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business
accounting 28th edition
Accounting Business Reporting For Decision Making 6th Edition Jacqueline Birt, Keryn Chalmers, Suzanne Maloney, Albie Brooks, Judy Oliver - Solutions
Explain the meaning of the term ‘budgetary slack’.
Ainsworth Enterprises has provided the following estimates relating to the first quarter of 2018.The cash balance at 1 January 2018 was $19,800.RequiredPrepare a cash budget for the quarter ending 31 March 2018. Cash sales Credit sales Receipts from accounts receivable Cash payments: Wages Office
Kyle Company makes specially designed coffee mugs. The entity has developed its web page and is trying to switch customer behaviour to this form of medium. Sales for each quarter of 2017 were as follows.Due to the change in sales strategy, the marketing department at Kyle Company expects sales to
Ski Lifters is a business that provides a chairlift for tourists in the Alpine region. The peak season is in winter, with the low season during the summer months. Sales are high during the ski season and then taper off once the season closes. Explain why preparing a cash budget might be
Vesty Travel Services plans to commence operations on 1 July 2018. The following data and estimates relate to the three months ending 30 September 2018.RequiredPrepare a monthly cash budget for the three months ending 30 September 2018. Initial capital Fees charged (credit) Fees received Computer
During late 2016, Ski Lifters commenced a new business in the Alpine region to rent ski gear to tourists. A budget has been prepared for the coming financial year. Prepare a brief report to management on how the budget can be used as a control device to monitor actual performance.
One of the downsides of using a participative style of budgeting is the possibility of ‘budgetary slack’. Explain whether you consider the strengths of a participative style of budgeting outweigh the problems associated with ‘budgetary slack’.
Coconut Plantations Pty Limited produces and sells two types of coconut-based products: soaps and candles. Jo Geter, the manager, is implementing a new marketing strategy in 2019. Actual sales in 2018 were as follows:Due to the change in sales strategy, Jo expects sales of both product to grow by
Garden Sculptures presents the following data relating to the expected operations for the months of January to March 2018.Requireda. Prepare a cash budget on a monthly basis for the three months ending March 2018. The cash balance at 31 December 2017 was $25,000.b. Explain how a variance report
Greenacres is a garden design and landscaping business. At 30 June 2018, it had a bank balance of $26,500. Provided below are estimates for receipts and payments for the three months ending 30 September 2018.Requireda. Prepare a monthly cash budget for the three months ending 30 September 2018.b.
Coconut Plantations Pty Limited produces and sells two types of coconut based products: soaps and candles. The 2019 sales budget for the two products is as follows.The beginning inventory on 1 January 2019 is expected to be 4200 units of Soaps and 1200 units of Candles. Management desires an ending
Kimona City has undertaken its budget planning for the coming accounting period.RequiredPrepare a budgeted statement of profit or loss for the coming accounting period. Budget item Sales Cost of inventory Raw materials inventory Raw material cost Selling and administration costs Budget data 40 000
Lineham Services is preparing a master budget for the coming year. At present senior management are reviewing the inventory policies. Which budgets would policies concerning the level of inventories affect? Why?
Alette Renn is the newly appointed chief accountant at Aerospace Data Components (ADC), which designs and manufactures data components for the aerospace and car industries. One of Alette’s early tasks was to review the budgeting and planning system. From her initial enquiries, she found the issue
Ron Howard is the operational manager for Tours R Us. Ron’s bonus is dependent upon the reduction of his department’s operating expense budget by 10 per cent in the coming year. One initiative he has taken is to cut staff training expenditure. What implications could this decision have for
Refer to the discussion at the beginning of the chapter regarding the ABC Shop closures.Discuss how budgeting techniques were used by the ABC’s financial accountant to assist in making the decision to rationalise operations.
Mandy Dahl, the accountant for Crane Distributors, is currently preparing the budget for the coming year. One of the agenda items for next week’s finance meeting is consideration of whether an outstanding loan of $500,000 should be refinanced, paid out in a lump sum, or extended by reducing the
Spreadsheet Service’s management expressed surprise that the budgeted profit was achieved despite actual sales being under by $50,000. Give reasons why the actual profit was able to match the budgeted profit.
