Ccmk4017 - prepare the general journal of the transactions

Question

Essential of Accounting Individual Assignment

Section A - Multiple choice questions
Answer all questions from this section.

1. An entity will remain in operation for the foreseeable future as per the
A. economic entity assumption.
B. monetary unit assumption.
C. going concern assumption.
D. cost principle.

2. Which sequence correctly summarizes the accounting process?
A. Journalize transactions, post to the ledger, prepare a trial balance
B. Journalize transactions, prepare a trial balance, post to the ledger
C. Post to the ledger, journalize transactions, prepare a trial balance
D. Prepare a trial balance, journalize transactions, post to the ledger

3. Fitness First has a new client who prepays $600 for a package of six training sessions. Fitness First had provided four training sessions as of year end. Which of the following amounts should Fitness First report on its income statement?
A. Service Revenue of $400
B. Service Revenue of $600
C. Unearned service revenue of $400
D. Unearned service revenue of $600

4. Financial Accounting refers to
A. certified professionals who work for a single company.
B. the field of accounting that focuses on providing information for external decision makers.
C. licensed professional accountants who serve the general public.
D. the field of accounting that focuses on providing information for internal decision makers.

5. As of March 31, 2015 the beginning balance of cash account is $24,500. At the end of the month, the following information is available:

Deposits in transit	$2,000
Service charges	100
Electronic fund transfer receipts	5,400
Nonsufficient funds (NSF) checks	2000
Outstanding checks:
No. 205	1,000
No. 401	500
No. 421	2,500

Calculate the adjusted cash balance.
A. $25,800
B. $31200
C. $29,800
D. $27,800

6. Earnings per share is calculated as:
A. net income plus preferred dividends multiplied by weighted average number of common shares outstanding.
B. net income minus preferred dividends divided by weighted average number of common shares outstanding.
C. retained earnings minus preferred dividends divided by average common stockholders' equity.
D. retained earnings plus preferred dividends multiplied by average common stockholders' equity.

7. Which of the following is an indirect manufacturing cost in a manufacturing company?
A. Selling expenses
B. Cost of raw materials
C. Salary of floor manager in production area
D. Cost of direct labour

8. Mars Inc. a manufacturer of computers, has provided the following information:

Direct Materials Used	$125,000
Direct Labor	$75,000
Manufacturing Overhead	$105,000
Beginning Work-in-process Inventory	$15,000
Ending Work-in-Process Inventory	$20,000
Number of units sold	100
Number of units produced	150
Number of units in work-in-process	50

Calculate the unit cost per computer.
A. $1,900
B. $6,000
C. $3,000
D. $2,000

9. Contribution margin is the____.
A. difference between net sales revenue and mixed costs
B. sum of net sales revenue and variable costs
C. sum of net sales revenue and fixed costs
D. difference between net sales revenue and variable costs

10. At the breakeven point:
A. total revenues exceeds total costs.
B. total revenues equal total costs.
C. total revenues exceeds fixed costs.
D. total revenues equal fixed costs.

Section B
Short and Long Question

Answer All question in this section.

Question 1

Yolanda Sin owns a pet store called Fur & Purrs. The firm started business in August 2017 and is closing its first month's accounts. The following transactions occurred during the month for August 2017:

Aug	01	Deposited cash from Yolanda's personal account into the firm's bank account, $550,000.
	02	Signed contract for lease of shop at $8,000 per month for 3 years and paid 2 months rental deposit. (Note: rent is due to be paid at the end of every month)
	06	Bought 5 cash registers at $14,000 each Paid a 10% deposit by cheque.
	10	Issued a cheque for an advertisement in the monthly newsletter (for the month of September 2017), $600.
	14	Paid another 30% on the cash registers by cheque.
	18	Applied for a loan from the bank for $300,000 by the company.
	21	Electricity bill of $560 received but not yet paid.
	26	Paid rent by cheque.
	30	Total revenue for the month was $63,000 (all sales are in cash); and 10% discounts were given as an introductory offer for this month only.

Additional information (the following have not been paid for):

a.	Electricity & water expenses	$234
b.	Telephone expenses	$99
c.	Salaries for the month	$3,210

Require:
Prepare the general journal of the transactions of Fur & Purrs.

