Contemporary Accounting A Strategic Approach For Users 10th Edition Phil Hancock, Peter Robinson, Mike Bazley - Solutions

Read the extract from the article ‘Former bookkeeper charged with 170 counts of theft’. What procedures would have helped prevent Inaba from being able to steal successfully for eight years?
Stephanie Flight has recently been hired as the manager of Tender Chickens. Tender Chickens is a national chain of franchised gourmet chicken retailers. During her first month as store manager, Stephanie encountered the following internal control situations:a The store has only one cash register.
The Royal Park Company statement of comprehensive income for 20X1 appears below:Required Determine the cash flow from operating activities for Royal Park. Royal Park Company Statement of profit or loss and other comprehensive income for the year ended 31 December 20X1 $000 Sales 160 000 Cost of
The following information about Thompson Corp. applies to the entity for the year ended 30 June 20X7.a What was Thompson Corp.’s cash flow from operating activities?b What was Thompson Corp.’s cash flow from investing activities?c What was Thompson Corp’s cash flow from financing?
From the following information, determine the cash flows from operating activities. Cash End of year Beginning of year $ 27579 $ 32333 Receivables 17632 10849 Accounts payable 23581 33 134 Salaries payable 6373 5687 Wages payable 11045 11044 Inventory 123879 114453 Prepaid expenses 499 1006
Classify the following transactions according to whether they relate to operating, investing or financing activities or none of those categories for the purposes of preparing a statement of cash flows.a Received cash of $14 000 from the sale of equipment previously used in carrying out the
Each of the transactions listed below will affect one of the four categories on the statement of cash flows: cash flows from operating activities, cash flows from investing activities, cash flows from financing activities, or non-cash investing and financing activities. Analyse each transaction and
Identify the type of cash flow activity for each of the following events (investing, operating, financing or non-cash transaction):a received cash from customers b paid employees for wages c signed a four-year lease agreement for a motor vehicle d paid interest e issued debentures f issued ordinary
Discuss the impact of each of the items below on the balance sheet, the statement of comprehensive income and the statement of cash flows, giving reasons for your answer where appropriate.a During the year the company sold a non-current asset with a carrying value of $5000 for $3000.b The company
Explain how the following transactions would be recorded on a statement of cash flows:a Salaries payable were $50 000 at the beginning of the year and $45 000 at year-end.b Fully depreciated equipment with a cost value of $20 000 was discarded as follows:i sold to a scrap merchant for $1000 ii
You have been appointed treasurer of your cricket club. The cricket club runs a bar and members are rostered to work on the bar. All the transactions across the bar are cash and the club uses a drawer to store the cash. After reviewing the bar records, you notice a significant decline in the
Explain how it is that a business that is making profits can have difficulties in meeting its debts. Perhaps you can bring to class some examples of businesses in this situation.
Refer to the Woolworths 2018 financial report in Appendix 1.a Did cash increase or decrease over period ended 30 June 2018? If so, by how much?b Why did operating cash flows decline in 2018?
How can interest paid and received be classified?
Give three examples of financing cash inflows and outflows.
Give three examples of investing cash inflows and outflows.
When a business provides a service to another business, it normally does so ‘on account’ rather than as a cash transaction. This results in an account receivable for the business providing the service and an account payable for the business receiving the service. At some later date, the account
Bill Smith owns and runs a supermarket. He is certain that one of the check-out staff is stealing money but, on every occasion, her till balances. If Bill is correct, how is the theft being committed and what steps can he take to overcome the problem?
Give three examples of operating cash inflows and outflows.
What information can be obtained from a statement of cash flows?
What are the main principles of the internal control of cash?
The profit is determined after all revenues, other income and expenses for the period have been recognised, in accordance with accounting standards. Total comprehensive income is the sum of profit and items of other comprehensive income that are either never recognised in profit or loss or are
Profits are based on accrual accounting; therefore, it is possible to have a profit and yet have no cash. Profit means that the assets have increased by more than the liabilities – but the assets don’t have to be in the form of cash.
An asset provides an economic benefit, whereas with an expense the benefit has already been consumed. In some cases, there are activities (like research and development, exploration and evaluation activities) which will provide economic benefits. However, the likelihood of such benefits flowing to
Income includes gross inflows to an entity while revenue only includes inflows to an entity that result from its ordinary activities. Therefore, for a company like Woolworths, revenue arises from sales of food and groceries. If the company sells some plant and equipment, any gain would be regarded
The Northshore Sailing Association (NSA) is a not-for-profit association with 1875 members. The association represents the interests of its members through a management committee, which organises the publication of a quarterly newsletter and holds an annual meeting. It has subcommittees that create
You are the chief accountant of Elphick & Company, a firm of chartered accountants. Paul Cruit and his wife, Debbie, have asked for your advice regarding the following business proposition.At present, Paul earns $30 000 per annum and Debbie has a part-time job in which she earns $7000 per
Swallow Ltd is a statewide real estate brokerage company that is well known for selling small businesses through local real estate brokers. A local broker joining the group pays Swallow Ltd an initial contract fee of $8000 plus 5 per cent of all future revenue as a service fee. In return, Swallow
In 2017, Spotify Australia adopted the new standard AASB 15 early and as a result its 2017 calendar revenue decreased from $128.5 million to $37.1 million. Why do you think the standard had such a significant impact on Spotify revenue?Does this mean the company has performed poorly and the share
When a customer purchases a ticket to fly with Qantas the cash is paid upfront for a flight that may be in six months’ time.Explain how Qantas should record the initial transaction, and after the customer takes the flight in six months.
