Explain why we use these three requirements hint discuss


Assignment Part I

Question 1

Refer to the consolidated financial statements (including notes) in the 2012 annual report of JB Hi-Fi Limited (www.jbhifi.com.au ) and answer the following:

1.      What is the value of the business' sales revenue for the current and previous years? Calculate the percentage change in sales revenue. 

2.      What is the business' profit after tax for the current and previous years? Calculate the percentage change in profit after tax. 

3.      Compare the percentage changes calculated in 1. and 2. What information does this provide? 

4.      What is the total value of inventory for the current and previous years? Calculate the percentage change in inventory. Comment on the inventory management by comparingthe percentage change in inventory with the percentage calculated in 1.

5.      Calculate inventory turnover for the current and previous years.What does the change in inventory turnover indicatewith respect to the profitability of the group?

6.      Have trade receivables increased or decreased over this year, and by how much? Is the figure reported gross or net receivables? 

7.      What was the amount of bad debts written off for the current and previous years?What are the possible reasons for the change in the amount of bad debts written off?

8.      Calculate the average collection period for trade receivables for the current and previous years using the gross method. Comment on the credit control performance of the group?(Hint: if net credit sales is not available, total salescan be used as a substitute to calculate the average collection period. Assuming the proportion of cash to credit sales has remained constant.)

9.      Calculate appropriate profitability ratios for 2012 and 2011, and assess JB Hi-Fi's profit performance.

 

 

Question 2

You are the accountant for ColourfulPollies Flower Shop. You are required to complete the bank reconciliation for the business for the month ended 30 April 2012. The bank reconciliation for March 2012 is as follows:

 

ColourfulPollies Flower Shop

Bank Reconciliation

as at 31 March 2012

 

Balance per bank statement 31 March 2012

$4634.58 Cr

ADD: Outstanding deposit

432.67  

 

  5067.25

LESS: UnpresentedCheques

Cheque No 5467       $67.35

5468       134.89

5470       287.34

 

 

 

     489.58

Balance per Cash at Bank account as at 31 March 2012

 

$4577.67Dr

 

Abridged cash receipts and cash payments journal are shown below.  Both journals have been finalised and posted to the general ledger account as at 30 April 2012.

Cash Payments Journal

Date

Account

Cheque no.

Cash at Bank

2012

 

 

 

Apr-01

White Ltd

5471

    345.67

2

Blue Ltd

5472

    189.60

4

Wages and salaries

5473

    880.00

5

Petty cash

5474

      54.65


D. Red

5475

    125.60

8

Tan & Sons

5476

      54.90

9

Calpol Petrol

5477

      95.00


Accommodation

5478

    235.40

11

Green & Partner

5479

    584.30

12

Electricity Ltd

5480

    720.89

15

Big Gas Corporation

5481

    220.54


Telephone Company

5482

    325.90

17

Advertising

5483

    220.00

18

Wages and salaries

5484

    880.00

19

Donation - Blue Cross

5485

      50.00

22

Freight

5486

      80.00

24

Purchases

5487

2 080.90

25

Calpol Petrol

5488

      56.80

26

R Vermillion

5489

    125.00

29

Petty Cash

5490

      42.05

30

T Crimson

5491

      38.70

 

 

 

 7 405.90

 




Cash Receipts Journal

 

Date

Account

Cash at Bank

 

2012

 

 

 

Apr-01

Sales

599.54

 

2

G Whitlam

56.98

 

 

Sales

515.90

 

4

P. Gorton

64.00

 

 

Sales

602.78

 

5

Sales

548.70

 

8

B Hawke

98.00

 

 

J Howard

45.68

 

 

Sales

555.60

 

9

Sales

525.00

 

12

P Keating

34.65

 

 

Sales

502.40

 

15

Sales

519.56

 

17

B McMahon

35.40

 

 

G Whitlam

22.20

 

 

Sales

440.86

 

19

P Keating - dishonored cheque

-34.65

 

 

Sales

498.90

 

22

Sales

548.65

 

26

B Sneddon

34.50

 

 

Sales

536.00

 

29

Sales

506.80

 

30

Sales

480.65

 

 

 

7738.10

 






 

 

