Statement of comprehensive income for the year to date

Assignment Help Financial Accounting
Reference no: EM13509365

Question 1

The owner of a business reviews the income statement prepared by you and asks, "Why do you report a profit of only $30,000 when cash collections of $100,000 were received and cash payments for the period totalled only $50,000 for expenses?" How would you respond to the owner's question?

Question 2

On 31 March, Padbury Publishers received a subscription of $240 for the supply of twelve monthly magazines, beginning in April. At the end of the reporting period, 30 June, the accountant suggested that the owner make an adjusting entry to defer the revenue on nine issues until the next financial year. The owner of the business was reluctant to do so, claiming that he had already received the subscriptions in cash and could see no reason for the delay in recognising the revenue. Do you agree with the owner or the accountant? Respond to the owner, explaining the accountant's position. Ignore GST.

Question 3

Depreciation is a process of allocation and not valuation. What do you think is meant by this statement? Give examples to support your answer.

Chalmers and oliver (2014, p.213) describes ‘depreciation as an allocation or what it is now called amortisation of the depreciable amount of a depreciable asset over its estimated useful life'. The nature of depreciation and amortisation is same because they both the expenses incurred in the income statement which further do not involve any outflow of cash as such. (Rama Rao 2010) further contribute to the statement of depreciation being an allocation process as it caters to spreading the cost of a fixed asset over its useful life less salvage value. So, a portion of that cost is recognised as an expense in each period that the asset is in service. For example:

A piece of machinery cost $ 11,000 with a serviceable life of 5 years.

The scrap value of the machine at the end 5th year is going to be $1,000 not $10,000 (i.e. $11,000 less $1,000) will be allocated over 5 years on rational basis.

(Accounting allocation 2011) fair value or valuation on the other hand, reflects the overall value of the remaining equipment, machinery etc., which is expected to be consumed by next 12 recognised months or so on. The net book value may not represent the actual market value of the asset. Many authors claimed that this approach is employed because the value/valuation of asset may fluctuate due to the time span when that has been purchased and the time it is sold. Also, values are difficult to measure where the allocation of price is rather straightforward. However, it is not a matter of valuation but a means of allocating the cost.

Question 4

Prepare an income statement for the year ended 30th June 2014 given the following account balances. Note: Some accounts may not be relevant.

Cash $3,000
Sales $280,000
Salary and wages $37,000
Accounts receivable $15,000
Loan interest $4,000
Insurance $2,000
Loan $40,000
Telephone and postage $1,500
Rent and rates $12,400
Cost of sales $160,000
Inventory $11,000
Accounts payable $9,100
Heat and light $3,700
Motor vehicles $32,000
Equipment repairs $1,600
Depreciation- motor vehicles $4,500
Motor vehicle running costs $1,700
Depreciation-equipment $3,200
Royalties received $1,700
Accounting and audit $3,400
Bad and doubtful debts $800

Question 5

The following is the statement of financial position of TT Ltd. at the end of the first year of trading

Statement of Financial Position as at 31st December 2013

Current Assets
Cash At Bank $750
Prepaid Expenses $5 300
Accounts Receivable $19,600
Inventory $65,000
$90,650
Non-Current Assets
Motor Vehicles- Cost $12,000
Accumulated Depreciation ($2,500)
$9,500
TOTAL ASSETS $100,150
Current Liabilities
Accrued Expenses $1,250
Accounts Payable $22,000
$23,250
Owner's Equity
Original $50,000
Retained Profit $26,900
$76,900
Total Liabilities And Owner's Equity $100,150

• Prepaid expenses included $5,000 for rent and $300 for rates.

• Accrued expenses included wages of $630 and electricity of $620.

During 2014, the following transactions took place:

• The owner's withdrawal capital In the form of cash of $20,000

• A premise continues to be rented at an annual rental of $20,000. During the year, rent of $15,000 was paid to owner of the premises.

• Rates on the premises were paid during the year for period 1st April 2014 to 31st March 2015, $1,300.

• A second delivery vehicle was bought on 1st January for $13,000. This is expected to be used in business for four years and then be sold for $3,000.

• Wages totalling $36,700 were paid during the year. At the end of the year the business owed $860 of wages for the last week of the year,

• Electricity bills totalling $1,820 for the first three quarters of the year were paid. After 31st December 2014, once the accounts had been finalised for the year, the bill for the last quarter arrived showing a charge of $690.

