Reference no: EM13504706

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.