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Accounting Information For Business Decisions Accounting 4th Edition Billie Cunningham, Loren A. Nikolai, John Bazley, Marie Kavanagh - Solutions
Briefly discuss the controls that should be put in place to manage over collections of cash from accounts receivable.
Briefly discuss the controls that should be put in place to ensure cash payments are authorised and made in a timely manner.
What does ‘insufficient funds’ mean in relation to a transaction on a bank statement?
What does a ‘stock out’ mean? What are the implications of this? How can it be prevented?
To what does FIFO refer?
How is the LIFO method of costing different from the FIFO method in terms of the effect on net profit for a period?
Why is it important that a business pays accounts payable in a timely manner?
Munro Pty Ltd presented you with the following information relating to the June bank reconciliation process. You are required to reconcile the records of the business with the bank statement and:a adjust the ‘Cash at bank’ account b prepare a bank reconciliation statement as at 30 June c
Johnson and Bates run a small business and are worried about their accounts receivable spiralling out of control.a Advise them of the steps they can take to manage credit and recover outstanding accounts.They are thinking about which method to calculate an amount for debts that might become bad.
In the chapter, we mentioned that if Cafe´ Revive came up short four coffee gift packs, it should increase its cost of goods sold account and decrease its inventory account by the cost of those gift packs. Suppose Emily wanted to keep a record of coffee shortages in the accounting
In terms of the accounting equation, where are changes in revenue and expense accounts recorded?
What are the main types of accounts included in the Income statement to determine profit or loss? Define each.
When do businesses normally recognise and record (a) revenues and (b) expenses?
What is the difference between operating expenses and non-operating expenses. Give examples of each.
Explain the difference between selling, general and administrative, and financial expenses.
What is the link between the income statement and the statement of owner’s equity?
What are the limitations of using ratio analysis to make decisions about the performance of a business?
State whether you think a business would recognise the following as revenue. When would it be recognised?a Cash sale by business $20 000 b Sale of excess equipment by a restaurant $350 c Hairdressing services for which clients paid cash $120 d Sale of goods on credit by a retailer $180 e A printer
State whether you think a business would recognise the following as an expense. When would it be recognised?a Depreciation $350 b Wages to be paid in the next month $1200 c Electricity bill due to be paid next month $430 d Purchase of goods for resale $500 e Insurance amount paid at the start of
On 1 October, Cooper’s Appliance purchased $8800 of goods including GST for resale. On 11 October, it sold $4500 of these goods that cost $4400 including GST to customers at a selling price of $6600 (including GST). The business uses a perpetual inventory system, and all transactions were for
The Swanlake Tax Services business was established on 1 March of the current year to help clients with their tax planning.During January, the business entered into the following transactions:Required:a Using the following column headings or account titles, prepare a worksheet to record the above
The following information is available for the Miller & Keen business for the year:Required:Prepare a schedule that calculates the cost of goods sold for the year. Beginning inventory Ending inventory Purchases Purchases returns and allowances $135000 150000 306 000 12000
The income statement information of Walten Furniture business for 20X2 and 20X3 is as follows.Required:Fill in (a)–(f). All the necessary information is given. (Hint: It is not necessary to find the answers in alphabetical order.) 20X2 20X3 Cost of goods sold $ (a) $95 360 Interest expense 960 00
Four independent cases related to the owner’s equity account of the Schmidt business are as follows:Required:Determine the amounts of (a)–(d). Schmidt, capital Net income Withdrawals Case 1 May for May in May 1 $ (a) $5 400 $2000 2 74000 (b) 3440 3 54 400 1 800 (c) 4 68 000 7 640 3 000 Schmidt,
The statement of profit and loss for JT Andrews for the financial year ended 30 June 2019 reports that the business had increased its gross profit from $123 000 in 2018 to $147 000 in 2019. Its net profit for 2019 was $59 000 compared with $49 000 in 2018.Suggest reasons why Required:a the gross
Neil Russell, the owner and bookkeeper for Jiffy Couriers, was confused when he prepared the following financial statements:Neil asks for your help. He says, ‘Something is not right! My business had a fantastic year in 20X3; I’m sure it made more than $3600. I don’t remember much about
Slick Suction’s ending inventory of vacuum cleaner parts included the following items:Required:a Calculate the value of the ending inventory under the lower-of-cost or net realisable value method.b Show how the ending inventory would be reported on the company’s balance sheet. Item # Number of
What is the difference between a T-form and a narrative form of balance sheet?
