QUESTION2: Balance Day Adjustments (25 marks) This is not a typo. Q1 was included in Part A of the assignment, which now continues in Q2. Below is the unadjusted Trial Balance for Auldana Custom Concrete Foundations as at 30th June 2016. NOTE: Please us

QUESTION2: Balance Day Adjustments (25 marks)

This is not a typo. Q1 was included in Part A of the assignment, which now continues in Q2.

Below is the unadjusted Trial Balance for Auldana Custom Concrete Foundations as at 30th June 2016.

NOTE: Please use this trial balance to complete the question ( NOT the trial balance you completed in Part Aof the assignment).

AULDANA CUSTOM CONCRETE FOUNDATIONS

UNADJUSTED TRIAL BALANCE

AS AT 30 June 2016

Debit ($)

Credit ($)

Cash at Bank

14037

Accounts Receivable

47046

Inventory

140400

Prepaid Insurance

4914

Office Supplies on hand

3 276

Furniture & Fittings

21030

Accumulated Depreciation – Furniture &Fittings

11 934

Equipment

69200

Accumulated Depreciation – Equipment

18720

Accounts Payable

27027

Loan Payable

120275

Paul’s ACCF – Capital

54972

Paul’s ACCF – Drawings

29280

Sales Revenue

706800

Sales Returns and Allowances

9924

Cost of Sales

412308

Discount received

12957

Freight inwards

9360

Sales Salary Expense

68328

Delivery Expense

18252

Advertising Expense

28590

Rent Expense

28 548

Office Salaries Expense

33750

Electricity Expense

7656

Discount Allowed

6 786

Totals

952685

On the next page is Paul’s information related to the year that ended 30 June 2016.

(1) A count of the stationery room showed that Office Supplies on hand at 30th June 2016 were $2 793.

(2) Both the Furniture & Fittings and the Equipment will 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

$1030

Equipment

10 years

(3) In order to allow for cash flow fluctuations, the bank has approved a $15,000 overdraft facility for Paul’s businessbank account.

(4) Office Salaries which are payable but not recorded as at 30th June are $1 125.

(5) The balance in the Prepaid Insurance accountrepresents a 12 month insurance policy that commenced on 1stMarch 2016.

(6) $6500 of the recorded Sales Revenueis for deposits made for foundations which will not be installed until July/August 2016.

(7) As of 30th June 2016, Paulhas estimated that3% of his Accounts Receivable will not be collected.

REQUIRED:

As it is now the end of the financial year, you have to undertake the following work for Paul:

a. Prepare any necessary Balance Day Adjustment Journals for ACCF. Include a brief narration (explanation) for each journal entry. (11 marks)

b. Post the journals from (a) above to the General Ledgers provided. (7 marks)

c. Complete the Adjusted Trial Balance provided for the account balances calculated in the General Ledgers from (b) above. (7 marks)

a. Prepare any necessary Balance Day Adjustment Journals for ACCF. Include a brief narration (explanation) for each journal entry.

Date

Details

Debit ($)

Credit ($)

b. Complete and post the journals from (a) above to the General Ledgers provided below. All ledgers must be footed.

Allowance for Doubtful Debts

Prepaid Insurance

Office Supplies on Hand

Accumulated Depreciation – Furniture and Fittings

Accumulated Depreciation – Delivery Equipment

Unearned Sales

Office Salaries Payable

Sales

Office Salaries Expense

Depreciation – Furniture and Fittings

Depreciation – Delivery Equipment

Office Supplies Expense

Insurance Expense

Doubtful Debts Expense

c. Complete the Adjusted Trial Balance provided below.You may need to insert additional accounts that are not currently listed.

