ACCT5001 S1 2010 Week 5 Self-Study Solutions

ACCT5001 S1 2010Self-Study Solutions Week 5 ACCT5001 S1 2010 Self-Study Solutions Week 5 Ch. 4: Q5, Q6; E4.1; E4.5; E4.9; PSA4.3; PSA4.4; PSA4.6* EXERCISE 4.1 Sailing Boats Ltd (a) (1) 7 Dec Accounts Receivable Sales (to record sale on credit) Review PSA2.5*; PSA3.7* 720,000 720,000 5. (a) The primary source documents are: (1) (2) cash sales – cash register tapes, and credit sales – sales invoices. Cost of Goods Sold (b) The entries for the perpetual method of accounting for inventories are: Debit Cash sales Cash Sales Cost of Goods Sold Inventory Credit sales Accounts Receivable Sales Cost of Goods Sold Inventory xx xx xx xx xx xx xx xx (3) 13 Dec Cash ($690,000 - $13,800) Discount Allowed [($720,000 - $30,000) x 2%] Accounts Receivable ($720,000 - $30,000) (to record collection within 2/7, n/30 discount period from Ships Ahoy Ltd) 480,000 480,000 Inventory (to record cost of inventory sold to Ships Ahoy Ltd) Credit (2) 8 Dec Sales Returns and Allowances Accounts Receivable (to record allowance granted to Ships Ahoy Ltd) 30,000 30,000 676,200 13,800 690,000 6. 24 July Accounts Payable ($4,480 - 280) Discount Received ($4,200 x 2%) Cash ($4,200- $84) (to record payment of balance, 2/7) (b) 4,200 84 4,116 2 Jan Cash Accounts Receivable ($720,000 - $30,000) (to record receipt of payment by Ships Ahoy Ltd) 690,000 690,000 (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. 1 2 $300) (to record payment to R.$3.000 .$3.800) 26.000 Administrative expenses 522.200 (75.5 Hans Olaf Pty Ltd EXERCISE 4. Ward & Co.633.000 PROFIT AFTER INCOME TAX 3 4 .200 (3) 7 April Equipment Accounts Payable (to record purchase of equipment on account) 26. 30/n) 18.434. Ward & Co.820.000 3.000) Discount Received [($18.000 300 Financial expenses Total operating expenses 84.700 PROFIT BEFORE INCOME TAX Less: Income tax expense 253.000 Income Statement for the year ended 30 June 2010 (2) 6 April Freight In Cash (to record payment of freight on goods purchased) 900 900 OPERATING REVENUE Net sales revenue: Less: Cost of goods sold $2.000 (5) 11 April Accounts Payable ($18.000) 54.186. Ward & Co.000 15.000 OPERATING EXPENSES Selling expenses 828. terms 2/7.000 .000 Other operating revenue (4) 8 April Accounts Payable Inventory (to record return of incorrect inventories and granted allowance of $3.000 .9 (a) Music Box Ltd (a) (1) 5 April Inventory Accounts Payable (to record purchase of inventory from R.000 GROSS PROFIT $1.000 14.000 .200 3.000 1. including discount 2/7) 15. 30/n) 15.687.000 1.ACCT5001 S1 2010 Self-Study Solutions Week 5 ACCT5001 S1 2010 Self-Study Solutions Week 5 EXERCISE 4.240 (b) 4 May Accounts Payable ($18.960) $177.$3.000) x 2%] Cash ($15.000 18.000 (1.000) Cash (to record payment to R. 800 7.800 .400 6 Accounts Payable Inventory (to record return of inventory to Tool World) 600 600 9 Accounts Payable ($7.800 Gross profit rate = Gross Profit Net Sales 1.200 x .3 (b) The Power House General Journal Profit margin = Profit after tax Net sales 177.800 Cost of Goods Sold (140 x $60) Inventory (to record cost of inventory sold) 8.400 8.9% 2.000  50.000 Cash (to record payment of freight to Speedy Couriers) 3 Accounts Receivable (140 x $120) Sales (to record sale of power tools to Hardware House) 16.200 72 7.9% 2.000 (to record purchase of power tools from Tool World.820.01) Cash (to record payment to Tool World.000 June 2 Inventory (130 x $60) Accounts Payable 7.820.800 5 6 . 1/7) 7.128 15 Cash Accounts Receivable (to record payment received from Hardware House) 16. 1/7.800 16.3% 2.200  57.ACCT5001 S1 2010 Self-Study Solutions Week 5 ACCT5001 S1 2010 Self-Study Solutions Week 5 PROBLEM SET A 4.820.