Questions and Answers of Financial Accounting 6th Edition

Indicate the effects (increase, decrease or no effect) of each of the following independent transactions on:1. The rate of return on shareholders' equity 2. The current ratio 3. The debt-to-equity
Management is interested in what would have been the impact on net profit before tax for the year ended 30 June 2016 and cash flow from operations for the year ended 30 June 2016 and the current
Comparative balance sheets and income statements for Stradbroke Ltd are given below.During 2016, Stradbroke Ltd declared and paid preference dividends of $5600 and ordinary dividends of $46400. On 31
You are interested in the shares of Ittelson Pty Ltd. Before investing, you want to learn as much as possible about the company. However, all you have is a summary of ratios for the company that you
The following ratios describe the performance of Ratio Ltd for 2015 and 2016:1. Classify these ratios into those relating to:a. Profitabilityb. Liquidity and solvencyc. Financingd. Activity.2.
The general manager of a medium-sized manufacturing company wants to renew the company's operating loan. In discussions with the bank's lending officer, the general manager says: 'As the accompanying
The following is an extract from the Discussion and analysis of the financial statements of Manufacturer Limited.Explain the content of the above extract and its implications. WORKING CAPITAL
A friend has asked you to evaluate information about two companies in the same industry. Your friend wants to invest in one or the other, but not both. Both companies are publicly traded, started
Jeans F' All and Jeans 'R' Us are very similar companies in size and operation. Jeans F' All uses FIFO and the straight-line depreciation method and Jeans 'R' Us uses LIFO and diminishing value
As a senior investment analyst, you have been analysing financial results of CRetail Ltd for the last few years. The following table comprises a summary of the financial results for CRetail Ltd.1.
Traditional measures of assessing financial performance and financial position in the private sector are often not relevant for assessing the performance of public sector entities. In the private
a. Outline the kinds of information you would expect to see in a company's significant accounting policies note to the financial statements.b. How should a company decide what to include in that
Comment briefly on the following remarks by a businessperson:a. 'No one cares what our accounting policy choices are, because they have no effect on the price of the company's shares.'b. 'Last year
Refer to the following statement and answer the questions that follow:'In an accrual accounting setting, altering policies by, for example, choosing to capitalise rather than expense an interest cost
Company A is 100 percent owned by Mr A. The summary of Company A's financial statement information is as follows:1. Calculate Company A's return on equity for 2016.2. Company A is considering
TMC Ltd, a large producer of telecommunications equipment, retails its products through suburban outlets. Shown below are the calculations of some of its key ratios for 2016 and 2015.1. Comment on
Briefly explain the differences in profit margin, asset turnover, accounts receivable turnover, inventory turnover and any other important differences between a retailer of fast-moving consumer goods
A senior member of a large public company's management complained: 'Accountants' financial analyses don't seem very useful to me. The analyses don't reveal the business management factors that are
Explain the benefits of the Du Pont system of ratio analysis.
What ratios would you calculate to evaluate a company's liquidity?
What is a common size statement? When is its use most appropriate?
Shown below are extracts from the 2014 statement of cash flows from two Australian companies, Myer Holdings Limited and Harvey Norman Holdings Limited.1. State what you learn from the two
Refer to the extracts of the annual report of Woolworths Limited in this book's appendix. All questions relate to the consolidated accounts.1. What are the main components of cash flows from
The following information relates to Sandra Limited.Additional information (dollar amounts expressed in full units):a. The equipment that was sold was originally purchased by Sandra Limited three
Additional information:a. Net profit after tax is $25 270, which included a gain on the sale of plant and equipment of $250 (on plant and equipment that cost $2000).b. There was no opening or
Axiomatic Ltd's statement of cash flows for last year is shown below. Provide observations about how the company managed its cash during the year. Operating: AXIOMATIC LTD STATEMENT OF CASH FLOWS FOR
The following information is taken from the accounts of Property Ltd:Additional information:a. During the year, a building with a value of $700 000 was acquired by the issue of a long-term note. The
1. Explain the main differences in cash flows between 2015 and 2016.2. Comment on Como's cash flow position in 2016. COMO LIMITED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016 Cash flows
The financial year for Neverless Limited ends on 30 June 2016. During the month of June 2016, the company has incurred the following transactions:1. Sent invoices for $20 000 to customers for work
The financial year for Beta Limited ends on 30 June 2016. Management has asked you what effect each of the following June transactions will have on net profit before tax, cash flow from operations,
The following information relates to Tut Ltd.Additional information (dollar amounts expressed in full units):1. Land was revalued upwards during the year by $80 000.2. Motor vehicles with an original
1. Cost of goods sold = $2300 000 Inventory increased from $300 000 to $610 000 Accounts payable increased from $200 000 to $295 000Required: Calculate cash payments for purchases.2. Income tax
Following is the income statement for JKL Limited.Additional information: a. All sales were on credit.b. Accounts receivable decreased by $2000 during the year,c. All stock purchases were on
A business commentator made the following remark during a discussion of the financial performance of a large, but struggling, company:These accountants spend lots of money to create complicated
At the Annual General Meeting of Scotlay Ltd, the managing director made the following statement:Although the year was one characterised by poor sales performance, Scotlay Ltd maintained strong
Provide three examples of transactions that will affect:a. Cash flow from operationsb. Cash flows from financing activitiesc. Cash flows from investing activities.
