Victorian Certificate of Education

2022

ACCOUNTING
Written examination

Tuesday 8 November 2022

Reading time: 2.00 pm to 2.15 pm (15 minutes)
Writing time: 2.15 pm to 4.15 pm (2 hours)

QUESTION BOOK

Structure of book
Number of Number of questions Number of
questions to be answered marks
11 11 100

• Students are permitted to bring into the examination room: pens, pencils, highlighters, erasers,
sharpeners, rulers and one scientific calculator.
• Students are NOT permitted to bring into the examination room: blank sheets of paper and/or
correction fluid/tape.
Materials supplied
• Question book of 13 pages
• Answer book of 17 pages
Instructions
• Write your student number in the space provided on the front cover of the answer book.
• Answer all questions in the answer book.
• All written responses must be in English.
At the end of the examination
• You may keep this question book.

Students are NOT permitted to bring mobile phones and/or any other unauthorised electronic
devices into the examination room.
© VICTORIAN CURRICULUM AND ASSESSMENT AUTHORITY 2022
2022 ACCOUNTING EXAM QB 2

Instructions
Answer all questions in the answer book provided.

Question 1 (8 marks)
On 1 January 2022, Furniture Style had five large tables on hand at $1 200 each (plus GST).
The business uses the First In, First Out (FIFO) inventory cost assignment method and it reports
monthly.
The business has provided the following documents for January 2022.

Barten Imports Furniture Style

Date: 1 January 2022 Date: 3 January 2022

Invoice 123 Receipt 945

To: Furniture Style From: PIX Cafe

For: 10 large tables at $1 300 each For: Sale of 7 large tables at $1 600
(plus GST) each (plus GST)

Amount: $13 000 Amount: $11 200

GST:  
$1 300 GST:  
$1 120
Total: $14 300 Total: $12 320

Furniture Style Furniture Style

Date: 5 January 2022 Date: 7 January 2022

Invoice C86 Credit Note 453

To: RS Goldberg To: RS Goldberg

For: Sale of 3 large tables at $1 600 For: Return of 1 large table at $1 600
each (plus GST) each (plus GST)

Amount: $4 800 Amount: $1 600

GST:  
$480 GST:  
$160
Total: $5 280 Total: $1 760

a. Using the information provided, complete the Inventory Card. 5 marks

b. Calculate the Cost of Sales for the large tables for the first week of January 2022. 1 mark

c. Describe the effect that Credit Note 453 will have on the Income Statement for the month
ended 31 January 2022. 2 marks
 3 2022 ACCOUNTING EXAM QB

Question 2 (7 marks)
BAX reports monthly. The following ledger account shows details of Accounts Payable for June
2022.

Accounts Payable

Date Cross-reference Amount Date Cross-reference Amount

2022 2022
June 16 Bank 68 200 June 1 Balance 45 800

22 Inventory/GST Clearing 2 200 12 Inventory/GST Clearing 77 000

30 Balance 52 400

122 800 122 800

a. Identify the source document that would be used to verify the entries on:
• 12 June
• 16 June
• 22 June. 3 marks

b. One year ago, on 1 July 2021, BAX had:

• increased its selling price by 5%
• increased the annual advertising budget by 20%
• borrowed $250 000 to finance a renovation of its premises.
Information from the Income Statements for the years ended 30 June 2021 and 30 June 2022
show the following.

