Transcript
ACCT5001 S1 2010
Self-Study Solutions
Week 5
Ch. 4: Q5, Q6; E4.1; E4.5; E4.9; PSA4.3; PSA4.4; PSA4.6* Review
5.
ACCT5001 S1 2010
Self-Study Solutions
EXERCISE 4.1 Sailing Boats Ltd
PSA2.5*; PSA3.7*
(a)
(a)
The primary source documents are: (1) (2)
(1)
7 Dec
Accounts Receivable
720,000
Sales
cash sales – cash register tapes, and
720,000
(to record sale on credit)
credit sales – sales invoices.
Cost of Goods Sold (b)
Week 5
The entries for the perpetual method of accounting for inventories are:
480,000
Inventory
480,000
(to record cost of inventory sold to Ships Ahoy Ltd)
Debit
Cash sales -
Credit sales -
Cash
xx
Sales Cost of Goods Sold Inventory
xx
Accounts Receivable Sales Cost of Goods Sold Inventory
Credit
(2)
8 Dec
Sales Returns and Allowances
30,000
Accounts Receivable
xx
30,000
(to record allowance granted to Ships Ahoy Ltd)
xx (3)
xx
13 Dec
xx
Cash ($690,000 - $13,800) Discount Allowed [($720,000 - $30,000) x 2%]
xx
676,200 13,800
Accounts Receivable ($720,000 ($720,000 - $30,000)
xx
690,000
(to record collection within 2/7, n/30 discount period from Ships Ahoy Ltd)
6. 24 July
Accounts Payable ($4,480 - 280) Discount Received ($4,200 x 2%) Cash ($4,200- $84)
(b)
4,200
2 Jan
Cash
690,000 Accounts Receivable ($720,000 ($720,000 - $30,000)
84 4,116
690,000
(to record receipt of payment by Ships Ahoy Ltd)
(to record payment of balance, 2/7)
(c)
The advantages associated with granting a discount for early payment are that the purchaser saves money and the seller is able to shorten the operating cycle thereby improving cash flow by converting accounts receivable to cash earlier. The disadvantage to the seller is that there is a cost associated with offering a discount.
ACCT5001 S1 2010
Self-Study Solutions
Week 5
ACCT5001 S1 2010
Self-Study Solutions
Week 5
EXERCISE 4.5 Hans Olaf Pty Ltd
EXERCISE 4.9
(a) (a)
(1)
5 April
Inventory
Music Box Ltd
18,000
Accounts Payable
Income Statement
18,000
for the year ended 30 June 2010
(to record purchase of inventory from R. Ward & Co, terms 2/7, 30/n)
(2)
6 April
Freight In
900
Cash
900
OPERATING REVENUE Net sales revenue:
(to record payment of freight on goods purchased)
Less:
(3)
7 April
Equipment
$2,820,000
Cost of goods sold (1,186,800)
26,000
Accounts Payable
26,000
GROSS PROFIT
$1,633,200
(to record purchase of equipment on account)
Other operating revenue (4)
8 April
Accounts Payable
3,000
Inventory
3,000 OPERATING EXPENSES
(to record return of incorrect inventories and granted allowance of $3,000)
(5)
11 April
Accounts Payable
54,000 1,687,200
15,000
Selling expenses
828,000
Administrative expenses
522,000
($18,000 - $3,000) Discount Received
300
Financial expenses
[($18,000 - $3,000) x 2%]
Total operating expenses
Cash ($15,000 - $300)
PROFIT BEFORE INCOME TAX Less:
4 May
Accounts Payable ($18,000 - $3,000) Cash (to record payment to R. Ward & Co, 30/n)
1,434,000
14,700
(to record payment to R. Ward & Co, including discount 2/7)
(b)
84,000
Income tax expense
PROFIT AFTER INCOME TAX
15,000 15,000
253,200 (75,960) $177,240
ACCT5001 S1 2010
Self-Study Solutions
Week 5
ACCT5001 S1 2010
Self-Study Solutions
Week 5
PROBLEM SET A 4.3 The Power House
(b)
General Journal
Profit margin =
Profit after tax
177,240 6.3% 2,820,000
Net sales
June
2
Inventory (130 x $60)
7,800
Accounts Payable
Gross profit rate =
Gross Profit Net Sales
1,633,200 57.9% 2,820,000
Freight In
