Culculations

QUESTION 1: Balance Day Adjustments 

  Debit ($) Credit ($)
Rooftop Tea Room

Trial Balance

30 June 2018

 

 

   
Vauxhall Delivery Van 21 100  
Rooftop Cleaning Expense 18 800  
Insurance Expense 12 393  
Water Expense 17 814  
Gas Expense 18 776  
Accumulated Depreciation – Refrigeration Equipment   24 470
Repairs and Maintenance Payable   8 063
Sales Returns & Allowances 795  
Electricity Expense 20 550  
Shop Furniture 22 500  
Discount Allowed 975  
Victoria, Capital   198 357
Pastry Chef Wages Expense 36 095  
Office Cleaning Expense 15 000  
Refrigeration Equipment 48 000  
Interest Expense 21 900  
Cash at Bank 36 232  
Waiting Staff Wages Expense 56 818  
Discount Received   1 935
Office Supplies Expense 1 763  
Unearned Sales   6 503
Oven 14 000  
Victoria, Drawings 43 549  
Accounts Receivable 4 900  
Accounts Payable   9 378
Loan   266 915
Inventory (1 July 2017) 44 213  
Purchases 189 750  
Sales   180 327
Rent Expense 31 500  
Advertising Expense 18 525  
     
Totals 695 948 695 948

 

Victoria has very little bookkeeping experience and has emailed you the following list of account information related to the year ended 30 June 2018:

(Continued next page)

  1. The Refrigeration Equipment is expected to have a useful life of eight years and have a $4 000 scrap value (calculate and record the depreciation expense for the year).
  2. $975 of the Unearned Sales were earned for providing morning tea at Camden Canal Boat club Annual General Meeting on 12 June 2018.
  3. Rent was paid on 1 July 2017 for an 18 month period ending 31 December 2018.
  4. The Office Supplies on hand at 30 June 2018 was $624.
  5. The oven was purchased on 1 May 2018 and will be depreciated at a rate of 15% per annum and will have no residual value (calculate and record the depreciation expense).
  6. The 12 month Insurance policy (policy # 558) of $12 393 was paid on 1 June 2018.
  7. The Vauxhall Delivery Van was purchased on 1 September 2017 and is expected to have a useful life of five years and have a residual value of $300 (calculate and record the depreciation expense for the year).
  8. On 30 June 2018, Victoria estimated 4% of Accounts Receivable will not be collected as this amount has been outstanding for 180 days.
  9. The bank has approved an overdraft facility for $2 500 for Rooftop Tea Rooms.
  10. The Pastry Chef’s wages payable but not recorded as at 30 June 2018 are $2 582.

** If your calculation results in an answer with decimal places please round to the nearest dollar i.e. 1.5 will become 2, 1.4 will become 1.

REQUIRED:

It is now the end of the financial year and Victoria requires you to undertake the following:

Prepare the Balance Day Adjustment Journals for Rooftop Tea Rooms where required in the proforma provided on the next page. Include narration (explanation) for each journal entry.

Rooftop Tea Room

General Journal

 

Date Details Debit ($) Credit ($)
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       

 

 

QUESTION 2: Financial Statement 

Mr Bing owns and manages a cherry farm called ‘Delicious Cherries’ specialising in the retail of cherries to the public. The following Trial Balance for Delicious Cherries has been prepared at year end by Mr Bing.

DELICIOUS CHERRIES – TRIAL BALANCE

AS AT 30 JUNE 2018

                                                                            Debit ($)                                                Credit ($)

     
Accrued Accounting Wages   3 200
Cash at Bank 48 200  
Depreciation Expense – Van 5 000  
Accounts Receivable 76 000  
Orchard Tractor 62 000  
Sales   333 970
Orchard Rent Expense 24 000  
Delivery Van 35 000  
Freight Inwards 19 000  
Unearned Revenue   3 100
Discounts Received   6 600
Accrued Van Maintenance Expense   1 900
Mr Bing, Capital (1 July 2017)   346 150
Inventory (1 July 2017) 116 000  
Term Deposit 130 000  
Mr Bing, Drawings 8 300  
Allowance for Doubtful Debts   3 594
Prepaid Rent 2 000  
Depreciation Expense – Orchard Tractor 6 000  
Van Maintenance Expense 10 000  
Doubtful Debts Expense 3 594  
Purchases 161 467  
Accounting Wages 15 898  
Freight Outwards 15 947  
Accumulated Depreciation – Orchard Tractor   24 000
Advertising Expense 8 223  
Accumulated Depreciation – Van   17 500
Discount Allowed 900  
Sales Returns and Allowances 12 370  
Accounts Payable   63 000
Wages Sales Staff 66 565  
Mortgage   20 000
Purchases Returns and Allowances   3 450
     
Total 826 464 826 464

 

The stocktake performed at 30 June 2018 recorded an ending inventory balance of        $128 600

 

REQUIRED:

 

Prepare a fully classified Income Statement for the year ending 30 June 2018.