2021 2022 Change

$ $ $ %

Sales 420 000 462 000 42 000 10%

Gross Profit 220 000 220 000 0 0%

Net Profit 100 000 80 000 (20 000) (20%)

Analyse the financial information above and provide likely reasons for the lower Net Profit for
the year ended 30 June 2022. 4 marks

TURN OVER
2022 ACCOUNTING EXAM QB 4

Question 3 (9 marks)
Droon Designs sells furniture. The business reports annually on 30 June. The furniture includes
lounge suites imported from overseas.
In May 2022, Droon Designs purchased 16 leather lounge suites costing $64 000 (plus GST).
Delivery costs were $4 800 (plus GST). The lounge suites were delivered on 30 May.
In June 2022, Droon Designs imported a large quantity of chairs, cushions, rugs and other furniture,
costing $90 000 (plus GST). Delivery costs were $7 200 (plus GST). These items were delivered
together, in a shipping container.
a. Explain how the two delivery costs should be treated. 4 marks

b. After opening the shipping container, the owner finds that, instead of the 50 chairs that were
ordered and paid for, 80 chairs have been delivered. The overseas supplier is unaware of the
discrepancy and is unlikely to take any legal action in the future. It would be too expensive to
return the additional 30 chairs.
The 50 chairs that were ordered cost $40 each (plus GST) and are expected to be sold in the
next few months for $100 each (plus GST). The owner believes that the additional 30 chairs
can be sold but that it will take several months to sell them.
The owner is unsure what to do. The owner’s family believes that the chairs should be treated
as an unexpected gain, and that no action is required.
Discuss any ethical and financial issues that the owner should consider when deciding how to
deal with the additional chairs. 5 marks
 5 2022 ACCOUNTING EXAM QB

CONTINUES OVER PAGE

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2022 ACCOUNTING EXAM QB 6

Question 4 (10 marks)

Wallis Shoes reports annually. The accountant is preparing the Budgeted Cash Flow Statement for
2023. The following information has been provided.

Wallis Shoes
Balance Sheet (extracts)

Actual as at Budgeted as at
30 June 2022 30 June 2023
$ $
Current Assets

Bank 14 300 0

Current Liabilities

Bank overdraft 0 6 700

Loans 10 000 25 000

Non-Current Liabilities

Loans 30 000 60 000

Owner’s Equity

Capital 320 000 500 000

Wallis Shoes
Income Statement (extracts)

Actual year ended Budgeted year ending

30 June 2022 30 June 2023
$ $
Net Profit 212 000 178 000

Additional information
• A new loan for $60 000 will be taken out in August 2022. Loan repayments will be made
during the year. Interest on the loans for the year ending 30 June 2023 is expected to be
$6 500.
• In September 2022, the owner will contribute $40 000 cash and a vehicle with a fair value
of $30 000.
• The owner will take cash drawings during the year ending 30 June 2023.
a. Reconstruct the Capital account to determine the budgeted cash drawings for the year ending
30 June 2023. 5 marks

b. Prepare the Financing Activities section of the Budgeted Cash Flow Statement (extract) for
the year ending 30 June 2023. 4 marks

c. Calculate the budgeted net increase or decrease in the cash position for the year ending
30 June 2023. 1 mark
 7 2022 ACCOUNTING EXAM QB

Question 5 (8 marks)
PSF sells kitchen equipment to cafes and restaurants on credit, with 30-day credit terms. It reports
on a quarterly basis.
The following balances were taken from the Pre-adjusted Trial Balance.

Pre-adjusted Trial Balance (extract) as at 30 June 2022

Account Debit Credit

$ $
Accounts Receivable 105 000

Allowance for Doubtful Debts 3 000

Sales 405 000

Sales Returns 5 000

a. With reference to one accounting assumption, explain the purpose of the Allowance for
Doubtful Debts account. 3 marks

b. On 30 June 2022, PSF decided to write off a debt of $3 960 from Forrest Sushi after this
restaurant was declared bankrupt (Memo 70).
Prepare the General Journal entry to write off Forrest Sushi’s debt.
A narration is not required. 3 marks

c. PSF then decided to increase the Allowance for Doubtful Debts to 3% of net credit sales
(Memo 74).
Calculate the amount of bad debts to be recognised in the Income Statement for the quarter
ended 30 June 2022. 2 marks

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2022 ACCOUNTING EXAM QB 8

Question 6 (9 marks)
The accountant for Simply BBQs is preparing the financial reports for the quarter ended
30 June 2022. The accountant is waiting for the owner of Simply BBQs to provide details of the
physical count of inventory at the end of the quarter plus the amount of drawings taken by the
owner in June. By August 2022, this information has not yet been provided and reports have not yet
been finalised.
a. Explain one qualitative characteristic, other than relevance, that is being breached due to this
delay in reporting. 3 marks

b. On 10 August 2022, the accountant received the following email from the owner of
Simply BBQs.