Explain the difference between the direct and indirect methods of calculating cash flow from operations.
What are cash and cash equivalents?
Why is managing cash flow important?
The Sydney Cricket Ground Trust released the following offer:1. Assume the Trust is the promoter of the limited edition prints (i.e. it receives all revenues and pays all costs). Describe the
Quickflix describes its activities as follows:The principal activities of the Company during the course of the financial year were that of the development and operation of an online movie
Refer to the extracts of the annual report of Woolworths Limited in this book's appendix. All questions relate to the consolidated accounts.1. Which of the notes under significant accounting
A company stops accumulating costs (capitalising) in a long-term asset account (such as a building asset), and begins charging expenditures to expense and calculating depreciation expense on the
Senior management of Telemark Skiing Ltd wishes to capitalise $2 650 000 in ski-hill improvement costs expended this year, and amortise the capitalised costs over 10 years, rather than just expensing
Randwick Ltd has recorded development costs as an expense. Now the company is considering recognising these costs as an asset. If this was done, a development account would appear in the current
Kenso Limited has traditionally capitalised a portion of its advertising costs as a deferred asset. The amount of advertising cost capitalised this year was $300 000, and the new company's policy is
Highrise Constructions Ltd had a large three-year project with total revenue of $5 000 000 and estimated total costs of $4 200 000. The project was 25 percent complete at the end of the first year,
Multi-Storey Builders Ltd had a large three-year project with total revenue of $8 000 000 and estimated total costs of $6 500 000. The project was 20 per cent complete at the end of the first year,
BHP Billiton is the world's largest diversified resources company. Its core operations involve production of aluminium, copper, zinc, iron ore, diamonds, oil and gas.Read the following excerpt from
The following transactions occurred for Andrew Ltd for the year ended 30 June 2016:a. There was a major change in the Australian dollar resulting in a large exchange rate loss.b. Income tax expense
Pickin' Chicken Ltd and Country Delight Ltd both sell franchises for their chicken restaurants. The purchaser of the franchise (the franchisee) receives the right to use Pickin' Chicken's or Country
A builder formed a construction company in September. After several months of effort, the company completed a residence at a total cost of $70000 and advertised it for sale. By 31 December, the
The controller of Squiffle Ltd is having some disagreements with senior management about some company accounting policies. Squiffle, in business for only a year, has capitalised $67000 in development
Indicate whether each of the events described below gives rise to an expense under the Framework. If the event does give rise to an expense, what would be the other side of the transaction?1. A
When is a sale a sale? When does the accounting system recognise revenue as having been earned? Indicate what you think would be the revenue recognition policy in each of the following cases.
Learning Ltd provides one-day training programs on accounting. It charges $4000 per day. The following events occurred during May 2016.a. Received $20 000 from accounts receivable for sales in
Indicate whether each of the events described below gives rise to a revenue or an expense under the Framework. If they do, what would be the other side of the transaction?1. A bank loan of $30 000 is
Discuss when the following organisations are likely to recognise revenue.1. CPA Australia for membership fees.2. The University of New South Wales for student tuition fees.3. The Melbourne Cricket
Provide an example of a trade-off between relevance and reliability for revenue recognition.
On 31 May 2016, the following figures were extracted from the general ledger of Leonora Ltd.Additional information:On 31 May 2016, the directors of Leonora Ltd resolved to:a. Provide for estimated
Provided below are certain balances of Weldon Ltd at 30 June 2016.Additional information:1. Provide for taxation on 2016 profits, $9000.2. Provide for a final dividend that had been declared and
The abridged balance sheet of Brace Ltd, at 30 June 2016, was as follows:Fifty thousand shares were issued to the public at $1.50 per share, with the full amount of $1.50 per share being payable on
Consider the following note on reserves in an annual report.1. How much of the $76 587 would be shown on the face of the balance sheet?2. Could a bonus issue be made out of:a. The revaluation
The shareholders' equity section of Journal Limited is reproduced below.1. Provide two plausible reasons for the reduction in retained profits between 2015 and 2016.2. List three examples of what
The following shares were held by Roxby Pty Ltd at 30 June 2016.1. Prepare the journal entry for 30 June 2016 to reduce the shares to the lower of cost or net realisable value.2. What is the
Peach Furniture has decided to purchase 65 percent of Banana Appliances Ltd for $43 million in cash. The two companies' balance sheets, as at acquisition date, are (in millions of dollars):Peach
The following transactions occurred in the 2016 financial year. The opening balance of retained profits was $20 000.a. Shares were issued (4000 at $4 each).b. $2500 worth of inventory was purchased
Explain how the following benefit from the issue of share dividends (bonus shares):a. Existing shareholdersb. Future shareholdersc. The company.