Dorquay Hotel has twenty rooms available for rent. During the month of December its average room rate is expected to be $150 and its room occupancy 85 percent. Due to the holiday season, the room rate is to be increased by 10 per cent, and the occupancy is expected to be 95 per cent. In February,
Dorquay Hotel has a dining room which has the capacity to seat 50 guests. It is opened for breakfast and lunch seven days a week. During January 2016, management has forecast the seat turnover for breakfast to be 2.5 times and for lunch 2 times, with the average bill to be $20 for breakfast and $40
The Zeal Company operates antique and second-hand goods stores throughout Victoria. Such stores are currently very popular and sales are increasing each month. It has budgeted the following sales for the indicated months.Zeal Company’s success in this specialty market is due in large part to the
Mike Triump is the owner/manager for Online Logistic Solutions, which is a small transport and courier company that provides logistic services to business. Mike is about to start the budget process for 2018. His marketing manager has contacted customers and analysed market trends, and expects sales
Rainbow Enterprises has presented the following estimates relating to 2018 activities.Sales in the December quarter of 2017 were $690,000. All sales are on credit, of which 55 percent are collected in the quarter of sale and 45 per cent in the following quarter. Purchases are on credit, and entity
Nancy Ho owns and operates the Always on Time printing company. Nancy and her staff do not engage in planning or budgeting, as they consider the business too small to warrant their attention to such matters. Recently, it has been necessary for the employees to work overtime every night in order to
Lisa Lin is the manager of a large retail store specialising in children’s clothing and accessories. As Lisa is the longest-serving employee, she believes that she knows what is best for the store. Lisa does not consult with her departmental managers in relation to operational plans, and prepares
‘Nobody ever seems to be able to hit our sales targets. Why is that?’ (John Lyons, Chief Accountant of Clocktower Fashions). John Lyons was showing his frustration at the failure of the company’s store managers to meet their specific targets for sales and expenses. He says, ‘We do
Yummy Burgers R Us operates a store in Melbourne City, and the following is its average monthly statement of profit or loss:The owner is currently preparing the budget for next year and is considering the following alternatives:1. Reducing the cost of sales for food from 50 percent to 45 percent.
At the recent finance committee, the Chief Operating Officer advised the marketing department that a 10 per cent increase in sales is expected for the coming year. The increase is to apply to all product lines.Requireda. How would this directive impact on the preparation of next year’s budget?b.
Nicholas Cash of Advantage Tennis Coaching (ATC) has received an offer from a top-ranked Australian player, Roger Novac, who wishes to spend two months in the beautiful Queensland weather and have 50 private coaching sessions with Nicholas. If the offer is accepted, Nicholas will need to hire an
Pamcar Industries sells IT equipment, specialising in printers and faxes. The following statement reflects the contribution margin of each activity, and overall profit levels.Requireda. Calculate the contribution margin ratios for each of the two areas of activity, and in total.b. Using the total
Find the missing figure for each of the following independent cases. Selling price/unit $40 18 e. 8 5 Variable costs/unit $20 C. 20 6 i. Units sold 60 000 10000 50 000 100 000 500 000 Contribution margin (total) a. $ 60000 250 000 g. j. Fixed costs b. $ 48 000 f. 50 000 460 000 Profit (loss) $300
Vestal Industries operates in the IT industry, producing and selling computer and IT equipment. It is structured along functional lines (research and design, production, marketing and so on) and, for most of its history, it has operated with a fairly authoritarian management style. This management
Coconut Plantations Pty Ltd advertises weekly specials and makes sure that the shelf space (9 metres) at the entrance to the store showcases the specials. For the current week, their three products are being advertised at special prices. Each product must be allocated shelf space.RequiredHow should
How may an opportunity cost be relevant in an outsourcing decision?
Advantage Tennis Coaching (ATC) has been engaged to provide tennis coaching services to students at a local private girls’ college. ATC has put forward a proposal to the University of Queensland’s School of Human Movement (SHM) to offer students work experience. ATC qualified coaches will plan
When making a non-routine operating decisions are all future costs relevant? Explain.
Discuss the effect on CVP analysis of a lower income tax rate.
Discuss how knowledge of the break-even point and the margin of safety will assist management in its risk assessment of business operations.
Coconut Plantations Pty Ltd management plans to introduce detergents to their product range in 2018. They have provided the following information relating to their planned activities.Requireda. Calculate the break-even point in total units and units per product based on the 2018 data.b. Calculate
Explain the importance of the relevant range in relation to cost behaviour when considering the costs of expanding business activities.
The Coffee Club sells specialist coffee drinks from a rented cart on the beachside on the Gold Coast. Provided below is a summarised version of the statement of profit or loss for July 2016.The cost of beverages and napkins are classified as variable costs.Requireda. Calculate the contribution
The Cone Head House sells ice-cream cones in a variety of flavours. Financial data for a recent week are shown below.The Cone Head’s manager received a call from a university student club requesting 100 cones to be picked up in three days. The cones could be produced in advance by the store
If an entity has an objective of profit maximisation, break even analysis is not necessary. Discuss this assertion.
Briefly outline some of the key qualitative risk considerations with respect to outsourcing decisions.
Coconut Plantations Pty Ltd manufactures and sells candles, soaps and detergents and distributes them to stores located in Australia and New Zealand. The normal selling price per carton of candles is $25; the variable cost of a carton of candles is $15. The principal of the local primary school has
Coconut Plantations Pty Ltd manufactures three coconut-based products, candles, soaps and detergents. On average 75,000 candles, 50,000 soaps and 125,000 detergents are sold. Next year, the company has a restricted advertising budget of $40,000, which is sufficient to effectively promote only one
Diamond Light Company incurred the following costs to produce 50,000 light switches for floor lamps in 2017.The Ignition Company has offered to supply the switches for $16 per unit. An analysis of the overhead costs has identified that if the switches are outsourced, Diamond Light Company would
Pruton Processing is a single-product entity, and provides the following summary data relating to its product for 2017.Requireda. Calculate the break-even in units and sales dollars for 2017.b. Calculate the profit earned in 2017.c. Pruton Processing is considering introducing a second product that
The statement of profit or loss for Menage Industries for 2016 is as follows.Cost behaviour seems to follow this pattern: all of the cost of sales is considered variable; 50 per cent of the total marketing and distribution costs are variable; and 40 per cent of the total administration costs are
Taff Services offers three core accounting and bookkeeping services. After a cost behaviour study, the following profitability analysis has been preparedThe management of Taff Services estimates that the total fees mix (52%:28%:20%) is generally representative.Requireda. Calculate the contribution
Winslet Company has the capacity to manufacture 100,000 units annually of its only product. The following information is available.Requireda. Calculate the number of units that need to be sold annually to break even.b. How many units would need to be sold to earn a target annual profit of
Magic Dusters has also identified that another ingredient Delta D (500 litres required) will also be used in the special order for Stay Clean Ltd, (see problem 10.46). Unlike Alpha A, Delta D is currently used in the production of the normal production for Magic. The current inventory of Delta D
Nardeb Company is a software producer and sales company. Currently, it pays all sales staff on a fixed base salary. Recently, management has been considering switching sales staff across to an incentive-based reward system. Nardeb’s chief accountant Polly Xu has prepared some summarised numbers
In its first year of operations, Benson Pty Ltd earned $160000 in services revenue, $24000 of which was on account and still outstanding at the end of the reporting period. The remaining $136000 was received in cash from customers. The company paid expenses of $40000 in cash. Included in the $40000
Brendan and Paul, owners of competing businesses, agree to form a partnership on 1 July 2017. Their individual assets and liabilities were independently valued, and it was on this basis that the following values were assigned to the partnership.RequiredPrepare a balance sheet for the new
J. Robottom commenced business on 1 October 2017 as a beautician operating as iBeauty Salon and Services. Transactions for the month of October were as follows.Requireda. Prepare a statement of profit or loss for iBeauty Salon and Services for the month ended 31 October 2017.b. Prepare a balance
What do the following terms mean?a. Unlimited liabilityb. Mutual agencyc. Dividendd. Preference sharese. Unit trust
The shareholders’ equity section of the balance sheet for a public company includes:a. Share capital (contributed equity).b. Retained earnings.c. Reserves.d. All of the above.
Using your knowledge of the accounting equation, solve the missing values in the following table. Assets 200 000 b. 250 000 17 800 = = Liabilities 46 000 66 000 C. 11 600 + + + + Equity a. 140 000 46 000 d.
Go to the ASX website, www.asx.com.au. In the search window, type ‘listing on the ASX’. How does the ASX define ‘Listing’? What are the key benefits of ‘Listing’ according to the ASX?