To: Virtualbooks <[email protected]>

Sent: 10 August 2022
Subject: Details as requested

Hi Noel,
Sorry for the delay – we were very busy over summer – but here’s the information you
wanted.
Physical count:
There are a couple of problems here. The Inventory account balance at 30 June was
$88 500 but we could only find $85 000 when we did the physical count. We know three
of the Baseline BBQs were donated to the local sporting club in May to promote our
business. They cost $700 each (plus GST). This needs to be accounted for because we
have not recorded the donation. We are not sure where the rest of the BBQs went but they
are not in the store and we need to account for this loss.
Drawings:
Unfortunately, our bookkeeper recorded all my drawings as wages in June. Sorry about
that. The total was $6 000 – all cash. Please correct this and I will send you Memo 35.
PS The bookkeeper is new – we will do better this quarter!
Cheers,
Ash
Simply BBQs

Prepare the General Journal entries that arise from the email above.
Narrations are not required. 6 marks
 9 2022 ACCOUNTING EXAM QB

Question 7 (10 marks)

The accountant provides the following extract from the Adjusted Trial Balance of Mayze’s
Hardware. It includes all revenue and expense accounts for the year ended 30 June 2022.

Adjusted Trial Balance (extract) as at 30 June 2022

Account Debit Credit

$ $

Advertising 14 000

Allowance for Doubtful Debts 9 000

Bad Debts 7 500

Cost of Sales 320 000

Depreciation – Equipment 6 500

Discount Revenue 1 500

Drawings 23 000

Interest Revenue 2 500

Prepaid Advertising 2 000

Sales 584 000

Sales Returns 8 000

Wages 112 000

a. Prepare General Journal entries to:

• close the revenue and expense accounts
• transfer the accounts required to update the Capital account.
Narrations are not required. 7 marks

b. With reference to one accounting assumption, explain why revenue and expense accounts
need to be closed at the end of each reporting period. 3 marks

TURN OVER
2022 ACCOUNTING EXAM QB 10

Question 8 (9 marks)
Kitch Equip has recently entered the catering supplies industry and reports monthly. The business
provided the following data for August 2022.

Kitch Equip Industry average

Return on Assets 21% 21%

Return on Owner’s Investment 45% 23%

Debt Ratio 80% 20%

a. Explain why Kitch Equip’s Return on Owner’s Investment is significantly higher than the
industry average. 4 marks

b. Describe the risk associated with a high Debt Ratio. 2 marks

c. On 28 September 2022, Kitch Equip was paid a $30 000 deposit on catering supplies to be
delivered in the first week of October. This amount was credited to the Sales account. The
accountant said that a balance day adjustment would have to be made on 30 September.
Explain why this adjustment is necessary. 3 marks
 11 2022 ACCOUNTING EXAM QB

Question 9 (15 marks)

E-Sortz sells a wide range of computer gaming products. It reports monthly.
E-Sortz offers free delivery on orders over $200 and a delivery charge of $10 for all other orders.
While these charges do not cover the delivery costs to the business, home delivery is popular with
customers and attracts a lot of sales. Feedback from customers indicates that home delivery is the
reason why many customers choose to buy from E-Sortz.
The business has been using a van for delivering packages but the van has high maintenance costs
and needs replacing.

The Balance Sheet as at 31 May 2022 showed the following.

