Questions and Answers of Managerial Accounting An Integrative Approach

Olden Motor Vehicles Ltd offers a 12-month warranty for the sale of used motor vehicles. On 1 July 2015, there was a credit balance of $70 000 in its Warranty Provision account. During the year ended
Premier Investment Ltd’s annual report 2013 contained the following selected data (in $ thousands). Required(a) Calculate these values and provide an overview of Premier Investment Ltd’s
At the beginning of 2016, Davis Builders Pty Ltd had a credit balance of $130 000 in its Warranty Provision account. The warranty expense for the year was $42 000 and the balance of the Warranty
The following entries were recorded in the accounts of Speedy Delivery Ltd. The following entries were recorded in the accounts of Fast Trucks Ltd. RequiredFor the four journal entries
Benson Builder Pty Ltd provides a 12-month warranty on building work performed by the entity. On 1 January 2016, there was a credit balance of $80 000 in its Warranty Provision account. During the
On 1 June, Sunny Nursery Ltd (lessee) signed a 2-year operating lease agreement with Bunning’s Rentals Ltd (lessor) to lease gardening tools for $400 per month. Payments are due every 2 months on
On 30 May, Grand Design Ltd (lessee) signed a 3-year operating lease agreement with Doby Ltd (lessor) to lease office space for $500 per month. Payments are due every 3 months on the last day of the
Edward Lee is about to start a business selling smartphone accessories on campus. Explain the impact of business transactions on cash by giving examples of the transactions that involve cash at the
Gerry’s Pizza operates strictly on a takeaway basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash. At the counter, the customer can see other employees
Rabbit Ears Pet Food Ltd recently changed its system of internal control over cash disbursements. The system includes the following features.Instead of being unnumbered and manually prepared, all
Continue with question 1 above. Describe the electronic banking processes to Edward as he is setting up his business on campus. Data from question 1Edward Lee is about to start a business
Harry Ford is starting a fruit juice bar on campus. He is wondering whether he should accept EFTPOS payments at his juice bar. Identify some of the costs and benefits of using electronic banking for
Burlington Theatre is in the Burlington Mall. A cashier’s booth is located near the entrance to the theatre. Two cashiers are employed. One works from 1 to 5 p.m., the other from 5 to 9 p.m. The
The 2013 financial statements of Domino’s are presented in the appendix at the back of this book. The cash flow statement for Domino’s for 2013 is reproduced below and on the following
The bank reconciliation statement for Watson Pty Ltd at 31 October 2015 is shown here: The November bank statement showed the following cheques and deposits: The company’s cash records
Johanna and Jake Berkvom own Campus Fashions. From its inception Campus Fashions has sold goods on either a cash or credit basis, but no credit cards have been accepted. During the past several
Shoe City Pty Ltd’s bank reconciliation clerk is unable to reconcile the bank balance at 31 January. The balance of the Cash at Bank account, before any entries for transactions initiated by the
Aaron Tso is the merchandising manager for Franklin Office Supplies Ltd. During the month of April when the Franklin’s accounts payable manager was on holiday, Aaron was responsible for receiving
Delicious Pies Pty Ltd is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep clerical and office expenses to a
The chief accountant of Shirts Galore Ltd believes that the entity’s yearly allowance for doubtful debts should be 2% of net credit sales. The managing director of Shirts Galore Ltd, nervous that
Highland Ltd owns these assets at year-end: What amount should be reported as Cash in the statement of financial position? Cash at bank savings account Cash on hand GST refund due Cheque account
At 31 July Ridley Pty Ltd has this bank information: cash balance as per bank $8420; unpresented cheques $862; outstanding deposits $2700; and a bank service charge $20. Determine the balance of the
The following is an accounts receivable ageing schedule for Cain Ltd. At 31 December 2016 the unadjusted balance in Allowance for Doubtful Debts is a credit of $10 000. Required(a)
As incidence of corporate fraud increased in the wake of the global financial crisis, so has the demand for forensic accountants to investigate and manage business risks. An article published in the
On 31 May 2016 Interactive Ltd had a cash balance as per company records of $10 949 debit. The bank statement from Community Bank on that date showed a credit balance of $15 569.20. A comparison of
As a new auditor for Farmers Chartered Accountants, you have been assigned to review the internal controls over cash receipts of Aardvark Pty Ltd. Your review reveals that cheques are promptly
Marc Pty Ltd has accounts receivable of $92 500 at 31 March 2016. An analysis of the accounts shows these amounts: Credit terms are 2/7, n/30. At 31 March 2016 there is a $1600 credit balance in
Dent Department Stores has just installed new electronic cash registers in its stores. How do cash registers improve internal control over cash receipts?