ColourfulPollies

Bank Statement for 31 March 2012 - 30 April 2012







Date

Particulars

Debit

Credit

Balance


2012






Apr-01

Balance



     4,634.58

CR

2

5468

             134.89


4,499.69

CR


Deposit


         432.67

     4,932.36

CR


Deposit


         599.54

     5,531.90

CR

3

Deposit


         572.88

6,104.78

CR

4

Term Deposit maturing


   10,527.10

16,631.88

CR


5471

             345.67


   16,286.21

CR


5472

             189.60


   16,096.61

CR


5473

             880.00


   15,216.61

CR


Deposit


         666.78

   15,883.39

CR

5

5474

                54.65


   15,828.74

CR


Deposit


         548.70

   16,377.44

CR

6

5470

             287.34


   16,090.10

CR

8

Deposit


         699.28

   16,789.38

CR

9

5477

                95.00


   16,694.38

CR


Deposit


         525.00

   17,219.38

CR

10

Term Deposit invested

       15,000.00


2,219.38

CR

12

5475

             125.60


     2,093.78

CR


5478

             235.40


     1,858.38

CR


Returned Cheque

                98.00


     1,760.38

CR


Deposit


         537.05

     2,297.43

CR

15

5479

             584.30


     1,713.13

CR


5476

                54.90


     1,658.23

CR


5481

             220.54


     1,437.69

CR


Deposit


         519.56

     1,957.25

CR

17

5482

             325.90


     1,631.35

CR


5479

             584.30


     1,047.05

CR


Deposit


         498.46

     1,545.51

CR

18

5484

             880.00


665.51

CR

 

 

 

 

 

 

19

5480

             720.89


55.38

DR

 

 

 

 

 

 


5483

             230.00


285.38

DR


Deposit


         498.90

         213.52

CR


Returned Cheque

                34.65


         178.87

CR

22

5486

                80.00


98.87

CR


Deposit


         548.65

         647.52

CR

26

5485

                50.00


597.52

CR

 

 

 

 

 

 


5487

          2,080.90


1,483.38

DR

 

 

 

 

 

 


Deposit


         570.50

 912.88

DR

 

 

 

 

 

 

29

5488

                56.80


969.68

DR

 

 

 

 

 

 


5490

                42.05


1,011.73

DR

 

 

 

 

 

 

30

Deposit


         506.80

 504.93

DR

 

 

 

 

 

 


Bank Charges

                60.00


564.93

DR

 

 

 

 

 

 


Interest Paid

                  8.00


572.93

DR


TOTAL

       23,459.38

   18,251.87









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following is a copy of the bank statement for the month of April 2012.

Additional information:

  • Cheque No 5483 - the invoice amount from the Sydney Morning Herald was for $230
  • 4 April - A term deposit matured and was deposited directly to the bank account. The amount included interest of $527.10
  • 10 April - A new term deposit commenced for $15 000 for a term of 6 months

Required:

1)      The final totals from the Cash Receipts and Cash Payments Journals have been posted to the General Ledger account for Cash at Bank, prepare any journal entries required to reconcile the bank statements to the general ledger at 30 April 2012. Narrations are required.

2)      Prepare the general ledger account for Cash at Bank (in T-account format) showing the final account balance as at 30 April 2012.

3)      Prepare the bank reconciliation statement as at 30 April 2012.

4)      With the completion of the bank reconciliation, outlinethree conclusions can be drawn regarding controls over cash and the usefulness of preparing a bank reconciliation. 

 

Assignment Part II

Question 1

Part A

Yarra Stationery Store is in the city center of Sydney. At the end of the business reporting period on 30 June 2013, the following accounts appeared in two of its trial balances. All accounts have normal balances.The ending inventory was determined by a physical stock take count was $47 930.

 

Account

Unadjusted

Adjusted

Cash at bank

$ 21 900

$21 900

Accounts receivable

   26 230

  26 230

Inventory (1 July 2012)

   59 170

  59 170

Prepaid insurance

     2 400

       700

Store equipment

   39 060

  39 060

Accumulated depreciation - store equipment

   11 560

  15 660

Delivery van

     9 800

    9 800

Accumulated depreciation - vehicle

     4 100

    6 130

Accounts payable

   12 780

  12 780

Loan payable

   15 000

  15 000

Interest payable

 

       980

Rent payable

 

  11 500

Yarra, Capital

   78 620

  78 620

Yarra, Drawings

   21 780

  21 780

Sales

 357 960

357 960

Sales returns and allowances

   14 610

  14 610

Discount received

     1 070

    1 070

Purchases

 199 570

199 570

Purchases returns and allowances

   12 800

  12 800

Freight inwards

     4 120

    4 120

Sales salaries expense

   43 100

  43 100

Freight outwards

     2 000

    2 000

Discount allowed

     1 800

    1 800

Interest expense

     2 130

    3 110

Insurance expense

 

    1 700

Depreciation expense - store equipment

 

    4 100

Depreciation expense - vehicle

 

    2 030

Office salaries expense

   46 220

  46 220

Rent expense

 

  11 500

 

Required:

1)      By comparing the Unadjusted Trial Balance with the Adjusted Trial Balance, journalise the adjusting entries that you can discern were made. Narrations are required.

2)      Journalise the closing entries that are necessary. Narrations are required.

3)      Prepare an Income Statement for the year ended 30 June 2013.

 

Part B

Givenchy and Energy are two businesses that are very similar in many aspects. One difference is the depreciation methods they apply. Givenchy uses the straight-line method while Energy uses the reducing-balance method at double the straight-line rate. On 1 July 2010, both businesses acquired the following depreciable assets.

