1. a) Explain how a suspense account can be used as part of the book-keeping

error correction process. (4 marks)

b) The following are extracted balances from Harbhajan's business accounts along

with other information relating to the business's year end on 30 April 2017.

For some reason, the figure for Capital at the beginning of the year has not

been supplied, although you have been given the year end net profit figure:

Capital as at 1 May 2016 unknown

Machinery at cost 100,000

Sales Revenue 59,000

Motor Vehicles at cost 50,000

Purchases 25,000

Trade Receivables 13,500

Trade Payables 12,500

Accumulated [provision for] depreciation: Machinery 10,000

HM Revenue and Customs: VAT (owing) 7,750

Net Profit as at 30 April 2017 7,105

Accumulated [provision for] depreciation: Motor Vehicles 5,000

Water and Utilities 4,500

Inventory as at 1 May 2016 3,500

Wages and Salaries 3,500

Rent 3,000

Bank (in funds) 1,800

Purchases Returns 1,355

Business Rates 1,250

Bad Debts written off 1,150

Sales Returns 1,250

Discounts Allowed 950

Cash in Hand 760

Drawings 750

Discounts Received 550

The Rent figure includes 600 relating to May, June and July 2017.

The Machinery still has to be depreciated at year end by 10% straight line.

There was unpaid Wages and Salaries at year end 30 April 2017 of 800.

Stocktake at year end 30 April 2017 valued Inventory at 5,000.

Motor Vehicles need year end depreciation (diminishing [reducing] balance

at 10%).

Use the information given about Harbhajan's business as appropriate to

prepare Statement of Financial Position for its year end, including the

missing figure for Capital. (12 marks)

c) Explain the problems from a working capital perspective for a business which

has i) too many orders and ii) too few orders. (4 marks)

Total 20 marks

Question aims

To test candidates' ability to:

? Explain the place of a suspense account as part of the process to correct unresolved

errors detected by a trial balance

? Construct the financial statements for an unincorporated sole trader business,

including adjustments

? Explain the importance of working capital in a business in decline or overtrading

Suggested grounds for response include:

a) A suspense account can be used as part of the book-keeping error correction

process as follows:

? Where the trial balance does not agree, in that the debit and credit columns

come to different hash totals, the difference is most likely caused by an

arithmetical error or a combination of arithmetical errors. These are errors

which are identified by an imbalanced trial balance and the imbalance should

be investigated and resolved.

? Examples of these errors might include omission of one side of the double-

entry, recording two debits or two credits instead of one of each, recording

different amounts in the two entries or extracting account balances to the trial

balance incorrectly [Further details of example errors are not required beyond

naming typical examples, and examples of errors not identified by a trial

balance are not relevant to the task].

? If the error(s) cannot be found and the imbalance not entirely resolved even

after investigation, then the trial balance totals should be made to agree with

each other by inserting the amount of the difference between the two sides in

the 'lower' column and creating a suspense account entry in that sum,

supported by a journal entry (as no 'true' transaction has taken place). The

Suspense Account sits in the Nominal Ledger and the suspense account entry

has the effect of balancing the trial balance at the higher hash total.

? As errors are subsequently identified and corrected, journal entries are made

to support the corrective action taken, and double entry transactions posted

featuring the Suspense Account in respect of each error resolved. The

corrections made ultimately clear the original suspense account entry if all

errors made and detected by the trial balance are resolved.

QS 2-10 Computing T-account balance LO C4 Determine the ending balance of each of the following T-accounts. Cash Accounts Payable Beg.Bal. 160 110 Beg.Bal. 2,600 9,800 360 120 3,700 80 End.Bal. End.Bal. Supplies Accounts Receivable Beg.Bal. 10,600 4,400 Beg.Bal. 900 210 1,700 210 210 160 End.Bal. End.Bal. Wages Payable Cash Beg.Bal. 760 Beg.Bal. 12,800 5, 100 760 860 6,600 160 1,900 End.Bal. End.Bal.Question Help At December 31, 2016, the Accounts Receivable balance of Austin Technology Group is $265.000. The Allowance for Bad Debts account has a $25,545 debit balance Austin Technology Group prepares the folowing aging schedule for its accounts receivable " (Click the icon to view the aging schedule ) Requirements 2016. Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule, Show the T-account for the Allowance for Bad Debts at December 31, N Show how Austin Technology Group will report its net accounts receivable on its December 31, 2016, balance sheet. Requirement 1. Journalize the year-end adjusting entry for bad debts on the basis of the aging schedule. Show the T-account for the Alowance for Bad Debts of December 31, 2016. Begin by determining the target balance of Allowance for Bad Debts by using the age of each account Age of Accounts 1-30 31-60 61-90 Over 90 days Days Days Days Accounts Receivable 45 080 $ 85 000 $ 60 000 36,000 52 0 Estimated percent uncollectible 0.1 Estimated total uncollectible Enter any number in the edit fields and then click Check Answer. Check Answer Clear All parts m remaining Administered by the Arizona Dept of Administration, Benefits Services Division COBRA Walgreens mail service registration and prescription order form (for State of Andone, including universities) Prescription Mail Order Prescription Mail Order Far Far DELLCP 1-7 View Solution Required: From the balances below, complete the following income statement, statement of changes in equity, and balance sheet. Accounts receivable $ 4,000 Accounts payable 5,000 Cash 1,000 Share capital Equipment 8,000 Insurance expense 1,500 Miscellaneous expense 2,500 Office supplies expense 1,000 Service revenue 20,000 Wages expense 9,000 Income Statement Service revenue S Expenses Insurance Miscellaneous Office Supplies Wages Net income Statement of Changes in Equity Share Retained Total Capital Earnings Equity Opening Balance 5 -0- -0- Shares Issued Net Income Ending Balance Balance Sheet Assets Liabilities and Shareholder's Equity Cash Accounts Payable $ Accounts Receivable Share Capital Equipment Retained Earnings $ $ CHAPTER 1/ Overview of Financial Accounting 21Inventory Turnover: Managing the Forest AND the Trees Table One: Last Year's Balance Sheet and Income Statement for Sequoia Distributing Balance Sheet Income Statement $1,573,180 Cash $36,491,330 Sales Revenue $6,844,260 Accounts Receivables $32,352,920 Cost of Goods Sold $5,329,830 Inventory $3,388,410 Net Income $6,020,950 Accounts Payable QUESTION #1: What was the company inventory turnover for Sequoia Distributing last year? (NOTE: All inventory turnover numbers in this case should be accurate to three decimal places)