Prepare a fully classified income statement

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Reference no: EM132212271

Accounting for Business Assignment -

Accounting for Business Assignment - Learning Outcomes

The Assignment is a further opportunity to apply the knowledge and skills that you are developing. The Assignment also develops learning outcomes which are highly valued by the employers of accounting graduates: Knowledge, Judgement, Critical analysis and Problem-solving skills, and Communication skills. Learning outcomes are the knowledge and skills that graduates are expected to know, understand and be able to do as a result of their learning.

QUESTION 1: Balance Day Adjustments

Below is the unadjusted Trial Balance for Pool Wave, a pool product and maintenance shop owned and operated by Wade Wilson, as at 30 June 2018.

Pool Wave Unadjusted Trial Balance As at 30 June 2018
	Debit ($)	Credit ($)
Cash at Bank	26,766
Accounts Receivable	31,875
Inventory	140,400
Prepaid Insurance	4,914
Office Supplies on hand	3,276
Furniture & Fittings	39,780
Accumulated Depreciation - Furniture & Fittings		11,934
Cleaning Equipment	46,800
Accumulated Depreciation - Cleaning Equipment		18,720
Accounts Payable		27,027
Loan Payable		117,000
W. Wilson - Capital		66,222
W. Wilson - Drawings	28,080
Sales Revenue		691,029
Sales Returns and Allowances	9,924
Cost of Good Sold	412,308
Discount received		12,957
Freight inwards	9,360
Sales Salary Expense	68,328
Delivery Expense	18,252
Advertising Expense	26,910
Rent Expense	28,548
Office Salaries Expense	33,750
Electricity Expense	8,832
Discount Allowed	6,786

Totals	944 889	944 889

1. Office Salaries which are payable but not recorded as at 30 June are $785.

2. Both the Furniture & Fittings and the Cleaning Equipment are expected to be used evenly over their useful lives. The expected total useful lives and residual values of both assets is as follows:

	Estimated Useful life	Estimated Residual
Furniture & Fittings	8 years	$1 780
Cleaning Equipment	10 years	$2 100

3. A physical stocktake of inventory on 30 June 2018 revealed $139 200 of stock on hand

4. A count of the stationery room revealed that office supplies on hand at 30 June 2018 were $1 737. (Hint: The difference between the supplies on hand and supplies in the unadjusted trial balance should be treated as an expense.)

5. The balance in the Prepaid Insurance account represents a 12-month insurance policy that commenced on 1 March 2018.

6. $2 700 of the recorded Sales Revenue is for specially imported robotic pool cleaner that will not be delivered to the customer until 24 July 2018.

7. As of 30 June 2018, Wade has estimated that 4% of his Accounts Receivable may not be collected.

8. Wade last paid an electricity bill on 31 May 2018, and estimates that his power usage from then until 30 June 2018 was $220.

REQUIRED: It is now the end of the financial year and Wade has asked you to prepare any necessary balance day adjusting journals.

Use the General Journal document provided to record the correctly formatted journal entries required.

QUESTION 2: Financial Statements

Tony Stark owns and operates a dry cleaning and pressing business called "Ironing Man". At year end Tony has prepared the following partially completed Trial Balance. Tony knows it is not in the correct order and he has not yet included all the Balance Sheet accounts. There is however sufficient information to complete an Income Statement.

IRONING MAN TRIAL BALANCE AS AT 30 JUNE 2018
	Debit ($)	Credit ($)
Shop Shelving	255 000
Delivery Van	120 000
Sales		1 560 000
Purchases	576 000
Insurance Expense	19 500
Allowance for Doubtful Debts		4 932
Accounts Receivable	82 200
Bank Overdraft		3 000
Shop Water Expense	12 000
Discount Received		6 000
Interest Expense	12 300
Office Water Expense	4 140
Loan (repayable 1 Oct 2019)		138 000
Discount Allowed	3 450
Bookkeepers Wages	75 000
Shop Staff Wages	256 386
Accumulated Depreciation - Office Furniture & Fittings		18 900
Accounts Payable		23 268
Doubtful Debts	4 932
Freight Inwards Expense	6 450
Advertising Expense	14 100
Shop Rent Expense	196 000
Office Cleaning Expense	35 400
Depreciation - Shop Shelving	36 000
Interest Received		4 500
Unearned Revenue		3 600
Depreciation - Delivery Van	30 000
Accumulated Depreciation - Shop Shelving		72 000
T. Stark, Capital (1 July 2017)		400 650
Depreciation - Office Furniture & Fittings	18 900
Inventory (1 July 2017)	157 200
Office Furniture and Fittings	96 000
Office Rent	53 750
Freight Out	22 260
Electricity Expense	29 100
Purchase Returns and Allowances		18 600
T. Stark, Drawings	108 000
Sales Returns & Allowances	2 850
Shop Cleaning	21 600

Tony has provided the following additional information to assist in your statement preparation:

30% of the electricity expense specifically relates to the administration office. The remainder of this expense relates to running the store.
$15 600 of the insurance expense relates coverage for the shop premises. The remainder of this expense relates to the office.
The inventory stock take conducted on 30 June 2018 revealed $54,900 of stock on hand.