Identify and briefly explain five current assets that most businesses might have.
Identify and briefly explain three current liabilities that most businesses might have.
In each of the following situations, the total increase or decrease for one component of the accounting equation is missing.i Assets increased by $20 800; liabilities increased by $6400.ii Liabilities decreased by $4000; owner’s equity increased by $20 000.iii Assets decreased by $12 400;
The total increase or decrease for one component of the accounting equation is missing in each of the following situations:i Assets decreased by $30 000; liabilities decreased by $19 500.ii Owner’s equity decreased by $37 250; assets decreased by $22 500.iii Liabilities increased by $3000;
Identify whether the following assets would be classified as current or non-current at the end of the reporting period.Explain your classification decision.a Cash and cash equivalents b Motor vehicles c Prepaid expenses d Land e Accounts receivable f Inventory g Goodwill h Accrued revenue i Plant
Identify whether the following liabilities would be classified as current or non-current at the end of the reporting period.Explain your classification decision.a GST collected b Loan payable in three years c Accounts payable d Mortgage on premises e Bank overdraft f Capital contributed by owner g
UNeedit Sports Store, a business owned by Penny Needham, had the following assets and liabilities as at the financial years ended 30th June, 20X1 and 20X2:Required:a What is the owner’s equity at the end of each financial year?b If Penny contributed an extra $10 000 and made no drawings, what
From the following account balances of Josland at 31 December 20X2 prepare a balance sheet in both T-format and narrative classified format. Cash at bank $113 500 Accounts receivable (net) 52 400 Inventory 92 000 Prepayments 11 300 Vehicles Buildings Intangible assets 44 600 225 700 72 000 Accounts
Many long-term loans are payable over a period of time. For example, when a business takes out a mortgage to finance a building, it pays off a fraction of that mortgage every month.Required:What criteria would you use to decide whether to classify a mortgage as a current liability or a long-term
In this chapter, we said that the quick ratio is a better measure of liquidity than the current ratio because the quick ratio includes only those current assets that may be easily converted to cash.Required:What is the quick ratio? What current assets do we include in the calculation? Do you think
Obtain the Woolworths 2018 annual report and answer the following questions.Required:1 How does Woolworths report on its corporate responsibility?2 List three important points the CEO makes relating to sustainability.3 List any sustainability metrics Woolworths employed during 2018.4 What reduction
Flightboat Ltd borrowed $60 000, issued $20 000 worth of ordinary shares, paid a dividend of $50 000 and the owner withdrew $10 000 in cash. What was Flightboat’s net cash provided (used) by financing activities?
Fredski Coaching School had accounts receivable of $30 000 at the beginning of the year and $60 000 at the year end. The revenue for the year was $120 000. How much cash did Fredski collect from his customers?
Greengrass Mowing Service had operating expenses for the year of $60 000. At the beginning of the year, Greengrass owed$15 000 on accrued liabilities. The closing balance of accrued liabilities was $20 000. How much did Greengrass pay in cash for the operating expenses?