The directors of Kent Ltd provide you with the following financial information for the period ended 31 December 2017: selling expenses $76050; interest expense $29250; legal fees $4875; administrative expense $60450; income tax expense $31 200; cost of sales $370500; ordinary share capital (20000
Samuel and Vinnie decided to form a partnership on 1 January 2017. They secured the services of a solicitor to draw up their partnership agreement as follows:a. Samuel is to contribute the following:• His vehicle valued at $72000• Plant and equipment valued at $168000• Accounts receivable
The closing balance sheet items are given below for Jason Woodstock in accounting equation form as at 30 June 2018. Transactions for the following month of July are also given.Transactions for July 2018 were as follows.Requireda. Prepare worksheet entries for the business transactions for the month
Determine the missing entries. Current assets $ 5000 7000 21 000 Non-current assets $ 9000 5000 61 000 Current liabilities $6000 2000 9000 Non-current liabilities $ 1400 3 000 12 000 Capital $3000 2000 C. Income a. 26000 60 100 Expense $ 5000 b. 41 000
Complete the following table. Current assets 200 6400 15100 d. Non-current assets a. 19 700 8400 5700 = Current liabilities 1700 50 3900 10700 Non-current liabilities 1100 400 2200 17 900 + Capital 4000 b. 11 100 3 500 Profit/loss 700 750 C. 5300
Refer to the reality check ‘Differential Reporting project’. Access the latest update on the project from the AASB website (www.aasb.gov.au/admin/file/content102/c3/Differential_Reporting_ Project_Update_28_07_2014.pdf) and summarise the current status of the project.
Refer to the Balance Sheets for Advantage Tennis Coaching and Coconut Plantations Pty Ltd.Requireda. Summarise the differences in the ownership structure of the two business entities.b. What are the relative advantages and disadvantages of each form of ownership structure?c. What are the advantages
Rotterdam Financial Services Pty Ltd, managed by Saphira Browne, provides accounting, taxation and financial planning services to clients residing in the inner Melbourne area. The balance sheet for Rotterdam Financial Services Pty Ltd as at 1 October 2018 is as follows.During the three months from
Explain what is meant by an ‘arm’s length business transaction’ when a business buys accounting software on credit.
What is the purpose of a statement of profit or loss for an entity? List typical items that you would see in the statement of profit or loss for a florist.
The following transactions were taken from the records of Anthony Reader, an interior designer, for the month ending 31 May 2017. You are required to design a suitable accounting worksheet for the period. May 12357 7 8 9 10 11 May 15 16 17 18 19 21 22 1278285 23 29 31 Commenced business with cash
Can errors still exist in the trial balance if the sum of the debit and credit columns equals the same amount? If so, provide an example.
From the following business transactions of Kathy Baker (landscape consultant):a. state the impact on the accounting equation for each transaction. For example:b. prepare a worksheet and a balance sheet for the month of June 2017 from the following information. 6 June ↑Cash $216 000 Capital 216
The following business transactions and business events relate to Danielle Chan’s Business Consultancy Pty Ltd.Requireda. Prepare a worksheet for the business transactions for June.b. Enter these transactions into ledger accounts for the business.c. Complete a statement of profit or loss and
Advantage Tennis Coaching, a business owned by sole trader Nicholas Cash, had the following assets and liabilities as at the financial years ended 30 June 2016 and 30 June 2017 as shown.Requireda. What is the equity as at the end of the two financial years?b. If Nicholas contributed an extra $15000
Cash sales of $2079 have caused the worksheet to be out of balance because a mistake was made when the figures were put into the worksheet. The bookkeeper accidentally increased the cash account by $2097 and increased the profit or loss account in the worksheet by $2079. This is often referred to
From the following account balances of Cloudy as at 30 June 2016, prepare a balance sheet in both the T-format and the narrative classified format. Cash at bank Accounts receivable (net) Inventory Plant and equipment Goodwill Accounts payable Borrowings Provisions Share capital Retained earnings $
From the following account balances of Graduant as at 31 December 2016, prepare a balance sheet in both the T-format and the narrative classified format. Cash at bank Accounts receivable (net) Inventory Other current assets Land and buildings Intangible assets Other financial assets (term
Choose appropriate account names and demonstrate the dual effect that occurs when the following business transactions take place. For example, in (a) we would increase cash $14 000 and increase capital $14000.a. Sam Major commenced business by contributing $14000 cash.b. Received $7000 income for
Solve for the missing financial numbers as they would appear on the balance sheet. Current assets $ 35000 d. 159 000 j. 46941 Non- current assets $46 000 84 000 g. 24 000 m. Total assets a. e. $295 000 k. 129 127 Current liabilities b. $29 000 55 000 6900 n. Non- current liabilities $ 28000 f. 102