Asset

Cost

Residual value

Useful life

Building

$250 000

$20 000

40 years

Equipment

 125 000

  10 000

10 years

Including the appropriate depreciation expenses, annual profit for the businesses in the years 2011, 2012 and 2013 were as follows.

 

2011

2012

2013

Total

Givenchy

$80 000

$84 000

$90 000

$254 000

Energy

 70 000

 76 000

  85 000

  231 000

 

As at 30 June 2013, the two businesses have similar financial positions except that Energy has more cash than Givenchy. Linda Young is considering investing in one of the businesses andhas come to you for advice.

 

Required:

1)      Reconstruct an extract from the Balance Sheet showing the value of depreciable assets for the year ended 30 June 2012 for Energy.Show all workings (Round the accumulated depreciation to the nearest dollar).

2)      Assuming Energy also uses the straight-line method of depreciation, calculate the annual profit for Energy for 2011, 2012 and 2013,showing all workings.

3)      Based on the information given and your calculations, explain why Energy has more cash than Givenchy as at 30 June 2013. Has the annual depreciation expense contributed to the business cash flow position? Advise Linda Young which company she should invest in? Justify your answer.

 

Question 2

Part A

Mira Maz loves decorating and set up her own business a few years ago; Mira's Decorating Touches. The business is registered for GST, and has a 30 September year-end date.

The business is doing very well lately and Mira no longer has time to manage the books. She has approached you as her friend, and chartered accountant, to help her prepare her financial statements. Mira has provided you with her adjusted ledger balance as at 30 September 2012, as follows:

 

Account

Adjusted

Accounts payable

$36 036

Accounts receivable

102 528

Accumulated depreciation - delivery equipment

37 440

Accumulated depreciation - furniture and fixtures

21 216

Advertising expense

35 880

Cash at bank

35 688

Cost of sales

549 744

Delivery equipment

62 400

Depreciation expense - delivery equipment

12 480

Depreciation expense - furniture and fixtures

5 304

Discount allowed

9 048

Discount received

11 232

Electricity expense

13 344

Freight inwards

12 480

Freight outwards

24 336

Furniture and fixtures

53 040

GST Collections

94 817

GST Outlays

67 205

Insurance expense

3 744

Inventory

187 200

Loan payable

156 000

Mira Maz, Capital

162 552

Mira Maz, Drawings

37 440

Office Supplies expense

2 496

Office Supplies on hand

1 872

Prepaid insurance

2 808

Rent expense

38 064

Salaries expense

140 784

Salaries payable

4 680

Sales revenue

961 400

Sales returns and allowances

13 232

 

Required:

1)      Mira is keen to see the balance of her capital account, and asks you to prepare the narrative Balance Sheet as at 30 September 2012.

2)      When you review the Balance Sheet, you notice Mira has not accounted for any doubtful debts. You advise her to provide you with an ageing analysis of her debtors. She provides you with the following analysis, but has not completed the last column:

 

Accounts Receivable Balance

% estimated uncollectable

Estimated bad debts

Accounts not yet due

$38 600

5

 

Accounts overdue:     10 - 30 days

12 378

10

 

31 - 60 days

10 150

20

 

61 - 120 days

6 400

35

 

121 days and over

35 000

85

 

 

$102 528

 

 

2a) Complete the last column, in the table above, showing all calculations below and round to the two decimal places. 

2b) Prepare the journal entry to establish the Allowance for doubtful debts account, in accordance with your calculations in the last column from the table above. Narrationsare not required. 

 

Date

Account

Debit

Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2c)  On inspection of correspondence with debtors, it was determined that amounts due from customers totaling $33 000 must be written-off as uncollectable. Record the journal entry to reflect this. Narrations are not required. 

 

Date

Account

Debit

Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2d) The following day, Mira rings you to tell you that she received a cheque for $18 700, as payment in full for one of the accounts that had been written off as uncollectable. Record the journal entries to record the transaction. Narrations are not required. 

 

Part B

Following are three requirements that affect certain assets:

1.      the lower of cost and net realisable value rule;

2.      accounting for depreciation by means of an accumulated depreciation account; and

3.      accounting for doubtful debts by means of an allowance for doubtful debts account.

Required:

a)      Which three accounting assumptions enable these three requirements to be used? Explain your answer.

b)      Explain why we use these three requirements. (Hint: discuss how the relevant accounts, and the corresponding accounts, for each of the three requirements effect aspects of the Balance Sheet and Income Statement, in terms of overstatements or understatements.) 

c)      Explain what the collective impact is of these three requirements on the quality of the resulting accounting information provided to users.

Solution Preview :

Prepared by a verified Expert
Taxation: Explain why we use these three requirements hint discuss
Reference No:- TGS0772641

Now Priced at $70 (50% Discount)

Recommended (99%)

Rated (4.3/5)