Operating expenses to sales ratio =
Operating Expenses Net Sales
7,800
(to record purchase of power tools from Tool World, 1/7, 30/n)
60
Cash
1,434,000 50.9 2,820,000
60
(to record payment of freight to Speedy Couriers)
3
Accounts Receivable (140 x $120)
16,800
Sales
16,800
(to record sale of power tools to Hardware House)
Cost of Goods Sold (140 x $60)
8,400
Inventory
8,400
(to record cost of inventory sold)
6
Accounts Payable
600
Inventory
600
(to record return of inventory to Tool World)
9
Accounts Payable ($7,800 - $600)
7,200
Discount Received ($7,200 x .01)
72
Cash
7,128
(to record payment to Tool World, 1/7)
15
Cash
16,800 Accounts Receivable
(to record payment received from Hardware House)
16,800
ACCT5001 S1 2010
Self-Study Solutions
Week 5
ACCT5001 S1 2010
Self-Study Solutions
Week 5
4U)
17
Accounts Receivable (120 x $120)
14,400
Sales
14,400
Inventory Cost of Goods Sold
(to record sale of power tools to Funning’s Warehouse)
(to record cost of goods returned)
Cost of Goods Sold (120 x $60)
7,200
Inventory
7,200
(to record cost of inventory sold)
20
Inventory (120 x $60)
7,200
Accounts Payable
7,200
(to record purchase of power tools from Electro Tool, 2/7, 30/n)
24
Cash
14,112
Discount Allowed ($14,400 x .02)
288
Accounts Receivable
14,400
(to record payment received by Funning’s Warehouse, 2/7)
26
Accounts Payable
7,200
Discount Received ($720 x .02)
144
Cash
7,056
(to record payment to Electro Tool, 2/7)
28
Accounts Receivable (110 x $120)
13,200
Sales
13,200
(to record sale of power tools to Power Tools 4U)
Cost of Goods Sold (110 x $60)
6,600
Inventory
6,600
(to record cost of inventory sold)
30
Sales Returns and Allowances Accounts Receivable (Allowances on power tools returned by Power Tools
1,800 1,800
900 900
ACCT5001 S1 2010
Self-Study Solutions
Week 5
ACCT5001 S1 2010
PROBLEM SET A 4.4
(a) Dave Jonos Department Store Pty Ltd Income Statement
Self-Study Solutions
Week 5
Electricity expense
13,780
Insurance expense
11,700
Office salaries expense
52,000
Rent expense – office space
26,000
Rates and taxes expense
4,550
113,230
for the year ended 30 June 2011
Financial expenses:
OPERATING REVENUE
Interest expense
Sales revenue: Gross sales revenue Less: Sales returns and allowances
Total operating expenses
$1,183,000 (13,000)
Net sales revenue
PROFIT BEFORE INCOME TAX
$1,170,000
Less: Cost of goods sold
(823,186)
GROSS PROFIT
Less: Income tax expense
10,400
10,400 267,540
85,774 (25,740)
PROFIT AFTER INCOME TAX
60,034
$346,814
Other operating revenue: Discount received
1,300
Interest revenue
5,200
Dave Jonos Department Store Pty Ltd
6,500 353,314
Statement of Changes in Equity for the year ended 30 June 2011
OPERATING EXPENSES
Retained Earnings, 1 July 2010
Selling expenses:
60,034
Dep’n expense – store equipment
12,350
Freight out
10,660
Rent expense – store space
11,700
Sales commissions expense
18,200
Sales salaries expense
91,000
Administrative expenses: Dep’n expense – office equipment
$18,460
5,200
Add: Profit 78,494 Less: Dividends Retained Earnings, 30 June 2011 143,910
(15,600) 62,894
ACCT5001 S1 2010
Self-Study Solutions
Week 5
ACCT5001 S1 2010
Self-Study Solutions
Week 5
Dave Jonos Department Store Pty Ltd Statement of Financial Position
(b)
as at 30 June 2011
Return on assets =
ASSETS
Av total assets
Current assets: Cash
15,301
Inventory
47,060
Prepaid Insurance
60 ,034 221,644
27 . 1 %
Av total assets = (208,000 + 235,287) /2 = 221,644