When a CitiPower customer uses electricity, the commission earns revenue. It is impossible, however, to read the meters of all customers on the last day of its financial year. How does CitiPower determine its revenue for a given year?
The core business of Greenmango Ltd involves the sale of antivirus software. The following took place during the financial year ended 30 June 20X0. The company earned $25 000 000 from the sale of software; $3 000 000 from update downloads; and $50 000 in interest from investing on the short-term
Using the following information, prepare statements of comprehensive income and changes in equity for Waterloo Ltd for the year ended 30 June 20X9. Assume all amounts are net of tax where appropriate.a Net profit from the profit or loss statement for the period is $130m.b Dividends of $50m were
Jill has recently gone into business selling office chairs. Details of her transactions for the first month are given below.a In each situation where there are two possible treatments, discuss the arguments for and against each alternative.b Based on the outcome of your discussions, draw up a
Mandy Plover recently completed her professional accounting qualification and has registered as a tax agent. During the three years in which she was fulfilling the work requirement for her professional status she managed to save $30 000. As she had always wanted to run her own practice, she rented
K. Kitten was made redundant from his job as a senior civil servant and was paid a $15 000 redundancy payout. With this money, he invested in a toy business. Transactions during June are summarised in the following table.Required a Complete a worksheet for the month of June using the data
Joe decided to start a business selling second-hand boats. He had some money of his own, but this was not enough so he borrowed money (on interest-free terms) from a rich uncle. The transactions of the business during March were all cash transactions as summarised in the table.Required a Complete a
I. Cover decided to open Re-cover Upholstery Repairs on 1 January 20X4. She contributed office equipment valued at$20 000 and a van valued at $24 000. She also opened a new business account with a bank and deposited $10 000 cash.Transactions during January are summarised in the table below.Required
In each of the following situations, discuss whether the item would be included in the statement of comprehensive income for the year to 31 December 20X8 and at what amount. The business is that of a builder and builder’s trader.a Sales of general building materials by the builder’s trader to
Jimmy Jones receives a $200 000 legacy from his great-aunt. As he has some knowledge of the textile industry he decides to go into business manufacturing garments. He commences trading on 1 July 20X1 and uses all of the $200 000 as capital. Unfortunately, because he does not have an accounting
Your friend James Smith, knowing that you are a ‘top gun’ accounting student, has asked you to prepare a balance sheet and a statement of comprehensive income from the following information. He does not know the owners’ equity figure as he has not been able to calculate the profit for the
J. Blemish’s statement of comprehensive income for the month ending 31 March 20X1 showed a surplus of $2231.During the same month, the owner withdrew $2500 from the business. Would it be correct to say that the business incurred a loss of $269 during the month? Discuss.
The statement of comprehensive income for the 12 months showed a surplus of $34692. What was the figure for owners’ equity for the year ending 30 June 20X1?
J. Blemish’s balance sheet at 30 June 20X0 showed net assets of $134645. During the year ending 30 June 20X1 an additional$5000 of capital was put into the business and the owner withdrew $56
From the information in the table below calculate:a owners’ equity at 1 January 20X0 b owners’ equity at 31 December 20X0 c profit earned for the 12 months ending 31 December, assuming there were no inputs or withdrawals of equity by the owner.W Case Total assets ($)Total liabilities
From the information in the table below calculate:a owners’ equity at 1 January 20X0 b owners’ equity at 31 December 20X0 c profit earned for the 12 months ending 31 December, assuming there were no inputs or withdrawals of equity by the owner. 3 Calculate the missing amounts for each
Refer to the Woolworths financial report in Appendix 1 and answer the following questions.a What is the revenue from operations for the year to 30 June 2018?b What is the gross profit from ordinary activities before tax for the year ended 30 June 2018, and for 2017? By how much did this increase in
Which accounts would you expect to be changed by the following transactions?a cash invested in the business b cash received from a cash sale c supplies purchased on credit d electricity account paid e land purchased for $100 000 and paid for by$40 000 in cash and a $60 000 mortgage from the bank.