$600) Discount Received ($7. 30/n) Freight In 60 60 Operating expenses to sales ratio = Operating Expenses Net Sales 1.240 6.800 16.434.633. 2/7) 14.800 1. 2/7.02) Cash (to record payment to Electro Tool.600 6.400 14.800 7 8 .056 28 Accounts Receivable (110 x $120) Sales (to record sale of power tools to Power Tools 4U) 13.ACCT5001 S1 2010 Self-Study Solutions Week 5 ACCT5001 S1 2010 4U) Self-Study Solutions Week 5 17 Accounts Receivable (120 x $120) Sales (to record sale of power tools to Funning’s Warehouse) 14.200 20 Inventory (120 x $60) Accounts Payable (to record purchase of power tools from Electro Tool.200 Cost of Goods Sold (110 x $60) Inventory (to record cost of inventory sold) 6.200 144 7.600 30 Sales Returns and Allowances Accounts Receivable (Allowances on power tools returned by Power Tools 1.400 26 Accounts Payable Discount Received ($720 x .02) Accounts Receivable (to record payment received by Funning’s Warehouse.400 x . 2/7) 7.200 13.400 Inventory Cost of Goods Sold (to record cost of goods returned) 900 900 Cost of Goods Sold (120 x $60) Inventory (to record cost of inventory sold) 7.112 288 14.200 7. 30/n) 7.200 7.200 24 Cash Discount Allowed ($14. 1 July 2010 Dep’n expense – store equipment Freight out Rent expense – store space Sales commissions expense Sales salaries expense Add: Profit $18.500 353.000 4.186) $346.910 Retained Earnings.494 Less: Dividends (15.200 9 10 .660 11.000) $1.700 52.774 (25.4 Self-Study Solutions Week 5 ACCT5001 S1 2010 Self-Study Solutions Week 5 Electricity expense Insurance expense 13.183.300 5.540 Total operating expenses 85.170.460 60.700 18.034 Selling expenses: 12.ACCT5001 S1 2010 PROBLEM SET A 4.350 10.314 Dave Jonos Department Store Pty Ltd Statement of Changes in Equity for the year ended 30 June 2011 OPERATING EXPENSES Retained Earnings.780 11.000 (823.740) 60.550 113.034 Less: Income tax expense PROFIT AFTER INCOME TAX GROSS PROFIT Other operating revenue: Discount received Interest revenue 1.000 143.200 6.400 10.600) Administrative expenses: Dep’n expense – office equipment 5.000 26. 30 June 2011 62.200 91.894 78.000 (13.400 267.814 PROFIT BEFORE INCOME TAX Sales revenue: 10.230 (a) Dave Jonos Department Store Pty Ltd Income Statement for the year ended 30 June 2011 OPERATING REVENUE Office salaries expense Rent expense – office space Rates and taxes expense Financial expenses: Interest expense Gross sales revenue Less: Sales returns and allowances Net sales revenue Less: Cost of goods sold $1. 000 Non-Current Assets Property.393 35.000 (c) LIABILITIES AND EQUITY Current Liabilities Accounts payable Income tax payable Rates and taxes payable Sales commissions payable Total Current Liabilities Non-Current Liabilities Bank loan Total Liabilities Equity Share capital Retained Earnings Total Equity TOTAL LIABILITIES AND EQUITY 39. discounts allowed on sales.676 $235.400 15. 1 % 221.503 25.540  22.800 73.593 A fully classified income statement provides more information than a summary-type statement.644 Av total assets = (208.800 133.160 Gross profit rate = Gross Profit  Net Sales 346. and discounts received on purchases.500 (54.740 4.9%  Net Sales 1.287 59.1% 1. For instance.000 Office equipment Less: Accum.ACCT5001 S1 2010 Self-Study Solutions Dave Jonos Department Store Pty Ltd Statement of Financial Position as at 30 June 2011 Week 5 ACCT5001 S1 2010 Self-Study Solutions Week 5 (b) Return on assets = Profit after tax ASSETS Current assets: Cash Accounts receivable Inventory Prepaid Insurance Total Current Assets $10.060 5.100 (25. a further breakdown of expenses into categories can give insight as to which particular expenses were excessive.287 108.034  