Simmo Education had cost of goods sold of $42 000 for the year. The beginning inventory was $40 000 and the ending inventory was $61 000. The beginning accounts payable was $35 000 and the closing balance was $50 000. How much inventory was purchased during the period? How much cash was paid to the
Nadine’s Fitball Pty Ltd began on 1 July 20X0 with cash of $140 000. During the year, Fitball earned service revenue of$650 000 and collected $620 000 from customers. Fitball expenses for the year totalled $ 450 000, of which $420 000 cash was paid to employees and suppliers. Fitball also brought
Tube Tunnel has the following information in its ‘Cash‘ account for July:i Paid employees: $18 000 ii Paid suppliers: $8000 iii Cash sales: $44 000 iv Collected interest: $3200 v Paid interest: $2000 vi Collected accounts receivable: $20 000.Required:Using the direct method, prepare the cash
Items to be included in the Mitchell’s Mechanics business’s cash flow statement for the current year are as follows:i Investment by owner: $12 000 ii Payments to employees: $32 400 iii Receipt from sale of investments: $5200 iv Ending cash balance: $29 200 v Payments for inventory: $24 000 vi
An analysis of the Barty Battles business’s Cash account for October shows these entries:i Beginning cash balance: $1600 ii Collections from customers: $43 000 iii Payment for purchase of storage shed: $19 000 iv Investment by owner: $10 000 v Payment to suppliers: $25 600 vi Collection of
Poodle Pets Company has asked for your assistance in preparing its cash flow statement for 20X1. Among other items, its 20X1 income statement shows sales revenue (net) of $270 000, cost of goods sold of $144 000 and salaries expense of$73 600. You analyse the business’s 20X1 beginning and ending
You have been hired by Freddy Flintstone to prepare its 20X1 cash flow statement. The business provides you with its 20X1 income statement, as follows:You determine that these numbers are correct. You review the business’s 20X1 beginning and ending balance sheets and find that the cash balance
Ryan Rebel Footy had net cash provided by operating activities of $8600 for 20X0. The business’s income statement showed sales (net) of $80 000, interest expense of $800 and net income of $8000. Its 20X0 beginning balance sheet listed total assets of $84 000 and owner’s equity of $36 000, and
The following information is taken from the accounting records of Ward’s business for the current year:1 Net income: $34 000 2 Increase in inventory: $9200 3 Decrease in accounts receivable: $17 000 4 Depreciation expense: $20 000 5 Decrease in salaries payable: $2000 6 Increase in accounts
Define a ‘stakeholder’. Suggest some examples of stakeholders at a university or at your own workplace.
What is sustainability reporting?
What is meant by ‘closing the loop’ in life cycle analysis?
What is the eco-efficiency ratio formula?
Explain what is meant by the term the ‘time value of money’ and provide an example.
What is the Global Reporting Initiative (GRI)? Outline its key components.
What is the difference between eco-efficiency and ecological balance?
Explain why business sustainability is a key consideration for management.
Suppose you have $100 000 to invest in the share market.a Using the triple bottom line to analyse company performance what company would you invest in, and why?b Would your decision differ if you only used financial performance data to make your investment decision? Why or why not?
Explore the Integrated Reporting website: http://integratedreporting.org/Required:a What is integrated reporting?b What is the aim of integrated reporting? (Hint: try the FAQs.)
The International Integrated Reporting Framework describes six categories of capital that organisations must consider as a benchmark in preparing an integrated report. Briefly describe each capital. Do you think all of these apply to your university or the organisation where you work? Explain why
Skatelove Ltd is a manufacturer of skate boards, based in Jacksonville, Florida. The skateboards have three main parts: the deck (wood and PVA glue); an aluminium truck (holding the wheels to the deck); and the wheels (polyurethane based). The wood used in manufacture of the boards is maple,
Define the characteristics of relevant costs and relevant revenues.
Explain why sunk costs are irrelevant.
What is an opportunity cost? Are these costs always able to be quantified?
‘All future costs are irrelevant.’ Do you agree? Why or why not?
‘If a product line is making a loss, should it be discontinued.’ Why or why not?
In a decision to make a previously purchased part, think of two incremental costs that might not be avoidable if the decision is reversed a year later. Why would they not be avoidable?
Suppose your friend tells you, ‘My colleague offered me $200 to rent my boat over the weekend, but I decided that I would use it myself to go water skiing at a cost of $90.’ What costs are involved in making this decision? Would you have rented the boat or used it yourself? Why?
Explain, by using an example, how a fixed cost can be a relevant cost.
When are fixed costs relevant in a short-term decision?
What is the decision rule for a special order decision?
An airline company is considering giving rates reduced by up to 50 per cent to members of the families of businesspeople at certain times of the week, in order to encourage businesspeople to take more trips. What relevant costs would the airline be considering in order to make this decision?