AULDANA CUSTOM CONCRETE FOUNDATIONS

ADJUSTED TRIAL BALANCE

AS AT 30 JUNE 2016

Debit ($)

Credit ($)

Cash at Bank

14037

Accounts Receivable

47046

Inventory

140400

Prepaid Insurance

Office Supplies on hand

Furniture & Fittings

21 030

Accumulated Depreciation – Furniture &Fittings

Delivery Equipment

69200

Accumulated Depreciation – Delivery Equipment

Accounts Payable

27 027

Loan Payable (long term)

120275

Paul’s ACCF – Capital

54972

Paul’s ACCF – Drawings

29280

Sales Revenue

Sales Returns and Allowances

9924

Cost of Sales

412308

Discount received

12957

Freight inwards

9360

Sales Salary Expense

68328

Delivery Expense

18252

Advertising Expense

28590

Rent Expense

28 548

Office Salaries Expense

Electricity Expense

7656

Discount Allowed

6786

Totals

QUESTION 3: Financial Statement (18 marks)

The following Trial Balance for Paul’s Recycled Books has been prepared at year end by Paul, but he realises it is not in the correct order.

REQUIRED:

Using the Trial Balance provided below, prepare the following for the period in question:

1. Fully classified Balance Sheet

2. Statement of Changes in Equity

Paul’s Recycled Books

TRIAL BALANCE AS AT 30 JUNE 2016

Debit ($) Credit ($)

Shop Furniture & Fittings

24375

Accounts Receivable

45 066

Accumulated Depreciation – Shop Furniture & Fittings

8395

Rent Expense – Admin

3 650

Cash at Bank

47 753

Advertising Payable

3 901

Sales

545 385

Electricity Expense

1 443

COGS

386 210

Negan, Capital

43 810

Depreciation Expense – Shop Furniture & Fittings

3 550

Freight Inwards

2 945

Rent Expense – Store

25 225

Accounts Payable

14995

Discount Allowed

3 580

Inventory

20 335

Salaries Expense - Store

33 400

Loan Payable

32400

Allowance for Doubtful Debts

1 000

Prepaid Advertising

1 470

Interest Payable

550

Advertising Expense

635

Sales Equipment

14 500

Interest Expense

395

Doubtful Debts Expense

1 000

Paul, Drawings

17600

Sales Returns & Allowances

6705

Discount Received

3 026

Salaries Expense - Admin

13 725

Totals

653562

· The loan is payable in equal amounts over 36 months

Answer on following pages

QUESTION 4: Accounting Concepts (10 marks)

You are employed as a graduate accountant in a mid-tier accounting firm. One of the partners has asked you to review the following cases where a client has violatedat least one of the assumptions, concepts or definitions you studied at university. The partner has asked for a written report in your own words (using references where appropriate), to please explain:

a) which concept or assumption has been violated, and;

b) what the correct treatment should be.

i. The owner of a farming property argued that the value of a public road running past his land should be included among the farm’s assets. He felt this was right because the road made it quicker and easier for him to transport his products. “This means that the road is an asset to the farm,” he said.

[5 marks]

__________________________________________________________________________________

ii. Jayne, an owner of a children’s party business took party supplies home for her own personal use. She recorded this as a debit to Supplies Expense and credit to Supplies in the business’s books. [5 marks]

____________________________________________________________________________________________________________________________________________________________________

__________________________________________________________________________________

QUESTION 5: Cash Flow Statement (17 marks)

Below are the summarised cash flow statements for two businesses. Comment in your own words using referencing where appropriate on which one has a healthier cash flow situation and justify your answer by explaining the significance of each of the three types of cash flows for each business:

Cheap as Smith’s

Sniggles

Cash flow from Operating Activities

(12500)

11800

Cash flow from Investing Activities

18500

(6 200)

Cash flow from Financing Activities

(3500)

(6800)

Net increase / (decrease) in cash held

2 500

(1 200)

Cash at the beginning of the year

3900

7 300

Cash at the end of the year

6 400

6 100

[Approximately 400 words expected in your answer]

__________________________________________________________________________________

9 years ago

Report issue

QUESTION2: Balance Day Adjustments (a) Adjusting Entries Date Details Debit ($) Credit ($) 2016 June 30 Office Supplies Expense 483 Office Supplies 483 (Adjustment of the usage of office supplies) June 30 Depreciation 9420 Accum

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