Question 1                                                                                                           (48 marks)

The following information relates to Gem’s Jewels Ltd:

Gem’s Jewels Ltd

Statement of Financial Position

As at 30 June

2015 2016
$ $ $ $
Current Assets
Cash at bank 20,000 39,500
Inventory 80,000 150,000
Accounts Receivable 120,000
309,500
Non-current Assets
Buildings 330,000 430,000
Acc. Depreciation – buildings (80,000) 250,000 (110,000) 320,000
Office Equipment 110,000 75,000
Acc. Depreciation – office equipment (30,000) (20,000)
Total assets 507,000 684,500
Current liabilities
Accounts Payable 60,000 120,000
Current tax liability 7,500 17,000
Wages payable 20,000
87,500
Non-current liabilities
NAB Loan Payable – 80,000
Total liabilities 87,500 247,000
Equity
Share capital 400,000 420,000
Retained earnings
Total liabilities plus equity 507,000 684,500

 

 

Gem’s Jewels Ltd

Income Statement

For the year ended 30 June 2016

 

 

$ $
Income
Sales revenue 485,000
Less: Discount allowed   (1,500) 483,500
Cost of sales 365,000
Less: Discount received   ( 1,000) 364,000
Gross Profit 119,500
Other income
Interest revenue
Expenses
Bad debts written off 4,500
Loss on sales of office equipment 5,000
Depreciation-buildings 30,000
Depreciation-furniture 10,000
Other expenses 39,000 88,500
Profit before income tax 45,000
Income tax expense 13,500
Profit after income tax 31,500

  

Additional information:

 

  1. A dividend was paid during the year.
  2. New buildings were purchased for cash
  3. Office furniture which had cost $35,000, with a carrying amount of $15,000 was sold for cash for $10,000
  4. The company made a payment to the ATO for income tax.

 

Required:

  1. Prepare the statement of cash flows for Gem’s Jewels Ltd for the year ended 2016. (32 marks)
  2. Comment on the cash flow position of the entity as shown in the statement of cash flows. In your analysis, identify any warning signs or areas of strength for the liquidity of the business(9 marks)
  3. Prepare the following ledger accounts (T-Account format) for 30th June 2016:
  1. Office furniture (3 marks)
  2. Accumulated depreciation – Office furniture (4 marks)

 

 

Question 2                                                                                                                   (32 marks)

 

1.            Shares (26 marks)

 

Goofy Ltd was incorporated on 1 July 2016 and issued a prospectus inviting applications for 500,000 ordinary shares at an issue price of $10.

The shares are payable are follows:

  • $5 payable on application
  • $3 payable on allotment
  • $2 payable on call to be made 30th September 2016 The transactions for the period were as follows:

31 August 2016: Applications were received for 580,000 shares.

  • September 2016: Applications for 80,000 were rejected by the directors and the application money was returned to the shareholders concerned.
  • September 2016: The Company allotted 500,000 shares to the remaining applicants.

25 September 2016: All the allotment money was received.

  • September 2016: The call was made on the shares, payable by 31 October 2016.
  • October 2016: Call money was received from the shareholders of only 460,000 shares.

31 December 2016: The remaining 40,000 shares were forfeited. The forfeited shares were offered to an investment company at a price of $8.50 per share paid to $10 and the transfer was completed on 31 March 2017. The costs of reissue amounted to $1,800.

The company’s constitution states that any forfeited shares must be refunded to the shareholders.

30 April 2017: These shareholders received a refund for the amount owed to them.

Required:

Prepare the general journal entries in the books of Goofy Ltd to record the above transactions. Provide narrations for all your entries. An example of journal template is given below:

 

Date Particulars Debit Credit

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