VCE ACCOUNTING – UNIT 4
OUTCOME 1A
Question Book
Name:
All answers should be written in the Answer Book provided.
Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM
Unit 4 Outcome 1: Assessment task A
Question 1
Maddy Mercurio owns and operates a small trading business called Scoresby Frames which sells picture
frames and mirrors. Maddy maintains a perpetual stock recording system and all stock movements are
recorded using the FIFO method of cost assignment. Maddy maintains control accounts for Debtors,
Creditors and Stock.
1.1
The following information relates to transactions for August 2010:
Cash Receipts Journal
Date
Details
Rec.
No.
Totals
Bank
$
14 540
Disc.
Exp.
Debtors
Cost of
sales
220
6 000
Disc.
Rev.
Creditors
35
700
Sales
3 700
GST
7 600
760
Sundries
400
Cash Payments Journal
Date
Aug. 2
6
11
16
23
27
30
Details
Ch.
No.
Bank
Stock Control
CU Prints
Electricity
Wages
McWilliams Inc.
Stock Control
Wages
3 300
665
154
600
2 375
1 100
500
Totals
$
8 694
Stock
Wages
GST
3 000
Sundries
300
14
140
600
125
2 500
1 000
100
500
160
3 200
4 000
1 100
414
140
Sales Journal
Date
Debtor
Invoice
number
Totals
Cost of
sales
$
Sales
2 100
4 500
GST
Total
Debtors
450
4 950
Purchases Journal
Date
Aug. 4
13
20
28
Creditor
Invoice
number
McWilliams Inc.
CU Prints
Top Grade Timber Products
McWilliams Inc.
MB103
104
x340
MB185
Totals
Stock
$
GST
Total
Creditors
800
900
200
350
80
90
20
35
880
990
220
385
2 250
225
2 475
General Journal
Date
Details
Aug. 22 Creditors Control
Creditor – CU Prints
Stock Control
GST Clearing
© Simmons, Hardy 2006
General
Ledger
Debit
Credit
$
$
Subsidiary
Ledger
Debit
Credit
$
$
132
132
120
12
Cambridge University Press
2
Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM
Unit 4 Outcome 1: Assessment task A
Required
1.1.1
Post the journals to the Stock Control and GST Clearing accounts in the General Ledger of
Scoresby Frames.
5 + 5 marks
1.1.2
Post the journals to the account of CU Prints in the Creditors Ledger of Scoresby Books.
3 marks
1.1.3
State the source document that would have verified the transaction recorded in the General
Journal on 22 August 2010.
1 mark
1.1.4
State one benefit CU Prints would derive by accepting returns from customers who change their
mind.
1 mark
1.2
Maddy has provided the following partially complete stock card for Mirrors (gold-framed):
Stock Item:
Mirror (gold-framed)
Location:
Stock Code:
Date
Supplier:
Details
Qty
IN
Unit
cost
Value
$
Qty
OUT
Unit
cost
Value
$
Sept. 1 Balance
7 Rec. 45
3
90
270
1
100
100
Qty
BALANCE
Unit
Value
cost
$
3
90
270
10
100
1 000
9
100
900
The following transactions relating to the mirrors have not yet been recorded:
Sept. 11
15
Maddy purchased 8 mirrors from Visage Mirrors for $120 plus $12 GST each (Inv. D34).
A debtor – Country Gifts – returned 1 mirror, and was issued Credit Note 31 for $250 plus
$25 GST.
Required
1.2.1
Record the transactions in the stock card for Mirrors (gold-framed).
2 marks
1.2.2
Record the transactions on 11 and 15 September 2010 in the appropriate journals.
(Narrations are not required.)
2 + 4 marks
1.2.4
Calculate Cost of sales for Mirrors (gold-framed) for September 2010.
2 marks
25 marks
© Simmons, Hardy 2006
Cambridge University Press
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Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM
Unit 4 Outcome 1: Assessment task A
Question 2
Greg Elsom owns Elsom IT which sells computers and other IT equipment. The business uses the accrual
method of recognising transactions, and records stock through a perpetual recording system. The
movement of goods is recorded through stock cards using the First-in, first-out method (FIFO).