5.170. If the operating expense ratio is high.644 Profit margin = Profit after tax Net sales = 60.814  29.287) /2 = 221. Dep’n – office equipment Total Non-Current Assets TOTAL ASSETS Operating expenses to sales ratio = Operating Expenses 267. plant and equipment Store equipment Less: Accum.611 = Av total assets 60 .6% 1. readers of the statement can ascertain how many sales were returned.850 $78.584) 48.516 156.034  27 .894 101.894 $235.000 + 235. dep’n – store equipment 162. Useful ratios such as the gross profit ratio and operating expenses/sales can also be calculated.170.301 47.000 62. 11 12 .170.340) 74.550 7. 000 143.600 OPERATING REVENUE Sales revenue: Gross sales revenue Less: Sales returns and allowances PROFIT BEFORE INCOME TAX Less: Income tax expense 135.300 (40.800 40.710 $990.ACCT5001 S1 2010 Self-Study Solutions Week 5 ACCT5001 S1 2010 Self-Study Solutions Week 5 PROBLEM SET A 4.000 Sales commissions expense (6600 + 4400) 11.700 Rent expense – office space (26400 – 6600)19.000 (610.100 237.500 PROFIT AFTER INCOME TAX Net sales revenue Less: Cost of goods sold GROSS PROFIT Other operating revenue: Discount received Rent revenue Total operating revenue 17.500) $346.400 372.000 Sales salaries expense 88.900 OPERATING EXPENSES Selling expenses: Advertising Freight out 11.6 Seaview Pty Ltd Income Statement for the year ended 30 June 2011 Financial expenses: Discount allowed Interest expense Bank charges Total operating expenses 8.200 1.800 26.000 Administrative expenses: Dep’n expense – office equipment Office salaries expense 8.000 (33.500 13 14 .800 Electricity expense 13.590) $94.100 12.000 33.200 82.800 2.600 8.000) $957. 5 Liu Advertising Pty Ltd (a) Date Account Titles and Explanation Post Ref Debit Credit Cash 1/4 11/4 20/4 Share Capital Revenue Received in Advance Service Revenue 3.5*.150 3/4 1.200 Apr.500 30 Accounts Payable Cash (Paid Speedy Art Supplies on account) 200 100 1.150 3.950 1.150 Revenue Received in Advance 11/4 Cash 209 550 30 Salaries Expense Cash (Paid monthly salary) 500 100 1.500 1/5 Opening Balance 25.150 30/4 30/4 29.150 1 2 No entry – not a transaction.150 25.1* PROBLEM SET A 2.950 Share Capital 1/4 Cash 300 25.550 2. 1 Cash Share Capital (Issued shares for cash) 100 300 25.400 2.400 20 Cash Service Revenue (Revenue received in cash) 100 400 3.550 115 10 110 400 1.550 3/4 Accounts Payable Supplies 2. PSA3.550 2.950 1.150 15 16 . Rent Expense Cash (Paid monthly office rent) Supplies Accounts Payable (Purchased supplies on account from Speedy Art Supplies) Accounts Receivable Service Revenue (Invoiced clients for services rendered) Cash Revenue Received in Advance (Received cash advance for future service) 510 100 950 950 10/4 Service Revenue Accounts Receivable 1.150 29.ACCT5001 S1 2010 Self-Study Solutions Week 5 ACCT5001 S1 2010 (b) Self-Study Solutions Week 5 Review Questions: PSA2.500 2/4 550 30/4 Rent Expense Salaries Expense 100 950 1.250 11 100 209 550 550 1/5 Opening Balance 1.150 1.200 Accounts Payable Closing Balance 25.350 110 3 115 200 2.250 Supplies 200 2.350 1.500 25.350 30/4 30/4 Cash Closing Balance Accounts Payable 1. 250 REF 100 110 115 200 209 300 400 500 510 Cash Accounts Receivable Supplies Accounts Payable Revenue Received in Advance Share Capital Service Revenue Salaries Expense Rent Expense Debit $ 25.350 1.500 4.7 (a) Date Self-Study Solutions Week 5 Corellian Windows Ltd General Journal Post Ref.350 2.150 4.100 2.950 950 $31.400 550 25.500 13.500 ACCT5001 S1 2010 PROBLEM SET A 3.000 4.800 (c) Liu Advertising Pty Ltd Trial Balance as at 30 April 2010 12 110 400 3.500 4.750 3.950 500 Cash Share Capital (Issued shares for cash) 13. 