5,850
Total Current Assets
$78,611
Profit margin =
Property, plant and equipment Store equipment Accum. dep’n – store equipment
Office equipment Accum. Dep’n – office equipment
Gross profit rate = 162,500 (54,340)
(25,584)
Operating expenses to sales ratio = 48,516
Total Non-Current Assets
Current Liabilities Accounts payable
35,503
Income tax payable
25,740 4,550 7,800 73,593
Non-Current Liabilities Bank loan
59,800
Total Liabilities
133,393
Equity Share capital
39,000
Retained Earnings
62,894
Total Equity TOTAL LIABILITIES AND EQUITY
Gross Profit Net Sales
346,814 1,170,000
29.6%
Operating Expenses Net Sales
267,540 22.9% 1,170,000
156,676
LIABILITIES AND EQUITY
Total Current Liabilities
$235,287
(c)
Sales commissions payable
60,034 5.1% 1,170,000
=
108,160
74,100
TOTAL ASSETS
Rates and taxes payable
Profit after tax Net sales
Non-Current Assets
Less:
=
$10,400
Accounts receivable
Less:
Profit after tax
101,894 $235,287
A f ully classified income statement provides more information t han a summary-type statement. For instance, readers of the statement can ascertain how many sales were returned, discounts allowed on sales, and discounts received on purchases. Useful ratios such as the gross profit ratio and operating expenses/sales can also be calculated. If the operating expense ratio is high, a further breakdown of expenses into categories can give insight as to which particular expenses were excessive.
ACCT5001 S1 2010
Self-Study Solutions
Week 5
ACCT5001 S1 2010
Self-Study Solutions
Financial expenses:
PROBLEM SET A 4.6 Seaview Pty Ltd
Discount allowed
Income Statement
Interest expense
2,200
Bank charges
1,100
for the year ended 30 June 2011
Total operating expenses
PROFIT BEFORE INCOME TAX
OPERATING REVENUE
Less:
Sales revenue: Gross sales revenue Less:
Sales returns and allowances
(33,000) $957,000
Cost of goods sold
(610,500)
GROSS PROFIT
$346,500
Other operating revenue: Discount received
17,600
Rent revenue
8,800
Total operating revenue
Selling expenses: Advertising
11,000
Freight out
33,000
Sales commissions expense (6600 + 4400) 11,000 Sales salaries expense
88,000
143,000
Administrative expenses: Dep’n expense – office equipment Office salaries expense
8,800 40,700
Rent expense – office space (26400 – 6600)19,800 Electricity expense
26, 400 372,900
OPERATING EXPENSES
13,200
82,500
Income tax expense
PROFIT AFTER INCOME TAX
$990,000
Net sales revenue Less:
Week 5
8,800
12,100 237,600
135,300 (40,590) $94,710
ACCT5001 S1 2010
Self-Study Solutions
Week 5
ACCT5001 S1 2010
Self-Study Solutions
Week 5
(b)
Review Questions: PSA2.5*; PSA3.1* PROBLEM SET A 2.5 Liu Advertising Pty Ltd
Cash
(a)
Date
Account Titles and Explanation
Post
Debit
1/4
Share Capital
11/4
Revenue Received in
Credit
Ref
25,500
100
2/4
550 30/4
1
Cash Share Capital (Issued shares for cash)
1 2
3
10
11
Service Revenue
25,500
3,150 30/4
1/5
Opening Balance
510 100
950
Supplies Accounts Payable (Purchased supplies on account from Speedy Art Supplies)
115 200
2,550
Accounts Receivable Service Revenue (Invoiced clients for services rendered)
110 400
1,350
Cash
100 209
550
100
3,150
Service Revenue
950 1,950
10/4
Service Revenue
3/4
Accounts Payable
30/4
Cash
30/4
Closing Balance
1,150 25,150 29,200
25,150
Accounts Receivable
Rent Expense Cash (Paid monthly office rent)
Cash
Accounts Payable Closing Balance
29,200
25,500
No entry – not a transaction.