2.1
The following invoice accompanied the purchase of CP140 printers:
ClearPrint
Tax Invoice
Charge to:
Date
Invoice: 142
Original
Net 30 days
Printers and Copiers
ABN: 20 433 564 997
Elsom IT, Coburg 3058
ABN: 12 341 220 945
Details
July 16 CP 140 printer
Packaging and handling
Qty
10
Unit Price
$
250
Total
$
2 500
500
3 000
300
$A
3 300
Sub total
GST (10%)
Total
Additional information:


All stock is delivered to Elsom IT by Gold Deliveries. Total freight charges for July 2010
amounted to $600.
As at 31 July 2010, 8 CP140 printers were still on hand.
Required
2.1.1
Calculate the cost price of one CP140 printer.
1 mark
2.1.2
Referring to your answer to 2.1.1, explain your treatment of:


Packaging and handling
Freight charges.
2 + 2 marks
2.1.3
Explain the effect on Net profit for July 2010 if Freight charges was treated as a period cost
rather than a product cost.
3 marks
2.2
In December 2010, Elsom IT had 6 fax machines in stock which it had purchased for $80 plus $8
GST each. Greg has stated that the fax machines can only be sold for $100 (plus $10 GST) each,
and this would require spending $150 to advertise a clearance sale (Memo 12).
Required
2.2.1
Define the term ‘Net Realisable Value’.
1 mark
© Simmons, Hardy 2006
Cambridge University Press
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Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM
Unit 4 Outcome 1: Assessment task A
2.2.2
Calculate the Net Realisable Value of each fax machine.
2 marks
2.2.3
Suggest two reasons why the Net Realisable Value of the fax machines has fallen below its
Historical cost.
2 marks
2.2.4
Referring to one Accounting principle, explain why the fax machines must be written down to
the lower of cost and Net Realisable Value.
3 marks
2.2.5
Record the stock write down in the stock card for fax machines.
1 mark
2.2.6
Show the General Journal entries to record the stock write down.
3 marks
2.3
Greg has provided the following extract from the firm’s Post-adjustment Trial Balance as at 31
January 2010:
Elsom IT
Post-adjustment Trial Balance (extract) as at 31 January 2010
Account
Accrued wages
Accumulated depreciation of office furniture
Bank
Cost of sales
Creditors Control
Debtors Control
Delivery to customers
Discount revenue
Drawings
Insurance of stock
Office furniture
Sales
Sales returns
Stock Control
Stock write down
Debit
$
Credit
$
740
19 100
3 700
28 000
32 000
12 800
520
130
2 000
1 200
23 000
45 000
3 000
43 000
190
Required
2.3.1
Prepare a Profit and Loss Statement for Elsom IT for January 2010 which shows Gross profit
and Adjusted Gross profit. (A full Profit and Loss Statement is not required.)
3 marks
2.3.2
State whether Insurance of stock was treated as a product cost or period cost. Justify your
answer.
2 marks
25 marks
© Simmons, Hardy 2006
Cambridge University Press
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VCE ACCOUNTING – UNIT 4
OUTCOME 1A
Answer Book
Name:
Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM
Unit 4 Outcome 1: Assessment task A
Question 1
1.1.1
General Ledger
Stock Control
Date
Cross-reference
Amount
$
Aug. 1 Balance
5 000
31 Bank
Creditors Control
Date
Cross-reference
Amount
$
Aug. 31 Cost of sales
13
700
12
100
14
000
Cost of sales
12
250
Creditors Control
1 120
GST Clearing
Date
Cross-reference
Amount
$
1 414
Aug. 31 Bank
Date
Aug. 1 Balance
1 225
Creditors Control
Cross-reference
Amount
$
780
1 760
31 Bank
Debtors Control
Creditors Control
1 450
1 12
5 + 5 marks
1.1.2
Creditors Ledger
CU Prints
Date
Cross-reference
Amount
$
1 700
Aug. 6 Bank / Discount revenue
22 Stock Control / GST Clear.
1 132
Date
Cross-reference
Aug. 1 Balance
13 Stock Control / GST Clear.
Amount
$
700
1 990
3 marks
1.1.3
Document Credit note
1 mark
1.1.4
Benefit
May generate greater sales / customer loyalty
1 mark
© Simmons, Hardy 2006
Cambridge University Press
2
Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM
Unit 4 Outcome 1: Assessment task A
1.2.1
Stock Item:
Mirror (gold-framed)
Location:
Stock Code:
Date
Supplier:
Details
Qty
IN
Unit
cost
Value
$
OUT
Unit
cost
Qty
Value
$
Sept. 1 Balance
7 Rec. 45
11 Inv. D34
8
15 Cr. note 31
120
1
100
BALANCE
Unit
Value
cost
$
Qty
3
90
270
1
100
100
960
100
3
90
270
10
100
1 000
9
100
900
9
100
900
8
120
960
10
100
1 000
8
120
960
2 marks
1.2.2
Purchases Journal
Date
Creditor
Sept. 11 Visage Mirrors
Invoice
number
Stock
1 960
D34
GST
1 96
Total
Creditors
1 056
General Journal
Date
Details
General
Ledger
Debit
Credit
$
$
Subsidiary
Ledger
Debit
Credit
$
$
1 250
Sept. 15 Sales returns
1 25
GST Clearing
1 275
Debtors Control
Debtor – Country Gifts
275
1 100
Stock Control
Cost of sales
100
2 + 4 marks
© Simmons, Hardy 2006
Cambridge University Press
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Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM
Unit 4 Outcome 1: Assessment task A
1.2.4
Calculation
(270 + 100) 1 – (100) 1
= 270
Cost of sales $ 270
2 marks
25 marks
© Simmons, Hardy 2006
Cambridge University Press
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Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM
Unit 4 Outcome 1: Assessment task A
Question 2
2.1.1
Calculation
$3 000 ÷ 10 printers
= $300 per printer
Cost price of one CP140 printer $ 300
1 mark
2.1.2
Packaging and handling
Explanation
Treated as a product cost 1 as it is incurred to get the stock ready for sale and can be
allocated to each individual printer on a logical basis 1
Freight charges
Explanation
Treated as a period cost 1 as although it is incurred to get the stock ready for sale, it
cannot be allocated to each individual printer on a logical basis 1
2 + 2 marks
2.1.3
Explanation
Cost of sales will be overstated 1 by $400 1 (8 printers @ $50 packaging each), so
Net profit will be understated 1 by $400.
3 marks
© Simmons, Hardy 2006
Cambridge University Press
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Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM
Unit 4 Outcome 1: Assessment task A
2.2.1
Estimated proceeds from sale less all direct marketing, selling and distribution costs
Definition
1 mark
2.2.2
Calculation
Estimated proceeds less direct selling, marketing, distribution expenses
= $100 1 – $25 1 ($150 / 6 fax machines)
Net Realisable Value of each fax machine $ 75
2 marks
2.2.3
Damage
Reason 1
Obsolescence
Deliberate strategy to sell below cost
Reason 2
Fall in demand
2 marks
2.2.4
Accounting principle
Explanation
Conservatism 1
Losses should be recognised when probable 1 so that assets are not overstated 1 –
i.e. it is probable that the assets will be sold for less than their Historical cost.
3 marks
2.2.5
Stock Item:
Fax machine
Location:
Stock Code:
Date
Supplier:
Details
Qty
IN
Unit
cost
Value
$
Dec. 31 Balance
Memo 12
6
5
30
Qty
OUT
Unit
cost
Value
$
Qty
BALANCE
Unit
Value
cost
$
6
80
480
6
75
450
1 mark
© Simmons, Hardy 2006
Cambridge University Press
6
Cambridge VCE Accounting Units 3 & 4 Teacher CD-ROM
Unit 4 Outcome 1: Assessment task A
2.2.6
General Journal
Date
Details
General
Ledger
Debit
Credit
$
$
Subsidiary
Ledger
Debit
Credit
$
$
1 30
Dec. 31 Stock write down
1 30
Stock Control
Write down of stock to lower of cost and
Net Realisable Value (Memo 12) 1
3 marks
2.3.1
Elsom IT
Profit and Loss Statement (extract) for January 2010
Revenue
Sales
45 000
less Sales returns
3 000
1 42
000
1 29
200
less Cost of Goods Sold
Cost of sales
28 000
Insurance of stock
1 200
12 800
Gross profit
1 190
less Stock write down
$12 610
3 marks
Adjusted Gross profit
2.3.2
Product / Period cost
Justification
Period cost 1
It has been recorded in its own ledger account 1
(rather than in the Stock Control account).
2 marks
25 marks
© Simmons, Hardy 2006
Cambridge University Press
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