The following information relates to Eason Ltd for 2016:Required(a) What amount of bad debts expense will Eason Ltd report if it uses the direct writeoff method of accounting for bad debts?(b)
The following information relates to Benson Ltd for 2016. Required(a) What amount of bad debts expense will Benson Ltd report if it uses the direct write-off method of accounting for bad
Green Dot Furniture reported the following financial data in its latest annual report: RequiredCalculate and comment on the cash to daily cash expenses ratio. Cash and cash equivalents Total
On 1 January 2017, Diego Ltd had Accounts Receivable $146 000; Notes Receivable $15 000; and Allowance for Doubtful Debts $13 200. The note receivable is from Annabelle Ltd. It is a 4-month, 12% note
Massey Ltd uses the allowance method to record bad debts expense and concludes, using the ageing of accounts receivable method, that 1% of accounts receivable will become uncollectable. Accounts
On 1 January 2017, Elam Ltd had Accounts Receivable $54 200 and Allowance for Doubtful Debts $4700. During the year the selected transactions shown below occurred. RequiredJournalise the
Brian Bazaar had sold goods on credit in September 2016 for $5500 (including 10% GST) and in November 2016 became aware that the debtor M. Waters was bankrupt and the creditors were unlikely to
The following information was taken from the 2017 financial statements of Honey Factory Ltd: RequiredAnswer each of the following questions.(a) Calculate the receivables turnover and average
Presented below is basic financial information from recent annual reports of Qantas and Air New Zealand: Required(a) Calculate the receivables turnover and average collection period for both
Consider these transactions:(a) Bella Restaurant accepted MasterCard for payment of a $200 dinner. The bank charges a 4% fee. What entry should Bella Restaurant make?(b) Frantella Ltd sold its
Advanced Lifestyle Ltd has stores in Auckland and Queenstown. The following information was taken from the 2016 financial statements, showing the results of its two divisions: Required(a)
On 3 March Virtual Appliances sells $900 000 of its receivables to Fundamental Factors Ltd. Fundamental Factors Ltd assesses a finance charge of 4% of the amount of receivables sold.RequiredPrepare
Simona Ltd’s operating cycle is 1 year. How would the following receivables be classified on the statement of financial position?(a) Trade debtor account of $500 000, of which 70% is due within 1
On 10 May New Mark Ltd sold inventory for $2400 and accepted the customer’s Business Bank MasterCard. At the end of the day, the Business Bank MasterCard receipts were deposited in New Mark Ltd’s
Jayne’s Gourmet Delivery is in its second year of operation. All sales are on credit and the business has a credit term of 30 days. You have just worked out that the receivables turnover is 8 times
At the beginning of the current season on 1 October, the ledger of Eagle Ridge Golf Pty Ltd showed Cash $5250; Inventory $7350; and Share Capital $12 600. The following transactions occurred during
Suggest the most appropriate inventory system and inventory cost flow method for each of the following businesses and products:(a) Textbook sales in the co-op bookshop.(b) Petrol sales in the local
Assume that Jess Ltd uses a periodic inventory system and has the following account balances: Beginning Inventory $45 000, Ending Inventory $67 500, Sales $472 500, Purchases $300 000, Purchase
The trial balance of Francine Pty Ltd at the end of its financial year, 30 June 2016, includes these accounts: Beginning Inventory $56 760; Purchases $469 920; Sales $627 000; Sales Returns and
Pumpkin Patchwork Ltd is located in New Zealand. At the end of the entity’s financial year on 30 November 2016, the following accounts appeared in its adjusted trial balance.Additional facts:1.