Which is more important – the balance sheet or the statement of comprehensive income?
In what circumstances would it be inappropriate to recognise a cost as either an expense or an asset?
Explain in your own words the concept of comprehensive income.
What is the purpose of a statement of comprehensive income, and who would use it?
‘Expenses for a period are always the same as costs.’Discuss the truth of this statement, using examples to illustrate your argument.
How does revenue differ from other income?
In your own words, define revenue.
The following are some of the limitations of a balance sheet:a It only documents one point in time.b It provides past information.c Items like research and development may not be recognised as an asset because they fail the definition or recognition criteria.d If the cost method of asset
Current: unearned income, tax payable, dividends payable, wages payable and so on.Non-current: long-term loans, employee benefits for long-service leave, deferred taxes and so on.
The following could be labelled as deficiencies: there is no mention of future benefits. This means an obsolete item of equipment would be classified as an asset. In addition, the concept of legal ownership is in itself too narrow because the IASB Conceptual Framework defines assets in terms of an
a Decrease the inventory column by $100 and decrease the owners’ capital column by $100.b Reduce the bank column by $30 and charge an expense of $30 in the profit and loss column.c No entry is required.d Increase the cash at bank column by $400 and decrease the accounts receivable column by
Jill Wright, head of the Green Trees Playgroup, wanted to know how well the business was performing after six months of activity. To do this she needed to know the company’s position at 30 June 20X1 and what the future outlook for the business was.The Green Trees Playgroup was founded by Mrs
It has been reported that the company Freedom is under investigation by ASIC following allegations that the company management used off-balance-sheet entities to hide losses and artificially pump up its market value a What do you believe is meant by the term ‘off-balance-sheet’?b Why do
For a number of years, the Remote Shire Council controlled a very large rubbish site in the southern area of Western Australia. Unfortunately, the site was nearly full and the council had to search for a new location. One of the preferred locations was an area that had previously been an open-cut
ABC Company and XYZ Company conduct the same type of business. Both are recently formed entities; thus the balance sheet figures for assets can be assumed to be at fair values. The balance sheets of the two companies as at 30 June 20X0 are as follows:Required a Assuming that you are a banker and
X Ltd sold 2000 computers in June 20X0. The terms of a sale included a 12-month warranty. The warranty provides that X Ltd will meet the cost of repairs that are associated with faulty parts attributable to manufacture. Past experience indicates that 10 per cent of computer sales lead to warranty
At 30 June 2017, Note 11 of the Qantas annual report included aircraft and engines with a closing net book value of $10 032 million. Included in this amount was aircraft and engines finance leased of $1355 million, which means$8677 million are owned by Qantas. Explain the difference between assets
The accounting department of ABC Co. Ltd was struck by lightning and some accounting records were destroyed. The senior accountant managed to salvage some records and has asked you to prepare a balance sheet, in good form, from the following information.Accounts receivable $10 000, bank overdraft
The ledger accounts of Mickey Ltd as at 30 June 20X1 are listed below. Prepare a balance sheet in good form and insert the missing amounts.$ $Total owners’ equity ? Other current assets ?Total non-current assets ? Total assets ?Tax payable ? Loan payable (31/12/20X3) ?Total liabilities ? Net
Month-end balance sheet amounts (for three consecutive months) for the dental practice of Dr Fang, a local dentist, are presented below. The information is complete except for the balance in the owners’ equity account.a Determine the balance in Dr Fang’s equity account at the end of each
Fred owns a garage and has tried to get everything together ready for the preparation of business accounts. He has drawn up the list of items below. You are required to identify, with reasons, the balance sheet heading under which each item should be classified, and the amount that should be
In each of the following situations, identify whether the item should be included in the balance sheet of Transom Trading as at 31 December 20X1, and, if so, at what amount and under which heading. Transom Trading is a retailer of motor parts and accessories. In all cases, reasons for your decision
Below are the final account balances (after all adjustments) of ABC Ltd for the year ending 30 June 20X1. From these balances prepare a balance sheet, in good form, and list the accounts that would not be included in the balance sheet.
The final account balances (after all adjustments) of Debbie Ltd for the year ending 30 June 20X1 are listed below. From the information given, prepare a balance sheet, in good form, and list the accounts that would not be included in the balance sheet.$Bank overdraft 11 900 Salaries payable 1000
Prepare a balance sheet from the following information and comment on the financial position of the business.$Cash 3000 Inventory 8000 Accounts payable 12000 Salaries payable ?Accounts receivable 16000 Land and buildings 20000 Plant and equipment 7 000 Furnishings and fittings 2 500 Owners’
Prepare a balance sheet from the following information and comment on the financial position of the business. Note: The business had been experiencing a downturn in sales over the past three months due to the economic recession.$Owners’ equity ?Cash 1 700 Accounts payable 42 250 Inventory 30 125
In each of the following cases, describe the two entries required on the worksheet.a The owner pays $769 cash for a desk and chair.b The insurance premium of $549 for one year is paid by cash.c The business checks the price of widgets from a supplier and is told the price is $650 per tonne.d A
In each of the following situations, discuss the potential effect on the business and suggest possible ways in which those effects could be reflected on the worksheet.a The owner starts up a new business and pays $2000 into the business bank account. In addition, it is decided that the owner’s
Given the following information, supply the missing figures. Note: Total assets were $10 000 less in 20X8 than in 20X9.