$ $
Van 45 000
Less Accumulated Depreciation of Van (37 000) 8 000

Depreciation of the van is 30% per annum using the reducing balance method.
On 1 July 2022, E-Sortz sold the van for $5 000 (plus GST) (Rec. 365).
a. Complete the Disposal of Van account. 5 marks

Before selling the van, the business had considered the best way to replace it.
The owner estimated that on average 500 packages would be delivered each month:
• 100 free deliveries
• 400 deliveries charged to customers at $10 each
The accountant has provided three options to consider:
Option 1 – Purchase two vans, each with the capacity to deliver 250 packages per month. They
would cost $25 000 each (plus GST). Van expenses (including depreciation) were
estimated to be $1 800 per van per month. Wages would double to $6 000 per month to
allow for a second driver.
Option 2 – U se the national postal service for all 500 deliveries each month. A 24-month lock-in
contract would cost $20 (plus GST) per package.
Option 3 – P urchase one van for $25 000 (plus GST), with the capacity to deliver 250 packages per
month. Van expenses (including depreciation) and wages were estimated at $4 800 per
month. A local carrier, Deliv’r Today, would be used for the other packages, without a
lock-in contract at a charge of $18 per delivery.
b. Complete the table provided to show the estimated delivery cost per month for each option. 5 marks

c. Recommend the option that you think E-Sortz should select. Justify your recommendation. 5 marks

TURN OVER
2022 ACCOUNTING EXAM QB 12

Question 10 (11 marks)

Crackles is an emerging business in the electronics industry. The business reports monthly and uses
a 100% mark-up on inventory. Inventory is sold both for cash and on credit, and is purchased on
credit.
Crackles has provided the following data for April 2022.

$ $
Cash receipts
Cash Sales 30 000
Accounts Receivable 80 400
GST Collected 3 000 113 400
Cash payments
Wages 14 000
Prepaid Advertising 7 500
Accounts Payable 51 900
GST Paid 750 74 150

Additional information
• Accounts Receivable:
– balance at 1 April: $21 200
– balance at 30 April: $24 400
• Sales Returns were $4 400 (including GST).
• A physical count revealed $160 000 inventory at cost. After applying the lower of cost and
net realisable value rule, the valuation was $159 800.
• The business operates seven days a week and wages are $500 per day. Wages have been
paid up to and including 28 April.
• There were no prepaid or accrued expenses at 31 March.
• Advertising was paid in advance for April and May.
a. Prepare the Accounts Receivable account to determine Credit Sales for April 2022. 4 marks

b. Prepare the Income Statement for the month ended 30 April 2022. 7 marks
 13 2022 ACCOUNTING EXAM QB

Question 11 (4 marks)
Ellianos Phones entered the smartphone market in 2020. This is a highly competitive industry and Ellianos
Phones set out to gain a significant share of the market. By 30 June 2022, it had been successful in increasing
its sales volume to gain a 5% share of the market, which is considered outstanding for a new business.
Ellianos Phones supplied the following data.

Inventory Turnover and Accounts Receivable Turnover,

January–June 2022

80

70
64
59
60
53 50
49 47
50

days 40
40 39 38
30
30 33 31
20

10

0
January February March April May June

months

Key
Inventory Turnover
Accounts Receivable
Turnover

For each of the financial indicators provided, outline one strategy that the business could have been using to
increase its sales volume.

END OF QUESTION BOOK

Victorian Certificate of Education SUPERVISOR TO ATTACH PROCESSING LABEL HERE

2022

Letter
STUDENT NUMBER

ACCOUNTING
Written examination

Tuesday 8 November 2022

Reading time: 2.00 pm to 2.15 pm (15 minutes)
Writing time: 2.15 pm to 4.15 pm (2 hours)

ANSWER BOOK

Instructions
• A question book is provided with this answer book.
• Answer all questions in the spaces provided in this book.
• Write your student number in the space provided above on this page.
• Refer to Instructions on the front cover of the question book.