• Inventory totalling $67,000 was bought on credit.

• Inventory totalling $8,000 was bought for cash.

• Sales on credit totalled $179,000 (cost $89,000).

• Cash sales totalled $54,000 (cost $25,000).

• Receipts from accounts receivable totalled $178,000.

• Payments to accounts payable totalled $71,000.

• Vehicle running expenses paid totalled $16,200.

REQUIRED

Prepare a Statement of Financial Position as at 31st December 2014 and a Statement of Comprehensive Income for the year to date.

Reference no: EM13509365

Questions Cloud

Compute the following for year 2 : Dividends during Year 2 totaled $89 thousand, of which $18 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $130.
How much force does the ball apply on the catchers mitt : A .230 kg baseball is thrown with a speed of 41 m/s. If the above ball comes to rest in the catcher's mitt in .085 seconds, how much force does the ball apply on the catcher's mitt
What would be the effect on the company : what would be the effect on the company overall net operating income if product Lo7E were dropped?
How long was the arrow in the air before striking the target : An archer lines up an arrow on the horizontal exactly dead center on a target. She releases the arrow, and it strikes the target a distance h=7.6cm below the center. how long was the arrow in the air before striking the target
Statement of comprehensive income for the year to date : Prepare a Statement of Financial Position as at 31st December 2014 and a Statement of Comprehensive Income for the year to date - How would you respond to the owners question?
With what speed was the loaded boxcar moving : In the railroad freight yard, an empty freight car of massmrolls along a straight level track at1.0m/s, Suppose instead that the two cars are at rest after the collision. With what speed was the loaded boxcar moving before the collision if the empt..
Compute contribution margin per pound of materials used : Demand for the company's products is very strong, with far more orders each month than the company can produce with the available raw materials.
What is the average force on the net due to the boy : A boy of mass 60.8 kg is rescued from a hotel fire by leaping into a firefighters' net. The window from which he leapt was 9.5 m above the net. What is the average force on the net due to the boy during the interval
Describe a polynomial-time algorithm to test dependency : Describe a polynomial-time algorithm to test dependency-preservation.

Reviews

Write a Review

 

Financial Accounting Questions & Answers

  Calculate the contribution per cd unit

Calculate the contribution per CD unit, break-even volume in CD units and dollars, net profit if 1 million CDs are sold and necessary CD unit volume to achieve a $200,000 profit.

  Prepare a statement of changes in retained earnings

Complete the December 31, 2014 and 2013, balance sheets and prepare a statement of changes in retained earnings for the year ended December 31, 2014.

  Greeting card industry position and formulating planany

greeting card industry position and formulating planany strategic decision must be evaluated with careful consideration

  Define miscellaneous receivable transactions

June 30 Discounted the Brisk, Inc note at the bank. The bank's discount rate is 12%. The note was discounted without recourse.

  Which asset do you recommend the corporation sell

Due to prior profitable years, Cooper is subject to the alternative minimum tax and it has $4,500,000 of positive adjustments and preferences in determining is alternative minimum taxable income. Which asset do you recommend the corporation sell? ..

  How much will the capital accounts of mccune

how much will the capital accounts of McCune, Oakley and Nall increases, correspondingly, due to the revaluation of the assets and recognition of goodwill?

  Question the following are partial income statement account

question the following are partial income statement account balances taken from the 31st december 2013 year-end trial

  The income statement approach to estimating uncollectible

the income statement approach to estimating uncollectible accounts expense is used by landis company.on february 28 the

  Evaluate the unit product cost of each product

Evaluate the unit product cost of each product for the current period and Carroll Company manufactures two products, Product DRT and Product CRT.

  Compute the standard direct labor-hours

Determine the reason for the underapplied or overapplied overhead - Compute the standard direct labor-hours allowed for the year's production.

  Evaluate owner''s equity at the end of 2008 and 2009

Evaluate owner's equity at the end of 2008 and 2009? and If Nobel paid dividends of $100 in 2009, and made no stock issues. what must have been net income during the year?

  Compute the ratios for 2012 and earnings per share

Compute the ratios for 2012 and earnings per share - return on common stockholders' equity

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd