Question 1
For a sole trader, which accounts generally are involved in closing entries? Why are these accounts closed? (80 – 150 words)
Question 2
Different equity accounts are used depending on the type of organisational structure of the business. Illustrate and explain. (80 – 150 words)
Question 1 Cash versus accrual accounting During March, Thuy Bui’s business performed services for a specific customer for which the fee was $9000. Payment was received in the following April. Was the revenue earned in March or April? What journal entries should be recorded under accrual accounting in March and April? What journal entries should be recorded under cash accounting in March and April? Question 2 Adjusting entries The financial year for Drip Dry Cleaning Services ends on 30 June. Using the following information, make the necessary adjusting entries at year-end. Ignore GST. On 15 February, Danielle Drip’s business borrowed $16 000 from Northern Bank at 8% interest. The principal and interest are payable on 15 August. Rent of $3600…
Assume that you purchase a 6-year, 12 percent savings certificate for $1,000. If interest is compounded annually, what will be the value of the certificate when it matures? If the interest in the previous problem is compounded quarterly. What is the difference between the ending value of the savings certificate compounded quarterly and the one compounded annually? A friend promises to pay you $600 two years from now if you loan him $500 today. What annual interest rate is your friend offering? At an inflation rate of 9 percent, the purchasing power of $1 would be cut in half in just over 8 years. How long, to the nearest year, would it take for the purchasing power of…
QUESTION 1 In February 2020 Ink Joy Ltd reported net profits after tax of $500,000 for the year 2019 and announced that it will pay the annual dividend on 20 May 2020. Ink Joy expects the net profits after tax for 2020 to be 20% higher and it will maintain its current dividend payout ratio of 60%. Ink Joy will pay the annual dividend for 2020 in 20 May, 2021. Amy Aldan owns 10% of the ordinary share capital of Ink Joy Ltd. She has no savings and her sole income comes from Ink Joy Ltd. If Amy wishes to buy household goods worth $5000 in May 2020 and pays all her other bills totalling $35,000, calculate how much can she…
Question 1 Diamond Ltd acquired an item of polishing equipment on 1 July 2015 for $440,000. The equipment is expected to have a useful life of 10 years and the straight-line method of depreciation is to be used. It has salvage value of $40,000. On 1 July 2017, the equipment is deemed to have a fair value of $424,000 and revaluation is undertaken in accordance with the Diamond Ltd policy of measuring property, plant and equipment at fair value. The asset is still usable for next 8 years but the salvage value is determined to be zero. The asset is sold for $356,000 on 1 July 2019. Required: Provide the journal entries necessary at the following dates to account for the…
Case Study 1 Introduction In this assignment students are required to use the: General Ledger Banking Sales – Accounts Receivable Purchases – Accounts payable Inventory modules of the MYOB computer accounting program to process transactions and to produce a set of accounting reports relating to business operations. Input Business data The business is a book retailer named, “Student Name Pty Ltd” (students are to insert their own name) and is located at Your Address – Sydney NSW 2000.The firm’s sales are both over-the-counter cash and credit to well known customers. Company Name Address ABN Current Financial Year Last Month of Financial Year Starter Chart “Your name” Books Pty Ltd Your Address Your student Number 2020 June Retail Book store …
Question 1 TXA Ltd acquired a machine from Blue Ltd for the following consideration: Cash $70, 000 Land in the books of TXA Ltd the land is recorded at its cost of $650,000. It has a fair value of $450,000. TXA Ltd also agrees to assume the liability of the Blue Ltd bank loan of $89,000 as part of the machine acquisition. Required: (a) Calculate the acquisition cost of the machine. (b) Provide the journal entries that would appear in TXA Ltd.’s books to account for the acquisition of the Machine. Question 2 Max Ltd acquires an item of machinery on 1 July 2016 for a total acquisition cost of $61,000. The life of the asset is assessed as being six…
Question 1. National First Bank offers you a home loan for the next 30 years. The interest rate on the loan is 2.5% per annum. Required: If the bank says that you need to pay $500 each week and the interest rate is compounded weekly, what is the amount of your home loan? What is your monthly payment if you wish to pay monthly instalments and the interest rate is compounding monthly? Question 2. Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same start-up costs. Project A will produce annual cash flow of $42 000 at the beginning of each year for eight years. Project B will produce cash flow of $48 000…
On 1 July 2019, Gilberts Ltd acquired all the issued shares (cum div.) of Potoroo Ltd for $50 000. At this date the equity of Potoroo Ltd consisted of: Share capital $25 000 Retained earnings 7 500 At this date, Potoroo Ltd had recorded a dividend payable of $7500 which was paid in August 2019. All the identifiable assets and liabilities of Potoroo Ltd were recorded at amounts equal to fair values except for inventory for which the fair value was $1000 greater than carrying amount. Only 10% of the inventory on hand at 1 July 2019 remained unsold by 30 June 2020. The tax rate is 30%. During the 2019–20 period, the following transactions occurred. (a) Gilberts Ltd…
MACACC LLP. Background You are an Analyst for the professional service firm, MANACC LLP. Your firm specializes in providing a wide variety of internal business solutions for different clients. After 4 months on the job, you walk into the partner’s office to provide him with your two-week notice. Given your excellent performance over the past few months, rival professional service firm, FININV LLP has provided you with an offer you cannot refuse by providing you with a promotion to Consultant and a significant raise. Although sad to see you go, lead partner requested assistance on a few engagements for several clients. Julia Child Company Julia Child Company is a local small business and it sells baby car seats. Since…
Assume that are the financial manager of a company, which is considering a potential project with a new product that is expected to sell for an average price of $22 per unit and the company expects it can sell 350 000 unit per year at this price for a period of 4 years. Launching this project will require purchase of a $2 000 000 equipment that has residual value in four years of $200 000 and adding $ 600 000 in working capital which is expected to be fully retrieved at the end of the project. Other information is available below: Depreciation method: straight line Variable cost per unit: $11 Cash fixed costs per year $350 000 Discount rate: 10% Tax Rate: 30% Do…
Question 1 Little Book LTD has total assets of $860,000. There are 75,000 shares of stock outstanding, total book value of $750,000 with a market value of $12 a share. The firm has a profit margin of 6.5% and a total asset turnover of 1.5. Required: Calculate the company’s EPS? What is the market –to- book ratio? Question 2 Fifteen years ago, you deposited $12,500 into an investment fund. Five years ago, you added an additional $20,000 to that account. You earned 8%, compounded semi-annually, for the first ten years, and 6.5%, compounded annually, for the last five years. Required: What is the effective annual interest rate (EAR) you would get for your investment in the first 10 years?…
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