Students are NOT permitted to bring mobile phones and/or any other unauthorised electronic
devices into the examination room.
© VICTORIAN CURRICULUM AND ASSESSMENT AUTHORITY 2022
2022 ACCOUNTING EXAM AB 2

do not write in this area

This page is blank
 3 2022 ACCOUNTING EXAM AB

Question 1 (8 marks)
a. 5 marks
Inventory Card

Item: Large tables Cost Assignment Method: FIFO

Supplier: Barten Imports
Date Document IN OUT BALANCE
2022
Qty Cost Total Qty Cost Total Qty Cost Total
do not write in this area

b. 1 mark

Working space

Cost of Sales for large tables for first week of January 2022 $

c. 2 marks

Description

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2022 ACCOUNTING EXAM AB 4

Question 2 (7 marks)
a. 3 marks

12 June

16 June

22 June

b. 4 marks

Analysis and likely reasons

do not write in this area

 5 2022 ACCOUNTING EXAM AB

Question 3 (9 marks)
a. 4 marks

Explanation
do not write in this area

b. 5 marks

Discussion

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2022 ACCOUNTING EXAM AB 6

Question 4 (10 marks)

a. 5 marks
Capital
Date Cross-reference Amount Date Cross-reference Amount
2022 2022
July 1 Balance 320 000

do not write in this area

Budgeted cash drawings for the year ending 30 June 2023 $

Question 4 – continued
 7 2022 ACCOUNTING EXAM AB

b. 4 marks

Working space

Wallis Shoes
Budgeted Cash Flow Statement (extract) for the year ending 30 June 2023
do not write in this area

$ $

Cash Flow from Financing Activities

c. 1 mark

Working space

Budgeted net increase or decrease in cash position $

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2022 ACCOUNTING EXAM AB 8

Question 5 (8 marks)
a. 3 marks

Accounting assumption

Explanation

do not write in this area

b. 3 marks
PSF
General Journal
Date Details Debit Credit
2022 $ $

c. 2 marks

Working space

Bad debts to be recognised $

 9 2022 ACCOUNTING EXAM AB

Question 6 (9 marks)
a. 3 marks

Qualitative characteristic

Explanation
do not write in this area

b. 6 marks
Simply BBQs
General Journal
Date Details Debit Credit
2022 $ $

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2022 ACCOUNTING EXAM AB 10

Question 7 (10 marks)

a. 7 marks
Mayze’s Hardware
General Journal
Date Details Debit Credit
2022 $ $

do not write in this area

Question 7 – continued
 11 2022 ACCOUNTING EXAM AB

b. 3 marks

Accounting assumption

Explanation
do not write in this area

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2022 ACCOUNTING EXAM AB 12

Question 8 (9 marks)
a. 4 marks

Explanation

do not write in this area

b. 2 marks

Description

Question 8 – continued
 13 2022 ACCOUNTING EXAM AB

c. 3 marks

Explanation
do not write in this area

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2022 ACCOUNTING EXAM AB 14

Question 9 (15 marks)

a. 5 marks

Working space

Disposal of Van
Date Cross-reference Amount Date Cross-reference Amount
2022 2022

do not write in this area

b. 5 marks

Option 1 – Working space

Estimated delivery cost per month $

Option 2 – Working space

Estimated delivery cost per month $

Option 3 – Working space

Estimated delivery cost per month $

Question 9 – continued
 15 2022 ACCOUNTING EXAM AB

c. 5 marks

Recommendation and justification

do not write in this area

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2022 ACCOUNTING EXAM AB 16

Question 10 (11 marks)

a. 4 marks
Accounts Receivable
Date Cross-reference Amount Date Cross-reference Amount
2022 2022

do not write in this area

Credit Sales for April 2022 $

b. 7 marks
Crackles
Income Statement for the month ended 30 April 2022

$ $

Revenue
 17 2022 ACCOUNTING EXAM AB

Question 11 (4 marks)

Strategy for Inventory Turnover

Strategy for Accounts Receivable Turnover

do not write in this area

END OF ANSWER BOOK