Revenue Received in Advance (Received cash advance for future service) 20
100 300
Salaries Expense
Advance 20/4
30/4
Apr.
Rent Expense
110
1,350
950
Supplies
2,550
Accounts Payable
1,350
1,150
200
3/4
Supplies
1/5
Opening Balance
2,250
Revenue Received in Advance
3,150
2,550
1,400 2,250
550
400
115
2,550
11/4
1,400
209
Cash
550
Cash
25,500
(Revenue received in cash) 30
Salaries Expense Cash
500
1,950
100
Share Capital
1,950
(Paid monthly salary) 30
Accounts Payable Cash (Paid Speedy Art Supplies on account)
200 100
1,150 1,150
1/4
300
ACCT5001 S1 2010
Self-Study Solutions
Week 5
Service Revenue
ACCT5001 S1 2010
400
10/4
Accounts Receivable
20/4
Cash
1,350
(a)
Date
30/4
Cash
1
1,950
Cash
510
950
Cash
3
5
Post Ref.
Debit
100 300
13,500
Motor Vehicles Cash Accounts Payable (Purchased truck)
171 100 200
9,000
Cleaning Supplies Accounts Payable (Purchased cleaning supplies)
120 200
1,350
Prepaid Insurance Cash (Paid insurance)
130 100
1,800
Accounts Receivable Service Revenue (Invoiced customers)
110 400
3,750
Accounts Payable Cash (Paid accounts payable)
200 100
2,250
Salaries Expense Cash (Paid salaries)
540 100
1,800
Cash
100 110
2,100
Accounts Receivable Service Revenue (Invoiced customers)
110 400
3,000
Petrol & Oil Expense Cash (Paid for petrol and oil)
500 100
300
Dividends Cash (Paid cash dividend)
315 100
900
Share Capital (Issued shares for cash)
500
Rent Expense
2/4
Corellian Windows Ltd General Journal
Account Titles and Explanation
July 1 Salaries Expense
Week 5
PROBLEM SET A 3.7
3,150 4,500
Self-Study Solutions
Credit
13,500
4,500 4,500
1,350
1,800
(c)
12
Liu Advertising Pty Ltd
Trial Balance as at 30 April 2010
REF
18
Debit
Credit
$
$
100
Cash
110
Accounts Receivable
1,350
115
Supplies
2,550
200
Accounts Payable
209
Revenue Received in Advance
300
Share Capital
400
Service Revenue
500
Salaries Expense
510
Rent Expense
20
25,150
21
Accounts Receivable (Collected cash from customers on account)
1,400 550 25,500
25
4,500 1,950 950 $31,950
31 $31,950
31
3,750
2,250
1,800
2,100
3,000
300
900
ACCT5001 S1 2010
Self-Study Solutions
Week 5
ACCT5001 S1 2010
Self-Study Solutions
(b), (e) & (h)
Motor Vehicles
1/7 Cash
1/7 21/7
Share Capital Accounts Receivable
13,500 2,100
1/8
Opening Balance
12/7
Service Revenue
3,750
25/7
Service Revenue
3,000
31/7
Service Revenue*
Motor Vehicles
31/7
5/7
Prepaid Insurance
1,800
Accounts Payable
2,250
20/7
Salaries Expense
1,800
31/7
Petrol & Oil Expense
300
31/7
Dividends
900
18/7
Cash
31/7
Closing Balance
4,050
31/7
Closing Balance
Accounts Payable
15,600
Motor Vehicles
3,600
Cleaning Supplies
3/7
5,850
110
Cash
31/7
Closing Balance
8,400
31/7
Opening Balance
1/7
* (e) adjusting entry, balance was $4,650 dr before adjusting entry
Accounts Payable
1,350
31/7
Cleaning Supplies Expense*
450
31/7
Closing Balance
900
1,350 1/8
Opening Balance
31/7
Dividends
31/7
Closing Balance
1,800