100 300 Debit Credit Account Titles and Explanation July 1 Salaries Expense 30/4 Cash 1.150 1.950 Accounts Receivable Service Revenue (Invoiced customers) Petrol & Oil Expense Cash (Paid for petrol and oil) Dividends Cash (Paid cash dividend) 110 400 3.750 18 200 100 2.500 Rent Expense 2/4 Cash 950 510 3 120 200 1.100 25 1.550 Credit $ 20 540 100 1.500 100 110 2.250 2.950 $31.800 1.800 21 1.350 5 130 100 1.ACCT5001 S1 2010 Self-Study Solutions Service Revenue 10/4 20/4 Accounts Receivable Cash Week 5 400 1.350 3.000 3.800 1.500 1 Motor Vehicles Cash Accounts Payable (Purchased truck) Cleaning Supplies Accounts Payable (Purchased cleaning supplies) Prepaid Insurance Cash (Paid insurance) Accounts Receivable Service Revenue (Invoiced customers) Accounts Payable Cash (Paid accounts payable) Salaries Expense Cash (Paid salaries) Cash Accounts Receivable (Collected cash from customers on account) 171 100 200 9.000 31 500 100 300 300 31 315 100 900 900 17 18 . 800 8.850 3. balance was $4.350 1/8 Opening Balance 900 Dividends 31/7 Cash 900 31/7 Retained Earnings * (e) adjusting entry.900 4.250 1.500 Retained Earnings Cleaning Supplies 3/7 Accounts Payable 1.400 Revenue 320 8.900 315 900 Prepaid Insurance 5/7 Cash 1.000 Accumulated Depreciation – Motor Vehicles 31/7 * (e) adjusting entry.600 Accounts Receivable 12/7 25/7 31/7 1/8 Service Revenue Service Revenue Service Revenue* Opening Balance 3.100 5/7 18/7 20/7 31/7 31/7 31/7 15.850 1/8 Opening Balance Motor Vehicles Cleaning Supplies 200 4.400 19 20 . 8.750 21/7 3.800 4.000 1.500 1.500 1. profit.600 1/8 Opening Balance 4.350 31/7 31/7 1.800 dr before adjusting entry Insurance Expense* Closing Balance 130 150 1.500 1/7 2. nil balance before adjusting entry Depreciation Expense* 172 300 Accounts Payable Cash Closing Balance 2. balance was $1.250 1/7 3. (e) & (h) Self-Study Solutions Week 5 ACCT5001 S1 2010 Self-Study Solutions Motor Vehicles Week 5 171 1/7 Cash 1/7 21/7 Share Capital Accounts Receivable 13.300 * (e) adjusting entry.300 8.600 3/7 5.400 6. It has a nil balance before and after closing entries because the balance.650 * (e) adjusting entry.650 1.050 15.600 18/7 31/7 Cash/Accounts Payable 9.800 2.400 Salaries Payable 31/7 * (e) adjusting entry.800 31/7 31/7 Expenses Retained Earnings Income Summary 3.350 dr before adjusting entry Cleaning Supplies Expense* Closing Balance 120 450 900 1. nil balance before adjusting entry Share Capital 1/7 Cash Salaries Expense* 210 600 300 13.350 31/7 31/7 Dividends Closing Balance 900 31/7 3.350 5.800 1/8 Opening Balance 1.800 1/8 Opening Balance Income Summary 310 4.600 31/7 4.650 31/7 8.050 Motor Vehicles Prepaid Insurance Accounts Payable Salaries Expense Petrol & Oil Expense Dividends Closing Balance 100 4.650 dr before adjusting entry Closing Balance Cash 110 2.ACCT5001 S1 2010 (b).800 300 900 4. balance was $1.100 6.800 31/7 31/7 1.800 3. is closed to retained earnings.400 Entries to this account are closing entries. 400 (c) & (f) Corellian Windows Ltd Trial Balance as at 31 July 2010 * (e) Adjusting entry.350 1.650 1.800 31/7 600 2.400 ACCT5001 S1 2010 Self-Study Solutions Week 5 31/7 Income Summary 8. nil balance before adjusting entry.850 $23. before closing Petrol & Oil Expense 31/7 Cash 300 31/7 Income Summary 500 300 No.400 cr after adjustment.650 9.400 300 450 300 150 Credit Cleaning Supplies Expense 31/7 Cleaning Supplies* 450 31/7 Income Summary 510 450 * (e) Adjusting entry.