Assignment Task
Objective
Apply relevant accounting concepts and principles in the preparation and analysis of financial statements.
Assessment
It is important that you provide workings for your answers, give adequate explanations to your answers, rather than general responses. In particular, and in answering the assignment questions, you need to be able to demonstrate you can:
Distinguish transactions used in the accounting process and distinguish the differences between the financial statements.
Identify and use the major accounting elements correctly according to how they have been listed or described as a part of transaction analysis and financial statement preparation.
Apply working knowledge of accounting principles and conventions to the accounting process correctly
Analyse and interpret financial statements and the information they present accurately and comprehensively.
Question 1
The following are the events associated with a healthcare service provider BettaBacks for the month of June:
1 June
The owner contributed an additional $100,000 to the business
1 June
Paid the insurance in advance for the next 12 months $4,500
3 June
Purchased new equipment for $35,000. $10,000 was paid in cash with the remainder on credit
10 June
Borrowed $100,000 from the bank
11 June
Invoiced a client for services provided $14,900. The invoice has not yet been paid
20 June
Provided $20,000 of services to a client for cash
21 June
The owner withdrew $2,000 for personal use to buy an ipad.
23 June
Received payment from services provided 11 June
25 June
Received $30,000 for services not yet performed. Services to be performed in July.
30 June
Received the electricity bill for the month of June for $2,900. Bill is to be paid on 15 July
30 June
Paid the wages to staff for the month of June $17,000
30 June
Paid $14,000 to an account payable
30 June
Recorded the insurance used up for the month of June
30 June
Paid rent for the month of June $5,000
30 June
Depreciation on medical equipment was estimated to be $200 and usage of supplies was estimated to be $500 for June
30 June
Received a letter of demand to pay $1500 in damages. Our legal team will dispute the claim.
At 1 June, the cash balance was $64,000, Supplies (Medical) were $4,000, Equipment was $44,000 and Capital was $112,000
Required
Complete a worksheet detailing the transactions for the month ending 30 June 2022. (Use a template similar to the one used in Activity 2.3 and adapt it for the purposes of BettaBacks). Calculate the ending balances, as well as profit/loss. Was the organisation profitable?
Describe why the recording of transactions is necessary and how this information will be used in external decision making. Explain why a manager should understand the accounting cycle in performing their job.
Question 2
The following data relates to a manufacturer of pharmaceuticals (GetGood Pharmaceuticals Ltd.) The accounts are in no particular order and relate to items of revenue and expense for the financial year ended 30 June 2023 and assets, liabilities and equity as at 30 June 2023:
Accounts Payable
12,000
Accounts Receivable
3,000
Buildings (net)
86,000
Share Capital
50,000
Cash
12,450
Cost of Goods Sold
57,500
Depreciation Expense
5,000
Dividends
26,500
Electricity Expense
1,260
Equipment (net)
13,800
Insurance Expense
6,000
Interest Expense
6,500
Interest Payable
4,200
Inventory
12,700
Land
40,000
Borrowings (due 2025)
40,000
Prepaid Insurance
1,500
Prepaid Rent
1,200
Rent Expense
1,500
Sales
125,000
Unearned Revenue
25,000
Wages Expense
22,000
Wages Payable
7,000
Provisions (approx. 50% is due to be paid in the next twelve months)
20,000
Retained Earnings
?
Required
Prepare a balance sheet (statement of financial position) which classifies assets and liabilities into current and non-current, as well as a profit and loss statement for the relevant period.
Using an example, explain two ways a manager may manipulate earnings this year to overstate profit. What may a manager look at to determine a red-flag and discuss the impact on subsequent years in the financial position and performance of the organisation
The state government has dictated to local health districts the rescue helicopters stationed at major hospitals are to be classified as assets of the local health district. The rescue helicopters were acquired by the state government with the local health district not responsible for staffing, maintaining or scheduling of rescues. The state government has provided guidance the rescue helicopters are gifted to the local health district, and with recording an asset the local health is to record an associated revenue.
Critically evaluate the accounting treatment of the rescue helicopters.
Question 3
The information above below relates to a private hospital Healthy Hospitals Pty Ltd for the financial year ended 30 June 2023. The cash balance at the beginning of the financial year was $14,100, the cash balance at the end of the year was $52,300.
Item
Amount
Amounts owing from customers
$38,000
Borrowed money on a long term long from the bank
$55,000
Cash paid to employees
$82,000
Cash paid to suppliers
$165,000
Cash received from services provided
$301,500
Depreciation on equipment
$18,000
Dividends paid to shareholders
$10,000
Income taxes paid
$24,900
Interest paid
$4,500
Interest received
$2,100
Issued shares for cash
$50,000
Payment to purchase new furniture
$62,000
Purchase of vehicles using lease finance
$85,000
Redeemed debentures for cash
$70,000
Sold equipment for cash
$48,000
(a) Prepare a Statement of Cash Flows for the year ending 30 June 2023.
(b) Describe the role the cash flow statement and profit and loss statement play in determining the financial sustainability of the organisation.
(c) Profit for the year was $76,750. What is the most relevant cash flow to compare to profit for the period. Outline the concerns you have in comparing profit with cash flow.
