Professional Documents
Culture Documents
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School of Accounting
ACCT 1501: Accounting and Financial Management lA
Question 1
Bank Reconciliation
20 Marks
The bank reconciliation statement for Cooma Pty Lld at March 31 is shown below.
3,521
274
591
132
997
4,518
(894
3,624
The bank statement received at the end of April shows the following:
Bank Statement
I-Mar
l-Apr
-Apr
-Apr
5-Apr
7-Apr
8-Apr
11-Apr
12-Apr
13-Apr
15-Apr
16-Apr
l7-Apr
19-Apr
O-Apr
I-Apr
3-Apr
4-Apr
5-Apr
7-Apr
9-Apr
'O-Apr
Statement Period
31/3/05 - 30/4/05
DR
$
CR
3,5210
894
2,627DR
2,9010
274
621
2,280D
1,756D
524
467
2,223D
512
2,735DR
77
2,812D
111
2,923D
470
2,453D
2,5510
98
2,3610
190
152
2,209D
132
2,3410
474
2,815D
423
2,392DR
661
3,053D
2,444D
609
392
2,836D
249
2,587DR
163
2,750DR
311
2,439DR
2,626DR
187
401
3,027DR
3,179DR
152
Cash Payments
Date Cheque No.
I-Apr
7002
4-Apr
7003
5-Apr
7004
7-Apr
7005
8-Apr
7006
II-Apr
7007
14-Apr
7008
18-Apr
7009
22-Apr
7010
24-Apr
7011
28-Apr
7012
30-Apr
7013
98
512
476
351
661
III
474
392
187
163
401
32
(2 marks)
c) Please identify (if any) the most important transaction to investigate and state your
reason for selecting this transaction.
(3 marks)
Question 2
15 marks
Fly by Night Airlines needs to finance the purchase of two new airplanes during the
current financial year and is deciding between two choices:
I. Issue 30,000 ordinary shares, at $90 per share
2. Issue $2,700,000 notes payable, repayable in 10 years, interest rate of 10% per
annum
The company estimates that at the end of the current financial year, with the two new
planes added to their fleet, the total profit before interest and tax will be $3,000,000. The
company currently has 70,000 ordinary shares issued, and at the end of the year it will
declare, and shareholders will approve, a final cash dividend of 15c per ordinary share.
The retained profit at the start of this current financial year is $12,500,000. The company
has a tax rate of 30%.
Required:
a. Determine the effect of each of these two choices on net profit and retained profit for
the current financial year. Show all workings.
(10 marks)
b. It is often said that debt finance places a company at more financial risk than equity
(5 marks)
finance. Give reasons why this would be so.
Question 3
Receivables
15 Marks
Below is the ageing schedule for Sand Grit Company as at June 30th 2004
Customer
Chen
Bergman
Russell
Miller
Iguana
Others
Estimated
Percentage
Uncollectible
Total
Estimated
Bad Debts
Total
Not yet
due
$22,000
40,000 $40,000
57,000
$35,000
16,000
6,000
$34,000
34,000
1,000
1,000
131,000
5,000
96,000 16,000 14,000
$285,000 $152,000 $32,000 $26,000 $35,000 $40,000
4%
7%
13%
25%
50%
At June 30,In, 2004, the unadJusted balance In Allowance for Doubtful Debts IS a credIt of
$12,000.
Required:
a) Calculate the total estimated bad debts as at June 30th 2004. Show all workings.
(3 marks)
b) Journalise and post the adjusting entry for bad debts at June 30th 2004. (I mark)
c) Journalise and post to the allowance account the following events and transactions
during the 2005 financial year.
(3 marks)
a. On 30 September 2004, a $1,000 customer balance originating from January
2004 is judged uncollectible.
b. On 30 November 2004, a cheque for $1,000 is received from the customer
whose account was written off on 30 September.
'
d) Journalise the adjusting entry for bad debts on June 30th 2005, assuming that the
unadjusted balance in Allowance for doubtful debts is a debit of $800 and the ageing
schedule indicates that total estimated bad debts will be $30,300.
(2 marks)
e) Now assume the company estimates that 3% of credit sales ($1,200,000) will be
uncollectible. Prepare the journal entry.
(2 marks)
f) How are bad debts accounted for under the direct write off method? Explain the
strength of this method and the disadvantages of this approach.
(4 marks)
Question 4
Non-Current Assets
30 Marks
3,000,000
$26,500,000
12,100,000
14,400,000
Equipment
$40,000,000
5,000,000
Less: Accumulated depreciation-equipment
35,000.000
$524000000
Total PP&E
During 2004, the following cash transactions occurred:
April I
May I
June I
Sold land purchased on I June 1993 for $1,800,000. The land cost
$500,000.
July I
December 31
December 31
Required:
Please round all figures to the nearest dollar. Show all calculations.
(a) Prepare journal entries for the above transactions. Kartsounis Company uses
straight-line depreciation for all classes of property, plant and equipment. The
buildings are estimated to have a 50-year useful life and no salvage value. The
equipment is estimated to have a 10-year useful life and no salvage value. All other
classes of property, plant and equipment have a 20-year useful life and no salvage
value. Update depreciation on assets disposed of at the time of sale or retirement.
(10 marks)
(b) Record adjusting entries for depreciation for 2004.
(10 marks)
(c) Prepare the property, plant and equipment section of Kartsounis Company's balance
sheet at 31 December 2004.
(10 marks)
Question 5
Part A
Liabilities
Liabilities, Provisions and Contingent Liabilities
20 Marks
(lO Marks)
(c)
(d)
(e)
Part B
Current Liabilities
(10 Marks)
On I January 2004, the ledger of Ciao Company contains the following liability accounts.
Accounts Payable
GST Payable
Unearned Service Revenue
$42,500
5,600
15,000
During January the following selected transactions occurred. Ciao Company uses a
periodic inventory system.
I Jan.
5 Jan.
Sold merchandise for cash totalling $7,800 which includes 10% GST.
12 Jan.
14 Jan.
Paid $5,600 to the Australian Tax Office for GST collected in December
2003.
25 Jan
Required:
(a)
(b)
(c)