31/7 31/7
Opening Balance
13,500
310
31/7
Income Summary
4,800
1/8
Opening Balance
3,900
4,800
900 Dividends
31/7
Cash
31/7
Expenses
31/7
Retained Earnings
900
31/7
315
Retained Earnings
900
130
Insurance Expense* Closing Balance
1,800 1/8
600
3,900
1,350
Prepaid Insurance
Cash
900 4,800
* (e) adjusting entry, balance was $1,350 dr before adjusting entry
5/7
3,600
300
Cash
Retained Earnings
3/7
1,350
210
Salaries Expense*
Share Capital
6,300
120
4,500
* (e) adjusting entry, nil balance before adjusting entry
8,400
Cleaning Supplies
300
5,850
Salaries Payable
2,100 6,300
172
200
2,250 1/7
1/8
21/7
Depreciation Expense*
* (e) adjusting entry, nil balance before adjusting entry
4,050
1,650
171
9,000
Accumulated Depreciation – Motor Vehicles
4,500
18/7
Accounts Receivable
Opening Balance
Cash/Accounts Payable
100
1/7
15,600
1/8
Week 5
1,650
* (e) adjusting entry, balance was $1,800 dr before adjusting entry
Income Summary
150 1,650 1,800
3,600
31/7
320
Revenue
8,400
4,800 8,400
Entries to this account are closing entries. It has a nil balance before and after closing entries because the balance, profit, is closed to retained earnings,
8,400
ACCT5001 S1 2010
Self-Study Solutions
Week 5
Service Revenue
31/7
Income Summary
8,400
ACCT5001 S1 2010
Self-Study Solutions
Week 5
400
12/7
Accounts Receivable
3,750
25/7
Accounts Receivable
3,000
31/7
Accounts Receivable*
8,400
(c) & (f) Corellian Windows Ltd
1,650 8,400
Trial Balance
* (e) Adjusting entry,$6,750 cr balance before adjusting entry, $8,400 cr after adjustment, before as at 31 July 2010
closing
Petrol & Oil Expense
31/7
Cash
300
31/7
300
Cleaning Supplies Expense
31/7
Cleaning Supplies*
450
31/7
(c) Unadjuste d
500
Income Summary
510
Income Summary
450
* (e) Adjusting entry, nil balance before adjusting entry, $450 dr after adjustment, before closing
Depreciation Expense
31/7
Accumulated Depreciation*
300
31/7
Income Summary
Insurance Expense
Prepaid Insurance*
150
31/7
Income Summary
Salaries Expense
Cash
31/7
Salaries Payable*
1,800
31/7
110 120
(f) Adjusted Debit
$4,050
$4,050
Accounts Receivable
4,650
6,300
Cleaning Supplies
1,350
900
130
Prepaid Insurance
1,800
1,650
171
Motor Vehicles
9,000
9,000
172
Accumulated Depreciation – M. Vehicles
200
Accounts Payable
$300 3,600
13,500
13,500
Share Capital
300
310
Dividends
400
Service Revenue
500
Petrol & Oil Expense
530
510
Cleaning Supplies Expense
450
150
520
Depreciation Expense
300
530
Insurance Expense
540
Salaries Expense
2,400 2,400
* (e) adjusting entry $1800 dr balance before adjusting entry, $2400 dr after adjusting entry before closing
Credit
$3,600
Salaries Payable
600 2,400
Cash
Credit
300
540
Income Summary
100
Debit
210
* (e) Adjusting entry, nil balance before adjusting entry, $150 dr after adjustment, before closing
20/7
Account Title
520
* (e) adjusting entry, nil balance before adjusting entry
31/7
No.