Go to National Australia Bank (NAB) website at www.nab.com.au and download the latest annual report.RequiredUse these statements to answer the following questionsa. What is the total value of each of the following items at the end of the current reporting year in the NAB group accounts? For each
Go to the Australian Taxation Office website, www.ato.gov.au, and click on the ‘Businesses’ tab. Then click on ‘Starting your own business’. Next, click on ‘Record keeping and on-line reporting’ and then ‘Standard Business Reporting’. Click on ‘Digital transformation – SBR
JB Hi-Fi Ltd has a legal obligation to prepare and lodge financial statements. Access the notes to JB Hi-Fi Ltd’s most recent financial statements and identify the rules and regulations that govern the basis for the preparation of the financial statements. Compare this with the basis for the
A friend who owns a small entity trading as Jobs Galore knows that you are studying accounting, and has asked if you would prepare the entity’s classified balance sheet in narrative format as at 30 June. The friend has provided you with the following list of assets and liabilities (the equity
Coconut Plantations Pty Limited had the following assets and liabilities at financial year end.Requireda. What is the balance of retained earnings as at the end of the two financial years?b. If the company reported profit after tax of $229 600 for the year ended 31 December 2017 what amount (if
Virgin Australia has been ranked amongst the top six airlines of global carriers when it comes to the availability of frequent flyer reward seats based on the sixth annual Switchfly Reward Seat Availability Survey, which attempts to book award redemptions on carriers. The survey looks at 280 paired
Entities spend millions of dollars on marketing and advertising intended to promote and build brands, develop customers and sell services or products. Consider a new hotel being launched. Extensive marketing spend is required to create an awareness of the hotel and attract the first visitors. With
One of Google’s largest acquisitions was Motorola Mobility for $12.5 billion in 2011. Google subsequently sold Motorola to Chinese giant PC producer Lenovo for $2.9 billion.RequiredExplain how goodwill associated with Lenovo’s acquisition would be determined.
Using the Conceptual Framework definition and recognition criteria, discuss if each of the following items can be recorded as assets:a. Trade receivablesb. Investments in sharesc. Inventoryd. Research expenditure
The accountant of the private secondary college, St Lucia, is preparing the school’s financial statements. Discuss the justification for the school preparing special purpose financial statements rather than general purpose financial statements.
On 8 November 2011, the Australian Senate passed the ‘carbon tax legislation’ in relation to the government’s clean energy proposal, including a mechanism for pricing carbon. The legislation was effective from 1 July 2012. Under the legislation approximately 500 of the largest emitters in
Find the University of NSW’s (UNSW) asset revaluation policy on the internet. Summarise the measurement of UNSW’s various asset classes. Discuss the advantages and disadvantages of the revaluation and cost measurement systems.
Read the following extract from the 2015 Preliminary annual report of Seek Ltd.Critical accounting policiesThe preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the
Australian Agricultural Company Limited was formed with a grant of one million acres and the stated aim of cultivating and improving the wastelands of the colony of New South Wales. Today the company is a cattle producer with a significant position in the Australian food industry and is the largest
Microsoft is going to struggle to raise the US$8.5 billion it agreed to pay for Skype, the internet communications company, this week — but the deal is likely to be important in its pursuit of key rivals and could have nasty consequences for the telecommunications sector. Skype is the most
The following information was obtained from the financial records of Bulmer Ltd for the year ended 30 June 2015. Prepare the statement of profit or loss for the year ended 30 June 2015. Retained earnings 1 July 2014 Sales revenue from continuing operations for the year Finance costs Estimated
EY’s analysis of the accounts of 16 European utilities reveals that almost €17.7 billion (US$23.4 billion) was written off balance sheets between 2010 and 2011. A large proportion (58 per cent) of this lost value is concentrated among just three utilities, while only four companies posted
Discuss the difference between profit or loss and comprehensive income.
Explain the three methods of depreciation.
The statement of profit or loss for JB Hi-Fi Ltd for the financial year ended 30 June 2015 was provided in figure 6.2. It reports that JB Hi-Fi Ltd has increased its gross profit from $756.0 million in 2014 to $798.3 million in 2015. Its profit for 2015 is $136.5 million compared to $128.4 million
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