions
Question 3: Double Entry (30 Marks)
Michael Walsh has decided to open his own business now he has retired from racing. Below is a list of his transactions for his first month of trading
To begin a business Michael deposited €10,000 of his
Jan 1
Jan 2 own money in the business bank account and €1,000 of his own money in the business cash account
The business purchased equipment on credit for €3,500 from T. Martin
Transferred €2,000 cash from the business bank account
Jan 2
Jan 5 into cash account
The business purchased office supplies for €800 cash
Jan 6 Sold on credit goods worth €2,600 to L. Hamilton
Paid €500 cash for equipment purchased on Jan 2 to T.
Jan 10
Martin
Jan 11 Cash Sales €2,000
Jan 12 Purchases for cash €200
Jan 13 Paid €900 for wages in cash
Jan 22 W. Watson loaned Michael €2,500 cash
Jan 23
Lodged €3,000 cash into the business bank account
Jan 27
Jan 30
L. Hamilton paid us the balance on his account by cheque
Paid
T. Martin the balance on his account €1,500 by cash and €1,500 by cheque
You are required to:
(a) Prepare and balance off the T accounts for Michael Walsh for the month ended 31
January 2015.
(20 marks)
(b) Balance off the T accounts and prepare the Trial Balance.
(10marks)
Total: 30 marks
Page 7 of 9

Question 4: Depreciation (30 Marks)
A Business which prepares its accounts to 31 st
of December each year had purchases and sales of machinery as follows:
1 st
April 2012 bought Car 1 for €18,000
1
1 st st
August 2013 bought Car 2 for €30,000
30
March 2014 bought Car 3 for €24,000 th
June 2015 sold Car1 for €4,000
Depreciation is to be provided at 20% per annum using straight line method, based on original cost, and providing one month’s depreciation for each month of ownership.
You are required to show for the above transactions:
(a) The machinery account
(b) The accumulated provision for depreciation account
(8 marks)
(12 marks)
(c) The machinery disposal account (7 marks)
(d) Explain how the reducing balance depreciation method works (3 marks)
Total: 30 marks
Page 8 of 9

Multiple Choice Answer Sheet
Name____________________________________
ID Number________________________________
Mark the correct answer for each question with an X
7
8
5
6
3
4
1
2
A
A
A
A
A
A
A
A
B
B
B
B
B
B
B
B
C
C
C
C
C
C
C
C
D
D
D
D
D
D
D
D
9
10
11
12
A
A
A
A
B
B
B
B
C
C
C
C
D
D
D
D
13
14
A
A
B
B
C
C
D
D
15 A B C D
Important: Return this sheet with the exam answer book.
Page 9 of 9