INTRODUCTION The objective of this Accounting practice set is to provide students with an insight into the process of recording transactions, completing adjusting and closing entries, and preparing financial statements for a retail business. Company Background Luxe Leather Bags Pty Ltd has been operating in Toorak, Victoria, since July, 2013. The company was started by Kent Cognac and operates a business which sells luxury leather bags on a wholesale basis to other bag boutiques on both credit and cash terms. The company's Share Capital consists of 810,000 ordinary shares, issued at $1 each, that are owned by various members of the Cognac family. The company employs a combination of sales and administration staff to operate the business.   Accounting System Information…

Question 1 The accounting profit before tax of Baby Shark Ltd for the year ended 30 June 2019 was $92,550. It included the following revenue and expense items: Accounting fees $5,500 Amortisation of development costs 15,000 Carrying amount of plant sold 30,000 Depreciation expense – equipment 5,500 Depreciation expense – plant 24,000 Doubtful debts expense 8,100 Employee expense 15,400 Entertainment expense 13,200 Goodwill impairment 2,000 Government grant (exempt income) 2,200 Insurance expense 12,900 Proceeds from insurance claim for loss of profits 41,200 Proceeds from sale of plant 33,000 Warranty expense 1,500     The draft statement of financial position as at 30 June 2019 included the following assets and liabilities:   2019 2018 Assets Cash $15,500 $17,500 Trade receivable 35,000 40,500…

Question 1 Financial statement disclosures You are the financial accountant for Superstore Ltd, and are in the process of preparing its financial statements for the year ended 30 June 2018.  Whilst preparing the financial statements, you become aware of the following situations: Superstore Ltd provides a warranty on goods sold for a period of 12 months from the date of sale.  The company has, in the past, always recognised a provision for warranties equal to 5% of sales made during the year.  Due to increasing warranty costs and the number of goods returned under warranty in previous years, the directors met during the financial year (ended 30 June 2018), and decided to increase the provision to 8% of sales made during…

Question 1 Topic 3: Consolidation: Non-controlling interests   On 1 July 2016, Peaceful Ltd acquired 80% of the shares of Serene Ltd on an ex div basis for $305,600. All the identifiable assets and liabilities of Serene Ltd were recorded at amounts equal to their fair values except for: Carrying amount Fair value $ $ Inventories 120,000 130,000 Machinery (cost $200,000) 160,000 165,000   At 30 June 2016, Serene Ltd had recorded a dividend payable of $10,000. The inventory on hand at 1 July 2016 was all sold by 30 November 2016. The machinery had a further 5-year life, but was sold on 1 April 2019. At acquisition date, Serene Ltd reported a contingent liability of $15,000 that Peaceful Ltd considered…

The following employees work for Shy-Fi Contracts Ltd, a public company specialising in contract labour force for different projects in construction industry. The employees are paid an hourly rate, based on their Job Classification level.  If an employee works more than 35 hours, they will be paid the overtime rate for the additional hours. The following table summarises the classifications and level of pay per classification: TABLE A:   Classification Levels Level Hourly pay 1 $        30.00 2 $        40.00 3 $        50.00 4 $        60.00 5 $        65.00 6 $        70.00   The overtime hourly rate is $ 80 per hour for ALL employees, regardless of their classification level. Sky-Fi Contracts Ltd has the following employees:   TABLE B:  …

Part A: Income Statement and Balance Sheet  Laura Golarsa’s Asset and Liabilities as at June 30 are outlined in the post-closing trial balance below.   Debit Credit Cash at Bank $2,700.00   Inventory (at cost) $4,000.00   Accounts Receivable $3,100.00   Plant & Equipment $6,600.00   Accumulated Depreciation: Plant & Equipment   $2,640.00   Debit Credit Motor Vehicles $18,000.00   Accumulated Depreciation: Motor Vehicles   $4,500.00 Land & Buildings $225,000.00   Accrued Expenses Payable   $530.00 Bank Loan   $51,730.00 Capital: Laura Golarsa   $200,000.00   $259,400.00 $259,400.00   Laura Golarsa estimates that her sales for the next three months will be as follows: July August September $15,750 $19,250 $17,500 Selling price is firmly established a cost plus 75% Markup, with…

Eureka Ltd commences operations on 1 July 2018. One year after the commencement of its operations (30 June 2019) the entity presents its first Statement of Comprehensive Income and Statement of Financial Position on 30 June 2019. The statements are prepared before considering taxation. The following information is available.   Eureka Ltd Statement of Comprehensive Income for the year ended 30 June 2019      $       $ Gross Profit   2,700,000       Expenses:     Administrative expenses 200,000   Selling expenses   80,000   Salaries 420,000   Interest expenses   14,000   Provision for doubtful debts   70,000   Long service leave 140,000   Warranty expenses   84,000   Depreciation expense – plant 224,000   Insurance   84,000…

Sampras Ltd issued $1 million of convertible notes on 1 July 2019. The notes have a life of 6 years and a face value of $1 each. They offer interest, payable at the end of each financial year, at a rate of 5 percent per annum. The notes were issued at their face value and each note can be converted into one ordinary share in Sampras Ltd at any time in the next 6 years. Organisations with a similar risk profile to Sampras Ltd have issued debt with similar terms but without the option to convert at the rate of 7%. The holders of the options elect to convert the options to ordinary shares at the end of the second year…

Financial statement presentation, accounting for income tax, statement of cash flows The trial balance of Dress to Impress Ltd, a new clothing retailer in Sydney (commenced operations on 1 July 2017), includes the following accounts at 30 June 2018:   DR ($) CR ($) Sales revenue   4,278,000 Interest income   19,000 Cost of goods sold 2,620,000   Advertising 230,000   Annual leave 28,000   Depreciation - administration office equipment 8,000   Depreciation - shop fittings 23,000   Doubtful debts expense 13,000   Electricity 26,000   Insurance 28,000     DR ($) CR ($) Interest expense 4,000   Long service leave 8,000   Rent 240,000   Salaries 518,000   Sundry expenses 74,000   Income tax expense ?   Cash on hand…