In 20X6, ABC Ltd had total assets of $100 000 and owners’ equity of $50 000. In 20X7, total liabilities were $50 000 more than in 20X6, and the owners’ equity was $60 000. Calculate:a the total assets figure for 20X7 b the total liabilities figure for 20X6.
In 20X6, XYZ Ltd had total assets of $200000 and total liabilities of $250000. Non-current assets and non-current liabilities were $50000 and $25000 respectively. What were the current assets, current liabilities and owners’ equity for 20X6?
Refer to the Woolworths 2018 financial report in Appendix 1.a What is the amount of (i) total assets, (ii) current assets and (iii) non-current assets?b Which class of non-current assets has the greatest value?c What is the amount of (i) total liabilities, (ii) current liabilities and (iii)
In situations where doubt exists as to whether a transaction has resulted in a liability or equity, what questions should be posed?
In each of the following cases, describe the two entries required on the worksheet.a The owner withdraws $200.b The business buys a vehicle for $27 500.c The business begins negotiations with a real estate agent for the purchase of shop premises for$156 500.d Salaries of $1760 are paid.e The
How would you identify a transposition error?
List three current liabilities and three non-current liabilities other than those mentioned in the text.
What is the purpose of a balance sheet and what information does it contain?
A major difference between fair value and net realisable value is that the expected costs to sell an item are deducted to determine NRV but are not deducted for fair value. Also, fair value involves an orderly market and willing market participants to the transaction, whereas NRV does not.
Your answer should include what an item can be sold for less the costs of selling it.
Your answer should relate to what was paid for an item at the date of acquisition.
In June 2018, Western Australia’s large whitegoods retailer Kambos suspended trading with debts estimated at several million dollars. The company was at that time facing either (i) liquidation; or (ii) trading out of difficulty and continuing as a going concern.a Identify five of the major groups
AASB 141 Agriculture requires companies with biological assets like grape assets to measure the fair value at the end of each reporting period and report gains and losses as part of profit or loss for the period.Required a Do you think the change in the value of grape assets should be included in
Merlin’s Magic Supply Company Ltd lists the following assets and liabilities at time periods T0 and T1:a From the different valuation methods discussed in this chapter, calculate the most appropriate change in net worth of the company (with supporting arguments for your decision) if it is:i a
Michelle Computers Ltd has had a difficult year owing to increasing costs associated with keeping its hardware and software up to date in the face of rapidly improving technology. As company accountant, you are aware that the company is overstocked with out-of-date antivirus software which the
Explain how you would determine the fair value of the following assets:a land and building b motor vehicle c share in Woolworths d Woolworths brand name
A balance sheet has assets measured in a number of different ways, including historic cost, net realisable value and fair value.Discuss why the IASB does not require the use of one method such as fair value for all assets.
On 1 July 20X1, the KLT Company purchased a very specialised item of machinery. KLT is the only company in Australia producing a special instrument used in the medical industry; hence, the new machinery has no resale value other than its scrap value. The following is a list of various values at 30
If the persons or things listed below were crucial to your entity and had to be insured:a How would you initially value them?b How would you value them 12 months after the initial date of acquisition (or accession)?i an elite football player ii a 2018 Toyota Camry Hybrid car iii a building of
Jean owns a shop that used to sell clothes. Given the location, she believes she would make more money running a restaurant on the same premises. She has obtained planning permission for the change of use and bought some of the equipment needed, but has not yet started trading. She makes a list of
Two sisters went into business buying and selling beds. Details of their transactions are as follows.They initially bought 400 beds at $200 each. At the end of six months they had sold 300 of the 400 beds for $300 each.Unfortunately, during that time the bed manufacturer, which was their only
A Ford Laser was purchased by Totem Ford for $10 000 and later sold in new condition to Spike Buzley for $12 000.One year later, Spike crashed the car and was told by the Royal Automobile Club it would cost $4000 to repair. Spike was advised that his car would be worth $1000 if repairs were not
One hears of large sums of money being exchanged between soccer clubs in Europe. How do you think a club arrives at a figure of, say, €10 million for a player?

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Contemporary Accounting A Strategic Approach For Users 10th Edition Phil Hancock, Peter Robinson, Mike Bazley - Solutions

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