 

 

Answer question 2 on the following page

 

 

 

 


 

QUESTION 3: Accounting Concepts (15 marks)

 

 

As a graduate accountant of J2R Chartered Accountants, you are frequently required to assist in stocktakes for various clients. One of the very new clients to J2R Chartered Accountants is Mr Bing who owns and operates quite a large cherry farm and is considering opening a shop on the farm which will sell cherry pies, cherry jam and cherry chocolate bars. He has been chatting to other fruit farmers and they have asked him whether he uses a periodic or perpetual inventory system. Mr Bing does not know anything about either of these inventory systems and during a recent meeting he had with the Managing Partner of J2R Chartered Accountants (your boss) he asked if he could be sent some information regarding these two inventory systems. The Managing Partner is extremely busy so she has asked you to prepare a letter which covers the following:

 

 

REQUIRED:

 

Please write a letter in your own words to the Managing Partner of your accounting firm explaining the following:

  • Identify the two inventory systems.
  • How Mr Bing can determine which inventory system he is using in his cherry farm accounting system (refer to the trial balance in question 2).
  • Identify which system Mr Bing should use for the cherry farm shop and why.
  • Which inventory system would be most appropriate for Mr Bing’s cherry farm (not the cherry farm shop) and why. (4 marks)

Up to an additional 3 marks will be awarded for following the formatting requirements below.

 

Formatting hints:

  • Date your letter 23rd March 2018
  • Address your letter to Miss Tulares Lapins (Managing Partner), J2R Chartered Accountants and Co. 39 Adelaide Terrace, Adelaide, SA,  5000
  • Any formal letter format is acceptable
  • Consider an appropriate way to sign off your letter
  • Set out your letter with subheadings to separate each part of your letter as you address the criteria required

 

QUESTION 4: Cash Flow Statement 

You are provided with the following financial information for Dessies Delicious Cherry Deserts Ltd:

 

DESSIES DELICIOUS CHERRY DESERTS LTD

COMPARATIVE BALANCE SHEETS

                                                AS AT DECEMBER 31                                                                 

 

Current Assets

       2018   2017  
Cash on Hand $1 200   $4 000  
Cash at Bank 7 926   1 009  
Accounts Receivable (net) 11 097   4 500  
Inventory 28 000   18 000  
Prepaid Expenses    1 650 $49 873     650 $28 159
Non Current Assets        
Plant & Equipment 83 500   64 000  
less Acc. Depreciation (23 000) 60 500 (17 600) 46 400
Land   80 000   180 000
Total Assets   190 373   254 559
         
Current Liabilities        
Bank Overdraft 6 402    
Accounts Payable 2 513   2 800  
Expenses Payable 780   790  
Tax Payable    1 877 11 572 1 200 4 790
Non Current Liabilities        
Bank Loan   20 000   20 000
Total Liabilities   31 572   24 790
Net Assets   $158 801   $229 769
         
Equity        
Capital   158 801   229 769
    $158 801   $229 769

 

(continued over page)

DESSIES DELICIOUS CHERRY DESERTS LTD

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31 2018

     
Net Sales   $126 897
Cost of Sales   45 200
Discount Received   280
Gross Profit:   81 977
Other Revenue:    
Interest Revenue   40     40
    82 017
Expenses:    
Selling & Admin Expense 21 087  
Doubtful Debts Expense 354  
Depreciation Expense 5 400  
Interest Expense 3 800 30 641
Profit before tax   51 376
Income tax expense   4 365
Profit   $47 011

 

 

 

 

ANSWER THIS QUESTION ON THE PRO FORMA PROVIDED

 

REQUIRED:

 

  1. Prepare a Statement of Cash Flows in the pro forma provided below and show all calculations (an answer without supporting calculations will receive zero).

(15 marks)

 

DESSIES DELICIOUS CHERRY DESERTS LTD

Cash Flow Statement

for the year ended 31 December 2018

 

  $ $
Cash Flows from Operating Activities    
Receipts from customers    
Payments to Suppliers & Employees    
Cash generated from operations    
Interest Paid    
Income Tax Paid    
Interest Received    
Cashflows from Operating Activities    
     
Cashflows from Investing Activities    
Purchase of Equipment    
Proceeds from Sale of Land    
Cashflows from Investing Activities    
     
Cashflows from Financing Activities    
Drawings    
     
Net Increase (decrease) in cash held    
Cash at start    
Cash at end    
     
     

 

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