a
a
Ai 2e
ogo! pal cao
rab Open Univers
Faculty of Business Studies
B291
Financial Accounting
Make-up MTA
2019-2020 / Fall Semester
23 — November - 2019
| Number of Exam Pages: 3 Time Allowed: 2 Hours
| (including this cover sheet)
Instructions:
1- Read each question carefully and make sure that you understand it before you begin to answer it. Take
about 10 minutes to look through all the questions on the exam and do the ones you are most comfortable
with first
2. This exam consists of TWO Compulsory Questions; cach question carries 50% of the marks
3- Programmable and financial calculators are not permitted or to share, or pass them between each
other in an examination. Also, you are not permitted to use calculators with word processing
capabilities.
4- In questions that require calculations, credit will be given for showing your workings.
8291 - MTA-MAKEUP Page |i 2019-2020/Fall Semester(Question
Part A
i, The main purpose of accounting is to provide financial information to managers and
owners of businesses and a variety if interested parties. Explain the different
objective that financial information fulfills
ii, Explain the various kinds of finaneial and capital market, Also discuss the nature
and role of financial markets.
iii, Efficient market hypothesis (EMH) has received a lot of attention since its
inception. What is meant by EMH? Briefly discuss the forms of market efficiency
and identify which market efficiency assumed to exist?
[Marks: (8 +8 +8) =24]
Part B
Ahmed started a business on 1“ January 2018 selling printers. He bought 120 printers at a cost
of $40 each at the beginning of his accounting year. On May 1* 2018 he bought a further 160
printers, but the cost had risen by this stage from $40 to $55. At the accounting year end on 31°
December 2018, Ahmed had 70 printers in inventory. He sold the others during the year for $65,
each.
Required:
1. Calculate the value of Ahmed’s inventory on 31* December 2018 using:
a. FIFO
b. LIFO
2. Calculate the gross profit earned by the business under each method,
[Marks: (10+10+6) = 26]
8291 ~ MTA-MAKEUP Page |2 2019-2020/Fall SemesterQuestion 2:
PartA
‘Adnan has started business as a trader on 1 October, 2019. The following transactions
and events of trading for his first month are as follows:
Date Transaction
1 Started the business by introducing $20,000 into the business bank account.
2 Rentis paid by cheque $800 for the month,
8 Adnan paid $5,000 in cash for a van
10 Adnan purchased goods costing $1,800 on credit from Ali (invoice no Ali123).
12 Adnan sold goods for $300 in cash.
15 Adnan sold goods for $800 on credit to Ahmed (invoice no Anmed001)
24 Adnan paid the amount, taking advantage of @ 10% settlement discount with respect to
invoice no. Ali123.
25 Ahmed paid to Adnan, taking advantage of a 5% settlement discount with respect to
invoice no. Ahmed001.
Required:
1- Enter the above transactions into an appropriate cash book,
2- Post the transactions directly to the appropriate nominal ledger accounts.
3. Prepare the trial balance as at October 31, 2019.
[Marks: (10 + 10 + 6) = 26]
Part B
Green Ocean Company acquired land and building for $300,000 on 1* January 2012. The land
at that date comprised 20% of the total cost. At that date the estimated useful life of the building
was 45 years with a residual value of $30,000.
Required:
1. Assume that Green Ocean has decided to recognize land and building under the cost
model approach, prepare a three-year depreciation schedule for the buildings under the
reducing balance method.
2, Assume that Green Ocean has decided to recognize land and building under the
revaluation model approach with revaluations taking place every three years. On 1*
January 2015 three years later, a surveyor valued the land and building at $400,000 of
which $80,000 was attributable to land. The estimated useful life and residual value of
the buildings remained the same.
2.1. Prepare the journal entries required to record these transactions on 1* January 2015
under the reducing balance method.
2.2 Compute and record the depreciation for the year ended 31* December 2015 under
the straight-line method.
[Marks: (10 + 8 + 6) = 24]
End of Questions
8291 - MTA-MAKEUP Page |3 2019-2020/Fall Semester