Question 2:
(A) Two project of A and B are expected to have the following cash inflows.

Project A/Year	Cash Flow ($000)
0	2000
1	500
2	500
3	400
4	600
5	300
6	200
Project B/Year	Cash Flow ($000)
0	1900
1	300
2	500
3	600
4	800
5	500

Require:
What is the expected payback period?

Question 3
Manu Limited
Adjusted Trial Balance
31 December 2015

	$Dr$	Cr$
Cash	960
Accounts receivable	18,300
Unexpired insurance	2,000
Prepaid rent	1,500
Supplies	200
Furniture and fixtures	8,400
Accumulated depreciation: Computer		5,200
Accounts payable		6,540
Notes payable		24,000
Salaries payable		1,700
Interest payable		360
Unearned client revenue		200
Capital stock		4,000
Retained earnings		2,600
Client revenue earned		70,000
Insurance expense	6,000
Office rent expense	9,000
Supplies expense	440
Salary expense	48,000
Depreciation expense: Computer	1,400
Office and telephone expense	3,000
Internet service expense	4,900
Legal expense	1,500
Interest expense	4,000
General expense	5,000
	114,600	114,600

Required:
(A) Prepare an income statement and statement of retained earnings for the year ended 31 December 2015.
(B) Prepare the necessary year end closing entries.
(C) Using the financial statement prepared in part (a) evaluates the company's profitability and liquidity performance.

Question 4

The Super Star Company Limited Manufactures and sells a line of exclusive sportswear. The firm's sales were $600000 for the year just ended, and its total asset exceeded $400,000. The company was started by Mr. Wen just 10 years ago and has been profitable every year since its inception. The chief financial officer of the firm, Brent Ching, has decided to seek a line of credit from the firm's bank totaling $80,000. In the past, the company has relied on its suppliers to finance a large Part of its needs for inventory. However, in recent months, tight money conditions have led the firm's suppliers to offer sizeable cash discounts to speed up payments for purchases. Mr. Ching wants to use the line of credit to replace a large Portion of the firm's payables during the summer, which is sales period.

The firm's two most recent balance sheets were presented to the bank in support of its loan request. In addition, the firm's income statement for the year just ended was provided.

These statements are found in the following tables:

Super Star Company Limited, Income statement for the year ended 31 Dec 2016

	$	$
Sales (all in credit)		600,000
Less: Cost of goods sold		460,000
Gross profit		140,000
Less: operating and interest expenses General and administrative	30,000
Interest	10,000
Depreciation Total	30,000
Profit before taxation		70,000
Taxation		70,000
Profit after taxation		27,100
Cash dividends		42,900
Retained profit for the year		31,800
		11,100

Balance Sheets at 31 Dec 2016

Non-current assets	2015	2016
Plant and machinery (Net book value)	286,000	270,000
Current assets
Prepaid rent	1,200	1,100
Inventory	51,000	84,000
Accounts receivable	42,000	33,000
Marketable securities	6,000	6,200
Cash	15,000	14,000
	115,200	138,300
Current liabilities
Trade creditors	48,000	57,000
Notes payable	15,000	13,000
Accruals	6,000	5,000
	69,000	75,000
Net current assets	46,200	63,300
	332,200	333,300
	2,015	2,016
Shareholders' equity
Ordinary share capital of $1 each	100,000	100,000
Profit and loss	72,200	83,300
	172,200	183,300
Long-term liabilities	160,000	150,000
Debenture 2020	332,200	333,300
Market value of each ordinary share	4	6

Calculate the financial ratios for 2016 corresponding to the industry norms provided as follows and comment briefly on the company's results with reference to the industry norms.

Ratio	Norm
Current ratio	1.8
Acid-test ratio	0.9
Debt ratio	0.5
Times interest earned	10
Average collection period	20
Inventory turnover (base on cost of goods sold)	7
Return on common equity	12%
Operating return on assets	16.80%
Operating profit margin	14%
Total asset turnover	1.2
Fixed asset turnover	1.8
Earning per share = Net income (after interest an tax/No. of common stockholders)	30 cents
Price earning ratio	20x

Note: Show formulae and workings.

b. Which of the ratios reported in the industry norms do you feel should be most crucial in determining whether the bank should extend the line of credit?