HI5001
ACCOUNTING FOR BUSINESS DECISIONS
FINAL ASSESSMENT
TRIMESTER 1, 2022
Assessment Weight: 50 total marks
Instructions:
• All questions must be answered in the answer area under each question in this paper.
• Completed answers must be submitted to Blackboard by the published due date and time.
Please ensure you follow the submission instructions at the end of this paper.
Purpose:
This assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit.
Question 1 (8 marks)
You have been approached by the owner of Energy Boost who wants a bank reconcile statement to be prepared for the month ended 31 May 2022. The following information is produced by comparing the accounting records of Energy Boost with their bank statement received at the end of May:
a. Debit balance as per cash at bank account in Energy Boost as at 31 May, $106,210
b. Credit balance as per bank statement as at 31 May, $141,624
c. Deposits not reflected on bank statement, $17,556
d. Unpresented cheques at 31 May, $52,370
e. Service charge on bank statement, $210
f. Interest earned on bank account, $105
g. Cheque for insurance expense, $7,520 incorrectly recorded in books as $8,275
h. A dishonoured cheque written by a client James Smith, $5,460
i. Electronic transfer from a customer Andy Jones of $5,410
The entity doesn’t use special journals for record keeping.
Required:
a) Prepare a bank reconciliation statement for Energy Boost at 31 May 2022. (6 marks)
b) Explain to the owner why a bank reconciliation is prepared. (2 marks)
ANSWER:
Question 2 (10 marks)
ANZ Kitchen Appliances Pty Ltd has the following information for the month ended 30th June 2022:
• Accounts receivable has a debit balance of $176,550 (including the balance of C. Cathy’s account) at 1 June 2022.
• Allowance for doubtful debts has credit balance of $11,220 at 1 June 2022.
• On 15 June, received $3,300 of the account balance of C. Cathy’s of $13,200 and
• On 16 June, wrote off the remaining balance of C.Cathy’s as a bad debt.
• On 30 June, estimated bad debts expense for the year to be 2% of net credit sales of $825,000.
Required:
a) Prepare general journal entries for the transactions on 15, 16 and 30 June (ignore GST). (6 marks)
b) Assuming that this is the only bad debt written off for the year and this is the only adjustment to the allowance for doubtful debts account, show the information that will appear in the income statement for the year ended 30th June 2022 as a result of the above transactions. (2 marks)
c) Show how accounts receivable will appear in the balance sheet as at 30th June 2022. (2 marks)
ANSWER:
Question 3 (10 marks)
The following information relates to the one typy of inventory of Toy Ltd during the month of May 2022. Ignore GST.
Units Units cost ($) Total cost ($)
1/5 Beginning inventory 2,520 33 83,160
10/5 Purchase 1,800 34.8 62,640
15/5 Purchase 1,080 36.6 39,528
23/5 Purchase 1,800 39 70,200
Totals 7,200 $255,528
Toy Ltd has adopted the Periodic Inventory System. A physical count on 31 May verified that 2160 units of the type of inventory were on hand.
Required:
a) Determine the Ending inventory and Cost of Sales for the month of May, using the FIFO costing method. (6 marks)
b) Discuss at least 4 differences between Perpetual and Periodic Inventory systems. Your comparison should be based on aspects such as recording keeping, internal control, end of period process and business opportunity etc. (4 marks)
ANSWER:
Question 4 (10 marks)
On 30 June 2021, Giant Ltd purchased an equipment with a list price of $134,734 and credit terms of 2/10, n/30. Freight costs of $3,105 and installation costs of $3,036 were also paid on the same day.
Giant Ltd also has a machinery that was purchased at a cost of 220,000 on 1 July 2019. The machine was estimated with a useful life of 10 years and a residual value of 11,000 at the end of its useful life.
Giant Ltd’s financial year ends on 30 June each year. Ignore GST.
Required
a. Record the purchase of the equipment on 30 June 2021. (2 marks)
b. Determine the amount of accumulated depreciation for the machine at the end of 30 June 2021, assuming use of: (4 marks)
i. the straight-line depreciation method
ii. Diminishing balance method (depreciation rate is 25%)
c. On 1 July 2021, the machine was sold for $190,000. Record the transaction assuming straight-line method has been used. (2 marks)
d. Discuss the nature of depreciation. (2 marks)
ANSWER:
Question 5 (5 marks)
Annie Brown owns a construction designing firm called Achi Design. The unadjusted trial balance on 30 June 2019 below was prepared by her accountant.
Achi Design
Unadjusted Trial Balance
As at 30 June 2019
Account Debit ($) Credit ($)
Cash at bank 144,150
Accounts receivable 276,450
Allowance for doubtful debts 3,750
Prepaid advertising 31,800
Office supplies 26,250
Office equipment 279,300
Accumulated depreciation – office equipment 34,200
Accounts payable 175,050
Unearned fees 38,700
A, Brown, Capital 239,850
Design fees revenue 1,509,300
Rent expense 198,600
Salaries & wages expenses 1,012,500
Telephone expense 31,800
2,000,850 2,000,850
The following additional information is available at 30 June.
1. Unused supplies on hand on 30 June totalled $2,700
2. The Unearned Fees account includes $12,350 received for fees earned during June.
3. Estimated annual depreciation on the office equipment is 10% of the cost of the asset.
4. Advertising costing $20,200 was consumed during the year
5. Based on ageing analysis, 4% of the total accounts receivable are estimated as doubtful debts.
Required
Prepare the adjusting entries at the end of the accounting period. Ignore narrations.
ANSWER:
Question 6 (7 marks)
Jim Brown owns a small retail store called JB Sports. The entity prepares monthly financial statements. Below is a 10-column worksheet provided by the accountant of the business at the end of May 2022 before the financial statements for the month are prepared.
Account Names Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash 5,750 5,750 5,750
Accounts Receivable 6,500 2,000 8,500 8,500
Prepaid insurance 5,000 2,500 2,500 2,500
Supplies 2,750 1,450 1,300 1,300
Equipment 15,000 15,000 15,000
Acc. Dep. – Equipment 3,000 3,000 6,000 6,000
Accounts Payable 2,750 2,750 2,750
Unearned Revenue 750 500 250 250
J. B. Capital 20,820 20,820 20,820
Drawings 2,500 2,500 2,500
Sales Revenue 14,000 500
2,000 16,500 16,500
Wages Expense 3,570 2,125 5,695 5,695
Miscellaneous Expense 250 250 250
Insurance expense 2,500 2,500 2,500
Supplies expense 1,450 1,450 1,450
Depreciation expense 3,000 3,000 3,000
Accrued wages 2,125 2,125 2,125
Total 41,320 41,320 11,575 11,575 18,450 18,450 12,895 16,500 35,550 31,945
3,605 3,605
16,500 16,500 35,550 35,550
Required
a) Based on the worksheet above, prepare the closing entries. (4 marks)
b) Illustrate and explain how profit or loss is closed if the organisaction structure of JB Sports is a company instead of small proprietorship? (3 mark)
ANSWER:
END OF FINAL ASSESSMENT
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