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					                          School District No. 91 (Nechako Lakes)
                       Practice Accounting Clerk II Skills Test No. 1
Time Limit:                       90 minutes
Maximum Points:                   74
% Required to Pass:               70%

Notes:

1.       Show all calculations in an orderly manner to obtain part marks.
2.       Round all calculations to the nearest dollar, except for the payroll calculations and
         financial ratios, where two decimal places should be used.
3.       Narrative for journal entries are not required unless specifically asked for.
4.       5 marks are awarded for neatness/legibility

Questions:

1.       Fit Ltd’s bank statement for the month ended December 31 showed an ending
         balance of $6,075. The company’s books indicated a December 31 cash balance of
         $10,800. The company’s bookkeeper had the following additional information to help
         prepare the December 31 bank reconciliation:

             The company had deposited $4,000 on December 27 and $3,000 on December
              31. Neither of these deposits is recorded on the bank statement.
             The bank charged the company $25 interest on overdrafts.
             The bank deducted $300 for an NSF cheque given to the company by a
              customer, Npay Ltd.
             A comparison of the company’s books to the bank statement revealed that
              $2,000 in cheques written by the company had not yet cleared the bank.
             A review of deposits recorded on the bank statement indicated that the company
              had failed to record a $600 cheque received from a customer in payment of an
              account receivable.

Required:

         a)   Prepare a bank reconciliation for Fit Ltd as of December 31. (6 marks)
         b)   Prepare the necessary journal entry(s). (4 marks)
         c)   Fit Ltd had a petty cash fund in the amount of $500. As at December 31, the
              petty cash box contained $300 in cash and $200 in courier bills for deliveries to
              customers. The bookkeeper failed to replenish the petty cash fund prior to
              preparing the December 31 financial statements. (4 marks)

State whether the failure to replenish petty cash resulted in an understatement (U),
overstatement (O), or had no effect (NE) on each of parts (i) to (iv). Also include the amount
of the overstatement or understatement. Use the following format:         Example: x) $200 U

                i)        Total assets
                ii)       Total liabilities
                iii)      Equity
                iv)       Net income



                                                                                February 23, 2004
School District No. 91 (Nechako Lakes)                                                       Page 2
Accounting Clerk II Skills Test No. 1

2.       While preparing the preliminary trial balance, you observe that the column totals did
         not balance. Upon scrutiny, you noticed that the purchase of office furniture for
         $5,000 was posted as a $5,000 credit to office furniture and a $ 5,000 credit to
         accounts payable. The balance in the office furniture account is a $20,000 debit.

     Required:

         a)      Identify whether the following items are understated, overstated, or correctly
                 stated: (4 marks)

                 i)      The debit column total of the trial balance
                 ii)     The credit column total of the trial balance
                 iii)    The balance of office furniture account
                 iv)     The balance of accounts payable account

         b)      If the credit column total of the trial balance was $862,000 before you
                 corrected the error, what was the total of the debit column of the trial balance,
                 assuming there were no other errors? Show your calculation. (2 marks)

3.       An aging of Maxi Limited’s accounts receivable as of December 31, 2001 determined
         a required allowance for doubtful accounts of $32,500. The balance of the allowance
         for doubtful accounts on January 1, 2001 was $31,000. During 2001, accounts
         receivable of $4,000 were written off. What would the bad dept expense for 2001 be?
         (2 marks)

4.       School Districts use fund accounting to distinguish between operating, capital and
         trust transactions. All cash is recorded in the operating fund bank account. To
         balance each fund, Due to/from accounts are used.

         A scholarship donation of $25,000 is received with the request that the School District
         invest the funds in order to pay out an annual bursary from the interest earned. The
         donation is invested in a bank long term GIC and the interest earned in the first year
         is $750.

         a)      Prepare the journal entry to record the deposit of the donation. (2 marks)
         b)      Prepare the journal entry to record the investment. (2 marks)
         c)      Prepare the journal entry to record the receipt of the interest earned.
                 (2 marks)
         d)      What would be the balance in the due to/from account after the bursary is paid
                 to the successful student? (2 marks)

5.       The dean of a business school would like to minimize the cost of offering the school’s
         accounting and marketing courses. The school needs to offer enough courses to
         attract students and is committed to offering at least 15 accounting courses and 10
         marketing courses. In order to maintain the accreditation standard for the school, at
         least 30 courses in total must be offered. The cost of offering an accounting course is
         $5,000 and the cost of offering a marketing course is $4,500. Determine the optimum
         number of accounting and marketing courses that should be offered. (5 marks)




                                                                                 February 23, 2004
School District No. 91 (Nechako Lakes)                                                         Page 3
Accounting Clerk II Skills Test No. 1

6.      Write a letter in response to the scenario below. You will be graded on your
        command of the business writing principles. In addition to issues of content, target
        audience, “you” approach, persuasiveness, tone, clarity, and conciseness, you will be
        evaluated on your use of correct grammar, spelling, punctuation, and conventional
        formatting.

        (18 marks with ½ mark deducted for each error in spelling, diction, grammar,
        sentence structure, paragraphing and punctuation)

                1 mark           effective opening set by an appropriate tone (drawing on a
                                 positive, sincere buffer statement)
                2 marks          effective use of ethical and/or logical appeals to sway the
                                 audience
                5 marks          ideas presented specifically and in detail
                1 mark           appropriate tone maintained throughout
                1 mark           absence of illegitimate emotional appeal, weak reasoning and
                                 logical fallacies
                1 mark           a professional closing that calls for specific action in the form of
                                 an adjustment
                2 marks          effective organization of ideas (using indirect approach)
                1 mark           specific references made to previous contact with Mega Plex
                                 staff regarding the claim
                4 marks          effective use of letter conventions

        Note:

        Please save your final version to disk and print the letter.

