U2 | ACCOUNTING
PRACTICE EXAM PART 1
Question One
Ruth is the owner of Left Field, a trading firm that specialises in the sale of baseball bats and gloves. Left Field
employs two part-time employees to help her with sales. The business uses the First In, First Out (FIFO) inventory
cost assignment method and purchases all inventory on credit from their suppliers in Japan. Although more
expensive, their Japanese supplier of baseball bats makes each bat with high-quality wood that is not available in
Australia.
Ruth has provided you with the following transactions for December 2021.
Dec. 1 Inventory on hand:
25 Homer Lightning Bats that cost $200 each, plus GST
14 Babe Special Bats that cost $165 each, including GST
2 Sold 5 Babe Special Bats to Mt Basin Baseball Club for $330 each, including GST (EFT 8)
6 Purchased 10 Babe Special Bats for $170 each, plus GST, from Elite Bats (Inv. AU12)
11 Sold 12 Babe Special Bats to Cranbourne Baseball Club for a total price of $3 600, plus GST (Inv.
LF77)
13 Ruth withdrew 2 Homer Lightning bats to give to her two nieces for their birthdays (Memo 28).
14 Mt Basin Baseball Club returned 2 Babe Special Bats as they ordered too many. A full credit note
was issued (Credit Note 12).
19 Cash sale of 3 Babe Special Bats for a total of $990, including GST (Rec. 92)
21 Received an order from AB Baseball Club for 15 Babe Special Bats (Order #33)
26 Sold 1 Homer Lightning Bat for $250 plus GST, and 2 Babe Special Bats for $300 each, plus GST, to
Tunners Baseball Club (Rec. 93)
28 AB Baseball Club cancelled their order as they required bats immediately.
29 1 Babe Special Bat was donated to the Victorian Baseball Association's annual raffle (Memo 28).
30 A physical stocktake found the following on hand (Memo 29):
21 Homer Lightning Bats
2 Babe Special Bats
a. Explain the effect of the transaction on 6 December on the Accounting Equation of Left Field
(Optional Table for workings)
1 2 3 4 5
Account
Value $
Element
Up or Down
(Compulsory Table)
Element Net Effect Amount ($)
Assets
Liabilities
Owner’s Equity
b. Complete the Babe Special Bat Inventory Card for December.
9 marks
Product: Babe Special Bat Cost assignment method: FIFO
IN OUT BALANCE
Date
Document
2021 Qty Cost Total Qty Cost Total Qty Cost Total
c. Calculate the Cost of Sales for the Babe Special Bat for December.
2 marks
Working space
Cost of Sales: $
d. State the effect of the transaction on 11 December on the accounting equation of Left Field
(Optional Table for workings)
1 2 3 4 5
Account
Value $
Element
Up or Down
(Compulsory Table)
Element Accounts Amount ($)
Assets
Liabilities
Owner’s Equity
e. Discuss the ethical and financial considerations faced by Ruth in selecting a supplier of baseball bats.
4 marks
Explanation
Question Two
Laura is the owner of Speedy Bikes. The business has been operating for five years and consistently operates with a
GST liability. She has provided you with the following transactions for June 2020.
June 7 Purchased 3 Racing Bikes for $400 each plus GST (EFT 18)
9 Purchased 10 Racing Bikes for $450 each plus GST from Betta Bikes (Inv. 2)
10 Sold 2 of the $450 Racing Bikes for $900 each plus GST to Essendon Bike Club (Inv. 19)
11 Returned 2 Racing Bikes from Inv. 2 to Betta Bikes (Credit Note 17)
22 Essendon Bike Club returned a Racing Bike purchased on 10 June (Credit Note 2)
26 Laura took home a Racing Bike for her son’s birthday that cost $450 (Memo 22)
27 Sold 2 of the $400 Racing Bikes and 4 of the $450 Racing Bikes for $800 each plus GST to Essendon Bike
Club (Inv. 19)
30 A physical stocktake found the following on hand (Memo 23): 5 bikes cost $400 each plus GST, 1 bike
costs $450 plus GST
a. Complete the Racing Bike inventory card for June using the Identified Cost inventory cost assignment method.
Product: Racing Bike Supplier: Betta Bikes
Cost assignment method: Identified Cost
IN OUT BALANCE
Date
Document
2020 Qty Cost Total Qty Cost Total Qty Cost Total
June 1 Balance 4 400 1 600
b. Complete the Racing Bike inventory card for June using the First In, First Out (FIFO) inventory cost assignment
method.
8 marks
Product: Racing Bike Supplier: Betta Bikes
Cost assignment method: FIFO
IN OUT BALANCE
Date
Document
2020 Qty Cost Total Qty Cost Total Qty Cost Total
June 1 Balance 4 400 1 600
c. Calculate the Cost of Sales using the Identified Cost inventory cost assignment method.
2 marks
Working space
Cost of Sales: $
d. Calculate the Cost of Sales using the FIFO inventory cost assignment method.
2 marks
Working space
Cost of Sales: $
e. Explain the impact on the accounting equation of the transaction on 7 June of using the FIFO inventory cost
assignment method.
3 marks
(Optional Table for workings)
1 2 3 4 5
Account
Value $
Element
Up or Down
Explanation
f. Explain the effect of the transaction on 10 June on the Accounting Equation of Speedy Bikes using the FIFO
inventory cost assignment method.
(Optional Table for workings)
1 2 3 4 5
Account
Value $
Element
Up or Down
(Compulsory Table)
Element Net Effect Amount ($)
Assets
Liabilities
Owner’s Equity
a. Explain the effect of the transaction on 11 June on the Accounting Equation of Speedy Bikes using the FIFO
inventory cost assignment method.
(Optional Table for workings)
1 2 3 4 5
Account
Value $
Element
Up or Down
(Compulsory Table)
Element Net Effect Amount ($)
Assets
Liabilities
Owner’s Equity