Nike and the adidas Group compete toe-to-toe in the sport shoe and sport apparel business. For both companies, inventory is a significant portion of total assets. The following information was taken
Bargains Department Store is located in Sydney. At the end of the entity’s financial year on 30 November 2016, the following accounts appeared in its trial balance: Additional facts:1.
Below is a series of cost of sales sections for companies X, F, L, and S. Required(a) Fill in the lettered blanks to complete the cost of sales sections. (b) Explain the purpose of this
The following data are from recent financial statements of Coca-Cola Amatil and PepsiCo.Required(a) Based on the information in the financial statements, calculate these values for each entity:1.
Olynda Garden Centre accumulates the following data at 30 June:Calculate the lower of cost and net realisable value for Olynda’s total inventory. Inventory categories Native trees Potting
The management of Canterbury Ltd, a US-based company, is reassessing the appropriateness of its present inventory costing method, which is average cost. Management asks your help in determining the
The management of Peoria Ltd, a US-based company, is reassessing the appropriateness of using its present inventory cost flow method, which is average cost. Management requests your help in
Bank of Epping is considering giving Hooton Ltd a loan. Before doing so, the bank decides that further discussions with Hooton’s accountant may be desirable. One area of particular concern is the
What is the main basis of accounting for inventories? What is the major objective in accounting for inventories?
At 30 June, the following information (in thousands) was available for sunglasses manufacturer, Che Eyewear Ltd: ending inventory $53 322; beginning inventory $39 300; cost of sales $129 201; sales
Presented here is information related to Djuric Ltd for the month of January 2016.Beginning inventory was $60 060, and ending inventory was $90 090. RequiredPrepare a fully classified statement
This information is available for the European Division of World Building Products Ltd for 2015. World Building Products uses the FIFO inventory method. Required(a) Calculate inventory turnover,
This information is available for the Automotive and Electronics Divisions of Prestige Motors Ltd for 2015. Prestige Motors uses the FIFO inventory method. Required(a) Calculate inventory
ChemCo International Ltd manufactures specialty chemicals, vehicle airbags and salt. Recently, its specialty chemicals business was reorganised, and three manufacturing plants were closed. Profits
SurfsUp Ltd sells a snowboard, Xpert, that is popular with snowboard enthusiasts. Below is information relating to SurfsUp’s purchases of Xpert snowboards during May. During the same month, 124
At the beginning of the current season, the ledger of Mill Park Tennis Shop Pty Ltd showed Cash $5000; Inventory $3400; and Share Capital $8400. The following transactions were completed during
Fenning Pty Ltd reports the following for the month of June:Required(a) Calculate cost of the ending inventory and the cost of sales under (1) FIFO, (2) LIFO and (3) average cost.(b) Which costing
You are the accountant of City Jeans Ltd. Su Lee, the managing director, recently mentioned to you that she found an error in the 2015 financial statements which she believes has corrected itself.
