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
|Cash at bank||20,000||39,500|
|Acc. Depreciation – buildings||(80,000)||250,000||(110,000)||320,000|
|Acc. Depreciation – office equipment||(30,000)||(20,000)|
|Current tax liability||7,500||17,000|
|NAB Loan Payable||–||80,000|
|Total liabilities plus equity||507,000||684,500|
Gem’s Jewels Ltd
For the year ended 30 June 2016
|Less: Discount allowed||(1,500)||483,500|
|Cost of sales||365,000|
|Less: Discount received||( 1,000)||364,000|
|Bad debts written off||4,500|
|Loss on sales of office equipment||5,000|
|Profit before income tax||45,000|
|Income tax expense||13,500|
|Profit after income tax||31,500|
- A dividend was paid during the year.
- New buildings were purchased for cash
- Office furniture which had cost $35,000, with a carrying amount of $15,000 was sold for cash for $10,000
- The company made a payment to the ATO for income tax.
- Prepare the statement of cash flows for Gem’s Jewels Ltd for the year ended 2016. (32 marks)
- 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)
- Prepare the following ledger accounts (T-Account format) for 30th June 2016:
- Office furniture (3 marks)
- 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.
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:
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