REQUIRED: Prepare a fully classified Income Statement using the partially completed Trial Balance and additional information provided.

QUESTION 3: Accounting Concepts, Communication

Part 1: The Business Letter

You are employed as a graduate accountant in a mid-tier accounting firm called Professional Accounting Solutions. As part of your ongoing professional development, the Managing Partner periodically presents you with a client's financial statements and asks you for comments in your own words (using references where appropriate), to demonstrate your understanding of various accounting concepts and assumptions.

This year, the managing Partner has provided you with the reports of Cycles'R Us and has asked that you write a formal business letter to her addressing the technical issues referred to below. She will then keep the letter on your employment file. The letter should be no more than 300 - 400 words (maximum). Penalties may be applied if the word limit is exceeded.

REQUIRED: On the following page, you are required write a letter in your own words to Christine Daniels (Managing Partner) addressing the three issues referred to below.

You have been presented with the accounts of Cycles'R US (a cycling shop owned and operated by Judy Wheeler) for the year ending 30 June 2018, and asked to explain the following:

1. Judy purchased a computer on 1 June 2018. Identify the correct treatment for recording the computer and explain why we cannot simply expense the entire cost. Refer to any appropriate accounting assumptions and/or definitions in your response.

2. Business owners often mistakenly believe that the 'carrying amount' of an asset in the Balance Sheet represents the asset's market or replacement value. With this in mind, explain the meaning of the amounts in the balance sheet extract below.

CYCLES' R US Balance sheet extract as at 30 June 2018
Computer	$2000
Less Accumulated Depreciation	200	$1800

3. As part of the process of preparing the year end accounts, a series of adjusting entries have been recorded, one of which is an entry to record the depreciation of assets. Explain the importance of adjusting entries by using the relevant accounting concepts, and also indicate the effect on the financial statements if the depreciation adjusting entry was not included.

Part 2: Use of communication skills

The following aspects of your written communication skills development will be awarded.

BEING RELEVANT

Does what is written contribute to answering the question(s)

Setting out to specifically answer the question(s) by using relevant information,
Staying 'on track' with answers,
Avoiding straying from the question and going off on irrelevant tangents.

WRITING FOR A PROFESSIONAL BUSINESS AUDIENCE (including good presentation)

The written work is clear and understandable,
Where applicable, the written work is based on the facts and available evidence,
Exaggeration and bold statements which are not supported by the facts and evidence are avoided.

Good presentation

The written work contains no spelling and grammatical errors. Obvious evidence of editing displayed. (Where the work contains any spelling and grammatical errors, it cannot be awarded more than 5 marks),
Any headings and sub-headings display properly, and are used consistently throughout the document,
Page numbering is used. It is usual for page numbering to commence on page 2 of a business document as "2",
Font size and font style are used consistently throughout the document,

QUESTION 4: Cash Flow Statement

You are provided with the following financial information for Dwayne Pipe Plumbing:

DWAYNE PIPE PLUMBING COMPARATIVE BALANCE SHEETS AS AT 30 JUNE
Current Assets	2019		2018
Cash on Hand	$1 200		$4 000
Cash at Bank	-		1 009
Accounts Receivable (net)	5 200		4 500
Inventory	28 000		18 000
Prepaid Expenses	1 650	$36 050	650	$28 159
Non-Current Assets
Plant & Equipment	83 500		64 000
Less:Accum. Depreciation	(23 000)	60 500	(17 600)	46 400
Total Assets		96 550		74 559

Current Liabilities
Bank Overdraft	6 402		-
Accounts Payable	4 000		2 800
Expenses Payable	780		790
Tax Payable	890	12 072	1 200	4 790
Non-Current Liabilities
Bank Loan		20 000		20 000
Total Liabilities		32 072		24 790
Net Assets		$64 478		$49 769

Equity
Capital - D.Pipe		64 478		49 769
		$64 478		$49 769

DWAYNE PIPE PLUMBING INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2018
Net Sales		$107000
Cost of Sales		45 200
Gross Profit:		61 800
Other Revenue:
Discount Received	$280
Interest Revenue	40	320
		62 120
Expenses:
Selling & Admin Expense	16 500
Doubtful Debts Expense	354
Depreciation Expense	5 400
Interest Expense	3 800	26 054
Profit before tax		36 066
Income Tax Expense		3 378
Profit		$32 688

ANSWER THIS QUESTION ON THE PRO FORMA PROVIDED.

