QUESTION 1: Balance Day Adjustments (20 marks)

 

	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:

 

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.                                                                                                                           (20 marks)

 

Rooftop Tea Room

General Journal 

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
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.             (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.

 

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 (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                                                                    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   188 049   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

 

 

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

 

 

Calculations below & on next page please

 

 

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