$6.400 12/7 25/7 31/7 8.750 cr balance before adjusting entry.400 $26.650 8.000 1.800 $23. before closing Salaries Expense 20/7 31/7 Cash Salaries Payable* 1.800 9.050 6. $2400 dr after adjusting entry before closing 21 22 . Vehicles Accounts Payable Salaries Payable Share Capital Dividends Service Revenue Petrol & Oil Expense Cleaning Supplies Expense Depreciation Expense Insurance Expense Salaries Expense (c) Unadjusted Debit $4.850 2.400 * (e) adjusting entry $1800 dr balance before adjusting entry. before closing Depreciation Expense 31/7 Accumulated Depreciation* 300 31/7 * (e) adjusting entry.400 1. 100 110 120 130 171 172 200 210 520 Income Summary 300 300 310 400 500 530 Income Summary 150 510 520 530 540 540 Income Summary 2.050 4.500 900 8.000 $3.750 3.500 900 6.400 $26.600 600 13.600 13. $150 dr after adjustment.400 Account Title Cash Accounts Receivable Cleaning Supplies Prepaid Insurance Motor Vehicles Accumulated Depreciation – M.400 2.ACCT5001 S1 2010 Self-Study Solutions Service Revenue Week 5 400 Accounts Receivable Accounts Receivable Accounts Receivable* 3. nil balance before adjusting entry. $8.000 $300 3. nil balance before adjusting entry Insurance Expense 31/7 Prepaid Insurance* 150 31/7 * (e) Adjusting entry.750 300 Credit (f) Adjusted Debit $4.300 900 1. $450 dr after adjustment. ACCT5001 S1 2010 (d) Self-Study Solutions Week 5 ACCT5001 S1 2010 Self-Study Solutions Corellian Windows Ltd Week 5 General Journal Date Account Titles and Explanation Post Ref. 31 520 172 300 300 Retained earnings 31 July 3.300 900 1.900 17. 31 540 210 600 600 Cash Accounts receivable Cleaning supplies Prepaid insurance Total current assets 4.500 3.050 6.800 (900) $3.200 Accumulated depreciation Total non-current assets 23 24 .600 600 4.400 $ Non-current assets: Motor Vehicles Less: Total Assets Liabilities and Equity: Current liabilities: Accounts payable Salaries payable Total current liabilities Equity: Share capital Retained earnings Total Equity Total Liabilities and Equity 13.600 (g) Corellian Windows Ltd Income Statement for the month ended 31 July 2010 $ Revenues: Service revenue Expenses: Salaries expense Cleaning supplies expense Depreciation expense Petrol & Oil expense Insurance expense Total expenses Profit 2.900 Add: Less: Profit Dividends 2.400 450 300 300 150 3.650 1.000 (300) 8.400 $21.650 12.650 $4.900 9.800 4.700 $21. 110 400 Debit Credit Retained earnings 1 July Statement of changes in equity for the month ended 31 July 2010 1.600 3. July 31 Accounts Receivable Service Revenue (Accrued revenue) Depreciation Expense Accumulated Depreciation (Depreciation expense) Insurance Expense Prepaid Insurance (Prepaid insurance expired) Cleaning Supplies Expense Cleaning Supplies (Supplies used) Salaries Expense Salaries Payable (Accrued salaries) 1.800 8.600 $4. 31 530 130 150 150 Corellian Windows Ltd Statement of Financial Position 4. 31 510 120 450 450 Current assets: as at 31 July 2010 $ $ 5. 800 31 310 315 900 900 (i) Corellian Windows Ltd Post-Closing Trial Balance as at 31 July 2010 No.000 300 3.600 600 13.400 31 320 310 4.650 9.900 $21.600 300 450 300 150 2.650 – 300 -150 .ACCT5001 S1 2010 (h) Self-Study Solutions Week 5 General Journal Date Account Titles and Explanation Post Ref 400 320 Debit Credit July 31 Service Revenue Income Summary (Close revenue accounts) Income Summary Petrol & Oil Expense Cleaning Supplies Expense Depreciation Expense Insurance Expense Salaries Expense (Close expense accounts) Income Summary Retained Earnings (Close Income summary account) Retained Earnings Dividends (Close dividends account) 8.900 Credit $ j) $150 = 1.050 6.400 31 320 500 510 520 530 540 3.900 Debit $ 4.450 – 600 25 .500 3.400 8.800 4.300 900 1. 100 110 120 130 150 151 200 210 300 310 Account Title Cash Accounts Receivable Cleaning Supplies Prepaid Insurance Motor Vehicles Accumulated Depreciation – Motor Vehicles Accounts Payable Salaries Payable Share Capital Retained Earnings $21.