600 900
900 6,750
300
8,400 300
150 1,800 $23,850
2,400 $23,850
$26,400
$26,400
ACCT5001 S1 2010
Self-Study Solutions
Week 5
ACCT5001 S1 2010
(d)
Self-Study Solutions
Week 5
Corellian Windows Ltd Statement of changes in equity
General Journal
for the month ended 31 July 2010
Date
1.
Account Titles and Explanation
July 31
2.
31
3.
31
4.
31
Accounts Receivable Service Revenue (Accrued revenue)
Post Ref.
Debit
Credit
110 400
1,650
Retained earnings 1 July
1,650
Add:
Profit
Less:
Dividends
$4,800 4,800
Depreciation Expense Accumulated Depreciation (Depreciation expense)
520 172
300
Insurance Expense Prepaid Insurance (Prepaid insurance expired)
530 130
150
Cleaning Supplies Expense Cleaning Supplies (Supplies used)
510 120
450
Salaries Expense Salaries Payable (Accrued salaries)
540 210
600
300
(900)
Retained earnings 31 July
150
$3,900
Corellian Windows Ltd Statement of Financial Position as at 31 July 2010
450
$
$
Current assets:
5.
31
600
(g)
Cash
4,050
Accounts receivable
6,300
Cleaning supplies
900
Prepaid insurance
1,650
Total current assets Corellian Windows Ltd
12,900
Non-current assets:
Income Statement for the month ended 31 July 2010
$
$
Motor Vehicles
9,000
Less:
(300)
Accumulated depreciation
Total non-current assets
8,700
Total Assets Revenues:
Liabilities and Equity:
Service revenue
8,400
Current liabilities:
Expenses: Salaries expense
Profit
Accounts payable 2,400
Cleaning supplies expense
450
Depreciation expense
300
Petrol & Oil expense
300
Insurance expense
150
Total expenses
$21,600
Salaries payable
3,600 600
Total current liabilities
4,200
Equity: Share capital Retained earnings 3,600 $4,800
Total Equity Total Liabilities and Equity
13,500 3,900 17,400 $21,600
ACCT5001 S1 2010
Self-Study Solutions
Week 5
(h) General Journal
Date
Account Titles and Explanation
July 31
31
31
31
Debit
Post Ref
Service Revenue Income Summary (Close revenue accounts)
400 320
8,400
Income Summary Petrol & Oil Expense Cleaning Supplies Expense Depreciation Expense Insurance Expense Salaries Expense (Close expense accounts)
320 500 510 520 530 540
3,600
Income Summary Retained Earnings (Close Income summary account)
320 310
4,800
Retained Earnings Dividends (Close dividends account)
310 315
900
Credit
8,400
300 450 300 150 2,400
4,800
900
(i) Corellian Windows Ltd Post-Closing Trial Balance as at 31 July 2010 Debit $
No.
Account Title
100
Cash
4,050
110
Accounts Receivable
6,300
120
Cleaning Supplies
900
130
Prepaid Insurance
1,650
150
Motor Vehicles
9,000
151
Accumulated Depreciation – Motor Vehicles
200
Accounts Payable
210
Salaries Payable
300
Share Capital
310
Retained Earnings
300 3,600 600 13,500 3,900 $21,900
j) $150 = 1,650 – 300 -150 - 450 – 600
Credit $
$21,900