Explain the difference between the equity method and the cost method for the valuation of investments.
Windhook Technologies Ltd has been having difficulty collecting its accounts receivable. For the year 2016, the company increased the allowance for doubtful accounts by $43 000, bringing the balance
Which of the following companies is likely to have low accounts receivable in comparison to total sales: Woolworths, Coca-Cola and QBE Insurance?
Novo Nordisk is an international healthcare company based in Denmark. Novo Nordisk prepares an integrated report. Use the online version of its Annual Report 2013 (available at
Obtain the Woolworths 2014 Corporate Responsibility Report (available at http://woolworthslimited2014.csr- report.com.au/downloads).1. List three important points the CEO makes relating to
Go to the following websites to examine the sustainability reports of some Australian companies:a. Telstra:
Refer to Exhibit 17.9 from the National Australia Bank (NAB) integrated report (2014 Annual Review). If you were an employee of NAB, which pieces of information in the 'Key Results' section would you
Underground Coal Mine is an underground coal-mining facility that processes coal on site. As a consequence, the Underground Coal Mine uses large quantities of diesel for the on-site transportation of
Supermarket Co. owns and operates a supermarket located in the suburbs of Melbourne. The supermarket is situated within a larger shopping complex owned and operated by Property fund Co. Property fund
Provide three examples of energy efficiency practices from an organisation of your choice reported in its sustainability report. Advise what the targets for 2015 were and if it achieved them.
Consider each of the following greenhouse gas emissions and determine if they would be reported under Scope 1, Scope 2 or Scope 3 emissions in the sustainability report:1. Electricity 2. Car
International surveys indicate that many companies do not have their sustainability data and reports assured.1. What are the benefits of having this information assured?2. Why would this assurance
The KPMG Survey of Corporate Responsibility Reporting 2013 notes KPMG member firms can help your organisation: 'Benchmark the quality of your reporting against industry peers'. What criteria are
Do you think the kinds of accounting concepts and standards illustrated in Chapter 6 as being part of GAAP can or should apply to a company's sustainability reports? Discuss the pros and cons of such
1. What is the purpose of a sustainability report?2. Why do companies prepare a stand-alone sustainability report?3. What disclosures are typically included in a sustainability report?
Why are benchmarks and targets important? What is the difference between the terms?
Provide two examples of each of the following:a. Scope 1 emissionsb. Scope 2 emissionsc. Scope 3 emissions.
What is the difference between direct and indirect energy and emissions sources?
What approaches are available for measuring a company's energy usage and emissions?
Identify at least two supply chain management practices that companies have undertaken to reduce their carbon footprint.
How can supply chain management assist in raising awareness of sustainability issues? Provide examples in your answer.
What do we mean by the concept of sustainability, and why does it matter?
What are the main criticisms of traditional financial reporting?
What types of information are missing in traditional financial reporting?
SRP Ltd has the following unadjusted trial balance at 31 December 2015.Data not yet recorded at 31 December 2015 include the following: a. Depreciation expense for 2015 was $3000. b. Insurance
The following transactions occurred during the year ended 31 December 2016 for Padstow Ltd: a. Issued share capital for $300 000 cash.b. Expiration of prepaid rent expense (i.e. prepaid rent expense
The following transactions occurred between 1 July 2015 and 30 June 2016 for AKH Limited, a. Issued share capital for $600 000 cash, b. Purchased $70 000 of inventory on credit, c. Paid $56 000 to
A business executive remarked: 'Accountants use a dual standard for measuring assets. Some are on the balance sheet because they have real future economic value. Others are there only because they're
What is the difference between depreciation and accumulated depreciation?
Outline some basic differences between cash accounting and accrual accounting.
Explain the difference between an expense and a cash disbursement.
Prepare journal entries for the following transactions in June 2016.1. Borrowed $100 000 cash from the bank and signed a note due in two years.2. Purchased inventory costing $15 000 on credit.3. Sold

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