Fashionista Ltd is located near the Southworld Shopping Centre. At the end of the entity’s financial year on 30 June 2017, the following accounts appeared in its adjusted trial balance.Additional
Williams Ltd reports profit of $180 000 in 2015. However, ending inventory was understated by $14 000. What is the correct profit for 2015? What effect, if any, will this error have on total assets
The following statement of profit or loss extracts are from entities employing different inventory recording methods. Required(a) Using the information above, prepare closing general journal
The following statement of profit or loss extracts are from entities employing different inventory recording methods. Required(a) Using the information provided, prepare closing general journal
Movies Abound Pty Ltd sells DVDs of the performing artist Edwin Drood. At the beginning of October, Movies Abound had in beginning inventory 1000 Drood DVDs with a unit cost of $10. During October,
In a period of decreasing prices, the inventory reported in Lee Ltd’s statement of financial position is close to the current cost of the inventory, whereas Lam Ltd’s inventory is considerably
Nancy Drews is studying for the next accounting examination. What should Nancy know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of net realisable value
Statement of profit or loss data for Goddard Pty Ltd were provided for 2015 and 2016 in E5.11.Data in E5.11Goddard Pty Ltd reported the following statement of profit or loss data for a 2-year
Computer Supplies Ltd chart of accounts includes the following selected accounts. On 1 April the accounts receivable ledger of Computer Supplies Ltd showed the following balances: East PC Ltd
South Morange Hardware’s chart of accounts includes the following selected accounts:On 1 November the accounts payable ledger of South Morange’s Hardware showed the following balances: R. Huff
Rotundo’s Pizza operates strictly on a takeaway basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash. At the counter, the customer can see other employees
Tessa Ltd uses both special journals and a general journal as described in this chapter. On 30 June, after all monthly postings had been completed, the Accounts Receivable Control account in the
Antique Jewels Pty Ltd’s chart of accounts includes the following selected accounts. On 1 October the accounts payable ledger of Antique Jewels Pty Ltd showed the following balances: Diamond
The chart of accounts of Victoria Ltd includes the following selected accounts. In May the following selected transactions were completed. All purchases and sales were on account except as
Generally, an accounting system is developed in phases. Identify and explain each of the phases.
The development of an accounting system involves four phases: analysis, design, implementation and follow-up. Identify the statement that best describes each of these four phases.(a) Determining
Caterpilla Tractors buys wheels from Wheels R Us in order to complete the manufacture of its tractors. The Mina brothers work for Caterpilla Tractors. Sam works in the purchasing department while
Several of the internal control procedures of Cumin Ltd are listed below. Identify the principles of internal control that are being followed in each case.(a) Employees who have physical control of
There are many businesses that sell computerised accounting software packages such as MYOB and QuickBooks. Many businesses provide detailed product information on the web page and some will even
Illuminate Lighting’s chart of accounts includes the following selected accounts: On 1 April the accounts receivable ledger of Illuminate Lighting showed the following balances: Horn $3100,
Jamies Hardware uses the columnar cash journals illustrated in the book. In April, the following selected cash transactions occurred.RequiredIndicate (a) the journal and (b) the columns in the
Wyatt Sports’ chart of accounts includes the following selected accounts.On 1 June the accounts receivable ledger of Wyatt Sports showed the following balances: Block & Son $1750, Field Ltd
Selected accounts from the chart of accounts of Ruby Ltd are shown below. The cost of all inventory sold was 60% of the sales price. During January, Ruby Ltd completed the following
‘Corporate governance does not apply to small business.’ Do you agree? Explain.
Ling & Jessop is a retail outlet for antique books that provides a book repair service and also sells rare music manuscripts. Ling & Jessop is operated by Cam Ling and Tim Jessop. Mildred
Explain the role of an internal auditor.
CRM stands for customer relationship management. As customers are at the centre of business success, it is essential for companies to understand and satisfy customer needs.Your friend, Marlene Jones,
Opera House Ltd has the following selected transactions during March. Opera House Ltd uses a single-column purchases journal, a sales journal, the multicolumn cash journals used in this book,
Identify the process of how accounting data is transformed into financial statements.
In the 2014 annual report for Domino’s Pizza Enterprises Ltd, Don Meij, the chief executive officer/managing director of Domino’s, stated at the end of his report: Future DevelopmentsIn
Describe the internal control principles applicable to the sales and receivables cycle and the purchases and payments cycle.
Jewels, Jewels and More Jewels Ltd is one of the largest sellers of diamonds in Australia. It has more than 50 stores nationwide and sells on the internet as well. This morning, Jane Peterson, one of
Lacquer Nail Supplies chart of accounts includes the following selected accounts. On 1 November the accounts payable ledger of Lacquer Nail Supplies showed the following balances: Cotton Balls
The chart of accounts of Fancy Footware Ltd includes the following selected accounts.In July the following selected transactions were completed. All purchases and sales were on account. The cost of

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