HA1020 Accounting Principles and Practice Assignment Problem

Assignment Help Accounting Basics

Reference no: EM132388034

HA1020 Accounting Principles and Practice Assignment - Holmes Institute, Australia

Instructions: Answer all SEVEN (7) questions.

Question 1 - Sydney Tour Company purchased a van for $150,000. The company expected the van to be used for 10 years, or 200,000 miles, with an estimated residual value of $2,000 at the end of that time. Actual usage of the van for the first 3 years were as follows:

Year 1: 5,000 miles
Year 2: 10,000 miles
Year 3: 12,000 miles

Required - a) Calculate the depreciation for the second year under each of the methods below

I. Straight-line

II. Units of production

b) Show how the asset of van would appear in the balance sheet prepared at the end of the second year if the straight-line method was used.

c) What factors should be considered in the selection of a depreciation method?

Question 2 - The total account receivables of Michelle's Laundry Services have a balance of $300,000 at the end of 30 June 2015. The company uses the allowance method to record bad debts expense. The accountant prepares an ageing analysis of accounts receivable balance as at 30^th June 2015 as below.

On 30^th June 2015 the credit balance of Allowance for doubtful debts account is $3,000 before any adjustments. (Ignore GST)

AGE	Account Receivable BALANCE	Estimated Uncollectable (%)	Estimated Bad Debts
Not yet due	200,000	1%
Overdue by 1 month	70,000	3%
Overdue more than 2 months	30,000	10%
Total	$300,000

Required:

a) Prepare the adjusting journal entry to record bad debts expense for the year ended 30 June (ignore notation).

b) One month later, at 31 July 2015, the manager decided to write off $500 of accounts receivable that were doubtful. Prepare journal entry (ignore notation).

Question 3 - At 30 June 2016, the unadjusted trial balance of Orange Ltd at 30 June 2016, was as follows:

Orange Ltd TRIAL BALANCE AS AT 30 JUNE 2016
Accounts	Debit ($)	Credit ($)
Cash at bank	5,990
Account receivables	20,800
Prepaid insurance	2,600
Office Supplies	3,120
Office equipment	9,400
Accumulated depreciation - equipment		1,900
Accounts payable		210
Salary payable
Unearned service revenue		820
Loan payable		7,000
Capital		22,200
Drawings	40,000
Service revenue		106,180
Salary expenses	44,000
Depreciation expenses - equipment
Miscellaneous expenses	12,400
TOTAL	138,310	138,310

The following additional information is available at the end of June for adjustments:

a) A physical count of office supplies on 30 June shows $440 of unused supplies on hand.

b) Depreciation of the office equipment this year is estimated to be $800.

c) Of the $820 unearned service revenue, $200 is still unearned.

d) Of prepaid insurance, 60% expired this period.

e) Salaries owed but not yet paid $1275.

f) Service revenue of $1000 has been earned, but have not yet been paid or recorded.

Required - Prepare adjusting entries at the end of 30 June 2016.

Question 4 - Various financial ratios could be used to analyse a company's financial performance and position.

a) What ratios would you calculate to evaluate a company's profitability? Provide two examples of the ratios and explain.

b) What ratios would you calculate to evaluate a company's liquidity? Provide two examples of the ratios and explain.

Question 5 - On 1 May, Big Ltd purchased inventory on credit from Small ltd for $270,000, terms 2/10, n/30; perpetual inventory system is used.

On 1 June, Big Ltd issued a 2 - month, 10% note for $270,000 to Small Ltd. Small Ltd agreed to accept the note from Big Ltd to cover the amount for the credit purchase of inventory on 1 May.

31 July, Big Ltd paid Small Ltd for the amount due on the note. (Assuming unearned interest account is not used and interest will be paid when the note matures.)

Required:

(a) Prepare the entry for Big Ltd on 1 May when inventory was purchased.

(b) Prepare the entry for Big Ltd on 1 June to record the issue of the note.

Question 6 - On 31 May 2016, the cash at bank account for P&Q Ltd showed a debit balance of $14,824 and the bank statement showed a credit balance of 18,200. A comparison of the two sets of records disclosed:

1) That there was a bank service fee of $24

2) Unpresented cheques are as below:

cheque No. 210 - $2000
cheque No. 211 - $1200

3) That the date of a deposit of $650 was shown by P&Q as 31 May, whereas bank did not record the deposit until 1 June 2016.

4) The bank had collected $800 on behalf of P&Q Ltd on the maturity of a note.

5) The bank statement shows interest received on bank account, $50.

Required: Prepare the bank reconciliation statement for P&Q for the month ended at 31 May 2016.

Question 7 - Crafts Pty Ltd is a retail firm selling handmade crafts. A system of perpetual inventory is employed. The following information has been extracted from records of Crafts Pty Ltd for one of its inventories of silk scarf. Ignore GST and narration.

Date	Transaction	Quantity	$ Unit cost
1/07	Beginning balance	6	70
6/07	Purchases	4	85
16/07	Sold @$150/unit *	8	?
17/07	Purchases	6	45
29/07	Sales @ $150/unit *	4	?
30/07	Sales Return	1	?

*Note: $150 is the sales price per unit, not the cost of each unit.

Required:

a) Complete the inventory stock record below to calculate the cost of inventory on hand at 31 July and the cost of sales for the month of July, assuming the FIFO method is used. (Write your answer in the table provided in the question paper).

b) Compare the perpetual inventory system and the periodic inventory system as a control device.

Date	Purchases			Cost of Goods Sold			Balance
Date	Units	Unit Cost	Total $	Units	Unit Cost	Total $	Units	Unit Cost	Total $
01/07
6/07
16/07
17/07
29/07
30/07
Total COGS
Ending Inventory

Reference no: EM132388034

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