        Remember to be specific and to develop your ideas. Add whatever plausible details
        you need to write your letter.

        Scenario:

        You are the team-building coordinator for Finance First Accounting, a Hamilton,
        Ontario-based firm that is known for its expertise in international tax laws. As
        coordinator, you organized yesterday’s team building day for the entire downtown
        Hamilton office of 375 employees. The day’s events included a morning scavenger
        hunt at Dundurn Castle, a lunchtime barbeque on our company’s roof top patio, and a
        private screening of the new Star Wars movie at the downtown Mega Plex theatre run
        by Cine Plus Ltd.

        The team-building day was, overall, a remarkable success. More than 200 staff
        members attended the scavenger hunt, 300 attended the barbeque lunch, and 185
        attended the film screening. The survey feedback you received concerning the first
        two events was overwhelmingly positive.

        However, the responses to the final event were decidedly more mixed. You found
        this quite surprising because similar events at the theatre have been extremely
        successful in the past. Overall, the moviegoers quite enjoyed the film, but
        complained about the terrible sound quality in the theatre. All of the complainants
        noted that the volume level in the theatre was inconsistent. Many people also


                                                                                   February 23, 2004
School District No. 91 (Nechako Lakes)                                                    Page 4
Accounting Clerk II Skills Test No. 1

        highlighted the fact that loud crackling and static noise occasionally drowned out the
        film’s dialogue. Also, the majority mentioned that on two separate occasions, the
        sound cut out completely for more than 30 seconds.

        Moviegoers were particularly frustrated because they couldn’t bring the problem to
        anyone’s attention. Apparently, there were no ushers around and there were no
        theatre management staff members visible in the lobby area. One of the teenagers
        working the busy concession stand promised to notify someone, but no help came.
        Complaints made to an usher after the film was over were met with apologies, but
        little explanation and no offer of compensation. When one of the moviegoers insisted
        on talking to the manager, the usher became rather tense and declared, “The
        manager is unavailable; I’m sorry, but these technical glitches just happen
        sometimes.”

        After reading the survey feedback and confirming the events by speaking with several
        of your firm’s employees, you called Mega Plex this morning to complain. After being
        put on hold for 15 minutes, you finally spoke to the assistant manager, Bill Van Zant.
        Mr. Van Zant stated that he had not worked the day before and knew nothing about
        any problems with sound. He also noted that there were no customer complaints
        entered in the log book from the previous evening. Before abruptly ending the
        conversation, Van Zant said that he would have the manager phone you back within
        the hour.

        Two hours later, you received the following e-mail message from the manager at
        Mega Plex:

        Hello Valued Customer:

        We apologize for the problem you encountered with our presentation. We did, in fact,
        have an isolated problem with the Dolby Digital sound unit. This high priced
        equipment just gave up the ghost and was having trouble reading the soundtrack
        coding. This unit is being replaced this morning. This is a minor problem and
        something that does not happen often. When it does happen, there is no warning; it
        just happens. Also, a labour dispute with projectionists has left us short-handed.

        I certainly hope you will enjoy the next movie you see at Mega Plex.

        We will be sending you 25 movie passes for any inconvenience you may have
        suffered.

        Thank you for your patronage.

        Sarah Smithey
        Manager

        Unhappy with the service and response you’ve received from Mega Plex
        management, you decide to write a complaint letter to Rod Whelm, the regional
        customer service manager for Cine Plus Ltd in Toronto, Ontario. Write a letter to
        Whelm, persuading him that Finance First Accounting is deserving of a more
        substantial financial adjustment than the one offered in Sarah Smithey’s e-mail
        message. Ask, as well, for an explanation for the poor service you have received.


                                                                               February 23, 2004
School District No. 91 (Nechako Lakes)                                                  Page 5
Accounting Clerk II Skills Test No. 1


7.      Whiskey-Jack Adventures offers guided tours and wilderness experiences in the
        mountains and lakes around Whistler, B.C. Whiskey-Jack provides a guide, all the
        necessary provisions, and equipment for a fee of $75 per person per day. Based on
        available equipment and guides, the maximum capacity is 800 tour-days per month(
        customers are taken on the equivalent of an all-day tour). The company is presently
        operating at a level of an average of 600 tour-days per month.

        Variable costs per tour-day for 2003 were as follows:

        Food                          $7.50
        Supplies                       3.00
        Guide’s salary                37.50
        Insurance                     12.00
        Total                        $60.00


        Annual fixed costs for 2001 were as follows:

        Equipment rental         $7,500
        Marketing                 3,000
        Customer Service          1,500
        Administration            6,000
        Total                   $18,000

        Required:

        Answer the following questions independently of each other.

        a)      Assuming that the fee is increased by $18.00 per person per day in 2002 and
                the number of tour-days declines by 200 per month, calculate the effect on the
                monthly operating income. (7 marks)

        b)      A group of foreign travelers has offered Whiskey-Jack a proposal for 300 tour-
                days in July if Whiskey-Jack will reduce the fee to $67.50 per tour-day. The
                group would provide its own food. Whiskey-Jack would incur $300 in
                additional costs for busing the tourists back and forth to the camp site.
                Determine whether Whiskey-jack should accept the proposal. (Hint: Calculate
                the effect on the operating income) (9 marks)




        Note:

        Question 1 taken from CGA Accounting 1 exam of March 2002
        Question 2 taken from CGA Accounting 1 exam of December 2001
        Question 3 taken from CGA Accounting 2 exam of March 2002
        Question 5 taken from CGA Quantitative Methods Jan 2001
        Question 6 taken from CGA Communications 1 exam of December 2001
        Question 7 taken from CGA Management Accounting of March 2002


                                                                             February 23, 2004

				
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