QUESTION 1: Balance Day Adjustments (20 marks)
|Debit ($)||Credit ($)|
|Rooftop Tea Room
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|
|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|
|Victoria, Drawings||43 549|
|Accounts Receivable||4 900|
|Accounts Payable||9 378|
|Inventory (1 July 2017)||44 213|
|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:
- 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).
- $975 of the Unearned Sales were earned for providing morning tea at Camden Canal Boat club Annual General Meeting on 12 June 2018.
- Rent was paid on 1 July 2017 for an 18 month period ending 31 December 2018.
- The Office Supplies on hand at 30 June 2018 was $624.
- 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).
- The 12 month Insurance policy (policy # 558) of $12 393 was paid on 1 June 2018.
- 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).
- On 30 June 2018, Victoria estimated 4% of Accounts Receivable will not be collected as this amount has been outstanding for 180 days.
- The bank has approved an overdraft facility for $2 500 for Rooftop Tea Rooms.
- The Pastry Chef’s wages payable but not recorded as at 30 June 2018 are $2 582.
** If your calculation results in an answer with decimal places please round to the nearest dollar i.e. 1.5 will become 2, 1.4 will become 1.
It is now the end of the financial year and Victoria requires you to undertake the following:
Prepare the Balance Day Adjustment Journals for Rooftop Tea Rooms where required in the proforma provided on the next page. Include narration (explanation) for each journal entry. (20 marks)
Rooftop Tea Room
|Date||Details||Debit ($)||Credit ($)|
QUESTION 2: Financial Statement (10 marks)
Mr Bing owns and manages a cherry farm called ‘Delicious Cherries’ specialising in the retail of cherries to the public. The following Trial Balance for Delicious Cherries has been prepared at year end by Mr Bing.
DELICIOUS CHERRIES – TRIAL BALANCE
AS AT 30 JUNE 2018
Debit ($) Credit ($)
|Accrued Accounting Wages||3 200|
|Cash at Bank||48 200|
|Depreciation Expense – Van||5 000|
|Accounts Receivable||76 000|
|Orchard Tractor||62 000|
|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|
|Accounting Wages||15 898|
|Freight Outwards||15 947|
|Accumulated Depreciation – Orchard Tractor||24 000|
|Advertising Expense||8 223|
|Accumulated Depreciation – Van||17 500|
|Sales Returns and Allowances||12 370|
|Accounts Payable||63 000|
|Wages Sales Staff||66 565|
|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
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:
Please write a letter in your own words to the Managing Partner of your accounting firm explaining the following:
- Identify the two inventory systems. (2 marks)
- 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). (2 marks)
- Identify which system Mr Bing should use for the cherry farm shop and why. (4 marks)
- 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.
- 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 (15 marks)
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
|DESSIES DELICIOUS CHERRY DESERTS LTD
FOR THE YEAR ENDED DECEMBER 31 2018
ANSWER THIS QUESTION ON THE PRO FORMA PROVIDED
- Prepare a Statement of Cash Flows in the pro forma provided below and show all calculations (an answer without supporting calculations will receive zero).
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|
|Income Tax Paid|
|Cashflows from Operating Activities|
|Cashflows from Investing Activities|
|Purchase of Equipment|
|Proceeds from Sale of Land|
|Cashflows from Investing Activities|
|Cashflows from Financing Activities|
|Net Increase (decrease) in cash held|
|Cash at start|
|Cash at end|
Calculations below & on next page please
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