REQUIRED:

a. Prepare a Statement of Cash Flows in the pro forma provided on the following page. You must show all calculations (an answer without supporting calculations will receive zero marks).

Attachment:- Assignment File.rar

Reference no: EM132212271

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Reviews

len2212271

1/10/2019 3:00:39 AM

You should aim to complete this assignment a few days prior to the due date to allow for any unforeseen circumstances such as illness, holidays, family issues, work commitments etc. You may submit the assignment early if you have other commitments around the due date. Please note the following important instructions relating to the assignment format and submission: IMPORTANT - Failure to follow these instructions may result in your assignment not being marked, so please read them carefully.

len2212271

1/10/2019 3:00:30 AM

You must complete your assignment using the assignment Word document provided. Do not convert this document into any other format (.docx or .doc are the only permissible file formats than can be uploaded). You can only submit this one file. Do not ‘embed’ other files (Excel for example) as pictures within the assignment Word document. You cannot scan hand written responses and submit. All assignments must be word processed. Remember to fill out the assignment coversheet which is the second page of assignment Word document.

len2212271

1/10/2019 3:00:19 AM

All assignments must be lodged via the Assignment Dropbox provided in the Assessments Module on the Course Website. WARNING: Please ensure that you upload the correct file. If you discover (after the due date) that you have uploaded a draft version or the wrong file completely, you will not be allowed to submit a second file. The file you upload will be the one that is marked. Note that this is an individual piece of assessment. Pay particular attention to the student declaration which forms part of the ‘Assignment Coversheet – Student Information’ included below. You must type your name and the date in the appropriate field in this declaration. Please note that extension requests made with 7 days of the due date must also include a draft of the work you have completed to that point.

len2212271

1/10/2019 3:00:08 AM

Communication skills - Employers want graduates who are strong communicators. Communication skills rank among the most important selection criteria that employers use when recruiting graduates (Source: Graduate Careers Australia). The following aspects of your written communication skills development will be assessed in the assignment in Question 3: Relevance and Writing for a Business Audience. Please refer to the resource Developing written communication skills in Accounting for Business in the ‘Assessments’ Module on the Course Website. It has information about the aspects of your written communication skills development and links to resources that will assist you develop your skills. Please use the resources in your assignment. Remember that your studies are the perfect time to start developing these skills and appreciating their importance in your career.

len2212271

1/10/2019 3:00:00 AM

IMPORTANT - Journals must be correctly formatted and must include a date and a narration (explanation) for each entry. Marks will be deducted if this instruction is not followed. The remaining 3 marks will be awarded for following the formatting requirements below. Date your letter 31. Address your letter to Christine Daniels (Managing Partner), Professional Accounting Solutions, 173 North Terrace, Adelaide, SA, 5000. Your personal address for the purpose of the letter is PO Box 1008 Adelaide SA 5001. A formal business letter format is required (though there are different ways of doing this and there will be some flexibility in marking). Your letter must however use an appropriate business-like way to begin and end your letter, and you should set out your letter with subheadings to separate each part of your letter as you address the criteria required. Included below are some suggested references that may help you in formatting your letter. You may use other Internet references if you wish.

len2212271

1/10/2019 2:59:50 AM

The following aspects of students’ written communication skills development are also awarded a total of 9 marks. PARAPHRASING - Presenting ideas and information that student read in their own words, Not simply taking what someone else has written and changing a few words. It is about translating another person’s ideas into the student’s own words. Mark (maximum 3 marks). BEING RELEVANT - Does what is written contribute to answering the question(s) Setting out to specifically answer the question(s) by using relevant information, Staying ‘on track’ with answers, Avoiding straying from the question and going off on irrelevant tangents. Mark (maximum 3 marks).

len2212271

1/10/2019 2:59:41 AM

WRITING FOR A PROFESSIONAL BUSINESS AUDIENCE (including good presentation) The written work is clear and understandable, Where applicable, the written work is based on the facts and available evidence, Exaggeration and bold statements which are not supported by the facts and evidence are avoided. Good presentation - The written work contains no spelling and grammatical errors. Obvious evidence of editing displayed. (Where the work contains any spelling and grammatical errors, it cannot be awarded 3 marks), Any headings and subheadings display properly, and are used consistently throughout the document, Page numbering is used. It is usual for page numbering to commence on page 2 of a business document as “2”, Font size and font style are used consistently throughout the document, If applicable, requested templates are used. Mark (maximum 3 marks).

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