Actionwear makes clothing and accessories for the fitness industry. The company is considering dropping its line of Fitbands.What costs would be considered relevant to this decision? Are there costs that are not relevant? If so, provide examples.
Lisa Cooper is an employee of a company that manufactures tear-proof tracksuits. Lisa is paid $60 per hour, and is the only person on staff who is trained to operate a piece of technology that is critical to the production of tear-proof tracksuits. Each tear-proof tracksuit has a contribution
Pete Panda has just discontinued its poorest-selling line of high-quality upholstery. In its inventory, Pete has 6000 metres of material that cost $10 per metre. At the current selling price of $20, it may take as long as eight years to sell the material. A foreign buyer has just offered the
Smartime manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $100 000 annually. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales
On a chilly Sunday morning, Shaz Granger bought 30 dozen doughnuts for $75, prepared 10 litres of hot coffee and went to a farm auction. There, she sold all the coffee and all but six dozen of the doughnuts before heading home late in the afternoon. Knowing that she could not eat six dozen
Steveo Company produces small gelblasters. The manufacturing costs per unit to produce a small gelblasters are as follows:Variable selling costs to obtain and fill orders normally average $6.00 per unit when Steveo sells the gelblasters to local customers. Recently, however, Steveo paid $50 000 to
Williamson Company, a furniture manufacturer, produces 10 000 units of Product X-100 each year for use in its production line. The costs per unit for Product X-100 are as follows:Direct materials: $4.60 Direct labour: $7.10 Variable overhead: $3.30 Fixed overhead: $10.00.Norejects Ltd, an overseas
Phonegrip Company manufactures mobile phone holders. Phonegrip currently buys a magnet for its phones for $0.90 per unit. Phonegrip’s president asked for cost estimates for making this product, and received the following report:Direct materials: $0.37 Direct labour: $0.15 Variable overhead: $0.18
Cooper Manufacturing produces high-quality cabinets. Cooper has been forced to increase prices by about 40 per cent over the last few years, mostly because of the increased costs of purchasing quality wood and other direct materials used in the manufacture of its cabinets. Although Cooper will
Why is it important to understand how your business is performing before making capital expenditure decisions? How is this understanding achieved?
Briefly explain the advantages and disadvantages of the ARR and the payback period.
From the following table, calculate the variances and discuss each one in relation to the following questions:i Is the variance positive or negative in terms of business performance?ii What are the reasons why the variance may have resulted? Sales Less: Budgeted 420 000 Actual 467 890 Variance
Refer to the example given in the accounting rate of return (ARR) section of the text (pages 492–3), a summary of which is given below.Required:a Calculate the net present value (NPV) of the proposal to buy the new machine, given a cost of capital for the business of 5 per cent. Should the
The Anderson Group has identified the following capital expenditure proposals as acceptable. Only $150 000 is available for investment.Required:Determine the combination of proposals to be selected. Investment proposal Required investment Net present value A $30 000 $12000 B 60 000 36 000 C 30 000
Cairns Farming is a small family run dairy farm, which is finding it hard to continue in business. After visiting a farm in Nienberg, Germany, it is considering buying equipment that will enable it to produce electricity on the farm by converting manure into biogas. There is a $10 000 local
Several years ago, Catherine’s Cattery Supplies signed a contract to deliver 5000 units of a special product each year to one of its customers at a price of $15 per unit. This contract, which runs for five more years, is non-cancellable.Catherine is currently making the product with an old
What do we mean when we refer to different categories of business?
What distinguishes a service business from a merchandising business?
What impact does changes in interest rates have on the business environment?
What are the types of regulations with which businesses must comply in different jurisdictions?
What is an accounting management system?
What are generally accepted accounting principles (GAAP)?
Which groups of users require financial accounting reports to make decisions and what type of information do they need?
What does the term ‘ethics’ mean in business?
Why are ethical codes of conduct important for professional groups such as accountants and who monitors these codes of conduct?
What does ‘sustainability’ mean in regard to business?
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